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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, 1998
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.)
1095 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 395-2121
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock, $.10 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. __
At January 31, 1999, the aggregate market value of the registrant's voting
stock held by nonaffiliates was approximately $93,149,000,000.
At January 31, 1999, 1,553,258,804 shares of the registrant's Common Stock
were outstanding, after deducting 22,987,521 shares held in treasury.
Documents incorporated by reference:
Portions of the registrant's Proxy Statement prepared in connection with
the 1999 Annual Meeting of Shareowners (Part III).
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TABLE OF CONTENTS
ITEM NO. PAGE
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PART I
1. Business .............................................................. 1
2. Properties ............................................................ 14
3. Legal Proceedings ..................................................... 15
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 ............................................................. 16
6. Selected Financial Data ............................................... 16
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................... 16
7A. Quantitative and Qualitative Disclosures About Market Risk ............ 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
UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MARCH 29, 1999
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PART I
Item 1. Business
GENERAL
Bell Atlantic Corporation was incorporated in 1983 under the laws of the State
of Delaware and completed a merger with NYNEX Corporation on August 14, 1997.
Our principal executive offices are located at 1095 Avenue of the Americas, New
York, New York 10036 (telephone number 212-395-2121).
Bell Atlantic is a telecommunications company that operates in a region
stretching from Maine to Virginia. Our principal operating subsidiaries are: New
York Telephone Company, Bell Atlantic - New Jersey, Inc., Bell Atlantic -
Pennsylvania, Inc., New England Telephone and Telegraph Company, Bell Atlantic -
Maryland, Inc., Bell Atlantic - Virginia, Inc., Bell Atlantic - West Virginia,
Inc., Bell Atlantic - Delaware, Inc., Bell Atlantic - Washington, D.C., Inc. and
Bell Atlantic Mobile.
We have four reportable segments, which we operate and manage as strategic
business units and we organize by products and services. Our segments and their
principal activities consist of the following:
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Domestic Telecom Domestic wireline telecommunications services - primarily
our nine operating telephone subsidiaries that provide local
telephone services from Maine to Virginia, including voice
and data transport, enhanced and custom calling features,
network access, directory assistance, private lines and
public telephones. This segment also provides customer
premises equipment distribution, systems integration,
billing and collections, and Internet access services.
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Global Wireless Wireless telecommunications services to customers in 24
states in the United States and foreign wireless investments
servicing customers in Latin America, Europe and the Pacific
Rim.
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Directory Domestic and international publishing businesses, including
print directories and Internet-based shopping guides, as
well as website creation and hosting and other electronic
commerce services. This segment has operations principally
in the United States and Central Europe.
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Other Businesses International wireline telecommunications investments
primarily in Europe and the Pacific Rim and lease financing
and other businesses.
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You can find financial information with respect to our segments in Note 17 to
the consolidated financial statements.
PROPOSED BELL ATLANTIC-GTE MERGER
Bell Atlantic and GTE Corporation (GTE) have announced a proposed merger of
equals under a definitive merger agreement dated as of July 27, 1998. Under the
terms of the agreement, GTE shareholders will receive 1.22 shares of Bell
Atlantic common stock for each share of GTE common stock that they own. Bell
Atlantic shareholders will continue to own their existing shares after the
merger.
We expect the merger to qualify as a pooling of interests, which means that for
accounting and financial purposes, the companies will be treated as if they had
always been combined. The completion of the merger is subject to a number of
conditions, including certain regulatory approvals, receipt of opinions that the
merger will be tax-free, and the approval of the shareholders of both Bell
Atlantic and GTE.
We believe that the merger will result in significant opportunities for cost
savings, revenue growth, technological development and other benefits. The
combined company will achieve synergies through economies of scope and scale,
the elimination of duplicative expenditures and the consistent use of the best
practices of Bell Atlantic and GTE in cost control and product offerings.
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Based on anticipated revenue and expense synergies, we expect that the merger
will improve earnings per share, excluding merger-related charges, in the first
year following the completion. We estimate that the merger will also generate
significant capital synergies, producing higher capital efficiency and higher
cash flow and margin growth. By the third year following the completion of the
merger, we expect:
. annual revenue synergies of approximately $2 billion, primarily from
improved market penetration for value-added services and faster development
of our data and long distance businesses, which, at an estimated operating
margin of 25%, will produce $500 million in incremental operating income;
. annual expense savings of approximately $2 billion, with savings generated
from operating and procurement synergies, reduced corporate overheads, the
migration of long distance traffic onto GTE's network, and greater
efficiency in wireless operations; and
. annual capital synergies of approximately $500 million through volume
purchasing and the elimination of certain capital costs associated with
building a data network in our current territory.
We are targeting revenue growth of 8-10% and earnings per share growth of 13-15%
(excluding merger-related charges) in each of the first two years following the
completion of the merger. By the third year after the completion of the merger,
we are targeting revenue growth in excess of 10% and earnings per share growth
in excess of 15% (excluding merger-related charges).
As a result of the merger, the combined company will incur direct incremental
and transition costs currently estimated at $1.6 billion to $2.0 billion
(pre-tax) in connection with completing the transaction and integrating the
operations of GTE and Bell Atlantic. These costs consist principally of systems
modification costs, costs associated with the elimination and consolidation of
duplicate facilities, employee severance and relocation resulting from the
merger, branding, compensation arrangements, and professional and registration
fees. While the exact timing, nature and amount of these costs is subject to
change, we anticipate that the combined company will record a charge of
approximately $375 million (pre-tax) for direct incremental costs in the quarter
in which the merger is completed. Transition costs of approximately $1.2 billion
to $1.6 billion (pre-tax) will be incurred over the three years following
completion of the merger.
DOMESTIC TELECOM
OPERATIONS
Our Domestic Telecom segment, primarily comprised of our nine operating
telephone subsidiaries, provided approximately 81% of 1998 operating revenues.
The operating telephone subsidiaries presently serve a territory consisting of
31 LATAs, or local access and transport areas, and provide mainly two types of
telecommunications services: exchange telecommunications and exchange access.
. Exchange telecommunications service is the transmission of
telecommunications among customers located within a local calling area
within a LATA. Examples of exchange telecommunications services include
switched local residential and business services, local private line voice
and data services, and Centrex services. We also provide toll services
within a LATA, including Wide Area Telecommunications Service and intraLATA
toll (long distance) service.
. Exchange access service links a customer's premises and the transmission
facilities of other telecommunications carriers, generally interLATA (long
distance) carriers. Examples of exchange access services include switched
access and special access services.
We have organized our Domestic Telecom segment into business units operating
across our telephone subsidiaries. The business units focus on specific market
segments. We are not dependent on any single customer. The telephone
subsidiaries remain responsible within their respective service areas for the
provision of telephone services, financial performance and regulatory matters.
The Consumer unit markets communications services to residential customers, as
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well as operator services, within our territory (22 million households and 63
million people). 1998 revenues were approximately $10 billion, representing
approximately 39% of Domestic Telecom's aggregate revenues. These revenues were
derived primarily from the provision of telephone services to residential users.
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The General Business unit markets communications and information services to
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small and medium-sized businesses, as well as pay telephone services, within our
territory. The General Business unit has approximately 2.1 million customers in
our territory and generated approximately $5 billion in revenues in 1998,
representing approximately 19% of Domestic Telecom's aggregate revenues.
The Enterprise Business unit markets communications and information technology
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and services to large businesses and to departments, agencies and offices of the
executive, judicial and legislative branches of the federal and state
government. 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 optimization (disaster avoidance,
911 service, intelligent vehicle highway systems), video services (distance
learning, telemedicine, videoconferencing) and interactive multimedia
applications services. The Enterprises Business unit also includes the Data
Solutions Group which provides data transmission and network integration
services (integrating multiple geographically disparate networks into one
system), as well as IP based solutions (communications using internet protocol
and internet services, including high-speed internet access and web hosting).
Global Networks, a unit of Data Solutions Group, is building a next generation
long distance network using ATM (asynchronous transfer mode) technology. 1998
revenues were approximately $5 billion, representing approximately 19% of
Domestic Telecom's aggregate revenues.
The Network Services unit markets (i) switched and special access to the
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telephone subsidiaries' local exchange networks, and (ii) billing and collection
services, including recording, rating, bill processing and bill rendering. 1998
revenues were approximately $6 billion, representing approximately 23% of
Domestic Telecom's aggregate revenues. Approximately 75% of total Network
Services revenues were derived from interexchange carriers. 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 which resell network connections to their own customers.
TELECOMMUNICATIONS ACT OF 1996
The Telecommunications Act of 1996 (the "1996 Act") became effective on February
8, 1996, and replaced the Modification of Final Judgment (the "MFJ"), a consent
decree that arose out of an antitrust action brought by the United States
Department of Justice against AT&T. In general, the 1996 Act includes provisions
that open local exchange markets to competition and permit Bell Operating
Companies (BOC), including ours, to engage in manufacturing and to provide long
distance service under certain conditions.
First, the 1996 Act permitted us to apply immediately for state approval to
offer long distance services originating outside of the states where our
operating telephone subsidiaries operate as local exchange carriers. Our
wireless businesses also were permitted to immediately offer long distance
services without having to comply with the conditions imposed in waivers granted
under the MFJ.
Second, the 1996 Act permits us to offer in-region long distance services (that
is, services originating in the states where our telephone subsidiaries operate
as local exchange carriers), once we have demonstrated to the Federal
Communications Commission ("FCC") that we have satisfied certain requirements.
The requirements include a 14-point "competitive checklist" of steps which we
must take to help competitors offer local services through resale, through
purchase of unbundled network elements, or through their own networks. We must
also demonstrate to the FCC that our entry into the in-region long distance
market would be in the public interest.
The U.S. Court of Appeals rejected a constitutional challenge to these
provisions, and the Supreme Court recently declined to review that decision.
During the period that the case was pending, we continued to work through the
regulatory process at both the state and federal levels in order to be in a
position to demonstrate compliance with the challenged provisions.
The U. S. Supreme Court recently reversed a U.S. Court of Appeals decision that
had invalidated certain aspects of the FCC rules implementing provisions of the
1996 Act. In particular, the Supreme Court reinstated the FCC's authority to
adopt rules governing the methodology to be used by state commissions in setting
prices for local interconnection and resale arrangements, and reinstated rules
that allow competitors to choose individual terms out of negotiated
interconnection agreements and that prohibit incumbent local telephone companies
from separating network elements that already are combined in the incumbent's
own network.
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The U. S. Supreme Court also decided that the FCC had applied the wrong standard
in determining what elements of their networks incumbent local telephone
companies are obligated to make available to competitors on an unbundled basis.
Among other things, the FCC failed to account for the fact that some elements
are available from other sources. As a result of the decision, the FCC must
conduct a new proceeding to apply the correct standard. Pending that proceeding,
we have informally agreed to continue offering the FCC's previously specified
list of unbundled elements. In addition, a challenge to the substantive merits
of the FCC's pricing rules remains pending in the U.S. Court of Appeals.
In April 1998, our operating telephone subsidiary in New York filed with the New
York State Public Service Commission a statement setting forth additional
commitments that we will make to the FCC in connection with our anticipated
application for permission to enter the in-region long distance market in New
York. Those commitments include terms under which we will offer combinations of
unbundled network elements and an unbundled network element platform (UNE-P) to
competitors wishing to provide basic local and ISDN-BRI service to business or
residential customers. We will offer UNE-P for basic local and ISDN-BRI service
throughout our New York operating area, but UNE-P will not be available to
competitors for other services, or for service to business customers in those
parts of New York City where there is a defined level of local competition from
two or more competitive local exchange carriers. Our commitment to offer UNE-P
will be for four years in New York City and other major urban areas and for six
years in the rest of the state. We believe that the terms of these commitments
generally are consistent with the recent Supreme Court decision.
We expect to file in the second quarter of 1999 an application with the FCC for
permission to enter the in-region long distance market in New York. We hope to
begin offering this service in the third quarter of 1999. Following our
application for New York, we expect next to file applications with the FCC for
Pennsylvania, Massachusetts, New Jersey, Virginia and Maryland and,
subsequently, for the remaining states in our territory. The timing of our long
distance entry in each of our 14 jurisdictions depends on the receipt of FCC
approval.
We are unable to predict definitively the impact that the 1996 Act will
ultimately have on our business, results of operations or financial condition.
The financial impact will depend on several factors, including the timing,
extent and success of competition in our markets, the timing and outcome of
various regulatory proceedings and any appeals, and the timing, extent and
success of our pursuit of new opportunities resulting from the 1996 Act.
FCC REGULATION AND INTERSTATE RATES
The operating telephone subsidiaries are subject to the jurisdiction of the FCC
with respect to interstate services and certain related matters. In 1998, the
FCC continued to implement reforms to the interstate access charge system and to
implement the "universal service" and other requirements of the 1996 Act.
Access Charges
Interstate access charges are the rates long distance carriers pay for use and
availability of our operating telephone subsidiaries' facilities for the
origination and termination of interstate service. The FCC required a phased
restructuring of access charges, which began in January 1998, so that the
telephone subsidiaries' nonusage-sensitive costs will be recovered from long
distance carriers and end-users through flat rate charges, and usage-sensitive
costs will be recovered from long distance carriers through usage-based rates.
In addition, the FCC has required that different levels of usage-based charges
for originating and for terminating interstate traffic be established.
Price Caps
Under the FCC price cap rules that apply to interstate access rates, each year
our price cap index is adjusted downward by a fixed percentage intended to
reflect increases in productivity (the productivity factor) and adjusted upward
by an allowance for inflation (the GDP-PI). The current productivity factor is
6.5 percent. These changes will be reflected in tariff changes that will be
filed to take effect on July 1, 1999.
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In October 1998, the FCC initiated a proceeding with respect to its price cap
rules to determine whether a change in the current productivity factor is
warranted, whether to continue its "market based" approach of allowing market
forces (supplemented by its price cap rules) to determine access charge levels,
and whether to afford additional pricing flexibility for access services. In
addition, we have petitioned the FCC to remove our special access services from
price cap regulation on the grounds that customers of these services have
competitive alternatives available, and a challenge to the FCC order
establishing the 6.5 percent productivity factor is pending in the U.S. Court of
Appeals. We are unable to predict the results of these further proceedings.
Universal Service
The FCC has adopted rules implementing the "universal service" provision of the
1996 Act. As of January 1, 1999, the rules require each of our operating
telephone subsidiaries to contribute approximately 2% of its interstate retail
revenues for high-cost and low-income subsidies. Each of our operating telephone
subsidiaries are also required to contribute a portion of their total retail
revenues for schools, libraries and not-for-profit health care. Our operating
telephone subsidiaries will recover these contributions through interstate
charges to long distance carriers and end-users. Our domestic wireless company
is required to contribute to these universal service programs and will recover
the cost of its contributions from end-users.
A new federal high-cost universal service support mechanism for nonrural
carriers and an increase in the funding level for schools and libraries are
expected to become effective in 1999. The FCC currently is considering, in
conjunction with a recommendation from a joint board of federal and state
regulators, a number of issues that could affect the size of the universal
service fund for high cost areas and the amount of universal service costs that
are assessed against our operating telephone subsidiaries and domestic cellular
subsidiary for recovery.
Reciprocal Compensation
We have been required by certain state regulatory decisions to pay "reciprocal
compensation" to competitive local exchange and other carriers to terminate
calls on their networks, including a large volume of one-way traffic from our
customers to internet service providers that are their customers. On February
26, 1999, the FCC confirmed that such traffic is interstate and interexchange in
nature and not subject to the reciprocal compensation requirements of the 1996
Act. Because the previous state regulatory decisions were based upon a view that
internet access calls are "local" rather than interstate and interexchange in
nature, we have asked those state commissions to revisit their prior
interpretations. Unless state regulators follow the FCC's interpretation, these
reciprocal compensation payments, which were approximately $175 million higher
in 1998, are expected to grow to approximately $350 million in 1999.
