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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8606
BELL ATLANTIC CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 23-2259884
(State of incorporation) (I.R.S. Employer
Identification No.)
1717 ARCH STREET
PHILADELPHIA, PENNSYLVANIA 19103
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (215) 963-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ----------------
Common Stock, $1 par value................... New York, Philadelphia,
Boston, Chicago and Pacific
Stock Exchanges
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
At February 29, 1996, the aggregate market value of the registrant's voting
stock held by non-affiliates was approximately $28,929,000,000.
At February 29, 1996, 437,646,355 shares of the registrant's Common Stock were
outstanding, after deducting 169,912 shares held in treasury.
Documents incorporated by reference:
Portions of the registrant's Annual Report to shareowners for the year ended
December 31, 1995 (Part II).
Portions of the registrant's Proxy Statement dated February 28, 1996 prepared
in connection with the Annual Meeting of Shareowners (Part III).
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TABLE OF CONTENTS
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ITEM NO. PAGE
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PART I
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1. Business................................................................................ 1
2. Properties.............................................................................. 13
3. Legal Proceedings....................................................................... 14
4. Submission of Matters to a Vote of Security Holders..................................... 15
Executive Officers of the Registrant......................................................... 15
PART II
5. Market for the Registrant's Common Equity and Related Stockholder Matters............... 15
6. Selected Financial Data................................................................. 16
7. Management's Discussion and Analysis of Financial Condition and Results of Operations.. 16
8. Financial Statements and Supplementary Data............................................. 16
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.... 16
PART III
10. Directors and Executive Officers of the Registrant...................................... 17
11. Executive Compensation.................................................................. 17
12. Security Ownership of Certain Beneficial Owners and Management.......................... 17
13. Certain Relationships and Related Transactions.......................................... 17
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................ 18
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UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MARCH 25, 1996
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PART I
ITEM 1. BUSINESS
GENERAL
Bell Atlantic Corporation (the "Company" or "Bell Atlantic") is one of the
seven regional holding companies ("RHCs") formed in connection with the court-
approved divestiture (the "Divestiture"), effective January 1, 1984, of those
assets of American Telephone and Telegraph Company ("AT&T") related to exchange
telecommunications, exchange access functions, printed directories and cellular
mobile communications.
Pursuant to the Divestiture, AT&T transferred to the Company, among other
assets, its 100% ownership interest in seven Bell System operating companies
("BOCs"): New Jersey Bell Telephone Company; The Bell Telephone Company of
Pennsylvania; The Diamond State Telephone Company; The Chesapeake and Potomac
Telephone Company; The Chesapeake and Potomac Telephone Company of Maryland; The
Chesapeake and Potomac Telephone Company of Virginia; and The Chesapeake and
Potomac Telephone Company of West Virginia (collectively, the "Network Services
Companies"). In January 1994, to facilitate the creation of a uniform "Bell
Atlantic" brand name across the territories served by these seven telephone
subsidiaries, the names of the Network Services Companies were changed to Bell
Atlantic - New Jersey, Inc. ("Bell Atlantic - New Jersey"), Bell Atlantic -
Pennsylvania, Inc. ("Bell Atlantic - Pennsylvania"), Bell Atlantic - Delaware,
Inc. ("Bell Atlantic - Delaware"), Bell Atlantic - Washington, D.C., Inc. ("Bell
Atlantic - Washington, D.C."), Bell Atlantic - Maryland, Inc. ("Bell Atlantic -
Maryland"), Bell Atlantic - Virginia, Inc. ("Bell Atlantic - Virginia") and Bell
Atlantic - West Virginia, Inc. ("Bell Atlantic - West Virginia"), respectively.
The Company was incorporated in 1983 under the laws of the State of Delaware
and has its principal executive offices at 1717 Arch Street, Philadelphia,
Pennsylvania 19103 (telephone number 215-963-6000).
LINE OF BUSINESS RESTRICTIONS AND THE TELECOMMUNICATIONS ACT OF 1996
The consent decree entitled "Modification of Final Judgment" ("MFJ") approved
by the United States District Court for the District of Columbia (the "D.C.
District Court") which, together with the Plan of Reorganization ("Plan")
approved by the D.C. District Court, set forth the terms of Divestiture also
established certain restrictions on the post-Divestiture activities of the RHCs,
including Bell Atlantic. The MFJ's principal restrictions on post-Divestiture
RHC activities included prohibitions on (i) providing interexchange
telecommunications, and (ii) engaging in the manufacture of telecommunications
equipment and customer premises equipment ("CPE").
The Telecommunications Act of 1996 (the "Act") became effective on February 8,
1996 and replaces the MFJ. In general, the Act includes provisions that would
open the telephone subsidiaries' local exchange markets to competition and would
permit local exchange carriers, such as the Company, to provide interLATA
services (long distance) and video programming and to engage in manufacturing.
However, the ability of the Company and its subsidiaries to engage in businesses
previously prohibited by the MFJ is largely dependent on satisfying certain
conditions contained in the Act and regulations to be promulgated thereunder.
The following is a brief discussion regarding certain provisions of the Act.
With regard to the rules governing competition in the interLATA market, the
Act takes a two-fold approach. Effective February 8, 1996, the Company is
permitted to apply for approval to offer interLATA services outside of the
geographic region in which it currently operates as a local exchange carrier.
The Company has announced its plans to offer such services in several states.
In addition, the Company's wireless businesses are now permitted to offer
interLATA services without having to comply with the conditions imposed in
waivers granted under the MFJ.
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Secondly, within the Company's geographic region, each of the telephone
subsidiaries must demonstrate to the FCC that it has satisfied certain
requirements in order to be permitted to offer interLATA services within its
jurisdiction. Among the requirements with which a telephone subsidiary must
comply is a 14-point "competitive checklist" which is aimed at ensuring that
competitors have the ability to connect to the telephone subsidiary's network.
A telephone subsidiary must also demonstrate to the FCC that its entry into the
interLATA market would be in the public interest.
The Act also imposes specific requirements on the telephone subsidiaries that
are intended to promote competition in the local exchange markets. These
requirements include the duty to: (i) provide interconnection to any other
carrier for the transmission and routing of telephone exchange access at any
technically feasible point; (ii) provide unbundled access to network elements at
any technically feasible point; (iii) provide retail services for resale at
wholesale prices; (iv) establish reciprocal compensation arrangements for the
origination and termination of telecommunications; and (v) provide physical
collocation.
No definitive prediction can be made as to the specific impact of the Act on
the business or financial condition of the Company. The financial impact on the
Company will be dependent on several factors, including the timing, extent and
success of competition in the Company's markets and the timing, extent and
success of the Company's pursuit of new business opportunities resulting from
the Act.
THE NETWORK SERVICES COMPANIES
GENERAL
The Network Services Companies presently serve a territory ("Territory")
consisting of 19 Local Access and Transport Areas ("LATAs"). These LATAs are
generally centered on a city or based on some other identifiable common
geography and, with certain limited exceptions, each LATA marks the boundary
within which a Network Services Company has historically been permitted to
provide telephone service.
The Network Services Companies currently provide two basic types of
telecommunications services. First, they transport telecommunications traffic
between subscribers located within the same LATA ("intraLATA service"),
including both local and toll services. Local service includes the provision of
local exchange ("dial tone"), local private line and public telephone services
(including dial tone service for pay telephones owned by the Company and other
pay telephone providers). Among other local services provided are Centrex
(telephone company central office-based switched telephone service enabling the
subscriber to make both intercom and outside calls) and a variety of special and
custom calling services. Toll service includes message toll service (calling
service beyond the local calling area) within LATA boundaries, and intraLATA
Wide Area Toll Service (WATS)/800 services (volume discount offerings for
customers with highly concentrated demand). As permitted by the Plan, Bell
Atlantic - New Jersey and Bell Atlantic - Pennsylvania also earn toll revenue
from the provision of telecommunications service between LATAs ("interLATA
service") in corridors between the cities (and certain surrounding counties) of
(i) New York, New York and Newark, New Jersey and (ii) Philadelphia,
Pennsylvania and Camden, New Jersey. Second, the Network Services Companies
provide exchange access service, which links a subscriber's telephone or other
equipment to the transmission facilities of interexchange carriers which, in
turn, provide interLATA service to their customers. Bell Atlantic -
Pennsylvania, Bell Atlantic - Delaware, Bell Atlantic - Maryland, Bell Atlantic
- - West Virginia, Bell Atlantic - Virginia and Bell Atlantic - New Jersey also
provide exchange access service to interexchange carriers which provide
intrastate intraLATA long distance telecommunications service.
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OPERATIONS
Although the Network Services Companies remain responsible within their
respective service areas for the provision of telephone services, financial
performance and regulatory matters, during 1993 Bell Atlantic reorganized
certain functions formerly performed by each of these companies into lines of
business ("LOBs") organized across the Network Services Companies around
specific market segments.
The Consumer Services LOB markets communications services to residential
customers within the Territory (11 million households and 29 million people).
1995 revenues generated by the Consumer Services LOB were approximately $4
billion, representing approximately 33% of the Network Services Companies'
aggregate revenues. These revenues were derived primarily from the provision of
telephone services to residential users.
The Carrier Services LOB markets (i) switched and special access to the
Network Services Companies' local exchange networks, and (ii) billing and
collection services, including recording, rating, bill processing and bill
rendering. 1995 revenues generated by the Carrier Services market were
approximately $2.6 billion, representing approximately 21% of the Network
Services Companies' aggregate revenues. Approximately 93% of total Carrier
Services revenues were derived from interexchange carriers; AT&T is the largest
single customer. Most of the remaining revenues came from business customers
and government agencies with their own special access network connections,
wireless companies and other local exchange carriers ("LECs") which resell
network connections to their own customers.
The Small Business Services LOB markets communications and information
services to small businesses (customers having up to 20 access lines). The
Small Business Services LOB has approximately 1.2 million small business
customers in the Territory which in 1995 generated approximately $1.8 billion in
revenues, representing approximately 15% of the Network Services Companies'
aggregate revenues.
The Large Business Services LOB markets communications and information
services to large businesses (customers having more than 20 access lines).
These services include voice switching/processing services (e.g., dedicated
private lines, custom Centrex, call management and voice messaging), end-user
networking (e.g., credit and debit card transactions, and personal computer-
based conferencing, including data and video), internetworking (establishing
links between the geographically disparate networks of two or more companies or
within the same company), network integration (integrating multiple
geographically disparate networks into one system), network optimization
(disaster avoidance, 911, intelligent vehicle highway systems), video services
(distance learning, telemedicine, videoconferencing) and interactive multi-
media applications services. 1995 revenues from the Large Business Services LOB
were approximately $1.6 billion, representing approximately 13% of the Network
Services Companies' aggregate revenues.
The Directory Services LOB manages the provision of (i) advertising and
marketing services to advertisers, and (ii) listing information (e.g., White
Pages and Yellow Pages). These services are currently provided primarily
through print media, but the Company expects that use of electronic formats will
increase in the future. In addition, the Directory Services LOB manages the
provision of photocomposition, database management and other related products
and services to publishers. 1995 revenues from the Directory Services LOB were
approximately $1.1 billion, representing approximately 9% of the Network
Services Companies' aggregate revenues.
The Public and Operator Services LOB markets pay telephone and operator
services in the Territory to meet consumer needs for accessing public networks,
locating and identifying network subscribers, providing calling assistance and
arranging billing alternatives (e.g., calling card, collect and third party
calls). 1995 revenues from the Public and Operator Services LOB were
approximately $700 million, representing approximately 6% of the Network
Services Companies' aggregate revenues.
The Federal Systems LOB markets communications and information technology and
services to departments, agencies and offices of the executive, judicial and
legislative branches of the federal government. 1995 revenues
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from the Federal Systems LOB were approximately $400 million, representing
approximately 3% of the Network Services Companies' aggregate revenues.
The Network LOB manages the technologies, services and systems platforms
required by the other LOBs and the Network Services Companies to meet the needs
of their respective customers, including switching, feature development and on-
premises installation and maintenance services.
FCC REGULATION AND INTERSTATE RATES
The Network Services Companies are subject to the jurisdiction of the Federal
Communications Commission ("FCC") with respect to interstate services and
certain related matters. The FCC prescribes a uniform system of accounts for
telephone companies, interstate depreciation rates and the principles and
standard procedures used to separate plant investment, expenses, taxes and
reserves between those applicable to interstate services under the jurisdiction
of the FCC and those applicable to intrastate services under the jurisdiction of
the respective state regulatory authorities ("separations procedures"). The FCC
also prescribes procedures for allocating costs and revenues between regulated
and unregulated activities.
The FCC has prescribed structures for exchange access tariffs to specify the
charges ("access charges") for use and availability of the Network Services
Companies' facilities for the origination and termination of interstate
interLATA service. In general, the tariff structures prescribed by the FCC
provide that interstate costs of the Network Services Companies which do not
vary based on usage ("non-traffic sensitive costs") are recovered from
subscribers through flat monthly charges ("subscriber line charges"), and from
interexchange carriers through usage-sensitive Carrier Common Line ("CCL")
charges. Traffic-sensitive interstate costs are recovered from carriers through
variable access charges based on several factors, primarily usage.
Price Caps
The price cap system, which became effective in 1991, (the "Prior Price Cap
Plan") placed a cap on overall LEC prices for interstate access services which
was modified annually, in inflation-adjusted terms, by a fixed percentage which
was intended to reflect increases in productivity. The price cap level could
also be adjusted to reflect "exogenous" changes, such as changes in FCC
separations procedures or accounting rules. Under the Prior Price Cap Plan, the
Company was required to share with customers in the form of prospective rate
reductions a portion of its earnings above a certain authorized rate of return.
In March 1995, the FCC approved an Interim Price Cap Plan ("Interim Plan") for
interstate access charges, which became effective on August 1, 1995, and
replaced the Prior Price Cap Plan.
Under the Interim Plan, the Company's price cap index must be adjusted by an
inflation index (GDP-PI), less a fixed percentage, either 4.0%, 4.7% or 5.3%,
which is intended to reflect increases in productivity ("Productivity Factor").
Companies selecting the 4.0% or 4.7% Productivity Factor are required to reduce
future prices and share a portion of their interstate return in excess of
12.25%. Companies selecting the 5.3% Productivity Factor are also required to
reduce prices but are not required to share a portion of their future interstate
earnings. The Interim Plan also provided for a reduction in the price cap index
of 2.8% to adjust for what the FCC believes was an underestimate in its
calculation of the Productivity Factor in prior years. The Interim Plan also
eliminated the recovery of certain "exogenous" cost changes, including changes
in accounting costs that the FCC believes have no economic consequences.
In May 1995, the Company selected the 5.3% Productivity Factor for the August
1995 to June 1996 tariff period. The rates included in the May 1995 filing
resulted in price decreases totaling approximately $305 million on an annual
basis. These price decreases included the scheduled expiration of a temporary
rate increase of
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approximately $98 million on an annualized basis that was in effect from March
17, 1995 through July 31, 1995 to recover prior years "exogenous" postemployment
benefit costs. Approximately 80% of the remaining $207 million reduction
resulted from compliance with the Interim Plan. The remaining 20% represented
reductions that the Company was required to make under the Prior Price Cap Plan.
Bell Atlantic appealed the Interim Price Cap Order to the Court of Appeals for
the D.C. Circuit, and that case is currently pending.
FCC Cost Allocation and Affiliate Transaction Rules
FCC rules govern: (i) the allocation of costs between the regulated and
unregulated activities of a communications common carrier and (ii) transactions
between the regulated and unregulated affiliates of a communications common
carrier.
The cost allocation rules apply to certain unregulated activities: activities
that have never been regulated as communications common carrier offerings and
activities that have been preemptively deregulated by the FCC. The costs of
these activities are removed prior to the separations procedures process and are
assigned to unregulated activities in the aggregate, not to specific services,
for pricing purposes. Other activities must be accounted for as regulated
activities, and their costs are subject to separations procedures.
The affiliate transaction rules govern the pricing of assets transferred to
and services provided by affiliates. These rules generally require that assets
be transferred between affiliates at "market price," if such price can be
established through a tariff or a prevailing price actually charged to third
parties. In the absence of a tariff or prevailing price, "market price" cannot
be established, in which case (i) asset transfers from a regulated to an
unregulated affiliate must be valued at the higher of cost or fair market value,
and (ii) asset transfers from an unregulated to a regulated affiliate must be
valued at the lower of cost or fair market value.
The FCC has not attempted to make its cost allocation or affiliate transaction
rules preemptive. State regulatory authorities are free to use different cost
allocation methods and affiliate transaction rules for intrastate ratemaking and
to require carriers to keep separate allocation records.
STATE REGULATION OF RATES AND SERVICES
The communications services of the Network Services Companies are subject to
regulation by the public utility commissions in the jurisdictions in which they
operate with respect to intrastate rates and services and certain other matters.
For a discussion of regulatory proceedings regarding competition in the Network
Services Companies' local exchange and intraLATA toll markets, see "Competition
- - Local Exchange Services" and "Competition - IntraLATA Toll Services."
Bell Atlantic - New Jersey, Inc.
The New Jersey Telecommunications Act of 1992 authorized the Board of Public
Utilities ("BPU") to adopt alternative regulatory frameworks to address changes
in technology and the structure of the telecommunications industry and to
promote economic development. It also deregulated services which the BPU found
to be competitive. Pursuant to that legislation, Bell Atlantic - New Jersey
filed a Plan for Alternative Form of Regulation (the "New Jersey Plan"), which
became effective with modifications required by the BPU in May 1993.
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The New Jersey Plan divides Bell Atlantic - New Jersey's services into Rate-
Regulated Services and Competitive Services. Rate-Regulated Services are
grouped in two categories:
-"Protected Services": Basic residence and business service, Touch-Tone,
access services, message toll services and the ordering, installation and
restoration of these services. Rates for Protected Services, other than basic
residence service, may be increased in an amount limited to the prior year's
increase in the Gross National Product-Price Index ("GNP-PI") less a 2%
productivity offset, as long as the return on equity for Rate-Regulated
Services does not exceed 11.7%. Basic residence service rates are capped
through December 1999. However, revenue neutral rate restructuring for Rate-
Regulated Services, including Protected Services and basic residence service,
is permitted.
-"Other Services": Custom Calling, Custom Local Area Signaling Services
("CLASS" services which utilize Signaling System 7), operator services and 911
enhanced service. Rates for Other Services may be increased beginning January
1996 in an amount limited to the prior year's increase in the GNP-PI less a 2%
productivity offset, as long as the return on equity for Rate-Regulated
Services does not exceed 12.7%.
All earnings above a return on equity of 13.7% for Rate-Regulated Services
will be shared equally with customers. There is no point at which the earnings
are capped. Competitive Services are deregulated under the New Jersey
Telecommunications Act. An appeal of the New Jersey Plan is pending.
Bell Atlantic - Pennsylvania, Inc.
In July 1993, legislation was enacted in Pennsylvania which enabled Bell
Atlantic - Pennsylvania to petition the Pennsylvania Public Utility Commission
("PPUC") to regulate Bell Atlantic - Pennsylvania under an alternative form of
regulation. In October 1993, Bell Atlantic - Pennsylvania filed its petition
and plan with the PPUC. In June 1994, the PPUC approved, with modifications,
Bell Atlantic - Pennsylvania's Alternative Regulation Plan, (the "Pennsylvania
Plan") which was accepted by Bell Atlantic - Pennsylvania in July 1994.
The Pennsylvania Plan provides for a pure price cap plan with no sharing and
replaces rate base rate of return regulation. The Pennsylvania Plan removes
from price and earnings regulation certain competitive services, including
directory advertising, billing service, Centrex service, paging, speed calling
and repeat calling. All remaining noncompetitive services will be price
regulated.
Under price regulation, annual price increases up to, but not exceeding, the
inflation rate (GDP-PI) minus 2.93% will be permitted. Annual price decreases
are required when the GDP-PI falls below 2.93%. Protected services revenues in
the noncompetitive category, which include residential and business basic
exchange services, special access and switched access, are capped through
December 31, 1999. However, revenue neutral rate restructuring for non-
competitive services is permitted.
The Pennsylvania Plan requires Bell Atlantic - Pennsylvania to propose a
Lifeline service for residential customers on a revenue neutral basis. The Plan
also requires deployment of a universal broadband network, which must be
completed in phases: 20% by 1998; 50% by 2004; and 100% by 2015. Deployment
must be reasonably balanced among urban, suburban and rural areas.
In July 1994, several parties filed appeals in the Pennsylvania Commonwealth
Court regarding the PPUC's June 1994 order approving the Pennsylvania Plan. On
December 22, 1995, the Commonwealth Court issued an opinion and order affirming
in part and reversing, vacating and remanding in part the PPUC's decision. The
Commonwealth Court: (i) vacated the PPUC's determination of the price cap
formula and remanded to the PPUC for quantification of an "input price
differential" (i.e., difference between the cost of Bell Atlantic -
Pennsylvania's inputs and the U.S. economy's inputs); (ii) vacated and remanded
for additional findings the PPUC's decision that directory advertising and
billing services are "competitive" services; and (iii) reversed the PPUC's
decision that
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paging, Centrex, speed calling, and repeat call are competitive. In all other
respects, the PPUC's order was sustained. The PPUC and Bell Atlantic -
Pennsylvania have filed petitions requesting that the Pennsylvania Supreme Court
review the Pennsylvania Commonwealth Court's ruling. The Supreme Court is
expected to decide whether to hear this appeal by the end of 1996. In the
meantime, the filing of the PPUC's petition for review has the effect of
automatically staying the Commonwealth Court's order.
Bell Atlantic - Delaware, Inc.
In March 1994, Bell Atlantic - Delaware elected to be regulated under the
alternative regulation provisions of the Delaware Telecommunications Technology
Investment Act of 1993 (the "Delaware Telecommunications Act"). The Delaware
Telecommunications Act provides:
-that the prices of "Basic Telephone Services" (e.g., dial tone and local
usage) will remain regulated and cannot change in any one year by more
than the rate of inflation (GDP-PI), less 3%;
-that the prices of "Discretionary Services" (e.g., Identa Ring SM and Call
Waiting) cannot increase more than 15% per year per service, after an
initial one-year cap;
-that the prices of "Competitive Services" (e.g., directory advertising and
message toll service) will not be subject to tariff; and
-that Bell Atlantic - Delaware will develop a technology deployment plan
with a commitment to invest a minimum of $250 million in Delaware's
telecommunications network during the first five years of the plan.
The Delaware Telecommunications Act also provides protections to ensure that
competitors will not be unfairly disadvantaged, including a prohibition on
cross-subsidization, imputation rules, service unbundling and resale service
availability requirements, and a review by the Delaware Public Service
Commission ("DPSC") during the fifth year of the plan.
Bell Atlantic - Washington, D.C., Inc.
In January 1993, the District of Columbia Public Service Commission ("DCPSC")
adopted a regulatory reform plan ("D.C. Reform Plan") for the intra-Washington,
D.C. services of Bell Atlantic - Washington D.C. for a three-year trial period.
The D.C. Reform Plan provides a banded rate of return of 100 basis points over
or under the authorized return on equity (which was set at 11.45% in December
1993). Bell Atlantic - Washington D.C. is permitted to seek a rate increase if
its return on equity falls below 10.45% and is required to share, through
refunds, 50% of any earnings in excess of a return on equity of 12.45%.
In January 1995, Bell Atlantic - Washington D.C. filed a petition with the
DCPSC seeking approval of a proposed price cap plan to become effective upon the
expiration of the D.C. Reform Plan in 1996. In February 1996, Bell Atlantic -
Washington D.C. signed a settlement agreement with the Office of People's
Counsel to implement a four-year price cap plan to replace the D.C. Reform Plan.
The settlement agreement, if approved, would: (1) introduce a four-year price
cap plan effective 1/1/96 through 12/31/99; (2) divide services into three
categories, basic, discretionary and competitive; (3) cap certain basic
residence rates for the term of the plan and allow other basic rates to change
with the rate of inflation minus 3%; (4) allow discretionary services rates to
increase by 15% annually; (5) eliminate pricing regulation of competitive
services; (6) reduce residential rates by $3.1 million in 1996; business rates
by $2.2 million in 1997 and $3.2 million in 1998; and (7) establish a trust fund
to wire public schools and libraries with Bell Atlantic integrated services
digital network (ISDN) lines. The agreement is pending approval by the DCPSC.
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Bell Atlantic - Maryland, Inc.
In January 1993, the Public Service Commission of Maryland ("MPSC") continued
a regulatory reform plan (the "Reform Plan"), first adopted in 1990, for
regulating the intrastate services provided by Bell Atlantic - Maryland. The
Reform Plan provides for sharing of earnings on Other-Than-Competitive Services
(e.g., basic business and residential dial-tone line and usage, pay telephone
services, and intraLATA toll services) within a prescribed range (12.7% to 16.5%
return on equity). Earnings on Competitive Services (e.g., Centrex intercom,
and high capacity, special access and private line service) are not subject to
rate of return limitation.
In 1995, the Maryland General Assembly enacted legislation which permits the
MPSC to regulate Bell Atlantic - Maryland by a method other than rate base rate
of return regulation.
In December 1995, Bell Atlantic - Maryland filed a proposed price cap plan
with the MPSC. Under the plan, services would be divided into six categories:
Access, Basic-Residential, Basic-Other, Discretionary, Competitive and Co-
Carrier. Rates for Access and Basic-Residential Services would be capped for a
period of two years, and rates for Basic-Other Services would be capped for one
year. After the cap period, rates for services in these three categories could
then be increased or decreased annually under a formula that is based on changes
in the rate of inflation (GDP-PI).
The Office of People's Counsel, the MPSC Staff and MCI Telecommunications
(MCI) have also filed proposed price cap plans for regulating Bell Atlantic -
Maryland. In addition, the Office of People's Counsel and the MPSC Staff have
argued that Bell Atlantic - Maryland's rates should be reduced by $232 million
and $97 million, respectively, while MCI has asked for an $85 million reduction
in Bell Atlantic - Maryland's switched access rates. Bell Atlantic - Maryland
has responded that its existing rates are reasonable and there is no basis to
reduce them. All of these issues are being considered in a single evidentiary
proceeding, which is expected to conclude by mid-year 1996.
Bell Atlantic - Virginia, Inc.
Under legislation passed in the 1993 session of the Virginia General Assembly,
the Virginia State Corporation Commission ("VSCC") is no longer statutorily
required to regulate telephone companies on the basis of rate of return
regulation. In February 1994, Bell Atlantic - Virginia filed a proposal to have
its non-competitive services regulated on a price cap basis; competitive
services would not be regulated.
Following public hearings, the VSCC approved a new optional regulatory plan,
effective January 1, 1995, which allows Bell Atlantic - Virginia to replace
traditional cost-based regulation with a plan that relies on price constraints.
The new plan, which eliminates regulation of profits, includes a temporary
moratorium on rate increases for basic local telephone service until 2001,
eliminates the monthly charge for Touch-Tone service and expands universal
telephone service to the poor. In November 1994, Bell Atlantic - Virginia
notified the VSCC of its election to participate in the new regulatory plan.
Following an appeal, the new plan was upheld by the Virginia Supreme Court.
Bell Atlantic - West Virginia, Inc.
In December 1991, the West Virginia Public Service Commission ("WVPSC")
approved an "Incentive Regulation Plan". The Incentive Regulation Plan
continued the major provisions of the prior plan, including pricing flexibility
for competitive services and a freeze on rates for basic local exchange service.
It also committed Bell Atlantic - West Virginia to invest $450 million from 1991
through 1995 in West Virginia's telecommunications infrastructure.
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In December 1994, the WVPSC issued an order extending the Incentive Regulation
Plan for three years, with certain modifications. Basic rates remain frozen
through January 15, 1998 and Touch-Tone charges will be eliminated over a three
year period. Bell Atlantic - West Virginia is committed to invest at least $375
million in its network over the five year period from 1995 through 1999.
COMPETITION
Regulatory changes, as well as new technology, are continuing to expand the
types of available communications services and equipment and the number of
competitors offering such services. An increasing amount of this competition is
from large companies which have substantial capital, technological and marketing
resources.
Local Exchange Services
The ability to offer local exchange service has historically been subject to
regulation by state public utility commissions. In 1994 and 1995, applications
from competitors to provide and resell local exchange services were approved by
the Maryland Public Service Commission and the Pennsylvania Public Utility
Commission. In addition, applications from competitors to provide local exchange
services are pending in Delaware, Maryland, New Jersey and Virginia. The Act is
expected to significantly increase the level of competition in all of the
telephone subsidiaries' local exchange markets. However, increased competition
in the local exchange markets will facilitate FCC approval of the telephone
subsidiaries' entry into the interLATA markets.
IntraLATA Toll Services
Competition to offer intrastate intraLATA toll services is currently permitted
in all of the Company's state jurisdictions that provide intraLATA toll
services. Increased competition from IXCs has resulted in a decline in several
components of the telephone subsidiaries' toll service revenues.
Currently, intraLATA toll calls in all of such jurisdictions are completed by
the telephone subsidiaries unless the customer dials a five-digit access code.
Presubscription for intraLATA toll services would enable customers to make
intraLATA toll calls using the carrier of their choice without having to dial
the five-digit access code.
In general, the Act prohibits a state from requiring presubscription or
"dialing parity" until the earlier of such time as a BOC in the state is
authorized to provide long distance services within the state or three years
from the effective date of the Act. This prohibition does not apply to a final
order requiring a BOC to implement presubscription that was issued on or prior
to December 19, 1995.
During 1995, state regulatory commissions in Pennsylvania, New Jersey, West
Virginia, Virginia and Delaware conducted proceedings to determine whether, and
under what conditions, to authorize presubscription.
On December 19, 1995, the Pennsylvania Public Utility Commission issued an
order directing the implementation of presubscription within eighteen months of
that order. However, the order stated that a reasonable effort should be made
to coordinate implementation of presubscription with Bell Atlantic -
Pennsylvania's entry into the interLATA market in Pennsylvania.
In New Jersey, the Board of Public Utilities ("BPU") issued an order on
December 14, 1995 finding that implementation of presubscription for intraLATA
toll services in New Jersey would be in the public interest and proposed rules
for implementation. The BPU is expected to issue final rules in the second
quarter of 1996.
9
<PAGE>
In October 1995, the West Virginia Public Service Commission issued an order
directing the implementation of presubscription within eighteen months of that
order. Bell Atlantic - West Virginia has filed an appeal with the West Virginia
Supreme Court.
In Virginia, the State Corporation Commission issued an order on July 24, 1995
denying intraLATA toll presubscription.
During 1995, proceedings in Delaware were suspended pending the outcome of the
federal legislative process. On March 26, 1996, the Delaware Public Service
Commission considered the issue of implementation of presubscription and
deferred any decision for six months. A final decision is expected in the fourth
quarter of 1996.
Alternative Access
A substantial portion of the Network Services Companies' revenues from
business and government customers is derived from a relatively small number of
large, multiple-line subscribers.
The Network Services Companies face competition from alternative
communications systems, constructed by large end users, interexchange carriers
and alternative access vendors, which are capable of originating and/or
terminating calls without the use of the local telephone company's plant. The
ability of such alternative access providers to compete with the Network
Services Companies has been enhanced by the FCC's orders requiring the Network
Services Companies to offer virtual collocated interconnection for special and
switched access services.
Other potential sources of competition are cable television systems, shared
tenant services and other non-carrier systems which are capable of bypassing the
Network Services Companies' local plant, either partially or completely, through
substitution of special access for switched access or through concentration of
telecommunications traffic on fewer of the Network Services Companies' lines.
Personal Communications Services
Radio-based personal communications services ("PCS") also constitute potential
sources of competition to the Network Services Companies and to Bell Atlantic's
cellular communications investments. PCS consists of wireless portable
telephone services which would allow customers to make and receive telephone
calls from any location using small handsets, and which could also be used for
data transmission.
Directories
The Network Services Companies continue to face significant competition from
other providers of directories, as well as competition from other advertising
media.
Public Telephone Services
The Company faces increasing competition in the provision of pay telephone
services from other pay telephone service providers. In addition, the growth of
wireless communications negatively impacts usage of public telephones.
Operator Services
Alternative operator services providers have entered into competition with the
Network Services Companies' operator services product line.
10
<PAGE>
DOMESTIC WIRELESS COMMUNICATIONS
Through several joint ventures, the Company provides wireless communications
services in the United States.
Effective July 1, 1995, Bell Atlantic and NYNEX Corporation (NYNEX) combined
substantially all of their domestic cellular and paging businesses and formed
Bell Atlantic NYNEX Mobile, a partnership which provides wireless services to
over 3.4 million customers in the Northeast, mid-Atlantic, Southeast and
Southwest portions of the United States. Bell Atlantic NYNEX Mobile is a
general partnership and is controlled equally by Bell Atlantic and NYNEX. Bell
Atlantic owns an approximate 63% economic interest in Bell Atlantic NYNEX Mobile
and accounts for its interest in the partnership under the equity method.
In October 1994, Bell Atlantic, NYNEX, AirTouch Communications and U S WEST,
Inc. formed two partnerships to provide nationwide wireless communications
services. The first partnership was formed to participate in the FCC auctions
for PCS licenses. In March 1995, this partnership was a successful bidder for
licenses for spectrum to provide PCS services in the following markets:
Chicago; Dallas; Tampa; Houston; Miami; New Orleans; Milwaukee; Richmond; San
Antonio; Jacksonville; and Honolulu. The partnership paid $1.1 billion for
these licenses. The second partnership was formed to develop a national brand
and provide coordination and centralization of various functions for the
companies' cellular and PCS businesses.
INTERNATIONAL WIRELESS INVESTMENTS
Through purchases of stock in 1993 and 1994 totaling $1.04 billion, the
Company acquired a 41.9% economic interest in Grupo Iusacell, S.A. de C.V., a
leading telecommunications company in Mexico and the primary business of which
is the provision of cellular telephone service.
The Company also has telecommunications investments in Italy, Slovakia and the
Czech Republic. These investments consist of joint ventures to build and
operate cellular networks in these countries.
TELECOM CORPORATION OF NEW ZEALAND
In 1990, wholly-owned New Zealand subsidiaries of the Company and Ameritech
Corporation ("Ameritech") each purchased approximately 49% of the common shares
of Telecom Corporation of New Zealand Limited ("TCNZ") for a purchase price of
approximately $2.4 billion. Under the terms of the acquisition and subsequent
agreements with the New Zealand government, the Company and Ameritech were
required to sell equity interests in TCNZ such that their combined ownership
would, within four years of the acquisition, be reduced to 49.9%. Through
public and private sales during 1991 and 1993, the Company reduced its ownership
interest in TCNZ to 24.8%, and, together with sales by Ameritech, completed its
sell-down obligations.
VIDEO SERVICES
In October 1994, the Company, NYNEX and Pacific Telesis Group formed two
partnerships to provide multimedia services. TELE-TV Media, L.P. will license,
acquire and develop entertainment and information services. TELE-TV Systems,
L.P. will provide the systems necessary to deliver these services over the
partners' networks.
CERTAIN CONTRACTS AND RELATIONSHIPS
Certain planning, marketing, procurement, financial, legal, accounting,
technical support and other management services are provided on behalf of the
Network Services Companies on a centralized basis by Bell
11
<PAGE>
Atlantic's wholly-owned subsidiary, Bell Atlantic Network Services, Inc.
("NSI"). Bell Atlantic Network Funding Corporation provides short-term financing
and cash management services to the Network Services Companies.
Certain corporate services also are provided to other subsidiaries on a
centralized basis by NSI. Bell Atlantic Financial Services, Inc. provides
short-, medium- and long-term financing services and cash management services to
subsidiaries of the Company other than the Network Services Companies.
The seven RHCs each own (directly or through subsidiaries) a one-seventh
interest in Bell Communications Research, Inc. ("Bellcore"). Pursuant to the
Plan, Bellcore furnishes the RHCs and their BOC subsidiaries with technical
assistance such as network planning, engineering and software development, as
well as various other consulting services that can be provided more effectively
on a centralized basis. Bellcore is the central point of contact for
coordinating the efforts of the RHCs in meeting the national security and
emergency preparedness requirements of the federal government. It also helps to
mobilize the combined resources of the RHCs in times of natural disasters.
EMPLOYEES
As of December 31, 1995, the Company and its subsidiaries had approximately
61,800 employees. Approximately 70% of the employees of the Company and its
subsidiaries are represented by unions. Of those so represented, approximately
80% are represented by the Communications Workers of America, and approximately
20% are represented by the International Brotherhood of Electrical Workers,
which are both affiliated with the American Federation of Labor-Congress of
Industrial Organizations.
12
<PAGE>
ITEM 2. PROPERTIES
GENERAL
The principal properties of the Company do not lend themselves to simple
description by character and location. The Company's investment in plant,
property and equipment, 98% of which was held by the Network Services Companies
in 1995 (94% in 1994), consisted of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
----- -----
<S> <C> <C>
Central office equipment... 38% 36%
Cable, wiring and conduit.. 37 36
Other equipment............ 12 15
Land and buildings......... 9 9
Other...................... 4 4
---- ----
100% 100%
==== ====
</TABLE>
"Central office equipment" consists of switching equipment, transmission
equipment and related facilities. "Cable, wiring and conduit" consists
primarily of aerial cable, underground cable, conduit and wiring. "Other
equipment" consists of public telephone instruments and telephone equipment
(including PBXs) used by the Network Services Companies in their operations,
poles, furniture, office equipment, and vehicles and other work equipment.
"Land and buildings" consists of land owned in fee and improvements thereto,
principally central office buildings. "Other" property consists primarily of
plant under construction, capital leases and leasehold improvements. In 1995,
other equipment no longer includes cellular plant, which was entirely held by
the Company's domestic cellular and paging businesses. Such equipment was
contributed to the Bell Atlantic NYNEX Mobile partnership, which was formed on
July 1, 1995, through the combination of substantially all of the domestic
cellular and paging businesses of Bell Atlantic and NYNEX Corporation.
The customers of the Network Services Companies are served by electronic
switching systems that provide a wide variety of services. The Network Services
Companies' network is in a transition from an analog to a digital network, which
provides the capabilities to furnish advanced data transmission and information
management services. At December 31, 1995, approximately 83% of the access
lines were served by digital capability.
CAPITAL EXPENDITURES
The Network Services Companies have been making and expect to continue to make
significant capital expenditures to meet the demand for communications services
and to further improve such services. Capital expenditures of the Network
Services Companies were approximately $2.1 billion in 1993, $2.2 billion in 1994
and $2.4 billion in 1995. The total investment in plant, property and equipment
was approximately $30.6 billion at December 31, 1993, $33.7 billion at December
31, 1994 and $33.6 billion at December 31, 1995, in each case after giving
effect to retirements, but before deducting accumulated depreciation at such
date.
13
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
PRE-DIVESTITURE CONTINGENT LIABILITIES AND LITIGATION
The Plan provides for the recognition and payment by AT&T and the former BOCs
(including the Network Services Companies) of liabilities that are attributable
to pre-Divestiture events but do not become certain until after Divestiture.
These contingent liabilities relate principally to litigation and other claims
with respect to the former Bell System's rates, taxes, contracts and torts
(including business torts, such as alleged violations of the antitrust laws).
Except to the extent that affected parties otherwise agree, contingent
liabilities that are attributable to pre-Divestiture events are shared by AT&T
and the BOCs in accordance with formulas prescribed by the Plan, whether or not
an entity was a party to the proceeding and regardless of whether an entity was
dismissed from the proceeding by virtue of settlement or otherwise. Each
company's allocable share of liability under these formulas depends on several
factors, including the type of contingent liability involved and each company's
relative net investment as of the effective date of Divestiture. Under the
formula generally applicable to most of the categories of these contingent
liabilities, the Network Services Companies' aggregate allocable share of
liability is approximately 10.2%.
AT&T and various of its subsidiaries and the BOCs (including in some cases one
or more of the Network Services Companies) have been and are parties to various
types of litigation relating to pre-Divestiture events, including actions and
proceedings involving environmental claims and allegations of violations of
equal employment laws. Damages, if any, ultimately awarded in the remaining
actions relating to pre-Divestiture events could have a financial impact on the
Company whether or not the Company is a defendant since such damages will be
treated as contingent liabilities and allocated in accordance with the
allocation rules established by the Plan.
Effective in 1994, the Company and the other Regional Holding Companies agreed
to discontinue sharing of new pre-Divestiture claims and certain existing claims
other than claims relating to environmental matters. AT&T is not a party to
this agreement.
While complete assurance cannot be given as to the outcome of any contingent
liabilities or litigation, in the opinion of the Company's management, any
monetary liability or financial impact to which the Company would be subject
after final adjudication of all of the remaining potential or actual pre-
Divestiture claims would not be material in amount to the financial position of
the Company.
OTHER PENDING CASES
In January 1991, the Company, its Chief Executive Officer and its former Chief
Financial Officer were named as defendants in several identical class action
complaints. These complaints, which have been consolidated in a single
proceeding in the United States District Court for the Eastern District of
Pennsylvania and have subsequently been amended, allege that, during a class
period from June 14, 1990 through January 22, 1991, the plaintiffs purchased
shares of Bell Atlantic stock at inflated prices as a result of the defendants'
alleged failure to disclose material information regarding certain aspects of
the Company's financial performance and prospects. The trial court's earlier
decision granting defendants' motion to dismiss this action was reversed by the
United States Court of Appeals for the Third Circuit upon appeal by the
plaintiffs. Discovery in this action is essentially complete and defendants
expect to file a motion for summary judgment during the second quarter of 1996.
While complete assurance cannot be given as to the outcome of any litigation,
in the opinion of the Company's management, any monetary liability or financial
impact to which the Company would be subject after final adjudication of the
foregoing actions would not be material in amount to the financial position of
the Company.
14
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Set forth below is certain information with respect to the Company's executive officers.
Held
Name Age Office Since
- ------------------------------------------ --- ----------------------------------------------------------- -----
<S> <C> <C> <C>
Raymond W. Smith.......................... 58 Chairman of the Board and Chief Executive Officer 1989
Lawrence T. Babbio, Jr.................... 51 Vice Chairman 1995
James G. Cullen........................... 53 Vice Chairman 1995
William O. Albertini...................... 52 Executive Vice President and Chief Financial Officer 1995
P. Alan Bulliner.......................... 52 Vice President - Corporate Secretary and Counsel 1992
Patrick C. G. Coulter..................... 55 Vice President - Corporate Communications 1995
John F. Gamba............................. 57 Senior Vice President - Corporate Resources 1995
and Performance Assurance
Bruce S. Gordon........................... 50 Group President - Consumer and Small Business Services, 1993
Bell Atlantic Network Services, Inc.
Stuart C. Johnson......................... 53 Group President - Large Business and Information Services, 1993
Bell Atlantic Network Services, Inc.
Thomas R. McKeough........................ 49 Vice President - Mergers and Acquisitions and Associate 1994
General Counsel
Kevin P. Pennington....................... 39 Vice President - Human Resources 1995
Doreen A. Toben........................... 46 Vice President - Finance and Controller 1995
Ellen C. Wolf............................. 42 Vice President - Treasurer 1995
James R. Young............................ 44 Vice President - General Counsel 1992
</TABLE>
Prior to serving as an executive officer of the Company, each of the above
officers, with the exception of Messrs. Coulter, Johnson, and Pennington, have
held high level managerial positions with the Company or one of its subsidiaries
for at least five years. Prior to joining the Company in 1995, Mr. Coulter was
with Raytheon Company, serving as Director of Media Relations and Advertising
(from 1991 to 1992) and Director of Corporate Communications (from 1992 to
1995). From 1987 until joining the Company in 1992, Mr. Johnson served as
President, GTE-Contel Federal Sector for GTE Corporation. Prior to joining the
Company in 1995, Mr. Pennington served as Executive Vice President-Corporate
Services and Chief Administrative Officer at Clark U.S.A., Inc. (from 1993 to
1995) and as Vice President-Human Resources at Mercy Health System (from 1991 to
1993).
Officers are not elected for a fixed term of office but are removable at the
discretion of the Board of Directors.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The principal market for trading in the common stock of Bell Atlantic
Corporation is the New York Stock Exchange. The common stock is also listed in
the United States on the Boston, Chicago, Pacific, and Philadelphia stock
exchanges. As of December 31, 1995, there were 932,705 shareowners of record.
15
<PAGE>
High and low stock prices, as reported on the New York Stock Exchange
composite tape of transactions, and dividend data are as follows:
<TABLE>
<CAPTION>
Market Price Cash
---------------- Dividend
High Low Declared
------- ------- --------
<S> <C> <C> <C> <C>
1995: First Quarter....... $55 3/4 $48 3/8 $.70
Second Quarter...... 58 7/8 52 .70
Third Quarter....... 61 7/8 54 7/8 .70
Fourth Quarter...... 68 7/8 59 .70
1994: First Quarter....... $59 5/8 $51 $.69
Second Quarter...... 56 3/4 49 .69
Third Quarter....... 58 3/8 52 1/4 .69
Fourth Quarter...... 53 1/4 48 3/8 .69
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The Selected Financial and Operating Data on page 4 of the Company's 1995
Annual Report to shareowners is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Management's Discussion and Analysis of Results of Operations and
Financial Condition on pages 11 through 20 of the Company's 1995 Annual Report
to shareowners is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Report of Independent Accountants, Consolidated Statements of Operations,
Consolidated Balance Sheets, Consolidated Statements of Cash Flows, and Notes to
Consolidated Financial Statements on pages 21 through 45 of the Company's 1995
Annual Report to shareowners are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
16
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
For information with respect to the executive officers of the Company, see
"Executive Officers of the Registrant" at the end of Part I of this Report. For
information with respect to the Directors of the Company, see "Election of
Directors" on pages 1 through 6 of the Proxy Statement for the Company's 1996
Annual Meeting of Shareowners, which is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
For information with respect to executive compensation, see "Executive
Compensation" on pages 11 through 16, "Stock Performance" on page 18, and
"Employment Agreements" on page 19 of the Proxy Statement for the Company's 1996
Annual Meeting of Shareowners, which are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
For information with respect to the security ownership of the Directors and
Executive Officers of the Company, see "Ownership of Bell Atlantic Common Stock"
on page 17 of the Proxy Statement for the Company's 1996 Annual Meeting of
Shareowners, which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
17
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements
See Index to Financial Statements and Financial Statement Schedule
appearing on Page F-1.
(2) Financial Statement Schedules
See Index to Financial Statements and Financial Statement Schedule
appearing on Page F-1.
(3) Exhibits.
Exhibits identified in parentheses below, on file with the Securities and
Exchange Commission (SEC), are incorporated herein by reference as exhibits
hereto.
Exhibit
Number
3a Certificate of Incorporation of Bell Atlantic Corporation ("Bell
Atlantic"), dated October 7, 1983. (Exhibit 3a to Registration Statement
on Form S-1 No. 2-87842, File No. 1-8606.)
3b Certificate of Amendment of Certificate of Incorporation of Bell
Atlantic, dated May 9, 1986 and filed May 16, 1986. (Exhibit 3b to
Form SE dated March 27, 1987, File No. 1-8606.)
3c Certificate of Amendment of Certificate of Incorporation of Bell
Atlantic, dated May 6, 1987 and filed May 8, 1987. (Exhibit 3c to
Form SE dated March 28, 1988, File No. 1-8606.)
3d Certificate of Amendment of Certificate of Incorporation of Bell
Atlantic, dated May 10, 1990 and filed June 29, 1990. (Exhibit 3d to
Form SE dated March 28, 1991, File No. 1-8606.)
3e By-Laws of Bell Atlantic, as amended through June 23, 1992. (Exhibit 3e
to Form SE dated March 29, 1993, File No. 1-8606.)
4 No instrument which defines the rights of holders of long and
intermediate term debt, of the Company and all of its consolidated
subsidiaries, is filed herewith pursuant to Regulation S-K, Item
601(b)(4)(iii)(A). Pursuant to this regulation, Bell Atlantic hereby
agrees to furnish a copy of any such instrument to the SEC upon request.
