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[LOGO]
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2000
NOTICE OF
ANNUAL MEETING
AND
PROXY STATEMENT
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Wednesday, May 24, 2000
at 9:30 a.m. local time
Arie Crown Theater
(Lakeside Center at McCormick Place)
2301 S. Lake Shore Drive
Chicago, Illinois 60616
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NOTICE OF MEETING
The 115th Annual Meeting of Shareholders of AT&T Corp. (the "Company") will
be held at the Arie Crown Theater (Lakeside Center at McCormick Place), 2301 S.
Lake Shore Drive, Chicago, Illinois on Wednesday, May 24, 2000, at 9:30 a.m.
local time, for the following purposes:
- To elect Directors for the ensuing year (page 8);
- To ratify the appointment of auditors to examine the Company's accounts
for the year 2000 (page 21);
- To approve an increase in the number of authorized shares of Liberty Media
Group Class A and Class B Tracking Stock (page 22); and
- To act upon such other matters, including shareholder proposals (page 23),
as may properly come before the meeting.
Holders of voting shares at the close of business on March 27, 2000 will be
entitled to vote with respect to this solicitation.
/s/ Marilyn J. Wasser
Marilyn J. Wasser
Vice President - Law and Secretary
March 27, 2000
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[LOGO]
32 Avenue of the Americas
New York, NY 10013-2412
C. MICHAEL ARMSTRONG
Chairman of the Board
March 27, 2000
Dear Shareholder:
It is a pleasure to invite you to our Company's 2000 Annual Meeting of
Shareholders in Chicago, Illinois on Wednesday, May 24, beginning at 9:30 a.m.
local time, at the Arie Crown Theater. This will be AT&T's 115th Annual Meeting
of Shareholders. If you plan to join us at the meeting, an admission ticket will
be required and is attached to the proxy card. For your convenience, a map of
the area and directions to the Theater are printed on the back of the proxy
card.
Whether you own a few or many shares of stock and whether or not you plan to
attend, it is important that your shares be voted on matters that come before
the meeting. Registered shareholders can vote their shares by using a toll-free
telephone number or via the Internet. Instructions for using these convenient
services are provided on the proxy card. Of course, you may still vote your
shares by marking your votes on the proxy card, signing and dating it, and
mailing it in the envelope provided. 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.
I look forward to seeing you on May 24 in Chicago.
Sincerely,
/s/ C. Michael Armstrong
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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) were mailed after March 27, 2000 to holders of voting shares in
connection with the solicitation of proxies by the Board of Directors for the
2000 Annual Meeting of Shareholders in Chicago, Illinois. Proxies are solicited
to give all shareholders of record at the close of business on March 27, 2000 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.
Registered shareholders (those who hold shares directly
or through Company plans rather than a bank or broker) can simplify their voting
and save the Company expense by calling 1-800-273-1174 or voting via the
Internet at HTTP://ATT.PROXYVOTING.COM/. Telephone and Internet voting
information is provided on the proxy card. A Control Number is designed to
verify shareholders' identities and allow them to vote their shares and confirm
that their voting instructions have been properly recorded. It is located above
the shareholder's name and address in the lower left section of the proxy card.
If you hold your shares through a bank or broker, you will receive separate
instructions on the form you receive. Although most banks and brokers now offer
telephone and Internet voting, availability and specific processes will depend
on their voting arrangements.
PROXY MATERIALS AND ANNUAL REPORT
AT&T's shareholders can access AT&T's Notice of Annual Meeting and Proxy
Statement and annual report via the Internet on the AT&T
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Investor Relations Home Page at HTTP://WWW.ATT.COM/IR/. For future shareholder
meetings, AT&T's registered shareholders can further save the Company expense by
consenting to access their proxy statement and annual report electronically. You
can choose this option by marking the "Electronic Proxy" box on your proxy card
or by following the instructions provided when you vote by telephone or via the
Internet. If you choose this option, prior to each shareholder meeting, you will
receive your proxy card in the mail with instructions for voting by mail,
telephone, or the Internet. You do not need to select this option each year;
however, you may want to choose this option for more than one account held in
your name. Your choice will remain in effect unless you revoke it by sending a
written request to AT&T, c/o EquiServe, P.O. Box 8035, Boston, MA 02266-8035.
If you do not choose to vote by telephone or the Internet, you may still
return your proxy card, properly signed, and the shares represented will be
voted in accordance with your directions. You can specify your choices by
marking the appropriate boxes on the proxy card. If your proxy card is signed
and returned without specifying your 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
for each of the proposals. Abstentions have the effect of a vote against the
Directors' Proposal to approve an increase in the number of authorized shares of
Liberty Media Group Class A and Class B Tracking Stock and have no effect on the
other items to be voted on. IF YOU DO VOTE BY TELEPHONE OR THE INTERNET, IT IS
NOT NECESSARY TO RETURN YOUR PROXY CARD.
If you wish to give your proxy to someone other than the Proxy Committee,
all three names appearing on the 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-voted proxy by telephone, the Internet, or mail, 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.
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO VOTE BY TELEPHONE, THE
INTERNET, OR BY SIGNING AND RETURNING THE
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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 canceling any proxy
previously voted.
CONFIDENTIAL VOTING
For many years, AT&T has had a confidential voting policy. The Company has
formalized its policy by amending its By-Laws so that all proxies and other
voting materials, including telephone and Internet voting, are kept confidential
and are not disclosed to the Company or its officers and Directors, subject to
standard exceptions. Such documents are available for examination only by the
inspectors of election and certain personnel associated with processing proxy
cards and tabulating the vote. This By-Law provision cannot be amended,
rescinded, or waived except by a shareholder vote. Three inspectors of election
have been appointed, including two officers of The Corporation Trust Company.
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") or the AT&T Employee Stock
Purchase Plan ("ESPP"), the proxy card will represent the number of full shares
in the DRISPP and the ESPP accounts on the record date, as well as shares
registered in the participant's name. If an employee shareholder is a
participant in the AT&T Employee Stock Ownership Plan, the AT&T Long Term
Savings Plan for Management Employees, the AT&T Long Term Savings and Security
Plan, the AT&T Retirement Savings and Profit Sharing Plan, the AT&T of Puerto
Rico, Inc. Long Term Savings Plan for Management Employees, the AT&T of Puerto
Rico, Inc. Long Term Savings and Security Plan, the Liberty Media 401(k) Savings
Plan, the Liberty Media 401(k) Savings Plan of Puerto Rico, the Long Term
Savings Plan (for AT&T Broadband), or the Long Term Savings Plan - San Francisco
(for AT&T Broadband), 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 proxy cards representing shares in the above-named plans are not returned,
those shares will not be voted except for shares in the employer shares fund in
the AT&T Long Term Savings and Security Plan which will be voted by the trustee
of the plan.
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ANNUAL MEETING ADMISSION
IF YOU ARE A REGISTERED SHAREHOLDER AND PLAN TO ATTEND THE MEETING IN
PERSON, PLEASE DETACH AND RETAIN THE ADMISSION TICKET AND MAP WHICH ARE ATTACHED
TO YOUR PROXY CARD. A BENEFICIAL OWNER WHO PLANS TO ATTEND THE MEETING MAY
OBTAIN AN ADMISSION TICKET IN ADVANCE BY SENDING A WRITTEN REQUEST, WITH PROOF
OF OWNERSHIP, SUCH AS A BANK OR BROKERAGE FIRM ACCOUNT STATEMENT, TO: MANAGER -
PROXY, AT&T CORP., 295 NORTH MAPLE AVENUE, ROOM 1216L2, BASKING RIDGE, NEW
JERSEY 07920-1002. ADMITTANCE TO THE ANNUAL MEETING WILL BE BASED UPON
AVAILABILITY OF SEATING.
Shareholders who do not present admission tickets at the meeting will be
admitted upon verification of ownership at the admissions counter.
The Arie Crown Theater is fully accessible to disabled persons, and sign
interpretation and wireless headsets will be available for our hearing-impaired
shareholders.
Highlights of the meeting will be included in a midyear report to
shareholders. Information on obtaining a full transcript of the meeting will
also be included in the midyear 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 who vote by
mail may authorize AT&T to discontinue mailing extra annual reports for selected
accounts by marking the "Annual Report" box on the proxy card. If you vote by
telephone or the Internet, you will also have the opportunity to indicate that
you wish to discontinue receiving extra annual reports. 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 SHAREOWNER SERVICES NUMBER, 1-800-348-8288.
Comments from shareholders about the proxy material or about other aspects
of the business are welcomed. Space is provided on the back of the proxy card
and on the Internet screen for this purpose. Although such comments will not be
answered on an individual basis, they are analyzed and used to determine what
additional information should be furnished in various Company communications.
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On January 1, 2000, there were 3,196,524,356 shares of AT&T Common Stock,
1,156,778,730 shares of Liberty Media Group Class A Tracking Stock, and
108,421,114 shares of Liberty Media Group Class B Tracking Stock outstanding.
Each share of AT&T Common Stock has one vote on each matter properly brought
before the meeting. Each share of Liberty Media Group Class B Tracking Stock has
0.75 of a vote and each share of Liberty Media Group Class A Tracking Stock has
0.075 of a vote on each of the matters properly brought before the meeting. The
number of shares of AT&T Common Stock outstanding and per share data have been
adjusted to reflect our three-for-two stock split paid on April 15, 1999. The
number of shares of Liberty Media Group Class A and Class B Tracking Stock
outstanding and per share data reflect a two-for-one stock split paid on
June 11, 1999.
BOARD OF DIRECTORS
The Board of Directors is responsible for establishing broad corporate
policies and overseeing the overall performance of the Company. However, in
accordance with corporate legal principles, the Board of Directors is not
involved in day-to-day operating details. Members of the Board are kept informed
of the Company's business by participating in Board and committee meetings, by
reviewing analyses and reports sent to them each month, and through discussions
with the Chairman and other officers.
The Board of Directors held 13 meetings and the committees held 21 meetings
in 1999. The average attendance in the aggregate of the total number of meetings
of the Board and the total number of committee meetings was 96%.
COMMITTEES OF THE BOARD
The Board has established a number of committees, including the Audit
Committee, the Capital Stock Committee, the Compensation and Employee Benefits
Committee, the Finance Committee, and the Governance and Nominating Committee,
each of which is briefly described below. Other committees of the Board include
the Executive Committee and the Proxy Committee (that votes the shares
represented by proxies at the annual meeting of shareholders).
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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 concerning 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 four times in 1999.
The Capital Stock Committee advises and makes recommendations to the Board
concerning the interpretation and implementation of policies regarding Liberty
Media Group tracking stock matters, including the authorization of the issuance
of shares of Liberty Media Group tracking stock. The committee, which consists
of two non-employee Directors, and Dr. John C. Malone, Chairman of Liberty Media
Corporation, met four times in 1999.
The Compensation and Employee Benefits Committee administers incentive
compensation plans, including stock option plans, and keeps informed and advises
the Board regarding employee benefit plans. The committee establishes the
compensation structure for senior managers of the Company and makes
recommendations to the Board with respect to compensation of the officers as
listed on page 50. The committee, which consists of five non-employee Directors,
met six times in 1999.
The Finance Committee meets with management to review the financial policy
and procedures of the Company, including the Company's Financing Plan, Capital
and Investment Program, and Dividend Policy. The committee advises the Board on
the Company's financial condition and makes recommendations concerning the
dividend policy and payments of the Company. The committee, which consists of
six non-employee Directors, met three times in 1999.
The Governance and Nominating Committee advises and makes recommendations to
the Board on all matters concerning directorship and corporate governance
practices, including compensation of Directors and
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the selection of candidates as nominees for election as Directors, and it
provides guidance with respect to matters of public policy. The committee, which
consists of four non-employee Directors and one employee Director, met
four times in 1999. The committee recommended this year's Director candidates at
the January 2000 Board Meeting.
In recommending AT&T Board candidates, the Governance and Nominating
Committee seeks individuals of proven judgment and competence who are
outstanding in their respective fields. The committee considers such factors as
experience, education, employment history, special talents or personal
attributes, anticipated participation in AT&T Board activities, and geographic
and other diversity factors. Shareholders who wish to recommend qualified
candidates should write to: Vice President - Law and Secretary, AT&T Corp., 32
Avenue of the Americas, New York, New York 10013-2412, stating in detail the
qualifications of such persons for consideration by the committee.
Upon the effective date of an initial public offering of the AT&T Wireless
Group tracking stock, we intend to form a separate capital stock committee for
that Group.
COMPENSATION OF DIRECTORS
In 1999, Directors who were not employees received an annual cash retainer
of $45,000 and AT&T Common Stock units with a then-current market value of
$45,000, which were deferred automatically and credited to a portion of a
deferred compensation account, pursuant to the Company's Deferred Compensation
Plan for Non-Employee Directors. The chairpersons of the Audit Committee,
Capital Stock Committee, Compensation and Employee Benefits Committee, and
Finance Committee each received an additional annual retainer of $7,500. The
chairperson of the Governance and Nominating Committee received an additional
annual retainer of $5,000. No fees are paid for attendance at regularly
scheduled Board and Committee meetings. Directors received a fee of $1,500 for
each special Board or committee meeting attended.
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Directors may elect to defer the receipt of all or part of their cash
retainer and other compensation into the AT&T Common Stock portion or the cash
portion of the deferred compensation account. The AT&T Common Stock portion (the
value of which is measured from time to time by the market value of AT&T Common
Stock) is credited on each dividend payment date for AT&T Common Stock with a
number of deferred shares of AT&T 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%.
Effective December 31, 1996, the Company terminated its Pension Plan for
Non-Employee Directors. The Pension Plan now covers only those non-employee
Directors who retired prior to December 31, 1996. Benefits accrued for
then-active Directors were valued and converted into a deferred annuity. 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
15 years from the policy's inception. This benefit will continue after the
non-employee Director's retirement from the Board.
Effective December 1997, the Board adopted AT&T Common Stock share ownership
targets equal to five times the total value of the annual cash retainer and
annual stock unit amounts. Directors generally have five years to attain the
ownership goal. Following closure of the MediaOne transaction, all of the
non-employee Directors will have met their targets. Directors who are employees
of the Company receive no compensation for serving as Directors, but also have
ownership targets.
ELECTION OF DIRECTORS (ITEM 1 ON PROXY CARD)
The Proxy Committee intends to vote for the election of the thirteen
nominees listed on the following pages unless otherwise instructed by the
shareholders on the proxy card or by telephone or Internet voting. These
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nominees have been selected by the Board on the recommendation of the Governance
and Nominating Committee. 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 or, if you are voting by telephone or the Internet,
follow the system instructions. Directors will be elected by a plurality of the
votes cast. Any shares not voted (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
Governance and Nominating Committee or, if none, the size of the Board will be
reduced. The Governance and Nominating Committee 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 March 27, 2000.
Under the MediaOne merger agreement, we will invite one of their directors
to join the AT&T Board upon completion of the merger.
NOMINEES FOR ELECTION AS DIRECTORS
<TABLE>
<S> <C>
C. MICHAEL ARMSTRONG, Chairman and Chief
Executive Officer of AT&T since 1997. Chairman
and Chief Executive Officer of Hughes [PHOTO]
Electronics (1992-1997). Chairman of the
President's Export Council. Chairman of FCC
Network Reliability and Interoperability
Council. Chairman of U.S.-Japan Business
Council. Member of the Council on Foreign
Relations, the National Security
Telecommunications Advisory Committee, and the
Defense Policy Advisory Committee on Trade.
Director of National Cable Television
Association (NCTA) and member of its Executive
Committee. Director of Citigroup Inc. and
member of the supervisory board of the
Thyssen-Bornemisza Group. Director of AT&T
since 1997; Chairman of the Executive Committee
and member of the Proxy Committee. Age 61.
</TABLE>
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<TABLE>
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KENNETH T. DERR, Retired Chairman of the Board
of Chevron Corporation (international oil
company); Chairman and Chief Executive Officer [PHOTO]
of Chevron Corporation (1989-1999); Director of
Citigroup Inc.; and Potlatch Corporation.
Director of AT&T since 1995; member of the
Audit Committee and the Compensation and
Employee Benefits Committee. Age 63.
M. KATHRYN EICKHOFF, President of Eickhoff
Economics Inc. (economic consultants) since
1987. Associate Director for Economic Policy, [PHOTO]
U.S. Office of Management and Budget
(1985-1987). Director of Fleet Bank, NA;
Pharmacia Corporation; and Tenneco Automotive
Inc. Director of AT&T since 1987; member of the
Audit Committee and the Finance Committee. Age
60.
WALTER Y. ELISHA, Retired Chairman and Chief
Executive Officer, Chairman (1983-1998), and
Chief Executive Officer (1981-1997) of Springs [PHOTO]
Industries (textile manufacturing). Director of
Cummins Engine Company, Inc.; Trustee of Wabash
College; Member of the Business Council; former
Member of the President's Advisory Committee
for Trade Policy and Negotiations. Director of
AT&T since 1987; Chairman of the Governance and
Nominating Committee and member of the Finance
Committee. Age 67.