STATE REGULATION OF RATES AND SERVICES
State public utility commissions regulate our operating telephone subsidiaries
with respect to certain intrastate rates and services and certain other matters.
In most jurisdictions the telephone subsidiaries have been able to replace rate
of return regulation with price regulation plans.
New York Telephone
New York
The New York State Public Service Commission has regulated New York Telephone
under the Performance Incentive Plan since 1995. The plan is performance-based,
replacing rate of return regulation with a form of price regulation and
incentives to improve service, and does not restrict New York Telephone's
earnings. The plan
. caps prices at current rates for "basic" services such as residence and
business exchange access, residence and business local calling and LifeLine
service;
. establishes price reduction commitments for a number of services, including
toll and intraLATA carrier access services;
. adjusts prices annually based on certain costs associated with state
commission mandates and other defined "exogenous" events; and
. establishes service quality targets with stringent rebate provisions if New
York Telephone is unable to meet some or all of the targets.
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Connecticut
New York Telephone's operations are subject to rate of return regulation, but an
incentive regulation plan which would eliminate regulation of earnings has been
filed with the Connecticut Department of Public Utility Control.
Bell Atlantic - New Jersey
Bell Atlantic - New Jersey is regulated under a Plan for Alternative Form of
Regulation, which expires on December 31, 1999. A petition has been filed to
extend the plan for another year. The plan divides Bell Atlantic - New Jersey's
services into Competitive Services and Rate-Regulated Services.
. The prices for Competitive Services may be changed without regulatory
involvement.
. Rate-Regulated Services are grouped in two categories:
. "Protected Services": Basic residence and business service,
Touch-Tone, access services and the ordering, installation and
restoration of these services.
. "Other Services": Custom Calling, Custom Local Area Signaling
Services ("CLASS" services which utilize Signaling System 7),
operator services and 911 enhanced service.
. There is a cap on basic residence service rates through 1999, but
revenue-neutral rate restructuring is permitted.
. There is no cap on earnings for Rate-Regulated Services, but Bell
Atlantic-New Jersey must share all earnings above a return on equity of
13.7% equally with customers.
Bell Atlantic - Pennsylvania
The Pennsylvania Public Utility Commission regulates Bell Atlantic -
Pennsylvania under an Alternative Regulation Plan approved in 1994. The plan
provides for a pure price cap plan with no sharing of earnings with customers
and replaces rate base, rate of return regulation.
. Competitive Services, including directory advertising, billing services,
Centrex service, paging, speed calling, repeat calling, and HiCap are
deregulated.
. All Noncompetitive Services are price regulated. The plan:
. permits annual price increases up to, but not exceeding, the GDP-PI
minus 2.93%.
. requires annual price decreases when the GDP-PI falls below 2.93%.
. caps prices for protected services, including residential and
business basic exchange services, special access and switched
access, through 1999.
. permits revenue-neutral rate restructuring for noncompetitive
services.
The plan requires Bell Atlantic - Pennsylvania to provide a Lifeline service for
residential customers. 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.
From September 1998 through February 1999, the commission sponsored a
multi-party global telecommunications settlement proceeding aimed at resolving
issues in a number of contentious telecommunications regulatory dockets at the
commission. The formal negotiation period ended on March 1, 1999, without a
settlement among all the negotiation parties having been reached. Since the
close of negotiations, two group of participants, one of which includes us, two
competitive local exchange carriers, and a number of small telephone companies,
have proposed separate nonunanimous settlements for consideration by the
commission in resolving some or all of the telecommunications dockets. The
commission has not decided what procedures it will follow in addressing the
issues raised in these settlement proposals.
New England Telephone
Maine
In 1995, the Maine Public Utilities Commission adopted a five-year price cap
plan for New England Telephone, with the provision for a five-year extension
after review by the state commission. Overall average prices and specific rate
elements for most services are limited by a price cap formula of inflation minus
a productivity factor plus or minus certain exogenous cost changes. There is no
restriction on New England Telephone's earnings. The state commission also
established a service quality index with penalties in the form of customer
rebates to apply if service quality categories are missed.
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Massachusetts
In 1995, the Massachusetts Department of Public Utilities approved a price
regulation plan for New England Telephone through August 2001, with no
restriction on earnings. Certain residence exchange rates are capped. Pricing
rules limit New England Telephone's ability to increase prices for most
services, including a ceiling on the weighted average price of all tariffed
services based on a formula of inflation minus a productivity factor plus or
minus certain exogenous changes. In addition, New England Telephone's service
quality performance levels in any given month could result in an increase in the
productivity offset by one-twelfth of one percent for purposes of the annual
price cap filing.
New Hampshire
New England Telephone's operations are subject to rate of return regulation.
Rhode Island
In 1996, the Rhode Island Public Utilities Commission approved an incentive
regulation plan for New England Telephone. The plan has no set term or
expiration, although there are opportunities for annual review by the state
commission, and there is no earnings cap or sharing mechanism. Other features of
the plan include: more stringent service quality requirements, including a
financial penalty, and no increase in residence or business basic exchange rates
through 1999.
Vermont
New England Telephone's operations are subject to rate of return regulation, but
an incentive plan has been filed with the Vermont Public Service Board which
would eliminate regulations of earnings.
Bell Atlantic - Maryland
In 1996, the Public Service Commission of Maryland approved a price cap plan for
regulating the intrastate services provided by Bell Atlantic - Maryland. Under
the plan, services are divided into six categories: Access; Basic-Residential;
Basic-Business; Discretionary; Competitive; and Miscellaneous. Rates for Access,
Basic-Residential and Basic-Business are capped for a period of three years.
After the cap period, rates for services in these three categories can be
increased or decreased annually under a formula that is based upon changes in
the GDP-PI minus a productivity offset based upon changes in the rate of
inflation (CPI). Rates for Discretionary services may be increased under the
same formula. Rates for competitive services may be increased without regulatory
limits. Regulation of profits is eliminated.
Bell Atlantic - Virginia
Effective in 1995, the Virginia State Corporation Commission approved an
alternative regulatory plan that regulates Bell Atlantic Virginia's
noncompetitive services on a price cap basis and does not regulate Bell Atlantic
- - Virginia's competitive services. The plan includes a moratorium on rate
increases for basic local telephone service until 2001 and eliminates regulation
of profits.
Bell Atlantic - West Virginia
In February 1998, the West Virginia Public Service Commission issued an order
extending the Incentive Regulation Plan until December 31, 2000. The Incentive
Regulation Plan includes pricing flexibility for competitive services. Bell
Atlantic - West Virginia is committed to invest at least $225 million in its
network over the three-year period from 1998 through 2000.
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Bell Atlantic - Delaware
In 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%;
. the prices of "Discretionary Services" (e.g., Identa RingSM and Call
Waiting) cannot increase more than 15% per year per service;
. the prices of "Competitive Services" (e.g., voice messaging and message
toll service) are not subject to tariff or regulation; and
. 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 during the fifth year of the plan. In March 1998, the state
commission approved Bell Atlantic - Delaware's request to continue under the
Delaware Telecommunications Act until March 2002.
Bell Atlantic - Washington, D.C.
In 1996, the District of Columbia Public Service Commission approved a price cap
plan for intra-Washington, D.C. services provided by Bell Atlantic - Washington,
D.C. Provisions of the plan include:
. a term of four years, through December 31, 1999;
. three service categories: basic, discretionary, and competitive;
. caps on certain basic residential rates for the term of the plan, with
other basic rates to change with the GDP-PI minus 3%;
. discretionary service rate increases of up to 15% annually;
. elimination of price limits on competitive service rates; and
. elimination of the regulation of profits.
COMPETITION
Legislative changes, including provisions of the 1996 Act discussed above under
"Telecommunications Act of 1996," regulatory changes and new technology are
continuing to expand the types of available communications services and
equipment and the number of competitors offering such services. We anticipate
that these industry changes, together with the rapid growth, enormous size and
global scope of these markets, will attract new entrants and encourage existing
competitors to broaden their offerings. Current and potential competitors in
telecommunication services include long distance companies, other local
telephone companies, cable companies, wireless service providers, foreign
telecommunications providers, electric utilities, Internet service providers and
other companies that offer network services. Many of these companies have a
strong market presence, brand recognition and existing customer relationships,
all of which contribute to intensifying competition and may affect our future
revenue growth. In addition, a number of major industry participants have
announced mergers, acquisitions and joint ventures which could substantially
affect the development and nature of some or all of our markets.
Local Exchange Services
The ability to offer local exchange services has historically been subject to
regulation by state regulatory commissions. Applications from competitors to
provide and resell local exchange services have been approved in every
jurisdiction in our territory. The 1996 Act is expected to significantly
increase the level of competition in all of our local exchange markets.
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One of the purposes of the 1996 Act was to ensure, and accelerate, the emergence
of competition in local exchange markets. Toward this end, the 1996 Act requires
most existing local exchange carriers (incumbent local exchange carriers, or
"ILECs"), including our operating telephone subsidiaries, to permit potential
competitors (competitive local exchange carriers, or "CLECs") to:
. purchase service from the ILEC for resale to CLEC customers
. purchase unbundled network elements from the ILEC, and/or
. interconnect the CLEC network with the ILEC's network.
The 1996 Act provides for arbitration by the state public utility commission if
an ILEC and a CLEC are unable to reach agreement on the terms of the arrangement
sought by the CLEC.
Negotiations between the operating telephone subsidiaries and various CLECs, and
arbitrations before state public utility commissions, have continued. As of
January 31, 1999, the operating telephone subsidiaries had entered into
approximately 897 agreements with CLECs covering all of our territory, of which
664 have been approved by state regulators.
We expect that these agreements, and the 1996 Act, will continue to lead to
substantially increased competition in our local exchange markets in 1999 and
subsequent years. We believe that this competition will be both on a facilities
basis and in the form of resale by CLECs of our operating telephone
subsidiaries' service. Under the various agreements and arbitrations discussed
above, our operating telephone subsidiaries are generally required to sell their
services to CLECs at discounts ranging from approximately 15% to 29% from the
prices our operating telephone subsidiaries charge their retail customers.
IntraLATA Toll Services
IntraLATA toll calls originate and terminate within the same LATA, but generally
cover a greater distance than a local call. State regulatory commissions rather
than federal authorities generally regulate these services. All of our state
regulatory commissions (except in the District of Columbia, where intraLATA toll
service is not provided) permit other carriers to offer intraLATA toll services
within the state.
Until the implementation of "presubscription," intraLATA toll calls were
completed by our operating telephone subsidiaries unless the customer dialed a
code to access a competing carrier. Presubscription changes this dialing method
and enables customers to make these toll calls using another carrier without
having to dial an access code.
The 1996 Act generally prohibits, with certain exceptions, a state from
requiring presubscription until the earlier of such time as the BOC is
authorized to provide long distance services originating in the state or three
years from the effective date of the 1996 Act.
New York Telephone fully completed intraLATA presubscription implementation by
September 1996. By December 1997, our operating telephone subsidiaries in
Delaware, Maine, New Hampshire, New Jersey, Pennsylvania, Rhode Island, Vermont
and West Virginia had also implemented presubscription. We expect to offer
intraLATA presubscription in Massachusetts in April 1999. In Maryland and
Virginia, the state commissions have decided that intraLATA presubscription need
not occur on the third anniversary of the 1996 Act, but did not set dates for
implementation. The recent Supreme Court decision reinstated the FCC's authority
to adopt rules governing intraLATA presubscription, and the FCC has required
that implementation be completed as early as May 1999.
Implementation of presubscription for intraLATA toll services has had a material
negative effect on intraLATA toll service revenues in those jurisdictions where,
as noted above, presubscription has been implemented before we are permitted to
offer long distance services. However, the negative effect is beginning to
subside now that presubscription has been available in most of our states for
more than one year. In addition, the adverse impact on intraLATA toll services
revenues is being partially offset by an increase in intraLATA network access
revenues.
9
<PAGE>
Alternative Access
A substantial portion of our operating telephone subsidiaries' revenues from
business and government customers is derived from a relatively small number of
large, multiple-line subscribers.
We 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 our
plant. The FCC's orders requiring us to offer virtual collocated interconnection
for special and switched access services have enhanced the ability of such
alternative access providers to compete with us.
Other potential sources of competition include cable television systems, shared
tenant services and other noncarrier systems which are capable of bypassing our
operating telephone subsidiaries' local plant, either partially or completely,
through substitution of special access for switched access or through
concentration of telecommunications traffic on fewer of our operating telephone
subsidiaries' lines.
Wireless Services
Wireless services also constitute potential sources of competition to our
wireline telecommunications services, especially as wireless carriers continue
to lower their prices to end users. Wireless portable telephone services employ
analog and digital technology that allows customers to make and receive
telephone calls from any location using small handsets, and can also be used for
data transmission. Our investment in wireless services is described below under
"Global Wireless."
Public Telephone Services
We face increasing competition in the provision of pay telephone services from
other providers. In addition, the growth of wireless communications decreases
usage of public telephones.
Operator Services
Alternative operator services providers have entered into competition with our
operator services product line.
DIRECTORY
Through Bell Atlantic Yellow Pages Company, Bell Atlantic Electronic Commerce
Services, Inc. and other subsidiaries, we publish printed and electronic
directories and provide Internet-based electronic shopping guides, as well as
website creation and hosting and other electronic commerce services. Our
directory publishing business produces over 600 domestic and international
Yellow Page directories with over 900,000 advertisers and distributes
approximately 80 million copies annually in its regional markets, as well as in
Poland, the Czech Republic, Slovakia, Greece, Gibraltar and China. We provide
on-line shopping services with more than 10,000 advertisers and nearly 23
million visits per month. 1998 revenues from the Directory segment were
approximately $2.3 billion.
10
<PAGE>
GLOBAL WIRELESS
1998 revenues from our Global Wireless segment were approximately $3.8 billion.
United States
We provide wireless communications services in the United States principally
through our subsidiary, Bell Atlantic Mobile ("BAM"), and PrimeCo Personal
Communications, L.P. ("PrimeCo"), a joint venture.
BAM provides wireless services to approximately 6.2 million customers in the
Northeast, mid-Atlantic, Southeast and Southwest portions of the United States.
BAM competes with other cellular carriers and personal communications service
("PCS") providers licensed by the FCC. Competing providers offer competitive
pricing plans, digital technology, and enhanced calling features. BAM has
introduced new pricing plans designed to meet this new competition, and offers
digital service as well as enhanced calling features in its markets.
PrimeCo is a partnership between Bell Atlantic and AirTouch Communications which
provides PCS services in over 30 major cities across the United States. At
year-end PrimeCo had approximately 902,000 customers. Since 1994 we have
invested approximately $1.6 billion in PrimeCo to fund its operations and the
build-out of its PCS network.
Mexico
We have a 47.2% economic interest in Grupo Iusacell, S.A. de C.V. ("Iusacell"),
a telecommunications company in Mexico whose primary business is the provision
of wireless telephone service. The Peralta Group, the other principal
shareholder of Iusacell, holds approximately 43.6%, and the remaining 9.3% is
held by public shareholders.
Since 1993, we have invested approximately $1.2 billion in Iusacell. In the
first quarter of 1997, we consummated a restructuring of our investment in
Iusacell to permit us to assume control of its board of directors and
management. At year end, Iusacell had approximately 750,000 subscribers.