10a Bell Atlantic Senior Management Short Term Incentive Plan, as amended
and restated effective as of January 1, 1993. (Exhibit 10c to Form SE
dated March 29, 1993, File No. 1-8606.)*
10b Bell Atlantic Senior Management Long-Term Disability and Survivor
Protection Plan, as amended. (Exhibit 10h to Form SE filed on March 27,
1986, File No. 1-8606.)*
10b (i) Resolutions amending the Plan, effective as of January 1, 1989
(Exhibit 10d to Form SE dated March 29, 1989, File No. 1-8606.)*
18
<PAGE>
10c Bell Atlantic Personal Financial Services Program, as amended and
restated as of July 1, 1995.*
10d Bell Atlantic Deferred Compensation Plan for Outside Directors, as
amended and restated as of February 1, 1995. (Exhibit 10d to
Form 10-K for the year ended December 31, 1994, File No. 1-8606.)*
10e Bell Atlantic Insurance Plan for Directors. (Exhibit 10hh to
Registration Statement on Form S-1 No. 2-87842, File No. 1-8606.)*
10f Description of Bell Atlantic Plan for Non-Employee Directors'
Travel Accident Insurance. (Exhibit 10ii to Registration Statement
on Form S-1 No. 2-87842, File No. 1-8606.)*
10g Article V from Bell Atlantic Management Pension Plan regarding
limitations on payment of pension amounts which exceed the
limitations contained in the Employee Retirement Income Security
Act of 1974. (Exhibit 10j to Form SE dated March 26, 1992, File
No. 1-8606.)*
10h Bell Atlantic Senior Management Retirement Income Plan, as amended
and restated effective as of December 31, 1995.*
10i Bell Atlantic Deferred Compensation Plan, as amended and restated
as of January 1, 1996.*
10j Bell Atlantic Stock Incentive Plan, as amended and restated as of
January 1, 1996.*
10j (i) Resolutions amending The Bell Atlantic 1985 Incentive
Stock Option Plan, (Exhibit 10m(i) Form 10-K for the year
ended December 31, 1993, File No. 1-8606.)*
10k Bell Atlantic Retirement Plan for Outside Directors, as amended and
restated, as of January 1, 1996.*
10l Bell Atlantic Stock Compensation Plan for Outside Directors, as
amended and restated as of January 1, 1996.*
10m Bell Atlantic Corporation Directors' Charitable Giving Program.
(Exhibit 10p to Form SE dated March 29, 1990, File No. 1-8606.)*
10m (i) Resolutions amending and partially terminating the
Program. (Exhibit 10p to Form SE dated March 29, 1993,
File No. 1-8606.)*
10n Employment Agreement dated May 2, 1995 between the Company and
Lawrence T. Babbio, Jr.*
19
<PAGE>
10o Resolution dated January 24, 1994 granting Lawrence T. Babbio, Jr.
certain nonqualified stock options to purchase American Depository
Receipts representing Series L shares of the capital stock of Grupo
Iusacell, S.A. de C.V. (Exhibit 10s to Form 10-K for the year ended
December 31, 1993, File No. 1-8606.)*
10p Employment Agreement dated May 2, 1995 between the Company and James G.
Cullen.*
10q Non-Compete and Proprietary Information Agreement dated August 9, 1993
among the Company, Bell Atlantic Network Services, Inc. and Stuart C.
Johnson. (Exhibit 10w to Form 10-K for the year ended December 31,
1993, File No. 1-8606.)*
11 Computation of Earnings Per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges.
13 Portions of the Company's Annual Report to shareowners for the year
ended December 31, 1995.
21 List of subsidiaries of Bell Atlantic.
23 Consent of Independent Accountants.
24 Powers of Attorney.
27 Financial Data Schedule.
99a Annual Report on Form 11-K for the Bell Atlantic Savings Plan for
Salaried Employees for the year ended December 31, 1995. (To be filed
by amendment.)
99b Annual report on Form 11-K for the Bell Atlantic Savings and Security
Plan (Non-Salaried Employees) for the year ended December 31, 1995. (To
be filed by amendment.)
*Indicates management contract or compensatory plan or arrangement.
Shareowners may request a copy of the exhibits to this Annual Report on
Form 10-K by writing to the Corporate Secretary, Bell Atlantic Corporation, 1717
Arch Street, Philadelphia, Pennsylvania 19103.
(b) Current Reports on Form 8-K filed during the quarter ended December 31,
1995:
A Current Report on Form 8-K, dated October 19, 1995, was filed regarding
the Company's third quarter 1995 financial results.
20
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
BELL ATLANTIC CORPORATION
By /s/ William O. Albertini
--------------------------------------
William O. Albertini
Executive Vice President
and Chief Financial Officer
March 27, 1996
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<S> <C> <C> <C>
+++++
Principal Executive Officer: +
Raymond W. Smith Chairman of the +
Board and Chief +
Executive Officer +
+
Principal Financial Officer: +
William O. Albertini Executive Vice +
President and Chief +
Financial Officer +
+
Principal Accounting Officer: +
Doreen A. Toben Vice President - +
Finance and Controller +
+
Directors: +
William W. Adams +++++ By /s/ William O. Albertini
William O. Albertini + --------------------------
Lawrence T. Babbio, Jr. + William O. Albertini
Thomas E. Bolger + (individually and as
Frank C. Carlucci + attorney-in-fact)
William G. Copeland + March 27, 1996
James G. Cullen +
James H. Gilliam, Jr. +
Thomas H. Kean +
John C. Marous, Jr. +
John F. Maypole +
Joseph Neubauer +
Thomas H. O'Brien +
Eckhard Pfeiffer +
Rozanne L. Ridgway +
Raymond W. Smith +
Shirley Young +++++
</TABLE>
21
<PAGE>
BELL ATLANTIC CORPORATION
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Page Number
--------------------
Annual
Form Report to
10-K Shareowners
---- -----------
Report of Independent Accountants...................... F-2 21
Consolidated Statements of Operations-
For the years ended December 31, 1995, 1994 and 1993.. -- 22
Consolidated Balance Sheets-
December 31, 1995 and 1994............................ -- 23
Consolidated Statements of Cash Flows-
For the years ended December 31, 1995, 1994 and 1993.. -- 24
Notes to Consolidated Financial Statements............. -- 25-45
Schedule II--Valuation and Qualifying Accounts--
For the years ended December 31, 1995, 1994 and
1993................................................. F-3 --
Financial statement schedules other than that listed above have been omitted
because such schedules are not required or applicable.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareowners of
Bell Atlantic Corporation
Our report on the consolidated financial statements of Bell Atlantic Corporation
and subsidiaries has been incorporated by reference in this Form 10-K from page
21 of the 1995 Annual Report to shareowners of Bell Atlantic Corporation and
subsidiaries. In connection with our audits of such financial statements, we
have also audited the related financial statement schedule listed in the index
on page F-1 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 5, 1996
F-2
<PAGE>
BELL ATLANTIC CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
ADDITIONS
--------------------
CHARGED TO
BALANCE AT CHARGED OTHER BALANCE
BEGINNING TO ACCOUNTS DEDUCTIONS AT END
DESCRIPTION OF PERIOD EXPENSES --NOTE(a) --NOTE(b) OF PERIOD
- ---------------------------------------------------------- ---------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for Uncollectible
Accounts Receivable:
Year 1995............................................... $188.9 $176.2 $203.5 $378.8 $189.8
Year 1994............................................... $192.6 $176.8 $197.8 $378.3 $188.9
Year 1993............................................... $170.4 $176.2 $163.7 $317.7 $192.6
Allowance for Uncollectible
Finance Lease Receivables:
Year 1995............................................... $ -- $ -- $ -- $ -- $ --
Year 1994............................................... $ 48.9 $ .2 $ .7 $ 49.8 $ --
Year 1993............................................... $ 52.2 $ 25.1 $ 9.5 $ 37.9 $ 48.9
Allowance for Obsolete
Inventory:
Year 1995............................................... $ 18.3 $ 3.6 $ .1 $ 20.2 $ 1.8
Year 1994............................................... $ 18.3 $ 5.0 $ -- $ 5.0 $ 18.3
Year 1993............................................... $ 10.4 $ 3.5 $ 11.8 $ 7.4 $ 18.3
Valuation Allowance for
Deferred Tax Assets:
Year 1995............................................... $ 22.4 $ 1.8 $ -- $ 14.6 $ 9.6
Year 1994............................................... $ 74.8 $ 5.6 $ -- $ 58.0 $ 22.4
Year 1993............................................... $ 39.7(c) $ 35.1 $ -- $ -- $ 74.8
Other Allowances (d):
Year 1995............................................... $ 10.8 $ 2.1 $ 5.6 $ 6.3 $ 12.2
Year 1994............................................... $ 10.7 $ 4.9 $ -- $ 4.8 $ 10.8
Year 1993............................................... $ 21.7 $ 4.7 $ .6 $ 16.3 $ 10.7
</TABLE>
____________
(a) Allowance for Uncollectible Accounts Receivable includes (1) amounts
previously written off which were credited directly to this account when
recovered, and (2) accruals charged to accounts payable for anticipated
uncollectible charges on purchases of accounts receivable from others which
were billed by the Company.
(b) Amounts written off as uncollectible or obsolete or transferred to other
accounts (except for the valuation allowance for deferred tax assets). In
1995 and 1994, amounts include ending balances for businesses sold during
the year.
(c) Represents the valuation allowance at implementation of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes,"
effective January 1, 1993.
(d) Other Allowances include allowances for notes receivable, obsolete
equipment and allowances for probable losses incurred in the directory
businesses arising in the normal course of operations.
F-3
<PAGE>
Exhibit 10C
BELL ATLANTIC
PERSONAL FINANCIAL SERVICES PROGRAM
Introduction
- ------------
Under the terms of this program, Bell Atlantic will reimburse up to $8,000 per
plan year for professional fees and miscellaneous related expenses that you
incur for certain financial counseling, estate planning, and income tax return
preparation services, up to specified limits.
The amended provisions of this program take effect July 1, 1995.
Eligibility
- -----------
Employees who are designated by the Human Resources Committee of the Bell
Atlantic Board of Directors as Senior Managers, and certain Executive Managers,
are eligible to participate in this program.
Definitions
- -----------
All references to "years" in this program description refer to the plan year,
which is July 1 to June 30. All references to "surviving spouse" mean the
person to whom you were married at the time of your death.
Active Employees
- ----------------
While you are an active employee, the program will reimburse you for any
financial counseling fees incurred up to $8,000 per plan year.
Retired Employees
- -----------------
The program allows for $8,000 per plan year for two full plan years after your
retirement.
Surviving Spouses of:
- --------------------
Active: After your death, the program will reimburse your surviving spouse,
for any expenses incurred under the program, for two full plan
years.
Retired: After your death, the program will reimburse your surviving spouse,
for any expenses incurred under the program, for up to the remaining
allowance (of 2 plan years) due that retiree.
/1/
<PAGE>
ELIGIBLE EXPENSES FOR REIMBURSEMENT:
- -----------------------------------
1) Financial Counseling
--------------------
Expenses incurred for personal financial advice, which include analysis of:
. compensation and benefits provided by Bell Atlantic;
. investment opportunities;
. personal financial planning; and
. tax planning.
2) Income Tax Preparation
----------------------
Preparation of federal and state individual income tax returns, including
returns you file jointly with your spouse.
3) Estate Planning
---------------
. review of any existing wills or trusts you or your spouse have prepared;
. advice concerning lifetime reallocation of assets by gifts directly or
through trusts;
. advice on disposition of assets by will or other means;
. preparation of wills, trusts, and related legal documents for you or your
spouse.
Reimbursement Process
- ---------------------
Plan participants may submit a "Request for Reimbursement" form once per
calendar quarter. The form, with copies of bills and receipts supporting the
requested reimbursement, should be mailed to:
Plan Administrator
Executive Compensation
1310 North Court House Road
9th Floor
Arlington, VA 22201
/2/
<PAGE>
Any bill submitted for payment by the 15th of the month following the end of a
calendar quarter will be paid by the end of that month.
e.g. Bills submitted by October 15th for expenses incurred from July 1 through
September 30, will be paid, less applicable withholding taxes, by October 30.
Concurred: _________________________
AVP Compensation Planning
Approved: _________________________
Vice Chairman
/3/
<PAGE>
Exhibit 10h
BELL ATLANTIC SENIOR MANAGEMENT
RETIREMENT INCOME PLAN
----------------------
As Amended and Restated Effective as of December 31, 1995
ARTICLE 1. STATEMENT OF PURPOSE
The purpose of this Plan (which was known prior to January 1, 1989 as the
Bell Atlantic Senior Management Non-Qualified Pension Plan) is to provide
supplementary pension payments to Senior Managers of Bell Atlantic and its
affiliated companies. The Plan provides pension benefits for Senior Managers
with at least five Years of Service (and their Beneficiaries) upon retirement or
upon Separation from Service for certain other reasons. The amount of the
pension benefit under the Plan is based upon factors which take account of Years
of Service and Final Average Pay. The Plan also provides a lump sum death
benefit for active Senior Managers, and for Senior Managers in retiree status
under a Qualified Pension Plan.
This document describes the terms of the Plan, which was comprehensively
redesigned, amended and restated effective January 1, 1989, and as it has been
amended from time to time thereafter through December 31, 1995. For Senior
Managers with a Separation from Service Date prior to January 1, 1989, the terms
of the Prior Plan Document shall apply.
ARTICLE 2. DEFINITIONS
2.1 "Appeals Committee" means a committee comprised of the Chief Executive
Officer, the Plan Administrator, and such other persons (if any) as the Plan
Administrator may designate from time to time.
2.2 "Bell Atlantic" means Bell Atlantic Corporation, a Delaware
corporation. Any reference to the "Board of Directors", the "Human Resources
Committee", or to the title of any officer, shall mean the Board of Directors,
the Human Resources Committee of the Board of Directors, or the respective
officer, as the case may be, of Bell Atlantic.
2.3 "Bell Atlantic Company" means Bell Atlantic and each of its direct and
indirect corporate subsidiaries (whether wholly or majority owned), and each
partnership in which a Bell Atlantic Company has a 51% or greater partnership
interest.
2.4 "Beneficiary" means the surviving spouse or other designated
beneficiary of a Senior Manager (with respect to the survivor annuity provisions
of this Plan), and the person or persons who may be eligible for a lump sum
death benefit under this Plan.
2.5 "Claims Committee" means a committee of one or more persons consisting
of the Plan Administrator and such other persons (if any) as the Plan
Administrator may designate from time to time.
2.6 "Disability Pension" shall have the meaning stated in Section 4.3.
<PAGE>
2.7 "Final Average Pay" means a Senior Manager's average annual Pay for
the five years of highest Pay among the last ten years, to and including the
calendar year of the Senior Manager's Separation from Service.
2.8 "Grantor Trusts" means the one or more trusts described in the Bell
Atlantic Rabbi Trust Agreement and any similar trust agreements to which one or
more Bell Atlantic Companies are parties as co-grantors, and which are designed
(i) to qualify as grantor trusts within the meaning of Sections 671 through 679
of the Internal Revenue Code, and (ii) to satisfy the rules applicable to so-
called "rabbi trusts" as described in rulings and announcements of the Internal
Revenue Service and the Department of Labor.
2.9 "Hostile Change of Control" means a "Hostile Change of Control" as
that term is defined in the Bell Atlantic Management Pension Plan, as it may be
amended from time to time.
2.10 "Mandatory Beneficiary" shall have the same meaning as defined under
the Bell Atlantic Management Pension Plan, as it may be amended from time to
time.
2.11 "Mandatory Retirement Age" shall have the following meaning (except as
otherwise provided by any applicable state or local law which is not pre-empted
by Federal law):
(a) age 65, in the case of any employee who has attained age 65, and
who, for the two-year period immediately prior to his Separation from
Service, is employed as a Senior Manager or in any other bona fide
executive or policy making position and would, in the event of retirement
at such time, be entitled to an immediate retirement benefit of not less
than $44,000 per annum, in the aggregate, from the Qualified Pension Plans,
this Plan, and all other qualified and non-qualified pension, savings and
deferred compensation plans maintained by Bell Atlantic Companies; and
(b) in the case of any other employee, there shall be no Mandatory
Retirement Age.
2.12 "Mid-Career Pension Plan" means the Bell Atlantic Mid-Career Pension
Plan, which was frozen as of May 1, 1991, for purposes of any further accruals.
2.13 "Participating Company" shall mean a Bell Atlantic Company which
employs one or more Senior Managers and which has adopted this Plan.
2.14 "Pay" shall mean the gross amount (before reduction for tax
withholding, or for pre-tax or after-tax contributions to any employee benefit
plans) of the sum of:
(a) the total base recurring salary earned by the Senior Manager for a
calendar year (or the portion of a calendar year) during which he was an
employee of one or more Bell Atlantic Companies; plus
(b) the gross amount of the annual cash bonus or bonuses earned for
performance for one or more Bell Atlantic Companies during all or part of
such year, including
<PAGE>
(i) the Short Term Incentive Award earned by the Senior Manager
for performance during all or part of such year, and/or
(ii) any other annual cash bonus amount earned for performance
during all or part of such year under any annual incentive pay plan of
a Bell Atlantic Company (for performance during a period prior to
being designated a Senior Manager).
Solely for purposes of this Section, all references to forms of remuneration
paid by one or more "Bell Atlantic Companies" shall, in the case of a Senior
Manager who is on an approved rotational assignment to Bell Communications
Research, Inc. ("Bellcore"), be deemed to include the corresponding forms of
remuneration earned by the Senior Manager while employed by Bellcore, but only
such remuneration which is earned while the Senior Manager retains the status of
Bellcore rotational.
2.15 "Paying Agent" shall mean Bell Atlantic, or any other Bell Atlantic
Company which is designated by the Plan Administrator from time to time with the
concurrence of the Executive Vice President and General Counsel and the Vice
President - Secretary and Treasurer, in such company's capacity as agent for the
Participating Companies in the performance of the payroll function of disbursing
any and all benefits which are payable under the terms of this Plan.
2.16 "Pension Commencement Date" shall be the date as of which the benefit
under this Plan shall be payable, which is not to be confused with the first
date on which a benefit payment will be transmitted to the Senior Manager (which
will typically occur up to 90 days following the Pension Commencement Date). For
a Senior Manager with a vested accrued benefit under a Qualified Pension Plan,
the Pension Commencement Date under this Plan shall be the same as the benefit
commencement date under the Qualified Pension Plan.
2.17 "Plan" shall mean this Bell Atlantic Senior Management Retirement
Income Plan, as it is described herein and as it may be amended from time to
time.
2.18 "Plan Administrator" shall mean the Vice President - Human Resources
of Bell Atlantic.
2.19 "Post-Separation Pension" shall have the meaning stated in Section 4.2
of this Plan.
2.20 "Prior Plan Document" shall mean the plan document describing the
terms of the Bell Atlantic Senior Management Non-Qualified Pension Plan, as
amended and restated as of January 1, 1986.
2.21 "Qualified Pension Benefits" shall mean the aggregate of the one or
more pension benefits actually payable (whether from trust assets or company
assets) to a Senior Manager (or, subsequent to a Senior Manager's death, to his
Beneficiaries) for a calendar year (before deducting any taxes which may be
withheld for such year) under the terms of the one or more Qualified Pension
Plans in which the Senior Manager has accrued vested benefits, taking into
account (a) any death benefits, and (b) all elements of the pension calculation,
including without limitation (i) the form in which the benefit is being paid
(whether as a
<PAGE>
single-life annuity or a joint and survivor annuity), and (ii) any early
retirement discount and actuarial reduction which may be applicable under the
terms of the Qualified Pension Plans based on the Pension Effective Date.
2.22 "Qualified Pension Formula Benefits" shall mean the amount of a Senior
Manager's Qualified Pension Benefits under only those Qualified Pension Plans
which are described in Section 2.23(a) hereof, but calculated without taking
account of any limitations imposed by Section 415 of the Internal Revenue Code.
2.23 "Qualified Pension Plans" shall mean both (a) the defined-benefit
pension plans designed to be qualified under Section 401(a) of the Internal
Revenue Code and sponsored by a Bell Atlantic Company, and (b) any "excess
benefit plan" (as such term is defined in Section 3(36) of ERISA) which is
sponsored by a Bell Atlantic Company and which does not expressly exclude Senior
Managers from participation, whether such plan is described in a separate plan
document or in the plan document of any of the Qualified Pension Plans referred
to in clause (a) of this paragraph. For purposes of this definition, this Plan
shall not be treated as an "excess benefit plan".
2.24 "Replacement Pay Percentage" shall have the meaning stated in Section
5.3 hereof.
2.25 "Retirement Pension" shall have the meaning stated in Section 4.1 of
this Plan.
2.26 The term "Senior Manager" shall mean an active or former employee who
is serving or has served as an officer of one or more Bell Atlantic Companies
and who, by resolution adopted by the Human Resources Committee, has at any time
been granted the status of Senior Manager, unless and until such status is
revoked in a subsequent resolution adopted by the Human Resources Committee.
The Human Resources Committee may, in its sole discretion, revoke Senior Manager
status in the event, and as of the date, of either (a) the demotion or downgrade
of an officer who was then a Senior Manager, or (b) upon the occurrence of any
forfeiture event stated under Section 4.4 hereof; provided, however, that under
no circumstances shall the Human Resources Committee, or any officer or director
of any Bell Atlantic Company, take any action on or after the occurrence of a
Hostile Change of Control to revoke, or construe as revoked, the Senior Manager
status of any person who had Senior Manager status immediately prior to the
Hostile Change of Control.
2.27 "Senior Manager LTD Plan" means the Bell Atlantic Senior Management
Long Term Disability and Survivor Protection Plan, as it may be amended from
time to time.
2.28 "Separation from Service" means the termination of employment of a
Senior Manager for any reason, including, without limitation, retirement,
disability, resignation, discharge, other voluntary or involuntary termination,
failure to return to duty upon recovery from a disability or at the expiration
of a recognized leave of absence or approved rotational assignment, or death,
but not including (i) commencement of an approved leave of absence or rotational
assignment, or (ii) transfer to another Bell Atlantic Company.
2.29 "Separation from Service Date" means, in the event of a Senior
Manager's Separation from Service, the first day following the last day on which
a Senior Manager is treated as being on the payroll of a Bell Atlantic Company
as an employee in active service or on an approved leave or rotational
assignment. In the case of a Senior Manager with a
<PAGE>
Retirement Pension, the Separation from Service Date is also referred to as the
"pension commencement date". For a former employee with a right to receive a
deferred Post-Retirement Pension, the pension commencement date means the first
day for which a pension benefit hereunder becomes payable.
2.30 "Short Term Incentive Award" means the amount (if any) awarded to a
Senior Manager after the end of an annual performance period, pursuant to the
Short Term Incentive Plan in which the Senior Manager then participates. The
term Short Term Incentive Award refers to the gross amount earned (before any
applicable tax withholding), whether such amount is subsequently paid in cash or
deferred in accordance with the Senior Manager's election.
2.31 "Short Term Incentive Plan" means the Bell Atlantic Senior Management
Short Term Incentive Plan maintained for Senior Managers by the Bell Atlantic
Companies.
2.32 "Target Automatic Survivor Annuity" shall have the meaning stated in
Section 7.1(b)(ii) hereof. "Automatic Survivor Annuity" shall have the meaning
stated in Section 7.1(b)(i) hereof.
2.33 "Target Lump Sum Death Benefit" shall have the meaning stated in
Section 7.2 hereof.
2.34 "Target Pension" means a pension, expressed as an annual amount
calculated in the manner described in Article 5 of this Plan, which is intended
to represent the total pension benefit for which a Senior Manager is eligible
under all defined-benefit pension plans which are maintained by any Bell
Atlantic Company, including, without limitation, benefits under this Plan and
under the Qualified Pension Plans.
2.35 "Totally Disabled" and "Total Disability" shall have the following
meaning: a Senior Manager shall be considered to be Totally Disabled and to be
subject to a Total Disability if, on and after the completion of the 26- or 52-
week period of disability benefits (whichever is applicable) through the date as
of which the Company elected to terminate the Senior Manager's employment due to
disability, the Senior Manager continues to suffer from a physical or mental
impairment which prevents the Senior Manager from meeting the performance
requirements of all of the following: (1) the position held immediately
preceding the onset of the physical or mental impairment, (2) a similar
position, or (3) any appropriate position within the employing company which the
person would otherwise be capable of performing by reason of the Senior
Manager's background and experience. This definition shall be applied in a
manner consistent with the corresponding definition under the Senior Manager LTD
Plan.
2.36 "Years of Service", except as expressly limited or stated elsewhere in
the Plan, shall mean the aggregate (without double counting) of all periods of
service for which the Senior Manager is credited for benefit accrual purposes
under the terms of the one or more Qualified Pension Plans in which the Senior
Manager has an accrued benefit, stated in terms of years and any fraction of a
year. Years of Service shall, in addition (but without double counting), include
any period during which the Senior Manager is employed by any Bell Atlantic
Company which does not at that time participate in a Qualified Pension Plan.
2.37 Gender Neutral. The use in this Plan of personal pronouns of the
--------------
masculine
<PAGE>
gender is intended to include both the masculine and feminine genders.
ARTICLE 3. PARTICIPATION
3.1 Participation. Each Senior Manager shall be a participant in this Plan
-------------
on and after the date on which he becomes a Senior Manager, and shall remain a
participant so long as he retains the status of Senior Manager.
3.2 Mandatory Retirement Age. Each Senior Manager for whom a Mandatory
------------------------
Retirement Age is applicable under Section 2.11(a) hereof shall be subject to
mandatory Separation from Service, and shall cease to be eligible for hire in
the capacity of a Senior Manager by any Bell Atlantic Company, on and after the
last day of the month in which such Senior Manager attains the Mandatory
Retirement Age (whether or not he is then eligible for a Retirement Pension or
Post-Separation Pension).
ARTICLE 4. TYPES OF PENSION; ELIGIBILITY;
WHEN BENEFIT COMMENCES; FORFEITURE.
4.1 Retirement Pension.
------------------
(a) Eligibility. A Senior Manager shall be eligible for a Retirement
-----------
Pension under this Plan upon his Separation from Service for any reason other
than death, Total Disability, or cause, if, on his Separation from Service Date,
the following conditions are met:
(i) he is then treated as having the status of a Senior Manager; and
(ii) he then, either: (A) has a combination of age and years of
service (as calculated for retirement-eligibility purposes) on the
Separation from Service Date that equals or exceeds any of the following
combinations:
<TABLE>
<CAPTION>
Age equal to or greater than: Service equal to or greater than:
----------------------------- ---------------------------------
<S> <C>
Any age 30 years
50 25 years
55 20 years
60 15 years
65 10 years
</TABLE>
or (B) has attained and accrued a combination of age and retirement
eligibility service which the Human Resources Committee has determined, in
its discretion on a case-by-case basis, constitute sufficient age and
service for that particular Senior Manager to qualify for an immediate
Retirement Pension.
(b) Benefit Commencement. A Retirement Pension shall commence on the date
--------------------
the benefit commences under the Qualified Pension Plan.
4.2 Post-Separation Pension.
-----------------------
(a) Eligibility. A Senior Manager who is not eligible for a Retirement
-----------
Pension under paragraph (a) above, or who Separates from Service on account of
disability but fails to satisfy
<PAGE>
clause (ii) or (iii) of Section 4.3(a), shall be eligible for a Post-
Separation Pension under this Plan in the event of his Separation from Service
for any reason other than death or cause, if, on his Separation from Service
Date, the following conditions are met:
(i) he is then treated as having the status of a Senior Manager; and
(ii) he has then accrued five years of service for vesting purposes
under the terms of at least one Qualified Pension Plan.
(b) Benefit Commencement; Actuarial Reduction Factors.
-------------------------------------------------
(i) A Post-Separation Pension shall commence on the same date as the
benefit commencement date under the Qualified Pension Plan in which the
Senior Manager participates (sometimes referred to herein as the "pension
commencement date"). If the Senior Manager does not participate in a
Qualified Pension Plan or has no vested benefit under any Qualified Pension
Plan, the pension commencement date shall be the Separation from Service
Date.
(ii) In the event that the pension commencement date occurs prior to
age 65, the Post-Separation Pension shall be subject to actuarial reduction
in accordance with the terms of Section 5.2(b)(ii) and, if applicable,
Section 5.2(c)(ii).
4.3 Disability Pension.
------------------
(a) Eligibility. A Senior Manager shall be eligible under this Plan for a
-----------
Disability Pension in the form of an annuity if, on his Separation from Service
Date, the following conditions are met:
(i) he or she is then treated as having the status of a Senior
Manager;
(ii) he or she has accrued at least 15 Years of Service; and
(iii) his or her employment is terminated by the employing company on
account of disability.
(b) Benefit Commencement and Cessation. A Disability Pension shall commence
----------------------------------
on the date as of which the Senior Manager commences a benefit under the
Qualified Pension Plan. A Senior Manager may elect to waive a Disability Pension
and to receive instead the Retirement Pension or Post-Separation Pension which
he or she would have been eligible to receive in the absence of the disability.
A Disability Pension shall cease in the event, and at the time, that the Senior
Manager is found to be no longer Totally Disabled, at which time the benefit
shall convert to a deferred Post-Separation Pension (with an actuarial reduction
based on the individual's age at the time of commencing the Post-Separation
Pension), or an immediate and unreduced Retirement Pension, depending upon the
age and service of the Senior Manager on the Separation from Service Date.
(c) No Accrual During Disability. Notwithstanding the terms of any
----------------------------
Qualified Pension Plan in which a Senior Manager who is receiving a Disability
Pension may be a participant, for purposes of this Plan, no Years of Service
shall accrue on or after the Separation from Service Date of the Senior Manager,
unless the Senior Manager ceases to be
<PAGE>
Totally Disabled and is re-employed as a Senior Manager.
(d) Conversion to Retirement Pension. A Disability Pension which has
--------------------------------
commenced at any date prior to the date a Senior Manager attains age 65 shall
convert to a Retirement Pension on the date he attains age 65.
4.4 Forfeiture of Benefits. On any date prior to, but in no event at any
----------------------
time after, the occurrence of a Hostile Change of Control, the Human Resources
Committee may, in its sole discretion, take action to cause to be forfeited all
benefits for which a Senior Manager (and his Beneficiaries) would be otherwise
eligible hereunder, under any of the following circumstances:
(a) the Senior Manager is discharged by his employing company for
cause;
(b) the Human Resources Committee determines that the Senior Manager
engaged in misconduct in connection with his employment with a Bell
Atlantic Company; or
(c) the Human Resources Committee determines that the Senior Manager
has breached his or her non-compete or proprietary information duties to
Bell Atlantic. In furtherance of the prohibitions of this Plan against
engaging in competitive activities or disclosing proprietary information,
the following additional terms and conditions shall apply:
(i) During the first two years following a Senior Manager's
Separation from Service Date, (1) a cash out under the Plan shall be
available only if the Senior Manager signs a non-compete and
proprietary information agreement, or delivers a copy of a previously
executed agreement of that type which is then in force, in a form
acceptable to the Plan Administrator with the advice of counsel, and
(2) neither a cashout shall be paid nor an annuity shall commence
under the Plan unless and until the Senior Manager delivers both: (a)
written information sufficient to enable the Plan administrator to
determine whether the Senior Manager's subsequent career plans or
commitments will violate the applicable non-compete rule, and (b) an
agreement to provide timely notice of any changed circumstances during
the ensuing two years.
(ii) In addition to, and apart from, the Human Resource
Committee's existing discretion to cause a forfeiture of a Senior
Manager's pension if he or she violates the applicable non-compete
rule, the Plan Administrator with the advice of counsel and the
concurrence of the Chairman of the Human Resources Committee shall
have the discretion, for up to two years, to suspend a Senior
Manager's eligibility to cash out the benefit or commence an annuity
under this Plan if the Senior Manager does not fully comply with
applicable requirements of paragraph "(i)", or if there is evidence
that further investigation would show that the Senior Manager is
seeking to, or has, become involved with employment or business
activities contrary to the applicable non-compete rule.
<PAGE>
(iii) For purposes of this Plan, the definitions of prohibited
competitive activities and prohibited disclosure of proprietary
information shall be as stated in the terms and conditions of the form
of non-compete and proprietary information agreement generally
applicable to newly hired and promoted Senior Managers, as that form
of agreement may exist on the Separation from Service Date; provided,
however, that, for a Senior Manager who, on the Separation from
Service Date, is subject to a previously executed non-compete and
proprietary information agreement which then remains in force, the
applicable definitions for purposes of this Plan shall be as stated in
such prior agreement; provided, however, that nothing in this
paragraph is intended to negate the provisions of the previous two
paragraphs.
ARTICLE 5: AMOUNT OF PENSION BENEFIT
5.1 Pension Payable under this Plan. Subject to the special rules stated
-------------------------------
in Section 5.6 hereof, the annual amount of the pension to which an eligible
Senior Manager shall be entitled under this Plan shall be equal to the Senior
Manager's Target Pension, minus his Qualified Pension Benefits.
-----
5.2 Target Pension. On his Separation from Service Date, a Senior
--------------
Manager's Target Pension (expressed as an annuity) shall be equal to the greater
of his Qualified Pension Formula Benefits (expressed as an immediate annuity),
or:
(a) the product of:
(i) the Replacement Pay Percentage, times
(ii) Final Average Pay;
(b) reduced (except in the case of a Disability Pension in the form of an
-------
annuity) by:
(i) any applicable early retirement reduction factor under Section
5.4, in the case of a Retirement Pension; or
(ii) any applicable actuarial reduction factor under Section 5.5, in
the case of a Post-Separation Pension; and
(c) if the benefit is paid in any form of annuity other than a single life
annuity, the portion of the benefit that is paid in that form shall be
further reduced by the applicable factor which, under the terms of the
---------------
Qualified Pension Plan, is to be used to convert a single life annuity
to an annuity of the form elected by the Senior Manager.
5.3 Replacement Pay Percentage. A Senior Manager's Replacement Pay
--------------------------
Percentage shall be measured as of his Separation from Service Date, and shall
be equal to
<PAGE>
the sum of:
(a) two percentage points (2%) for each of his first 20 Years of Service;
(b) one and a half percentage points (1.5%) for each of his next 10 Years
of Service; plus
(c) one percentage point (1%) for each of his next 5 Years of Service; and
(d) no further percentage points for any additional Years of Service
thereafter.
For a Senior Manager with less than 35 Years of Service, where the Senior
Manager has accrued a fraction of a Year of Service in addition to a whole
number of years, then such Senior Manager shall be credited with the product of
(i) that fraction, times (ii) the number of percentage points that would be
credited for the next full year.
5.4 Early Retirement Reduction Factor. The early retirement reduction
---------------------------------
factor which is applicable to a Senior Manager's Retirement Pension shall be
equal to the product of:
(a) five percent (5%), times
(b) the number of years and fraction of a year by which the Separation
from Service Date precedes the date on which the Senior Manager
attains age 60, where the "fraction of a year" is measured in twelfths
based on the number of full (not partial) months;
provided, however, that the Human Resources Committee may, in its sole
discretion on a case-by-case basis, waive all or any portion of the early
retirement reduction which would otherwise apply to a Senior Manager.
5.5 Post-Separation Actuarial Reduction Factor. In the case of a Post-
------------------------------------------
Separation Pension in the form of an annuity which commences at any time prior
to the date on which the Senior Manager attains age 65, the actuarial reduction
factor shall be determined with reference to the date the Post-Separation
Pension actually commences, based on interest rates and mortality factors
prescribed by the Federal legislation commonly known as "GATT", namely, the
yield on 30-year U.S. Treasury bonds and 1983 Group Annuity Mortality (GAM 83)
factors. In the case of a Post-Separation Pension commencing on or after the
date the Senior Manager attains age 65, the actuarial reduction factor shall be
zero. Notwithstanding any other provision of this Section 5.5, the Human
Resources Committee may, in its sole discretion on a case-by-case basis, waive
all or any portion of the actuarial reduction which would otherwise apply to a
Senior Manager whose Post-Separation Pension has commenced, or will commence,
prior to age 65.
5.6 No Reduction of Pension under Prior Plan Document. The Target Pension
-------------------------------------------------
under Section 5.2 of this Plan, for which a Senior Manager is eligible as a
consequence of his actual Separation from Service at any time on or after
January 1, 1989, shall not be less, when expressed as a benefit in the form of a
single-life annuity, than the aggregate pension amount (expressed as a single-
life annuity) to which he would have been entitled if he had a Separation from
Service Date of December 31, 1988, taking into account the Years of Service and
compensation history he had then accrued (including the actual Short-Term
Incentive
<PAGE>
Award for performance in 1988), and the age he had then attained, under the
December 31, 1988 pension formulas of the Qualified Plans, the Mid-Career
Pension Plan, the non-disability provisions of the Senior Manager LTD Plan, and
the Prior Plan Document.
ARTICLE 6: FORM OF BENEFIT.
6.1 Unmarried Senior Managers. In the case of a Senior Manager who is not
-------------------------
married on the pension commencement date, the pension benefit under Section 5.1
of this Plan shall be paid in accordance with the form of benefit elected by the
Senior Manager under the Qualified Pension Plan in which the Senior Manager
participates; provided, however, if a Senior Manager is eligible to, and elects
to, cashout his or her benefit under a Qualified Pension Plan, the Senior
Manager shall be eligible to elect a benefit under this Plan either (a) in any
form of annuity which would have been available to the Senior Manager to elect
under the then-existing terms of the Qualified Pension Plan (where the
conversion from the amount of the single life annuity payable under this plan is
converted to any other form of annuity using the applicable conversion factors
of the Qualified Pension Plan), or (b) as a cashout as described in Section 6.4.
6.2 Married Senior Managers.
-----------------------
(a) Forms of Benefit. In the case of a Senior Manager who is married on
----------------
the pension commencement date, the pension benefit under Section 5.1 of this
Plan shall be paid in accordance with the form of benefit elected by the Senior
Manager under the Qualified Pension Plan in which the Senior Manager
participates, subject to the applicable spousal consent rules of that plan;
provided, however, if a Senior Manager elects, with the consent of his or her
spouse, to cashout his or her benefit under a Qualified Pension Plan, the Senior
Manager shall be eligible, with the consent of his or her spouse within 90 days
of the Pension Commencement Date, to elect a benefit under this Plan either (a)
in any form of annuity which would have been available to the Senior Manager to
elect under the then-existing terms of the Qualified Pension Plan (where the
conversion from the amount of the single life annuity payable under this plan is
converted to any other form of annuity using the applicable conversion factors
of the Qualified Pension Plan), or (b) as a cashout as described in Section 6.4.
(c) Marital Status. For purposes of this Plan, the Plan Administrator may
--------------
require a Senior Manager or a person purporting to be a Beneficiary to present,
and the Plan Administrator may rely upon without any duty to further
investigate, any official documentary evidence of civil law marital status, such
as a marriage certificate or record of marriage, or a court order or other
record of divorce, issued by a court or governmental unit. Common law marriage
shall not be recognized for purposes of this Plan.
6.3 Monthly Payments. Pension benefits in the form of an annuity shall be
----------------
payable in monthly installments. The Plan Administrator shall endeavor to ensure
that the annual Target Pension amount for any annuity is paid, as nearly as
practicable, in twelve approximately equal monthly installments. The Plan
Administrator may elect to cause the Paying Agent to pay a constant portion of
each monthly installment from company assets under this Plan and to cause the
trustee of the Qualified Pension Plans referred to in Section 2.23(a) to pay a
complementary constant portion from the applicable qualified trust.
<PAGE>
Exhibit 10i
BELL ATLANTIC
DEFERRED COMPENSATION PLAN
(Amended and Restated as of January 1, 1996)
1. Purpose. The Bell Atlantic Deferred Compensation Plan
-------
(previously known as the Bell Atlantic Senior Management Incentive Award
Deferral Plan) (the "Plan") is a nonqualified, unfunded deferred compensation
plan. The Plan is intended to enable eligible employees to defer the
distribution of cash and stock awards of short term and long term incentive
compensation, and to defer base salary in excess of $150,000. The Plan was
established by the Board of Directors (the "Board") of Bell Atlantic Corporation
("Bell Atlantic") effective as of January 1, 1984, and is maintained for certain
active and former officers, executives and key employees of Bell Atlantic and
its subsidiaries. The Human Resources Committee (the "HRC") of the Board has the
authority to amend the Plan, from time to time, and the Plan Administrator, as
described in Section 6, is responsible for the day-to-day administration of the
Plan.
2. Eligibility.
-----------
(a) Participating Companies. The "Participating Companies" under this
-----------------------
Plan shall be Bell Atlantic and each subsidiary or other company affiliated with
Bell Atlantic which employs one or more active employees who are either
(a) Senior Managers who are eligible for an award under the Bell Atlantic Senior
Management Short Term Incentive Plan or any of the seven other Short Term
Incentive Plans maintained for executives of Bell Atlantic and certain of its
subsidiaries (the "Short Term Incentive Plans"), (b) Key Employees who are
eligible for an award under the Bell Atlantic 1985 Performance Share Plan (the
"Performance Share Plan"), (c) effective for awards for performance in 1991 and
thereafter, Key Executive Managers who are eligible for an award under the Bell
Atlantic Executive Management Annual Bonus Plan (the "Annual Bonus Plan"), or
(d) Executive Managers and Senior Managers whose base salary exceeds $150,000.
(b) Eligible Employees. An active employee of a Participating Company
------------------
shall be eligible to defer awards and establish deferral accounts under this
Plan if the employee is in active service and is eligible to receive an award
under either a Short Term Incentive Plan, the Performance Share Plan, or (for
awards for performance in 1991 and thereafter) the Annual Bonus Plan, or earns a
base salary at an annual rate in excess of $150,000. Certain former employees
shall have the right to receive distributions from existing deferral accounts
under the Plan, but not to defer future awards; those participants shall
include: (a) any former employee who elected during a period of active
employment with a Participating Company to defer one or more awards under a
Short Term Incentive Plan, Performance Share Plan or Annual Bonus Plan, and
(b) any employee who was a participant in the predecessor Bell System Senior
Management Incentive Award Deferral Plan (the "Predecessor Plan") as of December
31, 1983.
3. Elections to Defer Awards and Other Compensation.
------------------------------------------------
(a) Optional Election to Defer Stock Award under the Performance
------------------------------------------------------------
Share Plan.
----------
(1) Optional Election. On or before the last day of any
-----------------
calendar year, an eligible employee may elect to participate in the Plan by
directing that all or part of any shares of Bell Atlantic stock which may be
awarded to the employee in the following year under the
- --------------------------------------------------------------------------------
Bell Atlantic Deferred Compensation Plan (1/1/95 Restatement) Page 1
<PAGE>
Performance Share Plan shall be credited to a "Share Deferral Account" as
described in Section 4(a) of this Plan. In no event, however, shall the amount
of the award which is deferred in any given year be less than $1,000 worth of
such shares (based on valuation at the time the award would otherwise be paid).
(2) Form and Timing of Optional Election to Defer. An optional
---------------------------------------------
election to defer a Performance Share Plan award, as described in Section
3(a)(1), shall be on a form approved by, and delivered to, the Plan
Administrator on or before the close of business on the last day of December
prior to the calendar year in which the award to be deferred is determined,
approved and awarded. The elections signified on the employee's form may be
changed or revoked on or before, but (except as provided in Section 3(f) or
3(g)) not after, said last day of December. The deferral election form shall
provide each such eligible employee the opportunity to elect as follows:
(A) to determine the percentage or amount of the award to be
deferred, if any;
(B) to select the future date or event as described in Sections
4(a)(1) to 4(a)(3) which shall trigger the commencement of distribution;
(C) to elect whether to receive the deferred award either in a single
distribution, or in two to twenty approximately equal annual distributions,
and
(D) in the event of the death of the employee prior to the completion
of the distribution, to cause either a single distribution of shares to be
made in the year of the employee's death, or two to ten approximately equal
annual distributions commencing in the year of the employee's death.
(b) Mandatory Deferral of Stock Portion of Short Term Award.
-------------------------------------------------------
(1) Awards subject to Mandatory Deferral. Commencing with the 1992
------------------------------------
award for the 1991 performance years under the Short Term Incentive Plans, any
portion of an employee's award under any of such plans that is approved in the
form of a deferred distribution of shares of Bell Atlantic stock shall
automatically be credited in the form of phantom shares to a special share
deferral account for the employee (a "Mandatory Share Deferral Account") as
described in Section 4(b).
(2) Form and Timing of Certain Elections. Not later than December
------------------------------------
15th of the calendar year preceding a year in which such a deferred stock award
is to be approved under the Short Term Incentive Plans, the Plan Administrator
shall distribute a deferral election form to each employee who is eligible to
receive such an award. The deferral election form shall notify the employee that
deferral of the stock portion of the award is mandatory and that distribution
shall occur or commence in the year in which the employee retires, dies, or
terminates employment for any other reason. The deferral election form shall
furthermore provide each such eligible employee the opportunity to elect as
follows: (1) to receive the deferred stock award either in a single distribution
of shares of Company stock, or in two to twenty approximately equal annual
distributions of stock, and (2) in the event of the death of the employee prior
to the completion of the distribution of shares, to cause either a single
distribution of shares in the year of the employee's death, or in two to ten
approximately equal annual distributions commencing in the year of the
employee's death. To be valid and enforceable, the completed election form must
be
- --------------------------------------------------------------------------------
Bell Atlantic Deferred Compensation Plan (1/1/95 Restatement) Page 2
<PAGE>
executed by the employee and delivered to the Plan Administrator on or before
the close of business on the last day of December prior to the calendar year in
which the award to be deferred is determined, approved and awarded. Any
elections signified on the employee's form may be changed or revoked on or
before, but (except as provided in Section 3(f)) not after, said last day of
December.
(3) Default Election for Mandatory Deferral. In the event that an
---------------------------------------
employee described in Section 3(b)(1) of this Plan fails to deliver a signed
deferral election form as described in Section 3(b)(2), the employee shall be
deemed to have elected distribution in the form of a single distribution of
shares of Bell Atlantic stock from the Mandatory Share Deferral Account in the
year of his or her retirement, termination of employment, or death, whichever
occurs first.
(c) Optional Election to Defer Cash Short Term Award.
------------------------------------------------
(1) Optional Election. On or before the last day of any calendar year,
-----------------
an eligible employee may elect to direct that all or part of any cash short term
award which may be awarded to the employee in the following year under a Short
Term Incentive Plan or Annual Bonus Plan shall be credited to either a "Cash
Deferral Account" as described in Section 4(c) (in the case of awards for 1990
and prior years), or a "Short Term Award Deferral Account" as described in
Section 4(d) (in the case of awards for 1991 and later years). In no event,
however, shall the part of any such award which is deferred in any calendar year
be less than $1,000.
(2) Form and Timing of Optional Election to Defer. The form and timing
---------------------------------------------
of an employee's election to defer a cash short term award shall be as described
in Section 3(a)(2).
(3) Election of Form of Distribution of Post-1990 Short Term Awards.
---------------------------------------------------------------
Each employee who elects to defer the cash portion of a post-1990 short term
award pursuant to Section 3(a)(1) and (2) hereof shall have the right to elect
at the time the distribution of the deferred award is scheduled to commence
whether to receive the distribution in the form of cash or shares of Bell
Atlantic stock. Such election shall be made at the time and in the form required
by the Plan Administrator. In the event of the death of the employee prior to
electing the form of distribution, the award shall be distributed in cash to the
person or persons, and in the number of installments, previously designated by
the employee.
(d) Optional Election to Defer Salary in Excess of $150,000.
-------------------------------------------------------
(1) Eligibility. For Senior Managers, and for Executive Managers who
participate in the Annual Bonus Plan, commencing with a 1993 election for
calendar year 1994, and annually for each calendar year thereafter, an eligible
participant may deliver to the Plan administrator an election in writing to
defer a portion of base salary, as described in this section (d), which shall
become irrevocable on December 31 of the calendar year prior to the year in
which salary is to be deferred. For Executive Managers of Salary Grades C, D or
E (or equivalent grades), eligibility to defer salary under this section (d)
shall commence with 1994 elections for calendar year 1995.