</TABLE>
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<TABLE>
<S> <C>
GEORGE M. C. FISHER, Chairman of the Board,
Eastman Kodak Company (imaging company).
Chairman and Chief Executive Officer, Eastman [PHOTO]
Kodak Company (1993-1999); Chairman of the
Board, Motorola, Inc. (1990-1993); Chief
Executive Officer of Motorola, Inc.
(1988-1993). Formerly Chairman of the Boards of
Directors of: the University of Illinois
Foundation (1997-1999), the U.S.-China Business
Council (1997-1999), and the U.S. Council on
Competitiveness (1991-1993). Member of The
Business Council. Elected to the American
Academy of Arts and Sciences and the National
Academy of Engineers. Member of President's
Advisory Committee for Trade Policy and
Negotiations. Director of Eastman Kodak
Company; Delta Airlines, Inc.; General Motors
Corporation. Director of AT&T since 1997;
member of the Compensation and Employee
Benefits Committee and the Finance Committee.
Age 59.
DONALD V. FITES, Retired Chairman and Chief
Executive Officer, Chairman and Chief Executive
Officer (1990-1999), President and Chief [PHOTO]
Operating Officer (1989-1990) of Caterpillar
Inc. (manufacturer of construction and mining
equipment, diesel and natural gas engines, and
industrial gas turbines). Past Chairman of The
Business Roundtable, the U.S.-Japan Business
Council, the National Foreign Trade Council,
and the Equipment Manufacturers' Institute.
Director of the National Association of
Manufacturers; Member of the Business Council
and former Member of the President's Advisory
Committee for Trade Policy and Negotiations.
Director of Caterpillar Inc., AK Steel
Corporation, Exxon Mobil Corporation,
Georgia-Pacific Corporation, and Wolverine
World Wide, Inc. Director of AT&T since 1997;
Chairman of the Capital Stock Committee; member
of the Governance and Nominating Committee and
the Finance Committee. Age 66.
AMOS B. HOSTETTER, JR., Former Chairman and
Chief Executive Officer of Continental
Cablevision, Inc. (a cable communications [PHOTO]
company); Co-founder and Chief Financial
Officer of Continental Cablevision, Inc.
(1963-1980). Past Chairman of the Board
(1973-1974) and Director (1968-1998) of the
National Cable Television Association. Founding
member and past Chairman of the Cable-Satellite
Public Affairs Network (C-SPAN) and current
member of C-SPAN's Board and Executive
Committee. Chairman of the Board of Trustees of
Amherst College; Trustee of the Museum of Fine
Arts, Boston and WGBH-TV. Director of AT&T
since 1999. Age 63.
</TABLE>
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<TABLE>
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RALPH S. LARSEN, Chairman and Chief Executive
Officer of Johnson & Johnson (pharmaceutical,
medical, and consumer products) since 1989. [PHOTO]
Chairman of The Business Council and Member of
the Policy Committee of The Business
Roundtable. Director of Johnson & Johnson and
Xerox Corporation. Director of AT&T since 1995;
Chairman of the Finance Committee and member of
the Audit Committee. Age 61.
JOHN C. MALONE, Chairman of Liberty Media
Corporation (a diversified media and
communications company) since 1990. Former [PHOTO]
Chairman (1996-1999), Chief Executive Officer
(1994-1999), and President (1994-1997) of
Tele-Communications, Inc. Director of Liberty
Media Corporation, The Bank of New York, At
Home Corporation, TCI Satellite Entertainment,
Inc., UnitedGlobalCom, Inc., USANi LLC, and
Cendant Corporation. Director of AT&T since
March 1999. Member of the Capital Stock
Committee. Age 59.
DONALD F. MCHENRY, President of IRC Group LLC
(international relations consultants) since
1981; Distinguished Professor in the Practice [PHOTO]
of Diplomacy, Georgetown University, since
1981. Director of Fleet Boston Corp. and its
subsidiary, First National Bank of Boston;
Coca-Cola Co.; International Paper Co.; and
SmithKline Beecham plc (U.K.). Director of AT&T
since 1986; member of the Audit Committee, the
Compensation and Employee Benefits Committee,
the Governance and Nominating Committee, and
the Executive Committee. Age 63.
</TABLE>
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<TABLE>
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MICHAEL I. SOVERN, Chairman of Sotheby's
Holdings, Inc. President Emeritus and
Chancellor Kent Professor of Law at Columbia [PHOTO]
University; President (1980-1993). President
and Director of Shubert Foundation and Director
of Shubert Organization. Director of Sequa
Corp., Sotheby's Holdings, Inc., and
Warner-Lambert Company. Chairman of the Japan
Society. Chairman of the American Academy in
Rome. Director of AT&T since 1984; Chairman of
the Audit Committee and member of the
Compensation and Employee Benefits Committee,
the Executive Committee, the Proxy Committee,
and the Capital Stock Committee. Age 68.
SANFORD I. WEILL, Chairman and Co-Chief
Executive Officer of Citigroup Inc. (a
financial services company) since October 1998; [PHOTO]
Chairman and Chief Executive Officer of
Travelers Group and its predecessor, Commercial
Credit Company (1986 to 1998). President of
American Express Company (1983-1985) and
Chairman and Chief Executive Officer of the
Fireman's Fund Insurance Company subsidiary
(1984-1985). Chairman of the Board of Trustees
of Carnegie Hall; Chairman of the Board of
Overseers for Cornell University's Joan and
Sanford I. Weill Medical College and Graduate
School of Medical Sciences; and Founder and
Chairman of the National Academy Foundation.
Vice Chairman of The Business Council. Director
of E. I. du Pont de Nemours and Company; New
York Presbyterian Hospital; Memorial
Sloan-Kettering Cancer Center; and United
Technologies Corporation. Director of AT&T
since 1998; member of the Audit Committee and
the Finance Committee. Age 67.
JOHN D. ZEGLIS, Chief Executive Officer of AT&T
Wireless Group since December 1999. President
since 1997, Vice Chairman (June-November 1997), [PHOTO]
General Counsel and Senior Executive Vice
President (1996-1997), Senior Vice President
and General Counsel (1986-1996) of AT&T.
Director of Helmerich and Payne Corporation,
Sara Lee Corporation, Illinova Corporation, and
Liberty Media Corporation. Director of AT&T
since 1997; member of the Governance and
Nominating Committee. Age 52.
</TABLE>
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STOCK OWNERSHIP OF MANAGEMENT AND DIRECTORS
The following table sets forth information concerning the beneficial
ownership of AT&T Common Stock, Liberty Media Group Class A Tracking Stock
("Class A Liberty Stock"), and Liberty Media Group Class B Tracking Stock
("Class B Liberty Stock") as of January 1, 2000 for (a) each current Director
elected to the Board in 1999; (b) each of the officers named in the Summary
Compensation Table herein ("Named Officers") 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. The number of shares of AT&T Common Stock has been adjusted to
reflect the three-for-two stock split paid on April 15, 1999. The number of
shares of Class A Liberty Stock and Class B Liberty Stock reflects a two-for-one
stock split paid on June 11, 1999.
<TABLE>
<CAPTION>
PERCENT
TITLE OF BENEFICIALLY DEFERRAL OF
NAME STOCK CLASS OWNED PLANS(1) TOTAL CLASS
---- -------------- ------------------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
(a)
C. Michael Armstrong... AT&T Common 491,817(2) 15,335 507,152 *
Class A
Liberty
Class B
Liberty
Kenneth T. Derr........ AT&T Common 4,500 6,696 11,196 *
Class A
Liberty
Class B
Liberty
M. Kathryn Eickoff..... AT&T Common 4,500 5,173 9,673 *
Class A
Liberty
Class B
Liberty
Walter Y. Elisha....... AT&T Common 16,488 30,870 47,358 *
Class A
Liberty
Class B
Liberty
George M. C. Fisher.... AT&T Common 15,132 7,533 22,665 *
Class A
Liberty
Class B
Liberty
Donald V. Fites........ AT&T Common 4,500 5,307 9,807 *
Class A
Liberty
Class B
Liberty
Amos B.
Hostetter (3)........ AT&T Common 431,800 1,065 1,065 *
Class A 431,800 *
Liberty
Class B
Liberty
Ralph S. Larsen........ AT&T Common 4,800 11,858 16,658 *
Class A
Liberty
Class B
Liberty
John C. Malone......... AT&T Common 32,624,807(4)(5)(6) 919 32,625,726 1.02%
Class A 3,220,214(4)(5) 3,220,214 *
Liberty 97,546,022(4)(5)(7) 97,546,022 89.01%
Class B
Liberty
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
PERCENT
TITLE OF BENEFICIALLY DEFERRAL OF
NAME STOCK CLASS OWNED PLANS(1) TOTAL CLASS
---- -------------- ------------------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Donald F. McHenry...... AT&T Common 4,817 9,449 14,266 *
Class A
Liberty
Class B
Liberty
Michael I. Sovern...... AT&T Common 2,300 6,413 8,713 *
Class A 1,500 1,500 *
Liberty
Class B
Liberty
Sanford I. Weill....... AT&T Common 50,000 1,409 51,409 *
Class A
Liberty
Class B
Liberty
Thomas H. Wyman........ AT&T Common 1,500 12,971 14,471 *
Class A
Liberty
Class B
Liberty
John D. Zeglis......... AT&T Common 1,161,859(8) 162,381 1,324,240 *
Class A
Liberty
Class B
Liberty
</TABLE>
<TABLE>
<CAPTION>
PERCENT
TITLE OF BENEFICIALLY DEFERRAL OF
NAME STOCK CLASS OWNED PLANS(1) TOTAL CLASS
---- -------------- ------------------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
(b)
Daniel E. Somers....... AT&T Common 175,560(9) 24,064 199,624 *
Class A
Liberty
Class B
Liberty
Frank Ianna............ AT&T Common 318,035(10) 8,974 327,009 *
Class A
Liberty
Class B
Liberty
John C. Petrillo....... AT&T Common 378,211(11) 36,954 415,165 *
Class A
Liberty
Class B
Liberty
(c)
Directors and Executive
Officers as a
group................ AT&T Common 37,630,957(12) 413,333 38,044,290 1.18%
Class A 3,653,514 0 3,653,514 *
Liberty 97,546,022 0 97,546,022 89.01%
Class B
Liberty
</TABLE>
- ----------------------------------
*Less than one percent
FOOTNOTES
1. Share units held in deferred compensation accounts that do not constitute
beneficially owned securities.
2. Includes beneficial ownership of 273,410 shares which may be acquired within
60 days pursuant to stock options awarded under employee incentive
compensation plans.
3. Also beneficially owns 6,100 shares of Series A Stock of Liberty Digital, a
subsidiary of the Company, which constitute less than 1% of this class of
securities.
4. Includes beneficial ownership of the following shares which may be acquired
within 60 days pursuant to stock options granted in tandem with stock
15
<PAGE>
appreciation rights: (a) 162,897 shares of AT&T Common Stock; (b) 3,194,600
shares of Class A Liberty Stock; and (c) 582,400 shares of Class B Liberty
Stock.
5. Includes 1,004,620 shares of AT&T Common Stock, 25,452 shares of Class A
Liberty Stock, and 1,704,718 shares of Class B Liberty Stock held by
Dr. Malone's wife, Mrs. Leslie Malone, as to which Dr. Malone has disclaimed
beneficial ownership, and includes 439,000 shares of AT&T Common Stock held
by the Malone Foundation.
6. Between January 3 and January 10, 2000, Dr. Malone's beneficial ownership of
AT&T Common Stock was reduced by aggregate dispositions of 3,550,000 shares,
including 439,000 shares held by the Malone Foundation.
7. In connection with the merger of Tele-Communications, Inc. ("TCI") into
AT&T, TCI assigned to Liberty Media Group ("Liberty") its rights under a
call agreement with Dr. Malone and Dr. Malone's wife (the "Malones") and a
call agreement with the estate of Bob Magness, the Estate of Betsy Magness,
Gary Magness (individually and in certain representative capacities) and Kim
Magness (individually and in certain representative capacities)
(collectively, the "Magness Group"). As a result, Liberty has the right,
under certain circumstances, to acquire the Class B Liberty Stock owned by
the Malones and the Magness Group. Further, in connection with the AT&T
merger, TCI assigned to Liberty its rights under a shareholders agreement
with the Magness Group and the Malones, pursuant to which, among other
things, Dr. Malone has an irrevocable proxy, under certain circumstances, to
vote the Class B Liberty Stock or any super voting class of equity
securities issued by Liberty held by the Magness Group. As a result of
certain provisions of the shareholders agreement referred to above,
Dr. Malone's beneficial ownership of Class B Liberty Stock includes
47,791,166 shares held by the Magness Group. (See footnotes 4, 5, 6, and 7
in the section entitled "Ownership of Voting Securities In Excess of Five
Percent by Beneficial Owners".)
8. Includes beneficial ownership of 1,153,716 shares which may be acquired
within 60 days pursuant to stock options awarded under employee incentive
compensation plans.
9. Includes beneficial ownership of 174,498 shares which may be acquired within
60 days pursuant to stock options awarded under employee incentive
compensation plans.
10. Includes beneficial ownership of 302,517 shares which may be acquired within
60 days pursuant to stock options awarded under employee incentive
compensation plans.
11. Includes beneficial ownership of 376,047 shares which may be acquired within
60 days pursuant to stock options awarded under employee incentive
compensation plans.
12. Includes beneficial ownership of 4,164,531 shares which may be acquired
within 60 days pursuant to stock options awarded under employee incentive
compensation plans.
16
<PAGE>
OWNERSHIP OF VOTING SECURITIES IN EXCESS OF FIVE PERCENT BY BENEFICIAL OWNERS
The following table sets forth information as to the beneficial ownership of
AT&T Common Stock, Liberty Media Group Class A Tracking Stock ("Class A Liberty
Stock"), and Liberty Media Group Class B Tracking Stock ("Class B Liberty
Stock") by each person or group known by the Company, based upon filings
pursuant to Section 13(d) or (g) under the Securities Exchange Act of 1934 (the
"Exchange Act"), to own beneficially more than 5% of the outstanding shares of
AT&T Common Stock, Class A Liberty Stock or Class B Liberty Stock as of
January 1, 2000. The number of shares of AT&T Common Stock has been adjusted to
reflect the three-for-two stock split paid on April 15, 1999. The number of
shares of Class A Liberty Stock and Class B Liberty Stock reflects a two-for-one
stock split paid on June 11, 1999.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF TITLE OF NUMBER OF PERCENT OF
BENEFICIAL OWNER STOCK CLASS SHARES CLASS
------------------- ------------------- --------------- ----------
<S> <C> <C> <C>
AXA (1)........................... Class A Liberty 89,881,853 7.70%
9 Place Vendome
75001 Paris France
Putnam Investments, Inc. (2)...... Class A Liberty 89,467,127 7.70%
One Post Office Square
Boston, MA 02109
Janus Capital Corporation and..... Class A Liberty 66,909,561 5.70%
Thomas H. Bailey (3)
100 Fillmore Street
Denver, CO 80206
Gary Magness (4).................. AT&T Common 28,105,978 0.88%
c/o Baker & Hostetler LLP Class A Liberty 65,982,568 5.70%
Suite 1100 Class B Liberty 46,977,318 43.33%
303 East 17th Avenue
Denver, CO 80203
Kim Magness (5)................... AT&T Common 28,044,954 0.88%
c/o Baker & Hostetler LLP Class A Liberty 65,790,680 5.69%
Suite 1100 Class B Liberty 47,054,952 43.4%
303 East 17th Avenue
Denver, CO 80203
Estate of Bob Magness (6)......... AT&T Common 20,433,307 0.64%
c/o Baker & Hostetler LLP Class A Liberty 48,591,512 4.2%
Suite 1100 Class B Liberty 35,425,056 32.67%
303 East 17th Avenue
Denver, CO 80203
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS OF TITLE OF NUMBER OF PERCENT OF