Italy
We have a 19.71% economic interest in Omnitel Pronto Italia, S.p.A. ("Omnitel"),
an Italian digital cellular telecommunications company. Since 1994 we have
invested approximately $544 million in Omnitel. At year-end, Omnitel had
approximately 6.2 million subscribers.
Greece
We have a 20% economic interest in STET Hellas Telecommunications S.A. ("STET
Hellas"), which holds one of three nationwide licenses for cellular services in
Greece. At year-end, STET Hellas had approximately 688,000 subscribers.
Czech Republic and Slovakia
We have an economic interest of approximately 25% in EuroTel Praha s r.o. and
EuroTel Bratislava a.s., which have been operating cellular systems in the Czech
Republic and Slovakia, respectively, since 1991.
Indonesia
We have an economic interest of approximately 23% in P.T. Excelcomindo Pratama
("Excelcomindo"), which holds a nationwide license to provide cellular service
in Indonesia.
In the third quarter of 1998, we recorded a charge of $137 million to adjust the
carrying value of our investment in Excelcomindo to its estimated fair value. We
considered the following factors in determining this charge:
11
<PAGE>
. The continued weakness of the Indonesian currency as compared to historical
exchange rates will create additional financial burdens on the company in
servicing U.S. dollar-denominated debt. The continuing political unrest in
Indonesia has contributed to the currency's instability.
. The economic instability and prospects for an extended recovery period have
resulted in weaker than expected growth in Excelcomindo's business. One
significant factor has been inflexible tariff regulation despite rising
costs due to inflation. This and other factors have resulted in reduced
expectations of future cash flows and, accordingly, a reduction in the
value of our investment.
. Issues with cash flow are requiring Excelcomindo's shareholders to evaluate
the future funding of the business.
OTHER BUSINESSES
1998 revenues from our Other Businesses were approximately $124 million.
New Zealand
We have a 24.94% economic interest in Telecom Corporation of New Zealand Limited
("TCNZ"). TCNZ is the principal provider of telecommunications services in New
Zealand, offering local service, national and international long distance
service, cellular service and Internet access. At December 31, 1998, TCNZ had
approximately 1.85 million access lines, 565,000 cellular connections and
160,000 internet access customers. TCNZ faces increasing competition in most of
its markets. The New Zealand government retains a single share in TCNZ, which
gives the government the right to limit residential local service price
increases to no more than the rate of inflation and requires a flat-rate local
calling option for residential customers.
In February 1998, we monetized our investment in TCNZ and issued approximately
$2.5 billion in five year notes, which are exchangeable into shares of TCNZ at
the option of the holder after September 1, 1999. Upon exchange by the holders,
we retain the option to settle in cash or by delivery of shares.
Great Britain
We have an 18.5% economic interest in Cable & Wireless Communications, PLC
("CWC"), which was created in April 1997 through the merger of Mercury
Communications, NYNEX CableComms, and Bell Cablemedia, following the acquisition
of Videotron Holdings by Bell Cablemedia. CWC provides telecommunications and
CATV services and at December 31, 1998 had approximately 1 million residential
telephony lines and 837,000 CATV subscribers.
In August 1998 we monetized our investment in CWC and issued approximately $3.2
billion in notes which are exchangeable into shares of CWC at the option of the
holder after July 1, 2002. Upon exchange by the holders, we retain the option to
settle in cash or by delivery of shares.
Thailand
We have an economic interest of 18.2% in TelecomAsia Corporation Public Company
Limited ("TelecomAsia"), which operates a telecommunications network and CATV
system in metropolitan Bangkok. At year-end, TelecomAsia had approximately 1.3
million telephony lines in service and 350,000 CATV subscribers.
In the third quarter of 1998, we recorded a charge of $348 million to adjust the
carrying value of our investment in Telecom Asia to its estimated fair value. We
considered the following factors in determining this charge:
. The continued weakness of the Thai currency as compared to historical
exchange rates will place additional financial burdens on the company in
servicing U.S. dollar-denominated debt.
. The economic instability and prospects for an extended recovery period have
resulted in weaker than expected growth in TelecomAsia's business. This is
indicated by slower than expected growth in total subscribers and usage.
These factors resulted in reduced expectations of future cash flows and,
accordingly, a reduction in the value of our investment.
. The business plan for TelecomAsia contemplated cash flows from several
lines of business. Given TelecomAsia's inclination to focus on its core
wireline business, these other lines of business may not contribute future
cash flows at previously expected levels.
12
<PAGE>
Philippines
We have a 20% economic interest in BayanTel Telecommunications Holdings
Corporation ("BayanTel"), a local exchange provider. At December 31, 1998,
BayanTel had approximately 250,000 access lines.
FLAG
FLAG Limited (FLAG) owns and operates an undersea fiberoptic cable system,
providing digital communications links between Europe and Asia. FLAG launched
commercial service in the fourth quarter of 1997. We hold approximately a 34%
equity interest in the venture and have invested approximately $227 million
since 1994.
We have approximately a 5% interest in the parent company of FLAG, FLAG Telecom
Holding Limited (FLAG Telecom). In the first quarter of 1999, a subsidiary of
FLAG Telecom and Global TeleSystems Group, Inc., a U.S. telecommunications
company, agreed to establish a joint venture to build and operate a transoceanic
dual cable system to carry high-speed data and video traffic across the Atlantic
Ocean. The companies expect to offer service in 2000.
EMPLOYEES
As of December 31, 1998, Bell Atlantic and its subsidiaries had approximately
140,000 employees. Unions represent approximately 69% of our employees. In 1998
we executed new collective bargaining agreements with the unions.
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
In this Annual Report on Form 10-K we have made forward-looking statements.
These statements are based on our estimates and assumptions and are subject to
risks and uncertainties. Forward-looking statements include the information
concerning our possible or assumed future results of operations. Forward-looking
statements also include those preceded or followed by the words "anticipates,"
"believes," "estimates," "hopes" or similar expressions. For those statements,
we claim the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995.
The following important factors, along with those discussed elsewhere in this
Annual Report, could affect future results and could cause those results to
differ materially from those expressed in the forward-looking statements:
. materially adverse changes in economic conditions in the markets served by
us or by companies in which we have substantial investments;
. material changes in available technology;
. the final outcome of federal, state and local regulatory initiatives and
proceedings, including arbitration proceedings, and judicial review of
those initiatives and proceedings, pertaining to, among other matters, the
terms of interconnection, access charges, universal service, and unbundled
network elements and resale rates;
. the extent, timing, success and overall effects of competition from others
in the local telephone and toll service markets;
. the timing and profitability of our entry into the in-region long distance
market;
. the success and expense of our remediation efforts and those of our
suppliers, customers, joint ventures, noncontrolled investments and
interconnecting carriers in achieving year 2000 compliance; and
. the timing of, and regulatory or other conditions associated with, the
completion of the merger with GTE and our ability to combine operations and
obtain revenue enhancement and cost savings following the merger.
13
<PAGE>
Item 2. Properties
GENERAL
Our principal properties do not lend themselves to simple description by
character and location. Our total investment in plant, property and equipment
was approximately $83.1 billion at December 31, 1998 and $77.4 billion at
December 31, 1997, including the effect of retirements, but before deducting
accumulated depreciation. Our gross investment in plant, property and equipment
consisted of the following at December 31:
1998 1997
------ ------
Outside communications plant .................... 40.5% 40.9%
Central office equipment ........................ 37.9 37.7
Land and buildings .............................. 8.5 8.7
Furniture, vehicles and other work equipment .... 9.5 9.4
Other ........................................... 3.6 3.3
------ ------
100.0% 100.0%
====== ======
Our properties are divided among our operating segments as follows:
1998 1997
------ ------
Domestic Telecom ................................ 92.3% 93.0%
Global Wireless ................................. 7.2 6.5
Directory ....................................... .4 .4
Other Businesses ................................ .1 .1
------ ------
100.0% 100.0%
====== ======
"Outside communications plant" consists primarily of aerial cable, underground
cable, conduit and wiring, cellular plant, and telephone poles. "Central office
equipment" consists of switching equipment, transmission equipment and related
facilities. "Land and buildings" consists of land and land improvements, and
principally central office buildings. "Furniture, vehicles and other work
equipment" consists of public telephone instruments and telephone equipment
(including PBXs), furniture, office equipment, motor vehicles and other work
equipment. "Other" property consists primarily of plant under construction,
capital leases and leasehold improvements.
The customers of our operating telephone subsidiaries are served by electronic
switching systems that provide a wide variety of services. The operating
telephone subsidiaries' 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, 1998, approximately 97% of
the access lines were served by digital capability.
Substantially all of the assets of New York Telephone Company, totaling
approximately $13.3 billion at December 31, 1998, are subject to the lien of New
York Telephone Company's refunding mortgage bond indenture.
CAPITAL EXPENDITURES
We continue to make significant capital expenditures to meet the demand for
communications services and to further improve such services. Capital
expenditures for our Domestic Telecom business were approximately $6.4 billion
in 1998, $5.5 billion in 1997 and $4.9 billion in 1996. Capital expenditures for
our Global Wireless, Directory and Other Businesses were approximately $1.0
billion in 1998, $1.1 billion in 1997 and $1.5 billion in 1996. Capital
expenditures exclude additions under capital leases. We expect capital
expenditures in 1999 to total approximately $8.1 billion, including
approximately $7.3 billion to be invested in our Domestic Telecom business to
facilitate the introduction of new products and services, enhance responsiveness
to competitive challenges, and increase the operating efficiency and
productivity of the network. This estimate includes approximately $500 million
related to the implementation of the new accounting standard on costs of
computers software, Statement of Position (SOP) 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use."
14
<PAGE>
Item 3. Legal Proceedings
There were no proceedings reportable under Item 3.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is certain information with respect to our executive
officers.
<TABLE>
<CAPTION>
Held
Name Age Office Since
- ------------------------ --- ---------------------------------------------------- -----
<S> <C> <C> <C>
Ivan G. Seidenberg 52 Chairman and Chief Executive Officer 1998
Lawrence T. Babbio, Jr. 54 President and Chief Operating Officer 1998
James G. Cullen 56 President and Chief Operating Officer 1998
Jacquelyn B. Gates 47 Vice President - Ethics and Corporate Compliance 1998
Alexander H. Good 49 Executive Vice President - Strategy 1998
and Corporate Development
Patrick F.X. Mulhearn 47 Vice President - Corporate Communications 1997
Donald J. Sacco 57 Executive Vice President - Human Resources 1997
Frederic V. Salerno 55 Senior Executive Vice President and Chief Financial 1997
Officer/Strategy and Business Development
Thomas J. Tauke 48 Senior Vice President - Government Relations 1997
Doreen A. Toben 49 Vice President - Controller 1998
Chester N. Watson 48 Vice President - Internal Auditing 1997
Morrison DeS. Webb 51 Executive Vice President - External Affairs and 1997
Corporate Communications
Ellen C. Wolf 45 Vice President - Treasurer 1997
James R. Young 47 Executive Vice President - General Counsel 1997
</TABLE>
Prior to serving as an executive officer, each of the above officers have held
high level managerial positions with the company or one of its subsidiaries for
at least five years.
Officers are not elected for a fixed term of office but are removable at the
discretion of the Board of Directors.
15
<PAGE>
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 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,
1998, there were 1,102,900 shareowners of record.
High and low stock prices, as reported on the New York Stock Exchange composite
tape of transactions, and dividend data are as follows:
Market Price Cash
------------------- Dividend
High Low Declared
---- --- --------
1998: First Quarter............... $53 $42 3/8 $.385
Second Quarter.............. 51 5/8 44 11/16 .385
Third Quarter............... 50 7/16 40 7/16 .385
Fourth Quarter.............. 61 3/16 47 3/4 .385
1997: First Quarter............... $35 11/16 $29 5/8 $.37
Second Quarter.............. 39 1/8 28 3/8 .37
Third Quarter............... 40 7/8 34 .385
Fourth Quarter.............. 45 7/8 37 3/8 .385
Reflects 2-for-1 stock split declared and paid in second quarter of 1998.
Pursuant to the terms of an Agreement and Plan of Merger, dated September 23,
1997, relating to the merger of Blue Ridge Cellular Telephone Company with one
of our subsidiaries, we issued 212,171 shares of common stock in 1997 and 1,742
shares of common stock in 1998, none of which was registered under the
Securities Act of 1933.
Item 6. Selected Financial Data
The information required by this item is included on page F-21 of this report.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this item is included on pages F-2 through F-20 of
this report.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by this item is included on pages F-13 through F-15 of
this report.
Item 8. Financial Statements and Supplementary Data
The information required by this item is included on pages F-22 through F-51 of
this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable.
16
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
For information with respect to our executive officers, see "Executive Officers
of the Registrant" at the end of Part I of this Report. For information with
respect to the Directors and compliance with Section 16(a) of the Securities
Exchange Act of 1934, see the Proxy Statement for our 1999 Annual Meeting of
Shareowners to be filed pursuant to Regulation 14A, which is incorporated herein
by reference.
Item 11. Executive Compensation
For information with respect to executive compensation, see the Proxy Statement
for our 1999 Annual Meeting of Shareowners to be filed pursuant to Regulation
14A, which is 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, see the Proxy Statement for our 1999 Annual Meeting of
Shareowners to be filed pursuant to Regulation 14A, which is incorporated herein
by reference.
Item 13. Certain Relationships and Related Transactions
For information with respect to certain relationships and related transactions,
see the Proxy Statement for our 1999 Annual Meeting of Shareowners to be filed
pursuant to Regulation 14A, which is incorporated herein by reference.
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 Information appearing on Page F-1.
(2) Financial Statement Schedule
See Index to Financial Information appearing on Page F-1.
(3) Exhibits
Exhibits identified in parentheses below, on file with the Securities and
Exchange Commission (SEC) in File No. 1-8606 except as otherwise noted, are
incorporated herein by reference as exhibits hereto.
Exhibit
Number
- -------
2 Agreement and Plan of Merger by and among Bell Atlantic Corporation, Beta
Gama Corporation and GTE Corporation, dated as of July 27, 1998. (Exhibit
2.01 to Form 8-K, date of report July 30, 1998.)
3a Restated Certificate of Incorporation of Bell Atlantic Corporation ("Bell
Atlantic"). (Exhibit 3(i) to Form 8-K, date of report August 14, 1997.)
3b By-Laws of Bell Atlantic, as amended and restated as of January 1, 1999.
4 No instrument which defines the rights of holders of long-term debt of Bell
Atlantic and 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 Deferred Compensation Plan for Outside Directors, as amended
and restated as of January 1, 1998.*
10b Bell Atlantic Insurance Plan for Directors. (Exhibit 10hh to Registration
Statement on Form S-1 No. 2-87842).*
10c Description of Bell Atlantic Plan for Non-Employee Directors' Travel
Accident Insurance. (Exhibit 10ii to Registration Statement on Form S-1 No.