(2) Form of Election. Any such election shall state the number of
dollars per annum to be deferred, which shall be withheld in approximately equal
installments from each
- --------------------------------------------------------------------------------
Bell Atlantic Deferred Compensation Plan (1/1/95 Restatement) Page 3
<PAGE>
regular pay, in an amount per annum not less than $1,000, in increments of
$1,000, and not greater than the amount by which the annual base salary rate at
the time of deferral exceeds $150,000.
(3) Not Subject to Adjustment. The amount of the deferral shall not
adjust as a result of any salary modification that may occur during the ensuing
year.
(4) Other Applicable Provisions. Amounts deferred under the Plan
shall be subject to the existing provisions of the Plan, including without
limitation provisions with respect to vesting, alternative periods of deferral,
alternative forms of distribution, one-time modifications of deferral elections,
6% penalty on ad hoc withdrawals, and imputed earnings on deferral accounts
(based on the better of the yield on 10-year US Treasury obligations or total
return on the Corporation's common stock).
(e) Elections under Predecessor Plan. For the purpose of this Section 3,
--------------------------------
an election made by an eligible employee under the Predecessor Plan shall be
considered as an election made under Section 3(a) or 3(c) (whichever is
applicable). Any reference to deferral of a "short term incentive award" in any
election under the Predecessor Plan shall be treated as a deferral of a pre-1991
award under the Short Term Incentive Plan, and references to deferral of a "long
term incentive award" in such any election under the Predecessor Plan shall be
treated as a deferral of an award under the Performance Share Plan.
(f) Designation of Beneficiaries. Each active employee who elects to defer
----------------------------
an award, and each active or former employee who maintains a deferral account
under this Plan may, at any time, designate one or more beneficiaries, and
revoke or change beneficiary designations, on a form approved by the Plan
Administrator.
(g) One-Time Postponement of Commencement Date and One-Time Modification
--------------------------------------------------------------------
of Number of Installments. At any time earlier than 12 months prior to the date
- -------------------------
on which a distribution of a portion (or all) of an employee's Cash or Share
Deferral Account would be payable under the terms of an initial deferral
election, the employee may submit a written election to the Plan administrator
requesting an increase or decrease in the number of installments requested under
his or her initial election of a distribution option for the account.
Furthermore, at any time earlier than 12 months prior to the date on which a
distribution of a portion (or all) of an employee's Cash or Share Deferral
Account would be payable under the terms of an initial deferral election, the
employee may submit a written election to the Plan administrator requesting that
the initial distribution date be further deferred; provided, however, that in no
event shall the deferral commence later than the year in which the employee
eventually retires or terminates employment for any reason. An employee may
postpone the distribution date and modify the form of distribution for each and
any deferral account once, but not more than once. If an employee, in fact,
retires or terminates employment less than 12 months subsequent to the date on
which the employee submits a modified deferral election of any type under the
terms of this paragraph, the Plan administrator shall void the modified election
and shall administer the deferral account in accordance with the employee's
initial deferral election. The provisions of this paragraph are effective
November 1, 1992.
(h) Early Withdrawals Subject to Penalty.
------------------------------------
- --------------------------------------------------------------------------------
Bell Atlantic Deferred Compensation Plan (1/1/95 Restatement) Page 4
<PAGE>
(1) Withdrawal from Elective Deferral Accounts. Except as provided in
------------------------------------------
the following paragraph (2), neither the employee, a beneficiary, nor any other
individual or entity, shall have any right to receive a distribution or make any
withdrawal from a deferral account, except in accordance with the terms of an
election made in accordance with Sections 3.1(a)-(g).
(2) Early Withdrawal Penalty. On or after November 1, 1992, an active
------------------------
or former or retired employee may at any time direct the Plan administrator to
distribute, as soon as administratively practicable, all or any portion of the
balance of any one or more of the employee's deferral accounts which the
employee then designates; provided, however, that, in each such instance of a
distribution prior to the date on which the account would otherwise be
distributed, a six percent early withdrawal penalty shall apply to the amount of
the requested early withdrawal.
(3) Not Applicable to Mandatory Deferrals of Shares. The provision of
-----------------------------------------------
this section (h) shall apply only to elective deferral accounts (as described in
Sections 3(a), 3(c), 3(d) and 3(e) hereof) and shall not apply to Mandatory
Share Deferral Accounts (as described in Section 3(b)).
4. Deferral Accounts.
-----------------
(a) Optional Deferral of Share Awards under Performance Share Plan.
--------------------------------------------------------------
(1) Share Deferral Accounts. The deferred portion of an award of
-----------------------
shares of Bell Atlantic stock pursuant to Section 3(a) of this Plan shall be
credited to a Share Deferral Account under this Plan in the form of a number of
phantom shares which shall reflect the same fluctuation in price and the same
dividend rate as an equivalent number of shares of Bell Atlantic stock.
Distributions from Share Deferral Accounts shall be distributed in shares of
Bell Atlantic common stock.
(2) Crediting of Earnings. From the date of an award under the
---------------------
Performance Share Plan of shares that an employee has elected to defer, to the
date that shares of Bell Atlantic stock are actually distributed under this
Plan, the phantom shares credited to the Share Deferral Account shall be
credited with phantom dividends on each dividend record date for Bell Atlantic
stock at the same rate at which dividends are actually declared and paid on such
stock. The phantom dividends credited on said dividend record date shall
immediately be converted to a number of whole and fractional dividend
reinvestment phantom shares equal to the result of dividing the market value per
share of Bell Atlantic stock on the dividend record date into the total number
of dollars of phantom dividends credited to the Share Deferral Account on that
date. For purposes of this paragraph, the value of Bell Atlantic shares on a
dividend record date shall be equal to the average of the five daily means of
the high and low sale prices per share of Bell Atlantic stock on the New York
Stock Exchange ("NYSE") for the five trading days ending on such dividend record
date.
(3) Earnings on Balances Between Installments. In the case of a Share
-----------------------------------------
Deferral Account on which an employee has elected to receive distributions in
two or more annual installments, dividends shall continue to be credited to the
undistributed share balance of the Share Deferral Account, and such dividends
shall continue to be converted to additional
- --------------------------------------------------------------------------------
Bell Atlantic Deferred Compensation Plan (1/1/95 Restatement) Page 5
<PAGE>
phantom shares, on and after the date on which the distribution of installments
commences, in the same manner in which dividends are credited and reinvested
prior to the distribution commencement date.
(b) Mandatory Deferral of Stock Portion of Short Term Awards.
--------------------------------------------------------
(1) Mandatory Share Deferral Accounts. All of the whole and fractional
---------------------------------
shares that are awarded to an employee under a Short Term Incentive Plan in the
form of mandatory deferred shares shall be credited pursuant to Section 3(b)
hereof to a Mandatory Share Deferral Account under this Plan in the form of
whole and fractional phantom shares which shall reflect the same fluctuation in
price and the same dividend rate as an equivalent number of shares of Bell
Atlantic common stock. The number of shares to be credited to the Mandatory
Share Deferral Account shall be determined in accordance with the rules for
conversion of cash awards to share awards which are stated under the terms of
the Short Term Incentive Plan. Distributions from Mandatory Share Deferral
Accounts shall automatically commence as soon as practicable after the date of
notice of an employee's death, or the date the employee retires from, or
terminates employment with, a Bell Atlantic Company, and shall be distributed in
the form of shares of Bell Atlantic common stock.
(2) From the date of the award of mandatory deferral shares under the
Short Term Incentive Plan to the date that shares are actually distributed from
the Mandatory Share Deferral Account, the balance of phantom shares in the
account shall be credited with phantom dividends and dividend reinvestment
phantom shares in the same manner as described in Sections 4(a)(2) and 4(a)(3).
(c) Optional Deferral of Pre-1991 Cash Short Term Awards.
----------------------------------------------------
(1) Cash Deferral Accounts. With respects to cash awards under a Short
----------------------
Term Incentive Plan which were awarded in 1990 or any prior year, the portion
(if any) of such a cash short term award which the employee elected to defer
under Section 3(c) shall be credited to a deferral account which shall be
referred to as a "Cash Deferral Account".
(2) Earnings on the Cash Deferral Account. A Cash Deferral Account
-------------------------------------
shall be credited with earnings from the date the award would, in the absence of
deferral, have been paid. Such earnings shall be in the form of interest, which
shall be credited to the account and compounded not less frequently than once
each calendar quarter, at an annual rate of interest determined by the Plan
Administrator, subject to review and revision from time to time by the HRC.
(3) Earnings After 1990. Effective on and after January 1, 1991,
-------------------
subject to modification from time to time by the HRC, earnings on the balance of
each Cash Deferral Account shall be credited and compounded on a monthly basis
at a rate of interest equal to one-twelfth of the then-current annual yield on
10-year U.S. Treasury Notes, as such rates are derived from an index and applied
to account balances by the Plan Administrator or a person to whom the Plan
Administrator delegates such responsibility.
(4) Earnings on Balances Between Installments. In the case of a Cash
-----------------------------------------
Deferral Account on which an employee has elected to receive distributions in
two or more
- --------------------------------------------------------------------------------
Bell Atlantic Deferred Compensation Plan (1/1/95 Restatement) Page 6
<PAGE>
annual installments, interest shall continue to be credited to the unpaid
balance of the Cash Deferral Account on and after the date on which the
distribution of installments commences in the same manner in which interest is
credited to such account prior to the distribution commencement date.
(d) Deferral of Salary and the Cash Portion of Post-1990 Short Term
---------------------------------------------------------------
Awards.
------
(1) Short Term Award Deferral Accounts. Any portion of salary which
----------------------------------
has been deferred under this Plan, and the deferred cash portion of a short term
award, which, in the absence of the employee's decision to defer under Section
3(c), would have been distributed in cash under an employee's Short Term
Incentive Plan in 1991 or any later year, or under an employee's Annual Bonus
Plan in 1992 or any later year, shall be credited in full to a deferral account
which shall be referred to as a "Short Term Award Deferral Account", with equal
amounts credited, for the purpose of tracking alternative earnings growth, to
each of two tandem sub-accounts under this Plan in the employee's name (the
"Short Term Award Cash Alternative Account" and the "Short Term Award Shares
Alternative Account").
(2) Two Alternative Sub-Accounts to Track Growth. The balance of the
--------------------------------------------
Short Term Award Cash Alternative Account shall be stated in dollars, and shall
be initially equal to the number of dollars of a post-1990 cash award that is
deferred pursuant to Section 3(c). The balance of the Short Term Award Share
Alternative Account shall be stated in phantom shares, and shall initially have
a dollar value equal to the deferred cash amount credited to the Cash
Alternative Account, but converted to a number of whole and fractional shares of
phantom stock determined in accordance with the rules for conversion of cash
awards to deferred shares, as stated under the terms of the Short Term Incentive
Plan.
(3) Growth of Interest-Bearing Alternative. Earnings on the Cash
--------------------------------------
Alternative Account shall be in the form of interest, which shall be credited at
the rate and in the manner described in Section 4(c)(3).
(4) Growth of Stock Alternative. Earnings on the Shares Alternative
---------------------------
Account shall be in the form of phantom dividends and dividend reinvestment
phantom shares, which shall be credited in the manner described in Sections
4(a)(2) and (3).
(5) Employee Entitled to the Better Total Return. The employee shall
--------------------------------------------
be entitled to earnings growth on a Short Term Award Deferral Account until the
date distribution commences, at the greater of the two alternative cumulative
total returns provided by either of the two sub-accounts. Accordingly, effective
as of the first day of the month in which the distribution of the Short Term
Award Deferral Account is to commence, the Plan Administrator shall reset the
value of the Short Term Award Deferral Account to the greater of the value of
the Cash Alternative Account or the Shares Alternative Account, each computed as
of that date. For purposes of this and the following paragraph, the value of the
Shares Alternative Account as of the applicable date shall be equal to the
average of the five daily means of the high and low sale prices per share of
Bell Atlantic stock on the NYSE on the last five trading days of the month prior
to the month in which the distribution is to commence.
(6) Election to Receive Shares. If the employee elects, pursuant to
--------------------------
Section 3(a)(3) hereof, to receive the distribution of the Short Term Award
Deferral Account in shares,
- --------------------------------------------------------------------------------
Bell Atlantic Deferred Compensation Plan (1/1/95 Restatement) Page 7
<PAGE>
the balance of the Short Term Award Deferral Account, as determined in the
second sentence of paragraph (5) above, shall be restated in shares based on the
valuation method described in the last sentence of paragraph (5) above, and
distribution shall commence, as soon as practicable thereafter. Furthermore, if
the employee elected, pursuant to Section 3(c)(2), to receive the distribution
in two or more annual installments, the Short Term Award Deferral Account shall
thereafter be credited with phantom dividends and dividend reinvestment phantom
shares in the manner described in Sections 4(a)(2) and (3) until the entire
balance of the account is distributed.
(7) Election to Receive Cash. If the employee elects pursuant to
------------------------
Section 3(c)(3) to receive the distribution of the Short Term Award Deferral
Account in cash, the balance of the Short Term Award Deferral Account, as
determined in the second sentence of paragraph (5) above, shall be stated in
dollars, and distribution shall commence, as soon as practicable thereafter.
Furthermore, if the employee elected, pursuant to Section 3(a)(3) hereof, to
receive the distribution in two or more annual installments, the Short Term
Award Deferral Account shall thereafter be credited with interest in the manner
described in Sections 4(c)(3) until the entire balance of the account is
distributed.
(e) Stock Splits and Other Adjustments. In the event of any change in
----------------------------------
outstanding Bell Atlantic common shares by reason of any stock dividend or
split, recapitalization, merger, consolidation, combination or exchange of
shares or other similar corporate change, the Plan Administrator, with the
advice of counsel, shall make any appropriate adjustments in the number of
phantom shares then credited to employees' accounts. Any and all such
adjustments shall be conclusive and binding upon all parties concerned.
(f) Deferral Accounts transferred from Predecessor Plan. If an employee's
---------------------------------------------------
cash deferral account under the Predecessor Plan has been transferred to a Cash
Deferral Account under this Plan as of the January 1, 1984 effective date of
this Plan, then the employee's Cash Deferral Account under this Plan shall be
credited as of such date with the balance of the employee's account under the
Predecessor Plan as of December 31, 1983, and such amount shall bear interest in
accordance with Section 4(c)(3) hereof, on and after the effective date of the
Plan. If an employee's share deferral account under the Predecessor Plan has
been transferred to a Share Deferral Account under this Plan as of the January
1, 1984 effective date of this Plan, then the conversion of the account balance
under the Predecessor Plan shall be performed in accordance with the terms of
this Plan that were in effect as of January 1, 1984, and such account shall
thereafter be credited with phantom dividends and dividend reinvestment phantom
shares in the same manner as a Share Deferral Account as described in Section
4(a)(2) and (3) hereof.
5. Distributions from Deferral Accounts.
------------------------------------
(a) Pursuant to the terms of a deferral election which has been made by an
employee under Section 3 of this Plan, the first installment (or the single
distribution if the employee has so elected) shall be paid on, or as soon as
practicable after, the beginning of the calendar month next following the
earliest to occur of the following:
(1) the date on which the employee attains the age specified by the
employee in his or her deferral election form, which date shall not be
- --------------------------------------------------------------------------------
Bell Atlantic Deferred Compensation Plan (1/1/95 Restatement) Page 8
<PAGE>
earlier than one year from the date the award otherwise would have
been distributed in the absence of an election to defer the
distribution;
(2) the end of the month in which the employee dies, retires from, or
terminates employment with, Bell Atlantic or any company affiliated
with Bell Atlantic; provided, however, that a transfer of employment
between companies affiliated with Bell Atlantic shall not constitute
termination of employment; or
(3) the anniversary, as specified by the employee in his or her deferral
election form, of the date on which the award otherwise would have
been distributed in the absence of an election to defer the
distribution.
(b) Notwithstanding the terms of any deferral election pursuant to Section
3, the entire amount then credited to each of an employee's one or more deferral
accounts shall be paid as soon as practicable in a single distribution (or a
combination of single distributions, in the case of an employee with more than
one deferral account) in the event that any of the following circumstances has
occurred:
(1) the Plan Administrator determines that the employee, at any time after
his or her separation from service as an employee, has been employed
by any governmental agency having regulatory jurisdiction over the
business of a Participating Company;
(2) the Plan Administrator determines that the employee has terminated
employment (for any reason other than death or transfer to another
Bell Atlantic company or Bellcore) at a time when the employee is not
eligible for an immediate pension on account of retirement or
disability;
(3) the HRC determines that the employee has engaged in misconduct in
connection with his or her employment with the employing company; or
(4) the HRC determines that the employee, at any time within two years
after his or her separation from service, has, without the written
consent of Bell Atlantic, personally engaged in managing, planning or
advising in any manner whatever an activity which directly competes
with any of the businesses of Bell Atlantic or any of its direct or
indirect subsidiaries, which any such company engaged in (A) on his or
her separation from service date, or (B) thereafter, if plans to
engage in such business had been formulated during the twelve-month
period preceding the employee's separation from service date.
(c) In the event of the death of an employee before the balance of any and
all the employee's deferral accounts under this Plan are fully distributed, the
balance of each such deferral account shall be distributed in accordance with
the death-related deferral election of the employee with respect to each such
account. Distribution shall be made to the beneficiary or beneficiaries
designated in writing by the employee, or if the Plan Administrator determines,
with the advice of counsel, that no valid and enforceable designation has been
made, then the balances shall be distributed to the estate of the employee. The
first installment (or the single
- --------------------------------------------------------------------------------
Bell Atlantic Deferred Compensation Plan (1/1/95 Restatement) Page 9
<PAGE>
payment if the employee has so elected) shall be paid on, or as soon as
practicable after, the first day of the calendar quarter next following the
month of death.
(d) In the case of a deferral account which is to be distributed in two or
more installments, each installment subsequent to the first distribution shall
be distributed as soon as practicable after the first anniversary of the date
that the first distribution was due to be distributed.
(e) References in this Plan to distributions of "approximately equal
annual installments" shall mean a distribution each year of a fraction of the
then-undistributed account balance of a deferral account, where the numerator of
the fraction shall be 1, and the denominator shall be the number of installments
remaining to be distributed from that deferral account under the Plan (including
the installment which is the subject of the calculation).
6. Unfunded Plan.
-------------
(a) Plan Unfunded. Nothing in this Plan shall be interpreted or construed
-------------
to require Bell Atlantic in any manner to fund any obligation to the employees
participating in this Plan, or their beneficiaries. Nothing contained in the
Plan or in any trust agreement governing any grantor trust that refers to the
Plan, and no action taken under the Plan or any such grantor trust shall create,
or be construed to create, a "trust" (as that term is construed under Title I of
the Employee Retirement Income Security Act of ERISA) or a trust in which the
portion of the trust assets held for the account of a Bell Atlantic company as
co-grantor is exempt from the claims of the general creditors of such co-grantor
in the event of such co-grantor's bankruptcy or insolvency. Any assets which may
be accumulated by any Participating Company in order to meet its obligations
under this Plan shall for all purposes continue to be a part of the general
assets of such Participating Company. To the extent that any employee or
beneficiary acquires a right to receive distributions under this Plan for which
any Participating Company is ultimately liable, such rights shall be no greater
than the rights of any unsecured general creditor of the applicable
Participating Company.
(b) Contributions to Grantor Trust. In the event that Bell Atlantic, or
------------------------------
the officer or officers who have been delegated the appropriate authority by the
Board, determine that it would be desirable to set aside assets in one or more
grantor trusts, in an amount (the "Grantor Amount") which shall be less than or
equal to the accumulated benefit obligations of all Bell Atlantic companies to
participants under the one or more plans covered by such grantor trust or
trusts, each Participating Company shall contribute, in the manner and in the
amount then prescribed by Bell Atlantic or its delegatees, its allocated share
of the Grantor Amount.
(c) Allocation of Accrued Cost and Disbursements. On and after January 1,
--------------------------------------------
1989, the Plan Administrator, with the advice of the officers of Bell Atlantic
who have responsibility for legal, treasury and accounting matters, shall have
authority to establish and maintain cost allocation guidelines which shall
govern the allocation of accrued expenses under the Plan for financial
accounting purposes, and the allocation of any amounts by which Participating
Companies are obligated to reimburse any another Participating Company for
disbursements and other expenditures under the Plan. Such guidelines shall, if
established, allocate to each Participating Company its reasonable and
appropriate share of the direct benefit cost (and any associated administrative
cost) of the Plan.
- --------------------------------------------------------------------------------
Bell Atlantic Deferred Compensation Plan (1/1/95 Restatement) Page 10
<PAGE>
(d) Participating Companies as Co-Grantors of Grantor Trusts. In the event,
--------------------------------------------------------
and in each and every instance, that Bell Atlantic elects in its sole discretion
to transfer assets to one or more grantor trusts of the type described in
Section 6(a), each Participating Company shall promptly reimburse Bell Atlantic
in an amount equal to such company's allocated share of the amount transferred,
determined in the manner described in Section 6(c) hereof.
(e) No Voting or Cash Dividend Rights on Phantom Shares. Shares of phantom
---------------------------------------------------
stock held in deferral accounts under this Plan shall neither entitle the
employee to vote the shares nor to receive dividends in cash. In lieu of cash
dividends, shares of phantom stock shall be credited with phantom dividends
which shall be converted to dividend reinvestment phantom shares as described
elsewhere herein.
7. Administration; Amendment and Termination.
-----------------------------------------
(a) Plan Administrator. The Assistant Vice President - Executive
------------------
Compensation and Benefits of Bell Atlantic Network Services, Inc. shall have the
authority and responsibility to act as "Plan Administrator" (as that term is
used in this Plan), including, without limitation, the authority and
responsibility to distribute summary descriptions of the Plan, notify employees
of their rights to defer awards, receive deferral election forms and beneficiary
designations, calculate balances of deferral accounts and the amount of
distributions from the Plan. The Plan Administrator, with the advice of counsel,
shall have the right to respond to and decide any claims or disputes under the
Plan and to interpret the Plan, subject to the ultimate authority of the HRC to
review any appeal from any such claim or interpretation. In the event of any
such appeal, the action of the HRC shall be final and binding.
(b) Amendment and Termination of Plan. The HRC may at any time amend or
---------------------------------
modify the Plan, or terminate the Plan.
(c) Administrative Modifications. The Plan Administrator, with advice of
----------------------------
counsel, may make administrative modifications to the Plan to comply with
changes in applicable law or to ensure effective and consistent administration
of the Plan; provided, however, that the Plan Administrator shall not have the
authority to amend the Plan in any manner which alters the amount of
compensation or benefits provided by the Plan. The Vice President - Human
Resources of Bell Atlantic Corporation shall have the authority to adopt
amendments to the Plan which that officer determines, with the advice of
counsel, are necessary or appropriate to ensure that transactions under the Plan
are exempt, to the maximum extent practicable, from the short-swing trading
provisions of Section 16(b) of the Securities Exchange Act.
(d) Scope of Amendments and Modifications. A Plan amendment or modification
-------------------------------------
under Section 7(b) or (c) may affect both those employees who are participating
in the Plan at the time of the amendment or modification, as well as future
participants. Any such amendment or modification, and any Plan termination,
shall not adversely affect the rights of any employee (or beneficiary, in the
case of a deceased employee), without his or her consent, to any benefit under
the Plan to which such employee (or beneficiary) may have previously become
entitled prior to the effective date of such change or termination.
(e) No Forfeiture of Benefits. Each employee for whom one or more deferral
-------------------------
accounts is established under this Plan shall at all times have the fully vested
right to receive
- --------------------------------------------------------------------------------
Bell Atlantic Deferred Compensation Plan (1/1/95 Restatement) Page 11
<PAGE>
one or more distributions from such accounts at the times and in the manner
stated under this Plan, and such accounts shall under no circumstances be
subject to forfeiture. The rights of an employee to the balance of any deferral
account under this Plan shall not, however, be assignable or subject to
alienation. The value of deferral accounts which are based on phantom shares is
expected to fluctuate, and there is no guarantee in any respect that the value
of any such account balance shall be free from a decline in value from time to
time.
- --------------------------------------------------------------------------------
Bell Atlantic Deferred Compensation Plan (1/1/95 Restatement) Page 12
<PAGE>
Exhibit 10j
BELL ATLANTIC
1985 INCENTIVE STOCK OPTION PLAN
Restated as of January 1, 1996, to incorporate amendments adopted
through December 31, 1995
Section 1. Purpose. The Bell Atlantic 1985 Incentive Stock Option
Plan (the "Plan") is intended to provide key employees of Bell Atlantic
Corporation (the "Company") and its subsidiaries an opportunity to acquire
common stock of the Company. The Plan is expected to help the Company and its
subsidiaries attract, retain, and motivate key employees to work for the success
of the Company and its subsidiaries. With the exception of options granted under
section 6 of the Plan, options granted under the Plan are intended to be
incentive stock options as defined in section 422A(b) of the Internal Revenue of
1986 (the "Code"). Options granted under section 6 of the Plan are intended to
be nonqualified stock options.
Section 2. Administration.
(a) Human Resources Committee. The Plan shall be administered by the
Human Resources Committee of the Company's Board of Directors (the "Committee").
The Committee may delegate some or all of its administrative responsibility
under the Plan to one or more persons.
(b) Administration. The Assistant Vice President - Executive
Compensation and Benefits of Bell Atlantic Network Services, Inc. shall have the
authority and responsibility to act as "Plan Administrator" (as that term is
used in this Plan), including, without limitation, the authority and
responsibility, with the advice of counsel, to distribute summary descriptions
of the Plan, to enter into stock option agreements with optionees on behalf of
the Company, to maintain records of options granted and outstanding, and to
administer transactions in connection with the exercise of options by optionees.
The Plan Administrator, with the advice of counsel, shall have the right to
respond to and decide any claims or disputes under the Plan and to interpret the
Plan, subject to the ultimate authority of the Committee to review any appeal
from any such claim or interpretation. In the event of any such appeal, the
action of the Committee shall be final and binding.
(c) Grant of Options. The Committee shall determine the key
employees of the Company and its subsidiaries to whom options may be granted
under this Plan. The Committee shall also determine the time at which options
shall be granted under the Plan, the number of shares for which these options
shall be granted, the time at which these options may be exercised, and the
conditions under which these options may be exercised. The Committee, in its
sole discretion, shall prescribe the terms and conditions of each option granted
under the Plan.
(d) Liability. No member of the Committee may be held accountable
for any action taken under this Plan in good faith.
Section 3. Eligibility.
(a) In General. Options may be granted to key employees of the Company
or any of its subsidiaries as defined in section 424(f) of the Code
("Subsidiaries").
- --------------------------------------------------------------------------------
Incentive Stock Option Plan Page 1 Restated as of January 1, 1996
<PAGE>
(b) Directors. Options may not be granted to any director of the
Company or its Subsidiaries unless the director is also a key employee of the
Company or any of its Subsidiaries.
(c) Ten-Percent Shareholders. Incentive stock options may not be
granted under this Plan to shareholders of the Company or any of its
Subsidiaries who own more than ten percent of the total combined voting power of
all classes of stock of the Company or any of its Subsidiaries, unless the
special requirements of sections 5(a) and 5(c) relating to ten-percent
shareholders are met.
(d) No Options for Committee. Options may not be granted under this
Plan to members of the Committee.
Section 4. Stock.
(a) Common Stock. Options may be granted under this Plan for shares
of the $1.00 par value common stock of the Company (the "Stock"). In the
discretion of the Treasurer of the Company, Stock distributed under this Plan
may be authorized but unissued shares or treasury shares; it may also be
outstanding shares acquired by the Company in the open market or elsewhere.
(b) Aggregate Share Limitation. The aggregate number of shares of
Stock (restated to take into account the stock splits of record on March 31,
1986 and April 10, 1990) which may be distributed upon the exercise of options
under this Plan may not exceed 25 million shares, less the number of shares
(restated to take account of such splits) distributed under the Bell Atlantic
1985 Performance Share Plan. The expiration or termination of an option will not
reduce the number of shares which may be distributed under this Plan; but the
exercise of a stock appreciation right and the cancellation of the related
option shall reduce the number of shares which may be distributed under this
Plan by the number of shares for which the canceled option was granted. For
purposes of determining whether the aggregate share limitation of this paragraph
has been exceeded, the total number of shares distributed under this Plan shall
be reduced by the number of shares tendered by key employees in stock-for-stock
option exercise transactions under this Plan which occur after January 1, 1991.
(c) Individual Option Grant Limitation. In the absence of a Plan
amendment approved by the shareowners of the Company, the aggregate number of
options to purchase a class of stock of the Company which may be granted under
this Plan to any individual in any single calendar year shall be a number not
greater than one-half of one percent of the number of shares of that class of
stock which are issued and outstanding as of the first day of that calendar
year.
(d) Reorganization of the Company. The limitation on the aggregate
number of shares that may be distributed or granted under this Plan may be
adjusted in accordance with section 8 of the Plan (relating to
recapitalizations, etc., of the Company).
Section 5. Terms and Conditions of Incentive Stock Options. Each
incentive stock option granted under the Plan will be evidenced by a stock
option agreement ("Agreement") between the Company and the individual to whom
the option is granted ("Optionee"). Each incentive stock option granted under
the Plan will comply with the following conditions:
- --------------------------------------------------------------------------------
Incentive Stock Option Plan Page 2 Restated as of January 1, 1996
<PAGE>
(a) Option Price. The option price of an incentive stock option will
not be less than the fair market value of the Stock at the time an option is
granted. However, in the case of an Optionee who owns more than ten percent of
the total combined voting power of all classes of stock of the Company or any of
its Subsidiaries, the option price will not be less than one-hundred-ten percent
of the fair market value of the Stock at the time the option is granted. The
fair market value of the Stock shall be the mean between the highest and lowest
selling prices of the Stock on the day an option is granted, as reported on the
New York Stock Exchange Composite Tape. However, if there are no sales on the
day an option is granted, the fair market value of the Stock shall be a weighted
average of the means between the highest and lowest selling prices of the Stock
on the nearest day before and the nearest day after the day the option is
granted, as reported on the New York Stock Exchange Composite Tape; the average
is to be weighted inversely by the respective number of trading days between the
selling days and the day the option is granted.
(b) Dollar Limitation. With respect to any incentive stock options
granted on or after January 1, 1987, the aggregate fair market value (determined
at the time the option is granted) of the Stock with respect to which any such
incentive stock options are exercisable for the first time by the Optionee
during any calendar year shall not exceed $100,000. For purposes of the dollar
limitation under this Section 5(b), all incentive stock options which are
granted on or after January 1, 1987 by the Company or any of its Subsidiaries,
and which first become exercisable in the applicable year, shall be treated as
granted under this Plan and shall be subject to the aggregate fair market value
limit under this Section 5(b) for such year.
(c) Ten-Year Limitation. No incentive stock option may be exercised
more than ten years after it is granted. However, in the case of an Optionee who
owns more than ten percent of the combined voting power of all classes of stock
of the Company or any of its Subsidiaries, no incentive stock option may be
exercised more than five years after it is granted. Each Agreement must contain
this ten-year (or five-year) limitation. However, the Committee may grant
options which may only be exercised during a period of less than ten (or five)
years. In the case of any options which may only be exercised during a period of
less than ten (or five) years, each Agreement must contain this shorter
limitation.
(d) Exercise of Options. The Committee will determine the time at
which incentive stock options may be exercised and the conditions under which
incentive stock options may be exercised. Any restrictions upon exercise of an
option will be contained in the Agreement. Subject to these limitations, if any,
options may be exercised in whole or in part. They may be exercised on any
business day until they expire. However, no option may be exercised for fewer
than ten shares (or such other minimum number as may be established by the Plan
Administrator) unless fewer than ten shares (or such other number established by
the Plan Administrator) are outstanding, and the option is exhausted upon its
exercise. When an option is exercised, and before shares are transferred to an
Optionee upon his exercise of the option, the option price must be paid in full.
In the discretion of the Committee, the option price may be paid in cash, with
Stock, or in any combination of cash and Stock. If the option price may be paid
other than in cash, then the Agreement will specify the acceptable methods of
payment. If the option price may be paid in Stock, the Optionee may not tender
on or after January 1, 1991 any share of Stock which was acquired by the
Optionee through exercise of an option less than six months prior to the date of
exercise for which the Stock is being tendered. An Optionee will not have any of
the rights of a shareholder by reason of an option until it is exercised. The
Committee in its sole discretion may
- --------------------------------------------------------------------------------
Incentive Stock Option Plan Page 3 Restated as of January 1, 1996
<PAGE>
accelerate the time at which options may be exercised when it is in the best
interests of the Company and its Subsidiaries to do so.
(e) Seriatim Exercise. An incentive stock option granted prior to
December 31, 1986 (a "Pre-1987 ISO") may not be exercised by an Optionee if
there is an unexercised and unexpired incentive stock option granted to the
Optionee at an earlier time under this Plan (or under another plan of the
Company or any other company that was a Subsidiary when the incentive stock
option was granted). Each Agreement with respect to a Pre-1987 ISO grant shall
contain this restriction. This Section 5(e) shall not apply to any stock option
granted on or after January 1, 1987.
(f) Termination of Employment.
(i) In the case of any stock options for which the one-year
waiting period has not expired, the remaining waiting period shall be waived,
and a 90-day exercise period shall commence, on the day following the effective
date of either (1) an Optionee's termination of employment under a company-
initiated, voluntary or involuntary, force management or force reduction program
or initiative, or (2) an Optionee's cessation of employment by Bell Atlantic or
any Subsidiary as a direct consequence of the sale of the business unit or
Subsidiary which then employs the Optionee; provided, however, that this
paragraph will not apply to an Optionee whose employment is terminated for
unsatisfactory performance, misconduct, or refusal to accept a reassignment that
involves no relocation or downgrade. In case of a termination or cessation of
employment as described in clause "(1)" or "(2)" of the prior sentence, any
outstanding stock options which are exercisable on the date of such termination
or cessation of employment shall remain exercisable until the earlier of (a) the
90th day following the date of such termination or cessation of employment, or
(b) the tenth anniversary of the date of grant. Nothing in this paragraph is
intended to cause the post-employment exercise period to be shorter than may be
provided for under any other applicable sections of this Plan, such as those
relating either to retirement, death or termination of employment due to
disability.
(ii) Except as provided in paragraphs 5(j), 5(f)(i), 5(g)
(relating to retirement of an Optionee), 5(h) (relating to death of an
Optionee), and 5(i) (relating to disability of an Optionee), no incentive stock
option may be exercised by an Optionee after termination of the employment
relationship between the Optionee and the Company, or between the Optionee and a
Subsidiary, as the case may be. In the case of an Optionee who is transferred to
the Company, to a Subsidiary, or to Bell Communications Research, Inc.
("Bellcore"), or who commences an approved Bellcore rotational assignment, the
termination of the employment relationship shall not be deemed to occur until
the first date on which the Optionee is employed neither by the Company, a
Subsidiary, nor Bellcore.
(g) Retirement. Except as provided in paragraph 5(j) or this
paragraph 5(g), in the case of an Optionee who either:
(i) separates from service with a combination of age and
years of service (as calculated for retirement-eligibility purposes) that
equals or exceeds any of the following combinations:
Age equal to or greater than: Service equal to or greater than:
----------------------------- ---------------------------------
Any age 30 years
50 25 years
- --------------------------------------------------------------------------------
Incentive Stock Option Plan Page 4 Restated as of January 1, 1996
<PAGE>
55 20 years
60 15 years
65 10 years, or
(ii) at the time of termination of employment satisfies such
age and service criteria for retirement as the Committee may have established,
in its discretion, on a case-by-case basis at the time of granting options to
said Optionee,
incentive stock options which are exercisable on the day of retirement may be
exercised during the remaining option term, but not more than five years after
the day of retirement. The Committee may, in its discretion, at the time of
granting options to some or all key employees, establish a permissible exercise
period following retirement which is shorter than the five-year period stated in
the previous sentence.
(h) Death. Except as provided in paragraph 5(j) or this paragraph
5(h), in the case of the death of an Optionee while employed by the Company or a
Subsidiary, an incentive stock option may be exercised during the remaining
option term, but not more than one year after the day of death, by the person
entitled to exercise the option under the Optionee's will or under the laws of
descent and distribution. The Committee may, in its discretion, at the time of
granting options to some or all key employees, establish a permissible exercise
period following death which is shorter than the one-year period stated in the
previous sentence.
(i) Disability. Except as provided in paragraph 5(j) or this
paragraph 5(i), in the case of an Optionee who becomes disabled within the
meaning of section 37(e)(3) of the Code while employed by the Company or a
Subsidiary, incentive stock options which are exercisable on the day the
disability occurs may be exercised during the remaining option term, but not
more than five years after the day the disability occurs, and options which are
not exercisable on the day the disability occurs may never be exercised. The
Committee may, in its discretion, at the time of granting options to some or all
key employees, establish a permissible exercise period following termination for
disability which is shorter than the five-year period stated in the previous
sentence.
(j) Waiver of Limitations; Acceleration of Options. Upon an
Optionee's termination of employment, retirement, death, or disability, the
Committee in its sole discretion may waive the limitations on exercise of an
incentive stock option contained in paragraphs 5(f) through 5(i) when it is in
the best interests of the Company and its Subsidiaries to do so. Upon an
Optionee's termination of employment, retirement, death, or disability, the
Committee may also waive any requirements of paragraphs 5(d) and 5(l) that an
incentive stock option may not be exercised within a certain time of its grant
when it is in the best interests of the Company and its Subsidiaries to do so.
However, the Committee may not extend the period during which an incentive stock
option could otherwise be exercised.
(k) Transferability of Option. Except as provided in this
paragraph 5(k), no incentive stock option will be transferable. Upon the death
of an Optionee, an incentive stock option may be transferred as provided in
paragraph 5(h) (relating to death of an Optionee). Moreover, an Optionee may
designate the person or persons who may exercise and benefit from the option
after the Optionee's death. During an Optionee's lifetime, an incentive stock
option may only be exercised by the Optionee. Each Agreement will contain these
restrictions on transferability.
- --------------------------------------------------------------------------------
Incentive Stock Option Plan Page 5 Restated as of January 1, 1996
<PAGE>
(l) No Exercise within One Year of Grant. Except as provided in
this section 5(l) or in section 8(b) or 6(b) of this Plan, no option granted
under the Plan may be exercised within one year of its grant. The Committee may,
in its discretion, waive this limitation in the case of any or all options
granted to any or all Optionees when it is in the best interests of the Company
and its Subsidiaries to do so.
Section 6. Terms and Conditions of Nonqualified Options.
(a) General Provisions. Each nonqualified stock option granted
under the Plan will be evidenced by an Agreement between the Company and the
Optionee. No Agreement evidencing a nonqualified stock option shall also
evidence an incentive stock option. Each nonqualified option shall be subject to
all the terms and conditions of this Plan with the exception of section 5(c)
(relating to the ten-year limitation). No nonqualified stock option may be
exercised more than ten years after it is granted, except in the case of an
Optionee who becomes disabled within the meaning of section 37(e)(3) of the Code
while employed by the Company or a Subsidiary, in which case the nonqualified
stock option may be exercised not more than five years (or such shorter time
limit as the Committee may, in its discretion, prescribe) after the day the
disability occurs, without regard to the ten-year limitation. Each Agreement
will contain this restriction.
(b) Reload Options. Notwithstanding any other provision of this
Plan, the Committee may provide for the automatic granting of nonqualified stock
options ("reload options") to all or one or more classifications of key
employees, as designated by the Committee, upon the exercise by any such
designated key employees of options in transactions in which Stock is tendered
to pay the option price. In such a case, the number of reload options which
shall automatically be granted by the Company to a designated key employee shall
be equal to the number of shares of Stock tendered by the designated key
employee. The option price of each such reload option shall be equal to the fair
market value of the Stock on the date on which the reload option is
automatically granted, and such reload options shall expire on the same date as
the options then being exercised would have expired in the absence of being
exercised. Reload options shall be exercisable by the Optionee after the date on
which they are granted, subsequent to any waiting period that the Plan
Administrator with the advice of counsel determines is necessary or appropriate
to conform with legal or accounting requirements. Except as provided in this
section 6(b) to the contrary, the terms and conditions applicable to reload
options shall be the same as those that apply to other nonqualified options as
described in section 6(a).
Section 7. Stock Appreciation Rights. Incentive stock options and
nonqualified stock options granted under the Plan may, in the discretion of the
Committee, be coupled with stock appreciation rights in the same number of
shares of Stock for which the options are granted. Stock appreciation rights may
be exercised at the same time, and under the same conditions, as the incentive
stock options or nonqualified stock options to which they relate. Upon an
Optionee's exercise of a stock appreciation right, the Optionee shall be
entitled to a cash payment from the Company in an amount equal to the difference
between the fair market value of one share of Stock on the day the stock
appreciation right is exercised, as determined under section 5(a), and the
option price of the related incentive stock option or nonqualified stock option,
and the related incentive stock option or nonqualified stock option shall be
canceled.
Section 8. Recapitalization of Company.
- --------------------------------------------------------------------------------
Incentive Stock Option Plan Page 6 Restated as of January 1, 1996
<PAGE>
(a) Adjustments in Stock. In a transaction to which section 424(a)
of the Code applies, the share and option limitations of sections 4(b) and 4(c)
may be adjusted and the Stock subject to option under section 4(a) may be
changed. The Committee will determine the adjustments to be made in the case of
reorganization, recapitalization, stock split, stock dividend, combination of
shares, or any other change affecting the Stock. Adjustments in the shares
subject to option under the Plan may be in the aggregate number of shares
subject to option under the Plan; the number of shares for which any Optionee
has options; the option price of any options; and the type of stock subject to
option under the Plan.
(b) Acceleration of Options. In connection with a transaction to
which section 424(a) of the Code applies, the Committee may waive any
requirements of sections 5(d) and 5(l) that an incentive stock option may not be
exercised within a certain time of its grant. The Committee may waive these
requirements in the case of any or all Optionees. It may waive these
requirements with respect to any or all options granted to an Optionee. The
Committee may take this action either before or after the transaction to which
section 424(a) of the Code applies. If this action is taken by the Committee
before the transaction occurs, the action must be contingent upon the
transaction occurring.
Section 9. Amendment and Termination. To the extent permitted by
law, the Committee or the Company's Board of Directors ("Board") may amend or
suspend, and the Board may terminate, this Plan. The Plan Administrator may make
administrative modifications to the Plan to comply with changes in applicable
law or to ensure effective and consistent administration of the Plan; provided,
however, that the Plan Administrator shall not amend the Plan in any manner
which alters the amount of the benefit provided under the Plan. Unless an
Optionee consents to an amendment, suspension, or termination of the Plan which
is adopted by the Board, the Committee or the Plan Administrator, no amendment,
suspension, or termination of the Plan will adversely affect the rights of an
Optionee with respect to any option granted to the Optionee. Moreover, without
approval of the owners of a majority of the shares of the Stock voting either in
person or by proxy at a duly convened meeting of the Company's shareowners, no
amendment to the Plan may:
(a) except as provided in section 8(a), increase the
aggregate number of shares subject to option under section 4(b) of the Plan or
the number of options which may be granted to an individual in a single calendar
year under section 4(c) of the Plan;
(b) except as provided in section 8(a), decrease the option
price at which options may be granted under section 5(a) of the Plan;
(c) extend the period during which any option may be
exercised beyond the limits stated in Section 5(c); or
- --------------------------------------------------------------------------------
Incentive Stock Option Plan Page 7 Restated as of January 1, 1996
<PAGE>
(d) extend the period during which options may be granted
under section 10 of the Plan.
The Vice President - Human Resources of the Company, with the advice of
counsel, has the authority to amend the Plan or modify the administration of the
Plan to the extent required to ensure that transactions under the Plan are
exempt to the maximum extent possible from the short-swing profit provisions of
Section 16(b) of the Securities Exchange Act of 1934.
Section 10. Effective Date. This Plan will be effective on the date it is
adopted by the Board. However, this adoption will be conditioned upon approval
of the Plan, within one year of its adoption, by owners of a majority of the
shares of the Stock voting either in person or by proxy at a duly convened
meeting of the Company's shareowners. All grants of incentive stock options,
nonqualified stock options, and stock appreciation rights granted before
shareowner approval of the Plan shall be conditioned on shareowner approval of
the Plan.
Section 11. Miscellaneous Provisions.
(a) No Right to Employment. No grant of an incentive stock option,
nonqualified stock option, or stock appreciation right under this plan shall
give an Optionee a right to continued employment by the Company or any
Subsidiary or otherwise interfere with the Company's or any Subsidiary's right
to discharge an Optionee, whether or not for cause.
(b) Tax Withholding. When the Company has an obligation to withhold any
federal, state, or local tax upon the exercise of an incentive stock option or a
nonqualified stock option under the Plan, the Optionee may pay the Company the
amount of the required withholding, in cash, at the time of exercising the
option, in lieu of the Company withholding the amount through the sale of
shares.
(c) Governing Law. This Plan shall be construed and enforced in accordance
with the laws of the State of Delaware (without regard to the legislative or
judicial conflict of laws rules of any state), except to the extent superseded
by federal law.
- --------------------------------------------------------------------------------
Incentive Stock Option Plan Page 8 Restated as of January 1, 1996
<PAGE>
Exhibit 10k
BELL ATLANTIC RETIREMENT PLAN
FOR OUTSIDE DIRECTORS
Restated as of January 1, 1996
to incorporate amendments through December 31, 1995
Article 1: INTRODUCTION
This Plan is maintained by Bell Atlantic Corporation and its Operating
Telephone Companies for the benefit of Outside Directors (and their
Beneficiaries) who are, or have been, members of the Bell Atlantic Board or an
Operating Telephone Company Board (each, a "Participating Board"), and who
retire from (or otherwise cease to serve as a director on) a Participating Board
at any time on or after January 1, 1987. The Plan shall be maintained according
to the terms of this document, as it may be amended from time to time.
This Plan represents the merger of eight plans which were formerly
maintained separately by Bell Atlantic Corporation and the seven Operating
Telephone Companies. The merger of the Plan is not intended to alter the
authority of each Participating Board to determine independently the level of
directors' fees and other compensation and perquisites for its Outside
Directors.
Article 2: DEFINITIONS
2.1 DEFINITIONS. When used in this document, the following words and
phrases shall have the meaning assigned to them, unless the context clearly
indicates otherwise:
(a) AFFILIATED COMPANY means Bell Atlantic and any direct or indirect
subsidiary of Bell Atlantic.
(b) BELL ATLANTIC means Bell Atlantic Corporation, a Delaware corporation,
which maintains its principal offices in Philadelphia, Pennsylvania.
(c) BELL ATLANTIC BOARD means the board of directors of Bell Atlantic.
(d) BENEFICIARY means the person or persons, natural or otherwise,
designated by an Outside Director under Section 4.2 to receive any death benefit
payable under Section 4.1.
(e) OPERATING TELEPHONE COMPANY means, with reference to any time period
before or after divestiture, any of the following companies:
. Bell Atlantic - Delaware, Inc.;
. Bell Atlantic - Maryland, Inc.;
. Bell Atlantic - New Jersey, Inc.;
. Bell Atlantic - Pennsylvania, Inc.;
. Bell Atlantic - Virginia, Inc.;
. Bell Atlantic - Washington, D.C., Inc.; and
. Bell Atlantic - West Virginia, Inc.
(f) OPERATING TELEPHONE COMPANY BOARD shall mean the board of directors of
any Operating Telephone Company, as any such board may be or may have been
constituted either before or after divestiture.
- --------------------------------------------------------------------------------
RETIREMENT PLAN - OUTSIDE DIRECTORS PAGE 1 RESTATED JANUARY 1, 1996
<PAGE>
(g) OUTSIDE DIRECTOR means a person who (at the time of reference) served
or is serving as a director on a Participating Company Board, and who, at such
time, is not an employee of the Participating Company or any Affiliated Company.
(h) PARTICIPANT means an Outside Director who has satisfied the eligibility
requirements of Section 3.1 hereof.
(i) PARTICIPATING COMPANY means Bell Atlantic and each Operating Telephone
Company.