BENEFICIAL OWNER STOCK CLASS SHARES CLASS
------------------- ------------------- --------------- ----------
<S> <C> <C> <C>
Magness Securities, LLC (7)....... AT&T Common 7,090,690 0.22%
c/o Baker & Hostetler LLP Class A Liberty 15,564,360 1.35%
Suite 1100 Class B Liberty 10,816,048 9.98%
303 East 17th Avenue
Denver, CO 80203
</TABLE>
FOOTNOTES
1. According to a Schedule 13G/A jointly filed on February 14, 2000 by AXA
Assurances I.A.R.D. Mutuelle ("IARD"), AXA Assurances Vie Mutuelle ("AAVM"),
AXA Conseil Vie Assurance Mutuelle ("ACVAM"), AXA Courtage Assurance
Mutuelle ("ACAM"), AXA ("AXA"), and AXA Financial, Inc. ("AFI"): (a) each of
IARD, AAVM, ACVAM, ACAM and AXA beneficially owns 89,881,853 shares of
Class A Liberty Stock and has sole voting power with respect to 41,141,513
shares, shared voting power with respect to 29,302,247 shares, sole
dispositive power with respect to 89,881,853 shares and shared dispositive
power with respect to 333,657 shares, including the following AXA entities
having sole voting and dispositive power: AXA Investment Managers (France),
18,970 shares; AXA Investment Managers (Hong Kong), 7,409 shares; AXA Sun
Life & Provincial Holdings plc (UK), 212,425 shares; AXA Colonia Konzern AG
(Germany), 2,100 shares; (b) AFI beneficially owns 89,640,949 shares of
Class A Liberty Stock and has sole voting power with respect to 40,900,609
shares, shared voting power with respect to 29,302,247 shares, sole
dispositive power with respect to 89,288,942 shares and shared dispositive
power with respect to 333,657 shares; and (c) the following subsidiaries of
AFI beneficially own shares of Class A Liberty Stock: (i) Alliance Capital
Management L.P. (87,226,753 shares, as to which such entity exercises sole
voting power with respect to 39,555,219 shares, shared voting power with
respect to 28,422,104 shares, sole dispositive power with respect to
87,066,169 shares and shared dispositive power with respect to 160,584
shares), (ii) Donaldson, Lufkin & Jenrette Securities Corporation (578,673
shares, as to which such entity exercises sole voting power with respect to
390,600 shares, sole dispositive power with respect to 405,600 shares and
shared dispositive power with respect to 173,073 shares), (iii) the
Equitable Life Insurance Society of the United States (1,026,871 shares, as
to which such entity exercises sole voting power with respect to 152,438
shares, shared voting power with respect to 874,433 shares and sole
dispositive power with respect to all such shares), and (iv) Wood,
Struthers & Winthrop Management Corporation (808,652 shares, as to which
such entity exercises sole voting power with respect to 802,352 shares,
shared voting power with respect to 5,710 shares and sole dispositive power
with respect to all such shares). Addresses of the joint filers: IARD and
AAVM, 21, rue de Chateaudum, 75009 Paris France; ACVAM, 100-101 Terrasse
Boieldieu, 92042 Paris La Defense France; ACAM, 26, rue Louis le Grand,
75002 Paris France; and AFI, 1290 Avenue of the Americas, New York NY 10104.
18
<PAGE>
2. According to a Schedule 13G filed on February 17, 2000, Putnam
Investments, Inc. ("PI") beneficially owns 89,467,127 shares of Class A
Liberty Stock and has shared voting power with respect to 5,823,196 shares,
and the following subsidiaries of PI own shares of Class A Liberty Stock:
(i) Putnam Investment Management, Inc. (71,681,068 shares, with shared
dispositive power with respect to all such shares), and (ii) The Putnam
Advisory Company, Inc. (17,786,059 shares, with shared voting power with
respect to 5,823,196 shares and shared dispositive power with respect to all
such shares). Marsh & McLennan Companies, Inc. is the parent holding company
of PI and has no voting or dispositive power over PI shares.
3. According to a Schedule 13G filed on February 15, 2000, Janus Capital
Corporation beneficially owns 66,909,561 shares of Class A Liberty Stock and
has sole voting and dispositive power over all such shares. Thomas H. Bailey
owns approximately 12.2% of Janus Capital Corporation, serves as President
and Chairman of the Board, and may be deemed to have voting and dispositive
power with respect to shares held by the managed portfolios of Janus Capital
Corporation.
4. According to a Schedule 13D filed on April 10, 1999, Gary Magness
beneficially owns (a) 28,105,978 shares of AT&T Common Stock and has sole
voting power with respect to 581,980 shares, shared voting power with
respect to 20,433,307 shares, sole dispositive power with respect to 581,980
shares and shared dispositive power with respect to 27,523,998 shares;
(b) 65,982,568 shares of Class A Liberty Stock with sole voting power with
respect to 1,304,700 shares, shared voting power with respect to 48,591,512
shares, sole dispositive power with respect to 1,304,700 shares and shared
dispositive power with respect to 64,677,868 shares; and (c) 46,977,318
shares of Class B Liberty Stock with sole voting power with respect to
736,214 shares, shared voting power with respect to 35,425,056 shares, sole
dispositive power with respect to 736,214 shares and shared dispositive
power with respect to 46,241,104 shares. Gary Magness is the holder of a 50%
membership interest in Magness Securities, LLC. The following shares
beneficially owned by Magness Securities, LLC are reflected in full in Gary
Magness' share information: 7,090,690 shares of AT&T Common Stock,
15,564,360 shares of Class A Liberty Stock and 10,816,048 shares of Class B
Liberty Stock.
5. According to a Schedule 13D filed on April 10, 1999, Kim Magness
beneficially owns (a) 28,044,954 shares of AT&T Common Stock and has sole
voting power with respect to 7,611,646 shares, shared voting power with
respect to 20,433,307 shares, sole dispositive power with respect to 520,956
shares and shared dispositive power with respect to 27,523,998 shares;
(b) 65,790,680 shares of Class A Liberty Stock with sole voting power with
respect to 17,199,168 shares, shared voting power with respect to 48,591,512
shares, sole dispositive power with respect to 1,112,812 shares and shared
19
<PAGE>
dispositive power with respect to 64,677,868 shares; and (c) 47,054,952
shares of Class B Liberty Stock with sole voting power with respect to
11,629,896 shares, shared voting power with respect to 35,425,056 shares,
sole dispositive power with respect to 813,848 shares and shared dispositive
power with respect to 46,241,104 shares. Kim Magness is the manager and a
holder of a 50% membership interest in Magness Securities, LLC. The
following shares beneficially owned by Magness Securities, LLC are reflected
in full in Kim Magness' share information: 7,090,690 shares of AT&T Common
Stock, 15,564,360 shares of Class A Liberty Stock, and 10,816,048 shares of
Class B Liberty Stock.
6. According to a Schedule 13D filed on April 10, 1999, the Estate of Bob
Magness beneficially owns (a) 20,433,307 shares of AT&T Common Stock with
sole voting power and sole dispositive power with respect to all such
shares; (b) 48,591,512 shares of Class A Liberty Stock with sole voting
power and sole dispositive power with respect to all such shares and
(c) 35,425,056 shares of Class B Liberty Stock with sole voting power and
sole dispositive power with respect to all such shares. Kim Magness and Gary
Magness are the co-personal representatives of the Bob Magness Estate and
share both voting and dispositive power over the shares held by the Bob
Magness Estate.
7. According to a Schedule 13D filed on April 10, 1999, Magness Securities, LLC
beneficially owns (a) 7,090,690 shares of AT&T Common Stock with sole voting
power and sole dispositive power with respect to all such shares;
(b) 15,564,360 shares of Class A Liberty Stock with sole voting power and
sole dispositive power with respect to all such shares; and (c) 10,816,048
shares of Class B Liberty Stock with sole voting power and sole dispositive
power with respect to all such shares. Kim Magness is the manager and a
holder of a 50% membership interest in Magness Securities, LLC. Gary Magness
is also a holder of a 50% membership interest in Magness Securities, LLC.
20
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and executive officers, and persons who own more than 10 percent of a
registered class of the Company's equity securities, to file with the SEC and
the New York Stock Exchange, initial reports of ownership and reports of changes
in beneficial ownership of such equity securities of the Company.
To the Company's knowledge, based upon the reports filed and written
representations that no other reports were required, during the fiscal year
ended December 31, 1999, none of its Directors and executive officers failed to
file on a timely basis reports required by Section 16(a).
RATIFICATION OF APPOINTMENT OF AUDITORS
(ITEM 2 ON PROXY CARD)
Subject to shareholder ratification, the Board of Directors, upon
recommendation of the Audit Committee, has reappointed the firm of
PricewaterhouseCoopers LLP ("PwC") as the independent auditors to examine the
Company's financial statements for the year 2000. PwC 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. Any shares not voted (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 PwC 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 1999, PwC 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.
21
<PAGE>
DIRECTORS' PROPOSAL TO APPROVE AN INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF
LIBERTY MEDIA GROUP CLASS A AND CLASS B TRACKING STOCK
(ITEM 3 ON PROXY CARD)
The Board of Directors recommends an amendment of the Company's Restated
Certificate of Incorporation to increase the number of authorized shares of
Class A Liberty Stock from 2.5 billion to 4 billion, and to increase the number
of authorized shares of Class B Liberty Stock from 250 million to 400 million.
On January 1, 2000, 1,156,778,730 shares of Class A Liberty Stock and
108,421,114 shares of Class B Liberty Stock were issued and outstanding.
The Board of Directors believes that the proposed increases are desirable to
make available additional shares for possible future stock splits, stock
dividends, employee benefit plan issuances, equity financings, acquisitions, and
other corporate purposes relating to the Liberty Media Group without the expense
and delay of a special shareholders' meeting.
The Company is not aware of any specific transaction or plan that would
require an increase in the number of authorized shares of Class A Liberty Stock
or Class B Liberty Stock (together "Liberty Stock"). Authorized but unissued
shares of Liberty Stock may be issued at such times, for such purposes, and for
such consideration as the Board of Directors may determine, without the
requirement of further action by shareholders, except as otherwise required by
applicable corporate law or stock exchange policies or by the Company's Restated
Certificate of Incorporation or By-Laws. The Company's Restated Certificate of
Incorporation limits the circumstances in which Class B Liberty Stock may be
issued. Under the Inter-Group Agreement between members of the Liberty Media
Group, on the one hand, and the Company, on the other, the Company is required
to contribute to a member of the Liberty Media Group the net proceeds of
(i) any issuance of shares of Liberty Stock (or securities convertible into, or
exercisable or exchangeable for, shares of Liberty Stock) and (ii) any sale of
Liberty Stock (or such other securities) that were acquired using cash or assets
that are attributable to the Liberty Media Group.
22
<PAGE>
The proposed amendment would not affect the authorized number of shares of
AT&T Common Stock, AT&T Wireless Group tracking stock, and AT&T Preferred Stock.
The adoption of the proposed amendment of the Restated Certificate of
Incorporation to increase the number of authorized shares of Class A Liberty
Stock from 2.5 billion to 4 billion shares, and to increase the number of
authorized shares of Class B Liberty Stock from 250 million to 400 million
shares will require the affirmative vote of both (a) a majority of the combined
voting power of the holders of AT&T Common Stock, Class A Liberty Stock, and
Class B Liberty Stock, voting as a single class, and (b) a majority of the
combined voting power of Class A Liberty Stock and Class B Liberty Stock, voting
separately as a single class (without any vote of the holders of AT&T Common
Stock). Any shares not voted (whether by abstention, broker non-vote, or
otherwise) have the effect of a negative vote. YOUR DIRECTORS RECOMMEND A VOTE
FOR THE ADOPTION OF THE PROPOSED AMENDMENT OF THE COMPANY'S RESTATED CERTIFICATE
OF INCORPORATION.
SHAREHOLDER PROPOSALS
AT&T receives many suggestions from shareholders, some as formal shareholder
proposals. All are given careful consideration and adopted, if appropriate.
After discussion with Company representatives and clarification of the Company's
position, many proposals are withdrawn.
Proponents of seven 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 - PROXY,
AT&T CORP., 295 NORTH MAPLE AVENUE, ROOM 1216L2, BASKING RIDGE, NEW JERSEY
07920-1002. The proposals and supporting statements are quoted below. The Board
has concluded it cannot support these proposals for the reasons given.
----------------------------
SHAREHOLDER PROPOSAL (ITEM 4 ON PROXY CARD)
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Ave., N.W., Suite
215, Washington, DC 20037, has submitted the following proposal:
23
<PAGE>
"RESOLVED: "That the stockholders of A.T.T. assembled in Annual Meeting in
person and by proxy, hereby recommend that the Corporation affirm its
political non-partisanship. To this end the following practices are to be
avoided:
"(a) The handing of contribution cards of a single political party to an
employee by a supervisor.
"(b) Requesting an employee to send a political contribution to an individual in
the Corporation for a subsequent delivery as part of a group of
contributions to a political party or fund raising committee.
"(c) Requesting an employee to issue personal checks blank as to payee for
subsequent forwarding to a political party, committee or candidate.
"(d) Using supervisory meetings to announce that contribution cards of one party
are available and that anyone desiring cards of a different party will be
supplied one on request to his supervisor.
"(e) Placing a preponderance of contribution cards of one party at mail station
locations."
"REASONS: "The Corporation must deal with a great number of governmental units,
commissions and agencies. It should maintain scrupulous political neutrality
to avoid embarrassing entanglements detrimental to its business. Above all, it
must avoid the appearance of coercion in encouraging its employees to make
political contributions against their personal inclination. The Troy (Ohio)
News has condemned partisan solicitation for political purposes by managers in
a local company (not A.T.T.)." "And if the Company did not engage in any of
the above practices, to disclose this to ALL shareholders in each quarterly
report."
"If you AGREE, please mark your proxy FOR this resolution."
----------------------------
24
<PAGE>
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THE ABOVE PROPOSAL. The Board of
Directors believes that adoption of this proposal would not be in the best
interests of the Company or its shareholders and that the resolution is both
unnecessary and administratively burdensome.
The Company does not endorse or engage in activities that would coerce its
employees to make political contributions. Moreover, the Company is required to
comply with numerous federal and state laws and regulations governing political
contributions.
As authorized by federal law, the Company sponsors a political action
committee supported solely by contributions from employees. This provides an
opportunity for employees to make voluntary contributions to support candidates
and public officials whose views are consistent with the Company's long-term
legislative and regulatory goals regarding the telecommunications industry or
who represent the communities served by the Company and its subsidiaries. The
Company has a strong record of supporting the political process in a bipartisan
manner. The Company has established policies and procedures to ensure that
employee contributions to the AT&T Political Action Committee are strictly
voluntary. Contributions may not be solicited or secured through the use of job
discrimination or financial reprisal, or the threat thereof, or as a condition
of employment. The AT&T Political Action Committee is not affiliated with any
political party nor with any specific candidate for election.
The Company believes strongly that federal and state regulations, along with
its own policies and procedures, adequately address all issues raised by the
proposal. THEREFORE, YOUR DIRECTORS RECOMMEND THAT SHAREHOLDERS VOTE AGAINST
THIS PROPOSAL.
----------------------------
SHAREHOLDER PROPOSAL (ITEM 5 ON PROXY CARD)
Robert D. Morse, 212 Highland Ave., Moorestown, NJ 08057-2717, has submitted the
following proposal:
"That the Officers and Directors consider the discontinuance of all bonuses
immediately, and options, rights, SAR's, etc., after termination of any
existing programs for top management. I must also include
25
<PAGE>
discontinuance request of "Severance Contracts", which overpay a person no
longer satisfactory to the Company, just to leave !
"This does not include any programs for employees.
"REASONS:
"Management and Directors are compensated enough to buy on open market, just as
You and I, if they are so motivated.
"Management is already well paid with base pay, life insurance, retirement
plans, paid vacations, free use of vehicles and other perks.
"Options, rights, SAR's, are available elsewhere, and a higher offer would
induce transfers, not necessarily "attain and hold" qualified persons.
"Who writes the objections to my proposal ? Is it not the same persons who
nominate and pay the directors who in turn will provide Management these
exorbitant extras above a good base salary ? Shareowners should start reading
and realizing that these persons are not providing them entertainment on an
individual choice basis, as do athletes, movie stars, and similar able
performers.
"Align management with shareowners" is a repeated ploy or "line" to lull us as
to continually increasing their take of our assets. Do we get any options to
purchase at previous [presumed] lower rates, expecting prices to increase ?
"After taxes, present base salaries are way above the $200,000.00 our President
receives plus free lodging, and Management only looks after a Company, not the
USA and some of the world problems. If they filled out a daily work or
production sheet, what would it show ?
"Please vote "YES" for this proposal, and pay attention to the vote for
directors until they stop this practice."
----------------------------
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THE ABOVE PROPOSAL. This proposal
would discontinue some of the most significant components of compensation and
render AT&T non-competitive in the employment market. AT&T's compensation
decisions are designed to
26
<PAGE>
attract, motivate, and retain high-caliber employees at all levels of the
Company. As indicated in the compensation philosophy statement on pages 40
through 45 of this proxy statement, the Company's overall executive compensation
levels are designed to be competitive with the relevant group of organizations
with which the Company competes for executive talent. This is essential in the
current economic environment with intense competition for executives' talent.
The Company's overall compensation plans have three basic components: 1) an
annual base salary component; 2) a short-term incentive component, consisting of
an annual bonus; and 3) a long-term incentive component, which may include such
features as performance shares, stock options, and restricted stock. Through
this integrated compensation program, the Company has successfully recruited new
executives and retained executives key to the execution of its strategy.
Concurrently, we also have lost talent to other firms willing to offer
exceptionally valuable compensation packages. To continue to attract and retain
key executives, it is becoming increasingly important for AT&T to have the
flexibility to offer stock incentives and design and execute employment
agreements, which include severance provisions, that address the unique
circumstances associated with each employment situation.