2-87842.)*
10d Bell Atlantic Retirement Plan for Outside Directors, as amended and
restated as of January 1, 1996. (Exhibit 10k to Form 10-K for the year
ended December 31, 1995.)*
10e Bell Atlantic Stock Compensation Plan for Outside Directors, as amended and
restated as of January 1, 1998.*
10f Bell Atlantic Corporation Directors' Charitable Giving Program. (Exhibit
10p to Form SE dated March 29, 1990.)*
10f(i) Resolutions amending and partially terminating the Program. (Exhibit
10p to Form SE dated March 29, 1993.)*
10g Description of Changes in Compensation for Outside Directors of Bell
Atlantic, effective August 14, 1997 (Exhibit 10y to Form 10-Q for the
quarter ended September 30, 1997.)*
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<PAGE>
10h Bell Atlantic Senior Management Short Term Incentive Plan, as amended and
restated effective as of January 22 1996. (Exhibit 10a to Form 10-K for the
year ended December 31, 1996.)*
10h(i) Description of Amendment, effective August 14, 1997. (Exhibit 10a(i)
to Form 10-Q for the quarter ended September 30, 1997.)*
10i Bell Atlantic Deferred Compensation Plan, as amended and restated as of
January 1, 1997. (Exhibit 10i to Form 10-K for the year ended December 31,
1996.)*
10i(i) Description of Amendments to Bell Atlantic Deferred Compensation
Plan (renamed the Bell Atlantic Senior Management Income Deferral
Plan), effective January 1, 1998. (Exhibit 10i(i) to Form 10-K for
the year ended December 31, 1997.)*
10j Bell Atlantic 1985 Incentive Stock Option Plan, as amended and restated as
of July 1, 1996. (Exhibit 10j to Form 10-K for the year ended December 31,
1996.)*
10j(i) Description of Amendment and Administrative Change to Bell Atlantic
1985 Incentive Stock Option Plan, effective August 14, 1997.
(Exhibit 10a(i) to Form 10-Q for the quarter ended September 30,
1997.)*
10k Section 6 from Bell Atlantic Cash Balance Plan regarding limitations on
payment of pension amounts which exceed the limitations contained in the
Employee Retirement Income Security Act of 1974. (Exhibit 10g to Form 10-K
for the year ended December 31, 1996.)*
10l Bell Atlantic Senior Management Long-Term Disability and Survivor
Protection Plan, as amended. (Exhibit 10h to Form SE filed on March 27,
1986.)*
10l(i) Resolutions amending the Plan, effective as of January 1, 1989.
(Exhibit 10d to Form SE dated March 29, 1989.)*
10l(ii) Description of Amendments, effective January 1, 1998, to Bell
Atlantic Senior Management Long Term Disability Plan (formerly
known, as the Bell Atlantic Senior Management Long-Term Disability
and Survivor Protection Plan). (Exhibit 10b(ii) to Form 10-K for
the year ended December 31, 1997.)*
10m Bell Atlantic Salary Program for Senior Managers, effective August 14,
1997. (Exhibit 10x to Form 10-Q for the quarter ended September 30, 1997.)*
10n Description of Bell Atlantic Senior Management Estate Management Plan.*
10o Description of Bell Atlantic Senior Management Death Benefit Plan,
effective April 1, 1998. (Exhibit 10rr to Form 10-K for year ended December
31, 1997.)*
10p Description of Bell Atlantic Senior Management Flexible Spending Perquisite
Account, effective January 1, 1998. (Exhibit 10ss to Form 10-K for year
ended December 31, 1997.)*
10q NYNEX 1984 Stock Option Plan, as amended and restated. (Post-Effective
Amendment No. 1 to NYNEX's Registration No. 2-97813, dated September 21,
1987, File No. 1-8608.)*
10r NYNEX 1987 Restricted Stock Award Plan (Exhibit No. (28) (i) 1 to NYNEX's
filing on Form SE dated March 23, 1988, File No. 1-8608.)*
10s NYNEX 1990 Stock Option Plan as amended. (Exhibit No. 2 to NYNEX's Proxy
Statement dated March 20, 1995, File No. 1-8608.)*
10t NYNEX 1995 Stock Option Plan as amended. (Exhibit No. 1 to NYNEX's Proxy
Statement dated March 20, 1995, File No. 1-8608.)*
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<PAGE>
10u NYNEX 1995 Long Term Incentive Program as amended. (Exhibit No. 3 to
NYNEX's Proxy Statement dated March 20, 1995, File No. 1-8608.)*
10v NYNEX Supplemental Life Insurance Plan. (Exhibit No. 10 iii 21 to NYNEX's
Quarterly Report on Form 10-Q for the period ended June 30, 1996, File No.
1-8608.)*
10w NYNEX Executive Retention Agreement. (Exhibit No. 10 iii 35 to NYNEX's
Quarterly Report on Form 10-Q, for the period ended June 30, 1996, File No.
1-8608.)*
10x Employment Agreement, dated August 14, 1997, by and between Bell Atlantic
and Raymond W. Smith (Exhibit 10aa to Form 10-Q for the quarter ended
September 30, 1997.)*
10x(i) Letter dated April 16, 1998, to Raymond W. Smith concerning
employment-related issues. (Exhibit 10v(i) to Form 10-Q for the
quarter ended June 30, 1998.)*
10x(ii) Resolutions dated May 1, 1998, approving amendments to Employment
Agreement of Raymond W. Smith. (Exhibit 10v(ii) to Form 10-Q for
the quarter ended June 30, 1998.)*
10y Employment Agreement, dated as of June 1, 1998, by and between Bell
Atlantic Corporation and Lawrence T. Babbio, Jr.. (Exhibit 10a to Form 10-Q
for the quarter ended June 30, 1998.)*
10z Employment Agreement, dated as of June 1, 1998, by and between Bell
Atlantic Corporation and James G. Cullen. (Exhibit 10b to Form 10-Q for the
quarter ended June 30, 1998.)*
10aa Employment Agreement, dated as of June 1, 1998, by and between Bell
Atlantic Corporation and Frederic V. Salerno. (Exhibit 10c to Form 10-Q for
the quarter ended June 30, 1998.)*
10bb Employment Agreement, dated as of June 1, 1998, by and between Bell
Atlantic Corporation and Donald J. Sacco. (Exhibit 10d to Form 10-Q for the
quarter ended June 30, 1998.)*
10cc Employment Agreement, dated as of June 1, 1998, by and between Bell
Atlantic Corporation and Morrison DeS. Webb. (Exhibit 10e to Form 10-Q for
the quarter ended June 30, 1998.)*
10dd Employment Agreement, dated as of June 1, 1998, by and between Bell
Atlantic Corporation and James R. Young. (Exhibit 10f to Form 10-Q for the
quarter ended June 30, 1998.)*
10ee Form of Amendment, dated as of October 27, 1998, to Employment Agreements
with Lawrence T. Babbio, Jr., James G. Cullen, Frederic V. Salerno, Donald
J. Sacco, Morrison DeS. Webb and James R. Young.*
10ff Employment Agreement, dated as of January 1, 1999, by and between Bell
Atlantic Corporation and Ivan G. Seidenberg.*
10gg Employment Agreement, dated as of October 27, 1998, by and between Bell
Atlantic Corporation and Alexander H. Good.*
10hh 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.)*
10ii Form of stock option grant to Lawrence T. Babbio, Jr., dated February 18,
1997, containing terms and conditions of 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 10q to Form 10-K
for the year ended December 31, 1996.)*
10jj Forms of Stay Incentive Agreement and Separation and Non-Compete Agreement
with Doreen A. Toben and Ellen C. Wolf with respect to the Bell
Atlantic-NYNEX merger. (Exhibit 10(f) to Registration Statement on Form S-4
No. 333-11573.)*
20
<PAGE>
10kk Form of Stay Incentive Agreement, dated as of November 23, 1998, with
Doreen A. Toben and Ellen C. Wolf with respect to the Bell Atlantic - GTE
Merger.*
10ll Form of Stay Incentive Agreement, dated as of November 23, 1998, with
Patrick F. X. Mulhearn and Thomas J. Tauke.*
10mm Form of Stay Incentive Agreement, dated as of November 23, 1998, with
Jacquelyn B. Gates and Chester N. Watson.*
10nn Form of Merger Agreement, dated as of January 29, 1999, with Doreen A.
Toben and Ellen C. Wolf.*
10oo Form of Merger Agreement, dated as of January 29, 1999, with Patrick F. X.
Mulhearn and Thomas J. Tauke.*
10pp Form of Merger Agreement, dated as of January 29, 1999, with Jacquelyn B.
Gates and Chester N. Watson.*
10qq Stock Option Agreement, dated as of July 27, 1998, between Bell Atlantic
Corporation and GTE Corporation. (Exhibit 10.01 to Form 8-K, date of report
July 30, 1998.)
10rr Stock Option Agreement, dated as of July 27, 1998, between GTE Corporation
and Bell Atlantic Corporation. (Exhibit 10.02 to Form 8-K, date of report
July 30, 1998.)
12 Computation of Ratio of Earnings to Fixed Charges.
21 List of subsidiaries of Bell Atlantic.
23 Consent of Independent Accountants.
24 Powers of Attorney.
27 Financial Data Schedule.
- -----------
*Indicates management contract or compensatory plan or arrangement.
21
<PAGE>
(b) Current Reports on Form 8-K filed during the quarter ended December 31,
1998:
A Current Report on Form 8-K, dated October 13, 1998, was filed regarding
certain charges taken in the third quarter of 1998.
A Current Report on Form 8-K, dated October 21, 1998, was filed regarding
Bell Atlantic's third quarter 1998 financial results.
A Current Report on Form 8-K, dated October 26, 1998, was filed on behalf
of the Bell Atlantic Savings and Security Plan (Non Salaried Employees)
regarding a change in the Plan's independent accountants.
A Current Report on Form 8-K, dated October 26, 1998, was filed on behalf
of the Bell Atlantic Savings and Plan for Salaried Employees regarding a
change in the Plan's independent accountants.
A Current Report on Form 8-K, dated October 26, 1998, was filed on behalf
of the NYNEX Corporation Savings and Security Plan (Non-Salaried Employees)
regarding a change in the Plan's independent accountants.
A Current Report on Form 8-K, dated October 28, 1998, was filed regarding
certain statements made at a Bell Atlantic Analyst Conference on October
28, 1998.
22
<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/ Doreen A. Toben
--------------------------------
Doreen A. Toben
Vice President - Controller
March 29, 1999
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: Chairman of the +
Ivan G. Seidenberg Board and Chief +
Executive Officer +
+
Principal Financial Officer: Senior Executive Vice +
Frederic V. Salerno President and Chief +
Financial Officer/Strategy and +
Business Development +
+
Principal Accounting Officer: Vice President - Controller +
Doreen A. Toben +
+
Directors: +
+
Lawrence T. Babbio, Jr. +++++ By /s/ Doreen A. Toben
Richard L. Carrion + -------------------------
James G. Cullen + Doreen A. Toben
Lodewijk J.R. de Vink + (individually and as
James H. Gilliam, Jr. + attorney-in-fact)
Stanley P. Goldstein + March 29, 1999
Helene L. Kaplan +
Thomas H. Kean +
Elizabeth T. Kennan +
John F. Maypole +
Joseph Neubauer +
Thomas H. O'Brien +
Eckhard Pfeiffer +
Hugh B. Price +
Rozanne L. Ridgway +
Frederic V. Salerno +
Ivan G. Seidenberg +
Walter V. Shipley +
John R. Stafford +
Morrison DeS. Webb +
Shirley Young +++++
</TABLE>
23
<PAGE>
INDEX TO FINANCIAL INFORMATION
Page Number
-----------
Management's Discussion and Analysis of Results of Operations
and Financial Condition ........................................... F-2
Selected Financial Data .............................................. F-21
Consolidated Statements of Income
For the years ended December 31, 1998, 1997 and 1996 .............. F-22
Consolidated Balance Sheets
December 31, 1998 and 1997 ........................................ F-23
Consolidated Statements of Changes in Shareowners' Investment
For the years ended December 31, 1998, 1997 and 1996 .............. F-24
Consolidated Statements of Cash Flows
For the years ended December 31, 1998, 1997 and 1996 .............. F-25
Notes to Consolidated Financial Statements ........................... F-26
Report of Management ................................................. F-51
Report of Independent Accountants .................................... F-51
Schedule II--Valuation and Qualifying Accounts
For the years ended December 31, 1998, 1997 and 1996 .............. F-52
Financial statement schedules other than that listed above have been omitted
because such schedules are not required or applicable.
F-1
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OVERVIEW
- --------------------------------------------------------------------------------
1998 marked a year in which we achieved very solid financial results while
continuing to position ourselves for entry into new markets in
telecommunications. Our results were driven by strong market demand for voice
and data services in our Domestic Telecom business and robust operating
performance by our Global Wireless group.
In 1998, we reported net income of $2,965 million, or $1.86 diluted earnings per
share. In 1997, we reported net income of $2,455 million or $1.56 diluted
earnings per share, and in 1996 we reported net income of $3,402 million or
$2.18 diluted earnings per share. Our reported results for all three years were
affected by special items. After adjusting for such items, net income would have
been $4,323 million or $2.72 diluted earnings per share in 1998, $3,847 million
or $2.45 diluted earnings per share in 1997, and $3,474 million or $2.23 diluted
earnings per share in 1996. The table below summarizes reported and adjusted
results of operations for 1998, 1997 and 1996.
(DOLLARS IN MILLIONS)
Years Ended December 31 1998 1997 1996
- --------------------------------------------------------------------------------
Operating revenues $ 31,566 $ 30,194 $ 29,155
Operating expenses 24,939 24,852 23,076
---------------------------------------
Operating income 6,627 5,342 6,079
REPORTED NET INCOME 2,965 2,455 3,402
---------------------------------------
Special items-pre-tax
Merger-related costs 196 519 --
Retirement incentive costs 1,021 513 236
Other charges and special items 589 1,041 315
---------------------------------------
Total special items-pre-tax 1,806 2,073 551
Tax effect and other tax-related
items (448) (681) (206)
Cumulative effect of change in
accounting principle, net of
tax (273)
---------------------------------------
Total special items-after-tax 1,358 1,392 72
---------------------------------------
ADJUSTED NET INCOME $ 4,323 $ 3,847 $ 3,474
=======================================
DILUTED EARNINGS PER SHARE-REPORTED $ 1.86 $ 1.56 $ 2.18
DILUTED EARNINGS PER SHARE-ADJUSTED $ 2.72 $ 2.45 $ 2.23
All prior year per share amounts have been adjusted to reflect a two-for-one
common stock split on June 1, 1998.
The following table shows how special items are reflected in our consolidated
statements of income for each of the three years:
(DOLLARS IN MILLIONS)
Years Ended December 31 1998 1997 1996
- --------------------------------------------------------------------------------
OPERATING REVENUES
Regulatory contingencies $ -- $ 179 $ 132
---------------------------------------
EMPLOYEE COSTS
Retirement incentive costs 1,021 513 236
Merger direct incremental costs -- 53 --
Merger severance costs -- 223 --
Merger transition costs 15 4 --
Video-related charges -- 12 --
Other special items 30 -- 41
DEPRECIATION AND AMORTIZATION
Write-down of assets 40 300 19
OTHER OPERATING EXPENSES
Merger direct incremental costs -- 147 --
Merger transition costs 181 92 --
Video-related charges 15 69 --
Real estate consolidation -- 55 --
Regulatory, tax and legal
contingencies and other
special items 9 347 171
---------------------------------------
1,311 1,815 467
---------------------------------------
(INCOME) LOSS FROM
UNCONSOLIDATED BUSINESSES
Write-down of Asian investments 485 -- --
Write-down of video investments 8 162 --
Equity share of CWC formation
costs -- 59 --
Gains on sales of investments -- (142) (60)
OTHER INCOME AND EXPENSE, NET
Write-down of assets (45) -- 12
INTEREST EXPENSE
Write-down of assets 47 -- --
---------------------------------------
TOTAL SPECIAL ITEMS-PRE-TAX 1,806 2,073 551
PROVISION FOR INCOME TAXES
Tax effect of special items and
other tax-related items (448) (681) (206)
Cumulative effect of change in
accounting principle-directory
publishing, net of tax -- -- (273)
---------------------------------------
TOTAL SPECIAL ITEMS-AFTER-TAX $ 1,358 $ 1,392 $ 72
=======================================
F-2
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS continued
- --------------------------------------------------------------------------------
What follows is a further explanation of the nature and timing of these special
items.