(j) PARTICIPATING COMPANY BOARD means the Bell Atlantic Board and each
Operating Telephone Company Board.
(k) PLAN means this Bell Atlantic Retirement Plan for Outside Directors, as
set forth in this document and as it may be amended by the Bell Atlantic Board
from time to time.
(l) PLAN ADMINISTRATOR shall mean the Assistant Vice President -
Compensation and Benefits of Bell Atlantic Network Services, Inc., or the person
to whom that individual delegates responsibility for administering this Plan, as
more fully described in Section 5.3.
(m) POST-1/1/96 OUTSIDE DIRECTOR shall mean (a) each Outside Director who
is first elected to the Bell Atlantic Board on or after January 1, 1996, and (b)
each existing Outside Director as of December 31, 1995 who elected in January
1996 to forfeit his or her accrued pension benefit under this Plan in exchange
for the right to participate in stock option grants for Post-1/1/96 Outside
Directors under the Bell Atlantic Stock Compensation Plan for Outside Directors.
(n) PREDECESSOR PLAN means any of the eight retirement plans for Outside
Directors which were formerly maintained separately by the Participating
Companies and which were merged into this Plan effective as of April 1, 1989.
Article 3: RETIREMENT BENEFITS
3.1 ELIGIBILITY. An Outside Director, except a Post-1/1/96 Outside
Director, shall become a Participant upon the completion of five (or more)
twelve-month periods of service (whether or not such periods are consecutive) as
an Outside Director, whether such service is rendered on one Participating
Company Board or a combination of two or more Participating Company Boards;
provided, however, that solely those periods of service as a non-employee
director (and not periods of service when such director was concurrently
employed by the Participating Company or any Affiliated Company) shall be
counted for purposes of eligibility and benefit accrual under this Plan. For the
period ending with the date on which an Outside Director ceases to serve on any
and all Participating Company Board's, any final fraction of a year shall be
rounded up to the next whole year in the same manner provided in Section 3.3.
Notwithstanding the other provisions of this Section 3.1, any Outside Director
who resigns or retires from an Operating Telephone Company Board at any time in
1994 or 1995 shall be deemed to satisfy the eligibility requirements of this
Section 3.1. Any Post-1/1/96 Outside Director who is first elected to the Bell
Atlantic Board on or after January 1, 1996, shall at no time be eligible to
participate in this Plan. Any Post-1/1/96 Outside Director who was first elected
to the Bell Atlantic Board prior to January 1, 1996, and who elected on or
before January 22, 1996 to surrender the right to participate in this Plan,
shall cease to be eligible to participate in this Plan, and shall forfeit all
accrued benefits under this Plan, as of Januaury 22, 1996.
- --------------------------------------------------------------------------------
RETIREMENT PLAN - OUTSIDE DIRECTORS PAGE 2 RESTATED JANUARY 1, 1996
<PAGE>
3.2 WHEN PAYABLE.
(a) NORMAL PENSION: A Participant shall be entitled to a normal pension
benefit (a "Normal Pension") commencing on the first business day of the
calendar quarter next following the latest of (a) the Participant's retirement
from, or other cessation of service as a director on, a Participating Company
Board, (b) attainment of age 65, or (c) the first anniversary of the date of
delivery of the Participant's written notice of his or her election of the form
and timing of the benefit distribution pursuant to Section 3.5.
(b) DEFERRED PENSION: A Participant may elect, at the time and in the
manner described in Section 3.5(a), to defer the commencement date for the
distribution of benefits under this Plan to the first business day of January of
the year next following the later of the date on which such Participant attains
age 70, or the date of cessation of service as a director on a Participating
Company Board. In the case of such a "Deferred Pension," the amount of the
benefit shall be the Normal Pension amount increased by the product of (A) nine
percent (9%) for each year (and by 0.75% for each month in excess of a whole
number of years), times (B) the number of years (and months) from the date on
which a Normal Pension would have commenced for such Participant (in the absence
of such a deferral) to the Deferred Pension commencement date.
(c) EARLY PENSION: A Participant may elect, at the time and in the manner
described in Section 3.5(a), to receive a reduced pension benefit (an "Early
Pension") commencing on the first business day of the calendar quarter next
following the latest of (a) the Participant's cessation of service as a director
on the Participating Company Board, (b) the date on which the Participant
attains age 55 (but has not yet attained age 65), or (c) the first anniversary
of the date of delivery of the Participant's written notice of his or her
election of the form and timing of the benefit distribution pursuant to Section
3.5. In such a case, the amount of such Early Pension benefit shall be the
Normal Pension amount reduced by the product of (A) six percent (6%) for each
year (and 0.5% for each month in excess of a whole number of years), times (B)
the number of years (and months) from the Early Pension commencement date to the
date on which a Normal Pension would have commenced for such Participant (in the
absence of such an election).
(d) SUSPENSION OF BENEFITS.
(1) SUSPENSION. The payment of pension benefits under this Plan shall
be suspended throughout any period (and no cash-out under this Plan shall then
be paid) when the Participant is serving as an Outside Director on a
Participating Company Board.
(2) RESUMPTION OF BENEFIT. Subsequent to any such period of benefit
suspension for service on a Participating Company Board, such Participant's
pension benefit under this Plan shall be recalculated with reference to all
service as an Outside Director, including the directors' retainer earned and the
years of service accrued during such period of benefit suspension, and the
Participant's pension benefit shall be paid or resumed at the newly calculated
higher rate.
(e) NON-DUPLICATION OF BENEFITS.
(1) BENEFITS UNDER ONLY ONE PENSION PLAN. A Participant who at any
time would be eligible for benefits under this Plan and under any of the
Predecessor Plans shall receive benefits solely under this Plan. The benefit
under this Plan shall, however, take account of all service rendered as an
Outside Director for all Participating Companies.
(2) BENEFITS MAY NOT EXCEED 100 PERCENT. In the event that (i) a
Participant is paid a cash-out distribution under this Plan or any of the
Predecessor Plans, and
- --------------------------------------------------------------------------------
RETIREMENT PLAN - OUTSIDE DIRECTORS PAGE 3 RESTATED JANUARY 1, 1996
<PAGE>
(ii) such a Participant subsequently serves as an Outside Director on a
Participating Company Board, then the sum of the percentage amounts utilized for
purposes of calculating such Participant's benefits under Section 3.3 of this
Plan and the corresponding provision of any other such plan shall not exceed 100
percent.
(f) DEFERRED COMPENSATION PLAN. Nothing in this Plan shall affect
eligibility for or benefits under the Bell Atlantic Deferred Compensation Plan
for Outside Directors or any predecessor of that merged plan.
3.3 AMOUNT. A Participant's Normal Pension, as defined in Section 3.2(a),
shall be an annual amount equal to the product of (A) 10 percent, times (B) the
rate of the Participant's annual directors' retainer (exclusive of meeting fees
or committee chairmen's retainers) which is prevailing at the time the
Participant retires from (or otherwise ceases to serve on) the Participating
Company Board as an Outside Director, times (C) the number of terms of service
(rounding up any fraction of a one-year term as though it were a whole term),
not to exceed 10, that such Participant has then rendered as an Outside Director
- -------------
on all Participating Company Boards.
3.4 FORFEITURE OF BENEFITS. All benefits not yet paid for which an Outside
Director would be otherwise eligible under this Plan shall be forfeited in the
event that the Bell Atlantic Board determines that any of the following
circumstances has occurred:
(a) the Outside Director has engaged in knowing and willful misconduct in
connection with his or her service as a director; or
(b) the Outside Director, without the consent of the Bell Atlantic Board,
has at any time during the period from the last day he or she served as a
director on a Participating Company Board (the "Director's Cessation of Service
Date") to the second anniversary of such date, personally engaged in managing,
planning, or advising in any manner whatever an activity which directly competes
with any of the businesses in which a Bell Atlantic Company was engaged on the
Director's Cessation of Service Date, or any business which was in the planning
stage at a Bell Atlantic Company on such date. For the purposes of this
paragraph, a "Bell Atlantic Company" means either (a) the one or more Operating
Telephone Companies on the board of which the Outside Director served, in the
case of an Outside Director who served on one or more Operating Telephone
Company Boards but not the Bell Atlantic Board, or (b) Bell Atlantic or any
Affiliated Company, in the case of an Outside Director who last served on the
Bell Atlantic Board.
3.5 FORM OF PAYMENT.
(a) ELECTION OF FORM OF PAYMENT. In the absence of any written election by
a Participant, such Participant's benefit shall be paid as a Normal Pension in
the form of a life annuity commencing at the time stated in Section 3.2(a). The
Participant may elect from among the alternative times and forms of benefit
distribution as described under Sections 3.2(b) and (c), and 3.5(b). Any such
election of the time and form of distribution shall be delivered in writing to
the Plan Administrator at any time before, and not later than 30 days after the
date on which the Outside Director retires from, or otherwise ceases to serve
on, the Participating Company Board. In no event may a benefit commence less
that 12 months following the date on which the Outside Director delivers his or
her written election of the form and timing of distribution.
(b) ALTERNATIVE FORMS OF BENEFIT DISTRIBUTION. Each Participant may, if he
or she so elects, deliver either or both of two types of elections under the
Plan, in the
- --------------------------------------------------------------------------------
RETIREMENT PLAN - OUTSIDE DIRECTORS PAGE 4 RESTATED JANUARY 1, 1996
<PAGE>
manner described in Section 3.5(a): (i) whether to receive his or her benefit,
as described in Section 3.2, in lieu of a Normal Pension, in the form of a
Deferred Pension (in the case of a Participant retiring as an Outside Director
prior to attaining age 70), or an Early Pension (in the case of a Participant
who retires as an Outside Director prior to age 65); and (ii) whether to receive
his or her benefit, in lieu of a life annuity, in the form of either a joint and
survivor annuity or a single-sum cash-out, as follows:
(1) LIFE ANNUITY. This form of benefit shall consist of a series of
quarterly payments to the Participant, commencing on the applicable date under
Sections 3.5 (a) and 3.2, and continuing until his or her death. A life annuity
is the default form of benefit in the absence of an alternative election by a
Participant.
(2) JOINT AND 50-PERCENT SURVIVOR ANNUITY FOR SPOUSE. This form of
benefit shall consist of a series of quarterly payments to the Participant,
commencing on the applicable date under Sections 3.5(a) and 3.2, and equal to 90
percent of the amount that would have been payable on that date to the
Participant if the Participant had elected a benefit in the form of a life
annuity, and continuing for the Participant's life, and, if the Participant is
survived by the person who was his or her spouse on the last date he or she
served as an Outside Director, a series of quarterly payments to said spouse for
his or her life, commencing on the Participant's death, each such payment being
in an amount equal to 50 percent of the quarterly amounts previously paid to the
Participant. In the event that said spouse predeceases the Outside Director, or
in the event of a divorce of said spouse and the former Outside Director, the
benefit shall thereafter automatically be paid in the form of a life annuity,
and the 10 percent reduction attributable to the election of the joint and
survivor annuity shall thereafter cease to apply.
(3) SINGLE-SUM CASH-OUT PAYMENT. This form of benefit shall consist
of a single-sum payment in cash, in an amount determined with reference to the
pension benefit that would be payable on the Normal Pension, Early Pension, or
Deferred Pension benefit commencement date, whichever the Participant has
elected, where such benefit is converted to a single-sum cash-out by utilizing
(i) the immediate annuity interest rate assumption published by the federal
Pension Benefit Guaranty Corporation for the calendar month immediately
preceding the month in which the Participant resigns or retires as an Outside
Director, and (ii) unisex tables to determine the life expectancy of the
Participant as of the date on which the cash-out is payable.
(c) QUARTERLY PAYMENTS. In the case of any annuity pursuant to Subsection
(b)(1) or (b)(2) above, the quarterly distribution shall be payable on the first
business day of each calendar quarter during the prescribed payment period.
Article 4: DEATH PRIOR TO COMMENCING BENEFITS
4.1 DEATH OF DIRECTOR. If any Participant dies prior to the date on which
his or her benefit distribution commences, then his or her Beneficiary shall be
entitled to receive a death benefit. The death benefit shall be a single-sum
cash-out, payable on the first business day of the calendar quarter next
following the date of death (even if such death occurred prior to the
Participant's attaining age 55), and shall be in an amount equal to the lump sum
(if any) that would have been payable on such date (after taking account of any
Early Pension reduction which may be applicable as described in Section 3.2(c));
provided, however, that, in the case of a death of such a Participant which
occurs prior to age 55, the amount of the Early Pension (expressed as a single
life annuity) shall be determined by using the lesser of (a) the
- --------------------------------------------------------------------------------
RETIREMENT PLAN - OUTSIDE DIRECTORS PAGE 5 RESTATED JANUARY 1, 1996
<PAGE>
six percent per annum reduction factor described in Section 3.2(c), or (b) the
applicable actuarial reduction factor derived in the manner described in
Attachment 1.
4.2 DESIGNATION OF BENEFICIARY. Each Participant may designate from time
to time, at any time not later than the benefit commencement date, any person or
persons, natural or otherwise, as his or her Beneficiary or Beneficiaries to
whom any death benefits which may be payable under Section 4.1 are to be paid.
Each Beneficiary designation shall be made on a form prescribed by the Plan
Administrator and shall be effective only when filed with the Corporate
Secretary or Assistant Secretary of the Participating Company during the
Participant's lifetime. Each Beneficiary designation filed with the Plan
Administrator shall revoke all Beneficiary designations previously made by the
Participant. Neither the appointment of a Beneficiary nor the revocation of a
Beneficiary designation shall require the consent of any person.
Article 5: ADMINISTRATION
5.1 NO FUNDING OBLIGATION. Except as otherwise provided in this Section
5.1, the obligation of the Participating Companies to pay benefits under this
Plan shall be unfunded and unsecured, and, in all events, any payments under
this Plan shall be made solely from those assets of a Participating Company
which would be available to satisfy the claims of the Participating Company's
general creditors in the event of bankruptcy. The Treasurer of Bell Atlantic (a)
may, in that officer's discretion, and (b) shall, if and when either (i) said
Treasurer is directed to do so by a committee of officers of the Corporation
chaired by the Chief Executive Officer, or (ii) there occurs a "Hostile Change
of Control" as defined in the Bell Atlantic Senior Management Retirement Income
Plan, cause Bell Atlantic and the Participating Companies to set aside assets,
including, without limitation, assets which may be held under the Bell Atlantic
Rabbi Trust Agreement, or to purchase annuity or life insurance contracts, and
to apply such assets or the proceeds of such contracts to discharge all or part
of the benefit obligations under this Plan.
5.2 APPLICABLE LAW. This Plan shall be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania, to the extent not
superseded by federal law.
5.3 ADMINISTRATION AND INTERPRETATION. The Assistant Vice President -
Compensation and Benefits of Bell Atlantic Network Services, Inc., or the person
to whom that individual delegates responsibility for administering this Plan
(the "Plan Administrator"), shall have the authority and responsibility to
administer and interpret this Plan. The day to day administration of the Plan
shall be carried out by the Plan Administrator in cooperation with the Corporate
Secretaries and Assistant Secretaries of BAC and each of the Operating Telephone
Companies. Benefits due and owing to an Outside Director or Beneficiary under
the Plan shall be paid when due without any requirement that a claim for
benefits be filed. However, Outside Directors and Beneficiaries who have not
received the benefits to which they feel entitled may file a written claim with
the Plan Administrator, who shall act on the claim within thirty days. The Plan
Administrator's action on any such claim may be appealed by the claimant to the
Bell Atlantic Board, which is hereby empowered as a fiduciary with full
discretion to interpret the Plan and apply its terms to the facts of the
claimant's case. The decision of the Bell Atlantic Board, in the event of any
such appeal, shall be final and binding to the full extent permitted under
applicable law, unless and to the extent that a claimant subsequently proves an
abuse of discretion.
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RETIREMENT PLAN - OUTSIDE DIRECTORS PAGE 6 RESTATED JANUARY 1, 1996
<PAGE>
ATTACHMENT 1
Reduction Factor for Single-Sum Cash-Out
In the Event of Death of an Outside Director
Prior to Age 55
For computing death benefits pursuant to Section 4.1 of this Plan
For the designated beneficiary(ies) of an Outside Director who dies prior to
commencing benefits under this Plan on a date prior to attaining age 55, the
single-sum cash-out shall be determined in two steps: first, by determining the
applicable Early Pension benefit amount (expressed as a single-life annuity),
and, second, by determining the single-sum cash-out amount in accordance with
Section 3.5(b)(3).
The Early Pension benefit amount shall be based on an Early Pension reduction
factor which shall be equal to the lesser of:
(a) 0.06 (i.e. 6%) for each year (and 0.005 (i.e. 0.5%) for each month) by
which the Outside Director's age on the date of death is less than age
65, or
(b) the result of subtracting from 1.00 (i.e. 100%) the factor in the
following table which corresponds to the years and months of age
attained by an Outside Director on his or her date of death.
<TABLE>
<CAPTION>
Completed
Years
of Age Months in Excess of Years
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 1 2 3 4 5 6 7 8 9 10 11
20 0.022 0.022 0.022 0.023 0.023 0.023 0.023 0.023 0.023 0.023 0.024 0.024
21 0.024 0.024 0.024 0.025 0.025 0.025 0.025 0.025 0.025 0.025 0.026 0.026
22 0.026 0.026 0.026 0.026 0.027 0.027 0.027 0.027 0.027 0.027 0.028 0.028
23 0.028 0.028 0.028 0.028 0.029 0.029 0.029 0.029 0.029 0.030 0.030 0.030
24 0.030 0.030 0.031 0.031 0.031 0.031 0.031 0.032 0.032 0.032 0.032 0.032
25 0.033 0.033 0.033 0.033 0.033 0.033 0.034 0.034 0.034 0.034 0.035 0.035
26 0.035 0.035 0.036 0.036 0.036 0.036 0.037 0.037 0.037 0.037 0.037 0.038
27 0.038 0.038 0.038 0.039 0.039 0.039 0.039 0.040 0.040 0.040 0.040 0.041
28 0.041 0.041 0.042 0.042 0.042 0.042 0.043 0.043 0.043 0.043 0.044 0.044
29 0.044 0.045 0.045 0.045 0.045 0.046 0.046 0.046 0.047 0.047 0.047 0.048
30 0.048 0.048 0.048 0.049 0.049 0.049 0.050 0.050 0.050 0.051 0.051 0.051
31 0.052 0.052 0.052 0.053 0.053 0.053 0.054 0.054 0.055 0.055 0.055 0.056
32 0.056 0.056 0.057 0.057 0.057 0.058 0.058 0.059 0.059 0.059 0.060 0.060
33 0.060 0.061 0.061 0.062 0.062 0.063 0.063 0.063 0.064 0.064 0.065 0.065
34 0.065 0.066 0.066 0.067 0.067 0.068 0.068 0.069 0.069 0.069 0.070 0.070
35 0.071 0.071 0.072 0.072 0.073 0.073 0.074 0.074 0.075 0.075 0.076 0.076
36 0.077 0.077 0.078 0.078 0.079 0.079 0.080 0.080 0.081 0.081 0.082 0.082
37 0.083 0.083 0.084 0.085 0.085 0.086 0.086 0.087 0.087 0.088 0.089 0.089
38 0.090 0.090 0.091 0.092 0.092 0.093 0.093 0.094 0.095 0.095 0.096 0.097
39 0.097 0.098 0.099 0.099 0.100 0.101 0.101 0.102 0.103 0.103 0.104 0.105
40 0.105 0.106 0.107 0.108 0.108 0.109 0.110 0.111 0.111 0.112 0.113 0.113
41 0.114 0.115 0.116 0.117 0.117 0.118 0.119 0.120 0.121 0.121 0.122 0.123
42 0.124 0.125 0.126 0.127 0.127 0.128 0.129 0.130 0.131 0.132 0.133 0.134
43 0.134 0.135 0.136 0.137 0.138 0.139 0.140 0.141 0.142 0.143 0.144 0.145
44 0.146 0.147 0.148 0.149 0.150 0.151 0.152 0.153 0.154 0.155 0.156 0.157
45 0.159 0.160 0.161 0.162 0.163 0.164 0.165 0.167 0.168 0.169 0.170 0.171
46 0.172 0.174 0.175 0.176 0.177 0.179 0.180 0.181 0.182 0.184 0.185 0.186
47 0.187 0.189 0.190 0.191 0.193 0.194 0.196 0.197 0.198 0.200 0.201 0.202
48 0.204 0.205 0.207 0.208 0.210 0.211 0.213 0.214 0.216 0.217 0.219 0.220
49 0.222 0.224 0.225 0.227 0.229 0.230 0.232 0.234 0.235 0.237 0.239 0.240
</TABLE>
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RETIREMENT PLAN ATTACHMENT 1 RESTATED JANUARY 1, 1996
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 .24 .24 .24 .25 .25 .25 .25 .25 .25 .26 .26 .26
51 .26 .26 .26 .27 .27 .27 .27 .27 .27 .28 .28 .28
52 .28 .28 .29 .29 .29 .29 .30 .30 .30 .30 .31 .31
53 .31 .31 .32 .32 .32 .32 .33 .33 .33 .33 .34 .34
54 .34 .34 .35 .35 .35 .35 .36 .36 .36 .36 .37 .37
55 .37 .37 .38 .38 .38 .38 .39 .39 .39 .39 .40 .40
56 .40 .40 .41 .41 .41 .42 .42 .42 .43 .43 .43 .44
57 .44 .44 .45 .45 .45 .46 .46 .46 .47 .47 .47 .48
58 .48 .48 .49 .49 .50 .50 .51 .51 .51 .52 .52 .53
59 .53 .53 .54 .54 .55 .55 .56 .56 .56 .57 .57 .58
60 .58 .59 .59 .60 .60 .61 .62 .62 .63 .63 .64 .64
61 .65 .66 .66 .67 .67 .68 .69 .69 .70 .70 .71 .71
62 .72 .73 .73 .74 .75 .75 .76 .77 .77 .78 .79 .79
63 .80 .81 .82 .82 .83 .84 .85 .85 .86 .87 .88 .88
64 .89 .90 .91 .92 .93 .94 .95 .95 .96 .97 .98 .99
65 1.0
</TABLE>
- --------------------------------------------------------------------------------
RETIREMENT PLAN ATTACHMENT 1 RESTATED JANUARY 1, 1996
<PAGE>
BELL ATLANTIC STOCK COMPENSATION PLAN
FOR OUTSIDE DIRECTORS
Restated as of January 1, 1996,
to incorporate amendments adopted through December 31, 1995
1. NAME OF PLAN. The plan shall be known as the Bell Atlantic Stock
Compensation Plan for Outside Directors (and is referred to herein as the
"Plan").
2. OBJECTIVES OF THE PLAN. The objectives of the Plan are to encourage
ownership of shares of the Common Stock (the "Stock") of Bell Atlantic
Corporation (the "Corporation"), and to further align the interests of non-
employee members of the boards of directors of Participating Companies with the
interests of shareowners of the Corporation.
3. EFFECTIVE DATE. The effective date of the Plan is July 1, 1991. The
Plan was submitted to, and was approved by, shareowners at the annual meeting of
the Corporation in April 1991.
4. PARTICIPATING COMPANIES. The "Participating Companies" in the Plan
shall be the Corporation and the domestic operating telephone company
subsidiaries of the Corporation (the "OTCs").
5. ELIGIBLE PARTICIPANTS. Each member of the board of directors of a
Participating Company who is, as of the date of any award or grant hereunder, in
active service as a director, but who is not then an employee of the Corporation
or any subsidiary of the Corporation (each, an "Outside Director"), shall be
eligible to receive an award or grant under the Plan. For purposes of certain
provisions of Section 6 ("Stock Options"), a "Post-1/1/96 Outside Director"
shall mean (a) each Outside Director who is first elected to the Board of
Directors of the Corporation on or after January 1, 1996, and (b) each existing
Outside Director as of December 31, 1995 who elected in January 1996 to forfeit
his or her accrued pension benefit under the Bell Atlantic Retirement Plan for
Outside Directors (the "Pension Plan") in exchange for the right to participate
in stock option grants for Post-1/1/96 Outside Directors under Sections 6(a) and
6(e) of this Plan.
6. STOCK OPTIONS
(a) Annual Grant of Options. Commencing in January 1995, and annually
thereafter, each individual who, at the close of the regular January meeting of
the Board of Directors of the Corporation (the "Board"), is then serving as an
Outside Director of the Corporation, except Post-1/1/96 Outside Directors, shall
receive a grant of nonqualified stock options ("Options") to purchase 1,000
shares of Stock at an exercise price per Option equal to the fair market value
of the Stock on the date of grant, and, effective January 1996, the number of
such Options granted annually to each Post-1/1/96 Outside Director shall be
2,500. "Fair market value", for purposes of the previous sentence, shall have
the same meaning as stated in the Bell Atlantic 1985 Incentive Stock Option
Plan, as that plan may be amended from time to time (the "ISO Plan"). Options
granted under this Plan shall be granted on the same date, and with the same
exercise price, as the principal annual grant of options by the Human Resources
Committee ("HRC") of the Board under the ISO Plan. Options shall be granted
under this Plan automatically, and no action by the Board shall be required. The
Board
- --------------------------------------------------------------------------------
Stock Compensation Plan for Outside Directors Page 1 of 5
<PAGE>
shall retain the authority in its sole discretion to revise, from time to time,
the number of Options to be automatically granted annually under this Plan,
provided, however, that no such action shall be taken without first obtaining
the advice of counsel.
(b) Initial Grant Upon Election to the Board. Effective as of the first
day on which Stock is publicly traded in the calendar month first following the
month in which an individual's initial election to the Board, as an Outside
Director, becomes effective, the Outside Director shall receive a grant of
Options to purchase 1,000 shares of Stock, with an exercise price equal to the
fair market value of the Stock on said first trading day of said month.
(c) Terms of Options. Options shall be subject to the following terms and
conditions:
(i) Options shall expire not later than the tenth anniversary of
the date of grant;
(ii) Options shall be subject to a waiting period of one year, and
shall first become exercisable on the first anniversary of the date of
grant;
(iii) In the event of the retirement of an Outside Director from the
Board upon having attained mandatory retirement age, or on account of
disability, any outstanding Options which are not yet exercisable
shall become exercisable on the day following the Outside Director's
retirement, and all outstanding Options shall expire on the earlier of
the fifth anniversary of the date of retirement or the tenth
anniversary of the date of grant;
(iv) In the event of a resignation or a termination of the service
of an Outside Director from the Board for any reason other than
disability or retirement upon having attained mandatory retirement
age, any outstanding Options shall expire at the close of business on
the effective date of said resignation; provided, however, that the
Board may, in its discretion, take action to cause the Options of such
an Outside Director to become exercisable, and/or to remain
exercisable, for a period of time subsequent to said resignation or
termination, but in no event may the Options remain exercisable after
the later of the fifth anniversary of the last date of service as an
Outside Director or the tenth anniversary of the date of grant;
(v) In the event of the death of an Outside Director at a time when
Options are outstanding, any such Options shall be exercisable until
the earlier of the first anniversary of the date of death or the tenth
anniversary of the date of grant; and
(vi) The exercise price for Options shall be payable solely in cash.
(d) Option Agreements. With respect to each grant of Options, the Plan
Administrator, with the advice and assistance of counsel, shall have the
authority, responsibility and discretion to prepare a form of agreement (the
"Option Agreement") which shall state the terms and conditions stated in section
6(c) hereof, and such additional terms and conditions as the Plan Administrator
determines are appropriate. In each case, the grant of Options to an Outside
Director shall be conditioned on the Outside Director signing the corresponding
Option Agreement within a period determined by the Plan Administrator. In the
event that an Optionee does not deliver to the Plan Administrator a signed
Option Agreement within an applicable period, or signs an Option
- --------------------------------------------------------------------------------
Stock Compensation Plan for Outside Directors Page 2 of 5
<PAGE>
Agreement which has been modified in a manner unacceptable to the Plan
Administrator, the Optionee shall forfeit the Options stated on said Option
Agreement.
(e) Special Grant. Each incumbent Outside Director as of December 31,
1995, who elected on or before January 22, 1996 to forfeit his or her accrued
benefit under the Pension Plan in exchange for eligibility to receive Option
grants as a Post-1/1/96 Outside Director, shall receive, on January 22, 1996, in
addition to the grant described in Section 6(a), a one-time grant of Options in
an amount equal to the product of (i) 1,500, times (ii) the Outside Director's
years of service, as of that date of grant, as determined under the terms of the
Pension Plan.
(f) Adjustments in Stock. Notwithstanding any other provision of this
Plan, in a transaction to which section 424(a) of the Internal Revenue Code
applies, the Board of Directors shall determine whether, and to what extent, it
is appropriate to make adjustments in the class or issuer of stock subject to
outstanding Options under the Plan, and/or in the number and corresponding
exercise prices of outstanding Options, in order to preserve the aggregate value
of the spreads between the exercise prices of the outstanding Options and the
value of the applicable Stock or stocks. Such modifications shall be consistent
with the terms of any such reorganization, recapitalization, stock split, stock
dividend, combination of shares, or any other change affecting the Stock.
7. STOCK AWARDS.
(a) Annual Awards. On the first business day of July of each year, each
Participating Company except the Corporation shall cause to be transferred to
each of its Outside Directors who is on that day in active service as an elected
Outside Director of the Participating Company, an award of Stock (and cash in
lieu of any fractional share) for services to be rendered as an Outside Director
for the twelve-month period on and after that date (or for any portion of said
twelve-month period during which the Outside Director remains on the respective
board).
(b) Value of Awards. For Outside Directors of Participating Companies
other than the Corporation, the annual Stock award shall be a number of whole
shares (and cash in lieu of any fractional share) the value of which shall equal
$1,000. For purposes of computing the number of shares to be awarded, the value
of a share of Stock at the time of an award shall be deemed to be equal to the
average of the closing prices of the Stock for each of the last five trading
days of the month of June immediately preceding the date of the award.
(c) Election to Transfer Shares to DRSPP. Each Outside Director who is
eligible for an award of Stock under this section 7 shall, prior to the date of
the award for a given year, have the right to elect whether to receive the award
in the form of a share certificate, which shall be solely in the name of the
Outside Director, or to have the Corporation deposit the share award directly
into an account, which shall be solely in the name of the Outside Director,
under the Corporation's Dividend Reinvestment and Stock Purchase Plan ("DRSPP").
For an Outside Director who elects to deposit the award in a DRSPP account, the
terms of DRSPP shall thereafter apply and the shares awarded under this Plan
shall be treated no differently than any other shares held under DRSPP.
- --------------------------------------------------------------------------------
Stock Compensation Plan for Outside Directors Page 3 of 5
<PAGE>
(d) No Accrued Interest In Subsequent Awards. Until the applicable award
date under the Plan, an eligible Outside Director shall have no accrued right to
receive all or any portion of any subsequent award, except to the extent
provided in any plan amendment adopted by the Plan Administrator pursuant to
Section 12(c)(iii). An eligible Outside Director shall have no right to assign
or alienate any interest in any award which has not yet been presented under
this Plan.
8. SOURCE OF STOCK. Shares of Stock awarded under the Plan, and Stock
transferred to an Outside Director upon exercise of Options, may be treasury
shares, or authorized but unissued shares, or outstanding shares of Stock
acquired by the Corporation in the open market or elsewhere.
9. TAXES. Any and all tax consequences for an Outside Director which are
associated with an award of shares or an exercise of Options under this Plan
shall be the sole responsibility of the participating Outside Director.
10. AUTHORIZED NUMBER OF SHARES. The aggregate number of shares of Stock
which may be awarded under this Plan, or transferred upon exercise of Options,
shall be 100,000. Said limit shall be adjusted, in the manner determined
appropriate by the Plan Administrator with the advice of counsel, in the event
of any stock split, stock dividend, recapitalization, or other change affecting
the Stock.
11. NO EFFECT ON RETIREMENT PLAN OR DEFERRED FEE PLAN. The awards of
Stock, and transfers of Stock upon exercise of Options, under this Plan shall
not be treated as a portion of the Outside Directors' retainer, or as benefit
bearing compensation of any kind, for purposes of determining the amount of any
benefit under the Bell Atlantic Retirement Plan for Outside Directors. Neither
the Options nor the Stock received under this Plan shall be eligible for
deferral under the Bell Atlantic Deferred Fee Plan for Outside Directors.
12. ADMINISTRATION; AMENDMENT AND TERMINATION.
(a) Authority of the Board. The Board of the Corporation shall have the
authority to amend and to terminate the Plan at any time in its discretion;
provided, however, that any amendment adopted by the Board may be submitted for
approval by the shareowners of the Corporation if, in the opinion of counsel,
such approval is required to exempt the awards of Stock, and the grant or
exercise of Options, under this Plan from the short-swing trading provisions of
Section 16 of the Securities Exchange Act of 1934, or to preserve the status of
Outside Directors as "disinterested administrators" (within the meaning of
regulations issued pursuant to said Section 16) for purposes of the
Corporation's compensation plans for officers and key employees. The Committee
on Directors of the Board may recommend amendments to the Plan for the approval
of the full Board.
(b) Authority of Board of Directors of Operating Telephone Companies. The
board of directors of an OTC shall have the authority to adopt the Plan on
behalf of the OTC, and to withdraw from participation in the Plan at any time in
its sole discretion.
(c) Authority of Plan Administrator. The Vice President - Human Resources
of the Corporation, or any person to whom that officer delegates administrative
responsibility for
- --------------------------------------------------------------------------------
Stock Compensation Plan for Outside Directors Page 4 of 5
<PAGE>
the Plan, shall be the "Plan Administrator" (as that term is used herein), with
the authority (i) to administer and interpret the Plan, (ii) to prepare and
distribute Option Agreements and administer the exercise of Options, (iii) to
adopt minor and administrative modifications of the Plan and amendments which
the Plan Administrator believes, with the advice of counsel, to be necessary or
appropriate to comply with changes in applicable law or to ensure that
transactions under the Plan remain exempt from Section 16(b) of the Securities
Exchange Act of 1934 to the maximum extent practicable, (iv) to adopt Plan
provisions for the awarding of prorated amounts of Stock in appropriate
circumstances, and (v) with advice of counsel, to submit the Plan, or amendments
to the Plan, to the shareowners of the Corporation for approval.
(d) Authority of Corporate Secretaries of OTCs. The corporate secretary of
each OTC shall have the status of deputy administrator of the Plan, with
authority to assist the Plan Administrator with communications and
correspondence with Outside Directors of the respective OTC.
- --------------------------------------------------------------------------------
Stock Compensation Plan for Outside Directors Page 5 of 5
<PAGE>
Exhibit 10(n)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made this 2nd day of May, 1995, by and between
Bell Atlantic Corporation ("Bell Atlantic") and Lawrence T. Babbio, Jr. (the
"Executive").
WHEREAS, Bell Atlantic seeks to retain the services of the Executive and to
provide for an efficient transition upon any change in the Chief Executive
Officer of Bell Atlantic;
WHEREAS, the Executive is willing to remain in the employ of Bell Atlantic
upon the following terms and conditions; and
WHEREAS, Bell Atlantic and the Executive wish to set forth their agreement
as to the terms and conditions upon which the Executive's employment will
continue.
NOW, THEREFORE, for good and valuable consideration, including the
compensation and benefits recited below, the Executive and Bell Atlantic hereby
agree as follows:
1. Definitions:
-----------
(a) Effective Date shall mean the announced effective date of the
--------------
election of any individual to succeed the person who, on the date of this
Agreement, is the incumbent Chief Executive Officer of Bell Atlantic.
(b) Bell Atlantic Companies shall mean Bell Atlantic and each
-----------------------
corporate subsidiary and other affiliated company in which Bell Atlantic
directly or indirectly owns a fifty percent or greater interest.
(c) Board shall mean the board of directors of Bell Atlantic.
-----
(d) Chief Executive Officer shall mean the Chief Executive Officer of
-----------------------
Bell Atlantic, as elected and serving from time to time.
(e) Committed Employment Period shall mean the period commencing on
---------------------------
the date of this Agreement and continuing until the earlier of the second
anniversary of the Effective Date or July 1, 1998.
(f) Release shall mean a legal release in the form attached to this
-------
Agreement as Exhibit A, which shall be signed by the Executive at the time
of his retirement from Bell Atlantic as a condition of receiving any and
all pension and severance benefits provided under the terms of this
Agreement.
2. Termination of this Agreement: In the event that the Executive is
-----------------------------
elected Chief Executive Officer as of the Effective Date, this Agreement shall
then terminate and shall be of no further force or effect.
3. Bell Atlantic Obligations during the Committed Employment Period:
----------------------------------------------------------------
During the Committed Employment Period:
- --------------------------------------------------------------------------------
Employment Agreement Page 1
<PAGE>
(a) Bell Atlantic shall continue to employ the Executive as a Bell
Atlantic officer with the title of Vice Chairman, with duties of a type and
level appropriate to such a title;
(b) Bell Atlantic shall compensate the Executive at a Salary Grade not
less than 37, and, to the extent not otherwise modified by the terms of
this Agreement, the Executive shall be eligible to participate in all of
the benefit and compensation plans, and the programs of perquisites,
applicable to similarly-situated Senior Managers of Bell Atlantic, as those
plans and programs may be amended from time to time;
(c) The Board shall nominate the Executive for election as a director
at each annual meeting of shareowners of Bell Atlantic which occurs during
the Committed Employment Period; and
(d) In the event that the Executive does not become Chief Executive
Officer on the Effective Date, Bell Atlantic shall, as of the Effective
Date, promote the Executive to Salary Grade 38, and shall for the remainder
of the Committed Employment Period deliver compensation, benefits and
perquisites to the Executive commensurate with that Salary Grade,
including, without limitation, annual base salary increases not less than
one-third of the amount by which the mid-point of Salary Grade 38 exceeds
the Executive's initial salary upon promotion to that Salary Grade.
(e) In the event that James G. Cullen is elected Chief Executive
Officer as of the Effective Date, the Executive will be elected Vice
Chairman and Chief Operating Officer of Bell Atlantic effective as of the
Effective Date, and Bell Atlantic shall retain the Executive in that
position, with duties commensurate with that title, through the end of the
Committed Employment Period.
4. Obligations of the Executive during the Committed Employment Period:
-------------------------------------------------------------------
During the Committed Employment Period, the Executive shall have the following
obligations and duties.
(a) The Executive shall continue to fully and faithfully perform his
duties and responsibilities (i) as a director, so long as he is elected and
serving, and (ii) as an officer, reporting only to the Chief Executive
Officer and the Board.
(b) The Executive shall serve in such executive capacities, titles and
authorities with respect to the Bell Atlantic Companies as the Board or the
CEO may from time to time prescribe, and the Executive shall perform all
duties incidental to such positions, shall cooperate fully with the Board
and the CEO, and shall work cooperatively with the other officers of the
Bell Atlantic Companies.
(c) The Executive shall continue to diligently devote his entire
business skill, time and effort to the affairs of the Bell Atlantic
Companies in accordance with the duties assigned to him that are not
inconsistent with the terms hereof, and shall perform all such duties, and
otherwise conduct himself, in a manner reasonably calculated in good faith
by him to promote the best interests of the Bell Atlantic Companies. Prior
to the Executive's retirement from Bell Atlantic, except to the extent
specifically permitted by the Chief Executive Officer or the Board and
except as set forth below, the Officer shall not, directly or indirectly,
render any services of a
- --------------------------------------------------------------------------------
Employment Agreement Page 2
<PAGE>
business, commercial or professional nature to any other person or
organization other than a Bell Atlantic Company or a venture in which a
Bell Atlantic Company has a financial interest, whether or not the services
are rendered for compensation. However, the Executive is not prohibited
from serving on committees or boards of charitable, educational, civic or
other nonprofit organizations, so long as such service does not interfere
with his full-time responsibilities to Bell Atlantic.
(d) The failure of the Executive to perform his obligations pursuant
to paragraphs (a) through (c) above shall be excused when such failure is
on account of the Executive's disability within the meaning of the
applicable disability benefit plans in which the Executive participates
from time to time.
5. Retirement. If the Executive is not elected Chief Executive Officer
----------
as of the Effective Date, the Executive hereby agrees, at any time after the
last day of the Committed Employment Period, upon request of the then-current
Chief Executive Officer or the Board, to retire from active service with Bell
Atlantic, effective as of the date specified in the request. The parties
acknowledge that Bell Atlantic shall have the right to cause the Executive to be
retired and removed from active service as of any date after the last day of the
Committed Employment Period. On the date of such retirement, as a condition of
eligibility to receive the pension and severance benefits described in Sections
6 and 7 of this Agreement, the Executive shall sign and deliver the Release and
shall not revoke his signature.
6. Retirement Pension Benefits.
---------------------------
(a) Eligibility for Waiver of Early Retirement Pension Discount. If a
-----------------------------------------------------------
person other than the Executive is elected Chief Executive Officer as of
the Effective Date, and if the Executive thereafter completes the Committed
Employment Period by remaining in active service with Bell Atlantic in
accordance with the terms of this Agreement, the Executive shall at any
time thereafter be entitled, subject to signing and delivering the Release,
to retire with a two-year waiver of any applicable early retirement pension
discount under the terms of the Bell Atlantic Senior Management Retirement
Income Plan or any successor to that plan which applies to Senior Managers,
as that plan may be amended from time to time ("RIP"), as more fully
described in the following paragraph. The parties acknowledge that the
pension enhancement described in this Section is part of the consideration
given by Bell Atlantic in exchange for the Release and the non-compete and
proprietary information covenants granted by the Executive under Sections
10 and 11 of this Agreement.
(b) Calculation of Waiver of Early Retirement Pension Discount. If
----------------------------------------------------------
the Executive qualifies for the waiver of early retirement pension
discount, as described in the previous paragraph, the Executive's target
pension under RIP shall be equal to the greater of:
(i) The target pension determined under the applicable pension
formula under RIP which is in effect and applicable to the Executive
at the time of the Executive's retirement, after adding two additional
years to the Executive's age at the time of retirement for purposes of
determining the amount of any applicable early retirement discount
(but not for any other purpose under RIP); or
- --------------------------------------------------------------------------------
Employment Agreement Page 3
<PAGE>
(ii) The target pension which would have been applicable to the
Executive if he had retired at any time during the Committed
Employment Period, under the terms of any early retirement incentive,
pension window, or other special provision of RIP which may then have
been in effect but which is no longer in effect at the time of the
Executive's actual retirement. In such a case, the calculation of the
RIP enhanced benefit shall not be subject to further supplementation
by the discount waiver provisions of the prior paragraph.
7. Further Consideration for Non-Compete Agreement:
-----------------------------------------------
(a) If a person other than the Executive is elected Chief Executive
Officer as of the Effective Date, and if the Executive thereafter completes
the Committed Employment Period by remaining in active service with Bell
Atlantic in accordance with the terms of this Agreement, then, subject to
the Executive signing and delivering the Release, Bell Atlantic shall pay
the Executive a cash severance payment, as described in the following
paragraph, upon the Executive's retirement at any time thereafter. The
parties acknowledge that the severance payment described in this Section is
part of the consideration given by Bell Atlantic in exchange for the
Release and the non-compete and proprietary information covenants granted
by the Executive under Sections 10 and 11 of this Agreement.
(b) The severance benefit described in the previous paragraph shall be
equal to two times the sum of (i) the annualized amount of the Executive's
then-current base salary, plus (ii) the greatest of (A) the value of the
Executive's most recent award of cash and deferred stock under the Senior
Management Short Term Incentive Plan or any successor to that plan (the
"STIP"), or (B) the value of the most recent award of cash and deferred
stock under the STIP for the Executive's salary grade without taking into
account any individual performance adjustments to the award, or (C) 150% of
the target STIP award for the Executive's salary grade as of the date of
retirement. This cash separation benefit shall be payable in one
installment, not later than 30 days after the termination of employment
date, subject to the Executive's continuing compliance with the terms of
this Agreement.
8. Retirement or Discharge for Cause during Committed Employment Period.
--------------------------------------------------------------------
(a) In the event that the Executive voluntarily resigns or retires for
any reason (except a "constructive discharge", as defined in Section 9(c)),
or is discharged by Bell Atlantic for "cause" (as hereinafter defined),
prior to the end of the Committed Employment Period, the Executive shall
forfeit any and all rights to receive the special supplementary pension
benefits and the severance benefits set forth in Sections 6 and 7 of this
Agreement, but shall otherwise be eligible to receive any and all
compensation and benefits for which a similarly-situated retiring Senior
Manager would be eligible under the applicable provisions of the
compensation and benefit plans, as those plans may be amended from time to
time. In such event, the Executive shall be subject to the terms of the
covenant not to compete, as described in Section 10 of this Agreement, for
a period which shall extend from the actual date of retirement through the
second anniversary of the end of the Committed Employment Period.
(b) For purposes of this Agreement, the term "cause" shall mean a
violation of law (other than a traffic violation or other minor civil
offense), or behavior that Bell
- --------------------------------------------------------------------------------
Employment Agreement Page 4
<PAGE>
Atlantic concludes amounts to a material breach of any company policy or
provision of the Employee Code of Business Conduct, and including, by way
of example: dishonesty; working outside the Bell Atlantic Companies in
violation of Section 4(c) or 10 of this Agreement in competition with any
Bell Atlantic Company; other conduct that poses a material conflict of
interest; revealing confidential or proprietary information of any Bell
Atlantic Company in violation of Section 11 of this Agreement; or a
substantial and deliberate abuse of the voucher or expense reimbursement
processes of any Bell Atlantic Company.
9. Certain Involuntary Terminations of Employment:
----------------------------------------------
(a) Consequences of Certain Involuntary Terminations. Except in the case
------------------------------------------------
of a discharge for cause, in the event that Bell Atlantic involuntarily
discharges the Executive, or the Executive is "constructively discharged" (as
hereinafter defined), prior to the end of the Committed Employment Period, then
the Executive shall be entitled to receive, as liquidated damages, subject to
signing and delivering the Release, an amount of cash equal to the compensation
and benefits which he would have been entitled to receive had Bell Atlantic
fulfilled its obligation to employ the Executive in accordance with the
provisions of Section 3 of this Agreement, calculated and paid in accordance
with paragraph (b) of this Section. In such a case, in addition to the
liquidated damages described in the previous sentence, subject to signing and
delivering the Release, the Executive shall be entitled to receive the benefits
set forth in Sections 6 and 7 of this Agreement, but calculated as though the
Executive had actually remained in active service with Bell Atlantic, earning
the compensation described in Section 3 of this Agreement, until the end of the
Committed Employment Period, with the payment of the cash separation benefit
under Section 7 to be made within 30 days after the termination of employment
date. Under the circumstances described in this paragraph, the Executive shall
be subject to the non-compete covenants of this Agreement through the period
ending on the second anniversary of the date of termination of the Executive's
employment.
(b) Calculation and Payment of Liquidated Damages. The liquidated damages
---------------------------------------------
described in the first sentence of the previous paragraph shall consist of all
five of the following items, but only the following items. All of the following
items of liquidated damages shall be subject to applicable withholding taxes.
Each payment contemplated by this subsection (b) shall be contingent upon the
absence, as of the time of such payment, of any knowing and material violation
by the Executive of any of the covenants contained in Sections 10 and 11.
(i) Salary: The liquidated damages shall be paid monthly in cash, in
an amount each month equal to the salary which would have been paid to
the Executive under Section 3 of this Agreement, assuming salary
adjustments annually at a percentage equal to the merit increase
budget percentage for Bell Atlantic Senior Managers.
(ii) Short-Term Incentives: The liquidated damages for foregone
short-term incentives under STIP shall be paid annually in cash, not
later than 30 days after the date on which incentives are awarded by
Bell Atlantic under the STIP for the prior year's performance, in an
amount equal to the value of the cash and deferred stock which the
Executive would have been entitled to receive under the STIP, without
adjustment for individual performance.
- --------------------------------------------------------------------------------
Employment Agreement Page 5
<PAGE>
(iii) Long-Term Incentives: The liquidated damages for foregone long-
term incentives shall be paid annually in cash, within 30 days of the
granting of stock options for the year, in an amount equal to the
Black-Scholes value of options which the Executive would have been
entitled to receive.