The Compensation and Employee Benefits Committee has and will continue to
perform an analysis of compensation relative to the Company's performance and
industry-wide trends. Because other companies provide their executives with
significant incentives, including bonuses and stock-based incentives to remain
employed, AT&T must be able to offer its executives comparable employment and
incentive packages. This is essential for recruitment plus retention because
AT&T's highly talented employees frequently are approached by other competing
firms. THEREFORE, YOUR DIRECTORS RECOMMEND THAT SHAREHOLDERS VOTE AGAINST THIS
PROPOSAL.
----------------------------
SHAREHOLDER PROPOSAL (ITEM 6 ON PROXY CARD)
Richard A. Dee, 115 East 89th Street, New York, NY 10128, has submitted the
following proposal:
27
<PAGE>
"Opportunity is Calling for AT&T to create the nation's first STOCKHOLDER
MATCHING GIFT PROGRAM. Such a program will provide the owners of AT&T, its
stockholders, with incentives and a way to leverage their generosity similar
to those that the company now provides its employees, retirees, and even
outside directors.
"For many years, support of educational and other socially-beneficial
organizations has been encouraged by the AT&T EMPLOYEE MATCHING GIFT PROGRAM.
Education is widely considered to be the most crucial factor that will
determine our nation's future, and educational organizations receive about 75%
of the value of matching gifts generated by this and similar well-established
and well-accepted programs offered by over a thousand forward-looking
companies.
"IT IS HEREBY REQUESTED THAT THE BOARD OF DIRECTORS PROMPTLY ADOPT A RESOLUTION
CALLING FOR ESTABLISHMENT OF A STOCKHOLDER MATCHING GIFT PROGRAM, SIMILAR TO
AND PATTERNED ON THE AT&T EMPLOYEE MATCHING GIFT PROGRAM, THAT WILL ENABLE
STOCKHOLDERS TO HAVE ALL OR A PORTION OF THE DIVIDENDS TO WHICH THEY BECOME
ENTITLED PAID TO QUALIFYING ORGANIZATIONS OF THEIR CHOICE, WITH SUCH
CONTRIBUTIONS MATCHED BY THE COMPANY TO AN EXTENT DETERMINED BY THE BOARD.
"A Stockholder Matching Gift Program similar to and patterned upon the company's
Employee Matching Gift Program will provide a new right, and a new sense of
participation, to AT&T stockholders, most of whom, in common with the
stockholder-owners of most large publicly-owned companies, now experience
little if any connection to the company.
"The Stockholder Matching Gift Program concept is new, and establishment of such
a program for AT&T stockholders therefore will require action by the Board of
Directors as called for by this Proposal. Program implementation and
day-to-day operation, as with the employee program, will be the responsibility
of management.
"In recent years, stockholders of a growing number of major publicly-owned
companies, including AT&T, have been critical of corporate charity - its
extent and its recipients. A Stockholder Matching Gift Program will enable
AT&T STOCKHOLDERS to designate, relative to their ownership interest in the
company, the amounts and recipients of at least some part of the company's
charity.
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"Although matching gift programs that enable the leveraging of individual
charity are available to many investors through their employers, a far greater
number, including many AT&T stockholders, have no access at all to these
important and valuable socially-beneficial programs because they are
self-employed or employees or retirees of companies without such programs.
"Investors have begun to look with favor upon companies genuinely concerned with
the nation's future - companies that consider contributions to the nation's
future 'affordable'. A Stockholder Matching Gifts Program will enhance AT&T's
reputation as an active and concerned corporate citizen, and the cost of such
a program will be more than justified by increased community goodwill and the
building of a more loyal and supportive stockholder base.
"Because the financial needs of many stockholders decline following their
retirement, opportunities to leverage their generosity through Stockholder
Matching Gift Programs hopefully will serve as powerful incentives for many
such stockholders to increase substantially their contributions to
socially-beneficial organizations.
"PLEASE VOTE FOR THIS PROPOSAL."
----------------------------
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THE ABOVE PROPOSAL. The AT&T
Employee Matching Gift Program is a limited program that combines an employee
benefit, drawing on limited funds, with a philanthropic endeavor. The level of
funding and the program's administrative structure are insufficient to support a
widespread program extending to millions of shareholders. On the administrative
structure, the expense of running a program would substantially increase the
Company's overall cost for matching gifts for more than 4 million AT&T
shareholders. Furthermore, with limited funding, there is no equitable
allocation of the available funds that would sufficiently cover all possible
shareholder requests.
We are convinced that identifying and selecting charitable recipients, and
making meaningful contributions to specific organizations, for millions of
shareholders, should ultimately rest with and would be better
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addressed by individual shareholders; not through a very expensive
administrative structure, built and managed by the Company. THEREFORE, YOUR
DIRECTORS RECOMMEND THAT SHAREHOLDERS VOTE AGAINST THIS PROPOSAL.
----------------------------
SHAREHOLDER PROPOSAL (ITEM 7 ON PROXY CARD)
Judith M. Barnet, 3074 Main Street, P.O. Box 276, Barnstable, MA 02630; Robert
W. Burnett, 828 Arlington Ave., Berkeley, CA 94707; Byron Stookey, 42 North
Street, Brattleboro, VT 05301; Scott Haas and Nilloufer Daruwala, 20595 Biltmore
Ct., Potomac Falls, VA 20165; and Virginia Coyle, Box 513, Big Pine, CA 93513,
have submitted the following proposal:
"WHEREAS, despite a record profitability in the 1990s, U.S. corporations,
including AT&T, have also laid off record number of workers, arguing that
cost-cutting is one key to long-term competitiveness and increased
profitability;
"WHEREAS, only 44% of firms that downsized employees saw a rise in operating
profits, according to a 1992 study by the American Management Association. The
same study found that only 31% of corporate downsizers experienced
productivity gains following the layoffs, while 77% experienced deterioration
in employee morale. A similar study of 1,000 large companies conducted by the
Wyatt Company found that less than one-third of the companies surveyed hit
profit targets projected at the time of the restructuring;
"WHEREAS, a 1992 study by the Haas School of Business at the University of
California at Berkeley found that firms with the widest pay gaps experienced
lower quality. A study published in the JOURNAL OF ORGANIZATIONAL BEHAVIOR
found that high levels of executive compensation generated cynicism among
white-collar employees;
"WHEREAS, in 1998, in conjunction with a large-scale reduction in workforce,
AT&T Chairman Michael Armstrong announced a pay freeze for nearly 1,000 top
officers and managers. This move demonstrated a
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sense of shared sacrifice within the organization and received widespread
positive coverage in the media;
"WHEREAS, in fall, 1999, AT&T announced another impending round of restructuring
involving the layoff of an unspecified number of workers. The company also
announced that this latest round of layoffs will not include generous
severance packages for which AT&T has been known;
"WHEREAS, AT&T has been a leader in pursuing policies of seeking improved
financial health through layoffs. Despite years of practicing this policy, our
company continues to experience stagnant revenue growth relative to its major
competitors;
"WHEREAS, we believe that asking employees to sacrifice while at the same time
rewarding executives sends a mixed message to employees, suppliers and
shareholders. We believe that business success over the long-term is enhanced
when business is viewed as a shared enterprise in which both the rewards and
sacrifices are equitably shared among all employees;
"WHEREAS, corporate leaders should have a long-term view when making management
decisions. If decisions to cut costs are in the long-term best interest of the
company, executives should be willing to defer their rewards until positive
results are demonstrated. Rewarding cost-cutting executives for potentially
good future performance is in conflict with standards of good corporate
governance.
"RESOLVED, shareholders request that the Board build upon its previous
commitment to a spirit of shared sacrifices and rewards by adopting an
executive compensation policy that freezes the pay of corporate officers
during periods of significant downsizing (layoffs involving the lesser of 5%
of the company's workforce or 2,000 workers.) This pay freeze shall continue
for a period of one year following the layoffs."
----------------------------
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THE ABOVE PROPOSAL. The Compensation
and Employee Benefits Committee is committed to establishing fair and equitable
compensation for all employees but cannot
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support a proposal that would freeze compensation and restrict the Company's
ability to maintain the overall competitiveness of its compensation structure at
any time it is reducing personnel. As the sponsor of this proposal acknowledges,
the Company has continued to demonstrate its commitment to share the burdens of
cost-cutting at all levels of the firm, as well as to provide opportunities for
employees to share in its successes. However, the Directors believe that
compensation levels should be driven in large part by the competitive dynamics
of the marketplace. This means that during and after personnel and other cost
reductions, it is still imperative to provide competitive compensation to the
employees and executives who continue to serve the Company.
Consequently, the Committee performs an annual analysis of total
compensation relative to the Company's financial performance and competitive
practices. The Committee's review of the compensation program encompasses
several factors, including a competitive analysis of pay levels and mix, the
link to operational results, the alignment of strategic goals, and consistency
with compensation and governance trends. These considerations help shape the
design of the total compensation program and guide the Committee to make the
decisions and develop recommendations regarding compensation.
With respect to trends and compensation practices, companies are offering
key executives significant compensation packages. The need to attract and retain
talented executives will continue to be critically important to AT&T. It would
not be in the best interests of shareholders to limit or restrict the
compensation of AT&T's key executives or to eliminate the flexibility of the
Committee to provide appropriate competitive incentives. THEREFORE, YOUR
DIRECTORS RECOMMEND THAT SHAREHOLDERS VOTE AGAINST THIS PROPOSAL.
----------------------------
SHAREHOLDER PROPOSAL (ITEM 8 ON PROXY CARD)
Daniel Solomon, 1450 Que Street, N.W., Washington, DC 20009 and Ann M. Sink,
2724 Old Sugar Road, Durham, NC 27707, have submitted the following proposal:
"WHEREAS, the federal government spends $125 billion annually on corporate
welfare, according to TIME magazine. TIME defines corporate
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welfare as "any action by local, state or federal government that gives a
corporation or an entire industry a benefit not offered to others. It can be
an outright subsidy, a grant, real estate, a low-interest loan or a government
service." Federal corporate welfare payments equaled an astounding 26% of
total 1998 after-tax corporate profits in the US and were equivalent to the
total federal income taxes paid by 60 million Americans;
"WHEREAS, only about 10% of American businesses receive any form of corporate
welfare, suggesting that dependence on government assistance is not necessary
for most corporations to remain healthy;
"WHEREAS, AT&T is among the largest recipients of corporate welfare in America,
according to TIME magazine;
"WHEREAS, there is a growing movement in America to end corporate welfare as we
know it. On June 30, 1999, House Budget Committee Chairman John Kasich
convened a watershed hearing on corporate welfare in the U.S. Capitol. Leaders
from across the political spectrum, including Ralph Nader, and representatives
of the conservative Heritage Foundation and the libertarian Cato Institute,
joined voices in calling for substantive corporate welfare reform;
"WHEREAS, a representative of a coalition of 78 CEOs also spoke before the House
Budget Committee, vowing to refuse corporate welfare for those firms. All
these leaders cited their concern that corporate welfare disrupts free market
principles by creating an unlevel playing field. They worry that continued
dependence on government support will soften the ability of American
businesses to compete;
"WHEREAS, given how pervasive corporate welfare has become, political reforms to
alter corporate welfare could have a material impact on some firms, including
AT&T;
"RESOLVED, that AT&T prepare a report outlining the financial benefit received
by the company from following sources: a) direct government subsidies;
b) below market real estate transactions offered as incentives by governments;
c) tax abatements offered by state and local governments; d) tax credits that
apply only to the company or to certain industries; e) below-market financing
backed by government funds or
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government guarantees. This report shall be prepared at reasonable cost and
may omit confidential information. It should be available to shareholders by
September 30, 2000.
"SUPPORTING STATEMENT
"AT&T is a major beneficiary of corporate welfare provided by all levels of
government. Though corporate welfare has been growing at rates approaching 10%
in recent years, there are growing political forces to reverse this trend and
end corporate welfare as we know it. Should this happen, shareholders of firms
that are large recipients of corporate welfare could be subject to presently
unquantifiable risks. The requested report will provide information to
shareholders that will allow them to assess the vulnerability of AT&T to
corporate welfare reform.
"PLEASE VOTE YES."
----------------------------
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THE ABOVE PROPOSAL. To the extent
that federal, state, and local governmental incentives are designed for and
available to businesses, AT&T should be free to participate in the same
incentives as its marketplace competitors.
Those who administer public policy offer targeted incentives and subsidies
to foster specific social goals, create job opportunities, encourage business
enterprise, and stimulate economic development. Under these incentive and
development programs, employees, companies, and communities mutually benefit
from the infusion of capital that generates sales, income, and property taxes at
the federal, state, and local level.
The value of the Company and the interests of the shareholders will not be
maximized if the Company does not use all of the incentives available to enhance
its competitive position and return for shareholders. Our responsibility is to
operate the business in the most competitive manner possible and to enhance the
value of shareholders' investments by achieving maximum financial results. This
obligation requires that we consider, as appropriate, the governmental
incentives that are available. THEREFORE, YOUR DIRECTORS RECOMMEND THAT
SHAREHOLDERS VOTE AGAINST THIS PROPOSAL.
----------------------------
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SHAREHOLDER PROPOSAL (ITEM 9 ON PROXY CARD)
Mark Seidenberg, P.O. Box 6102, Woodland Hills, CA 91365, has submitted the
following proposal:
"Be it resolved by the stockowners to recommend that the Board of Directors
adopt the following corporate governance policy:
"1. Each director may retain a resident analyst with an office at the
corporation's headquarters. The resident analyst would not be an employee of
the corporation and would report only to the director.
"2. The resident analyst shall have access to all records, books, officers,
employees, agents, attorneys, auditors, properties, facilities, assets, and
liabilities of the corporation, its subsidiaries, its affiliates, and its
joint ventures.
"3. A minimum budget of $100,000 per year shall be established for compensation,
travel, communications, data bases, and other expenses of the resident
analyst. The budget shall be considered compensation to the director.
"SUPPORTING STATEMENT
"Our directors cannot give us stockowners the best possible supervision of the
corporation. Simply put, they don't devote their full-time attention to the
corporation's affairs, and they don't have full-time offices at the
corporation's headquarters.
"Perhaps we get one-tenth of their time - some less, some more. Our
multi-billion dollar corporation deserves closer attention.
"If this system of part-time directors is going to continue, the second best
thing is for each director to have a full-time resident analyst. He or she
would be the director's eyes and ears on site and would report only to the
director. Vast amounts of data are currently fed to our directors, and they
need full-time assistance to analyze, critique, and improve on it. With this
help, our directors may be better able to exercise truly proactive governance
on our behalf.
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"Unfortunately, the current board of directors does not yet want to take on this
better informed and proactive role. That's apparently why they oppose this
proposal.
"Your YES vote can tell them that you want them to grab this opportunity for
progress and run with it."
----------------------------
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THE ABOVE PROPOSAL. Corporations,
like AT&T, are governed by a Board of Directors, elected by the shareholders,
and by corporate officers, elected by the Board. The proposal would create a
third type of management structure with a potentially powerful group of
independent full-time resident non-employees elected neither by the shareholders
nor the Board, and owing their loyalty only to their individual
employer-director. AT&T believes that such a third tier of corporate management
is antithetical to established principles of corporate governance and could
constitute a disruptive force within the Company. The role of the Board would be
inappropriately expanded beyond the customary one of general oversight and
direction of the Company to one of day-to-day supervision, review, and
investigation of corporate affairs, which could diminish the effectiveness of
the Company's elected corporate officers. Such an unnecessary overlay of new
structure upon AT&T's management would be a fundamental alteration and
complication in corporate dynamics, one likely to impair the Company's ability
to innovate, compete, and change.
Further, to the extent Directors seek additional information, Board members
can obtain it. Many publicly-held companies, including AT&T, already have
various representatives who support the Board and act as primary points of
contact to address director-related requests for strategic business, financial,
and competitive research. In fact, through the Corporate Secretary's
organization, AT&T maintains and forwards a comprehensive flow of critical
business information to directors that provides relevant, timely information
regarding AT&T's vital corporate business functions and interests. Additional
information is always available upon request by the Directors. THEREFORE, YOUR
DIRECTORS RECOMMEND THAT SHAREHOLDERS VOTE AGAINST THIS PROPOSAL.
----------------------------
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SHAREHOLDER PROPOSAL (ITEM 10 ON PROXY CARD)
Morton Bahr, Trustee, on behalf of the Communications Workers of America Pension
Fund, 501 Third Street, N.W., Washington, DC 20001-2797, has submitted the
following proposal:
"RESOLVED, that the stockholders of AT&T request the Board of Directors to take
the steps that may be necessary: (1) to develop standards for evaluating the
performance of the senior executives with respect to efforts to foster
employee participation in workplace decisions, to develop and conduct training
programs, and to maintain or improve employee satisfaction; and (2) to
explicitly incorporate those standards into the criteria that are used to make
compensation decisions with respect to senior executives.
"Supporting Statement
"The Company's ability to attract, develop and retain capable employees is
critical to its success. In fact, the employees and their skills are, in a
very real sense, the human capital of the enterprise.