- --------------------------------------------------------------------------------
Merger-related Costs
- --------------------------------------------------------------------------------
In connection with the Bell Atlantic-NYNEX merger, which was completed in August
1997, we recorded pre-tax costs totaling $196 million in 1998 and $519 million
in 1997.
In 1998, merger-related charges of $196 million were for transition and
integration costs. In 1997, merger-related charges consisted of $96 million for
transition and integration costs, $200 million for direct incremental costs and
$223 million for employee severance costs.
Transition and integration costs represent costs associated with integrating the
operations of Bell Atlantic and NYNEX, such as systems modifications costs,
advertising and branding costs, and costs associated with the elimination and
consolidation of duplicate facilities, relocation and training. Transition and
integration costs are expensed as incurred. Direct incremental costs consist of
expenses associated with completing the merger transaction, such as professional
and regulatory fees, compensation arrangements and shareowner-related costs.
Employee severance costs, as recorded under SFAS No. 112, "Employers' Accounting
for Postemployment Benefits," represent benefit costs for the separation by the
end of 1999 of approximately 3,100 management employees who are entitled to
benefits under pre-existing separation pay plans. During 1997 and 1998, 245 and
856 management employees were separated with severance benefits.
Merger-related costs were comprised of the following amounts in 1998 and 1997:
(DOLLARS IN MILLIONS)
Years Ended December 31 1998 1997
- --------------------------------------------------------------------------------
TRANSITION AND INTEGRATION COSTS
Systems modifications $ 149 $ 36
Advertising 20 --
Branding 11 48
Relocation, training and other 16 12
-----------------------
TOTAL TRANSITION AND INTEGRATION COSTS 196 96
-----------------------
DIRECT INCREMENTAL COSTS
Professional services 80
Compensation arrangements 54
Shareowner-related 16
Registration and other regulatory 18
Taxes and other 32
-------
TOTAL DIRECT INCREMENTAL COSTS 200
-------
EMPLOYEE SEVERANCE COSTS 223
-----------------------
TOTAL MERGER-RELATED COSTS $ 196 $ 519
=======================
We expect to incur between $100 million and $200 million (pre-tax) in transition
and integration costs over the next 12 to 18 months to complete our transition
efforts. You can find additional information on merger-related costs in Note 2
to the consolidated financial statements.
- --------------------------------------------------------------------------------
Retirement Incentive Costs
- --------------------------------------------------------------------------------
In 1993, we announced a restructuring plan which included an accrual of
approximately $1.1 billion (pre-tax) for severance and postretirement medical
benefits under an involuntary force reduction plan. Beginning in 1994,
retirement incentives have been offered under a voluntary program as a means of
implementing substantially all of the work force reductions planned in 1993.
Since the inception of the retirement incentive program, we recorded additional
costs totaling approximately $3.0 billion (pre-tax) through December 31, 1998.
These additional costs and the corresponding number of employees accepting the
retirement incentive offer for each year ended December 31 are as follows:
(DOLLARS IN MILLIONS)
Years Amount Employees
- --------------------------------------------------------------------------------
1994 $ 694 7,209
1995 515 4,759
1996 236 2,996
1997 513 4,311
1998 1,021 7,299
---------------------------------------
$ 2,979 26,574
=======================================
The additional costs are comprised of special termination pension and
postretirement benefit amounts, as well as employee costs for other items. These
costs have been reduced by severance and postretirement medical benefit reserves
established in 1993 and transferred to the pension and postretirement benefit
liabilities as employees accepted the retirement incentive offer. The remaining
severance and postretirement medical reserve balances totaled $93 million at
December 31, 1997 and were fully utilized at December 31, 1998. The retirement
incentive program covering management employees ended on March 31, 1997 and the
program covering associate employees was completed in September 1998. You can
find additional information on retirement incentive costs in Note 15 to the
consolidated financial statements.
- --------------------------------------------------------------------------------
Other Charges and Special Items
- --------------------------------------------------------------------------------
YEAR 1998
During 1998, we recorded other charges and special items totaling $589 million
in connection with the write-down of Asian investments and obsolete or impaired
assets, and for other special items arising during the year. The remaining
liability associated with these charges was $8 million at December 31, 1998.
These charges are comprised of the following significant items.
Asian Investments
In the third quarter of 1998, we recorded pre-tax charges of $485 million to
adjust the carrying values of two Asian investments -- TelecomAsia, a wireline
investment in Thailand, and Excelcomindo, a wireless investment in Indonesia. We
account for these investments under the cost method.
F-3
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS continued
- --------------------------------------------------------------------------------
The charges were necessary because we determined that the decline in the
estimated fair values of each of these investments was other than temporary. We
determined the fair values of these investments by discounting estimated future
cash flows.
In the case of TelecomAsia, we recorded a charge of $348 million to adjust the
carrying value of the investment to its estimated fair value. We considered the
following factors in determining this charge:
. The continued weakness of the Thai currency as compared to historical
exchange rates will place additional financial burdens on the company in
servicing U.S. dollar-denominated debt.
. The economic instability and prospects for an extended recovery period have
resulted in weaker than expected growth in TelecomAsia's business. This is
indicated by slower than expected growth in total subscribers and usage.
These factors resulted in reduced expectations of future cash flows and,
accordingly, a reduction in the value of our investment.
. The business plan for TelecomAsia contemplated cash flows from several
lines of business. Given TelecomAsia's inclination to focus on its core
wireline business, these other lines of business may not contribute future
cash flows at previously expected levels.
In the case of Excelcomindo, we recorded a charge of $137 million to adjust the
carrying value of the investment to its estimated fair value. We considered the
following factors in determining this charge:
. The continued weakness of the Indonesian currency as compared to historical
exchange rates will place additional financial burdens on the company in
servicing U.S. dollar-denominated debt. The continuing political unrest in
Indonesia has contributed to the currency's instability.
. The economic instability and prospects for an extended recovery period have
resulted in weaker than expected growth in Excelcomindo's business. One
significant factor has been inflexible tariff regulation despite rising
costs due to inflation. This and other factors have resulted in reduced
expectations of future cash flows and, accordingly, a reduction in the
value of our investment.
. Issues with cash flow are requiring Excelcomindo's shareholders to evaluate
the future funding of the business.
We will continue to monitor the political, economic and financial aspects of our
remaining investments in Thailand and Indonesia, as well as other investments.
The book value of our remaining Asian investments was approximately $210 million
at December 31, 1998. Should we determine that any further decline in the fair
values of these investments is other than temporary, the impact could be
material to our results of operations.
Video-related Charges
In 1998, we recorded pre-tax charges of $23 million primarily related to
wireline and other nonsatellite video initiatives. We made a strategic decision
in 1998 to focus our video efforts on satellite service being offered in
conjunction with DirecTV and USSB. We communicated the decision to stop
providing wireline video services to subscribers and offered them the
opportunity to subscribe to the satellite-based video service that we introduced
in 1998. In the third quarter of 1998, we decided to dispose of these assets by
sale or abandonment, and we conducted an impairment review under the
requirements of SFAS No. 121,"Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of." We based our estimate on an
estimate of the cash flows expected to result from the use of the assets prior
to their disposal and the net proceeds (if any) expected to result from
disposal. We are currently providing video service exclusively in conjunction
with our arrangements with DirecTV and USSB.
Write-down Of Assets And Other Items
Results for 1998 also included a pre-tax charge, net of minority interest, of
$42 million for the write-down of fixed assets (primarily buildings and wireless
communications equipment) and capitalized interest associated with our Mexican
wireless investment-Grupo Iusacell, S.A. de C.V. (Iusacell). These assets relate
to Iusacell's trial of fixed wireless service provided over the 450 MHz
frequency. While continuing this trial, Iusacell is considering whether or not
to pursue its rights to acquire 450 MHz licenses for other areas. Iusacell
believes that the capability of the CDMA technology and the success it has had
with its deployment indicate that impairment exists with respect to assets
related to the 450 MHz technology. Iusacell is currently providing service over
the 450 MHz spectrum and has concluded that the carrying amount of these assets
exceeds the sum of the estimated future cash flows associated with the assets.
We recognized an impairment loss under the provisions of SFAS No. 121. It is
currently anticipated that the 450 assets will remain in service until at least
the third quarter of 1999, at which point a decision on overall strategy will be
made. We account for our Iusacell investment as a fully consolidated subsidiary.
Other items arising in 1998 included charges totaling $39 million principally
associated with the settlement of labor contracts in August 1998.
YEAR 1997
During 1997, we recorded other charges and special items totaling $1,041 million
in connection with consolidating operations and combining organizations, and for
other special items arising during the year. You can find additional detail
about these accrued liabilities in Note 2 to the consolidated financial
statements.
Video-related Charges
In 1997, we recognized total pre-tax charges of $243 million related to certain
video investments and operations. We determined that we would no longer pursue a
multichannel, multipoint, distribution system (MMDS) as part of our video
strategy. As a result, we recognized liabilities for purchase commitments
associated with the MMDS technology and costs associated with closing the
operations of our Tele-TV partnership because this operation no longer supports
our video strategy. We also wrote-down our remaining investment in CAI Wireless
Systems, Inc.
F-4
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS continued
- --------------------------------------------------------------------------------
Write-down Of Assets And Real Estate Consolidation
In the third quarter of 1997, we recorded pre-tax charges of $355 million for
the write-down of obsolete or impaired fixed assets and for the cost of
consolidating redundant real estate properties. As part of our merger
integration planning, we reviewed the carrying values of long-lived assets. This
review included estimating remaining useful lives and cash flows and identifying
assets to be abandoned. In the case of impaired assets, we analyzed cash flows
related to those assets to determine the amount of the impairment. As a result
of these reviews, we recorded charges of $275 million for the write-off of some
assets and $25 million for the impairment of other assets. These assets
primarily included computers and other equipment used to transport data for
internal purposes, copper wire used to provide telecommunications service in New
York, and duplicate voice mail platforms. None of these assets are being held
for disposal. At December 31, 1998, the impaired assets had no remaining
carrying value.
In connection with our merger integration efforts, we consolidated real estate
properties to achieve a reduction in the total square footage of building space
that we utilize. We sold properties, subleased some of our leased facilities and
terminated other leases, for which we recorded a charge of $55 million in the
third quarter of 1997. Most of the charge related to properties in Pennsylvania
and New York, where corporate support functions were consolidated into fewer
work locations.
Regulatory, Tax And Legal Contingencies And Other Special Items
In 1997, we also recorded reductions to operating revenues and charges to
operating expenses totaling $526 million (pre-tax), which consisted of the
following items:
. Revenue reductions consisted of $179 million for federal regulatory
matters. These matters relate to specific issues that are currently under
investigation by federal regulatory commissions. We believe that it is
probable that the ultimate resolution of these pending matters will result
in refunds to our customers.
. Charges to operating expenses totaled $347 million and consisted of $75
million for interest on federal and other tax contingencies; $55 million
for other tax matters; and $52 million for legal contingencies and a state
regulatory audit issue. These contingencies were accounted for under the
rules of SFAS No. 5, "Accounting for Contingencies." These charges also
included $95 million related to costs incurred in standardizing and
consolidating our directory businesses and $70 million for other
post-merger initiatives.
Other charges arising in 1997 included $59 million for our equity share of
formation costs previously announced by Cable & Wireless Communications plc
(CWC). We own an 18.5% interest in CWC and account for our investment under the
equity method of accounting.
In 1997, we recognized pre-tax gains of $142 million on the sales of our
ownership interests of several nonstrategic businesses. These gains included $42
million on the sale of our interest in Sky Network Television Limited of New
Zealand (SkyTV); $54 million on the sale of our 33% stake in an Italian wireline
venture, Infostrada; and $46 million on the sale of our two-sevenths interest in
Bell Communications Research, Inc. (Bellcore).
YEAR 1996
In 1996, we recorded other charges and special items totaling $315 million,
consisting of $334 million in connection with regulatory and legal contingencies
and for costs associated with asset and investment dispositions and $41 million
for actuarially determined costs of a benefit plan amendment. These charges were
partially offset by a net gain of $60 million on the sale of a nonstrategic
investment.
Effective January 1, 1996, we changed our method of accounting for directory
publishing revenues and expenses. We adopted the point-of-publication method,
meaning that we now recognize directory revenues and expenses upon publication
rather than over the lives of the directories. We recorded an after-tax increase
in income of $273 million, representing the cumulative effect of this change in
accounting principle.
- --------------------------------------------------------------------------------
SEGMENTAL RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
We have four reportable segments, which we operate and manage as strategic
business units and we organize by products and services. Our segments are
Domestic Telecom, Global Wireless, Directory and Other Businesses. You can find
additional information about our segments in Note 17 to the consolidated
financial statements.
We measure and evaluate our reportable segments based on adjusted net income,
which excludes undistributed corporate expenses and special items arising during
each period. Special items are transactions that management has excluded from
the business units' results, but has included in reported consolidated earnings.
We previously described these special items in the Overview section. The effect
of these special items on each of the segment's reported net income is provided
in the following table:
(DOLLARS IN MILLIONS)
Years Ended December 31 1998 1997 1996
- --------------------------------------------------------------------------------
DOMESTIC TELECOM
Reported net income $ 2,383 $ 2,016 $ 2,413
Special items 790 977 377
---------------------------------------------
Adjusted net income $ 3,173 $ 2,993 $ 2,790
=============================================
GLOBAL WIRELESS
Reported net income $ 50 $ 113 $ 73
Special items 178 (18) 7
---------------------------------------------
Adjusted net income $ 228 $ 95 $ 80
=============================================
DIRECTORY
Reported net income $ 662 $ 564 $ 855
Special items 22 93 (270)
---------------------------------------------
Adjusted net income $ 684 $ 657 $ 585
=============================================
OTHER BUSINESSES
Reported net income $ (231) $ 28 $ 57
Special items 366 20 (45)
---------------------------------------------
Adjusted net income $ 135 $ 48 $ 12
=============================================
RECONCILING ITEMS
Reported net income $ 101 $ (266) $ 4
Special items 2 320 3
---------------------------------------------
Adjusted net income $ 103 $ 54 $ 7
=============================================
Reconciling items consist of corporate operations and intersegment eliminations.
F-5
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS continued
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE] Domestic Telecom
- -------------------------------------------------------------------------------
Our Domestic Telecom segment consists primarily of our nine operating telephone
subsidiaries that provide local telephone services from Maine to Virginia
including voice and data transport, enhanced and custom calling features,
network access, directory assistance, private lines and public telephones. This
segment also provides customer premises equipment distribution, systems
integration, billing and collections, and Internet access services. Domestic
Telecom represents the aggregation of our domestic wireline business units
(consumer, enterprise, general, and network services), which focus on specific
markets to increase revenues and customer satisfaction.
Years Ended December 31 (Dollars In Millions)
RESULTS OF OPERATIONS--ADJUSTED BASIS 1998 1997 1996
- --------------------------------------------------------------------------------
OPERATING REVENUES
Local services $ 13,882 $ 13,256 $ 12,627
Network access services 7,656 7,340 7,247
Long distance services 1,929 2,190 2,374
Ancillary services 2,090 2,023 1,888
----------------------------------
25,557 24,809 24,136
----------------------------------
OPERATING EXPENSES
Employee costs 7,298 7,436 7,679
Depreciation and amortization 5,195 4,990 4,911
Other operating expenses 7,047 6,696 6,262
----------------------------------
19,540 19,122 18,852
----------------------------------
OPERATING INCOME $ 6,017 $ 5,687 $ 5,284
==================================
INCOME (LOSS) FROM
UNCONSOLIDATED BUSINESSES $ 27 $ (14) $ (72)
ADJUSTED NET INCOME $ 3,173 $ 2,993 $ 2,790
OPERATING REVENUES
Local Services
Local services revenues are earned by our operating telephone subsidiaries from
the provision of local exchange, local private line, public telephone (pay
phone) and value-added services. Value-added services are a family of services,
which expand the utilization of the network. These services include products
such as Caller ID, Call Waiting and Return Call.