(iv) RIP Pension Benefits: The RIP target pension will be
recalculated after the completion of the Committed Employment Period
taking into account the liquidated damages under paragraphs (i) and
(ii) above as though they were earned as salary and short-term
incentives during a period of employment ending on the last day of the
Committed Employment Period, and (A) Bell Atlantic shall pay the
Executive a true-up payment based on said recalculation if the
Executive has elected a lump-sum payment of the benefit provided by
Section 6(a), and (B) if the Executive has elected a pension in the
form of an annuity, the Executive's RIP pension benefits thereafter
shall be based on said recalculation.
(v) Miscellaneous Benefits: The liquidated damages for all other
foregone benefits shall be paid monthly in an amount equal to the sum
of: (A) the BellFlex allowance that the Executive would have been
entitled to receive, plus (B) one-twelfth of the annual maximum
company matching contribution that the Executive would have been
eligible to receive if the Executive made the maximum contributions to
the Bell Atlantic Savings Plan then permitted by law.
(c) Constructive Discharge: The Executive shall be deemed to have
----------------------
been "constructively discharged" for purposes of this Agreement, if, in the
absence of conduct amounting to cause for discharge on the part of the
Executive, and without the Executive's express written consent, any of the
following events has occurred within 12 months prior to the Executive
electing to retire: (i) the Executive's status as a "Senior Manager" has
been revoked; (ii) the Executive's base recurring salary has been reduced
by more than 10%; (iii) the Executive has suffered a negative individual
performance adjustment which causes the Executive's short term award under
the STIP for a particular year to be reduced by 25% or more; or (iv) the
Executive's responsibilities have been substantially reduced in type or
scope, other than in a general reorganization of the management functions
of one or more Bell Atlantic Companies, with the result that the Executive
has materially less status and authority. Nothing in this Section 9(c)
shall limit or qualify the obligations of Bell Atlantic under Section 3 of
this Agreement, which are absolute.
10. Prohibition Against Competitive Activities:
------------------------------------------
(a) Prohibited Conduct by the Executive: During the period of the
-----------------------------------
Executive's employment with any Bell Atlantic Company, and for a period of
two years (or any longer period expressly provided under any applicable
provision of this Agreement) following the Executive's retirement or
termination of employment for any other reason from any and all Bell
Atlantic Companies, the Executive, without the prior written consent of the
Chief Executive Officer, shall not:
(i) personally engage in "Competitive Activities" (as defined
in paragraph 10(b)) within any geographic area in which any Bell
Atlantic Company is then engaged (or, at the time of the Executive's
termination of employment,
- --------------------------------------------------------------------------------
Employment Agreement Page 6
<PAGE>
had a board-approved business plan under which it planned to engage) in such
Competitive Activities;
(ii) work for, own, manage, operate, control or participate in
the ownership, management, operation or control of, or provide
consulting or advisory services to, any individual, partnership, firm,
corporation or institution engaged in Competitive Activities within
any geographic area described in Section 10(a)(i); provided, however,
that the Executive's purchase or holding, for investment purposes, of
securities of a publicly-traded company shall not constitute
"ownership" or "participation in ownership" for purposes of this
paragraph so long as the Executive's equity interest in any such
company is less than a controlling interest;
(iii) interfere with the relationship of any Bell Atlantic
Company with any of its employees, agents, representatives, suppliers
or vendors under contract, or joint venturers, where any such person
or entity cooperates with or supports a Bell Atlantic Company in its
performance of any Competitive Activities; or
(iv) directly or indirectly attempt to divert from any Bell
Atlantic Company any business in connection with Competitive
Activities.
(b) Competitive Activities: For purposes of Section 10(a) hereof,
----------------------
"Competitive Activities" means business activities relating to products or
services of the same or similar type as those for which the Executive had
responsibility to plan, develop, manage or oversee within the last 24
months of the Executive's employment with any Bell Atlantic Company.
(c) Notice. Bell Atlantic shall send the Executive written notice
------
in the event that Bell Atlantic believes that the Executive has violated
any of the prohibitions of this Section 10; provided, however, that any
failure by Bell Atlantic to give notice under this provision or to enforce
its rights under this Agreement in any one or more instances shall not be a
bar to Bell Atlantic giving notice and taking action to enforce its rights
under this Agreement at any later time. For a period of 15 days after the
giving of such notice, the Executive shall have the opportunity to respond
and discuss with Bell Atlantic the underlying facts and the basis for Bell
Atlantic's belief that the Executive is in breach of this Section 10.
During such 15-day period, Bell Atlantic shall not pursue any remedy
provided by this Agreement or at law or in equity.
(d) Forfeiture of Benefits. The Executive acknowledges that the
----------------------
Executive's violation of any of the prohibitions of this Section 10 or the
rules against wrongful competitive activity by the Executive as defined
under the RIP and the Bell Atlantic Performance Share Plan ("PSP"), as the
terms of those plans may be amended from time to time, may result in the
Executive's forfeiture of any and all rights to benefits or awards under
the RIP and the PSP.
(e) Waiver: Nothing in this Agreement shall bar the Executive from
------
requesting, at the time of the Executive's retirement or at any time
thereafter, that the then-current Chief Executive Officer waive Bell
Atlantic's rights to enforce the non-compete covenants of this Section 10,
and the Chief Executive Officer shall have the
- --------------------------------------------------------------------------------
Employment Agreement Page 7
<PAGE>
power to agree to such a waiver if the Chief Executive Officer determines
that it is not inconsistent with the interests of Bell Atlantic to do so.
11. Prohibition Against Disclosure of Proprietary Information:
---------------------------------------------------------
(a) Prohibited Conduct by the Executive: The Executive acknowledges
-----------------------------------
that, as one of the most senior officers of the Bell Atlantic Companies,
the Executive has continuing access to confidential and proprietary
information of Bell Atlantic Companies. The Executive shall, therefore, at
all times during the period of active employment with any Bell Atlantic
Company, and for a period of three years thereafter, preserve the
confidentiality of all proprietary information of any Bell Atlantic
Company. The three-year limitation under this paragraph shall not in any
way limit any Bell Atlantic Company's common law and statutory rights to
protect its trade secrets or intellectual property rights at any time, to
the full extent of the law. "Proprietary information" includes, but is not
limited to, information in the possession or control of a Bell Atlantic
Company that has not been fully disclosed in a writing which has been
generally circulated to the public at large, and which gives the Bell
Atlantic Company an opportunity to obtain or maintain advantages over its
current and potential competitors, such as strategic or tactical business
plans, and undisclosed financial data; ideas, processes, methods,
techniques, systems, patented or copyrighted information, models, devices,
programs, computer software or related information; documents relating to
regulatory matters and correspondence with governmental entities; pricing
and cost data; reports and analyses of business prospects; business
transactions which are contemplated or planned; research data; personnel
information and data; identities of users and purchasers of any Bell
Atlantic Company's products or services; and other confidential matters
pertaining to or known by one or more Bell Atlantic Companies, including
confidential information of a third party which a Bell Atlantic Company is
bound to protect.
(b) Obligation to Return Company Property: If and when the Executive
-------------------------------------
retires or terminates employment for any other reason with all Bell
Atlantic Companies, the Executive shall, prior to the last day of active
employment and without charge to any Bell Atlantic Company, return to the
employing Bell Atlantic Company (or the rightful Bell Atlantic Company) all
company property, including, without limitation, originals and copies of
records, papers, programs, computer software, documents and other materials
which contain Proprietary Information, as defined in Section 11(a). The
Executive shall thereafter cooperate with each applicable Bell Atlantic
Company in executing and delivering documents requested by the company that
are necessary to assist the Bell Atlantic Company in patenting or
registering any programs, ideas, inventions, discoveries, copyright
material or trademarks, and to vest title thereto in the Bell Atlantic
Company.
(c) Forfeiture of Benefits. The Executive acknowledges that the
----------------------
Executive's violation of the prohibitions of this Section 11, or other
"misconduct" by the Executive (as that term is interpreted by the Human
Resources Committee of the Board under the RIP and PSP plans, as those
plans may be amended from time to time), may result in the Executive's
forfeiture of any and all rights to benefits or awards under the RIP and
the PSP.
- --------------------------------------------------------------------------------
Employment Agreement Page 8
<PAGE>
12. Remedies in Addition to Forfeiture of Benefits. The Executive
----------------------------------------------
recognizes that irreparable injury will result to one or more Bell Atlantic
Companies, and to the business and property of any of them, in the event of a
breach by the Executive of any of the provisions of Section 10 or 11 of this
Agreement, and that the Executive's continued employment is predicated on the
commitments made by the Executive in those Sections. In the event of any breach
of any of the Executive's commitments under Section 10 or 11, any Bell Atlantic
Company that is damaged by such breach shall be entitled, in addition to
declaring a forfeiture of benefits as described herein, and in addition to any
other remedies and damages available, to injunctive relief to restrain the
violation of such commitments by the Executive or by any person or persons
acting for or with the Executive in any capacity whatsoever.
13. Miscellaneous Provisions.
------------------------
(a) Legal Release: Notwithstanding any provision of this Agreement,
-------------
no liquidated damages or benefits under the terms of this Agreement shall
be payable in connection with a separation from service by the Executive
unless and until the Executive signs the Release in a form satisfactory to
Bell Atlantic; provided, however, that nothing in this Agreement is
intended to cause the Executive to waive his right to submit claims for
employee benefits in accordance with the terms of any employee benefit
plans in which the Executive remains a participant.
(b) Assignment by Bell Atlantic: Bell Atlantic may assign this
---------------------------
Agreement without the Executive's consent to any company that acquires all
or substantially all of the assets of Bell Atlantic, or into which or with
which Bell Atlantic or the company which is then the Executive's employing
company is merged or consolidated. If and when the Executive transfers
employment to a Bell Atlantic Company other than Bell Atlantic, that
employing company shall automatically be deemed to be a party to this
Agreement in addition to Bell Atlantic. This Agreement may not be assigned
by the Executive, and no person other than the Executive or his estate may
assert the rights of the Executive under this Agreement. The right to
receive further compensation or benefits of any kind under this Agreement
shall be forfeited upon the death of the Executive, except as expressly
provided to the contrary under the terms of any applicable compensation and
benefit plan in which the Executive was a participant on the date of his
death, and except that, in the event of the death of the Executive during
the Committed Employment Period, the cash severance payment provided for by
Section 7 of this Agreement shall become payable in full.
(c) Waiver: The waiver by any Bell Atlantic Company of a breach by
------
the Executive of any provision of this Agreement shall not be construed as
a waiver of any subsequent breach by the Executive.
(d) Severability: If any clause, phrase or provision of this
------------
Agreement, or the application thereof to any person or circumstance, shall
be invalid or unenforceable under any applicable law, such event shall not
affect or render invalid or unenforceable the remainder of this Agreement
and shall not affect the application of any clause, phrase or provision
hereof to other persons or circumstances. Furthermore, in the event that a
court of law or equity determines that the geographic scope of the
covenants under Section 10, or the duration of any of the restrictions
under this Agreement, are not enforceable, this Agreement shall hereby be
deemed to be
- --------------------------------------------------------------------------------
Employment Agreement Page 9
<PAGE>
amended to the extent necessary, but only to the extent necessary, to
permit the enforcement of the terms of this Agreement.
(e) Governing Law: This Agreement shall be construed and enforced in
-------------
accordance with the laws of the Commonwealth of Pennsylvania.
(f) Entire Agreement: This Agreement supersedes the Non-Compete and
----------------
Proprietary Information Agreement, between Bell Atlantic and the Executive,
dated January 24, 1994, and that Agreement is hereby cancelled. Except for
the terms and conditions of the compensation and benefit plans applicable
to the Executive (as such plans may be amended by the applicable Bell
Atlantic Company from time to time), this Agreement sets forth the entire
understanding of BAC and the Executive and supersedes all prior agreements,
arrangements, and communications, whether oral or written, pertaining to
the subject matter hereof; and this Agreement shall not be modified or
amended except by written agreement of the Executive, Bell Atlantic and the
Bell Atlantic Company which then employs the Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first set forth above.
BELL ATLANTIC CORPORATION
By:__________________________________
Raymond W. Smith
Chairman of the Board and
Chief Executive Officer
THE EXECUTIVE
_____________________________________
Lawrence T. Babbio, Jr.
- --------------------------------------------------------------------------------
Employment Agreement Page 10
<PAGE>
EXHIBIT A
RELEASE
-------
THIS RELEASE (the "Release") is entered into by LAWRENCE T. BABBIO, JR.
(the "Executive"), for the benefit of BELL ATLANTIC CORPORATION ("Bell
Atlantic"), and all companies, and their officers, directors and employees,
which are affiliated with Bell Atlantic (Bell Atlantic and said affiliated
companies are sometimes referred to collectively herein as "Bell Atlantic
Companies").
WHEREAS, the Executive has retired from his employing Bell Atlantic Company
on ____________ (the "Retirement Date") pursuant to the terms of an Employment
Agreement, dated _______________, 1995, between Bell Atlantic and the Executive
(the "Agreement"), and he wishes to execute this Release as contemplated under
the terms of the Agreement.
NOW, THEREFORE, the Executive affirms as follows:
1. Except for any as-yet unfulfilled obligations of Bell Atlantic
under the terms of the Agreement, or any benefits which the Executive is
entitled to receive under the terms of the benefit plans in which he
participates (as those plans may be amended from time to time), the Executive,
as his free and voluntary act, hereby releases and discharges Bell Atlantic, its
affiliates, and their successors and assigns, and the directors, officers,
employees, and agents of each of them, of and from any and all debts,
obligations, claims, demands, judgments or causes of action of any kind
whatsoever, known or unknown, in tort, contract, by statute or on any other
basis, for equitable relief, compensatory, punitive or other damages, expenses
(including attorneys' fees), reimbursements or costs of any kind, including but
not limited to, any and all claims, demands, rights and/or causes of action,
including those which might arise out of allegations relating to a claimed
breach of an alleged oral or written employment contract, or relating to
purported employment discrimination or civil rights violations, such as, but not
limited to, those arising under Title VII of the Civil Rights Act of 1964 (42
U.S.C. Section 2000e et seq.), the Civil Rights Acts of 1866 and 1871 (42 U.S.C.
Sections 1981 and 1983), Executive Order 11246, as amended, the Age
Discrimination in Employment Act of 1967, as amended (29 U.S.C. Section 621 et
seq.), the Equal Pay Act of 1963 (29 U.S.C. Section 206(d)(1)), the
Rehabilitation Act of 1973 (29 U.S.C. Sections 701-794), the Civil Rights Act of
1991, the Americans with Disabilities Act, or any other applicable federal,
state or local employment discrimination statute or ordinance, which the
Executive might have or assert against any of said entities or persons (a) by
reason of the Executive's active employment by Bell Atlantic or any Bell
Atlantic Company, or the termination of said employment and all circumstances
related thereto; or (b) by reason of any other matter, cause or thing whatsoever
which may have occurred prior to the date of execution of this Release.
2. No Litigation or Other Legal Action. Except for any as-yet unfulfilled
-----------------------------------
obligations of Bell Atlantic under the terms of the Agreement, or any benefits
which the Executive is entitled to receive under the terms of the benefit plans
in which he participates (as those plans may be amended from time to time), the
Executive promises not to initiate a lawsuit or to bring a claim against Bell
Atlantic or any Bell Atlantic Company or their successors or assigns, or the
directors, officers, employees, or agents of any of them, in any court,
government agency, or otherwise, relating to the Executive's employment, the
termination of said employment, or
- --------------------------------------------------------------------------------
Release Page 1
<PAGE>
other events, including, but not limited to, any claim under any federal, state
or local statute, ordinance, or rule of law. The Executive waives any remedy or
recovery in any action which may be brought on the Executive's behalf by any
government agency or other person.
3. The Executive hereby reaffirms the terms and conditions of the
Agreement in all respects.
4. Should any provision of this Release be declared or be determined by
any court to be illegal or invalid, the validity of the remaining parts, terms
or provisions shall not be affected thereby, and said illegal or invalid part,
term or provision shall be deemed not to be a part of this Release.
STATEMENT BY THE EXECUTIVE WHO IS SIGNING BELOW: BELL ATLANTIC HAS ADVISED
-----------------------------------------------
ME IN WRITING TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS RELEASE. I
HAVE CAREFULLY READ AND FULLY UNDERSTAND THE PROVISIONS OF THIS RELEASE AND HAVE
HAD SUFFICIENT TIME AND OPPORTUNITY (OVER A PERIOD OF SUBSTANTIALLY MORE THAN 21
DAYS) TO CONSULT WITH MY PERSONAL TAX, FINANCIAL AND LEGAL ADVISORS PRIOR TO
EXECUTING THIS DOCUMENT, AND I INTEND TO BE LEGALLY BOUND BY ITS TERMS. I
UNDERSTAND THAT I MAY REVOKE THIS RELEASE WITHIN SEVEN (7) DAYS FOLLOWING MY
SIGNING, AND THIS RELEASE WILL NOT BECOME ENFORCEABLE OR EFFECTIVE UNTIL THAT
SEVEN-DAY PERIOD HAS EXPIRED.
THE UNDERSIGNED, intending to be legally bound, has executed this Release
as of the _____ day of __________, 19___, that being the Executive's Retirement
Date.
THE EXECUTIVE
Witness:____________________ Signed:__________________________________
THIS IS A RELEASE
READ CAREFULLY BEFORE SIGNING
- --------------------------------------------------------------------------------
Release Page 2
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made this 2nd day of May, 1995, by and
between Bell Atlantic Corporation ("Bell Atlantic") and James G. Cullen (the
"Executive").
WHEREAS, Bell Atlantic seeks to retain the services of the Executive
and to provide for an efficient transition upon any change in the Chief
Executive Officer of Bell Atlantic;
WHEREAS, the Executive is willing to remain in the employ of Bell
Atlantic upon the following terms and conditions; and
WHEREAS, Bell Atlantic and the Executive wish to set forth their
agreement as to the terms and conditions upon which the Executive's employment
will continue.
NOW, THEREFORE, for good and valuable consideration, including the
compensation and benefits recited below, the Executive and Bell Atlantic hereby
agree as follows:
1. Definitions:
-----------
(a) Effective Date shall mean the announced effective date of the
--------------
election of any individual to succeed the person who, on the date of
this Agreement, is the incumbent Chief Executive Officer of Bell
Atlantic.
(b) Bell Atlantic Companies shall mean Bell Atlantic and each
-----------------------
corporate subsidiary and other affiliated company in which Bell
Atlantic directly or indirectly owns a fifty percent or greater
interest.
(c) Board shall mean the board of directors of Bell Atlantic.
-----
(d) Chief Executive Officer shall mean the Chief Executive
-----------------------
Officer of Bell Atlantic, as elected and serving from time to time.
(e) Committed Employment Period shall mean the period commencing
---------------------------
on the date of this Agreement and continuing until the earlier of
the second anniversary of the Effective Date or July 1, 1998.
(f) Release shall mean a legal release in the form attached to
-------
this Agreement as Exhibit A, which shall be signed by the Executive at
the time of his retirement from Bell Atlantic as a condition of
receiving any and all pension and severance benefits provided under
the terms of this Agreement.
2. Termination of this Agreement: In the event that the Executive
-----------------------------
is elected Chief Executive Officer as of the Effective Date, this Agreement
shall then terminate and shall be of no further force or effect.
3. Bell Atlantic Obligations during the Committed Employment Period:
----------------------------------------------------------------
During the Committed Employment Period:
- --------------------------------------------------------------------------------
Employment Agreement Page 1
<PAGE>
(a) Bell Atlantic shall continue to employ the Executive as a Bell
Atlantic officer with the title of Vice Chairman, with duties of a type and
level appropriate to such a title;
(b) Bell Atlantic shall compensate the Executive at a Salary Grade not
less than 37, and, to the extent not otherwise modified by the terms of
this Agreement, the Executive shall be eligible to participate in all of
the benefit and compensation plans, and the programs of perquisites,
applicable to similarly-situated Senior Managers of Bell Atlantic, as those
plans and programs may be amended from time to time;
(c) The Board shall nominate the Executive for election as a director
at each annual meeting of shareowners of Bell Atlantic which occurs during
the Committed Employment Period; and
(d) In the event that the Executive does not become Chief Executive
Officer on the Effective Date, Bell Atlantic shall, as of the Effective
Date, promote the Executive to Salary Grade 38, and shall for the remainder
of the Committed Employment Period deliver compensation, benefits and
perquisites to the Executive commensurate with that Salary Grade,
including, without limitation, annual base salary increases not less than
one-third of the amount by which the mid-point of Salary Grade 38 exceeds
the Executive's initial salary upon promotion to that Salary Grade.
(e) In the event that Lawrence T. Babbio, Jr. is elected Chief
Executive Officer as of the Effective Date, the Executive will be elected
Vice Chairman and Chief Operating Officer of Bell Atlantic effective as of
the Effective Date, and Bell Atlantic shall retain the Executive in that
position, with duties commensurate with that title, through the end of the
Committed Employment Period.
4. Obligations of the Executive during the Committed Employment Period:
-------------------------------------------------------------------
During the Committed Employment Period, the Executive shall have the following
obligations and duties.
(a) The Executive shall continue to fully and faithfully perform his
duties and responsibilities (i) as a director, so long as he is elected and
serving, and (ii) as an officer, reporting only to the Chief Executive
Officer and the Board.
(b) The Executive shall serve in such executive capacities, titles and
authorities with respect to the Bell Atlantic Companies as the Board or the
CEO may from time to time prescribe, and the Executive shall perform all
duties incidental to such positions, shall cooperate fully with the Board
and the CEO, and shall work cooperatively with the other officers of the
Bell Atlantic Companies.
(c) The Executive shall continue to diligently devote his entire
business skill, time and effort to the affairs of the Bell Atlantic
Companies in accordance with the duties assigned to him that are not
inconsistent with the terms hereof, and shall perform all such duties, and
otherwise conduct himself, in a manner reasonably calculated in good faith
by him to promote the best interests of the Bell Atlantic Companies. Prior
to the Executive's retirement from Bell Atlantic, except to the extent
specifically permitted by the Chief Executive Officer or the Board and
except as set forth below, the Officer shall not, directly or indirectly,
render any services of a
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Employment Agreement Page 2
<PAGE>
business, commercial or professional nature to any other person or
organization other than a Bell Atlantic Company or a venture in which a
Bell Atlantic Company has a financial interest, whether or not the services
are rendered for compensation. However, the Executive is not prohibited
from serving on committees or boards of charitable, educational, civic or
other nonprofit organizations, so long as such service does not interfere
with his full-time responsibilities to Bell Atlantic.
(d) The failure of the Executive to perform his obligations pursuant
to paragraphs (a) through (c) above shall be excused when such failure is
on account of the Executive's disability within the meaning of the
applicable disability benefit plans in which the Executive participates
from time to time.
5. Retirement. If the Executive is not elected Chief Executive Officer
----------
as of the Effective Date, the Executive hereby agrees, at any time after the
last day of the Committed Employment Period, upon request of the then-current
Chief Executive Officer or the Board, to retire from active service with Bell
Atlantic, effective as of the date specified in the request. The parties
acknowledge that Bell Atlantic shall have the right to cause the Executive to be
retired and removed from active service as of any date after the last day of the
Committed Employment Period. On the date of such retirement, as a condition of
eligibility to receive the pension and severance benefits described in Sections
6 and 7 of this Agreement, the Executive shall sign and deliver the Release and
shall not revoke his signature.
6. Retirement Pension Benefits.
---------------------------
(a) Eligibility for Waiver of Early Retirement Pension Discount. If a
-----------------------------------------------------------
person other than the Executive is elected Chief Executive Officer as of
the Effective Date, and if the Executive thereafter completes the Committed
Employment Period by remaining in active service with Bell Atlantic in
accordance with the terms of this Agreement, the Executive shall at any
time thereafter be entitled, subject to signing and delivering the Release,
to retire with a two-year waiver of any applicable early retirement pension
discount under the terms of the Bell Atlantic Senior Management Retirement
Income Plan or any successor to that plan which applies to Senior Managers,
as that plan may be amended from time to time ("RIP"), as more fully
described in the following paragraph. The parties acknowledge that the
pension enhancement described in this Section is part of the consideration
given by Bell Atlantic in exchange for the Release and the non-compete and
proprietary information covenants granted by the Executive under Sections
10 and 11 of this Agreement.
(b) Calculation of Waiver of Early Retirement Pension Discount. If
----------------------------------------------------------
the Executive qualifies for the waiver of early retirement pension
discount, as described in the previous paragraph, the Executive's target
pension under RIP shall be equal to the greater of:
(i) The target pension determined under the applicable pension
formula under RIP which is in effect and applicable to the Executive
at the time of the Executive's retirement, after adding two additional
years to the Executive's age at the time of retirement for purposes of
determining the amount of any applicable early retirement discount
(but not for any other purpose under RIP); or
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Employment Agreement Page 3
<PAGE>
(ii) The target pension which would have been applicable to the
Executive if he had retired at any time during the Committed
Employment Period, under the terms of any early retirement incentive,
pension window, or other special provision of RIP which may then have
been in effect but which is no longer in effect at the time of the
Executive's actual retirement. In such a case, the calculation of the
RIP enhanced benefit shall not be subject to further supplementation
by the discount waiver provisions of the prior paragraph.
7. Further Consideration for Non-Compete Agreement:
-----------------------------------------------
(a) If a person other than the Executive is elected Chief Executive
Officer as of the Effective Date, and if the Executive thereafter completes
the Committed Employment Period by remaining in active service with Bell
Atlantic in accordance with the terms of this Agreement, then, subject to
the Executive signing and delivering the Release, Bell Atlantic shall pay
the Executive a cash severance payment, as described in the following
paragraph, upon the Executive's retirement at any time thereafter. The
parties acknowledge that the severance payment described in this Section is
part of the consideration given by Bell Atlantic in exchange for the
Release and the non-compete and proprietary information covenants granted
by the Executive under Sections 10 and 11 of this Agreement.
(b) The severance benefit described in the previous paragraph shall be
equal to two times the sum of (i) the annualized amount of the Executive's
then-current base salary, plus (ii) the greatest of (A) the value of the
Executive's most recent award of cash and deferred stock under the Senior
Management Short Term Incentive Plan or any successor to that plan (the
"STIP"), or (B) the value of the most recent award of cash and deferred
stock under the STIP for the Executive's salary grade without taking into
account any individual performance adjustments to the award, or (C) 150% of
the target STIP award for the Executive's salary grade as of the date of
retirement. This cash separation benefit shall be payable in one
installment, not later than 30 days after the termination of employment
date, subject to the Executive's continuing compliance with the terms of
this Agreement.
8. Retirement or Discharge for Cause during Committed Employment Period.
--------------------------------------------------------------------
(a) In the event that the Executive voluntarily resigns or retires for
any reason (except a "constructive discharge", as defined in Section 9(c)),
or is discharged by Bell Atlantic for "cause" (as hereinafter defined),
prior to the end of the Committed Employment Period, the Executive shall
forfeit any and all rights to receive the special supplementary pension
benefits and the severance benefits set forth in Sections 6 and 7 of this
Agreement, but shall otherwise be eligible to receive any and all
compensation and benefits for which a similarly-situated retiring Senior
Manager would be eligible under the applicable provisions of the
compensation and benefit plans, as those plans may be amended from time to
time. In such event, the Executive shall be subject to the terms of the
covenant not to compete, as described in Section 10 of this Agreement, for
a period which shall extend from the actual date of retirement through the
second anniversary of the end of the Committed Employment Period.
(b) For purposes of this Agreement, the term "cause" shall mean a
violation of law (other than a traffic violation or other minor civil
offense), or behavior that Bell
- --------------------------------------------------------------------------------
Employment Agreement Page 4
<PAGE>
Atlantic concludes amounts to a material breach of any company policy or
provision of the Employee Code of Business Conduct, and including, by way
of example: dishonesty; working outside the Bell Atlantic Companies in
violation of Section 4(c) or 10 of this Agreement in competition with any
Bell Atlantic Company; other conduct that poses a material conflict of
interest; revealing confidential or proprietary information of any Bell
Atlantic Company in violation of Section 11 of this Agreement; or a
substantial and deliberate abuse of the voucher or expense reimbursement
processes of any Bell Atlantic Company.
9. Certain Involuntary Terminations of Employment:
----------------------------------------------
(a) Consequences of Certain Involuntary Terminations. Except in the case
------------------------------------------------
of a discharge for cause, in the event that Bell Atlantic involuntarily
discharges the Executive, or the Executive is "constructively discharged" (as
hereinafter defined), prior to the end of the Committed Employment Period, then
the Executive shall be entitled to receive, as liquidated damages, subject to
signing and delivering the Release, an amount of cash equal to the compensation
and benefits which he would have been entitled to receive had Bell Atlantic
fulfilled its obligation to employ the Executive in accordance with the
provisions of Section 3 of this Agreement, calculated and paid in accordance
with paragraph (b) of this Section. In such a case, in addition to the
liquidated damages described in the previous sentence, subject to signing and
delivering the Release, the Executive shall be entitled to receive the benefits
set forth in Sections 6 and 7 of this Agreement, but calculated as though the
Executive had actually remained in active service with Bell Atlantic, earning
the compensation described in Section 3 of this Agreement, until the end of the
Committed Employment Period, with the payment of the cash separation benefit
under Section 7 to be made within 30 days after the termination of employment
date. Under the circumstances described in this paragraph, the Executive shall
be subject to the non-compete covenants of this Agreement through the period
ending on the second anniversary of the date of termination of the Executive's
employment.
(b) Calculation and Payment of Liquidated Damages. The liquidated damages
---------------------------------------------
described in the first sentence of the previous paragraph shall consist of all
five of the following items, but only the following items. All of the following
items of liquidated damages shall be subject to applicable withholding taxes.
Each payment contemplated by this subsection (b) shall be contingent upon the
absence, as of the time of such payment, of any knowing and material violation
by the Executive of any of the covenants contained in Sections 10 and 11.
(i) Salary: The liquidated damages shall be paid monthly in cash, in
an amount each month equal to the salary which would have been paid to
the Executive under Section 3 of this Agreement, assuming salary
adjustments annually at a percentage equal to the merit increase
budget percentage for Bell Atlantic Senior Managers.
(ii) Short-Term Incentives: The liquidated damages for foregone short-
term incentives under STIP shall be paid annually in cash, not later
than 30 days after the date on which incentives are awarded by Bell
Atlantic under the STIP for the prior year's performance, in an amount
equal to the value of the cash and deferred stock which the Executive
would have been entitled to receive under the STIP, without adjustment
for individual performance.
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Employment Agreement Page 5
<PAGE>
(iii) Long-Term Incentives: The liquidated damages for foregone long-
term incentives shall be paid annually in cash, within 30 days of the
granting of stock options for the year, in an amount equal to the
Black-Scholes value of options which the Executive would have been
entitled to receive.
(iv) RIP Pension Benefits: The RIP target pension will be
recalculated after the completion of the Committed Employment Period
taking into account the liquidated damages under paragraphs (i) and
(ii) above as though they were earned as salary and short-term
incentives during a period of employment ending on the last day of the
Committed Employment Period, and (A) Bell Atlantic shall pay the
Executive a true-up payment based on said recalculation if the
Executive has elected a lump-sum payment of the benefit provided by
Section 6(a), and (B) if the Executive has elected a pension in the
form of an annuity, the Executive's RIP pension benefits thereafter
shall be based on said recalculation.
(v) Miscellaneous Benefits: The liquidated damages for all other
foregone benefits shall be paid monthly in an amount equal to the sum
of: (A) the BellFlex allowance that the Executive would have been
entitled to receive, plus (B) one-twelfth of the annual maximum
company matching contribution that the Executive would have been
eligible to receive if the Executive made the maximum contributions to
the Bell Atlantic Savings Plan then permitted by law.
(c) Constructive Discharge: The Executive shall be deemed to have
----------------------
been "constructively discharged" for purposes of this Agreement, if, in the
absence of conduct amounting to cause for discharge on the part of the
Executive, and without the Executive's express written consent, any of the
following events has occurred within 12 months prior to the Executive
electing to retire: (i) the Executive's status as a "Senior Manager" has
been revoked; (ii) the Executive's base recurring salary has been reduced
by more than 10%; (iii) the Executive has suffered a negative individual
performance adjustment which causes the Executive's short term award under
the STIP for a particular year to be reduced by 25% or more; or (iv) the
Executive's responsibilities have been substantially reduced in type or
scope, other than in a general reorganization of the management functions
of one or more Bell Atlantic Companies, with the result that the Executive
has materially less status and authority. Nothing in this Section 9(c)
shall limit or qualify the obligations of Bell Atlantic under Section 3 of
this Agreement, which are absolute.
10. Prohibition Against Competitive Activities:
------------------------------------------
(a) Prohibited Conduct by the Executive: During the period of the
-----------------------------------
Executive's employment with any Bell Atlantic Company, and for a period of
two years (or any longer period expressly provided under any applicable
provision of this Agreement) following the Executive's retirement or
termination of employment for any other reason from any and all Bell
Atlantic Companies, the Executive, without the prior written consent of the
Chief Executive Officer, shall not:
(i) personally engage in "Competitive Activities" (as defined in
paragraph 10(b)) within any geographic area in which any Bell Atlantic
Company is then engaged (or, at the time of the Executive's
termination of employment,
- --------------------------------------------------------------------------------
Employment Agreement Page 6
<PAGE>
had a board-approved business plan under which it planned to engage)
in such Competitive Activities;
(ii) work for, own, manage, operate, control or participate in
the ownership, management, operation or control of, or provide
consulting or advisory services to, any individual, partnership, firm,
corporation or institution engaged in Competitive Activities within
any geographic area described in Section 10(a)(i); provided, however,
that the Executive's purchase or holding, for investment purposes, of
securities of a publicly-traded company shall not constitute
"ownership" or "participation in ownership" for purposes of this
paragraph so long as the Executive's equity interest in any such
company is less than a controlling interest;
(iii) interfere with the relationship of any Bell Atlantic
Company with any of its employees, agents, representatives, suppliers
or vendors under contract, or joint venturers, where any such person
or entity cooperates with or supports a Bell Atlantic Company in its
performance of any Competitive Activities; or
(iv) directly or indirectly attempt to divert from any Bell
Atlantic Company any business in connection with Competitive
Activities.
(b) Competitive Activities: For purposes of Section 10(a) hereof,
----------------------
"Competitive Activities" means business activities relating to products or
services of the same or similar type as those for which the Executive had
responsibility to plan, develop, manage or oversee within the last 24
months of the Executive's employment with any Bell Atlantic Company.
(c) Notice. Bell Atlantic shall send the Executive written notice
------
in the event that Bell Atlantic believes that the Executive has violated
any of the prohibitions of this Section 10; provided, however, that any
failure by Bell Atlantic to give notice under this provision or to enforce
its rights under this Agreement in any one or more instances shall not be a
bar to Bell Atlantic giving notice and taking action to enforce its rights
under this Agreement at any later time. For a period of 15 days after the
giving of such notice, the Executive shall have the opportunity to respond
and discuss with Bell Atlantic the underlying facts and the basis for Bell
Atlantic's belief that the Executive is in breach of this Section 10.
During such 15-day period, Bell Atlantic shall not pursue any remedy
provided by this Agreement or at law or in equity.
(d) Forfeiture of Benefits. The Executive acknowledges that the
----------------------
Executive's violation of any of the prohibitions of this Section 10 or the
rules against wrongful competitive activity by the Executive as defined
under the RIP and the Bell Atlantic Performance Share Plan ("PSP"), as the
terms of those plans may be amended from time to time, may result in the
Executive's forfeiture of any and all rights to benefits or awards under
the RIP and the PSP.
(e) Waiver: Nothing in this Agreement shall bar the Executive from
------
requesting, at the time of the Executive's retirement or at any time
thereafter, that the then-current Chief Executive Officer waive Bell
Atlantic's rights to enforce the non-compete covenants of this Section 10,
and the Chief Executive Officer shall have the
- --------------------------------------------------------------------------------
Employment Agreement Page 7
<PAGE>
power to agree to such a waiver if the Chief Executive Officer determines
that it is not inconsistent with the interests of Bell Atlantic to do so.
11. Prohibition Against Disclosure of Proprietary Information:
---------------------------------------------------------
(a) Prohibited Conduct by the Executive: The Executive acknowledges
-----------------------------------
that, as one of the most senior officers of the Bell Atlantic Companies,
the Executive has continuing access to confidential and proprietary
information of Bell Atlantic Companies. The Executive shall, therefore, at
all times during the period of active employment with any Bell Atlantic
Company, and for a period of three years thereafter, preserve the
confidentiality of all proprietary information of any Bell Atlantic
Company. The three-year limitation under this paragraph shall not in any
way limit any Bell Atlantic Company's common law and statutory rights to
protect its trade secrets or intellectual property rights at any time, to
the full extent of the law. "Proprietary information" includes, but is not
limited to, information in the possession or control of a Bell Atlantic
Company that has not been fully disclosed in a writing which has been
generally circulated to the public at large, and which gives the Bell
Atlantic Company an opportunity to obtain or maintain advantages over its
current and potential competitors, such as strategic or tactical business
plans, and undisclosed financial data; ideas, processes, methods,
techniques, systems, patented or copyrighted information, models, devices,
programs, computer software or related information; documents relating to
regulatory matters and correspondence with governmental entities; pricing
and cost data; reports and analyses of business prospects; business
transactions which are contemplated or planned; research data; personnel
information and data; identities of users and purchasers of any Bell
Atlantic Company's products or services; and other confidential matters
pertaining to or known by one or more Bell Atlantic Companies, including
confidential information of a third party which a Bell Atlantic Company is
bound to protect.
(b) Obligation to Return Company Property: If and when the Executive
-------------------------------------
retires or terminates employment for any other reason with all Bell
Atlantic Companies, the Executive shall, prior to the last day of active
employment and without charge to any Bell Atlantic Company, return to the
employing Bell Atlantic Company (or the rightful Bell Atlantic Company) all
company property, including, without limitation, originals and copies of
records, papers, programs, computer software, documents and other materials
which contain Proprietary Information, as defined in Section 11(a). The
Executive shall thereafter cooperate with each applicable Bell Atlantic
Company in executing and delivering documents requested by the company that
are necessary to assist the Bell Atlantic Company in patenting or
registering any programs, ideas, inventions, discoveries, copyright
material or trademarks, and to vest title thereto in the Bell Atlantic
Company.
(c) Forfeiture of Benefits. The Executive acknowledges that the
----------------------
Executive's violation of the prohibitions of this Section 11, or other
"misconduct" by the Executive (as that term is interpreted by the Human
Resources Committee of the Board under the RIP and PSP plans, as those
plans may be amended from time to time), may result in the Executive's
forfeiture of any and all rights to benefits or awards under the RIP and
the PSP.
- --------------------------------------------------------------------------------
Employment Agreement Page 8
<PAGE>
12. Remedies in Addition to Forfeiture of Benefits. The Executive
----------------------------------------------
recognizes that irreparable injury will result to one or more Bell Atlantic
Companies, and to the business and property of any of them, in the event of a
breach by the Executive of any of the provisions of Section 10 or 11 of this
Agreement, and that the Executive's continued employment is predicated on the
commitments made by the Executive in those Sections. In the event of any breach
of any of the Executive's commitments under Section 10 or 11, any Bell Atlantic
Company that is damaged by such breach shall be entitled, in addition to
declaring a forfeiture of benefits as described herein, and in addition to any
other remedies and damages available, to injunctive relief to restrain the
violation of such commitments by the Executive or by any person or persons
acting for or with the Executive in any capacity whatsoever.
13. Miscellaneous Provisions.
------------------------
(a) Legal Release: Notwithstanding any provision of this Agreement,
-------------
no liquidated damages or benefits under the terms of this Agreement shall
be payable in connection with a separation from service by the Executive
unless and until the Executive signs the Release in a form satisfactory to
Bell Atlantic; provided, however, that nothing in this Agreement is
intended to cause the Executive to waive his right to submit claims for
employee benefits in accordance with the terms of any employee benefit
plans in which the Executive remains a participant.
(b) Assignment by Bell Atlantic: Bell Atlantic may assign this
---------------------------
Agreement without the Executive's consent to any company that acquires all
or substantially all of the assets of Bell Atlantic, or into which or with
which Bell Atlantic or the company which is then the Executive's employing
company is merged or consolidated. If and when the Executive transfers
employment to a Bell Atlantic Company other than Bell Atlantic, that
employing company shall automatically be deemed to be a party to this
Agreement in addition to Bell Atlantic. This Agreement may not be assigned
by the Executive, and no person other than the Executive or his estate may
assert the rights of the Executive under this Agreement. The right to
receive further compensation or benefits of any kind under this Agreement
shall be forfeited upon the death of the Executive, except as expressly
provided to the contrary under the terms of any applicable compensation and
benefit plan in which the Executive was a participant on the date of his
death, and except that, in the event of the death of the Executive during
the Committed Employment Period, the cash severance payment provided for by
Section 7 of this Agreement shall become payable in full.
(c) Waiver: The waiver by any Bell Atlantic Company of a breach by
------
the Executive of any provision of this Agreement shall not be construed as
a waiver of any subsequent breach by the Executive.
(d) Severability: If any clause, phrase or provision of this
------------
Agreement, or the application thereof to any person or circumstance, shall
be invalid or unenforceable under any applicable law, such event shall not
affect or render invalid or unenforceable the remainder of this Agreement
and shall not affect the application of any clause, phrase or provision
hereof to other persons or circumstances. Furthermore, in the event that a
court of law or equity determines that the geographic scope of the
covenants under Section 10, or the duration of any of the restrictions
under this Agreement, are not enforceable, this Agreement shall hereby be
deemed to be
- --------------------------------------------------------------------------------
Employment Agreement Page 9
<PAGE>
amended to the extent necessary, but only to the extent necessary, to
permit the enforcement of the terms of this Agreement.
(e) Governing Law: This Agreement shall be construed and enforced in
-------------
accordance with the laws of the Commonwealth of Pennsylvania.
(f) Entire Agreement: This Agreement supersedes the Non-Compete and
----------------
Proprietary Information Agreements, between Bell Atlantic and the
Executive, dated August 10, 1993 and January 24, 1994, and each of those
Agreements is hereby cancelled. Except for the terms and conditions of the
compensation and benefit plans applicable to the Executive (as such plans
may be amended by the applicable Bell Atlantic Company from time to time),
this Agreement sets forth the entire understanding of BAC and the Executive
and supersedes all prior agreements, arrangements, and communications,
whether oral or written, pertaining to the subject matter hereof; and this
Agreement shall not be modified or amended except by written agreement of
the Executive, Bell Atlantic and the Bell Atlantic Company which then
employs the Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first set forth above.
BELL ATLANTIC CORPORATION
By:
-----------------------------------------------
Raymond W. Smith
Chairman of the Board and
Chief Executive Officer
THE EXECUTIVE
--------------------------------------------------
James G. Cullen
- --------------------------------------------------------------------------------
Employment Agreement Page 10
<PAGE>
EXHIBIT A
RELEASE
-------
THIS RELEASE (the "Release") is entered into by JAMES G. CULLEN (the
"Executive"), for the benefit of BELL ATLANTIC CORPORATION ("Bell Atlantic"),
and all companies, and their officers, directors and employees, which are
affiliated with Bell Atlantic (Bell Atlantic and said affiliated companies are
sometimes referred to collectively herein as "Bell Atlantic Companies").
WHEREAS, the Executive has retired from his employing Bell Atlantic
Company on ____________ (the "Retirement Date") pursuant to the terms of an
Employment Agreement, dated _______________, 1995, between Bell Atlantic and the
Executive (the "Agreement"), and he wishes to execute this Release as
contemplated under the terms of the Agreement.
NOW, THEREFORE, the Executive affirms as follows:
1. Except for any as-yet unfulfilled obligations of Bell Atlantic
under the terms of the Agreement, or any benefits which the Executive is
entitled to receive under the terms of the benefit plans in which he
participates (as those plans may be amended from time to time), the Executive,
as his free and voluntary act, hereby releases and discharges Bell Atlantic, its
affiliates, and their successors and assigns, and the directors, officers,
employees, and agents of each of them, of and from any and all debts,
obligations, claims, demands, judgments or causes of action of any kind
whatsoever, known or unknown, in tort, contract, by statute or on any other
basis, for equitable relief, compensatory, punitive or other damages, expenses
(including attorneys' fees), reimbursements or costs of any kind, including but
not limited to, any and all claims, demands, rights and/or causes of action,
including those which might arise out of allegations relating to a claimed
breach of an alleged oral or written employment contract, or relating to
purported employment discrimination or civil rights violations, such as, but not
limited to, those arising under Title VII of the Civil Rights Act of 1964 (42
U.S.C. Section 2000e et seq.), the Civil Rights Acts of 1866 and 1871 (42 U.S.C.
Sections 1981 and 1983), Executive Order 11246, as amended, the Age
Discrimination in Employment Act of 1967, as amended (29 U.S.C. Section 621 et
seq.), the Equal Pay Act of 1963 (29 U.S.C. Section 206(d)(1)), the
Rehabilitation Act of 1973 (29 U.S.C. Sections 701-794), the Civil Rights Act of
1991, the Americans with Disabilities Act, or any other applicable federal,
state or local employment discrimination statute or ordinance, which the
Executive might have or assert against any of said entities or persons (a) by
reason of the Executive's active employment by Bell Atlantic or any Bell
Atlantic Company, or the termination of said employment and all circumstances
related thereto; or (b) by reason of any other matter, cause or thing whatsoever
which may have occurred prior to the date of execution of this Release.
2. No Litigation or Other Legal Action. Except for any as-yet
-----------------------------------
unfulfilled obligations of Bell Atlantic under the terms of the Agreement, or
any benefits which the Executive is entitled to receive under the terms of the
benefit plans in which he participates (as those plans may be amended from time
to time), the Executive promises not to initiate a lawsuit or to bring a claim
against Bell Atlantic or any Bell Atlantic Company or their successors or
assigns, or the directors, officers, employees, or agents of any of them, in any
court, government agency, or otherwise, relating to the Executive's employment,
the termination of said employment, or
- --------------------------------------------------------------------------------
Release Page 1
<PAGE>
other events, including, but not limited to, any claim under any federal, state
or local statute, ordinance, or rule of law. The Executive waives any remedy or
recovery in any action which may be brought on the Executive's behalf by any
government agency or other person.
3. The Executive hereby reaffirms the terms and conditions of the
Agreement in all respects.
4. Should any provision of this Release be declared or be determined
by any court to be illegal or invalid, the validity of the remaining parts,
terms or provisions shall not be affected thereby, and said illegal or invalid
part, term or provision shall be deemed not to be a part of this Release.
STATEMENT BY THE EXECUTIVE WHO IS SIGNING BELOW: BELL ATLANTIC HAS
-----------------------------------------------
ADVISED ME IN WRITING TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS
RELEASE. I HAVE CAREFULLY READ AND FULLY UNDERSTAND THE PROVISIONS OF THIS
RELEASE AND HAVE HAD SUFFICIENT TIME AND OPPORTUNITY (OVER A PERIOD OF
SUBSTANTIALLY MORE THAN 21 DAYS) TO CONSULT WITH MY PERSONAL TAX, FINANCIAL AND
LEGAL ADVISORS PRIOR TO EXECUTING THIS DOCUMENT, AND I INTEND TO BE LEGALLY
BOUND BY ITS TERMS. I UNDERSTAND THAT I MAY REVOKE THIS RELEASE WITHIN SEVEN
(7) DAYS FOLLOWING MY SIGNING, AND THIS RELEASE WILL NOT BECOME ENFORCEABLE OR
EFFECTIVE UNTIL THAT SEVEN-DAY PERIOD HAS EXPIRED.
THE UNDERSIGNED, intending to be legally bound, has executed this
Release as of the _____ day of __________, 19___, that being the Executive's
Retirement Date.