"In recognition of this fact, a number of companies have begun to incorporate
measures of human capital into the standards that they use to evaluate the
performance of senior executives. These evaluations are then used to make
executive compensation decisions. Actions which could negatively affect
evaluations of executive performance with respect to measures of human capital
might include significant downsizing, wage or benefit reductions, or material
violations of workplace health and safety or anti-discrimination laws.
"According to an article in Business Week (Mar. 1, 1999), "employee satisfaction
accounts for 20% of executive bonuses" that are awarded at Kodak. The same
article reported that, beginning in 2000, part of the compensation for senior
executives at United Airlines "will be tied to worker satisfaction as measured
by an outside survey firm."
"These initiatives are consistent with the findings of a 1993 report by the U.S.
Department of Labor, which was entitled High Performance Work Practices and
Firm Performance. That report concluded, based on the available evidence, that
"there is a positive correlation between high performance work practices and
long-term financial performance."
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Moreover, the specific practices that the report cited included "training" and
"employee involvement" among those that "are often associated with higher
productivity."
"A report prepared by the Gordon Group for the California Public Employees
Retirement System reached a similar conclusion. It found that in the
aggregate, "firms with poor workplace practices have lower valuations than
their peers with reputations for positive workplace practices."
"Adoption of the proposed executive compensation standards is particularly
important at this time for AT&T. Our Company is continuing to suffer layoffs
that are likely to undermine the satisfaction and morale of the remaining
employees. In addition, AT&T has recently acquired other companies, such as
Teleport (now ALS) and TCI, where wages, benefits, training and job security
appear to be significantly below the standards that have been customary at
AT&T. These circumstances indicate that the development and retention of human
capital should be one of AT&T's highest priorities."
----------------------------
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THE ABOVE PROPOSAL. The Company now
has performance evaluation standards for senior executives that address employee
satisfaction. Those standards are addressed in conjunction with a variety of
other factors and result in competitive compensation levels. No single factor,
however, including employee satisfaction, can be a determinant in compensation
without regard to other factors and overall competitive ranges for compensation.
Setting compensation levels and determining appropriate performance-based
incentives is a key responsibility of the Board of Directors. Your Directors
must consider all pertinent factors in establishing compensation levels; and,
more importantly, must balance many competing factors to determine which are
most important and valid for evaluating executive performance in the relevant
time specified.
The Directors' ability to reward executives commensurate with the Company's
performance is reliant on flexible compensation programs that are responsive to
constant change in the highly competitive environment for executive talent. We
must maintain flexibility. Any other
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arrangement would not be in the best interests of the Company and its employees.
While we agree that employee satisfaction must be a factor, we do not agree that
the Board should commit to any specific methodology for incorporating employee
satisfaction into the criteria used for setting compensation levels.
The Directors must be able to modify the measures and standards of
performance to respond to the competitive situation and to appropriately
motivate the Company's executives. Performance measures should be readily
changeable to ensure that the Directors reward executives for the performance
that is most critical for the Company. As a result, measures must include items
that can be influenced and controlled by the executives, can be reliably
measured, and will not dilute the impact of, or contend with, other important
standards of performance. THEREFORE, YOUR DIRECTORS RECOMMEND THAT SHAREHOLDERS
VOTE AGAINST THIS PROPOSAL.
----------------------------
Approval of the preceding shareholder proposals would require a majority of
the votes cast. Any shares not voted (whether by abstention, broker non-vote, or
otherwise) have no impact on the vote.
ADVANCE NOTICE PROCEDURES
Under the Company's By-Laws, no business may be brought before an annual
meeting except as specified in the notice of the meeting (which includes
shareholder proposals that the Company is required to set forth in its proxy
statement under SEC Rule 14a-8) or as otherwise brought before the meeting by or
at the direction of the Board or by a shareholder entitled to vote who has
delivered notice to the Company (containing certain information specified in the
By-Laws) not less than 90 or more than 120 days prior to the first anniversary
of the preceding year's annual meeting. These requirements are separate and
apart from and in addition to the SEC's requirements that a shareholder must
meet to have a shareholder proposal included in the Company's proxy statement
under SEC Rule 14a-8.
A copy of the full text of the By-Law provisions discussed above may be
obtained by writing to AT&T's Office of the Corporate Secretary.
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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, New York 10013-2412, and must be received by November 25,
2000.
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. In the event that
any matter not described herein may properly come before the meeting, or any
adjournment thereof, 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 that might be presented for
shareholder action at the meeting.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Employee Benefits Committee ("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 (other than Directors who are
employees) is responsible for setting and administering salaries and the annual
bonus of the Named Officers in the Summary Compensation Table based upon
recommendations of the Committee.
COMPENSATION PHILOSOPHY
The Company's programs are designed to provide executives with a competitive
earnings opportunity, with earnings linked to the short-term and long-term
performance of the Company and the sustained
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performance of the individual. The Committee has developed executive
compensation principles to provide guidance in the design and operation of the
senior management compensation plans and in the review of executive performance.
COMPETITIVENESS: Total compensation for senior managers is targeted to
produce pay consistent with the Company's performance compared against a
group of direct competitors and selected major corporations of comparable
size and scope of operations.
PERFORMANCE CONTINGENCY: The design of the total compensation package
reflects a bias toward variable pay that matches pay to the achievement of
short-term and long-term performance objectives. For the Named Officers, the
variable portion of the pay program ranges from 80-85% of total target pay.
ACCOUNTABILITY TO STAKEHOLDERS: Performance measures used in the Company's
incentive programs support value creation for our three key stakeholders:
shareholders, customers, and employees. In addition, beginning in 1998, all
senior managers of the Company are expected to hold AT&T stock valued at
from one-to-five times their base salary.
BALANCE BETWEEN SHORT-TERM AND LONG-TERM PERFORMANCE: The compensation
structure for senior managers emphasizes long-term performance results over
short-term results at an average ratio of 3 to 1.
TAX EFFECTIVENESS: Elements of compensation under the annual bonus and
long-term incentive plans qualify for exemption from the annual limit on tax
deductibility under Section 162(m) of the Internal Revenue Code. In
addition, the Company has a salary and incentive award deferral plan that
permits compensation deferred under the plan to be exempt from the limit on
tax deductibility.
The Company's executive compensation program consists of three key elements:
(1) base salary; (2) short-term incentives, i.e., annual
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bonus; and (3) long-term incentives, i.e., performance shares, stock options,
and restricted stock/units. The policies and the basis for determining executive
compensation and specifically that of the Chairman of the Board and CEO,
Mr. Armstrong, are described below:
(1) BASE SALARY
The Committee determines the salary ranges for each of the executive officer
positions based upon the scope, level, and strategic impact of the position, and
on pay levels of similarly positioned executive officers in comparable
companies. Surveys conducted by external compensation consultants provide the
market data utilized by the Committee annually as part of the determination of
the succeeding year's executive compensation structure. Annual salary
adjustments recognize sustained individual performance by the executive, with
overall salary increase funding levels sensitive to both market movement and
Company performance.
The Committee presents the salary recommendations for the Named Officers to
the non-employee Directors for approval. These salary recommendations are based
on the executive's contribution to the Company, experience and expertise, and
relative position against competitive market rates. There are no individual
performance matrices or pre-established weightings given to each factor.
(2) ANNUAL INCENTIVES
The annual bonus for the Chairman and for the other Named Officers is
(i) 0.4% of the Company's net cash provided by operating activities for the
annual performance period, 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 applicable to bonuses set for other executive
officers.
The annual bonus for other executive officers is based on the Company's
financial and key non-financial results as measured against pre-set targets for
(i) Earnings Per Share ("EPS"); (ii) Revenue Growth;
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(iii) reduction in Sales, General & Administrative ("SG&A") expense and network
costs; (iv) Customer Value Added, which measures the relative value that
customers perceive when our services are compared with those of our competitors;
and (v) People Value Added, which measures employee views regarding leadership
and contributions to the diversity of the Company. Targets for these measures
were reviewed and approved by the Committee.
(3) LONG-TERM INCENTIVES: PERFORMANCE SHARES, STOCK OPTIONS, AND RESTRICTED
STOCK/UNITS
Long-term incentives provide a mechanism for aligning the economic interests
of executive officers with those of shareholders. Grants of stock options and
performance shares are made annually under the AT&T 1997 Long Term Incentive
Program ("1997 LTIP"). The size of these annual grants is based on competitive
market grant levels for similar positions. The size of previous grants and the
number of shares held by an executive generally are not considered in
determining annual award levels. Grants of restricted stock or restricted stock
units are made only on a selective and infrequent basis for purposes of
retention or reward for outstanding performance.
PERFORMANCE SHARES: Performance shares, which are awards of units
equivalent in value to shares of AT&T Common Stock, are awarded annually in
numbers based on surveys of competitive market grant levels for similar
positions. Prior to 1997, payout of 0% to 150% of such performance shares was
made in the form of cash and/or shares of AT&T Common Stock (with a required
minimum of 50% in 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 Internal Revenue code, in the last
year of a performance period, then the executive receives an "other stock unit
award" payout in lieu of the performance share payout. The value of the payout
to each such executive for the performance period is (i) 0.13% of the Company's
net cash provided by operating activities for each year in the performance
period, divided by the total number of Named Officers receiving such payouts, or
(ii) a lesser amount, based on factors that
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include targets for the Company's RTE established for performance shares for the
three-year performance period.
To address the transition period associated with the Company's
restructuring, and the difficulty of setting long-term financial targets while
restructuring was in progress, the Committee deemed the performance criteria for
the 1995-1997 performance cycle to have been met at the target level. The
opportunity to earn a payout above 100% was eliminated, and all other terms and
conditions of the award continued to apply. For the same reason, grants for the
1996-1998 cycle were issued in the form of three-year stock units. For Named
Officers, the net cash provided by operating activities formula and the
Committee's authority to exercise negative discretion continued to apply in
determining the actual payout for the 1995-1997 and 1996-1998 cycles.
In 1997, the Company re-instituted a performance share program tied to
three-year relative total shareholder return ("TSR") as measured against a peer
group of industry competitors. TSR equals the sum of the appreciation in the
price of AT&T Common Stock plus dividends paid over the period. Because of the
continuing consolidation in the industry and among the peer group companies, and
AT&T's continuing transformation into an all-distance company, as well as the
ongoing difficulty of setting viable long-term financial targets for measurement
purposes, the Committee recently approved a parallel set of measures to be used
for all outstanding performance share cycles (1998-2000, 1999-2001, and
2000-2002.) The additional measurements for the performance share program are
tied to a combination of three-year cumulative EPS and revenue results against
pre-established targets and relative TSR as measured against the S&P 500 peer
group companies. In addition to the extra measures, the Committee approved
calculating the performance shares based on the greater performance results of
either set of measures.
STOCK OPTIONS: Stock options are granted annually to executive officers
based on surveys of competitive grant levels for similar positions. Like
performance shares, the magnitude of such awards is determined annually by the
Committee. Stock options are granted with an exercise
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price equal to or greater than the fair market value of AT&T Common Stock on the
day of grant, and become exercisable after the expiration of a period of time,
typically between one and six years, and continue to be exercisable until ten
years from the date granted. Such stock options provide incentive for the
creation of shareholder value over the long term since the full benefit of the
compensation package cannot be realized unless an appreciation in the price of
AT&T Common Stock occurs over a specified number of years.
RESTRICTED STOCK: Restricted stock and restricted stock unit awards are
granted occasionally to executive officers under the 1997 LTIP, primarily for
purposes of retention. 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. Messrs. Zeglis, Somers, Ianna, and Petrillo received a
special award of restricted stock units of 102,000; 65,100; 65,100; and 57,000,
respectively, on January 29, 1999.
CEO COMPENSATION
During 1999, the Company's most highly compensated officer was C. Michael
Armstrong, Chairman and Chief Executive Officer. Mr. Armstrong's 1999
performance was reviewed by the Committee and discussed with the non-employee
Directors. The Committee's recommendations to the Board concerning the annual
component (base salary and annual bonus) of Mr. Armstrong's compensation and the
Board's approval of the annual component and his long-term component
(performance shares and stock options) were based on the considerations
discussed below.
BASE SALARY: Mr. Armstrong's base salary was established at the time of his
hire based on competitive market rates for a chief executive with his experience
and record of accomplishment. As specified in Mr. Armstrong's employment
agreement, the Committee will review
45
<PAGE>
Mr. Armstrong's salary annually in comparison with the salaries of chief
executive officers of other Fortune 20 companies, industry competitors, and
selected other large companies during its annual compensation survey and review
process. In 1999, Mr. Armstrong's salary was not increased based on the
recommendation to the Board by the Committee.
ANNUAL BONUS: After determining the maximum award payable to Mr. Armstrong
based on the Company's net cash provided by operating activities, the Committee
exercised its discretion in determining the actual bonus payable based on
achievement of pre-set performance targets related to 1) earnings per share,
2) revenue growth, and 3) reduction in SG&A and network costs, as well as
performance goals for Customer Value Added and People Value Added.
Under Mr. Armstrong's leadership, 1999 was a year in which the Company
continued to improve financial performance while also progressing to position
AT&T in critical new markets for the future. The Company met or exceeded its
financial targets, including a $2.20 EPS over 1998 including the TCI and IBM
Global Network Services acquisitions, pro forma revenue growth of more than 6%
over 1998 results, and a reduction in the SG&A expense-to-revenue ratio from 24%
in 1998 to 21.7%. AT&T also continued to progress toward achieving its target
for Customer Value Added and People Value Added measures.
In addition to its strong financial results, the Company initiated a number
of important strategic actions in 1999:
- In March 1999, it merged with TCI, the second largest cable company in the
United States. The cable plant offers AT&T an attractive foundation for a
significant broadband access strategy.
- It acquired the IBM Global Network Services business for $5 billion, which
significantly strengthens the Company's abilities to serve global clients.
- On May 6, 1999, it entered into an agreement to purchase MediaOne
Group, Inc. for approximately $58 billion, which will significantly
strengthen the Company's broadband access strategy and expand its cable
footprint.
46
<PAGE>
- It developed and implemented a Joint Venture with British
Telecommunications plc to position AT&T as a global communications leader.
- It initiated the creation of a Wireless Tracking Stock to promote growth
in its wireless businesses and deliver shareholder value.
The impact to shareholders of improving financial performance and strategic
positioning is seen in the increase in AT&T's market value during
Mr. Armstrong's tenure. Since October 1, 1997 through December 31, 1999, AT&T
has provided a TSR of 70% and the Company's market value has increased by over
$70 billion. In consideration of these accomplishments, the Committee awarded
Mr. Armstrong a bonus for 1999 performance of $2,258,000.
LONG-TERM INCENTIVES: In January 1999, the Committee granted Mr. Armstrong
an option on 450,000 shares, which becomes exercisable in 2002, 2003, and 2004.
In order for this option to reach the value indicated in the Option/SAR Grants
in the 1999 table on page 55, the Company's stock price would produce a
corresponding aggregate pre-tax gain of more than $60 billion for the Company's
shareholders. The Committee also granted Mr. Armstrong 75,000 performance shares
for the 1999-2001 cycle as described in the Long-Term Incentives section above.
THE COMPENSATION AND EMPLOYEE
BENEFITS COMMITTEE
Thomas H. Wyman, Chairman
Kenneth T. Derr
George M.C. Fisher
Donald F. McHenry
Michael I. Sovern
47
<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, New Peer Group(1), and
Old Peer Group (2). The Company has created the New Peer Group to reflect the
Company's 1999 acquisition of a major cable television company, TCI. The
performance of the Old Peer Group is displayed here for comparative purposes as
required by SEC Reg. S-K Item 402(l)(4), and will not be provided in the future.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS AT&T S&P 500 NEW PEER GROUP OLD PEER GROUP
<S> <C> <C> <C> <C>
1994 100 100 100 100
1995 132 138 138 140
1996 126 169 149 151
1997 194 226 207 206
1998 245 290 337 326
1999 251 351 425 400
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
DEC-94 DEC-95 DEC-96 DEC-97 DEC-98 DEC-99
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
AT&T Corp............ 100 132 126 194 245 251
S&P 500.............. 100 138 169 226 290 351
New Peer Group....... 100 138 149 207 337 425
Old Peer Group....... 100 140 151 206 326 400
</TABLE>
EXPLANATION
The graph assumes $100 invested on December 31, 1994 in AT&T Common Stock, the
S&P 500 Index, New Peer Group common stock, and Old Peer Group common stock with
the reinvestment of all dividends, including the Company's distribution to
shareholders of Lucent common stock on September 30, 1996 and NCR common stock
on December 31, 1996(3). For the purpose of this chart, the Lucent and NCR
distributions are treated as nontaxable cash dividends that would have been
converted into additional AT&T shares at the close of business for Lucent on
September 30, 1996 and at the close of business for NCR on December 31, 1996.
The number of shares of AT&T Common Stock outstanding and per share data have
been adjusted to reflect our three-for-two stock split paid on April 15, 1999.