[PIE CHART APPEARS HERE]
- -------------------------------------------------------------------------------
1998 Domestic Telecom Revenue Components
- -------------------------------------------------------------------------------
Local 54%
Long Distance 8%
Ancillary 8%
Network Access 30%
- -------------------------------------------------------------------------------
Growth in local services revenues of $626 million or 4.7% in 1998 and $629
million or 5.0% in 1997 was primarily due to higher usage of our network
facilities. This growth was generated, in part, by an increase in access lines
in service of 4.3% in 1998 and 3.7% in 1997. Access line growth primarily
reflects higher demand for Centrex services and an increase in additional
residential lines. Higher revenues from private line and switched data services
also contributed to the revenue growth in both years.
Our local services revenues were boosted in both 1998 and 1997 by increased
customer demand and usage of our value-added services and the implementation of
new charges to carriers resulting from pay phone deregulation in April 1997.
In 1998, revenue growth from these factors was partially offset by price
reductions on certain local services and the elimination of Touch-Tone service
charges by several of our operating telephone subsidiaries.
You can find additional information on the Telecommunications Act of 1996 (1996
Act) and its impact on the local exchange market under "Other Factors That May
Affect Future Results."
[PIE CHART APPEARS HERE]
- --------------------------------------------------------------------------------
Access Lines by Category
- --------------------------------------------------------------------------------
Residence 63%
Business 36%
Public 1%
41.6 million
- --------------------------------------------------------------------------------
Network Access Services
Network access services revenues are earned from end-user subscribers and long
distance and other competing carriers who use our local exchange facilities to
provide usage services to their customers. Switched access revenues are derived
from fixed and usage-based charges paid by carriers for access to our local
network. Special access revenues originate from carriers and end-users that buy
dedicated local exchange capacity to support their private networks. End-user
access revenues are earned from our customers and resellers who purchase retail
dial-tone services.
Our network access services revenues grew $316 million or 4.3% in 1998 and $93
million or 1.3% in 1997. This growth was mainly attributable to higher customer
demand, as reflected by growth in access minutes of use of 7.8% in 1998 and 7.3%
in 1997. Volume growth also reflects a continuing expansion of the business
market, particularly for high-capacity services. In 1998, we saw an increasing
demand for special access services as a result of a greater utilization of the
network by Internet service providers and other high-capacity users. Higher
network usage by alternative providers of intraLATA toll services and higher
end-user revenues attributable to an increase in access lines in service also
contributed to revenue growth in both years. Volume-related growth was partially
offset in both years by net price reductions mandated by federal and state price
cap and incentive plans.
F-6
<PAGE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS continued
- --------------------------------------------------------------------------------
[BAR CHART APPEARS HERE]
- --------------------------------------------------------------------------------
Access Minutes of Use
- --------------------------------------------------------------------------------
1996 149.5 B
1997 160.5 B
1998 173.0 B
1997 7.3% growth
1998 7.8% growth
- --------------------------------------------------------------------------------
The Federal Communications Commission (FCC) regulates the rates that we charge
long distance carriers and end-user subscribers for interstate access services.
We are required to file new access rates with the FCC each year, under the rules
of the Price Cap Plan. We implemented price decreases for interstate access
services of approximately $63 million on an annual basis for the period July
1996 through June 1997 and approximately $430 million on an annual basis for the
period July 1997 through June 1998.
In July 1998, we implemented price decreases of approximately $175 million on an
annual basis. The rates include amounts necessary to recover our operating
telephone subsidiaries' contribution to the FCC's universal service fund. The
FCC has created a multi-billion dollar interstate fund to link schools and
libraries to the Internet and to subsidize low-income consumers and rural
healthcare providers. Under the FCC's rules, all providers of interstate
telecommunications services must contribute to the fund. The subsidiaries'
contributions to the universal service fund are included in Other Operating
Expenses.
Beginning in the third quarter of 1998, access charges on intrastate toll calls
in New York were reduced by $94 million annually due to a New York State Public
Service Commission order. This reduction is, in part, an acceleration of access
revenue reductions expected under the New York Performance Regulation Plan and,
in addition, will be partially offset by increased revenues from the federal
universal service fund. In January 1999, rates were further reduced by
approximately $18 million on an annual basis to reflect lower required
contributions to the FCC's universal service fund. The rates included in our
July 1998 and January 1999 filings will be in effect through June 1999.
You can find additional information on FCC rulemakings concerning price caps,
access charges and universal service under "Other Factors That May Affect Future
Results-Recent Developments-FCC."
Long Distance Services
Long distance services revenues are earned primarily from calls made outside a
customer's local calling area, but within the same service area of our operating
telephone subsidiaries (intraLATA toll). Other long distance services that we
provide include 800 services, Wide Area Telephone Service (WATS), corridor
services and long distance services outside of our region.
Declines in long distance services revenues of $261 million or 11.9% in 1998 and
$184 million or 7.8% in 1997 were caused by two factors. First, we implemented
presubscription for intraLATA toll services during 1997 in most states
throughout the region. In these states, customers may now use an alternative
provider of their choice for intraLATA toll calls without dialing a special
access code when placing a call. The relative effect of presubscription on long
distance revenues was lower in the second half of 1998, as a result of
presubscription being available in most of our states for more than one year.
The adverse impact on long distance services revenues as a result of
presubscription was partially mitigated by increased network access services
revenues for usage of our network by these alternative providers. Second, we
implemented customer win-back and retention initiatives that included toll
calling discount packages and product bundling offers. These revenue reductions
were partially offset by higher calling volumes generated by an increase in
access lines in service.
Our operating telephone subsidiaries in Maryland and Virginia expect to offer
presubscription no later than coincident with our offering of interLATA long
distance services in those states, or earlier if so ordered by state or federal
regulators. Our operating telephone subsidiary in Massachusetts expects to offer
presubscription in April 1999. We believe that competition for long distance
services, including competitive pricing and customer selection of alternative
providers of intraLATA and interLATA toll services in the states currently
offering presubscription, will continue to affect revenue trends. You can find
additional information on presubscription under "Other Factors That May Affect
Future Results-Competition-IntraLATA Toll Services."
Ancillary Services
Our ancillary services include such services as billing and collections for long
distance carriers, systems integration, voice messaging, Internet access,
customer premises equipment and wiring and maintenance services.
Revenues from ancillary services grew $67 million or 3.3% in 1998 and $135
million or 7.2% in 1997 due principally to new contracts with business customers
for systems integration services and higher demand for voice messaging, billing
and collections and Internet access services. Revenues earned from our customer
premises services declined in 1998, while in 1997 revenues from these services
grew over the prior year.
OPERATING EXPENSES
Employee Costs
Employee costs, which consist of salaries, wages and other employee
compensation, employee benefits and payroll taxes, declined in 1998 by $138
million or 1.9% and in 1997 by $243 million or 3.2%. These reductions were
largely attributable to lower pension and benefit costs in both years. A number
of factors contributed to these cost reductions, including favorable pension
plan investment returns, lower than expected retiree medical claims, and plan
amendments including the conversion of a pension plan to a cash balance plan.
Effective January 1, 1998, we established common pension and savings plan
benefit provisions for all management employees. As a result, all former NYNEX
management employees receive the same benefit levels as previously given under
Bell Atlantic management benefit plans. This change included the conversion of
the NYNEX management pension plan to a cash balance plan.
F-7
<PAGE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS continued
- --------------------------------------------------------------------------------
Other items contributing to the decreases, but to a lesser extent, were lower
work force levels in 1998 and lower overtime pay for repair and maintenance
activity in 1997.
- --------------------------------------------------------------------------------
Employees per 10,000 Access Lines
- --------------------------------------------------------------------------------
[BAR CHART APPEARS HERE]
1996 30.9
1997 30.5
1998 28.9
- --------------------------------------------------------------------------------
These cost reductions were partially offset by salary and wage increases in both
years. In 1998, we executed new contracts with unions representing associate
employees. The new contracts provide for wage and pension increases and other
benefit improvements as described below:
. The wages, pension and other benefits for our associate employees are
negotiated with unions. During 1998, we entered into new 2-year contracts
with the Communications Workers of America (CWA), representing more than
73,000 associate workers and with the International Brotherhood of
Electrical Workers (IBEW), representing approximately 13,000 associate
workers in New York and the New England states. These contracts, which
expire in August 2000, provide for wage increases of up to 3.8 percent
effective August 1998, and up to 4 percent effective August 1999. Over the
course of this two-year contract period, pension increases will range from
11 percent to 20 percent. The contracts also include cash payments, working
condition improvements, and continuation of certain employment security
provisions.
. We also entered into a two-year extension of contracts with the IBEW,
representing approximately 9,000 associate members in New Jersey and
Pennsylvania. These contracts, which expire in August 2002, provide for
wage increases of 4.8 percent in April 1999, 3 percent in May 2000, and 3
percent in May 2001. Pensions will increase by a total of 11 percent for
the years 1999-2001, and there will be improvements in a variety of other
benefits and working conditions.
Depreciation and Amortization
Depreciation and amortization expense increased $205 million or 4.1% in 1998 and
$79 million or 1.6% in 1997 principally due to growth in depreciable telephone
plant and changes in the mix of plant assets. Depreciable telephone plant
increased in 1998 by 2.8%, compared to 1.8% in 1997 principally as a result of
increased capital expenditures to support the expansion of our network. These
expense increases were partially offset by the effect of lower rates of
depreciation.
Other Operating Expenses
The rise in other operating expenses of $351 million or 5.2% in 1998 and $434
million or 6.9% in 1997 was due to higher costs at our operating telephone
subsidiaries. These increases were primarily attributable to higher
interconnection payments to competitive local exchange and other carriers to
terminate calls on their networks of approximately $175 million in 1998 and $55
million in 1997, and additional Year 2000 readiness costs of approximately $70
million in 1998 and $20 million in 1997.
The higher payments for termination of calls to competitive carriers' networks
were the result of state regulatory decisions requiring us to pay "reciprocal
compensation" for the large volume of one-way traffic from our customers to
customers of other carriers, primarily calls to Internet service providers. On
February 26, 1999, the FCC confirmed that such traffic is interstate and
interexchange in nature and not subject to the reciprocal compensation
requirements of the 1996 Act. Because previous state commission decisions were
based upon a view that Internet access calls are "local" rather than interstate
and interexchange, we have asked the state commissions to revisit their prior
interpretations. Unless state regulators follow the FCC's decision, these
reciprocal compensation payments are expected to grow to approximately $350
million in 1999.
We also recognized additional costs in 1998 as a result of our contribution to
the federal universal service fund, as described earlier in the discussion of
"Network Access Services Revenues." Costs associated with opening our network to
competitors, including local number portability, declined by $85 million in
1998, compared to an increase of $165 million in 1997. Other operating expenses
were also affected in both years, but to a lesser extent, by higher material
purchases to support the network. Higher marketing and advertising costs also
contributed to the expense increase in 1997.
The cost increase in 1998 was partially offset by lower taxes other than income
due to the effect of a change in New Jersey state tax law. This state tax law
change, which became effective January 1, 1998, repealed the gross receipts tax
for our operating telephone subsidiary in New Jersey and replaced it with a net
income-based tax.
INCOME (LOSS) FROM UNCONSOLIDATED BUSINESSES
The change in income (loss) from unconsolidated businesses in both years was
primarily due to the effect of the disposition of our video operations in the
third quarters of 1998 and 1997.
F-8
<PAGE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS continued
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE] Global Wireless
- -------------------------------------------------------------------------------
Our Global Wireless segment consists of our wireless telecommunications services
to customers in 24 states in the United States and foreign wireless investments
servicing customers in Latin America, Europe and the Pacific Rim.
Years Ended December 31 (Dollars In Millions)
RESULTS OF OPERATIONS--ADJUSTED BASIS 1998 1997 1996
- --------------------------------------------------------------------------------
OPERATING REVENUES
Wireless services revenues $ 3,798 $ 3,347 $ 2,684
----------------------------------
OPERATING EXPENSES
Employee costs 548 490 395
Depreciation and amortization 592 481 303
Other operating expenses 1,942 1,742 1,465
----------------------------------
3,082 2,713 2,163
----------------------------------
OPERATING INCOME $ 716 $ 634 $ 521
==================================
LOSS FROM UNCONSOLIDATED BUSINESSES $ (96) $ (196) $ (141)
ADJUSTED NET INCOME $ 228 $ 95 $ 80
In the first quarter of 1997, we consummated a restructuring of our investment
in Iusacell, a Mexican wireless company, to permit us to assume control of the
Board of Directors and management of Iusacell. As a result of the restructuring,
we changed the accounting for our Iusacell investment from the equity method to
full consolidation in the first quarter of 1997. You can find more information
about Iusacell in Note 4 to the consolidated financial statements.
OPERATING REVENUES
Revenues earned from our consolidated wireless businesses grew $451 million or
13.5% in 1998 and $663 million or 24.7% in 1997. This revenue growth was largely
attributable to our domestic cellular subsidiary, Bell Atlantic Mobile, which
contributed $383 million to revenue growth in 1998 and $448 million to revenue
growth in 1997. This growth was principally due to more customers and increased
usage of our domestic wireless services. Our domestic cellular customer base
grew 15.8% in 1998 and 21.4% in 1997. Volume-related revenue growth in both
years was partially offset by the effect of competitive pricing factors. Total
revenue per subscriber by our domestic cellular operations was $50.84 in 1998,
$53.15 in 1997 and $57.83 in 1996.
[BAR CHART APPEARS HERE]
- --------------------------------------------------------------------------------
Bell Atlantic Mobile Customers (in thousands)
- --------------------------------------------------------------------------------
1996 4,410
1997 5,356
1998 6,201
1997 21.4% growth
1998 15.8% growth
- --------------------------------------------------------------------------------
Higher revenues of $63 million from Iusacell also contributed to revenue growth
in 1998. The consolidation of Iusacell contributed $228 million to wireless
services revenues in 1997.
OPERATING EXPENSES
Employee Costs
Employee costs at our wireless subsidiaries increased by $58 million or 11.8% in
1998 and $95 million or 24.1% in 1997 principally as a result of higher work
force levels. The number of employees at Bell Atlantic Mobile grew by
approximately 500 or 7.0% in 1998 and by 760 or 11.7% in 1997. The effect of
consolidating Iusacell also contributed $39 million to the expense increase in
1997.
Depreciation And Amortization
Depreciation and amortization expense increased by $111 million or 23.1% in 1998
and $178 million or 58.7% in 1997. These increases were mainly attributable to
growth in depreciable domestic cellular plant. The effect of consolidating
Iusacell also contributed $44 million to the expense increase in 1997.
Other Operating Expenses
Other operating expenses increased by $200 million or 11.5% in 1998 and $277
million or 18.9% in 1997 principally due to increased service costs at Bell
Atlantic Mobile, including higher roaming payments to wireless carriers and
additional cost of equipment. Higher marketing and advertising costs also
contributed to the rise in other operating expenses in both years. Iusacell's
operating costs increased by $58 million in 1998 as a result of higher service
costs and the effect of consolidating Iusacell added $180 million to other
operating expenses in 1997.