THE EXECUTIVE
Witness: Signed:
----------------------- -------------------------------------
James G. Cullen
THIS IS A RELEASE
READ CAREFULLY BEFORE SIGNING
- --------------------------------------------------------------------------------
Release Page 2
<PAGE>
EXHIBIT 11
FILE NO. 1-8606
BELL ATLANTIC CORPORATION AND SUBSIDIARIES
COMPUTATION OF PER COMMON SHARE EARNINGS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Income before extraordinary items and cumulative
effect of changes in accounting principles.............. $ 1,861.8 $ 1,401.9 $ 1,481.6
Extraordinary items......................................... (3.5) (2,156.7) (58.4)
Cumulative effect of changes in accounting principles....... -- -- (19.8)
------------ ------------ ------------
Net income (loss)........................................... $ 1,858.3 $ (754.8) $ 1,403.4
============ ============ ============
EARNINGS (LOSS) PER COMMON SHARE
Weighted average shares outstanding......................... 436,760,686 436,283,155 435,136,371
Incremental shares from assumed exercise of stock options
and payment of performance share award.................. 1,584,328 952,652 1,170,838
------------ ------------ ------------
Total shares................................................ 438,345,014 437,235,807 436,307,209
============ ============ ============
Income before extraordinary items and cumulative effect of
changes in accounting principles........................ $ 4.25 $ 3.21 $ 3.39
Extraordinary items......................................... (.01) (4.94) (.13)
Cumulative effect of changes in accounting principles....... -- -- (.04)
------------ ------------ ------------
Net income (loss)........................................... $ 4.24 $ (1.73) $ 3.22
============ ============ ============
FULLY DILUTED EARNINGS (LOSS) PER COMMON SHARE*
Weighted average shares outstanding......................... 436,760,686 436,283,155 435,136,371
Incremental shares from assumed exercise of stock options
and payment of performance share awards................. 1,815,245 1,007,218 1,298,288
------------ ------------ ------------
Total shares................................................ 438,575,931 437,290,373 436,434,659
============ ============ ============
Income before extraordinary items and cumulative effect of
changes in accounting principles........................ $ 4.25 $ 3.21 $ 3.39
Extraordinary items......................................... (.01) (4.94) (.13)
Cumulative effect of changes in accounting principles....... -- -- (.04)
------------ ------------ ------------
Net income (loss)........................................... $ 4.24 $ (1.73) $ 3.22
============ ============ ============
</TABLE>
________
*Fully diluted earnings per share calculation is presented in accordance with
Regulation S-K item 601(b)(11) although not required by footnote 2 to paragraph
14 of Accounting Principles Board Opinion No. 15 because it results in dilution
of less than 3%.
<PAGE>
EXHIBIT 12
FILE NO. 1-8606
BELL ATLANTIC CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Income before provision for income taxes, extraordinary
items, and cumulative effect of changes in
accounting principles......................................... $3,009.4 $2,286.8 $2,273.6 $2,025.7 $1,894.7
Equity in income of less than majority-owned subsidiaries...... (152.5) (41.1) (48.3) (52.4) (79.5)
Dividends from less than majority-owned subsidiaries........... 146.0 101.0 73.4 48.3 64.6
Interest expense, including interest on capital lease
obligations................................................. 571.1 624.6 719.6 828.7 1,000.8
Portion of rent expense representative of the interest factor.. 90.9 95.2 102.6 98.6 99.4
-------- -------- -------- -------- --------
Income, as adjusted............................................ $3,664.9 $3,066.5 $3,120.9 $2,948.9 $2,980.0
======== ======== ======== ======== ========
Fixed charges:
Interest expense, including interest on capital lease
obligations.................................................. $ 571.1 $ 624.6 $ 719.6 $ 828.7 $1,000.8
Portion of rent expense representative of the interest factor.. 90.9 95.2 102.6 98.6 99.4
Capitalized interest........................................... 64.4 19.1 1.1 3.2 6.4
Preferred stock dividend requirement........................... 9.9 5.7 -- -- --
-------- -------- -------- -------- --------
Fixed charges.................................................. $ 736.3 $ 744.6 $ 823.3 $ 930.5 $1,106.6
======== ======== ======== ======== ========
Ratio of Earnings to Fixed Charges............................. 4.98 4.12 3.79 3.17 2.69
======== ======== ======== ======== ========
</TABLE>
<PAGE>
EXHIBIT 13
- --------------------------------------------------------------------------------
Selected Financial and Operating Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Dollars in Millions, Except Per Share Amounts)
----------------------------------------------------------------------------
1995/(a)/ 1994/(b)/ 1993/(c)/ 1992 1991/(d)/
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR
Operating Revenues $13,429.5 $13,791.4 $13,145.6 $12,836.0 $12,659.7
Operating Income $ 3,086.2 $ 2,804.6 $ 2,797.6 $ 2,506.2 $ 2,525.3
Income Before Extraordinary Items
and Cumulative Effect of Changes
in Accounting Principles $ 1,861.8 $ 1,401.9 $ 1,481.6 $ 1,382.2 $ 1,229.9
Net Income (Loss) $ 1,858.3 $ (754.8) $ 1,403.4 $ 1,340.6 $ (324.4)
PER COMMON SHARE
Income Before Extraordinary Items
and Cumulative Effect of Changes
in Accounting Principles $ 4.25 $ 3.21 $ 3.39 $ 3.23 $ 2.91
Net Income (Loss) $ 4.24 $ (1.73) $ 3.22 $ 3.13 $ (.72)
Cash Dividends Declared $ 2.80 $ 2.76 $ 2.68 $ 2.60 $ 2.52
AT YEAR END
Total Assets $24,156.8 $24,271.8 $29,544.2 $28,099.5 $28,305.8
Long-Term Debt $ 6,407.2 $ 6,805.7 $ 7,206.2 $ 7,348.2 $ 7,984.0
Employee Benefit Obligations $ 3,841.3 $ 3,773.8 $ 3,396.0 $ 3,058.7 $ 2,985.1
Preferred Stock of Subsidiary $ 145.0 $ 85.0 - - -
Shareowners' Investment $ 6,683.6 $ 6,081.3 $ 8,224.4 $ 7,816.3 $ 7,367.6
Debt Ratio 55.5% 59.4% 54.6% 56.3% 59.5%
Book Value Per Common Share $ 15.27 $ 13.94 $ 18.85 $ 18.00 $ 17.12
Network Access Lines (in thousands) 19,820 19,168 18,645 18,181 17,750
Number of Employees 61,800 72,300 73,600 71,400 76,900
OTHER DATA
Return on Average Common Equity 28.6% (9.8)% 17.3% 17.4% (4.4)%
Additions to Plant, Property and Equipment $ 2,641.8 $ 2,699.0 $ 2,519.0 $ 2,546.8 $ 2,644.1
</TABLE>
/(a)/ On July 1, 1995, the company contributed its domestic cellular and paging
businesses to a partnership, and accounts for its share of the
partnership's results under the equity method.
/(b)/ 1994 includes an extraordinary charge for the discontinuation of
regulatory accounting principles at the telephone subsidiaries.
/(c)/ 1993 includes the adoption of changes in accounting for income taxes and
postemployment benefits.
/(d)/ 1991 includes the adoption of a change in accounting for postretirement
benefits other than pensions.
4
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis
of Results of Operations and Financial Condition
- --------------------------------------------------------------------------------
OVERVIEW
Bell Atlantic Corporation (Bell Atlantic or the Company) is a diversified
telecommunications company. Bell Atlantic's network operations subsidiaries
provide voice and data transport and calling services, network access, directory
publishing and public telephone services to customers in the mid-Atlantic
region. Other network-related subsidiaries principally provide systems
integration services, customer premises equipment distribution and video
services. The Company's network operations subsidiaries comprise seven
operating telephone companies and a subsidiary that performs centralized
services on their behalf. The operating telephone companies are public utilities
subject to regulation by each of the state jurisdictions in which they operate
and by the Federal Communications Commission.
Through several joint ventures, the Company provides wireless
communications services in the United States and has invested in wireless
businesses in Mexico, Italy, Slovakia, and the Czech Republic. The Company also
has an investment in Telecom Corporation of New Zealand Limited, which provides
a full range of telecommunications services.
Effective July 1, 1995, Bell Atlantic and NYNEX Corporation (NYNEX)
combined substantially all of their domestic cellular and paging businesses and
formed Bell Atlantic NYNEX Mobile, a partnership which owns such businesses in
the Northeast, mid-Atlantic, Southeast and Southwest portions of the United
States (see Note 2 to the Consolidated Financial Statements).
In 1994, Bell Atlantic and NYNEX formed two partnerships with U S WEST,
Inc. and AirTouch Communications to provide nationwide personal communications
services (PCS). The first partnership (PCS PrimeCo) acquired licenses for
approximately $1.1 billion which will allow PCS PrimeCo to provide PCS services
in 11 major markets across the United States. The second partnership was formed
to develop a national branding and marketing strategy and wireless
communications service standards. Bell Atlantic also formed two partnerships
with NYNEX and Pacific Telesis Group to provide multimedia services. TELE-TV
Media, L.P. will license, acquire and develop entertainment and information
services. TELE-TV Systems, L.P. will provide the systems necessary to deliver
these services over the partners' networks.
RESULTS OF OPERATIONS
Bell Atlantic reported income before extraordinary items and cumulative
effect of changes in accounting principles of $1,861.8 million, $1,401.9 million
and $1,481.6 million in 1995, 1994 and 1993, respectively. Earnings per share
before extraordinary items and cumulative effect of changes in accounting
principles for those years were $4.25, $3.21 and $3.39, respectively.
Results for 1995 included a pretax gain of approximately $314 million ($200
million after-tax) as a result of the sale of certain cellular properties in
Massachusetts and Rhode Island in connection with the formation of the Bell
Atlantic NYNEX Mobile partnership.
In 1994, the Company recorded a pretax charge of $161.9 million ($99.5
million after-tax), in accordance with Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits"
(Statement No. 112), to recognize benefit costs for the separation of employees
who are entitled to benefits under preexisting separation pay plans. Results for
1994 also included a non-cash, after-tax extraordinary charge of $2,150.0
million in connection with the Company's decision to discontinue application of
regulatory accounting principles required by Statement of Financial Accounting
Standards No. 71, "Accounting for the Effects of Certain Types of Regulation"
(see Note 4 to the Consolidated Financial Statements).
In 1993, the Company recorded a net after-tax charge of $19.8 million for
the cumulative effect of adopting new financial accounting standards related to
income taxes and postemployment benefits.
Results for the three years included extraordinary charges for the early
extinguishment of debt, net of tax, of $3.5 million, $6.7 million and $58.4
million for 1995, 1994 and 1993, respectively.
FORMATION OF THE BELL ATLANTIC NYNEX MOBILE PARTNERSHIP
As a result of the formation of the Bell Atlantic NYNEX Mobile partnership,
the Company discontinued consolidation of the domestic cellular and paging
operations contributed to the partnership. The Company's investment in the
partnership is accounted for under the equity method. Under this method, the
Company's proportionate share of the partnership's pretax income is included in
Equity in Income of Affiliates. The Consolidated Statements of Operations
continue to reflect the results of Bell Atlantic's domestic cellular and paging
businesses on a consolidated basis for all periods prior to July 1, 1995.
Revenues and expenses of the Company's domestic cellular and paging
businesses reflected in the financial statements for periods prior to the
formation of the partnership are provided in Note 2 to the Consolidated
Financial Statements.
To facilitate the comparison of financial results for purposes of the
Management's Discussion and Analysis, the net revenues and expenses of the
Company's domestic cellular and paging operations prior to July 1, 1995 are
classified in the Statements of Operations below as a component of Equity in
Income of Affiliates.
11
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis continued
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
with Domestic Cellular and Paging Results of Operations
prior to July 1, 1995 presented as though accounted for
under the equity method
<TABLE>
<CAPTION>
(Dollars in Millions)
-------------------------------------------------
For the Years Ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES
Transport Services
Local service $ 4,423.6 $ 4,333.2 $ 4,204.6
Network access 3,394.7 3,237.6 3,070.9
Toll service 1,435.1 1,555.5 1,558.0
Ancillary Services
Directory publishing 1,107.7 1,084.2 1,053.4
Other 557.4 481.0 385.0
Value-added Services 1,393.2 1,284.4 1,193.6
Other Services 515.9 800.6 929.1
----------- ----------- -----------
12,827.6 12,776.5 12,394.6
----------- ----------- -----------
OPERATING EXPENSES
Employee costs, including benefits and taxes 3,932.8 4,174.7 3,906.2
Depreciation and amortization 2,548.5 2,516.1 2,437.6
Other 3,358.0 3,396.8 3,299.7
----------- ----------- -----------
9,839.3 10,087.6 9,643.5
----------- ----------- -----------
OPERATING INCOME 2,988.3 2,688.9 2,751.1
Equity in Income of Affiliates 236.4 128.9 70.8
Other Income and Expense, Net 331.8 36.3 52.5
Interest Expense 547.1 567.3 600.8
----------- ----------- -----------
Income Before Provision for Income Taxes,
Extraordinary Items, and Cumulative Effect
of Changes in Accounting Principles 3,009.4 2,286.8 2,273.6
Provision for Income Taxes 1,147.6 884.9 792.0
----------- ----------- -----------
INCOME BEFORE EXTRAORDINARY ITEMS
AND CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES 1,861.8 1,401.9 1,481.6
----------- ----------- -----------
Extraordinary Items
Discontinuation of regulatory accounting - (2,150.0) -
principles, net of tax
Early extinguishment of debt, net of tax (3.5) (6.7) (58.4)
----------- ----------- -----------
(3.5) (2,156.7) (58.4)
----------- ----------- -----------
Cumulative Effect of Changes in Accounting Principles
Income taxes - - 65.2
Postemployment benefits, net of tax - - (85.0)
----------- ----------- -----------
- - (19.8)
----------- ----------- -----------
NET INCOME (LOSS) $ 1,858.3 $ (754.8) $ 1,403.4
=========== =========== ===========
</TABLE>
For the years ended December 31, 1995, 1994 and 1993, previously eliminated
intercompany transactions aggregating $28.0 million, $48.4 million and $37.4
million, respectively, are added back to both operating revenues and operating
expenses.
Items affecting the comparison of the above operating results between 1995
and 1994, and between 1994 and 1993, are discussed in the following sections.
12
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A bar chart is presented, depicting the following data:
<TABLE>
<CAPTION>
Access Line in Service
(in thousands)
--------------
<S> <C>
At December 31, 1993 18,645
At December 31, 1994 19,168
At December 31, 1995 19,820
- --------------------------------------------------------------------------------
</TABLE>
OPERATING REVENUES
- --------------------------------------------------------------------------------
LOCAL SERVICE REVENUES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dollars in Millions Increase
- --------------------------------------------------------------------------------
<S> <C> <C>
1995 - 1994 $ 90.4 2.1%
- --------------------------------------------------------------------------------
1994 - 1993 $ 128.6 3.1%
- --------------------------------------------------------------------------------
</TABLE>
Local service revenues are earned by the operating telephone subsidiaries
from the provision of local exchange, local private line and public telephone
services.
Local service revenues increased in 1995 and 1994 due primarily to growth
in network access lines in service of 3.4% and 2.8%, respectively. Business and
residence access lines increased 5.5% and 2.4%, respectively, compared to growth
rates of 4.3% and 2.1% in 1994. Stronger access line growth in 1995 reflects
higher demand for Centrex services and an increase in the number of second
residential lines in service.
- --------------------------------------------------------------------------------
A bar chart is presented, depicting the following data:
<TABLE>
<CAPTION>
Access Minutes
of Use
(in thousands)
--------------
<S> <C>
Year ended December 31, 1993 65,080
Year ended December 31, 1994 70,864
Year ended December 31, 1995 76,464
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NETWORK ACCESS REVENUES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dollars in Millions Increase
- --------------------------------------------------------------------------------
<S> <C> <C>
1995 - 1994 $ 157.1 4.9%
- --------------------------------------------------------------------------------
1994 - 1993 $ 166.7 5.4%
- --------------------------------------------------------------------------------
</TABLE>
Network access revenues are received from interexchange carriers (IXCs) for
their use of the Company's local exchange facilities in providing long distance
services to IXCs' customers and from end-user subscribers. Switched access
service revenues are derived from usage-based charges paid by IXCs for access to
the Company's network. Special access revenues arise from access charges paid by
IXCs and end-users who have private networks. End-user access revenues are
earned from local exchange carrier customers who pay for access to the network.
Network access revenues increased in 1995 and 1994 principally due to
higher customer demand for access services as reflected by growth in access
minutes of use. Access minutes of use for the years 1995 and 1994 grew by 7.9%
and 8.9%, respectively. Higher end-user revenues attributable to increases in
access lines in service also contributed to revenue growth in both years.
Revenues in 1995 were positively impacted by a temporary rate increase that was
in effect from March 17, 1995 through July 31, 1995 to recover prior years
"exogenous" postemployment benefit costs.
Revenue growth from volume increases for both years was partially offset by
the effect of price reductions under the Federal Communications Commission's
(FCC) Price Cap Plans.
In March 1995, the FCC adopted an order approving an Interim Price Cap Plan
for interstate access charges, which replaced the prior Price Cap Plan. As
required by the FCC's order, the Company filed its Transmittal of Interstate
Rates, which resulted in price decreases totaling approximately $305 million on
an annual basis, effective August 1, 1995. These price decreases included the
scheduled expiration of a temporary rate increase of approximately $98 million
on an annualized basis that was in effect from March 17, 1995 through July 31,
1995 to recover prior years "exogenous" postemployment benefit costs. Also as
part of the filing, the Company selected a 5.3% Productivity Factor, which
eliminates the requirement to share a portion of interstate overearnings related
to the August 1995 to June 1996 tariff period.
While the Company expects current volume growth trends to continue, the
impact of the August 1, 1995 price decreases is expected to substantially offset
volume-related growth during the first half of 1996, relative to 1995 network
access revenues.
- --------------------------------------------------------------------------------
TOLL SERVICE REVENUES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dollars in Millions (Decrease)
- --------------------------------------------------------------------------------
<S> <C> <C>
1995 - 1994 $ (120.4) (7.7)%
- --------------------------------------------------------------------------------
1994 - 1993 $ (2.5) (.2)%
- --------------------------------------------------------------------------------
</TABLE>
Toll service revenues are earned from calls made outside a customer's local
calling area, but within the same service area boundaries of the Company's
telephone subsidiaries, commonly referred to as Local Access and Transport Areas
(LATAs). Other toll services include 800 services, Wide Area Telephone Service
(WATS), and corridor services (between Northern New Jersey and New York City and
between Southern New Jersey and Philadelphia.)
The reduction in toll service revenues in 1995 was caused by a decline in
toll message volumes of 2.4% and company-initiated price reductions. The
decrease in toll messages was due primarily to increased competition throughout
the region for intraLATA toll, WATS and private line services. Price reductions
were implemented on certain toll services as part of the Company's competitive
response. Local calling areas were also extended in Virginia.
13
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis continued
- --------------------------------------------------------------------------------
Toll service revenues grew in the first half of 1994 by $37.0 million, but
declined by $39.5 million during the second half of 1994 over the comparable
periods in 1993. Growth in the first half of the year was primarily the result
of the recovering economy and severe winter conditions, which caused an increase
in toll calling volumes. The decline in the second half of 1994 reflected the
impact of competition for intraLATA toll, WATS and private line services, price
reductions and extended local calling areas. Toll message volumes increased 1.8%
in 1994, compared to the prior year.
The Company expects that competition for toll service revenues will
continue in 1996, however, the revenue decline is expected to be less than in
1995. See "Factors That May Impact Future Results" below for a further
discussion of toll service revenue issues.
- --------------------------------------------------------------------------------
DIRECTORY PUBLISHING
REVENUES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dollars in Millions Increase
- --------------------------------------------------------------------------------
<S> <C> <C>
1995 - 1994 $ 23.5 2.2%
- --------------------------------------------------------------------------------
1994 - 1993 $ 30.8 2.9%
- --------------------------------------------------------------------------------
</TABLE>
Directory publishing revenues are earned primarily from local advertising
and marketing services provided to businesses in White and Yellow Pages
directories published throughout the region. Other directory publishing services
include database and foreign directory marketing.
Growth in directory publishing revenues in 1995 and 1994 was principally
due to higher rates charged for these services. Volume growth continues to be
impacted by competition from other directory companies, as well as other
advertising media.
- --------------------------------------------------------------------------------
OTHER ANCILLARY SERVICES
REVENUES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dollars in Millions Increase
- --------------------------------------------------------------------------------
<S> <C> <C>
1995 - 1994 $ 76.4 15.9%
- --------------------------------------------------------------------------------
1994 - 1993 $ 96.0 24.9%
- --------------------------------------------------------------------------------
</TABLE>
Other ancillary services include systems integration services provided to
business customers and the federal government, billing and collection services
provided to IXCs, facilities rental, customer premises distribution and video
services.
Other ancillary services revenues increased in both years principally due
to an increase in the number of contracts for systems integration services. The
growth in revenues in 1995 was negatively impacted by the timing of certain
contracts with the federal government and a reduction in billing and collection
services as a result of the elimination of certain services from a contract with
an IXC.
- --------------------------------------------------------------------------------
VALUE-ADDED SERVICES
REVENUES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dollars in Millions Increase
- --------------------------------------------------------------------------------
<S> <C> <C>
1995 - 1994 $ 108.8 8.5%
- --------------------------------------------------------------------------------
1994 - 1993 $ 90.8 7.6%
- --------------------------------------------------------------------------------
</TABLE>
Value-added services represent a family of services which expand the
utilization of the network. These services include recent products such as voice
messaging services, Caller ID and Return Call as well as more mature products
such as Centrex, Touch-Tone, and customer premises wiring and maintenance
services.
Continued growth in the network customer base (access lines) and higher
demand by customers for certain value-added central office and voice messaging
services offered by the telephone subsidiaries increased value-added services
revenues in 1995 and 1994. Revenue increases in 1995 were partially offset by
the elimination of Touch-Tone service charges for Bell Atlantic - Virginia
customers, effective January 1, 1995.
- --------------------------------------------------------------------------------
OTHER SERVICES REVENUES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dollars in Millions (Decrease)
- --------------------------------------------------------------------------------
<S> <C> <C>
1995 - 1994 $ (284.7) (35.6)%
- --------------------------------------------------------------------------------
1994 - 1993 $ (128.5) (13.8)%
- --------------------------------------------------------------------------------
</TABLE>
Other services include the Company's computer maintenance, real estate and
leasing businesses.
During 1995 and 1994, the Company sold several non-strategic businesses,
including substantially all of its lease financing businesses and a liquefied
petroleum gas distribution business in 1994 and its domestic computer
maintenance business in October 1995 (see Note 6 to the Consolidated Financial
Statements). The decline in other services revenues in 1995 and 1994 was caused
principally by the effect of the disposition of these businesses.
Due to the disposition of the Company's domestic computer maintenance
business, Bell Atlantic Business Systems Services, Inc., future periods will no
longer include operating revenues from this business. Total operating revenues
related to this business were approximately $402 million, $472 million and $386
million for the years ended December 31, 1995, 1994 and 1993, respectively.
14
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A bar chart is presented, depicting the following data:
<TABLE>
<CAPTION>
Number of Employees
-------------------
<S> <C>
At December 31, 1993 73,600
At December 31, 1994 72,300
At December 31, 1995 61,800*
- --------------------------------------------------------------------------------
</TABLE>
* No longer includes employees of the Company's domestic cellular and paging
businesses and domestic computer maintenance business. At December 31, 1994,
employees of these businesses were 3,400 and 4,100, respectively.
OPERATING EXPENSES
- --------------------------------------------------------------------------------
EMPLOYEE COSTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dollars in Millions Increase (Decrease)
- --------------------------------------------------------------------------------
<S> <C> <C>
1995 - 1994 $ (241.9) (5.8)%
- --------------------------------------------------------------------------------
1994 - 1993 $ 268.5 6.9%
- --------------------------------------------------------------------------------
</TABLE>
Employee costs consist of salaries, wages, and other employee compensation,
employee benefits, and payroll taxes.
Employee costs at the network operations subsidiaries decreased in 1995 by
$201.5 million or 5.4% and increased by $218.7 million or 6.2% in 1994, compared
with the corresponding prior years.
The decrease in 1995 employee costs at the network operations subsidiaries
was principally due to the effect of a third quarter 1994 charge of $161.9
million to recognize benefit costs, in accordance with Statement No. 112, for
the separation of employees who are entitled to benefits under preexisting
separation pay plans. Decreased overtime pay, lower workforce levels and a
reduction in pension cost further reduced employee costs in 1995. These cost
reductions were partially offset by annual salary and wage increases and the
recognition of certain contract labor and separation pay costs in 1995
associated with a new five-year labor contract with the International
Brotherhood of Electrical Workers (IBEW) and the contract settlement with the
Communications Workers of America (CWA).
In June 1995, the telephone companies executed a five-year contract with
the IBEW, representing approximately 9,000 employees. The IBEW contract, which
became effective May 21, 1995, provided for a 14.5% wage increase over the five-
year contract period, a ratification bonus, improved pensions and benefits, and
certain employment security provisions.
The Bell Atlantic telephone companies' contract with the CWA, representing
approximately 34,000 employees, expired on August 5, 1995. In January 1996, a
tentative three-year labor agreement was reached, which was subsequently
ratified in February 1996. The agreement includes a 10.6% wage increase over the
three-year contract period, a ratification bonus, improved pensions and
benefits, and certain employment security provisions.
In 1994, employee costs were higher at the network operations subsidiaries
principally as a result of the $161.9 million charge for separation pay costs,
salary and wage increases, and increased overtime pay. Lower workforce levels
partially offset these cost increases.
Employee costs at the Company's nonregulated subsidiaries decreased by
$40.4 million or 9.4% in 1995 and increased by $49.8 million or 13.1% in 1994.
Employee costs were lower in 1995, as compared to the prior year, principally
due to a reduction in workforce levels resulting from the sale of the Company's
domestic computer maintenance subsidiary in late 1995 and the disposition of the
Company's lease financing subsidiaries and certain other non-strategic
businesses during 1994. In 1994, employee costs at the nonregulated subsidiaries
were higher as a result of workforce increases at the Company's computer
maintenance, video services and systems integration subsidiaries. This increase
was offset, in part, by a reduction in workforce levels resulting from the
aforementioned disposition of certain non-strategic businesses during 1994.
- --------------------------------------------------------------------------------
DEPRECIATION AND
AMORTIZATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dollars in Millions Increase
- --------------------------------------------------------------------------------
<S> <C> <C>
1995 - 1994 $ 32.4 1.3%
- --------------------------------------------------------------------------------
1994 - 1993 $ 78.5 3.2%
- --------------------------------------------------------------------------------
</TABLE>
Depreciation and amortization expense at the network operations
subsidiaries in 1995 and 1994 increased $87.7 million or 3.7% and $139.1 million
or 6.2%, respectively, compared with the corresponding prior years, principally
due to growth in depreciable telephone plant. Increased depreciation in 1994
also reflected the impact of higher rates of depreciation resulting principally
from the discontinued application of regulatory accounting principles in August
1994 (see Note 4 to the Consolidated Financial Statements). The composite
depreciation rates for the network operations subsidiaries were 7.9% in 1995,
7.8% in 1994 and 7.5% in 1993.
Depreciation and amortization expense at the nonregulated subsidiaries
decreased by $55.3 million or 43.4% in 1995 and $60.6 million or 32.2% in 1994
over the corresponding prior years. The decreases were primarily due to the
effect of the disposition of the Company's domestic computer maintenance
business in October 1995 and the sale of substantially all of the assets of the
Company's lease financing businesses during 1994.
15
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OTHER OPERATING EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dollars in Millions Increase (Decrease)
- --------------------------------------------------------------------------------
<S> <C> <C>
1995 - 1994 $ (38.8) (1.1)%
- --------------------------------------------------------------------------------
1994 - 1993 $ 97.1 2.9%
- --------------------------------------------------------------------------------
</TABLE>
Other operating expenses consist primarily of contract services, rent,
network software costs, provision for uncollectible accounts receivable and
other costs.
The reduction in other operating expenses in 1995 was largely due to the
effect of the aforementioned disposition of several non-strategic businesses
during 1995 and 1994. These cost reductions were partially offset by additional
costs incurred at the network operations subsidiaries to enhance systems,
consolidate work activities and market value-added services.
In 1994, other operating expenses were higher, as compared to 1993,
principally due to higher volumes of business at the Company's network
operations, computer maintenance, and systems integration subsidiaries. The
Company also incurred higher expenses in 1994, relative to 1993, for video
services development. These cost increases were partially offset by the effect
of the disposition of several non-strategic businesses, and reimbursements
received from other Bell Communications Research, Inc. (Bellcore) owners who
decided to participate in Bellcore's Advanced Intelligent Network project. This
project previously was supported entirely by the Company.
Due to the disposition of the Company's domestic computer maintenance
subsidiary in October 1995, future periods will no longer include employee
costs, depreciation and other operating expenses from this business. Total
operating expenses related to this business were approximately $392 million,
$450 million and $384 million for the years ended December 31, 1995, 1994 and
1993, respectively.
- --------------------------------------------------------------------------------
EQUITY IN INCOME OF
AFFILIATES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dollars in Millions Increase
- --------------------------------------------------------------------------------
<S> <C> <C>
1995 - 1994 $ 107.5 83.4%
- --------------------------------------------------------------------------------
1994 - 1993 $ 58.1 82.1%
- --------------------------------------------------------------------------------
</TABLE>
Equity in income of affiliates includes equity income and losses and
goodwill amortization related to the Company's investments in unconsolidated
businesses. For comparative purposes, the domestic cellular and paging
businesses previously consolidated in periods prior to July 1, 1995 are
presented as though accounted for under the equity method.
Equity in income of the Company's investment in domestic cellular and
paging businesses was $267.1 million in 1995, compared to $122.0 million in 1994
and $56.9 million in 1993. The increase in both years was driven by strong
revenue growth due to an increase of approximately 43% in 1995 and 58% in 1994
in the cellular subscriber base.
Equity in income of affiliates in 1995 and 1994 was further boosted by
improved operating results from the Company's investment in Telecom Corporation
of New Zealand Limited (Telecom).
Higher equity income from the Company's investments in domestic cellular
and paging businesses and Telecom was partially offset in both years by the
effects of goodwill amortization and equity losses associated with the Company's
investment in Grupo Iusacell, S. A. de C.V. (Iusacell). Results in 1995 were
also impacted by equity losses associated with TELE-TV, the Company's multimedia
joint venture which was formed in 1994.
The equity losses associated with Iusacell were $87.8 million, $65.4
million and $3.0 million in 1995, 1994 and 1993, respectively. The equity losses
in Iusacell in 1995 and 1994 were impacted by an increase in the Company's
economic interest from 23.2% to 41.9% in August 1994 and by the effect of the
devaluation of the Mexican peso on Iusacell's net liabilities, primarily debt,
denominated in U.S. dollars. It is expected that the Company's equity in income
of Iusacell will continue to be impacted positively or negatively by changes in
the peso exchange rate.
- --------------------------------------------------------------------------------
OTHER INCOME AND EXPENSE, NET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dollars in Millions Increase (Decrease)
- --------------------------------------------------------------------------------
<S> <C>
1995 - 1994 $ 295.5
- --------------------------------------------------------------------------------
1994 - 1993 $ (16.2)
- --------------------------------------------------------------------------------
</TABLE>
Other income and expense, net consists primarily of interest and dividend
income, and gains and losses from the disposition of subsidiaries and non-
operating assets and investments.
Other income and expense, net was $331.8 million in 1995, compared to $36.3
million in 1994. The increase in 1995 is principally attributable to the
recognition of a pretax gain of approximately $314 million on the sale of
certain cellular properties in connection with the formation of the Bell
Atlantic NYNEX Mobile partnership (see Note 2 to the Consolidated Financial
Statements).
Other income and expense in 1994 included principally the pretax gains and
losses associated with the aforementioned disposition of certain non-strategic
businesses, and additional interest income related to notes receivable held by
the Company in connection with the sale of its lease financing business.
16
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis continued
- --------------------------------------------------------------------------------
In 1993, other income and expense, net totaled $52.5 million and consisted
principally of a pretax gain of approximately $65 million related to the private
sale of a portion of the Company's investment in Telecom offset, in part, by a
pretax charge associated with the planned disposition of the Company's non-
strategic software development businesses.
- --------------------------------------------------------------------------------
INTEREST EXPENSE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dollars in Millions (Decrease)
- --------------------------------------------------------------------------------
<S> <C> <C>
1995 - 1994 $ (20.2) (3.6)%
- --------------------------------------------------------------------------------
1994 - 1993 $ (33.5) (5.6)%
- --------------------------------------------------------------------------------
</TABLE>
Interest expense decreased in 1995 and 1994 due to lower levels of debt,
lower interest rates on long-term debt, and the recognition of increased
capitalized interest costs at the telephone subsidiaries. Upon the discontinued
application of regulatory accounting principles, effective August 1, 1994, the
Company began recognizing capitalized interest costs as a reduction of interest
expense. Previously, the Company recorded an allowance for funds used during
construction as an item of other income.
The decrease in 1994 was partially offset by interest expense related to
debt instruments retained by the Company in connection with the disposition of
the Company's lease financing subsidiary, which was previously recognized as an
operating expense. Also included in 1994 was interest expense related to the
debt incurred to finance the Company's investment in Iusacell.
- --------------------------------------------------------------------------------
INCOME TAXES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dollars in Millions Increase
- --------------------------------------------------------------------------------
<S> <C>
1995 - 1994 $ 262.7
- --------------------------------------------------------------------------------
1994 - 1993 $ 92.9
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
EFFECTIVE INCOME TAX RATES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
- --------------------------------------------------------------------------------
<S> <C>
1995 38.1%
- --------------------------------------------------------------------------------
1994 38.7%
- --------------------------------------------------------------------------------
1993 34.8%
- --------------------------------------------------------------------------------
</TABLE>
The Company's effective income tax rate was lower in 1995, as compared to
1994, due principally to a decrease in the Pennsylvania state income tax rate
during 1995 and the effect of recording additional deferred state income taxes
on the Company's leveraged lease portfolio in 1994. The effect of these
decreases was partially offset by the reduction in the amortization of
investment tax credits and the elimination of the benefit of the income tax rate
differential applied to reversing timing differences at the telephone
subsidiaries, both as a result of the discontinued application of regulatory
accounting principles in August 1994.
The higher effective income tax rate in 1994, as compared to 1993, was due
principally to the aforementioned tax impacts associated with the discontinued
application of regulatory accounting principles in August 1994 and additional
deferred taxes recognized on the Company's leveraged lease portfolio.
A reconciliation of the statutory federal income tax rate to the effective
income tax rate for each period is provided in Note 15 to the Consolidated
Financial Statements.
FACTORS THAT MAY IMPACT FUTURE RESULTS
FEDERAL LEGISLATION
The Telecommunications Act of 1996 (the "Act"), which became effective on
February 8, 1996, is the most comprehensive revision of the federal
communications laws in over 60 years. In general, the Act includes provisions
that would open the telephone subsidiaries' local exchange markets to
competition and would permit local exchange carriers, such as the Company, upon
meeting certain conditions, to provide interLATA services (long distance) and
video programming and to engage in manufacturing.
With regard to the rules governing competition in the interLATA market, the
Act takes a two-fold approach. Effective February 8, 1996, the Company is
permitted to apply for approval to offer interLATA services outside of the
geographic region in which it currently operates as a local exchange carrier.
The Company has announced its plans to offer such services in Illinois, Florida,
North Carolina, South Carolina, and Texas.
Secondly, within the Company's geographic region, each of the telephone
subsidiaries must demonstrate to the FCC that it has satisfied certain
requirements in order to be permitted to offer interLATA services within its
jurisdiction. Among the requirements with which a telephone subsidiary must
comply is a 14-point "competitive checklist" which is aimed at ensuring that
competitors have the ability to connect to the telephone subsidiary's network.
A telephone subsidiary must also demonstrate to the FCC that its entry into the
interLATA market would be in the public interest.
No definitive prediction can be made as to the specific impact of the Act
on the business or financial condition of the Company. The financial impact on
the Company will be dependent on several factors, including the timing and
extent of competition in the Company's markets and the timing and extent of the
Company's pursuit of new business opportunities resulting from the Act.
17
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis continued
- --------------------------------------------------------------------------------
COMPETITION
IntraLATA Toll Services
Competition to offer intrastate intraLATA toll services is currently
permitted in all of the Company's state jurisdictions that provide intraLATA
toll services. Increased competition from IXCs has resulted in a decline in
several components of the telephone subsidiaries' toll service revenues.
Currently, intraLATA toll calls in all of such jurisdictions are completed
by the telephone subsidiaries unless the customer dials a five-digit access
code. Presubscription for intraLATA toll services would enable customers to make
intraLATA toll calls using the carrier of their choice without having to dial
the five-digit access code.
The Act prohibits a state from requiring presubscription or "dialing
parity" until the earlier of such time as a local exchange carrier in the state
is authorized to provide long distance services within the state or three years
from the effective date of the Act. This prohibition does not apply to a final
order for presubscription that was issued on or prior to December 19, 1995.
During 1995, state regulatory commissions in Pennsylvania, New Jersey, West
Virginia and Delaware conducted proceedings to determine whether, and under what
conditions, to authorize presubscription. Proceedings in Delaware were suspended
pending the outcome of the Congressional legislative process.
In October 1995, the West Virginia Public Service Commission issued an
order directing the implementation of presubscription within eighteen months of
that order. Bell Atlantic - West Virginia has filed an appeal with the West
Virginia Supreme Court.
On December 19, 1995, the Pennsylvania Public Utility Commission issued an
order directing the implementation of presubscription within eighteen months of
that order. However, the order stated that a reasonable effort should be made to
coordinate implementation of presubscription with Bell Atlantic - Pennsylvania's
entry into the interLATA market in Pennsylvania.
In New Jersey, the Board of Public Utilities issued an order on
December 14, 1995 finding that implementation of presubscription for intraLATA
toll services in New Jersey would be in the public interest and proposed rules
for implementation. The rulemaking to determine the timing of implementation of
presubscription in New Jersey is expected to be held in 1996.
Implementation of presubscription for intraLATA toll services could have a
material negative impact on toll service revenues, especially if the telephone
subsidiaries are not permitted contemporaneously to offer interLATA services.
Local Exchange Services
The ability to offer local exchange service has historically been subject
to regulation by state public utility commissions. In 1994 and 1995,
applications from competitors to provide and resell local exchange services were
approved by the Maryland Public Service Commission and the Pennsylvania Public
Utility Commission. In addition, applications from competitors to provide local
exchange services are pending in Delaware, Maryland, New Jersey and Virginia.
The Act is expected to significantly increase the level of competition in all of
the telephone subsidiaries' local exchange markets. However, increased
competition in the local exchange markets will facilitate FCC approval of the
telephone subsidiaries' entry into the interLATA markets.
BUSINESS DEVELOPMENT
The Company expects to incur significant business development expenses in
1996 in connection with its investments in PCS PrimeCo and Omnitel-Pronto
Italia, and its entry into the long distance business.
OTHER MATTERS
ENVIRONMENTAL ISSUES
The Company is subject to a number of environmental proceedings as a result
of the operations of its subsidiaries and the shared liability provisions in the
Plan of Reorganization related to the Modification of Final Judgement. Certain
of these environmental matters relate to Superfund sites for which the Company's
subsidiaries have been designated as potentially responsible parties by the U.S.
Environmental Protection Agency or joined as third-party defendants in pending
Superfund litigation. Such designation or joinder subjects the named company to
potential liability for costs relating to cleanup of the affected sites. The
Company is also responsible for the remediation of sites with underground fuel
storage tanks and other expenses associated with environmental compliance.
The Company continually monitors its operations with respect to potential
environmental issues, including changes in legally mandated standards and
remediation technologies. The Company's recorded liabilities reflect those
specific situations where remediation activities are currently deemed to be
probable and where the cost of remediation is estimable. Management believes
that the aggregate amount of any additional potential liability would not have a
material effect on the Company's results of operations or financial condition.
18
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis continued
- --------------------------------------------------------------------------------
PROSPECTIVE ACCOUNTING CHANGE
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-based Compensation"
(Statement No. 123) in October 1995. Statement No. 123 encourages companies to
recognize expense for stock options and other stock-based employee compensation
plans based on their fair value at the date of grant. As permitted by Statement
No. 123, the Company plans to continue to apply its current accounting policy
under APB Opinion No. 25, "Accounting for Stock Issued to Employees" in 1996 and
future years, and will provide disclosure of the pro forma impact on net income
and earnings per share as if the fair value-based method had been applied.
FINANCIAL CONDITION
<TABLE>
<CAPTION>
(Dollars in Millions)
-------------------------------------------
For the Years Ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From (Used In)
Operating activities $ 3,981.0 $ 3,777.0 $ 4,169.5
Investing activities (2,090.8) (1,694.2) (2,968.2)
Financing activities (1,676.3) (2,086.0) (1,351.2)
---------- ---------- ----------
</TABLE>
Management believes that the Company has adequate internal and external
resources available to meet ongoing operating requirements, including network
expansion and modernization and the payment of dividends. Management expects
that presently foreseeable capital requirements will be financed primarily
through internally generated funds. Additional long-term debt and equity
financing may be needed to fund additional development activities and to
maintain the Company's capital structure within management's guidelines. The
Company determines the appropriateness of the level of its dividend payments on
a periodic basis by considering such factors as long-term growth opportunities,
internal requirements of the Company, and the expectations of shareowners.
The use of derivatives by the Company is limited to managing risk that
could endanger the financing and operating flexibility of the Company, making
cash flows more stable over the long run, and achieving savings over traditional
means of financing. Derivative agreements are tied to a specific liability or
asset and hedge the related economic exposures. The use of these hedging
agreements has not had a material impact on the Company's financial condition or
results of operations. The Company does not hold derivatives for trading
purposes.
CASH FLOWS FROM OPERATING ACTIVITIES
The Company's primary source of funds continued to be cash generated from
operations. Improved cash flows from operating activities during 1995 resulted
principally from growth in operating income. Cash provided from operations in
1994 decreased versus 1993 due principally to higher income tax payments in
1994.
CASH FLOWS USED IN INVESTING ACTIVITIES
Capital expenditures continued to be the primary use of capital resources
in 1995. During 1995, 1994 and 1993, the Company invested approximately $2.4
billion, $2.2 billion and $2.1 billion, respectively, in its network operations
subsidiaries to facilitate the introduction of new products and services,
enhance responsiveness to competitive challenges and increase the operating
efficiency and productivity of the network.
During 1995, the Company invested $392.4 million in joint ventures,
including $292.0 million in PCS PrimeCo, primarily to fund the purchase of PCS
licenses.
During the first quarter of 1995, the Company prefunded a trust with $135.0
million in short-term investments for the purpose of compensating employees for
vacation pay earned during 1994. At December 31, 1995, the trust held no
investments.
19
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis continued
- --------------------------------------------------------------------------------
In 1995, the Company received cash proceeds of approximately $362 million
from the sale of certain cellular properties and approximately $250 million in
connection with the sale of Bell Atlantic Business Systems Services, Inc. and
the Company's interests in certain European computer maintenance operations.
Cash proceeds from investing activities in 1995 also included approximately
$221 million in connection with a note receivable resulting from the April 1994
sale of the Company's lease financing business and $87.0 million in connection
with a note receivable established with the formation of the Bell Atlantic NYNEX
Mobile partnership.
In 1994, cash proceeds from investing activities included $1,323.8 million
from the sale of the Company's lease financing subsidiary and $123.0 million
from the disposition of certain other nonregulated subsidiaries. Additionally,
the Company received $67.4 million under a special capital reduction plan
implemented by Telecom in which 20% of Telecom's outstanding shares were
canceled and shareowners received one New Zealand Dollar for each share
canceled. Telecom's capital reduction did not change the Company's percentage
ownership of Telecom. In 1993, the sale of a portion of the Company's interest
in Telecom provided cash proceeds from investing activities of $253.7 million.
In connection with Bell Atlantic's investment in Iusacell, the Company
purchased shares in 1993 for $520.0 million and additional shares in 1994 for
$524.0 million. The Company also used approximately $97 million in 1994
principally for the acquisition of a domestic cellular property, a minority
interest in a directory company, and to fund an equity investment in a
consortium that was awarded the second cellular license in Italy. In 1993, the
Company used $190.0 million for the acquisition of two directory companies and
certain other investments.
CASH FLOWS USED IN FINANCING ACTIVITIES
- --------------------------------------------------------------------------------
A bar chart is presented, depicting the following data:
<TABLE>
<CAPTION>
Dividends Paid
(dollars in millions)
---------------------
<S> <C>
Year ended December 31, 1993 $ 1,156.5
Year ended December 31, 1994 $ 1,195.1
Year ended December 31, 1995 $ 1,218.0
- --------------------------------------------------------------------------------
</TABLE>
Dividend payments in 1995, as in prior years, were a significant use of
capital resources. The Company reduced its long-term debt (including capital
leases) and short-term debt by $555.9 million in 1995, $990.2 million in 1994
and $168.2 million in 1993. Approximately $200 million, $250 million and $1.7
billion of debt in 1995, 1994 and 1993, respectively, was refinanced at more
favorable interest rates.
- --------------------------------------------------------------------------------
A bar chart is presented, depicting the following data:
<TABLE>
<CAPTION>
Debt Ratio
----------
<S> <C>
At December 31, 1993 54.6%
At December 31, 1994 59.4%
At December 31, 1995 55.5%
- --------------------------------------------------------------------------------
</TABLE>
As of December 31, 1995, the Company and its subsidiaries had in excess of
$2.2 billion of unused bank lines of credit. The Company and its telephone
subsidiaries also have shelf registrations for the issuance of up to $1.9
billion of unsecured debt securities. The Company and its subsidiaries had
$200.5 million in borrowings outstanding under bank lines of credit at
December 31, 1995.
The debt securities of Bell Atlantic's subsidiaries continue to be accorded
high ratings by primary rating agencies.
In the fourth quarter of 1995, Bell Atlantic New Zealand Holdings, Inc.
(BANZHI), a subsidiary of the Company, issued 600,000 shares of Series B
Preferred Stock at a price per share of $100 with a dividend rate of $5.80 per
share per annum resulting in a net cash inflow from financing activities of
$59.5 million. In 1994, BANZHI also issued 850,000 shares of Series A Preferred
Stock at a price per share of $100 with a dividend rate of $7.08 per share per
annum resulting in cash proceeds of $85.0 million.
20
<PAGE>
- --------------------------------------------------------------------------------
Report of Management
- --------------------------------------------------------------------------------
The management of Bell Atlantic Corporation is responsible for the
consolidated financial statements and the information and representations
contained in this report. Management believes that the financial statements have
been prepared in conformity with generally accepted accounting principles and
that the information in this report is consistent with those statements.
In meeting its responsibility for the financial statements of the Company,
management maintains a strong internal control structure, including the
appropriate control environment, accounting systems, and control procedures. The
internal control structure is designed to provide reasonable assurance that
assets are safeguarded from unauthorized use or disposition, that transactions
are properly recorded and executed in accordance with management's
authorizations, and that the financial records permit the preparation of
reliable financial statements. There are, however, inherent limitations that
should be recognized in considering the assurances provided by the internal
control structure. The concept of reasonable assurance recognizes that the costs
of the internal control structure should not exceed the benefits to be derived.
The internal control structure is reviewed and evaluated on a regular basis.
Compliance is monitored by the internal auditors through an annual plan of
internal audits.
The Board of Directors pursues its review and oversight role for the
financial statements through an Audit Committee composed of six outside
directors. The Audit Committee meets periodically with management and the Board
of Directors. It also meets with representatives of the internal auditors and
independent accountants and reviews the work of each to ensure that their
respective responsibilities are being carried out and to discuss related
matters. Both the internal auditors and independent accountants have direct
access to the Audit Committee.