FOOTNOTES
1. The New Peer Group is composed of the largest companies worldwide that
compete against the Company in its industry segment of telecommunications
and cable television services. 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 New Peer Group is
comprised of the following companies: Bell Atlantic Corp.; BellSouth
Corporation; GTE Corporation; SBC Communications Inc.; U.S. West, Inc.;
British Telecom plc (American Depository Receipt - "ADR"); Cable & Wireless
plc (ADR); MCI WorldCom, Inc.; Sprint Corp.; Vodafone Airtouch plc (ADR);
Comcast Corporation, Class A; and Cablevision Systems Corporation, Class A.
2. The Old Peer Group was composed of the S&P 1998 Telephone Index (Alltel
Corporation; Ameritech Corporation; Bell Atlantic Corp.; BellSouth
Corporation; Frontier Corporation; GTE Corporation; SBC Communications Inc.;
and U.S. West, Inc.); British Telecom plc (ADR); Cable & Wireless plc (ADR);
MCI WorldCom, Inc.; and Sprint Corp.
3. Data Source: S&P Computstat
49
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ANNUAL COMPENSATION(2) LONG-TERM COMPENSATION(2)
AWARDS(4) PAYOUTS
OTHER
ANNUAL RESTRICTED ALL OTHER
COMPEN- STOCK LTIP COMPEN-
NAMED OFFICERS AND SATION(3) AWARD(S)(5) OPTIONS/ PAYOUTS(6) SATION(7)
PRINCIPAL POSITION(1) YEAR SALARY($) BONUS($) ($) ($) SARS(#) ($) ($)
C. Michael Armstrong 1999 1,400,000 2,258,000 683,284 0 573,410 0 275,100
Chairman of the Board 1998 1,400,000 1,900,150 507,338 0 450,000 0 2,490,806
and CEO 1997 291,667 0 0 14,927,568(a) 1,125,000 0 8,539
John D. Zeglis 1999 850,000 1,335,400 1,199,880 6,107,250(b) 667,500 1,036,838 41,224
Chairman & CEO 1998 700,000 950,100 563,906 0 157,500 605,782 47,601
AT&T Wireless Group 1997 659,000 950,000 468,852 0 204,000 320,409 41,260
Daniel E. Somers 1999 556,250 706,900 172,800 3,897,863(b) 546,500 1,062,444 76,847
President & CEO 1998 500,000 542,900 71,202 0 99,000 730,148 65,681
AT&T Broadband 1997 270,833 350,000 0 452,813(c) 204,000 0 73,241
Frank Ianna 1999 497,250 612,900 185,414 3,897,863(b) 405,000 402,426 16,077
President - 1998 414,000 540,000 105,121 0 78,000 228,206 24,788
AT&T Network Services 1997 411,667 472,200 70,155 0 117,000 121,657 847,736
John C. Petrillo 1999 453,750 535,500 269,215 3,412,875(b) 354,000 680,011 23,704
Executive Vice President- 1998 435,000 519,000 149,024 0 78,000 469,186 30,112
Corporate Strategy & 1997 430,833 477,300 112,079 0 117,000 248,410 898,777
Business Development
</TABLE>
FOOTNOTES
1. Includes Chairman of the Board and Chief Executive Officer and the four
other most highly compensated individuals who were executive officers of
AT&T at the end of 1999, as measured by salary and bonus.
50
<PAGE>
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 incentive
compensation paid during the year, and (c) tax payment reimbursements. In
addition, for Mr. Armstrong, includes in 1999, $54,146 for personal use of
corporate aircraft and, in 1998, $32,785 for personal use of corporate
aircraft and $14,790 for personal use of a Company-provided leased
automobile.
4. All share and per share amounts have been adjusted to reflect the Company's
April 15, 1999, 3-for-2 stock split.
5. (a) On October 17, 1997, the Committee granted Mr. Armstrong an award of
157,995 restricted shares and 336,841 restricted stock units to replace
grants from Hughes Electronics Corporation ("Hughes") which were forfeited
upon his termination from Hughes. The value of these awards, as of the
original grant date, is reflected in the table. The vesting schedule for
these grants mirrors that applicable to the original grants from Hughes.
16,418 of the restricted shares vested May 1, 1998; 12,423 vested October
17, 1998; 28,608 vested January 1, 1999; 16,416 vested May 1, 1999; 12,423
vested October 17, 1999. Of the remaining 43,856 shares, 27,441 vested
January 1, 2000, and 16,415 vest May 1, 2000. The remaining restricted
shares and all the restricted stock units vest October 17, 2000, or later.
Dividends on the restricted shares and dividend equivalents on the
restricted units are paid to Mr. Armstrong in cash.
(b) On January 29, 1999, Messrs. Zeglis, Somers, Ianna, and Petrillo
received a special award of restricted stock units of 102,000; 65,100;
65,100; and 57,000 units, respectively. The value of these awards, as of the
original grant date, is reflected in the table. These units vest upon the
earlier of retirement or attainment of age 65 and carry penalties for
competition and other specified adverse activities. Dividends on the units
are paid in cash to Messrs. Zeglis, Somers, Ianna, and Petrillo.
(c) On October 15, 1997, an award of 15,000 restricted stock units was
granted to Mr. Somers. The value, as of the original grant date, of these
restricted stock units is reflected in the table. The grant vests on
51
<PAGE>
October 15, 2001, assuming continued employment and carries penalties
for competition and other specified adverse activities. Dividends on the
units are paid in cash to Mr. Somers.
The aggregate number (and value) of each of the Named Officers at
December 31, 1999 for outstanding restricted stock and restricted stock unit
awards was: Mr. Armstrong 408,548 ($20,733,811); Mr. Zeglis 141,759
($7,194,269); Mr. Somers 80,100 ($4,065,075); Mr. Ianna 65,100 ($3,303,825);
and Mr. Petrillo 57,000 ($2,892,750).
6. Includes distributions in 1997, 1998, and 1999 to Mr. Zeglis of performance
shares or stock units as to which three-year performance periods ended
December 31, 1996, December 31, 1997, and December 31, 1998, respectively.
Includes distributions in 1997 to Mr. Ianna and Mr. Petrillo; and in 1998
and 1999 to Messrs. Somers, Ianna, and Petrillo of stock units as to which
three-year performance criteria, in recognition of the Company's
restructuring and the difficulty of setting long-term financial targets
while the restructuring was in progress, were deemed to have been met at the
target level.
7. In 1999, includes (a) Company contributions to savings plans (Mr. Armstrong
$6,400, Mr. Zeglis $6,400, Mr. Somers $6,400, Mr. Ianna $5,917, and Mr.
Petrillo $5,928); (b) dollar value of the benefit of premiums paid for
split-dollar life insurance policies (unrelated to term insurance coverage)
projected on an actuarial basis (Mr. Armstrong $219,099, Mr. Zeglis $13,224,
Mr. Somers $56,847, and Mr. Petrillo $6,776); and (c) payments equal to lost
Company savings match caused by IRS limitations (Mr. Armstrong $49,601,
Mr. Zeglis $21,600, Mr. Somers $13,600, Mr. Ianna $10,160, and Mr. Petrillo
$11,000). In addition, for Mr. Armstrong, includes a $2,293,714 Company-paid
premium in 1998 to purchase a split-dollar survivorship insurance policy
insuring Mr. Armstrong and his spouse, as specified in his employment
agreement described on page 57. Interest was accrued on the $2,050,000 base
amount from Mr. Armstrong's hire date of October 17, 1997 through
November 6, 1998, the date of the premium payment, at the interest rate in
effect for the Senior Management Incentive Award Deferral Plan in 1998.
In 1997, for Messrs. Ianna and Petrillo, includes deposits into an
individual non-qualified supplemental retirement deferral account in the
amount of $828,000 and $870,000, respectively.
52
<PAGE>
AGGREGATED OPTION/STOCK APPRECIATION RIGHTS
("SAR") EXERCISES IN 1999 AND YEAR-END VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF $ VALUE OF
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
NUMBER OF AT YEAR END AT YEAR END
SHARES ------------- -------------
ACQUIRED $ VALUE EXERCISABLE/ EXERCISABLE/
NAME(2) ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- -------------------------------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
C. Michael Armstrong............ 150,000 $2,459,370 123,410 $ 0
1,875,000 $26,288,940
John D. Zeglis(3)(4)............ 0 $ 0 1,158,625 $30,878,655
840,502 $ 2,616,691
Daniel E. Somers................ 15,000 $ 497,187 141,498 $ 2,952,637
693,002 $ 2,951,529
Frank Ianna..................... 0 $ 0 250,517 $ 5,473,011
496,004 $ 1,423,581
John C. Petrillo................ 77,726 $3,009,944 311,048 $ 6,931,421
445,001 $ 1,460,712
</TABLE>
FOOTNOTES
1. All share and per share amounts have been adjusted to reflect the Company's
April 15, 1999 3-for-2 stock split.
2. Includes Chairman of the Board and Chief Executive Officer and the four
other most highly compensated individuals who were executive officers of
AT&T at the end of 1999, as measured by salary and bonus.
3. A portion of the outstanding stock options for Mr. Zeglis was converted in
connection with the Company's restructuring into a combination of adjusted
AT&T options and SARs exercisable with respect to Lucent and/or NCR shares.
This balancing of risk and opportunity among the three companies mirrored
the impact that the restructuring had on the Company's shareholders. The
conversion was awarded to Mr. Zeglis by virtue of his membership on the
Transition Steering Committee, the charter of which was to ensure the
creation of three healthy independent companies as a result of the
restructuring. Consistent with accounting principles governing such
conversion, the adjusted options and SARs retain the same term and vesting
provision as the original options.
4. For Mr. Zeglis, includes adjusted AT&T options and Lucent and NCR SARs.
53
<PAGE>
LONG-TERM INCENTIVE PLANS-AWARDS IN 1999(1)
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
PERFORMANCE NON-STOCK PRICE-BASED PLANS
NUMBER OF PERIOD UNTIL ------------------------------------
PERFORMANCES MATURATION THRESHOLD TARGET MAXIMUM
NAME(2) SHARES OR PAYOUT (#) (#)(3) (#)
- ------------------------------- ------------- ---------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
C. Michael Armstrong........... 75,000 1999-2001 18,750 75,000 150,000
John D. Zeglis................. 31,500 1999-2001 7,875 31,500 63,000
Daniel E. Somers............... 24,350 1999-2001 6,088 24,350 48,700
Frank Ianna.................... 15,750 1999-2001 3,938 15,750 31,500
John C. Petrillo............... 13,800 1999-2001 3,450 13,800 27,600
</TABLE>
FOOTNOTES
1. All share amounts have been adjusted to reflect the Company's April 15, 1999
3-for-2 stock split.
2. Includes Chairman of the Board and Chief Executive Officer and the four
other most highly compensated individuals who were executive officers of
AT&T at the end of 1999, as measured by salary and bonus.
3. In January 1999, the Performance Share Awards listed in the table were made.
If they remain Named Officers at December 31, 2001, the payout value of
these awards to Messrs. Armstrong, Zeglis, Somers, Ianna, and Petrillo would
be (i) 0.13% of the Company's net cash provided by operating activities for
each year in the performance period, divided by the total number of Named
Officers receiving payouts for the period ending December 31, 2001, or
(ii) a lesser amount, based on factors such as targets for the Company's
earnings, return to equity, cash flow, and total shareholder return for the
period.
54
<PAGE>
OPTION/SAR GRANTS IN 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
---------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS EXERCISE GRANT
UNDERLYING GRANTED TO OR DATE
OPTIONS/ EMPLOYEES BASE PRESENT
SARS IN PRICE EXPIRATION VALUE(7)
NAME(2) GRANTED(3) FISCAL YEAR ($/SH) DATE ($)
- ----------------------------------- ------------- ----------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
C. Michael Armstrong(4)(5)......... 450,000 0.93% 59.8750 1/29/09 8,083,125
123,410 0.26% 58.7813 1/30/08 2,176,260
John D. Zeglis(6).................. 157,500 0.33% 59.8750 1/29/09 2,829,094
510,000 1.60% 59.8750 1/29/09 9,160,875
Daniel E. Somers(6)................ 99,000 0.21% 59.8750 1/29/09 1,778,288
325,500 0.68% 59.8750 1/29/09 5,846,794
122,000 0.25% 46.9688 11/16/09 1,719,058
Frank Ianna(6)..................... 79,500 0.17% 59.8750 1/29/09 1,428,019
325,500 0.68% 59.8750 1/29/09 5,846,794
John C. Petrillo(6)................ 69,000 0.14% 59.8750 1/29/09 1,239,413
285,000 0.59% 59.8750 1/29/09 5,119,313
</TABLE>
FOOTNOTES
1. All share and per share amounts have been adjusted to reflect the Company's
April 15, 1999 3-for-2 stock split.
2. Includes Chairman of the Board and Chief Executive Officer and the four
other most highly compensated individuals who were executive officers of
AT&T at the end of 1999, as measured by salary and bonus.
3. Options become exercisable to the extent of one-third of the grant on the
third, fourth and fifth anniversaries of the grant date, respectively.
4. On May 20, 1999, Mr. Armstrong was awarded a stock option grant for 123,410
shares under the Ownership Acceleration Option Program, further explained in
footnote 5, upon the exercise of an outstanding grant and his agreement to
retain 26,590 net shares for a period of five years. This new grant vested
six months from the date of grant and carries the terms and conditions of
the original grant.
55
<PAGE>
5. In an effort to encourage senior officers of AT&T to increase their
ownership in the Company, and to meet specific ownership targets which have
been established for senior officers, an Ownership Acceleration Option
Program (the "Program") has been adopted for use under the AT&T 1997 Long
Term Incentive Program (as amended, the "Plan"). Under the Program, any
active senior officer of the Company is eligible to exercise an outstanding
stock option grant, under rules established by the Committee, and agree to
hold the shares received upon such exercise (net of any shares sold to pay
the exercise price of the stock option and applicable taxes) for a period of
five years. The Company will then award as of the date of such exercise a
new stock option grant equal to the number of shares which were sold to pay
the exercise price and taxes. The new option grant has a grant price as
provided for under the Plan, vests six months after the date of the new
grant, and has other terms equivalent to those of the original grant which
was exercised. The net shares are held by the Company and will not be
released to the employee until a five year holding period has been
satisfied. For 1999 only, the Committee established special rules which
allowed senior officers to participate in the program through the use of a
cashless exercise procedure, pursuant to which proceeds from the sale of
shares were used to pay both the exercise price of the option and applicable
taxes.
6. On January 29, 1999, Messrs. Zeglis, Somers, Ianna, and Petrillo were
awarded a special stock option grant of 510,000; 325,500; 325,500; and
285,000 shares, respectively. These grants vest one-third of the shares on
the third, fourth and fifth anniversary dates of the grant, respectively, or
earlier, upon retirement or attainment of age 65 and carry penalties for
competition and other specified adverse activities.
7. 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 of
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: an option term of 7 years, volatility of
23.00%, dividend yield at 2.20%, and interest rate of 5.57%. The real value
of the options in this table depends upon the actual performance of the
Company's stock during the applicable period.
56
<PAGE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
AT&T entered into an employment agreement with Mr. Armstrong dated
October 17, 1997. The agreement provided for an initial base salary of
$1,400,000 per year. It also provided for a guaranteed annual incentive award
for the 1998 performance year of no less than 100% of his then base salary, and
for 1998 and 1999 performance shares/stock units granted under the 1997 LTIP, a
guaranteed grant value equivalent to no less than 100% of his base salary at the
time of grant. Mr. Armstrong was eligible for annual stock option awards
commencing in 1998 in accordance with the Committee-approved compensation
structure for such years.
To address certain forfeitures experienced when Mr. Armstrong left his
previous employer, the Company paid a premium of $2,050,000 to purchase a
split-dollar survivorship insurance policy insuring Mr. Armstrong and his
spouse. Such policy will, upon the death of the last surviving insured, provide
insurance proceeds equal to the sum of the face amount of the policy and the
policy's cash value. An amount equal to the policy face amount shall be payable
to Mr. Armstrong's beneficiaries or to a trust which may be established to own
Mr. Armstrong's interest in such policy. The balance of the proceeds will be
paid to the Company, and, from its share of the death benefit, the Company will
pay a Company-paid death benefit to Mr. Armstrong's beneficiaries equal to the
death benefit received by the Company, minus the Company-paid premium. The face
amount of such split-dollar survivorship insurance policy will be determined in
accordance with the underwriting requirements of the insurance company providing
such coverage based on the Company's premium payment of $2,050,000 and
additional premium payments, if any, that Mr. Armstrong may become eligible for
under any similar program adopted by the Company for its senior executives and
in which Mr. Armstrong elects to participate.
In accordance with his employment agreement, Mr. Armstrong was also granted
AT&T Restricted Stock, AT&T Restricted Stock Units, and AT&T Stock Options under
the 1997 LTIP to replace similar grants forfeited from his prior employer and to
provide strong incentives to create shareholder value for AT&T shareowners.