[BAR CHART APPEARS HERE]
- --------------------------------------------------------------------------------
Bell Atlantic Mobile Monthly Cash Expense per Subscriber
- --------------------------------------------------------------------------------
1996 $31
1997 $27
1998 $24
- --------------------------------------------------------------------------------
LOSS FROM UNCONSOLIDATED BUSINESSES
The change in loss from unconsolidated businesses in 1998 of $100 million was
principally due to improved operating results from our investments in Omnitel
Pronto Italia S.p.A. (Omnitel), an international wireless investment, and
PrimeCo Personal Communications, L.P. (PrimeCo), a personal communications
services (PCS) joint venture.
In 1997, higher equity losses from unconsolidated businesses of $55 million were
primarily attributable to our PrimeCo investment. In November 1996, PrimeCo
launched commercial service in 16 major cities throughout the country, expanding
its PCS service to over 30 cities by the end of 1998. Results for 1997 were
positively affected by the consolidation of Iusacell and improved operating
results from Omnitel.
F-9
<PAGE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE] Directory
- --------------------------------------------------------------------------------
Our Directory segment consists of our domestic and international publishing
businesses including print directories and Internet-based shopping guides, as
well as website creation and hosting and other electronic commerce services.
This segment has operations principally in the United States and Central Europe.
Years Ended December 31 (Dollars In Millions)
RESULTS OF OPERATIONS--ADJUSTED BASIS 1998 1997 1996
- --------------------------------------------------------------------------------
OPERATING REVENUES
Directory services revenues $ 2,264 $ 2,215 $ 2,159
--------------------------------
OPERATING EXPENSES
Employee costs 326 215 212
Depreciation and amortization 37 39 34
Other operating expenses 777 886 910
--------------------------------
1,140 1,140 1,156
--------------------------------
OPERATING INCOME $ 1,124 $ 1,075 $ 1,003
================================
INCOME (LOSS) FROM
UNCONSOLIDATED BUSINESSES $ 29 $ 23 $ (1)
ADJUSTED NET INCOME $ 684 $ 657 $ 585
OPERATING REVENUES
Operating revenues from our Directory segment improved by $49 million or 2.2% in
1998 and $56 million or 2.6% in 1997 principally as a result of increased
pricing for certain directory services in both years. Higher business volumes
including revenue from new Internet-based shopping directory and electronic
commerce services also contributed to revenue growth in both years, but to a
lesser extent.
OPERATING EXPENSES
In 1998, the increase in employee costs and the reduction in other operating
expenses were largely due to a change in classification of certain costs from
other operating expenses to employee costs. For comparability purposes, similar
costs in 1997 and 1996 were approximately $95 million and $94 million,
respectively. If prior year amounts had been classified similar to 1998,
employee costs would have increased by approximately $16 million or 5.2% in 1998
and by $4 million or 1.3% in 1997. These increases were largely due to salary
and wage increases. After adjusting other operating expenses in prior years,
these expenses would have declined by approximately $14 million or 1.8 % in 1998
and by $25 million or 3.1% in 1997. Cost reductions in both years were
principally due to lower general and administrative costs of service.
INCOME (LOSS) FROM UNCONSOLIDATED BUSINESSES
Higher income from unconsolidated businesses in 1998 and 1997 was due to the
recognition of gains on the sale of portions of our ownership interests in
certain global directory businesses.
- -------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE] Other Businesses
- -------------------------------------------------------------------------------
Our Other Businesses segment includes international wireline telecommunications
investments in Europe and the Pacific Rim and lease financing and other
businesses.
Years Ended December 31 (Dollars In Millions)
RESULTS OF OPERATIONS--ADJUSTED BASIS 1998 1997 1996
- -------------------------------------------------------------------------------
OPERATING REVENUES
Other services revenues $ 124 $ 278 $ 456
--------------------------------
OPERATING EXPENSES
Employee costs 14 58 136
Depreciation and amortization 3 48 103
Other operating expenses 105 210 332
--------------------------------
122 316 571
--------------------------------
OPERATING INCOME (LOSS) $ 2 $ (38) $(115)
================================
INCOME FROM UNCONSOLIDATED
BUSINESSES $ 86 $ 78 $ 107
ADJUSTED NET INCOME $ 135 $ 48 $ 12
In the second quarter of 1997, we transferred our interests in cable television
and telecommunications operations in the United Kingdom to CWC in exchange for
an 18.5% ownership interest in CWC. This transaction was accounted for as a
nonmonetary exchange of similar productive assets and, as a result no gain or
loss was recorded. We now account for our investment in CWC under the equity
method. Prior to this transfer, we included the accounts of these operations in
our consolidated financial statements. You can find more information about CWC
in Note 3 to the consolidated financial statements.
OPERATING RESULTS
In 1998, the changes in operating revenues, expenses and income from
unconsolidated businesses principally reflect the effect of the change in the
accounting for our CWC investment under the equity method, beginning in the
second quarter of 1997.
The improvement in operating income between 1997 and 1996 reflects the effects
of the CWC transaction and the sale of our real estate properties business in
the second quarter of 1997.
Income from unconsolidated businesses decreased in 1997 primarily as a result of
higher equity losses from our international telecommunications investments.
These decreases were partially offset by the effect of the change in accounting
for CWC under the equity method and improved operating results from our
investment in FLAG Ltd. (FLAG). FLAG owns and operates an undersea fiberoptic
cable system, providing digital communications links between Europe and Asia.
F-10
<PAGE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NONOPERATING ITEMS
- --------------------------------------------------------------------------------
The following discussion of nonoperating items is based on the amounts reported
in our consolidated financial statements.
Years Ended December 31 (Dollars In Millions)
INTEREST EXPENSE 1998 1997 1996
- --------------------------------------------------------------------------------
Interest expense from
continuing operations $ 1,335 $ 1,230 $ 1,082
Capitalized interest costs 90 81 129
------------------------------------
Total interest costs on
debt balances $ 1,425 $ 1,311 $ 1,211
====================================
Average debt outstanding $19,963 $18,897 $17,745
Effective interest rate 7.14% 6.94% 6.82%
The rise in interest cost in both 1998 and 1997 was principally due to higher
average debt levels. In 1998, interest expense also included added costs due to
the settlement of tax-related matters. The reduction in capitalized interest
costs in 1997 was largely attributable to our PrimeCo investment and the
consolidation of Iusacell.
Years Ended December 31 (Dollars In Millions)
OTHER INCOME AND (EXPENSE), NET 1998 1997 1996
- --------------------------------------------------------------------------------
Minority interest $ (75) $ (95) $(169)
Foreign currency gains, net 40 28 3
Interest income 81 27 28
Gains on disposition of
assets/businesses, net 44 17 3
Other, net 32 20 35
------------------------------
Total $ 122 $ (3) $(100)
==============================
The change in other income and expense in 1998, as compared to 1997, was due to
several factors. These factors principally included an increase in income
resulting from the settlement of tax-related matters and from the sales of our
paging business and a leveraged lease. Other factors included a reduction in
minority interest, which was largely attributable to a write-down of assets by
Iusacell and higher foreign exchange gains associated with our international
investments.
The principal factors contributing to the change in other income and expense in
1997, as compared to the prior year, included the consolidation of our Iusacell
investment and the effect of the change in accounting method for our equity
investment in CWC, as described earlier.
Years Ended December 31 1998 1997 1996
- -------------------------------------------------------------------------------
EFFECTIVE INCOME TAX RATES 40.2% 38.4% 36.3%
The higher reported effective income tax rate in 1998 resulted from higher state
and local income taxes caused principally by the change in the New Jersey state
tax law described above under "Domestic Telecom-Other Operating Expenses," and
from the write-down of certain international investments for which no tax
benefits were provided. These rate increases were partially offset by
adjustments to deferred tax balances at certain subsidiaries and higher tax
credits related to our foreign operations.
The reported effective income tax rate was higher in 1997, than in 1996, due to
the effect of certain merger-related costs and special charges for which there
were no corresponding tax benefits. Adjustments to the valuation allowance
resulting from our re-evaluation of tax planning strategies in light of the
merger also contributed to the higher effective income tax rate in 1997. These
factors were partially offset by the effect of the change in the New Jersey
state tax law, which resulted in the recognition of a deferred state income tax
benefit of approximately $75 million in the third quarter of 1997.
You can find a reconciliation of the statutory federal income tax rate to the
effective income tax rate for each period in Note 16 to the consolidated
financial statements.
EXTRAORDINARY ITEM
We recorded extraordinary charges associated with the early extinguishment of
debentures and refunding mortgage bonds of our operating telephone subsidiaries
and debt issued by FLAG. These charges reduced net income by $25.5 million (net
of an income tax benefit of $14.3 million) in 1998.
- --------------------------------------------------------------------------------
CONSOLIDATED FINANCIAL CONDITION
- --------------------------------------------------------------------------------
(DOLLARS IN MILLIONS)
YEARS ENDED DECEMBER 31 1998 1997 1996
- --------------------------------------------------------------------------------
Cash Flows From (Used In)
Operating activities $ 10,071 $ 8,859 $ 8,781
Investing activities (7,685) (7,339) (7,574)
Financing activities (2,472) (1,447) (1,420)
-----------------------------------
Increase (Decrease) in
Cash and Cash Equivalents $ (86) $ 73 $ (213)
===================================
We use the net cash generated from our operations and from external financing to
fund capital expenditures for network expansion and modernization, pay
dividends, and invest in new businesses. While current liabilities exceeded
current assets at December 31, 1998 and 1997, our sources of funds, primarily
from operations and, to the extent necessary, from readily available external
financing arrangements, are sufficient to meet ongoing operating and investing
requirements. We expect that presently foreseeable capital requirements will
continue to be financed primarily through internally generated funds. Additional
debt or equity financing may be needed to fund additional development activities
or to maintain our capital structure to ensure our financial flexibility.
- --------------------------------------------------------------------------------
Cash Flows From Operating Activities
- --------------------------------------------------------------------------------
Our primary source of funds continued to be cash generated from operations.
Improved cash flows from operations during 1998 and 1997 resulted principally
from improved operating income before special charges and timing differences in
the payment of accounts payable and accrued taxes.
F-11
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cash Flows Used In Investing Activities
- --------------------------------------------------------------------------------
Capital expenditures continued to be our primary use of capital resources. The
majority of the capital expenditures were to support our Domestic Telecom
business in order to facilitate the introduction of new products and services,
enhance responsiveness to competitive challenges, and increase the operating
efficiency and productivity of the network. We invested approximately $6.4
billion in 1998, $5.5 billion in 1997 and $4.9 billion in 1996 in our Domestic
Telecom business. We also invested in our Wireless, Directory and Other
Businesses approximately $1.0 billion in 1998, $1.1 billion in 1997 and $1.5
billion in 1996. We expect capital expenditures in 1999 to total approximately
$8.1 billion, including approximately $7.3 billion to be invested in our
Domestic Telecom business. This estimate includes approximately $500 million
related to the implementation of the new accounting standard on costs of
computer software, Statement of Position (SOP) No. 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use." You can find
additional information on SOP No. 98-1 under "Other Matters-Recent Accounting
Pronouncements-Costs of Computer Software."
[BAR CHART APPEARS HERE]
- --------------------------------------------------------------------------------
Capital Expenditures
- --------------------------------------------------------------------------------
1996 $6.4B
1997 $6.6B
1998 $7.4B
- --------------------------------------------------------------------------------
We continue to make substantial investments in our unconsolidated businesses.
During 1998, we invested $603 million, which included a cash payment of $162
million to increase our ownership interest in Omnitel from 17.45% to 19.71%. In
1998, we also invested $301 million in PrimeCo to fund the build-out and
operations of its PCS network and $140 million in our lease financing
businesses. In 1997, cash investing activities in unconsolidated businesses
totaled $833 million and included $426 million in PrimeCo, $138 million in FLAG
and $269 million in leasing and other partnerships. During 1996, we invested
$257 million in PrimeCo, $315 million in Omnitel, primarily to increase our
ownership interest, $224 million in other international telecommunications
investments and $275 million in leasing and other partnerships.
Our short-term investments include principally cash equivalents held in trust
accounts for the payment of certain employee benefits. We invested $1,028
million in 1998, $844 million in 1997 and $418 million in 1996 principally to
pre-fund vacation pay and associate health and welfare benefits. In 1998 and
1997, we increased our pre-funding to cover employees of the former NYNEX
companies. Proceeds from the sales of all short-term investments were $968
million in 1998, $427 million in 1997 and $133 million in 1996.
In 1998, we received cash proceeds of $637 million in connection with the
disposition of investments. These proceeds included $564 million associated with
Viacom's repurchase of one-half of our investment in Viacom Inc. (Viacom) and
$73 million from the sales of our paging and other nonstrategic businesses. In
1997, we disposed of our real estate properties and our interests in Bellcore,
Infostrada, SkyTV and other joint ventures and received cash proceeds totaling
$547 million. In 1996, we received cash proceeds of approximately $128 million
from the sales of nonstrategic businesses. We invested $62 million in each of
1998 and 1997 to purchase cellular properties.
During 1997, we received cash proceeds of $153 million from the TCNZ share
repurchase plan, which was completed in December 1997.
- -------------------------------------------------------------------------------
Cash Flows Used In Financing Activities
- -------------------------------------------------------------------------------
As in prior years, dividend payments were a significant use of capital
resources. We determine the appropriateness of the level of our dividend
payments on a periodic basis by considering such factors as long-term growth
opportunities, internal cash requirements, and the expectations of our
shareowners. In September 1998, we announced a quarterly cash dividend of $.385
per share. For 1998, cash dividends declared totaled $1.54 per share. We
declared cash dividends of $.37 per share in the first and second quarters of
1997 and $.385 per share in the second half of 1997, or $1.51 per share for the
year. In 1996, cash dividends were $.36 per share each quarter, or $1.44 per
share for the year. Cash dividends declared in 1996 included a payment of $.0025
per share for redemption of all rights granted under our Shareholder Rights
Plan.
We increased our total debt (including capital lease obligations) by $1,026
million from December 31, 1997 to fund the increase in our Domestic Telecom
capital investment program, for higher purchases of shares to fund employee
stock option exercises, and for continued investments in PrimeCo and Omnitel.
Our debt level also increased by $1,438 million from 1996 to 1997 principally
due to an increase in telephone plant construction, new investments in PrimeCo
and other wireless subsidiaries, and the consolidation of our Iusacell
investment. Additional pre-funding of employee trusts as a result of covering
employees of the former NYNEX companies also contributed to the increase in the
1998 and 1997 debt levels.
[BAR CHART APPEARS HERE]
- --------------------------------------------------------------------------------
Dividends
- --------------------------------------------------------------------------------
1996 $2.2B
1997 $2.3B
1998 $2.4B
- --------------------------------------------------------------------------------
F-12
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis continued
- --------------------------------------------------------------------------------
In February 1998, our wholly owned subsidiary, Bell Atlantic Financial Services,
Inc. (FSI), issued $2,455 million of 5.75% senior exchangeable notes due on
April 1, 2003 that are exchangeable into ordinary shares of TCNZ stock that we
own (TCNZ exchangeable notes). In August 1998, FSI also issued $3,180 million of
4.25% senior exchangeable notes due on September 15, 2005 that are exchangeable
into ordinary shares of CWC stock that we own (CWC exchangeable notes). Proceeds
of both offerings were used for the repayment of a portion of our short-term
debt and other general corporate purposes. In addition, two of our operating
telephone subsidiaries refinanced debentures totaling $721 million and Iusacell
issued $100 million in debt.