/s/ Raymond W. Smith
Raymond W. Smith
Chairman of the Board
and Chief Executive Officer
/s/ William O. Albertini
William O. Albertini
Executive Vice President
and Chief Financial Officer
- --------------------------------------------------------------------------------
Report of
Independent Accountants
- --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND SHAREOWNERS
OF BELL ATLANTIC CORPORATION:
We have audited the accompanying consolidated balance sheets of Bell
Atlantic Corporation and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Bell Atlantic
Corporation and subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
As discussed in Notes 1 and 4 to the consolidated financial statements, the
Company discontinued accounting for the operations of its telephone subsidiaries
in accordance with Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation," effective August 1,
1994. Also, as discussed in Notes 1, 14 and 15 to the consolidated financial
statements, the Company changed its method of accounting for income taxes and
postemployment benefits in 1993.
/s/ Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 5, 1996
21
<PAGE>
Bell Atlantic Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Consolidated Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Dollars in Millions, Except Per Share Amounts)
-----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES $ 13,429.5 $ 13,791.4 $ 13,145.6
OPERATING EXPENSES
Employee costs, including benefits and taxes 4,022.0 4,333.1 4,027.6
Depreciation and amortization 2,627.1 2,652.1 2,545.1
Other 3,694.2 4,001.6 3,775.3
---------- ---------- ----------
10,343.3 10,986.8 10,348.0
---------- ---------- ----------
OPERATING INCOME 3,086.2 2,804.6 2,797.6
Equity in Income of Affiliates 152.5 41.1 48.3
Other Income and Expense, Net 331.7 23.2 39.8
Interest Expense 561.0 582.1 612.1
---------- ---------- ----------
Income Before Provision for Income Taxes,
Extraordinary Items, and Cumulative Effect
of Changes in Accounting Principles 3,009.4 2,286.8 2,273.6
Provision for Income Taxes 1,147.6 884.9 792.0
---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY ITEMS
AND CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES 1,861.8 1,401.9 1,481.6
---------- ---------- ----------
Extraordinary Items
Discontinuation of regulatory accounting
principles, net of tax - (2,150.0) -
Early extinguishment of debt, net of tax (3.5) (6.7) (58.4)
---------- ---------- ----------
(3.5) (2,156.7) (58.4)
---------- ---------- ----------
Cumulative Effect of Changes in
Accounting Principles
Income taxes - - 65.2
Postemployment benefits, net of tax - - (85.0)
---------- ---------- ----------
- - (19.8)
---------- ---------- ----------
NET INCOME (LOSS) $ 1,858.3 $ (754.8) $ 1,403.4
========== ========== ==========
PER COMMON SHARE:
INCOME BEFORE EXTRAORDINARY ITEMS
AND CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES $ 4.25 $ 3.21 $ 3.39
Extraordinary Items (.01) (4.94) (.13)
Cumulative Effect of Changes in
Accounting Principles - - (.04)
---------- ---------- ----------
NET INCOME (LOSS) $ 4.24 $ (1.73) $ 3.22
========== ========== ==========
Weighted Average Number of Common Shares
and Equivalent Shares Outstanding (in millions) 438.3 437.2 436.3
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
22
<PAGE>
Bell Atlantic Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Dollars in Millions, Except Per Share Amounts)
-----------------------------------------------
DECEMBER 31, 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 356.8 $ 142.9
Accounts receivable, net of allowances of $189.8 and $188.9 2,386.0 2,328.1
Inventories 132.8 274.6
Prepaid expenses 611.7 545.5
Other 385.4 492.2
---------- ----------
3,872.7 3,783.3
---------- ----------
Plant, Property and Equipment 33,553.8 33,745.8
Less accumulated depreciation 17,632.5 16,807.7
---------- ----------
15,921.3 16,938.1
---------- ----------
Investments in Affiliates 2,950.5 1,590.5
Other Assets 1,412.3 1,959.9
---------- ----------
Total Assets $ 24,156.8 $ 24,271.8
========== ==========
LIABILITIES AND SHAREOWNERS' INVESTMENT
Current Liabilities
Debt maturing within one year $ 1,930.2 $ 2,087.6
Accounts payable and accrued liabilities 2,723.5 2,737.4
Other 719.3 751.7
---------- ----------
5,373.0 5,576.7
---------- ----------
Long-Term Debt 6,407.2 6,805.7
---------- ----------
Employee Benefit Obligations 3,841.3 3,773.8
---------- ----------
Deferred Credits and Other Liabilities
Deferred income taxes 1,213.9 1,305.7
Unamortized investment tax credits 147.3 176.7
Other 345.5 466.9
---------- ----------
1,706.7 1,949.3
---------- ----------
Preferred Stock of Subsidiary 145.0 85.0
---------- ----------
Commitments (Note 8)
Shareowners' Investment
Preferred and Preference stock ($1 par value; none issued) - -
Common stock ($1 par value; 437,765,346 shares and
436,405,646 shares issued) 437.8 436.4
Common stock issuable (92,899 shares) - .1
Contributed capital 5,506.4 5,428.4
Reinvested earnings 1,776.5 1,144.4
Foreign currency translation adjustment (515.9) (330.8)
---------- ----------
7,204.8 6,678.5
Less common stock in treasury, at cost 3.1 11.0
Less deferred compensation-employee stock ownership plans 518.1 586.2
---------- ----------
6,683.6 6,081.3
---------- ----------
Total Liabilities and Shareowners' Investment $ 24,156.8 $ 24,271.8
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
23
<PAGE>
Bell Atlantic Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Dollars in Millions)
--------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,858.3 $ (754.8) $ 1,403.4
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 2,627.1 2,652.1 2,545.1
Extraordinary items, net of tax 3.5 2,156.7 58.4
Cumulative effect of changes in accounting principles, net of tax - - 19.8
Gain on sale of cellular properties, net of tax (200.1) - -
Equity in income of affiliates (152.5) (41.1) (48.3)
Dividends received from affiliates 146.0 101.0 73.4
Other items, net 62.3 (58.7) (121.3)
Changes in certain assets and liabilities, net of effects
from acquisition/disposition of businesses:
Accounts receivable (310.2) (192.6) (77.3)
Inventories (47.6) (80.8) (31.7)
Other assets (18.7) (226.6) 8.0
Accounts payable and accrued taxes 67.1 50.4 311.1
Deferred income taxes, net (95.4) (270.5) (105.8)
Unamortized investment tax credits (29.4) (49.4) (66.2)
Employee benefit obligations 84.8 382.8 193.3
Other liabilities (14.2) 108.5 7.6
---------- ---------- ----------
Net cash provided by operating activities 3,981.0 3,777.0 4,169.5
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments (135.0) (10.0) (8.5)
Proceeds from sale of short-term investments 135.0 18.5 34.0
Additions to plant, property and equipment (2,627.2) (2,648.3) (2,517.4)
Proceeds from sale of plant, property and equipment 3.5 102.1 47.4
Investment in finance lease and notes receivable - (741.6) (1,862.5)
Proceeds from finance lease and notes receivable 93.1 721.8 1,801.2
Investment in notes receivable and preferred stock (55.0) - -
Proceeds from notes receivable 338.7 - -
Acquisition of businesses, less cash acquired (41.4) (37.5) (146.9)
Investment in Grupo Iusacell, S.A. de C.V. - (524.0) (520.0)
Proceeds from Telecom Corporation of New Zealand Limited
1994 capital reduction plan and 1993 sale of ownership interest - 67.4 253.7
Investment in joint ventures (392.4) (59.7) (43.1)
Proceeds from disposition of businesses 611.2 1,446.8 -
Other, net (21.3) (29.7) (6.1)
---------- ---------- ----------
Net cash used in investing activities (2,090.8) (1,694.2) (2,968.2)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 106.6 249.6 2,148.1
Principal repayments of borrowings and capital lease obligations (439.3) (621.1) (949.0)
Early extinguishment of debt (200.0) (350.0) (1,575.0)
Net change in short-term borrowings with
original maturities of three months or less (48.1) (287.6) 186.7
Dividends paid (1,218.0) (1,195.1) (1,156.5)
Proceeds from sale of common stock 76.9 6.9 33.7
Purchase of common stock for treasury (11.2) (8.7) -
Net change in outstanding checks drawn on controlled disbursement accounts (2.7) 35.0 (39.2)
Proceeds from sale of preferred stock by subsidiary 59.5 85.0 -
---------- ---------- ----------
Net cash used in financing activities (1,676.3) (2,086.0) (1,351.2)
---------- ---------- ----------
Increase (decrease) in cash and cash equivalents 213.9 (3.2) (149.9)
Cash and cash equivalents, beginning of year 142.9 146.1 296.0
---------- ---------- ----------
Cash and cash equivalents, end of year $ 356.8 $ 142.9 $ 146.1
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
24
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Bell Atlantic Corporation (Bell Atlantic or the Company) is a diversified
telecommunications company. Bell Atlantic's network operations subsidiaries
provide voice and data transport and calling services, network access, directory
publishing and public telephone services to customers in the mid-Atlantic
region. The Company's network operations subsidiaries comprise seven operating
telephone companies and a subsidiary that performs services on their behalf.
Other network-related subsidiaries principally provide systems integration
services, customer premises equipment distribution and video services. Through
several joint ventures, Bell Atlantic provides wireless communications services
in the United States and has invested in wireless businesses in Mexico, Italy,
Slovakia, and the Czech Republic. The Company also has an investment in Telecom
Corporation of New Zealand Limited, which provides a full range of
telecommunications services.
The Company and its subsidiaries have approximately 61,800 employees, of
which approximately 55% are represented by the Communications Workers of America
(CWA), and approximately 15% are represented by the International Brotherhood of
Electrical Workers (IBEW), which are both affiliated with the American
Federation of Labor-Congress of Industrial Organizations. The terms of a five-
year contract with the IBEW became effective in May 1995 and expire in August
2000. The contract with the CWA expired on August 5, 1995. In January 1996, the
Company's telephone subsidiaries and the CWA reached a tentative three-year
labor agreement, which was subsequently ratified in February 1996.
The Telecommunications Act of 1996 is the most comprehensive revision of
the federal communications laws in over 60 years. In general, the
Telecommunications Act includes provisions that would open the telephone
subsidiaries' local exchange markets to competition and would permit local
exchange carriers, such as the Company, upon meeting certain conditions, to
provide interLATA services (long distance) and video programming and to engage
in manufacturing.
CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Bell Atlantic
Corporation and its majority-owned subsidiaries. Investments in businesses in
which the Company does not have control, but has the ability to exercise
significant influence over operating and financial policies, are accounted for
using the equity method. Other investments are accounted for by the cost method.
All significant intercompany accounts and transactions have been eliminated.
The Company operates predominantly in a single industry segment -
communications and related services.
Effective August 1, 1994, the telephone subsidiaries discontinued
accounting for their operations under the provisions of Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation" (Statement No. 71) (see Note 4).
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues, expenses, assets, and
liabilities and disclosure of contingencies. Actual results could differ from
those estimates.
REVENUE RECOGNITION
Revenues are recognized as earned on the accrual basis. The telephone
subsidiaries recognize revenues when services are rendered based on usage of the
Company's local exchange network and facilities. Other subsidiaries recognize
revenues when products are delivered or services are rendered to customers.
Revenues recognized from leasing transactions are recorded in accordance
with Statement of Financial Accounting Standards No. 13, "Accounting for
Leases."
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of 90
days or less when purchased to be cash equivalents. Cash equivalents are stated
at cost, which approximates market value.
SHORT-TERM INVESTMENTS
Short-term investments consist of investments that mature 91 days to 12
months from the date of purchase. Short-term investments are stated at cost,
which approximates market value.
INVENTORIES
New and reusable materials of the telephone subsidiaries are carried in
inventory, principally at average original cost, except that specific costs are
used in the case of large individual items. Inventories of other subsidiaries
are carried at the lower of cost (determined principally on either an average or
first-in, first-out basis) or market.
25
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements continued
- --------------------------------------------------------------------------------
Note 1 continued
PREPAID DIRECTORY
Costs of directory production and advertising sales are principally
deferred until the directory is published. Such costs are amortized to expense
and the related advertising revenues are recognized over the average life of the
directory, which is generally 12 months.
PLANT AND DEPRECIATION
The telephone subsidiaries' provision for depreciation is based principally
on the composite group remaining life method of depreciation and straight-line
composite rates. This method provides for the recovery of the remaining net
investment in telephone plant, less anticipated net salvage value, over the
remaining asset lives. The composite group method requires periodic revisions to
depreciation rates based on a number of variables, including retirement
estimates, survivor curves, salvage, and cost of removal.
In connection with the discontinued application of Statement No. 71,
effective August 1, 1994, for financial reporting purposes, the Company began
using estimated asset lives for certain categories of plant and equipment that
were shorter than those approved by regulators prior to the discontinuance of
Statement No. 71. The shorter lives result principally from the Company's
expectation as to the revenue-producing lives of the assets.
The following asset lives were used by the telephone subsidiaries in 1994
and 1995:
<TABLE>
<CAPTION>
January 1,
1994 to Effective
July 31, August 1,
Average Lives (in years) 1994 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Buildings 18-60 18-40 15-40
Central office equipment 6-13 4-12 5-12
Cable, wiring and conduit 20-60 14-50 16-50
Other equipment 6-38 6-38 5-35
</TABLE>
When depreciable plant of the telephone subsidiaries is replaced or
retired, the amounts at which such plant has been carried in plant, property and
equipment are removed from the respective accounts and charged to accumulated
depreciation, and any gains or losses on disposition are amortized over the
remaining asset lives of the remaining net investment in telephone plant.
Plant, property and equipment of other subsidiaries is depreciated
principally on a straight-line basis over the following estimated useful lives,
effective July 1, 1995: buildings, 25 to 40 years; and other equipment, 2 to 10
years. Previously, these assets were depreciated using 15 to 40 years and 2 to
15 years, respectively. The change in estimated useful lives resulted from the
contribution of plant, property and equipment of the Company's domestic cellular
and paging subsidiaries to Bell Atlantic NYNEX Mobile (see Note 2).
When the depreciable assets of other subsidiaries are retired or otherwise
disposed of, the related cost and accumulated depreciation are removed from the
respective accounts, and any gains or losses on disposition are recognized in
income.
MAINTENANCE AND REPAIRS
The cost of maintenance and repairs, including the cost of replacing minor
items not constituting substantial betterments, is charged to operating expense.
CAPITALIZED INTEREST COST
Upon the discontinued application of Statement No. 71, effective August 1,
1994, the telephone subsidiaries began reporting capitalized interest as a cost
of telephone plant and equipment and a reduction in interest expense, in
accordance with the provisions of Statement of Financial Accounting Standards
No. 34, "Capitalization of Interest Cost" (Statement No. 34). The Company's
other subsidiaries account for capitalized interest in accordance with Statement
No. 34 provisions.
Prior to the discontinued application of Statement No. 71, the telephone
subsidiaries recorded an allowance for funds used during construction, which
included both interest and equity return components, as a cost of plant and as
an item of other income.
COST IN EXCESS OF NET ASSETS ACQUIRED
The excess of the acquisition cost over the fair value of net assets of
businesses acquired is amortized by the straight-line method over periods not
exceeding 40 years. The Company assesses the impairment of the cost in excess of
net assets acquired related to consolidated subsidiaries in accordance with
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
The cost in excess of net assets acquired related to affiliates accounted for
under the equity method is reviewed whenever events or changes in circumstances
indicate that the carrying value may not be recoverable and a determination of
impairment (if any) is made based on estimates of future cash flows.
FOREIGN CURRENCY
Assets and liabilities of foreign subsidiaries and equity investees are
translated into U.S. dollars at exchange rates in effect at the end of the
reporting period. Foreign entity revenues and expenses are translated into U.S.
dollars at the
26
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements continued
- --------------------------------------------------------------------------------
Note 1 continued
average rates that prevailed during the period. The resultant net translation
gains and losses are reported as foreign currency translation adjustments in
Shareowners' Investment.
Exchange gains and losses on transactions of the Company and its equity
investees denominated in a currency other than their functional currency are
generally included in results of operations as incurred.
Exchange gains and losses on intercompany foreign currency transactions of
a long-term investment nature are reported as foreign currency translation
adjustments in Shareowners' Investment.
HEDGING INSTRUMENTS
The Company periodically enters into hedging agreements to reduce its
exposure to fluctuations in foreign exchange rates and interest rates.
Forward exchange contracts are generally used to hedge the exposure to
currency fluctuations on certain short-term transactions denominated in a
currency other than the entities' functional currency. Gains and losses on these
contracts generally offset the foreign exchange gains and losses on the
underlying hedged transactions and are included in results of operations. The
discount or premium on these contracts is included in results of operations over
the life of the contract.
Gains and losses on forward exchange contracts which hedge identifiable
foreign currency commitments are deferred and reflected as adjustments to the
related transactions. Gains and losses and related discounts or premiums arising
from financial instruments that hedge foreign balances of a long-term investment
nature are included as foreign currency translation adjustments in Shareowners'
Investment.
Interest rate hedge agreements are used to reduce interest rate risks and
costs inherent in the Company's debt portfolio. These agreements involve the
exchange of fixed and variable interest rate payments over the life of the
agreement without the exchange of the underlying principal amounts. The interest
differential to be paid or received under these agreements is accrued as
interest rates change and is recognized as an adjustment to interest expense
over the life of the agreements.
EMPLOYEE BENEFITS
Pensions, Postretirement Benefits Other Than Pensions, and
Postemployment Benefits
Substantially all employees of the Company are covered under
noncontributory defined benefit pension plans and postretirement health and life
insurance benefit plans.
Amounts contributed to the Company's pension plans are actuarially
determined, principally under the aggregate cost actuarial method, and are
subject to applicable federal tax regulations. Amounts contributed to 501(c)(9)
trusts and 401(h) accounts under applicable federal income tax regulations to
pay certain postretirement benefits are actuarially determined, principally
under the aggregate cost actuarial method.
The Company also provides employees with postemployment benefits such as
disability benefits, workers' compensation, and severance pay. Effective
January 1, 1993, the Company adopted Statement of Financial Accounting Standards
No. 112, "Employers' Accounting for Postemployment Benefits."
Savings Plans and Employee Stock Ownership Plans
The Company maintains savings plans which cover substantially all of its
employees. A substantial portion of the Company's matching contribution is
provided through employee stock ownership plans (ESOPs). The Company recognizes
expense based on accounting rules applicable to companies with ESOP trusts that
held securities prior to December 15, 1989. Under this method, the Company
recognizes 80 percent of the cumulative expense that would have been recognized
under the shares allocated method. The 80 percent of shares allocated method is
applied until cumulative cash payments exceed the cumulative minimum charge.
Subsequently, expense is recognized such that cumulative expense equals
cumulative cash payments. The transition from the 80 percent of shares allocated
method to the cash payments method occurred during 1995. All ESOP shares are
included in earnings per share computations.
The obligations of the ESOP trusts, which are guaranteed by the Company,
are recorded as long-term debt and the offsetting deferred compensation is
classified as a reduction of Shareowners' Investment. As the ESOP trusts make
principal payments, the Company reduces the long-term debt balance. The deferred
compensation balance is reduced by the amount of employee compensation
recognized as the ESOP shares are allocated to participants.
INCOME TAXES
Bell Atlantic Corporation and its domestic subsidiaries file a consolidated
federal income tax return.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (Statement No. 109).
The Tax Reform Act of 1986 repealed the investment tax credit (ITC) as of
January 1, 1986, subject to certain transitional rules. ITCs of the telephone
subsidiaries were deferred and are being amortized as a reduction to income tax
expense over the estimated service lives of the related assets.
27
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements continued
- --------------------------------------------------------------------------------
Note 1, continued
EARNINGS PER COMMON SHARE
Earnings per common share calculations are based on the weighted average
number of shares and equivalent shares outstanding during the year.
PROSPECTIVE ACCOUNTING CHANGE
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-based Compensation"
(Statement No. 123) in October 1995. Statement No. 123 encourages companies to
recognize expense for stock options and other stock-based employee compensation
plans based on their fair value at the date of grant. As permitted by Statement
No. 123, the Company plans to continue to apply its current accounting policy
under APB Opinion No. 25, "Accounting for Stock Issued to Employees" in 1996 and
future years, and will provide disclosure of the pro forma impact on net income
and earnings per share as if the fair value-based method had been applied.
RECLASSIFICATIONS
Certain reclassifications of prior years' data have been made to conform to
1995 classifications.
- --------------------------------------------------------------------------------
(2) FORMATION OF WIRELESS PARTNERSHIP
Effective July 1, 1995, Bell Atlantic and NYNEX Corporation (NYNEX)
completed the combination of substantially all of their domestic cellular and
paging businesses and the formation of a partnership, Bell Atlantic NYNEX
Mobile, which owns and operates such businesses. Bell Atlantic NYNEX Mobile
operates as a general partnership and is controlled equally by Bell Atlantic and
NYNEX. Bell Atlantic owns an approximate 63% equity interest in Bell Atlantic
NYNEX Mobile. The Company accounts for its interest in the partnership under the
equity method.
Coincident with, and as a condition to, the completion of the combination,
Bell Atlantic sold certain cellular properties in Massachusetts and Rhode
Island. The Company recorded a pretax gain of approximately $314 million on the
sale of the cellular properties in 1995.
Bell Atlantic contributed certain assets and liabilities of its domestic
cellular and paging operating subsidiaries in exchange for an equity interest in
Bell Atlantic NYNEX Mobile. No gain or loss was recognized on the contribution
of the assets and liabilities.
The following amounts were contributed in 1995 by the Company to the
partnership:
<TABLE>
<CAPTION>
(Dollars in Millions)
- --------------------------------------------------------------------------------
<S> <C> <C>
Current assets $ 124.0
Noncurrent assets 1,291.3
----------
Total assets $ 1,415.3
Current liabilities $ 167.1
Noncurrent liabilities 70.1
----------
Total liabilities 237.2
----------
Net assets contributed $ 1,178.1
==========
</TABLE>
An equity investment of approximately $143 million in a preexisting
cellular partnership with NYNEX serving the New York metropolitan area was
retained by the Company. This investment is scheduled to be contributed to the
Bell Atlantic NYNEX Mobile partnership in July 1996 and July 1997, pursuant to
the partnership agreement.
Revenues and expenses of the Company's domestic cellular and paging
businesses reflected in the financial statements for periods prior to the
formation of the partnership are as follows:
<TABLE>
<CAPTION>
(Dollars in Millions)
- ------------------------------------------------------------------------------------------------------------------
Six months ended Year ended Year ended
June 30, 1995 December 31, 1994 December 31, 1993
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating revenues $ 629.9 $ 1,063.3 $ 788.4
Operating expenses 532.0 947.6 741.9
---------- ---------- ----------
Operating income 97.9 115.7 46.5
Equity in income of
unconsolidated affiliates 22.6 34.2 34.4
Other expenses, net .1 13.1 12.7
Interest expense 13.9 14.8 11.3
---------- ---------- ----------
Income before income taxes $ 106.5 $ 122.0 $ 56.9
========== ========== ==========
</TABLE>
28
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements continued
- --------------------------------------------------------------------------------
(3) INVESTMENTS IN AFFILIATES
The Company's investments in affiliates, which are accounted for under the
equity method, consist of the following at December 31:
<TABLE>
<CAPTION>
(Dollars in Millions)
- ------------------------------------------------------------------------------------------------------------------------------
1995 1994
Ownership Investment Ownership Investment
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bell Atlantic NYNEX Mobile/*/ 62.594% $ 1,446.7 - $ -
PCS PrimeCo 25.0% 298.8 25.0% 13.7
Telecom Corporation of New Zealand Limited 24.8% 639.4 24.8% 625.6
Grupo Iusacell, S.A. de C.V. 41.9% 356.2 41.9% 646.4
Other Various 209.4 Various 304.8
--------- ---------
Total $ 2,950.5 $ 1,590.5
========= =========
</TABLE>
* Includes the Company's investment in a New York cellular partnership
(see Note 2)
The Bell Atlantic NYNEX Mobile partnership, which was formed on July 1,
1995 through the combination of substantially all of the domestic cellular and
paging businesses of Bell Atlantic and NYNEX (see Note 2), provides wireless
local services to customers in the Northeast, mid-Atlantic, Southeast and
Southwest domestic cellular markets.
PCS PrimeCo, which was formed in October 1994, is a four-way partnership of
Bell Atlantic, NYNEX, AirTouch Communications and U S West, Inc. In March 1995,
the PCS PrimeCo partnership acquired licenses for approximately $1.1 billion
which will allow PCS PrimeCo to provide personal communications services (PCS)
in 11 major markets across the United States.
Telecom Corporation of New Zealand Limited (Telecom) is the principal
provider of telecommunications services in that country. At the date of
acquisition in 1990, the Company's interest in Telecom exceeded the recorded
value of the proportionate share of the underlying net assets by approximately
$285 million. This amount is being amortized by the straight-line method over a
period of 40 years.
Through purchases of stock totaling $1,044.0 million, the Company has
acquired a 41.9% economic interest in Grupo Iusacell, S.A. de C.V. (Iusacell),
the second largest telecommunications company in Mexico. Shares held by Bell
Atlantic represent approximately 44% of the voting rights pertaining to Iusacell
stock. At acquisition, the cumulative investment in Iusacell exceeded the
recorded value of the underlying net assets by approximately $760 million. This
amount is being amortized by the straight-line method over a period of 25 years.
As a result of foreign currency translation losses recorded as a component of
Shareowners' Investment, the Company's investment in Iusacell was reduced by
approximately $530 million at December 31, 1995 and by approximately $330
million at December 31, 1994.
The Company also has telecommunications investments in Italy, Slovakia, and
the Czech Republic. These investments consist of joint ventures to build and
operate cellular networks in these countries.
Other investments also include a video services joint venture, real estate
partnerships, a one-seventh interest in Bell Communications Research, Inc.
(Bellcore), and several other domestic and international joint ventures.
During 1995, 1994 and 1993, the Company received dividends from
unconsolidated equity investees of $146.0 million, $101.0 million and $73.4
million.
Summarized unaudited financial information for investments which the
Company accounts for under the equity method is shown below on a 100 percent
basis.
<TABLE>
<CAPTION>
(Dollars in Millions)
- --------------------------------------------------------------------------------
Year Ended December 31, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Results of Operations:
Revenues $ 5,088.8
Operating income 926.9
Net income 407.1
Bell Atlantic's Equity in Income of Affiliates $ 152.5
========
</TABLE>
<TABLE>
<CAPTION>
(Dollars in Millions)
- --------------------------------------------------------------------------------
December 31, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Financial Position:
Current assets $ 1,707.8
Noncurrent assets 8,370.6
Current liabilities 2,697.8
Noncurrent liabilities 1,260.9
Minority interests 253.9
Stockholders' equity 5,865.8
Bell Atlantic's Investments in Affiliates $2,950.5
========
</TABLE>
The unaudited summarized financial information at December 31, 1995
includes net assets of foreign unconsolidated subsidiaries totaling
approximately $2.1 billion (on a 100% basis), of which $1.4 billion is located
in New Zealand and the remainder is located in Mexico and European and Asian
countries. These assets may be subject to risks in the event of changes in
government policies or other unforeseen circumstances.
29
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements continued
- --------------------------------------------------------------------------------
(4) DISCONTINUATION OF REGULATORY ACCOUNTING PRINCIPLES
In the third quarter of 1994, the Company determined that it was no longer
eligible for continued application of the accounting required by Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects of Certain
Types of Regulation" (Statement No. 71). In connection with the decision to
discontinue regulatory accounting principles under Statement No. 71, the Company
recorded a noncash, extraordinary charge of $2,150.0 million, which is net of an
income tax benefit of $1,498.4 million.
The Company's determination that it was no longer eligible for continued
application of the accounting required by Statement No. 71 was based on the
belief that the convergence of competition, technological change, actual and
potential regulatory, legislative and judicial actions, and other factors were
creating fully open and competitive markets. In such markets, the Company does
not believe it can be assured that prices can be maintained at levels that will
recover the net carrying amount of existing telephone plant and equipment, which
has been depreciated over relatively long regulator-prescribed lives. In
addition, changes from cost-based regulation to various forms of incentive
regulation in all jurisdictions contributed to the determination that the
continued application of Statement No. 71 was inappropriate.
A summary of the components of the after-tax charge recognized as a result
of the discontinued application of Statement No. 71 follows:
<TABLE>
<CAPTION>
(Dollars in Millions)
- --------------------------------------------------------------------------------
<S> <C>
Increase in plant and
equipment depreciation reserve $ 2,128.9
Accelerated investment
tax credit amortization (136.2)
Tax-related regulatory asset
and liability elimination 42.5
Other regulatory asset
and liability elimination 114.8
----------
Total $ 2,150.0
==========
</TABLE>
The increase in the accumulated depreciation reserve was supported by both
an impairment analysis, which identified estimated amounts not recoverable from
future discounted cash flows, and a depreciation study, which identified
inadequate depreciation reserve levels which the Company believes resulted
principally from the cumulative underdepreciation of plant as a result of the
regulatory process. Investment tax credit amortization was accelerated as a
result of the reduction in remaining asset lives of the associated telephone
plant and equipment.
Tax-related regulatory assets of $757.2 million and tax-related regulatory
liabilities of $714.7 million, which were established upon the adoption of
Statement No. 109 and amortized as the related deferred taxes were recognized in
the ratemaking process, were eliminated (see Note 15). The elimination of other
regulatory assets and liabilities relates principally to deferred debt
refinancing and vacation pay costs, which were being amortized as they were
recognized in the ratemaking process.
- --------------------------------------------------------------------------------
(5) PLANT, PROPERTY AND EQUIPMENT
Plant, property and equipment, which is stated at cost, is summarized as
follows at December 31:
<TABLE>
<CAPTION>
(Dollars in Millions)
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Land $ 262.2 $ 273.5
Buildings 2,736.8 2,741.7
Central office equipment 12,812.6 12,261.8
Cable, wiring and conduit 12,404.6 12,074.9
Other equipment 4,145.7 4,976.2
Other 619.4 587.6
Construction-in-progress 572.5 830.1
------------ ------------
33,553.8 33,745.8
Accumulated depreciation (17,632.5) (16,807.7)
------------ ------------
Total $ 15,921.3 $ 16,938.1
============ ============
</TABLE>
Due to the formation of the Bell Atlantic NYNEX Mobile partnership (see
Note 2) and the disposition of the Company's domestic computer maintenance
subsidiary, Bell Atlantic Business Systems Services, Inc. (see Note 6), plant,
property and equipment at December 31, 1995 no longer includes fixed assets of
these businesses. At December 31, 1994, amounts related to these businesses,
principally other equipment, totaled $933.5 million, net of accumulated
depreciation of $484.5 million.
Certain prior year amounts previously included in Construction-in-progress
have been reclassified to Other to conform to 1995 classifications.
Plant, property and equipment at December 31, 1995 and 1994 includes real
estate property under operating leases, or held for lease, of $327.5 million and
$313.4 million, less accumulated depreciation of $82.3 million and $71.0
million, respectively.
30
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements continued
- --------------------------------------------------------------------------------
(6) DISPOSITION OF BUSINESSES
COMPUTER MAINTENANCE
In the fourth quarter of 1995, the Company sold its domestic computer
maintenance subsidiary, Bell Atlantic Business Systems Services, Inc., and its
interests in certain European computer maintenance operations for approximately
$250 million in cash. The Company recorded a small gain as a result of this
disposition. This disposition did not have a material effect on the Company's
results of operations or financial position.
LEASE FINANCING
In the second quarter of 1994, the Company sold the assets of Bell Atlantic
TriCon Leasing Corporation (TriCon), except for leveraged lease and project
finance portfolios, to The Finova Group Inc. (Finova) (formerly GFC Financial
Corporation). The sale price consisted of $344.2 million in cash and $835.9
million in notes receivable, plus the assumption of $81.8 million of liabilities
by Finova. In addition, the Company retained $586.7 million of debt instruments
of TriCon and received a note of an equal amount from Finova. The principal and
interest payments on the retained debt match the principal and interest payments
received on the note from Finova. At December 31, 1995, the remaining balance of
a note receivable from Finova was $213.8 million. The Company recorded a pretax
gain of $42.0 million as a result of this transaction.
In the fourth quarter of 1994, the Company sold substantially all of the
assets of a leasing subsidiary, Bell Atlantic Systems Leasing International,
Inc., including the Company's 50% ownership interest in Pacific Atlantic Systems
Leasing, Inc. This sale did not have a material effect on the Company's results
of operations or financial position.
OTHER
In 1994, the Company recorded pretax charges aggregating $38.9 million in
connection with the disposition of a subsidiary that sells and distributes
liquefied petroleum gas and a foreign cellular operation.
- --------------------------------------------------------------------------------
(7) LEASING ARRANGEMENTS AS LESSOR
In 1994, the Company sold substantially all of its lease financing
business, except for leveraged lease and project finance portfolios (see Note
6). The Company is no longer providing new leasing services and during 1995
portions of the remaining portfolios were sold.
Finance lease receivables, which are included in Other (current assets)
and Other Assets (noncurrent assets) in the Consolidated Balance Sheets,
consist of the following at December 31:
<TABLE>
<CAPTION>
(Dollars in Millions)
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Leveraged leases $ 802.3 $ 896.0
Direct finance leases 27.3 29.1
-------- --------
Total $ 829.6 $ 925.1
======== ========
</TABLE>
The components of the net investment in leveraged leases at December 31
are as follows:
<TABLE>
<CAPTION>
(Dollars in Millions)
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Minimum lease payments
receivable $ 746.2 $ 852.3
Estimated residual value 496.8 548.7
Unearned income (440.7) (505.0)
---------- ---------
Total $ 802.3 $ 896.0
========== =========
</TABLE>
Minimum lease payments receivable are shown net of principal and interest
on the associated nonrecourse debt. Accumulated deferred taxes arising from
leveraged leases, which are included in deferred income taxes, amounted to
$755.6 million and $779.5 million at December 31, 1995 and 1994, respectively.
Future minimum lease payments to be received from noncancelable leases,
net of nonrecourse loan payments related to leveraged leases, for the periods
shown are as follows at December 31, 1995:
<TABLE>
<CAPTION>
(Dollars in Millions)
- --------------------------------------------------------------------------------
Years Capital Leases Operating Leases
- --------------------------------------------------------------------------------
<S> <C> <C>
1996 $ 4.1 $ 34.9
1997 9.9 32.2
1998 14.5 26.6
1999 15.8 17.1
2000 16.7 11.7
Thereafter 723.0 15.5
--------- ---------
Total $ 784.0 $ 138.0
========= =========
</TABLE>
31
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements continued
- --------------------------------------------------------------------------------
(8) LEASING ARRANGEMENTS AS LESSEE
The Company leases certain facilities and equipment for use in its
operations under both capital and operating leases. Plant, property and
equipment included capital leases of $172.8 million and $171.6 million, and
related accumulated amortization of $87.4 million and $82.8 million at December
31, 1995 and 1994, respectively. In 1995, 1994 and 1993, the Company incurred
initial capital lease obligations of $14.0 million, $11.9 million and $13.6
million, respectively.
Total rent expense amounted to $272.6 million in 1995, $285.5 million in
1994 and $307.8 million in 1993.
At December 31, 1995, the aggregate minimum rental commitments under
noncancelable leases for the periods shown are as follows:
<TABLE>
<CAPTION>
(Dollars in Millions)
-------------------------------------
Years Capital Leases Operating Leases
- --------------------------------------------------------------------------------
<S> <C> <C>
1996 $ 26.7 $ 84.3
1997 23.5 79.2
1998 23.3 67.7
1999 19.0 57.9
2000 29.2 56.3
Thereafter 92.6 583.5
----------- -----------
Total 214.3 $ 928.9
===========
Less imputed interest
and executory costs 94.6
Present value of net -----------
minimum lease
payments 119.7
Less current installments 12.0
-----------
Long-term obligation
at December 31, 1995 $ 107.7
===========
</TABLE>
As of December 31, 1995, the total minimum sublease rentals to be
received in the future under noncancelable operating subleases was $81.4
million.
- --------------------------------------------------------------------------------
(9) DEBT
DEBT MATURING WITHIN ONE YEAR
Debt maturing within one year consists of the following at December 31:
<TABLE>
<CAPTION>
(Dollars in Millions)
----------------------------
1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Notes payable:
Bank loans $ 200.5 $ 666.9
Commercial paper 1,415.8 918.3
Long-term debt maturing
within one year 313.9 502.4
---------- ----------
Total $ 1,930.2 $ 2,087.6
========== ==========
Weighted average interest
rates for notes payable
outstanding at year-end 5.8% 6.0%
---------- ----------
</TABLE>
Capital expenditures, primarily construction of telephone plant, are
partially financed, pending long-term financing, through bank loans and the
issuance of commercial paper payable within 12 months.
At December 31, 1995, the Company had in excess of $2.2 billion of unused
bank lines of credit. The availability of these lines, for which there are no
formal compensating balances or commitment fee agreements, is at the discretion
of each bank.
32
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements continued
- --------------------------------------------------------------------------------
Note 9 continued
LONG-TERM DEBT
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
(Dollars in Millions)
- ------------------------------------------------------------------------------------------------------------------------------
Interest Rates Maturities 1995 1994
- ---------------------------------------------------------------------------------------------------------- ----------
<S> <C> <C> <C> <C>
Telephone subsidiaries' debentures 3.25% - 7.00% 1996 - 2025 $ 2,172.0 $ 2,222.0
7.125% - 7.75% 2002 - 2033 1,955.0 1,955.0
7.85% - 8.75% 2019 - 2031 1,080.0 1,280.0
------------------------------------------------------ ----------
5,207.0 5,457.0
Notes payable 4.46% - 12.42% 1996 - 2005 916.7 1,175.7
Mortgage and installment notes 9.42% - 11.00% 1996 - 2003 11.9 18.1
Employee Stock Ownership
Plan loans - senior notes 8.17% 2000 497.9 571.3
Capital lease obligations -
average rate 10.4% and 10.6% 119.7 120.1
Unamortized discount and premium, net (32.1) (34.1)
---------- ----------
Total long-term debt, including
current maturities 6,721.1 7,308.1
Less maturing within one year 313.9 502.4
---------- ----------
Total long-term debt $ 6,407.2 $ 6,805.7
========== ==========
</TABLE>
Maturities of long-term debt outstanding at December 31, 1995, excluding
unamortized discount and premium and capital lease obligations, are: $301.9
million due in 1996, $279.3 million due in 1997, $397.4 million due in 1998,
$294.4 million due in 1999, $318.9 million due in 2000, and $5,041.6 million
thereafter.
Telephone subsidiaries' debentures outstanding at December 31, 1995 include
$1,572.0 million that are callable. The call prices range from 102.7% to 100.0%
of face value, depending upon the remaining term to maturity of the issue. In
addition, the telephone subsidiaries' debentures include $640.0 million that
will become redeemable for a limited period at the option of the holders. Of
this amount, $200.0 million becomes redeemable in 1996; $175.0 million becomes
redeemable in 1997, 2000, or 2002; and $265.0 million becomes redeemable in
1999. The redemption prices will be 100.0% of face value plus accrued interest.
Included in notes payable are medium-term notes issued by Bell Atlantic
Financial Services, Inc. (FSI), a wholly owned subsidiary that provides
financing for Bell Atlantic and certain of its subsidiaries. FSI debt securities
(aggregating $731.3 million at December 31, 1995) have the benefit of a Support
Agreement dated October 1, 1992 between Bell Atlantic and FSI, under which Bell
Atlantic has committed to make payments of interest, premium, if any, and
principal on the FSI debt in the event of FSI's failure to pay. The Support
Agreement provides that the holders of FSI debt shall not have recourse to the
stock or assets of Bell Atlantic's telephone subsidiaries. However, in addition
to dividends paid to Bell Atlantic by any of its consolidated subsidiaries,
certain assets of Bell Atlantic that are not subject to such exclusion are
available as recourse to holders of FSI debt. The carrying value of the
available assets reflected in the consolidated financial statements of Bell
Atlantic was approximately $4.6 billion at December 31, 1995.
See Note 14 for information on the Employee Stock Ownership Plan Loans.
The Company has recorded extraordinary charges associated with the early
extinguishment of debentures. These charges reduced net income by $3.5 million
(net of an income tax benefit of $2.5 million) in 1995, $6.7 million (net of an
income tax benefit of $3.6 million) in 1994, and $58.4 million (net of an income
tax benefit of $36.2 million) in 1993.
33
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements continued
- --------------------------------------------------------------------------------
(10) PREFERRED STOCK OF SUBSIDIARY
Bell Atlantic New Zealand Holdings, Inc. (BANZHI), a subsidiary of the
Company, issued 850,000 shares of Series A Preferred Stock in 1994 at a price
per share of $100 with a dividend rate of $7.08 per share per annum, and 600,000
shares of Series B Preferred Stock in 1995 at a price per share of $100 with a
dividend rate of $5.80 per share per annum. The dividend rate on the Series B
Preferred Stock may be adjusted if, under certain circumstances, legislation is
enacted that reduces the dividends received deduction generally available to
corporate shareholders for federal income tax purposes. Both series of preferred
stock are subject to mandatory redemption on May 1, 2004 at a redemption price
per share of $100, together with any accrued and unpaid dividends. BANZHI and
another subsidiary of the Company indirectly own the Company's investment in
Telecom Corporation of New Zealand Limited.
- --------------------------------------------------------------------------------
(11) FINANCIAL INSTRUMENTS
DERIVATIVES
The use of derivatives by the Company is limited to managing risk that
could endanger the financing and operating flexibility of the Company, making
cash flows more stable over the long run and achieving savings over traditional
means of financing. Derivative agreements are tied to a specific liability or
asset and hedge the related economic exposures. The use of these hedging
agreements has not had a material impact on the Company's financial condition or
results of operations. The Company does not hold derivatives for trading
purposes.
INTEREST RATE HEDGE AGREEMENTS
The notional amounts outstanding, maturity dates, and weighted average
receive and pay rates of interest rate hedge agreements are as follows at
December 31:
<TABLE>
<CAPTION>
(Dollars in Millions)
----------------------------------------------------
Weighted Average Rate
Notional ---------------------
Variable to Fixed: Amount Maturities Receive Pay
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 $ 200.0 1999 - 2005 5.4% 5.7%
1994 $ 70.0 1995 - 1999 5.6% 5.4%
</TABLE>
The notional amounts are used to calculate contractual payments to be
exchanged and are not actually paid or received, nor are they a measure of the
Company's exposure in the event of nonperformance by a counterparty.
The Company also entered into forward interest rate hedge agreements with
notional amounts of $1.9 million and $50.3 million at December 31, 1995 and
1994, respectively, in connection with a specific lease.
Interest rate hedge agreements have not significantly impacted the
Company's relative proportion of variable and fixed interest expense.
FOREIGN EXCHANGE CONTRACTS
Foreign exchange contracts have generally been limited to forward contracts
for delivery or purchase of certain foreign currencies on a specified future
date, usually within ninety days. At December 31, 1995, the Company had
contracts for the sale of $.4 million and the purchase of $8.5 million of
foreign currencies, compared to contracts for the sale of $27.6 million and the
purchase of $5.6 million of foreign currencies at December 31, 1994. No position
in any individual foreign currency exceeded $6.8 million and $16.1 million at
December 31, 1995 and 1994, respectively. All of these contracts have maturities
within ninety days of the respective year end. Market risk related to these
contracts arises from fluctuations in the value of the underlying currencies.
The Company continually monitors the relationship between gains and losses
recognized on forward exchange contracts and on the underlying transactions
being hedged to ensure an adequate correlation exists and to mitigate this
market risk.
Foreign exchange gains and losses recognized on these contracts were not
material to the Company's results of operations or financial condition and
generally offset the foreign exchange gains and losses on the underlying hedged
transactions. Deferred gains and losses from hedging identifiable foreign
currency commitments were not material.
At December 31, 1995, Bell Atlantic and its consolidated subsidiaries had
no material foreign currency cash flow exposure resulting from monetary assets
and liabilities, firm commitments, or highly anticipated cash flow exposures
denominated in a currency other than the Company's functional currency.
34
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements continued
- --------------------------------------------------------------------------------
Note 11 continued
The Company has not hedged its accounting translation exposure to foreign
currency fluctuations relative to its net equity position in foreign
subsidiaries since it does not represent actual cash flow exposure. The
Company's net equity position in its principal unconsolidated foreign
subsidiaries totaled $1,099.8 million and $1,335.7 million at December 31, 1995
and 1994, respectively. These subsidiaries have operations primarily in New
Zealand and Mexico.
Certain unconsolidated foreign subsidiaries accounted for using the equity
method have net liabilities, primarily debt, denominated in a currency other
than the investees' functional currency. The Company is subject to fluctuations
in its equity income from these subsidiaries related to foreign currency gains
and losses on such net liabilities. Foreign currency losses on such net
liabilities included in equity income totaled $29.0 million and $21.5 million
for the years ended December 31, 1995 and 1994, respectively.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that subject the Company to concentrations of credit
risk consist primarily of temporary cash investments, trade receivables, certain
notes receivable, preferred stock, interest rate hedge agreements and foreign
exchange forward contracts.
The Company places its temporary cash investments with high-credit-quality
financial institutions and, by policy, limits the amount of credit exposure to
any one financial institution.
Concentrations of credit risk with respect to trade receivables other than
those from AT&T are limited due to the large number of customers in the
Company's customer base. For the years ended December 31, 1995, 1994 and 1993,
revenues generated from services provided to AT&T, primarily network access and
billing and collection, were $1,316.4 million, $1,352.6 million and $1,368.4
million, respectively. At December 31, 1995 and 1994, Accounts receivable, net,
included $125.3 million and $153.0 million, respectively, from AT&T.
At December 31, 1995 and 1994, the Company had an uncollateralized note
receivable from Finova of $213.8 million and $435.0 million, respectively, in
connection with the disposition of TriCon (see Note 6).
The counterparties to the interest rate hedge agreements and forward
exchange agreements are all major financial institutions. The Company
continually monitors its positions and the credit ratings of its counterparties,
and limits the amount of contracts with any one party.
The Company believes the risk of incurring losses related to credit risk is
remote and any losses would not be material to results of operations or
financial condition.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments.
Cash and Cash Equivalents and Forward Exchange Contracts
The carrying amounts approximate fair value.
Debt
Fair value is estimated based on the quoted market prices for the same or
similar issues or on the net present value of the expected future cash flows
using current interest rates.
Preferred Stock and Notes Receivable
Fair value is based on the present value of the expected future cash flows
using current interest rates or on quoted market prices for similar instruments,
if available.
Interest Rate Hedge Agreements
The fair value of interest rate hedge agreements is based on the estimated
amount the Company would pay or receive to terminate the agreements, taking into
account current interest rates and the creditworthiness of the counterparties.
The estimated fair values of the Company's financial instruments are as
follows at December 31:
<TABLE>
<CAPTION>
(Dollars in Millions)
- ------------------------------------------------------------------------------------------------------------------------------
1995 1994
------------------------ ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt/*/ $ 8,249.8 $ 8,604.3 $ 8,807.3 $ 8,242.4
Preferred stock and notes receivable, net 315.6 318.4 482.7 478.4
Unrealized (loss) gain on interest rate hedge agreements - (3.8) - 1.8
</TABLE>
* Debt includes Long-term debt and Debt maturing within one year, but excludes
capital lease obligations and unamortized discount and premium.