57
<PAGE>
Details of these grants follow:
1. He was granted 157,995 shares of AT&T Restricted Stock, of which 86,288
shares vested in 1998 and 1999. The remaining 71,707 shares vest as
follows: 27,441 shares on January 1, 2000; 16,415 shares on May 1, 2000;
12,423 shares on October 17, 2000; 3,007 shares on May 1, 2001; and
12,421 shares on October 17, 2001.
2. Mr. Armstrong was also granted 336,841 AT&T Restricted Stock Units,
which vest on October 1, 2003, assuming continued employment, with a
guarantee that, in the event the fair market value of the AT&T shares
furnished to Mr. Armstrong on October 1, 2003 is less than $10,000,000,
such shortfall will be made up in cash by the Company. In the event of
(a) a Change in Control (as defined) on or before April 1, 2002 and a
subsequent (within 3 years) Company-initiated termination for other than
"cause" (as defined) or Constructive Termination Without Cause (as
defined) or (b) Mr. Armstrong's death, special vesting rules apply.
3. Mr. Armstrong was granted an option to purchase, within ten years,
1,125,000 shares of AT&T Common Stock, with a purchase price of $29.6876
per share. These options vest one-third each on October 17, 2000, 2001,
and 2002, based on continued employment.
As part of his employment agreement, the Company entered into a supplemental
pension arrangement with Mr. Armstrong. Pursuant to such arrangement,
Mr. Armstrong will receive an annual benefit (as defined in the employment
agreement) commencing at his retirement at or after age 65. Such benefit will
vest 20% per year on each of the first five anniversaries of his hire, and will
be payable in actuarially-reduced amounts for retirement and commencement prior
to age 65. Pension benefits payable under this arrangement will be paid out of
the Company's operating income, and will be offset by (1) all amounts actually
received by Mr. Armstrong under any other Company qualified or non-qualified
retirement plan or arrangement, and (2) the greater of (a) $655,642 or (b) the
actual pension benefits to be paid to Mr. Armstrong
58
<PAGE>
with respect to that year by his prior employers under their qualified and
non-qualified defined benefit plans. In addition, Mr. Armstrong will be entitled
to certain other post-retirement benefits that are generally made available from
time to time to retired executive officers and service-pension-eligible senior
managers.
Mr. Armstrong's agreement provides for certain entitlements in the event of
his termination from AT&T under specified circumstances. Pursuant to his
agreement, in the event of Mr. Armstrong's death, his beneficiaries or estate
will be entitled to his base salary through the end of his month of death, his
target annual incentive award for the year of death, a lump sum payout at target
for each open long-term incentive program performance cycle, and payment of
survivor benefits under his supplemental pension arrangement which vests 100% at
his death. All outstanding unvested stock options will vest and together with
already vested options will be exercisable for the remainder of the original
term of each grant; restrictions on the restricted stock granted as part of his
agreement will lapse; restricted stock units granted in his agreement will be
payable in accordance with the schedule established in his Restricted Stock Unit
Award Agreement (20% to 100% of units granted will be payable, depending on the
date of death) in the event of his death prior to the vesting of such restricted
stock units on October 1, 2003.
Mr. Armstrong's agreement also provides that in the event his employment is
terminated as a result of disability (as defined), he shall be entitled to
receive disability benefits in accordance with the long-term disability program
then in effect for Senior Managers. In addition, base salary, annual incentive,
stock options, restricted stock, and restricted stock units shall be treated in
the same manner as described above in the case of death. Treatment of long-term
incentives will be as described above in the case of death, provided, however,
payment will be in accordance with the terms of the plan instead of a lump sum.
Pension benefits under his supplemental pension arrangement will vest and will
be offset by any Company-provided disability benefits.
In the event of a termination for "cause" (as defined) or in the event of a
voluntary resignation, other than a termination due to death or disability or a
Constructive Termination (as defined) without "cause" or retirement on
October 31, 2003, Mr. Armstrong will forfeit all restricted stock and
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restricted stock units as to which restrictions have not lapsed, long-term
incentives with respect to uncompleted performance cycles, outstanding stock
options which are not exercisable, and any pension benefit not yet vested under
his Supplemental Pension Arrangement. He will receive base salary through his
date of termination, and vested stock options shall remain exercisable for
90 days after termination or until the originally scheduled expiration date, if
earlier.
In the event of a Company-initiated termination for other than "cause" or in
the event of a Constructive Termination without "cause," neither of which follow
within three years of a Change in Control (as defined), Mr. Armstrong will be
provided the following: base salary through the date of termination, a prorated
annual incentive award at target for the year of termination, a 24-month
continuation of monthly base salary, or at his option, the lump-sum present
value of such payments (using the short-term Treasury bill rate for the month of
termination); two times the target annual incentive award for the year of
termination payable over 24 months, or at his option, the lump-sum present value
of such payments (using the short-term Treasury bill rate for the month of
termination); and payout at target for each open long-term incentive program
performance cycle in accordance with the plan or in a lump sum as described
above. In addition, all outstanding unvested stock options will vest and
together with already vested options will be exercisable for the remainder of
the original term of each grant; restrictions on the restricted stock granted as
part of his agreement will lapse; and his supplemental pension benefit shall
fully vest. For a period of 24 months following his termination, or, if earlier,
until he receives equivalent coverage and benefits from another employer,
Mr. Armstrong will be entitled to continued participation in AT&T's benefit
plans and programs.
In the event of Mr. Armstrong's retirement as of October 31, 2003, he will
be entitled to payment of his supplemental pension and will be treated in
accordance with the plans, programs, and practices applicable to retired Senior
Managers.
Mr. Armstrong's agreement provides that in the event of a Change in Control,
all amounts and benefits to which he is entitled but are not yet vested (except
with respect to his restricted stock unit grant which is governed by the terms
of the grant agreement) shall become fully vested.
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In addition, in the event of a Company-initiated termination or a Constructive
Termination without "cause" following a Change in Control, he shall be entitled
to the benefits described above in connection with a Company-initiated
termination without "cause" or a Constructive Termination without "cause" not
associated with a Change in Control provided, however: (1) the number of months
associated with salary, annual incentive, and benefits continuation shall be
48 months, and such amounts will be payable as a lump sum as soon as practicable
after his termination; and (2) restricted stock units granted in his agreement
will be payable in accordance with the schedule established in his Restricted
Stock Unit Award Agreement (25% to 100% of units granted will be payable,
depending on date of termination). In the event the payments in this paragraph
are determined to constitute a payment under Section 280G(b)(2) of the Internal
Revenue Code and such payment is subject to an excise tax under Section 4999 of
the Code, the Company will provide Mr. Armstrong with a tax gross-up payment to
negate the excise tax.
In the event of any termination described above, Mr. Armstrong or his estate
shall also be entitled to the unpaid balance of any incentive awards for
completed performance periods, any expense reimbursements due him, and other
benefits in accordance with applicable plans and programs.
AT&T entered into an employment agreement with Mr. Somers dated as of
April 1997. The agreement provided for an initial base salary of $500,000. It
also provided for a guaranteed annual incentive award for 1997 performance of no
less than 80% of his then base salary prorated for his partial service in 1997.
Mr. Somers was also provided 17,400 Performance Shares covering the 1997-1999
performance period and an option to purchase, within ten years, up to 129,000
shares of AT&T Common Stock with a purchase price of $24.0417 per share. These
options vest one-third each on June 1, 1998, 1999, and 2000, based on continued
employment.
To address certain forfeitures experienced when Mr. Somers left his previous
employer and to incent him to join the Company, the agreement provided for
(i) a payment of $238,000 to replace a forfeited bonus from his prior employer;
(ii) a payment of $337,000 to replace forfeited spread
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on stock options of his prior employer; (iii) a signing bonus of $200,000; and
(iv) two awards each consisting of 17,400 Performance Shares/Stock Units for the
1995-1997 and 1996-1998 performance periods, respectively.
As part of his employment agreement, the Company entered into an arrangement
with Mr. Somers that will provide him with certain benefits in the event that he
terminates his employment after ten years of employment for any reason other
than death or Company-initiated termination for "cause." Pursuant to such
arrangement, he will be entitled to a death benefit of two and one-half times
base salary under the Company's life insurance program for Senior Managers and
for Company-sponsored medical coverage.
In the event Mr. Somers is terminated by the Company, at any time for any
reason other than "cause" or "long-term disability" (as both terms are defined
in the agreement) or in the event of self-initiated termination by Mr. Somers
for "good reason" (as defined in the agreement) following a Change in Control,
Mr. Somers will be provided the following: immediate vesting and continuation of
all Stock Options granted under the agreement as if he were eligible for Company
post-retirement benefits, and continuation of vesting and/or exercisability of
all long-term incentive awards granted in 1998 and later years under the terms
and conditions applicable to Senior Managers terminating employment with
eligibility for post-retirement benefits.
In the event Mr. Somers is terminated by the Company at any time within five
years of his date of hire for any reason other than "cause" or "long-term
disability" or in the event of self-initiated termination by Mr. Somers for
"good reason" following a Change in Control, Mr. Somers will be provided the
following: a severance benefit, payable over twelve months, equivalent to the
greater of $900,000 or 100% of the sum of his annual base salary plus target
annual incentive awards in effect at termination; a prorated target annual
incentive for his year of termination and continuation of all Performance
Shares/Stock Units granted under the agreement under the terms and conditions
applicable to Senior Managers terminating employment with eligibility for
post-retirement benefits.
In 1997, the Company adopted the Special Executive Severance Plan
("Severance Plan") for members of the Operations Team as constituted at
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that time and certain members of the Senior Management Team (a total of ten
executives, seven of whom remain with the Company). Under the Severance Plan if
covered executives (i) are terminated by the Company for other than "cause" (as
defined in the Severance Plan) or (ii) self-initiate termination for "good
reason" (as defined in the Severance Plan), they will be provided a severance
payment equivalent to two times the sum of base salary plus target annual
incentive in effect at termination. The severance amount payable may be deferred
for up to five years with five annual payments thereafter and will be credited
with interest based on the interest rate formula in effect for the Senior
Management Incentive Award Deferral Plan on the Severance Plan effective date.
In addition, covered executives who terminate under the terms of the Severance
Plan will be entitled to certain other post-termination benefits that are
generally made available from time to time to retired executive officers and
service-pension-eligible senior managers.
PENSION PLANS
The Company maintains the AT&T Management Pension Plan, a non-contributory
pension plan which covers all management employees, including the Named Officers
listed in the Summary Compensation Table. The normal retirement age under this
plan is 65; however, retirement before age 65 can be elected under certain
conditions.
The AT&T Management Pension Plan was amended in 1997 to update the adjusted
career average pay formula for computing pensions. Effective August 1, 1997, the
adjusted career average pay formula was 1.6% of the average annual pay for the
three years ending December 31, 1996, times the lesser of (a) 105% of the number
of years of service prior to January 1, 1997 or (b) the number of years of
service prior to January 1, 1997 plus one. Only the basic salary was taken into
account in the formula used to compute pension amounts for the Named Officers
and other senior managers under the adjusted career average pay formula. No
service or compensation after December 31, 1996 was used in calculating an
employee's normal retirement benefit under the adjusted career average pay
formula.
Effective January 1, 1998, the AT&T Management Pension Plan was further
amended to convert the plan to a cash balance design. Under the
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new design, a hypothetical cash balance account is established for each
participant for record-keeping purposes. Each year a participant's cash balance
account is credited with (a) a pay credit based on the participant's age and
eligible pay for that year, and (b) an interest credit based on the
participant's account balance as of the end of the prior year. Effective
January 1, 1998, an eligible participant's cash balance account received an
initial credit based on a conversion benefit equal to the participant's normal
retirement benefit under the adjusted career average pay formula described above
multiplied by a conversion factor based on the participant's age as of
December 31, 1996. The initial pay credit was made as of January 1, 1998 based
on the participant's eligible pay for 1997, and the initial interest credit was
made as of January 1, 1998 based on the conversion benefit. Only basic salary is
considered eligible pay under the cash balance design for the Named Officers and
other senior managers. Interest credits are calculated at the effective annual
rate of 7% for calendar years 1997, 1998, and 1999. Under the cash balance
design, a participant's benefit is determined by projecting interest credits to
his or her cash balance account to age 65, converting the projected cash balance
account to an annuity, and reducing that annuity for early commencement. A
participant's benefit under the plan after conversion to the cash balance design
will be no less than the benefit calculated under the career average pay formula
as adjusted in 1997.
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. Armstrong, Zeglis, Somers, Ianna, and
Petrillo, and other senior managers are computed based on actual annual bonus
awards under the Company's Short Term Incentive Plan. Pension benefits under
this plan will 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 no
less than the greater of the amounts computed under the Basic Formula or
Alternate Formula which were amended in 1997 and are described below.
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BASIC FORMULA
For the three-year period ending December 31, 1996, 1.6% of the average of
the actual annual bonus awards times the lesser of (a) 105% of the number of
years of service prior to January 1, 1997 or (b) the number of years of service
prior to January 1, 1997 plus one.
ALTERNATE FORMULA
The excess of (a) 1.7% of the adjusted career average pay over (b) 0.8% of
the covered compensation base times the lesser of (i) 105% of the number of
years of service prior to January 1, 1997 or (ii) the number of years of service
prior to January 1, 1997 plus one, 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 the average annual compensation for the three-year period ending
December 31, 1996, without regard to the limitations imposed by the Internal
Revenue Code. 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 1996. In 1996, the covered
compensation base was $27,600.
No service or compensation after December 31, 1996 is used to calculate an
employee's normal retirement benefit under the Basic Formula or Alternate
Formula.
Effective January 1, 1998, the AT&T Non-Qualified Pension Plan was further
amended to convert the plan to a cash balance pension design. Under the new
design, a hypothetical cash balance account is established for each participant
for record-keeping purposes. Each year a participant's cash balance account is
credited with (a) an award credit based on the participant's age and short-term
award paid in that year and (b) an interest credit based on the participant's
account balance as of the end of the prior year. Effective January 1, 1998, an
eligible participant's cash balance account received an initial credit based on
a conversion benefit equal to the participant's normal retirement benefit under
the Basic
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Formula described above multiplied by a conversion factor based on the
participant's age as of December 31, 1996. The initial award credit was made as
of January 1, 1998 based on the participant's short-term award paid in 1997 and
the initial interest credit was made as of January 1, 1998 based on the
conversion benefit. Interest credits are calculated at the effective annual rate
of 7% for calendar years 1997, 1998, and 1999. Under the cash balance design, a
participant's benefit is determined by projecting interest credits to his or her
cash balance account to age 65, converting the projected cash balance account to
an annuity, and reducing that annuity for early commencement in the same manner
as under the AT&T Management Pension Plan.
Senior Managers, including Mr. Zeglis, 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 qualified managers retiring with at least five
years at a senior level, the plan provides additional credits at approximately
one-half the rate in the AT&T Management Pension Plan. The number of credits is
equal to the lesser of (1) actual years of net credited service at retirement,
or (2) the employee's age at the time of hire minus 30. In addition, the AT&T
Mid-Career Pension Plan was amended to provide that liability with respect to
senior managers actively employed on January 1, 1998 be transferred to the AT&T
Non-Qualified Pension Plan and converted to cash balance as described above.
Pension amounts under 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. Armstrong, Zeglis, Somers, Ianna, and Petrillo continue in the positions
as previously stated and retire at the normal retirement age of 65, the
estimated annual pension amount payable under the AT&T Management Pension Plan
formula and the AT&T Non-Qualified Pension Plan would be $525,800, $1,430,100,
$801,000, $1,019,000, and $979,100, respectively. Amounts shown are straight
life annuity amounts not reduced by a joint and survivorship provision which is
available to these officers.
In 1997, the Company began purchasing annuity contracts to satisfy its
unfunded obligations to retired senior managers under the AT&T Non-Qualified
Pension Plan. In the event the Company purchases an
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annuity contract for any of the Named Officers, the pension payments for such
officer will vary from that set forth above. In such instance 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. Receipt of
the annuity is contingent on the signing of a two-year non-competition agreement
which, should competitive activity occur within the two-year period, gives the
Company the right to seek injunctive relief and to recapture any amounts already
paid out under the annuity contract.
In 1997, the Company entered into a supplemental pension arrangement with
Mr. Zeglis. Pursuant to Mr. Zeglis's arrangement, if employment is terminated
for any reason other than (i) Company-initiated termination for "cause" (as
defined in the arrangement) or (ii) self-initiated termination prior to age 52
for other than "good reason" (as defined in the arrangement), he will be
entitled to the supplemental pension. Under the supplemental pension
arrangement, Mr. Zeglis is entitled to pension benefits determined under the
then-existing Company qualified and non-qualified pension formulas, using
January 1, 1973 as a date of hire, and subject to a minimum amount. Pension
benefits payable under this arrangement will be paid out of the Company's
operating income, and will be offset by all amounts actually received by
Mr. Zeglis under any then-existing Company qualified and/or non-qualified
retirement plans. In addition, Mr. Zeglis will be entitled to certain other
post-retirement benefits that are generally made available from time to time to
retired executive officers and service-pension-eligible senior managers.
Pursuant to the supplemental pension arrangement for Mr. Zeglis, if he continues
in the position previously stated and retires at the normal retirement age of
65, the estimated annual supplemental pension amount, in addition to the pension
payable under the AT&T Management Pension Plan and AT&T Non-Qualified Pension
Plan described above, would be $140,900.
In 1997, the Company also entered into a special individual non-qualified
supplemental retirement arrangement with three executive officers including
Messrs. Petrillo and Ianna. Under this agreement, on November 1, 1997 a deferred
account (hereinafter "Deferred Account")
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was credited with an initial balance of two times base pay. The Company shall
credit interest to the Deferred Account as of the end of each calendar quarter
at a rate equal to one-quarter of the average 30-Year Treasury Bond Rate in
effect for the last previous quarter. Pursuant to the arrangement, if
(i) employment is terminated by the Company for any reason other than "cause"
prior to the vesting date or (ii) employee self-initiates termination prior to
the vesting date for "good reason" (as defined in the arrangement), he will be
entitled to the Deferred Account. The vesting date for the officers named above
is the sixth anniversary of the "effective date" (as defined in the
arrangement). The Deferred Account will be maintained as a bookkeeping account
on the records of the Company and the named officers have no present ownership
right or interest in the Deferred Account, or in any assets of the Company with
respect thereto.
As part of his employment agreement as described above, the Company entered
into a supplemental pension arrangement with Mr. Armstrong in 1997. Pursuant to
Mr. Armstrong's arrangement, if he continues in his position as previously
stated and retires at the normal retirement age of 65, the estimated pension
amount payable under the agreement, which supplements the annual pension amount
payable under the AT&T Management Pension Plan and the AT&T Non-Qualified
Pension Plan, would be $1,202,500.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
HOSTETTER TRANSACTIONS
The Company, Meteor Acquisition Inc., and MediaOne Group Inc. ("MediaOne")
entered into an Agreement and Plan of Merger dated as of May 6, 1999. Amos B.
Hostetter, Jr., a significant shareholder of MediaOne, assisted AT&T in
negotiating an agreement, to the extent permitted by his shareholder agreement
with MediaOne. Upon consummation of the merger, each holder of MediaOne Common
Stock will receive, at their election and subject to proration, 1.4912 shares of
AT&T Common Stock, $85.00 in cash or $30.85 in cash and 0.95 of a share of AT&T
Common Stock. In addition, to the extent that the price of AT&T's Common Stock
is less than $57.00 per share during a prescribed
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measurement period shortly prior to the closing, MediaOne stockholders receiving
AT&T Common Stock in the merger will also receive an additional cash payment to
account for the difference between the actual price of AT&T Common Stock
(subject to a floor of $51.30) and $57.00. For shares subject to the cash and
stock election, the maximum additional cash payment will be $5.42 per share, and
for shares subject to the all-stock election, the maximum additional cash
payment will be $8.50 per share. On July 21, 1999, Mr. Hostetter was elected to
serve on the AT&T Board of Directors. The consummation of the MediaOne merger
remains subject to the receipt of regulatory and contractual approvals.
MALONE TRANSACTIONS
On February 9, 1998, in connection with a settlement with the estate of Bob
Magness (the "Magness Settlement"), TCI entered into a call agreement (the
"Malone Call Agreement") with Dr. John C. Malone and Dr. Malone's wife (together
with Dr. Malone, the "Malones"), under which the Malones granted to TCI the
right to acquire any shares of TCI's common stock which are entitled to cast
more than one vote per share (the "High-Voting Shares") owned by the Malones
upon Dr. Malone's death or upon a contemplated sale of the High-Voting Shares
(other than a minimal amount) to third persons. In either such event, TCI had
the right to acquire such shares at a maximum price equal to the then relevant
market price of shares of "low-voting" Series A common stock plus a 10 percent
premium. The Malones also agreed that if TCI were ever to be sold to another
entity, then the maximum premium that the Malones would receive on their
High-Voting Shares would be no greater than a 10 percent premium over the price
paid for the relevant shares of Series A common stock. In connection with the
merger of TCI and a subsidiary of AT&T (the "Merger"), the TCI Group Series B
Stock was converted into AT&T Common Stock at a ten percent premium to the
exchange ratio applicable to the TCI Series A Stock. TCI paid $150 million to
the Malones in consideration of their entering into the Malone Call Agreement.
Additionally, on February 9, 1998, the Magness family entered into a
Shareholders' Agreement (the "Shareholders' Agreement") with the Malones and
TCI.
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In connection with the Merger, Liberty Media Corporation ("Liberty") became
entitled to exercise TCI's rights under each Call Agreement and the
Shareholders' Agreement with respect to the Liberty Media Group Class B Tracking
Stock acquired by the Malones and the Magness family as a result of the Merger.
Prior to the Merger, Dr. Malone acquired from certain subsidiaries of TCI
for $17 million, working cattle ranches located in Wyoming which were owned by
Silver Spur Land and Cattle Co. and Bob Magness, Inc. The purchase consideration
paid by Dr. Malone was in the form of a 12-month note in the amount of
$17 million having an interest rate of 7%. Such note was repaid by Dr. Malone on
March 9, 2000. In connection with the Merger, Dr. Malone's employment agreement
with TCI was transferred to Liberty and Liberty assumed TCI's obligations
thereunder.
TRANSACTIONS IN CONNECTION WITH THE MERGER
MANAGEMENT MATTERS: Following the Merger, Dr. Malone became Chairman of
Liberty. Pursuant to an agreement between AT&T and TCI, Dr. Malone was appointed
to the AT&T Board of Directors effective March 17, 1999. AT&T has also agreed
that, for a period of three years, it will nominate Dr. Malone for reelection to
the Board of Directors.
STOCK OWNERSHIP: In the Merger, holders of Liberty Group Series A Stock and
TCI Ventures Group Series A Stock, respectively, received shares of Liberty
Media Group Class A Tracking Stock that entitle such holders to cast 0.075 of a
vote per share (as adjusted for the 1999 stock splits). In the Merger, holders
of Liberty Group Series B Stock and TCI Ventures Group Series B Stock,
respectively, received shares of Liberty Media Group Class B Tracking Stock that
entitle such holders to cast 0.75 of a vote per share (as adjusted for the 1999
stock splits). The distinction between the shares of Liberty Media Group
Class A Tracking Stock and Liberty Media Group Class B Tracking Stock maintains
the 10-to-1 voting ratio between the holders of Liberty Group Series B Stock and
TCI Ventures Group Series B Stock on the one hand and the holders of Liberty
Group Series A Stock and TCI Ventures Group Series A Stock on the other hand. As
of December 31, 1999, the Malones beneficially owned 97,546,022 shares
(including 47,791,166 shares which are held by the Magness family and which
Dr. Malone has the right to vote pursuant to the
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terms of the Shareholders' Agreement) of Liberty Media Group Class B Tracking
Stock or approximately 89% of such shares outstanding as of such date.
Dr. Malone also beneficially owned options to acquire an additional 3,194,600
shares of Liberty Media Group Class A Tracking Stock. As a result, assuming the
exercise of his options to purchase shares of Liberty Media Group Class A
Tracking Stock and Liberty Media Group Class B Tracking Stock, Dr. Malone will
have the power to vote securities having approximately 43.4% of the voting power
with respect to any matters upon which the holders of Liberty Media Group
Class A Tracking Stock and Liberty Media Group Class B Tracking Stock will vote
as a separate class.
TCI HOLDINGS, INC.: Dr. Malone owns, as trustee for his children, 68 shares
of the 12% Series C Cumulative Compounding Preferred Stock of TCI
Holdings, Inc., a subsidiary of AT&T Broadband, LLC. In connection with the
Merger, AT&T agreed, and the terms of such preferred stock provide, that for a
period of 15 years following the effective time of the Merger, the preferred
stock may not be redeemed or modified.
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OTHER INFORMATION
A DIRECTORS' AND OFFICERS' LIABILITY POLICY WAS PLACED, EFFECTIVE JULY 1,
1997, 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 POLICY PREMIUM
FROM JULY 1, 1999 THROUGH JULY 1, 2000 IS $1,244,018. THIS INCLUDES COVERAGE FOR
NEWLY ACQUIRED COMPANIES IN 1999.
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 $35,000 plus reimbursement of reasonable
out-of-pocket expenses.
The above notice and proxy statement are sent by order of the Board of
Directors.
/s/ Marilyn J. Wasser
Marilyn J. Wasser
Vice President - Law and Secretary
Dated: March 27, 2000
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[LOGO]
32 Avenue of the Americas
New York, NY 10013-2412
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AT&T Corp.
c/o Proxy Services
P.O. Box 9398
Boston, MA 02205
115TH ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, MAY 24, 2000
9:30 a.m. local time
Arie Crown Theater
Lakeside Center at McCormick Place
2301 S. Lake Shore Drive
Chicago, Illinois 60616
(Map on Reverse Side)
ADMISSION TICKET
Please present this ticket for
admittance of shareholder(s)
named below.
- --------------------------------------------------------------------------------
VOTE BY TELEPHONE OR INTERNET
Your telephone or Internet vote authorizes the Proxy Committee to vote your
shares in the same manner as if you marked,signed, and returned your proxy card.
FOR TELEPHONE OR INTERNET VOTING, YOU WILL NEED TO ENTER YOUR INDIVIDUAL 9-DIGIT
CONTROL NUMBER LOCATED ABOVE YOUR NAME AND ADDRESS IN THE LOWER LEFT SECTION OF
THE CARD.
BY PHONE: CALL 1-800-273-1174 from any touch-tone telephone...ANYTIME.
- To vote as your Board of Directors recommends on ALL items
...PRESS 1.
- If you prefer to vote on each of the 10 items separately
...PRESS 0.
ITEM 1: To vote FOR ALL nominees...PRESS 1; to WITHHOLD FROM ALL nominees..
PRESS 9; to WITHHOLD FROM AN INDIVIDUAL nominee...PRESS 0.
NOMINEES: (01) C.M. ARMSTRONG, (02) K.T. DERR, (03) M.K. EICKHOFF,
(04) W.Y. ELISHA, (05) G.M.C. FISHER, (06) D.V. FITES, (07) A. B.
HOSTETTER, JR., (08) R.S. LARSEN, (09) J.C. MALONE, (10) D.F.
MCHENRY, (11) M.I. SOVERN, (12) S.I. WEILL, AND (13) J.D. ZEGLIS.
ITEM 2: To vote FOR...PRESS 1; to vote AGAINST...PRESS 9; to ABSTAIN...
PRESS 0.
(The voting instructions are the same for all remaining items to be
voted upon)
BY INTERNET: THE WEBSITE IS http://att.proxyvoting.com/
If you elected to vote by phone or Internet, DO NOT return your
proxy card. THANK YOU FOR VOTING.
- --------------------------------------------------------------------------------
DETACH CARD IF MAILING
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE.
YOUR DIRECTORS RECOMMEND A VOTE "FOR" ITEMS 1, 2, AND 3, AND "AGAINST" ITEMS 4,
5, 6, 7, 8, 9, AND 10.
1. Election of Directors
FOR ALL nominees / /
WITHHOLD FROM ALL nominees / /
FOR ALL EXCEPT THE FOLLOWING NOMINEE(S):
________________________________________________________
FOR AGAINST ABSTAIN
2. Ratification of Auditors / / / / / /
3. Increase Number of Shares / / / / / /
4. Political Non-Partisanship / / / / / /
5. Executive/ Officer Bonuses / / / / / /
6. Stockholder Matching Gift / / / / / /
7. Executive Pay / / / / / /
8. Financial Benefits Report / / / / / /
9. Resident Analyst / / / / / /
10. Executive Compensation Standards / / / / / /
ELECTRONIC PROXY
I prefer to access the annual report and proxy statement electronically. (No
paper copies).
ANNUAL REPORT
For multiple accounts only, mark here to discontinue extra annual report.
Signature(s): ___________________________________________ Date ___________,2000
Please sign this proxy as name(s) appears above and return it promptly whether
or not you plan to attend the annual 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 annual meeting and decide to vote by
ballot, such vote will supersede this proxy.
<PAGE>
ANNUAL MEETING AGENDA
8:30 A.M. Doors Open to the Arie Crown Theater - Lakeside Center
9:30 Welcome and Introductions, Notice of Meeting, Chairman's Remarks,
Election of Directors, Ratification of Auditors, Directors' Proposal,
and Shareholder Proposals
Voting, General Discussion, and Preliminary Voting Results
Adjournment
(AMPLIFIED HEARING EQUIPMENT WILL BE AVAILABLE ALONG WITH SIGN
INTERPRETATION)
1. FROM INDIANA VIA THE SKYWAY
From Indiana, take I-90 West (becomes the I-90 Chicago Skyway West). In turn,
I-90 becomes I-94 West (Dan Ryan Expressway). From the Dan Ryan Expressway
(I-94), take the Stevenson Expressway (I-55 North) to Lake Shore Drive South and
follow the signs to McCormick Place, Lakeside Center (East Building) - Arie
Crown Theater.
2. FROM THE NORTH, NORTHWEST, OR O'HARE AIRPORT
Take the Edens Expressway (I-94 East) to the Kennedy Expressway (I-90 East) to
the Dan Ryan Expressway (I-94 East). Stay to the right on the Dan Ryan
Expressway and take the Stevenson Expressway (I-55 North) to Lake Shore Drive
South. Follow the signs to McCormick Place, Lakeside Center (East Building) -
Arie Crown Theater.
3. FROM THE WEST
Take the Eisenhower Expressway (I-290 East) to the Dan Ryan Expressway (I-94
East). Stay to the right and take the Stevenson Expressway (I-55 North) to Lake
Shore Drive South and follow the signs to McCormick Place, Lakeside Center (East
Building) - Arie Crown Theater.
4. FROM THE SOUTH
Take the local traffic lanes on I-94 West (Bishop Ford Expressway) to the Dan
Ryan Expressway (I-94 West). From here, take the Stevenson Expressway (I-55
North) to Lake Shore Drive South and follow the signs to McCormick Place,
Lakeside Center (East Building) - Arie Crown Theater.
5. PUBLIC TRANSPORTATION
The Chicago Transit Authority (CTA) provides bus service from downtown Chicago
and Union Station to McCormick Place. In addition, the METRA electric
commuter trains provide direct rail service from the Randolph Train Station,
which is located in downtown Chicago, to McCormick Place. For further
information regarding directions, schedules, and departure/arrival times,
please contact the CTA or METRA.
Parking/Other Information - Follow the parking signs to underground Parking Lot
C (Lakeside Center - Arie Crown Theater). There is a facility fee for parking
(No full sized vans or campers are permitted). McCormick Place is in compliance
with the Americans with Disabilities Act and provides wheelchairs (reservations
are required) and designated handicapped parking for visitors.
P R O X Y
AT&T CORP.
32 AVENUE OF THE AMERICAS, NEW YORK, NY 10013-2412
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING ON MAY 24, 2000
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The undersigned hereby appoints C.M. Armstrong, M.I. Sovern, 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 shares of
the undersigned in AT&T Corp. at the annual meeting of shareholders to be held
at the Arie Crown Theater (Lakeside Center at McCormick Place), Chicago,
Illinois, at 9:30 a.m. on May 24, 2000, and at any adjournment thereof, upon all
subjects that may properly come before the meeting, including the matters
described in the proxy statement furnished with the proxy card, subject to any
directions indicated on the other side of the proxy card. IF NO DIRECTIONS ARE
GIVEN, THE PROXIES WILL VOTE FOR THE ELECTION OF ALL LISTED NOMINEES AND IN
ACCORD WITH THE DIRECTORS' RECOMMENDATIONS ON THE OTHER SUBJECTS LISTED ON THE
OTHER SIDE OF THE PROXY CARD. IN THE EVENT THAT ANY OTHER MATTER MAY PROPERLY
COME BEFORE THE MEETING, OR ANY ADJOURNMENT THEREOF, THE PROXY COMMITTEE IS
AUTHORIZED, AT THEIR DISCRETION, TO VOTE THE MATTER.
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: C.M. Armstrong, K.T. Derr, M.K. Eickhoff, W.Y. Elisha,
G.M.C. Fisher, D.V. Fites, A.B. Hostetter, Jr., R.S. Larsen, J.C. Malone, D.F.
McHenry, M.I. Sovern, S.I. Weill, and J.D. Zeglis. PLEASE SIGN ON THE OTHER SIDE
AND RETURN PROMPTLY TO AT&T CORP., C/O PROXY SERVICES, P.O. BOX 9390, BOSTON, MA
02205-9968. IF YOU DO NOT SIGN AND RETURN A PROXY CARD, VOTE BY TELEPHONE OR
INTERNET, OR ATTEND THE ANNUAL MEETING AND VOTE BY BALLOT, YOUR SHARES CANNOT BE
VOTED.
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COMMENTS:
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