35
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements continued
- --------------------------------------------------------------------------------
(12) SHAREOWNERS' INVESTMENT
<TABLE>
<CAPTION>
Common Stock Common Stock Issuable
Contri-
(Dollars in Millions, Shares (in Shares (in buted
Except Per Share Amounts) Thousands) Amount Thousands) Amount Capital
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992 434,155 $ 434.2 186 $ .2 $ 5,356.9
Net income
Dividends declared ($2.68 per share)
Common stock issued:
Employee plans 844 .7 47.0
Shareowner plans 200 .2 11.6
Acquisition agreements 47 .1 (44) (.1) .6
Former Metro Mobile
CTS, Inc. shareowners 884 .9 (.9)
Foreign currency translation adjustment,
net of tax benefit of $6.3
Reduction of ESOP obligations
Tax benefit of dividends paid to ESOPs
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 436,130 436.1 142 .1 5,415.2
Loss
Dividends declared ($2.76 per share)
Purchase of common stock
Common stock issued:
Employee plans 230 .2 13.2
Acquisition agreements 46 .1 (49) -
Foreign currency translation adjustment,
net of tax benefit of $.9
Reduction of ESOP obligations
Tax benefit of dividends paid to ESOPs
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 436,406 436.4 93 .1 5,428.4
Net income
Dividends declared ($2.80 per share)
Purchase of common stock
Common stock issued:
Employee plans 1,258 1.3 76.5
Shareowner plans 8 - 1.5
Acquisition agreements 93 .1 (93) (.1)
Foreign currency translation adjustment,
net of tax benefit of $1.1
Reduction of ESOP obligations
Tax benefit of dividends paid to ESOPs
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 437,765 $ 437.8 - $ - $ 5,506.4
====================================================================================================================================
<CAPTION>
Foreign Deferred
Currency Treasury Stock Compen-
(Dollars in Millions, Reinvested Translation Shares (in sation-
Except Per Share Amounts) Earnings Adjustment Thousands) Amount ESOPs
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992 $ 2,853.4 $ (140.1) 186 $ 9.1 $ 679.2
Net income 1,403.4
Dividends declared ($2.68 per share) (1,166.6)
Common stock issued:
Employee plans (8.2) (66) (3.3)
Shareowner plans
Acquisition agreements (70) (3.4)
Former Metro Mobile
CTS, Inc. shareowners
Foreign currency translation adjustment,
net of tax benefit of $6.3 56.2
Reduction of ESOP obligations (44.9)
Tax benefit of dividends paid to ESOPs 11.6
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 3,093.6 (83.9) 50 2.4 634.3
Loss (754.8)
Dividends declared ($2.76 per share) (1,203.9)
Purchase of common stock 209 10.5
Common stock issued:
Employee plans (.9) (13) (.7)
Acquisition agreements (26) (1.2)
Foreign currency translation adjustment,
net of tax benefit of $.9 (246.9)
Reduction of ESOP obligations (48.1)
Tax benefit of dividends paid to ESOPs 10.4
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 1,144.4 (330.8) 220 11.0 586.2
Net income 1,858.3
Dividends declared ($2.80 per share) (1,223.4)
Purchase of common stock 211 11.2
Common stock issued:
Employee plans (11.8) (43) (2.1)
Shareowner plans (234) (11.6)
Acquisition agreements (91) (5.4)
Foreign currency translation adjustment,
net of tax benefit of $1.1 (185.1)
Reduction of ESOP obligations (68.1)
Tax benefit of dividends paid to ESOPs 9.0
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 $ 1,776.5 $ (515.9) 63 $ 3.1 $ 518.1
====================================================================================================================================
</TABLE>
Bell Atlantic Corporation is authorized to issue up to 12.5 million shares
each of Preferred and Preference stock and 1.5 billion shares of common stock.
A cellular telephone acquisition closed during 1992 required the Company to
deliver shares of its common stock in 1993, 1994 and 1995.
In 1993, the Company issued 883,832 shares of common stock to settle
certain litigation arising from the merger in 1992 with Metro Mobile CTS, Inc.,
which was accounted for as a pooling of interests. This distribution represents
additional merger consideration to the former Metro Mobile shareholders and was
reflected as a credit to the common stock account with a corresponding charge to
contributed capital.
On January 23, 1996, the Board of Directors adopted a resolution ordering
the redemption of all Rights granted under the Company's Shareholder Rights
Plan, approved by the Board in 1989. Shareholders of record as of April 10, 1996
will be entitled to receive the redemption price of $.01 per Right ($.005 per
share as a result of a two-for-one stock split declared on March 16, 1990) on
May 1, 1996.
36
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements continued
- --------------------------------------------------------------------------------
(13) STOCK INCENTIVE PLANS
Under the stock option and performance share components of the Bell
Atlantic Stock Incentive Plan, a total of 25,000,000 shares of common stock may
be distributed upon the exercise of stock options under the 1985 Incentive Stock
Option Plan (the "ISO Plan"), and as a result of awards under the Performance
Share Plan (the "Shares Plan").
Under the ISO Plan, key employees may be granted incentive stock options,
and/or nonqualified stock options, to purchase shares of Bell Atlantic's common
stock at prices not less than the fair market value of the stock on the date of
the option grant. Under the ISO Plan, certain key employees may receive reload
options upon tendering shares of Bell Atlantic stock to exercise options. In
1991 and prior years, stock appreciation rights ("SARs") were granted to certain
officers in tandem with stock options under the ISO Plan. No SARs have been
granted since 1991.
In 1994, the Bell Atlantic "Options Plus" Plan was adopted. Nonqualified
stock options may be granted under the plan to approximately 800 managers below
the rank of officer, in place of a portion of each such manager's annual cash
bonus incentive.
The Shares Plan provides for the granting of awards to certain key
employees, in the form of shares of Bell Atlantic common stock. A key
employee may receive the distributions of shares at the end of the applicable
performance measurement period or the employee may elect to defer the
distribution of the awards for one or more years. Awards are based on the
total return of Bell Atlantic stock in comparison to the total return on the
stock of a number of other telecommunications companies. Authority to make
new grants under the Shares Plan expired in December 1994. Final awards were
distributed in January 1996.
Certain key employees receive awards under the Company's Short Term
Incentive Plan ("STIP"). Under the STIP, 80% of the amount of the awards is
payable in cash and 20% is deferred for future distribution in the form of
Bell Atlantic common stock. Activity associated with the deferred stock
portion of the STIP awards is included with the Shares Plan activity in the
Performance Share Awards section below.
Stock options, SARs and performance share awards under plans maintained
by Bell Atlantic and its subsidiaries are as follows:
<TABLE>
<CAPTION>
Weighted
Average Price
of Stock Performance
Stock Options SARs Options Share Awards
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1992 2,412,202 15,402 $ 48.68 1,001,746
Granted 930,219 - 53.45 91,258
Exercised/Distributed (664,753) - 47.77 (280,049)
Canceled (95,100) (2,742) 52.08 (76,576)
------------ ------ -----------
Outstanding at December 31, 1993 2,582,568 12,660 50.50 736,379
Granted 5,838,885 - 54.75 61,999
Exercised/Distributed (177,796) - 46.86 (145,804)
Canceled (326,323) - 54.69 (23,125)
------------ ------- -----------
Outstanding at December 31, 1994 7,917,334 12,660 53.55 629,449
Granted 3,798,970 - 51.06 70,588
Exercised/Distributed (1,332,155) - 52.27 (106,879)
Canceled (350,609) (6,160) 52.53 (21,634)
------------ ------ -----------
Outstanding at December 31, 1995 10,033,540 6,500 52.81 571,524
============ ====== ===========
</TABLE>
At December 31, 1995, stock options to purchase 6,258,259 shares of common
stock were exercisable under the ISO Plan, and 274,920 shares were exercisable
under Options Plus. A total of 10,879,082 and 14,003,993 shares of common stock
were available for the granting of stock options under the ISO Plan and for
distributions of shares under the Shares Plan, as of December 31, 1995 and 1994,
respectively. There is no established limit on the number of options granted
pursuant to Options Plus. At December 31, 1995, employees had deferred receipt
of 309,842 shares which had previously been awarded under the STIP and Shares
Plan.
37
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements continued
- --------------------------------------------------------------------------------
(14) EMPLOYEE BENEFITS
PENSION PLANS
Substantially all of the Company's management and associate employees are
covered under noncontributory defined benefit pension plans. The pension benefit
formula is based on a flat dollar amount per year of service according to job
classification under the associate plan. The pension benefit formula for plans
covering management employees in 1995 and prior years is based on a stated
percentage of adjusted career average earnings. The Company's objective in
funding the plans is to accumulate funds at a relatively stable level over
participants' working lives so that benefits are fully funded at retirement.
Plan assets consist principally of investments in domestic and foreign corporate
equity securities, U.S. and foreign government and corporate debt securities,
and real estate.
Effective January 1, 1996, the plan covering management employees was
converted to a cash balance plan. Under the cash balance plan, pension benefits
are determined by a combination of compensation credits based on age and service
and individual account-based interest credits. Each management employee's
opening account balance is based on accrued pension benefits as of December 31,
1995, and converted to a lump-sum amount determined under the prior plan's
provisions. The lump-sum value is multiplied by a transition factor, based on
age and service, to arrive at the opening balance.
Pension cost is composed of the following:
<TABLE>
<CAPTION>
(Dollars in Millions)
- -------------------------------------------------------------------------------------------------------
Years Ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Benefits earned during the year $ 162.6 $ 196.4 $ 162.7
Interest on projected benefit obligation 820.8 821.1 818.9
Actual return on plan assets (2,559.9) (27.6) (1,731.7)
Deferral of difference between actual
and assumed returned on plan assets 1,703.0 (817.7) 898.3
Net amortization (64.8) (24.2) .9
------------ ------------ ------------
Pension cost $ 61.7 $ 148.0 $ 149.1
============ ============ ============
</TABLE>
The reduction in 1995 pension cost is principally due to an increase in the
discount rate from 7.25% at December 31, 1993 to 8.25% at December 31, 1994, and
plan changes.
38
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements continued
- --------------------------------------------------------------------------------
Note 14 continued
The following table sets forth the pension plans' funded status and amounts
recognized in the Company's Consolidated Balance Sheets as of December 31:
<TABLE>
<CAPTION>
(Dollars in Millions)
--------------------------------
1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Benefits based on service to date and present salary levels
Vested $ 8,747.2 $ 7,387.2
Nonvested 1,847.1 1,674.8
------------ ------------
Accumulated benefit obligation 10,594.3 9,062.0
Additional benefits related to estimated future salary levels 708.9 1,061.6
------------ ------------
Projected benefit obligation 11,303.2 10,123.6
------------ ------------
Fair value of plan assets 13,218.9 11,470.1
------------ ------------
Plan assets in excess of projected benefit obligation (1,915.7) (1,346.5)
Unrecognized net gain 2,565.8 1,818.9
Unamortized prior service cost 3.4 109.0
Unamortized net transition asset 173.6 192.1
Additional minimum liability for nonqualified plans 27.7 37.0
------------ ------------
Accrued pension obligation $ 854.8 $ 810.5
============ ============
</TABLE>
The significant assumptions used for the pension measurements were as
follows at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.25% 8.25% 7.25%
Rate of future increases in compensation levels 4.75% 5.25% 5.25%
----- ----- -----
</TABLE>
The expected long-term rate of return on plan assets was 8.25% for 1995,
1994 and 1993.
Pension benefits for approximately 70% of employees are subject to
collective bargaining. Modifications in pension benefits have been bargained
from time to time. Additionally, the Company has amended the benefit formula
under pension plans maintained for its management employees. Substantive
commitments for future amendments to the Company's pension plans have been
reflected in determining the Company's pension cost. The actuarial assumptions
used to determine pension cost are based on financial market interest rates,
past experience, and management's best estimate of future benefit changes and
economic conditions. Changes in these assumptions may impact future pension cost
levels and benefit obligations.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Substantially all of the Company's management and associate employees are
covered under postretirement health and life insurance benefit plans. The
determination of benefit cost for postretirement health benefit plans is based
on comprehensive medical and dental benefit plan provisions. The postretirement
life insurance benefit formula used in the determination of postretirement
benefit cost is primarily based on annual basic pay at retirement. The Company
funds the postretirement health and life insurance benefits of current and
future retirees. Plan assets consist principally of investments in domestic and
foreign corporate equity securities, and U.S. Government and corporate debt
securities.
39
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements continued
- --------------------------------------------------------------------------------
Note 14 continued
Postretirement benefit cost is composed of the following:
<TABLE>
<CAPTION>
(Dollars in Millions)
- --------------------------------------------------------------------------------------------------
Years Ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Benefits earned during the year $ 63.8 $ 81.6 $ 73.3
Interest on accumulated postretirement
benefit obligation 297.6 298.0 302.1
Actual return on plan assets (330.7) 12.4 (163.7)
Net amortization and deferral 237.6 (89.0) 102.7
---------- ---------- ----------
Postretirement benefit cost $ 268.3 $ 303.0 $ 314.4
========== ========== ==========
</TABLE>
Postretirement benefit cost decreased in 1995 principally as a result of an
increase in the discount rate from 7.25% at December 31, 1993 to 8.25% at
December 31, 1994, and the effect of favorable plan experience.
The following table sets forth the postretirement benefit plans' funded
status and the amounts recognized in the Company's Consolidated Balance Sheets
as of December 31:
<TABLE>
<CAPTION>
(Dollars in Millions)
- -----------------------------------------------------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit
obligation attributable to:
Retirees $ 2,503.4 $ 2,143.6
Fully eligible plan participants 368.9 313.5
Other active plan participants 1,384.7 1,340.6
------------ ------------
Total accumulated postretirement benefit obligation 4,257.0 3,797.7
------------ ------------
Fair value of plan assets 1,632.5 1,279.7
------------ ------------
Accumulated postretirement benefit obligation in
excess of plan assets 2,624.5 2,518.0
Unrecognized net gain 145.7 214.7
Unamortized prior service cost (56.7) (60.3)
------------ ------------
Accrued postretirement benefit obligation $ 2,713.5 $ 2,672.4
============ ============
Total accumulated postretirement benefit
obligation by plan:
Health $ 3,747.2 $ 3,367.8
Life insurance 509.8 429.9
------------ ------------
$ 4,257.0 $ 3,797.7
============ ============
Fair value of plan assets by plan:
Health $ 932.1 $ 705.6
Life insurance 700.4 574.1
------------ ------------
$ 1,632.5 $ 1,279.7
============ ============
</TABLE>
Assumptions used in the actuarial computations for postretirement benefits
are as follows at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.25% 8.25% 7.25%
Rate of future increases in compensation levels 4.75 5.25 5.25
Medical cost trend rate:
Year ending 11.00 12.00 13.00
Ultimate (year 2003) 5.00 5.00 5.00
Dental cost trend rate 4.00 4.00 4.00
------- ------- -------
</TABLE>
40
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements continued
- --------------------------------------------------------------------------------
Note 14 continued
The expected long-term rate of return on plan assets was 8.25% for 1995,
1994 and 1993.
A one-percentage-point increase in the assumed health care cost trend rates
for each future year would have increased the aggregate of the service and
interest cost components of 1995 net periodic postretirement benefit cost by
$46.6 million and would have increased the accumulated postretirement benefit
obligation as of December 31, 1995 by $453.8 million.
Postretirement benefits other than pensions for approximately 70% of
employees are subject to collective bargaining agreements and have been modified
from time to time. The Company also has periodically modified benefits under
plans maintained for its management employees. Substantive commitments for
future amendments to the Company's postretirement benefit plans have been
reflected in determining the Company's postretirement benefit cost. The
actuarial assumptions used to determine postretirement benefit cost are based on
financial market interest rates, past experience, and management's best estimate
of future benefit changes and economic conditions. Changes in these assumptions
may impact future postretirement benefit cost levels and benefit obligations.
POSTEMPLOYMENT BENEFITS
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" (Statement No. 112). The cumulative effect at January 1, 1993 of
adopting Statement No. 112 reduced net income by $85.0 million, net of a
deferred income tax benefit of $50.6 million.
In the third quarter of 1994, the Company recorded a pretax charge of
$161.9 million to recognize benefit costs for the separation of employees who
are entitled to benefits under preexisting separation pay plans. The charge,
which was actuarially determined, represents benefits earned through July 1,
1994 for employees who are expected to receive separation payments in the
future.
SAVINGS PLANS AND EMPLOYEE STOCK OWNERSHIP PLANS
The Company has established savings plans to provide opportunities for
eligible employees to save for retirement on a tax-deferred basis and encourage
employees to acquire and maintain an equity interest in the Company. Under these
plans, the Company matches a certain percentage of eligible employee
contributions with shares of the Company's common stock. Two leveraged employee
stock ownership plans (ESOPs) were established to purchase the Company's common
stock and fund the Company's matching contribution. Common stock is allocated
from the ESOP trusts based on the proportion of principal and interest paid on
ESOP debt in a year to the remaining principal and interest due over the term of
the debt. At December 31, 1995, the number of unallocated and allocated shares
of common stock was 8,367,068 and 8,653,180, respectively.
The ESOP trusts were funded by the issuance of $790.0 million in ESOP
Senior Notes. Effective January 1, 1993, the annual interest rate on the ESOP
Senior Notes was reduced from 8.25% to 8.17%. The ESOP Senior Notes are payable
in semiannual installments, which began on January 1, 1990 and end in the year
2000. The ESOP trusts repay the notes, including interest, with funds from the
Company's contributions to the ESOP trusts, as well as dividends received on
unallocated shares of common stock and interest earned on the cash balances of
the ESOP trusts.
Total ESOP cost and trust activity consist of the following:
<TABLE>
<CAPTION>
(Dollars in Millions)
- ---------------------------------------------------------------------------------------------------------
Years Ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Compensation $ 68.0 $ 48.1 $ 45.0
Interest incurred 48.6 48.0 52.9
Dividends (26.0) (29.8) (33.3)
Other trust earnings and expenses, net (.5) (.3) .1
---------- ---------- ----------
Net leveraged ESOP cost 90.1 66.0 64.7
Additional ESOP cost (3.2) 7.1 .9
---------- ---------- ----------
Total ESOP cost $ 86.9 $ 73.1 $ 65.6
========== ========== ==========
Dividends received for debt service $ 43.8 $ 44.1 $ 43.4
========== ========== ==========
Total company contributions to trusts $ 99.1 $ 78.4 $ 80.3
========== ========== ==========
</TABLE>
41
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements continued
- --------------------------------------------------------------------------------
(15) INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (Statement No. 109).
As of January 1, 1993, the Company recorded a tax benefit of $65.2 million,
which has been reflected in the Consolidated Statement of Operations as the
cumulative effect of a change in accounting principle. This tax benefit is
principally attributable to net operating loss (NOL) carryforwards of the Metro
Mobile CTS, Inc. (Metro Mobile) subsidiaries that the Company expected to
realize based on projections of future taxable income.
Upon adoption of Statement No. 109, the effects of required adjustments to
deferred tax balances of the telephone subsidiaries, which would be recognized
in the future for regulatory purposes, were deferred on the balance sheet as
regulatory assets and liabilities, in accordance with Statement No. 71. At
January 1, 1993, the telephone subsidiaries recorded income tax-related
regulatory assets totaling $976.6 million in Other Assets and income tax-related
regulatory liabilities totaling $1,043.8 million in Deferred Credits and Other
Liabilities-Other. During 1993, these regulatory assets were increased by $23.9
million and regulatory liabilities were reduced by $94.1 million for the effect
of the federal income tax rate increase from 34% to 35%, effective January 1,
1993.
The income tax-related regulatory assets and liabilities were eliminated
as a result of the discontinued application of Statement No. 71, effective
August 1, 1994 (see Note 4).
The components of income tax expense from continuing operations are as
follows:
<TABLE>
<CAPTION>
(Dollars in Millions)
-----------------------------------------------------------
Years Ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 1,093.0 $ 1,010.8 $ 814.0
State and local 179.4 194.0 150.0
----------- ----------- -----------
Total 1,272.4 1,204.8 964.0
----------- ----------- -----------
Deferred:
Federal (79.7) (278.0) (107.9)
State and local (15.7) 7.5 2.1
----------- ----------- -----------
Total (95.4) (270.5) (105.8)
----------- ----------- -----------
1,177.0 934.3 858.2
----------- ----------- -----------
Investment tax credits (29.4) (49.4) (66.2)
----------- ----------- -----------
Total income tax expense $ 1,147.6 $ 884.9 $ 792.0
=========== =========== ===========
</TABLE>
Changes in federal and state income tax rates in 1995, 1994 and 1993 did
not have a material impact on income tax expense.
42
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements continued
- --------------------------------------------------------------------------------
Note 15 continued
The provision for income taxes varies from the amount computed by applying
the statutory federal income tax rate to income before provision for income
taxes. The difference is attributable to the following factors:
<TABLE>
<CAPTION>
Years Ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Investment tax credits (.6) (2.2) (2.6)
State income taxes, net of federal tax benefits 3.4 5.4 3.9
Benefit of rate differential applied to reversing
timing differences - (1.0) (2.6)
Other, net .3 1.5 1.1
----- ----- -----
Effective income tax rate 38.1% 38.7% 34.8%
===== ===== =====
</TABLE>
Significant components of deferred tax liabilities (assets) are as follows
at December 31:
<TABLE>
<CAPTION>
(Dollars in Millions)
---------------------------------------
1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation $ 2,019.4 $ 2,171.6
Leasing activities 774.1 869.8
Other 465.7 418.9
------------- -------------
3,259.2 3,460.3
------------- -------------
Deferred tax assets:
Employee benefits (1,593.7) (1,553.1)
Investment tax credits (56.6) (69.3)
Net operating loss carryforwards:
Federal - (105.8)
State (12.0) (22.5)
Advance payments (48.5) (51.5)
Other (520.1) (548.6)
------------- -------------
(2,230.9) (2,350.8)
------------- -------------
Valuation allowance 9.6 22.4
------------- -------------
Net deferred tax liability $ 1,037.9 $ 1,131.9
============= =============
</TABLE>
Deferred tax assets include approximately $1,108 million and $1,083 million
at December 31, 1995 and 1994, respectively, related to postretirement benefit
costs recognized in accordance with Statement of Financial Accounting Standards
No. 106, "Accounting for Postretirement Benefits Other Than Pensions." This
deferred tax asset will gradually be realized over the estimated lives of
current retirees and employees.
In 1995, the Company utilized the remaining federal NOL carryforwards of
the Metro Mobile subsidiaries as a result of the sale of certain cellular
properties (see Note 2). At December 31, 1995, NOL carryforwards for state
income tax purposes were $188.5 million (excluding amounts attributable to
leveraged leases) and expire from 1996 to 2009.
Based on projections of future taxable income, the Company expects to
realize future tax benefits of state NOL carryforwards in the amount of $7.7
million.
The valuation allowance required under Statement No. 109 primarily
represents tax benefits of certain state NOL carryforwards and other deferred
state tax assets, which may expire unutilized. During 1995, the valuation
allowance decreased $12.8 million as a result of the disposition of certain
nonregulated subsidiaries and the write-off of state NOLs that will expire prior
to utilization.
43
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements continued
- --------------------------------------------------------------------------------
(16) ADDITIONAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
(Dollars in Millions)
- -------------------------------------------------------------------------------------------
December 31, 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEETS:
Accounts payable and accrued liabilities:
Accounts payable $ 1,668.9 $ 1,595.2
Accrued expenses 513.1 625.0
Accrued vacation pay 242.4 251.5
Accrued taxes 195.9 137.2
Interest payable 103.2 128.5
----------- -----------
$ 2,723.5 $ 2,737.4
=========== ===========
Other current liabilities:
Advance billings and customer deposits $ 412.9 $ 450.7
Dividend payable 306.4 301.0
----------- -----------
$ 719.3 $ 751.7
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
(Dollars in Millions)
- ---------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSOLIDATED STATEMENTS OF CASH FLOWS:
Cash paid during the year for:
Interest, net of amounts capitalized $ 564.1 $ 569.1 $ 680.5
Income taxes, net of amounts refunded 1,182.1 1,283.7 844.8
Noncash investing and financing activities:
Conversion of accounts receivable
to note receivable 3.4 - -
Note receivable on sale of business - 435.0 -
Note receivable on sale of asset - 39.0 -
Acquisition of plant under capital leases 14.0 11.9 13.6
Common stock issued for incentive plans 4.0 5.3 24.0
Common stock issued for acquisitions 5.5 1.5 4.2
Contribution of net assets to joint ventures:
Bell Atlantic NYNEX Mobile 1,178.1 - -
Other 16.4 1.6 .2
CONSOLIDATED STATEMENTS OF OPERATIONS:
Interest expense incurred, net of amounts capitalized 571.1 624.6 719.6
Capitalized interest 64.4 19.1 3.8
------------ ------------ ------------
</TABLE>
Interest expense incurred includes $10.1 million in 1995, $42.5 million in
1994 and $107.5 million in 1993 related to the Company's lease financing
business. Such interest expense is classified as other operating expenses.
Income taxes, as well as payroll, gross receipts, property, capital stock
and other taxes, totaled $2,026.8 million for 1995.
Included in operating expenses are amounts billed by Bell Communications
Research, Inc. (Bellcore). Such expenses for 1995, 1994 and 1993 were $103.7
million, $99.8 million and $143.2 million, respectively, for various network
planning, engineering, and software development projects. Bellcore expenses in
1994 include reimbursements of approximately $50 million from other Bellcore
owners in connection with their decision to participate in the Advanced
Intelligent Network project. This project previously had been supported entirely
by the Company.
Total advertising expense amounted to $122.0 million in 1995, $122.6
million in 1994 and $169.0 million in 1993.
44
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements continued
- --------------------------------------------------------------------------------
(17) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in Millions, Except Per Share Amounts)
------------------------------------------------------------------------------------------------------
Income Before
Operating Operating Income Before Extraordinary Items
Quarter Ended Revenues Income Extraordinary Items Per Common Share Net Income (Loss)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995:
March 31 $ 3,449.7 $ 831.5 $ 414.5 $ .95 $ 414.5
June 30 3,564.5 843.0 447.1 1.02 447.1
September 30/*/ 3,261.1 719.4 604.8 1.38 604.8
December 31 3,154.2 692.3 395.4 .90 391.9
-------------- -------------- -------------- -------------- --------------
1994:
March 31 $ 3,419.6 $ 748.8 $ 395.9 $ .91 $ 389.2
June 30 3,430.0 797.5 415.4 .95 415.4
September 30/**/ 3,455.3 591.0 275.7 .63 (1,874.3)
December 31 3,486.5 667.3 314.9 .72 314.9
-------------- -------------- -------------- -------------- --------------
</TABLE>
* Net income for the third quarter of 1995 includes a gain of approximately
$200 million related to the sale of certain cellular properties in connection
with the formation of the Bell Atlantic NYNEX Mobile partnership (see
Note 2).
** The loss for the third quarter of 1994 includes an extraordinary charge of
$2,150.0 million, net of an income tax benefit of $1,498.4 million, related
to the discontinuation of regulatory accounting principles by the Company's
telephone subsidiaries (see Note 4).
45
<PAGE>
EXHIBIT 21
Bell Atlantic Subsidiaries
- --------------------------
Anderson CellTelCo
Atlantic West B.V.
BA Parkway Associates
BA Parkway Associates II
BABS Australia Pty. Ltd.
BAC Financial Services International B.V.
BAC International - The Netherlands B.V.
BAC International - The Netherlands B.V. Sucursal en Espana
BACPE, Inc.
BAP - 1760 Market, Inc.
BAP - 1800 Arch Land Parcel, Inc.
BAP - 6755 Snowdrift, Inc.
BAP - 7150 Windsor, Inc.
BAP - Caroline, Inc.
BAP-Durham, Inc.
BAPCI Services, Inc.
BATCL - 1987 - I, Inc.
BATCL - 1987 - II, Inc.
BATCL - 1987 - III, Inc.
BATCL-1991-I, Inc.
BATCL-1991-II, Inc.
BATCO-1989-II, Inc.
BATCO-1989-III, Inc.
Bell Atlantic - Delaware, Inc.
Bell Atlantic - Maryland, Inc.
Bell Atlantic - New Jersey, Inc.
Bell Atlantic - Pennsylvania, Inc.
Bell Atlantic - Virginia, Inc.
Bell Atlantic - Washington, D.C., Inc.
Bell Atlantic - West Virginia, Inc.
Bell Atlantic Administrative Services, Inc.
Bell Atlantic Asia, Inc.
Bell Atlantic Australia Pty. Limited
Bell Atlantic Austria, Inc.
Bell Atlantic Aviation Services, Inc.
Bell Atlantic Benelux, Inc.
Bell Atlantic Capital Corporation
Bell Atlantic Capital Funding Corp.
Bell Atlantic Cellular Consulting Group, Inc.
Bell Atlantic China Holdings Ltd.
Bell Atlantic Communications and Construction Services, Inc.
Bell Atlantic Computer Services International, Inc.
Bell Atlantic Construction Services, Inc.
Bell Atlantic Czech Republic, Inc.
Bell Atlantic Directory Graphics, Inc.
Bell Atlantic Electronic Publishing, Inc.
Bell Atlantic Enterprises International, Inc.
Bell Atlantic Entertainment and Information Services Group, Inc.
<PAGE>
Bell Atlantic Europe S.A.
Bell Atlantic Federal Integrated Systems, Inc.
Bell Atlantic Federal Integrated Systems - Puerto Rico, Inc.
Bell Atlantic Financial Services, Inc.
Bell Atlantic Foreign Sales Corporation
Bell Atlantic Foundation
Bell Atlantic Gulf Holdings Ltd.
Bell Atlantic Holdings Limited
Bell Atlantic India, Inc.
Bell Atlantic Indonesia, Inc.
Bell Atlantic Information Systems, Inc.
Bell Atlantic InfoSpeed Corp.
Bell Atlantic Integrated Systems, Inc.
Bell Atlantic International - Italia S.r.L.
Bell Atlantic International Ventures, Inc.
Bell Atlantic International, Inc.
Bell Atlantic Internet Solutions, Inc.
Bell Atlantic Investment Development Corporation
Bell Atlantic Investments, Inc.
Bell Atlantic Land Development, Inc.
Bell Atlantic Latin America Holdings, Inc.
Bell Atlantic Market Research, Inc.
Bell Atlantic Media Ventures, Inc.
Bell Atlantic Meridian Systems
Bell Atlantic Mexico, S.A. de C.V.
Bell Atlantic Mobile Systems of Allentown, Inc.
Bell Atlantic Mobile Systems of Northern New Jersey, Inc.
Bell Atlantic Mobile Systems, Inc.
Bell Atlantic Mobilfunk GmbH
Bell Atlantic Network Funding Corporation
Bell Atlantic Network Integration, Inc.
Bell Atlantic Network Services, Inc.
Bell Atlantic New Holdings, Inc.
Bell Atlantic New Zealand Holdings, Inc.
Bell Atlantic NSI Holdings, Inc.
Bell Atlantic NYNEX Mobile, Inc.
Bell Atlantic Paging, Inc.
Bell Atlantic PAI Comunicaciones C.A.
Bell Atlantic Payment Systems, Inc.
Bell Atlantic Personal Communications, Inc.
Bell Atlantic Poland, Inc.
Bell Atlantic Professional Services, Inc.
Bell Atlantic Properties, Inc.
Bell Atlantic Property Holdings II, Inc.
Bell Atlantic Property Holdings III, Inc.
Bell Atlantic Puerto Rico, Inc.
Bell Atlantic TELE-TV Holdings, Inc.
Bell Atlantic Telecommunications Systems, Inc.
Bell Atlantic TeleProducts Corp.
Bell Atlantic Telezone Holdings, Inc.
Bell Atlantic TriCon Leasing Corporation
Bell Atlantic Utilities Systems, Inc.
Bell Atlantic Vehicle Management
Bell Atlantic Vehicle Management, Inc.
<PAGE>
Bell Atlantic Ventures II, Inc.
Bell Atlantic Ventures XXIII, Inc.
Bell Atlantic Ventures XXV, Inc.
Bell Atlantic Ventures XXVIII, Inc.
Bell Atlantic Video Services Company
Bell Atlantic Video Services, Inc.
Bell Atlanticom Systems, Inc.
Bell Communications Research
CAI Wireless Systems, Inc.
Chesapeake Directory Sales Company
Columbia Cellular Telephone Company
Essar Commvision Limited
Essar Telecom Limited
EuroTel Bratislava Ltd.
EuroTel Praha Ltd.
FBA Computer Technology Services
FM America Corp.
Greenville Cellular Telephone Company
HKP Partners of New Zealand Limited
Howard W. Sams & Company
ICA Foreign Financial, Inc.
Infostrada S.p.A.
IR Northlight II Associates
Iron Run Venture I
Iron Run Venture II
Iron Run Venture III
Las Cruces Cellular Telephone Company
Metro Mobile CTS MIS, Inc.
Metro Mobile CTS of Albuquerque, Inc.
Metro Mobile CTS of Anderson, Inc.
Metro Mobile CTS of Charlotte, Inc.
Metro Mobile CTS of Cherokee, Inc.
Metro Mobile CTS of Columbia, Inc.
Metro Mobile CTS of El Paso, Inc.
Metro Mobile CTS of Fairfield County, Inc.
Metro Mobile CTS of Greenville, Inc.
Metro Mobile CTS of Hartford, Inc.
Metro Mobile CTS of Lancaster, Inc.
Metro Mobile CTS of Las Cruces, Inc.
Metro Mobile CTS of New Bedford, Inc.
Metro Mobile CTS of New Haven, Inc.
Metro Mobile CTS of New London, Inc.
Metro Mobile CTS of Newport, Inc.
Metro Mobile CTS of Phoenix, Inc.
Metro Mobile CTS of Pittsfield, Inc.
Metro Mobile CTS of Providence, Inc.
Metro Mobile CTS of Springfield, Inc.
Metro Mobile CTS of the Northeast, Inc.
Metro Mobile CTS of the Southeast, Inc.
Metro Mobile CTS of the Southwest, Inc.
Metro Mobile CTS of Tucson, Inc.
Metro Mobile CTS of Windham, Inc.
Metro Mobile of Venezuela, Inc.
Metro Mobile Real Estate Development of New York, Inc.
<PAGE>
Metro Mobile Transport, Inc.
MMDS Holdings II, Inc.
MMDS Holdings, Inc.
National Telephone Directory Company
New Bedford Cellular Telephone Company
Omnitel-Pronto Italiani S.p.A
Omnitel-Sistemi Radiocellulari Italiani S.p.A.
P.T. Citra Sari Makmur
Pacific Star Communications (NSW) Pty. Ltd.
Pacific Star Communications (QLD) Pty. Ltd.
Pacific Star Communications Pty. Ltd.
Penn-Del Directory Company
Portal Investments, Inc.
Sodalia S.p.A.
Southwestco Wireless, Inc.
Springfield Cellular Telephone Company
The Bell Atlantic Systems Group, Inc.
The Penn's Landing Marina Corporation
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Bell Atlantic Corporation on Form S-3 (File No. 33-30642), Form S-8 (File No. 2-
97281), Form S-3 (File No. 33-8451), Form S-8 (File No. 33-10377), Form S-8
(File No. 33-10378), Form S-8 (File No. 33-58681), Form S-8 (File No. 33-58683),
Form S-8 (File No. 333-00409), Form S-3 (File No. 33-36551), Form S-3 (File No.
33-49085), Form S-3 (File No. 33-62393), Form S-4 (File No. 33-49025), of our
reports dated February 5, 1996, which include an explanatory paragraph stating
that the Company discontinued accounting for the operations of its telephone
subsidiaries in accordance with Statement of Financial Accounting Standards No.
71, "Accounting for the Effects of Certain Types of Regulation," effective
August 1, 1994, and changed its method of accounting for income taxes and
postemployment benefits in 1993, on our audits of the consolidated financial
statements and financial statement schedule of the Company and its subsidiaries
as of December 31, 1995 and December 31, 1994, and for each of three years in
the period ended December 31, 1995, which reports are incorporated by reference
or included in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 27, 1996
<PAGE>
POWER OF ATTORNEY
The undersigned does hereby constitute and appoint Raymond W. Smith
and William O. Albertini, or either of them (with full power to act without the
other), his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to sign in the name and on behalf of the
undersigned, in any and all capacities in which the signature of the undersigned
would be appropriate, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and any and all amendments thereto for filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and the rules, regulations and requirements of the Securities
and Exchange Commission, and generally to do and perform all things which such
attorneys, or any of them, may deem necessary or advisable in connection with
the preparation, signing and filing of such Annual Report as fully and
effectually in all respects as the undersigned could do if personally present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 25th day of March, 1996.
/s/ WILLIAM W. ADAMS
-----------------------------------
William W. Adams
<PAGE>
POWER OF ATTORNEY
The undersigned does hereby constitute and appoint Raymond W. Smith
and William O. Albertini, or either of them (with full power to act without the
other), his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to sign in the name and on behalf of the
undersigned, in any and all capacities in which the signature of the undersigned
would be appropriate, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and any and all amendments thereto for filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and the rules, regulations and requirements of the Securities
and Exchange Commission, and generally to do and perform all things which such
attorneys, or any of them, may deem necessary or advisable in connection with
the preparation, signing and filing of such Annual Report as fully and
effectually in all respects as the undersigned could do if personally present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 26th day of March, 1996.
/s/ THOMAS E. BOLGER
-----------------------------------
Thomas E. Bolger
<PAGE>
POWER OF ATTORNEY
The undersigned does hereby constitute and appoint Raymond W. Smith
and William O. Albertini, or either of them (with full power to act without the
other), his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to sign in the name and on behalf of the
undersigned, in any and all capacities in which the signature of the undersigned
would be appropriate, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and any and all amendments thereto for filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and the rules, regulations and requirements of the Securities
and Exchange Commission, and generally to do and perform all things which such
attorneys, or any of them, may deem necessary or advisable in connection with
the preparation, signing and filing of such Annual Report as fully and
effectually in all respects as the undersigned could do if personally present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 25th day of March, 1996.
/s/ FRANK C. CARLUCCI
-----------------------------------
Frank C. Carlucci
<PAGE>
POWER OF ATTORNEY
The undersigned does hereby constitute and appoint Raymond W. Smith
and William O. Albertini, or either of them (with full power to act without the
other), his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to sign in the name and on behalf of the
undersigned, in any and all capacities in which the signature of the undersigned
would be appropriate, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and any and all amendments thereto for filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and the rules, regulations and requirements of the Securities
and Exchange Commission, and generally to do and perform all things which such
attorneys, or any of them, may deem necessary or advisable in connection with
the preparation, signing and filing of such Annual Report as fully and
effectually in all respects as the undersigned could do if personally present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 22nd day of March, 1996.
/s/ WILLIAM G. COPELAND
-----------------------------------
William G. Copeland
<PAGE>
POWER OF ATTORNEY
The undersigned does hereby constitute and appoint Raymond W. Smith
and William O. Albertini, or either of them (with full power to act without the
other), his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to sign in the name and on behalf of the
undersigned, in any and all capacities in which the signature of the undersigned
would be appropriate, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and any and all amendments thereto for filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and the rules, regulations and requirements of the Securities
and Exchange Commission, and generally to do and perform all things which such
attorneys, or any of them, may deem necessary or advisable in connection with
the preparation, signing and filing of such Annual Report as fully and
effectually in all respects as the undersigned could do if personally present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 26th day of March, 1996.
/s/ JAMES H. GILLIAM, JR.
-----------------------------------
James H. Gilliam, Jr.
<PAGE>
POWER OF ATTORNEY
The undersigned does hereby constitute and appoint Raymond W. Smith
and William O. Albertini, or either of them (with full power to act without the
other), his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to sign in the name and on behalf of the
undersigned, in any and all capacities in which the signature of the undersigned
would be appropriate, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and any and all amendments thereto for filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and the rules, regulations and requirements of the Securities
and Exchange Commission, and generally to do and perform all things which such
attorneys, or any of them, may deem necessary or advisable in connection with
the preparation, signing and filing of such Annual Report as fully and
effectually in all respects as the undersigned could do if personally present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 26th day of March, 1996.
/s/ THOMAS H. KEAN
-----------------------------------
Thomas H. Kean
<PAGE>
POWER OF ATTORNEY
The undersigned does hereby constitute and appoint Raymond W. Smith
and William O. Albertini, or either of them (with full power to act without the
other), his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to sign in the name and on behalf of the
undersigned, in any and all capacities in which the signature of the undersigned
would be appropriate, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and any and all amendments thereto for filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and the rules, regulations and requirements of the Securities
and Exchange Commission, and generally to do and perform all things which such
attorneys, or any of them, may deem necessary or advisable in connection with
the preparation, signing and filing of such Annual Report as fully and
effectually in all respects as the undersigned could do if personally present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 26th day of March, 1996.
/s/ JOHN C. MAROUS, JR.
-----------------------------------
John C. Marous, Jr.
<PAGE>
POWER OF ATTORNEY
The undersigned does hereby constitute and appoint Raymond W. Smith
and William O. Albertini, or either of them (with full power to act without the
other), his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to sign in the name and on behalf of the
undersigned, in any and all capacities in which the signature of the undersigned
would be appropriate, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and any and all amendments thereto for filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and the rules, regulations and requirements of the Securities
and Exchange Commission, and generally to do and perform all things which such
attorneys, or any of them, may deem necessary or advisable in connection with
the preparation, signing and filing of such Annual Report as fully and
effectually in all respects as the undersigned could do if personally present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 26th day of March, 1996.
/s/ JOHN F. MAYPOLE
-----------------------------------
John F. Maypole
<PAGE>
POWER OF ATTORNEY
The undersigned does hereby constitute and appoint Raymond W. Smith
and William O. Albertini, or either of them (with full power to act without the
other), his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to sign in the name and on behalf of the
undersigned, in any and all capacities in which the signature of the undersigned
would be appropriate, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and any and all amendments thereto for filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and the rules, regulations and requirements of the Securities
and Exchange Commission, and generally to do and perform all things which such
attorneys, or any of them, may deem necessary or advisable in connection with
the preparation, signing and filing of such Annual Report as fully and
effectually in all respects as the undersigned could do if personally present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 26th day of March, 1996.
/s/ JOSEPH NEUBAUER
-----------------------------------
Joseph Neubauer
<PAGE>
POWER OF ATTORNEY
The undersigned does hereby constitute and appoint Raymond W. Smith
and William O. Albertini, or either of them (with full power to act without the
other), his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to sign in the name and on behalf of the
undersigned, in any and all capacities in which the signature of the undersigned
would be appropriate, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and any and all amendments thereto for filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and the rules, regulations and requirements of the Securities
and Exchange Commission, and generally to do and perform all things which such
attorneys, or any of them, may deem necessary or advisable in connection with
the preparation, signing and filing of such Annual Report as fully and
effectually in all respects as the undersigned could do if personally present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 26th day of March, 1996.
/s/ THOMAS H. O'BRIEN
-----------------------------------
Thomas H. O'Brien
<PAGE>
POWER OF ATTORNEY
The undersigned does hereby constitute and appoint Raymond W. Smith
and William O. Albertini, or either of them (with full power to act without the
other), his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to sign in the name and on behalf of the
undersigned, in any and all capacities in which the signature of the undersigned
would be appropriate, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and any and all amendments thereto for filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and the rules, regulations and requirements of the Securities
and Exchange Commission, and generally to do and perform all things which such
attorneys, or any of them, may deem necessary or advisable in connection with
the preparation, signing and filing of such Annual Report as fully and
effectually in all respects as the undersigned could do if personally present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 26th day of March, 1996.
/s/ ECKHARD PFEIFFER
-----------------------------------
Eckhard Pfeiffer
<PAGE>
POWER OF ATTORNEY
The undersigned does hereby constitute and appoint Raymond W. Smith
and William O. Albertini, or either of them (with full power to act without the
other), his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to sign in the name and on behalf of the
undersigned, in any and all capacities in which the signature of the undersigned
would be appropriate, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and any and all amendments thereto for filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and the rules, regulations and requirements of the Securities
and Exchange Commission, and generally to do and perform all things which such
attorneys, or any of them, may deem necessary or advisable in connection with
the preparation, signing and filing of such Annual Report as fully and
effectually in all respects as the undersigned could do if personally present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 26th day of March, 1996.
/s/ ROZANNE L. RIDGWAY
-----------------------------------
Rozanne L. Ridgway
<PAGE>
POWER OF ATTORNEY
The undersigned does hereby constitute and appoint Raymond W. Smith
and William O. Albertini, or either of them (with full power to act without the
other), his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to sign in the name and on behalf of the
undersigned, in any and all capacities in which the signature of the undersigned
would be appropriate, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and any and all amendments thereto for filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and the rules, regulations and requirements of the Securities
and Exchange Commission, and generally to do and perform all things which such
attorneys, or any of them, may deem necessary or advisable in connection with
the preparation, signing and filing of such Annual Report as fully and
effectually in all respects as the undersigned could do if personally present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 25th day of March, 1996.
/s/ SHIRLEY YOUNG
-----------------------------------
Shirley Young
<PAGE>
POWER OF ATTORNEY
The undersigned does hereby constitute and appoint Raymond W. Smith
and William O. Albertini, or either of them (with full power to act without the
other), his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to sign in the name and on behalf of the
undersigned, in any and all capacities in which the signature of the undersigned
would be appropriate, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and any and all amendments thereto for filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and the rules, regulations and requirements of the Securities
and Exchange Commission, and generally to do and perform all things which such
attorneys, or any of them, may deem necessary or advisable in connection with
the preparation, signing and filing of such Annual Report as fully and
effectually in all respects as the undersigned could do if personally present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 25th day of March, 1996.
/s/ DOREEN A. TOBEN
-----------------------------------
Doreen A. Toben
<PAGE>
POWER OF ATTORNEY
The undersigned does hereby constitute and appoint Raymond W. Smith
and William O. Albertini, or either of them (with full power to act without the
other), his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to sign in the name and on behalf of the
undersigned, in any and all capacities in which the signature of the undersigned
would be appropriate, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and any and all amendments thereto for filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and the rules, regulations and requirements of the Securities
and Exchange Commission, and generally to do and perform all things which such
attorneys, or any of them, may deem necessary or advisable in connection with
the preparation, signing and filing of such Annual Report as fully and
effectually in all respects as the undersigned could do if personally present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 25th day of March, 1996.
/s/ LAWRENCE T. BABBIO, JR.
-----------------------------------
Lawrence T. Babbio, Jr.
<PAGE>
POWER OF ATTORNEY
The undersigned does hereby constitute and appoint Raymond W. Smith
and William O. Albertini, or either of them (with full power to act without the
other), his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to sign in the name and on behalf of the
undersigned, in any and all capacities in which the signature of the undersigned
would be appropriate, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and any and all amendments thereto for filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and the rules, regulations and requirements of the Securities
and Exchange Commission, and generally to do and perform all things which such
attorneys, or any of them, may deem necessary or advisable in connection with
the preparation, signing and filing of such Annual Report as fully and
effectually in all respects as the undersigned could do if personally present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 26th day of March, 1996.
/s/ JAMES G. CULLEN
-----------------------------------
James G. Cullen
<PAGE>
POWER OF ATTORNEY
The undersigned does hereby constitute and appoint William O.
Albertini, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to sign in the name and on behalf of the
undersigned, in any and all capacities in which the signature of the undersigned
would be appropriate, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and any and all amendments thereto for filing with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and the rules, regulations and requirements of the Securities
and Exchange Commission, and generally to do and perform all things which such
attorneys, or any of them, may deem necessary or advisable in connection with
the preparation, signing and filing of such Annual Report as fully and
effectually in all respects as the undersigned could do if personally present.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 26th day of March, 1996.
/s/ RAYMOND W. SMITH
-----------------------------------
Raymond W. Smith
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995 AND
THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 357
<SECURITIES> 0
<RECEIVABLES> 2,576
<ALLOWANCES> 190
<INVENTORY> 133
<CURRENT-ASSETS> 3,873
<PP&E> 33,554
<DEPRECIATION> 17,633
<TOTAL-ASSETS> 24,157
<CURRENT-LIABILITIES> 5,373
<BONDS> 6,407
<COMMON> 438
0
0
<OTHER-SE> 6,246
<TOTAL-LIABILITY-AND-EQUITY> 24,157
<SALES> 0
<TOTAL-REVENUES> 13,430
<CGS> 0
<TOTAL-COSTS> 10,343
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 561
<INCOME-PRETAX> 3,009
<INCOME-TAX> 1,148
<INCOME-CONTINUING> 1,862
<DISCONTINUED> 0
<EXTRAORDINARY> (4)
<CHANGES> 0
<NET-INCOME> 1,858
<EPS-PRIMARY> 4.24
<EPS-DILUTED> 0
</TABLE>