[BAR CHART APPEARS HERE]
- --------------------------------------------------------------------------------
Debt Ratio
- --------------------------------------------------------------------------------
1996 58.3%
1997 60.5%
1998 61.3%
- --------------------------------------------------------------------------------
As of December 31, 1998, we had in excess of $4.5 billion of unused bank lines
of credit and $299.5 million in bank borrowings outstanding. As of December 31,
1998, our operating telephone subsidiaries and financing subsidiaries had shelf
registrations for the issuance of up to $2.8 billion of unsecured debt
securities. The debt securities of those subsidiaries continue to be accorded
high ratings by primary rating agencies. After the announcement of the Bell
Atlantic-GTE merger, the rating agencies placed the ratings of certain of our
subsidiaries under review for potential downgrade. In a subsequent and unrelated
event, Moody's Investor Services changed its methodology for rating diversified
U.S. Telecommunications Companies. As a result, the debt ratings of four of our
operating telephone subsidiaries were downgraded and one operating telephone
subsidiary was upgraded to reflect this new rating methodology.
In 1998, we established a $2.0 billion Euro Medium Term Note Program, under
which we may issue notes that are not registered with the Securities and
Exchange Commission. The notes will be issued from time to time from our
subsidiary, Bell Atlantic Global Funding, Inc. (BAGF), and will have the benefit
of a support agreement between BAGF and Bell Atlantic. There have been no notes
issued under this program.
In December 1998, we accepted an offer from Viacom to repurchase one-half of our
investment in Viacom, or 12 million shares of their preferred stock (with a book
value of approximately $600 million), for approximately $564 million in cash.
This transaction resulted in a small loss in the fourth quarter of 1998. The
cash proceeds, together with additional cash, were used to purchase an outside
party's interest in one of our fully consolidated subsidiaries. This transaction
reduced Minority Interest by $600 million and included certain stock
appreciation rights and costs totaling $32 million. Our remaining investment in
Viacom, 12 million shares of their preferred stock (with a book value of
approximately $600 million), was repurchased by Viacom in a second transaction
in January 1999 for approximately $612 million in cash. This transaction did not
have a material effect on our consolidated results of operations. You can find
additional information on our Viacom investment in Notes 3 and 10 to the
consolidated financial statements.
In December 1998, Bell Atlantic Mobile announced an agreement with Crown Castle
International Corporation to form a joint venture into which Bell Atlantic
Mobile, together with certain partnerships in which it is the managing partner
(the managed entities), will contribute (assuming the participation of all
managed entities) approximately 1,400 network cellular towers in exchange for
approximately $380 million in cash and an equity interest of approximately 37.7%
in the joint venture. BAM and the managed entities will lease back a portion of
the network towers and the joint venture will lease the remaining space to third
parties. The joint venture also plans to build new towers. This financing
transaction is expected to close in the first quarter of 1999, assuming the
satisfaction of certain conditions of closing.
- --------------------------------------------------------------------------------
MARKET RISK
- --------------------------------------------------------------------------------
We are exposed to various types of market risk in the normal course of our
business, including the impact of interest rate changes, foreign currency
exchange rate fluctuations, changes in equity investment prices and changes in
corporate tax rates. We employ risk management strategies using a variety of
derivatives including interest rate swap agreements, interest rate caps and
floors, foreign currency forwards and options and basis swap agreements. We do
not hold derivatives for trading purposes.
It is our policy to enter into interest rate, foreign currency and other
derivative transactions only to the extent necessary to achieve our desired
objectives in limiting our exposures to the various market risks. Our objectives
include maintaining a mix of fixed and variable rate debt to lower borrowing
costs within reasonable risk parameters, hedging the value of certain
international investments, and protecting against earnings and cash flow
volatility resulting from changes in foreign exchange rates. We do not hedge our
market risk exposure in a manner that would completely eliminate the effect of
changes in interest rates, equity prices and foreign exchange rates on our
earnings. While we do not expect that our liquidity and cash flows will be
materially affected by these risk management strategies, our net income may be
materially affected by certain market risk associated with the TCNZ and CWC
exchangeable notes.
F-13
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Exchangeable Notes
- --------------------------------------------------------------------------------
In 1998, we issued the TCNZ and CWC exchangeable notes as described earlier, and
in Note 8 to the consolidated financial statements. These financial instruments
expose us to market risk, including foreign exchange rate risk, interest rate
risk and equity price risk, which could affect the fair values of the notes and
our future earnings.
Market risk that could affect the fair values of the exchangeable notes
includes:
. Equity price movements because the notes are exchangeable into shares that
are traded on the open market and routinely fluctuate in value.
. Foreign exchange rate movements because the notes are exchangeable into
shares that are denominated in a foreign currency. The fair value of the
TCNZ exchangeable notes is affected by changes in the U.S. dollar/ New
Zealand dollar exchange rate, and the fair value of the CWC exchangeable
notes is affected by changes in the U.S. dollar/ British pound exchange
rate.
. Interest rate movements because the notes carry fixed interest rates.
Market risk that could affect our future earnings includes:
. Equity price and/or foreign exchange rate movements because these movements
may result in our TCNZ shares rising to a level greater than 120% of the
share price at the pricing date of the offering. Similar movements may
cause the price of our CWC shares to rise to a level greater than 128% of
the share price at the pricing date of the offering. If either event should
occur, we are required to mark-to-market the applicable exchangeable note
liability by the amount of the increase in share price over the exchange
price. This mark-to-market transaction would reduce income by the amount of
the increase in the exchangeable note liability. If the share price
subsequently declines, the liability would be reduced (but not less than
its amortized carrying value) and income would be increased. At December
31, 1998, the fair value of neither the underlying TCNZ shares, nor the
underlying CWC shares, exceeded the recorded value of the debt liability
and, therefore, no mark-to-market adjustments were recorded to our
financial statements.
. Interest rate movements will not impact earnings because the exchangeable
notes carry a fixed interest rate and there is no requirement to
mark-to-market the notes based on changes in interest rates.
The following sensitivity analysis measures the effect on earnings due to
changes in the underlying share prices of the TCNZ and CWC stock.
. At December 31, 1998, the exchange price for the TCNZ shares (expressed as
American Depositary Receipts) was $44.93 and the exchange price for the CWC
shares (expressed as American Depositary Shares) was $57.47.
. For each $1.00 increase or decrease in value of the TCNZ shares above the
exchange price, our earnings would be reduced or increased by approximately
$55 million. For each $1.00 increase or decrease in value of the CWC shares
above the exchange price, our earnings would be reduced or increased by
approximately $56 million.
. Our earnings would not be affected when the TCNZ and CWC share prices are
at or below their exchange prices.
. Our cash flows would not be affected by ongoing mark-to-market activity
relating to the exchangeable notes.
. If we decide to deliver shares in exchange for the notes, the exchangeable
note liability (including any mark-to-market adjustments) will be
eliminated and the investment will be reduced by the book value of the
related number of shares delivered. Upon settlement, the excess of the
liability over the book value of the related shares delivered will be
recorded as a gain. We also have the option to settle these liabilities
with cash upon exchange.
- --------------------------------------------------------------------------------
Interest Rate Risk
- --------------------------------------------------------------------------------
The table that follows summarizes the fair values of our long-term debt,
interest rate derivatives and exchangeable notes as of December 31, 1998 and
1997. The table also provides a sensitivity analysis of the estimated fair
values of these financial instruments assuming 100-basis-point upward and
downward parallel shifts in the yield curve. Our sensitivity analysis did not
include the fair values of our commercial paper and bank loans because they are
not significantly affected by changes in market interest rates.
<TABLE>
<CAPTION>
(Dollars In Millions)
Fair Value assuming Fair Value assuming
At December 31, 1998 Fair Value +100 basis point shift -100 basis point shift
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Long-term debt and
interest rate derivatives $14,243 $13,414 $15,098
Exchangeable notes 5,818 5,618 6,018
-----------------------------------------------------------
Total $20,061 $19,032 $21,116
===========================================================
At December 31, 1997
- ----------------------------------------------------------------------------------------------------------
Long-term debt and
interest rate derivatives $14,420 $13,608 $15,209
Exchangeable notes - - -
-----------------------------------------------------------
Total $14,420 $13,608 $15,209
===========================================================
</TABLE>
- --------------------------------------------------------------------------------
Foreign Exchange Risk
- --------------------------------------------------------------------------------
The fair values of our foreign currency derivatives and investments accounted
for under the cost method are subject to fluctuations in foreign exchange rates.
Our most significant foreign currency derivatives are interest rate swap
agreements, which contain both a foreign currency and an interest rate component
and require an exchange of British pounds and U.S. dollars at the maturity of
the contract.
F-14
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis continued
- --------------------------------------------------------------------------------
The table that follows summarizes the fair values of our foreign currency
derivatives, cost investments, and the exchangeable notes as of December 31,
1998 and 1997. The table also provides a sensitivity analysis of the estimated
fair values of these financial instruments assuming a 10% decrease and increase
in the value of the U.S. dollar against the various currencies to which we are
exposed. Our sensitivity analysis does not include potential changes in the
value of our international investments accounted for under the equity method. As
of December 31, 1998, the carrying value of our equity method international
investments totaled approximately $1.9 billion.
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
Fair Value assuming Fair Value assuming
At December 31, 1998 Fair Value 10% decrease in US$ 10% increase in US$
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Costs investments and foreign
currency derivatives $ 154 $ 140 $ 172
Exchangeable notes (5,818) (6,023) (5,643)
--------------------------------------------------------
Total $(5,664) $(5,883) $(5,471)
========================================================
At December 31, 1997
- ----------------------------------------------------------------------------------------------------
Cost investments and foreign
currency derivatives $ 351 $ 368 $ 341
Exchangeable notes - - -
--------------------------------------------------------
Total $ 351 $ 368 $ 341
========================================================
</TABLE>
- --------------------------------------------------------------------------------
Foreign Currency Translation
- --------------------------------------------------------------------------------
The functional currency for nearly all of our foreign operations is the local
currency. The translation of income statement and balance sheet amounts of these
entities into U.S. dollars are recorded as cumulative translation adjustments,
which are included in Accumulated Other Comprehensive Loss in our consolidated
balance sheets. At December 31, 1998, our primary translation exposure was to
the British pound, Italian lira and New Zealand dollar. We have not hedged our
accounting translation exposure to foreign currency fluctuations relative to
these investments, except for our United Kingdom investment which is partially
hedged.
Equity income from our international investments is affected by exchange rate
fluctuations when an equity investee has assets and liabilities denominated in a
currency other than the investee's functional currency. Our investment in the
Philippines is exposed to fluctuations in the U.S. dollar/Filipino peso exchange
rate. Iusacell, our consolidated investment in Mexico, also holds U.S. dollar
denominated debt.
For the period October 1, 1996 through December 31, 1998, we considered Iusacell
to operate in a highly inflationary economy. Beginning January 1, 1999, we
discontinued highly inflationary accounting for our Iusacell subsidiary and
resumed using the Mexican peso as its functional currency. As a result,
beginning in 1999 our earnings will be affected by any foreign currency gains or
losses associated with the U.S dollar denominated debt held by Iusacell and our
equity will be affected by the translation from the Mexican peso.
- --------------------------------------------------------------------------------
Other Market Risks
- --------------------------------------------------------------------------------
Earnings generated from our leveraged lease portfolio may be affected by changes
in corporate tax rates. In order to hedge a portion of this risk, we entered
into several basis swap agreements which provide for the receipt of a variable
interest rate (LIBOR-based) in exchange for a rate calculated based on a
tax-exempt market index (J.J. Kenney). We account for these basis swaps at fair
value and record changes as unrealized gains and losses in earnings.
In addition to the risks that we have discussed, we are typically exposed to
other types of risk in the course of our business such as political risks to
assets located in foreign countries. Credit risks and other potential risks have
not been included in the above analysis.
- --------------------------------------------------------------------------------
OTHER FACTORS THAT MAY AFFECT FUTURE RESULTS
- --------------------------------------------------------------------------------
Proposed Bell Atlantic-GTE Merger
- --------------------------------------------------------------------------------
Bell Atlantic and GTE Corporation have announced a proposed merger of equals
under a definitive merger agreement dated as of July 27, 1998. Under the terms
of the agreement, GTE shareholders will receive 1.22 shares of Bell Atlantic
common stock for each share of GTE common stock that they own. Bell Atlantic
shareholders will continue to own their existing shares after the merger.
We expect the merger to qualify as a pooling of interests, which means that for
accounting and financial reporting purposes the companies will be treated as if
they had always been combined. The completion of the merger is subject to a
number of conditions, including certain regulatory approvals, receipt of
opinions that the merger will be tax-free, and the approval of the shareholders
of both Bell Atlantic and GTE.
We believe that the merger will result in significant opportunities for cost
savings, revenue growth, technological development and other benefits. The
combined company will achieve synergies through economies of scope and scale,
the elimination of duplicative expenditures and the consistent use of the best
practices of Bell Atlantic and GTE in cost control and product offerings.
Based on anticipated revenue and expense synergies, we expect that the merger
will improve earnings per share, excluding merger-related charges, in the first
year following the completion. We estimate that the merger will also generate
significant capital synergies, producing higher capital efficiency and higher
cash flow and margin growth. By the third year following the completion of the
merger, we expect:
. annual revenue synergies of approximately $2 billion, primarily from
improved market penetration for value-added services and faster development
of our data and long distance businesses, which, at an estimated operating
margin of 25%, will produce $500 million in incremental operating income;
. annual expense savings of approximately $2 billion, with savings generated
from operating and procurement synergies, reduced corporate overheads, the
migration of long distance traffic onto GTE's network, and greater
efficiency in wireless operations; and
F-15
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis continued
- --------------------------------------------------------------------------------
. annual capital synergies of approximately $500 million through volume
purchasing and the elimination of certain capital costs associated with
building a data network in our current territory.
We are targeting revenue growth of 8-10% and earnings per share growth of 13-15%
(excluding merger-related charges) in each of the first two years following the
completion of the merger. By the third year after the completion of the merger,
we are targeting revenue growth in excess of 10% and earnings per share growth
in excess of 15% (excluding merger-related charges).
As a result of the merger, the combined company will incur direct incremental
and transition costs currently estimated at $1.6 billion to $2.0 billion
(pre-tax) in connection with completing the transaction and integrating the
operations of Bell Atlantic and GTE. These costs consist principally of systems
modification costs, costs associated with the elimination and consolidation of
duplicate facilities, employee severance and relocation resulting from the
merger, branding, compensation arrangements, and professional and registration
fees. While the exact timing, nature and amount of these costs is subject to
change, we anticipate that the combined company will record a charge of
approximately $375 million (pre-tax) for direct incremental costs in the quarter
in which the merger is completed. Transition costs of approximately $1.2 billion
to $1.6 billion (pre-tax) will be incurred over the three years following
completion of the merger.
- --------------------------------------------------------------------------------
Telecommunications Industry Changes
- --------------------------------------------------------------------------------
The telecommunications industry is undergoing substantial changes as a result of
the 1996 Act, other public policy changes and technological advances. These
changes are bringing increased competitive pressures in our current businesses,
but will also open new markets to us.
The 1996 Act became law on February 8, 1996 and replaced the Modification of
Final Judgment (MFJ). In general, the 1996 Act includes provisions that open
local exchange markets to competition and permit Bell Operating Companies (BOCs)
or their affiliates, including ours, to provide long distance services and to
engage in manufacturing previously prohibited by the MFJ. Under the 1996 Act,
our ability to provide in-region long distance service is largely dependent on
satisfying certain conditions. The requirements include a 14-point "competitive
checklist" of steps we must take which will help competitors offer local service
through resale, the purchase of unbundled network elements or through their own
networks. We must also demonstrate to the FCC that our entry into the in-region
long distance market would be in the public interest.
The U. S. Court of Appeals rejected a constitutional challenge to these
provisions, and the Supreme Court recently declined to review that decision.
During the period that the case was pending, we continued to work through the
regulatory process at both the state and federal levels in order to be in a
position to demonstrate compliance with the challenged provisions.
The U. S. Supreme Court recently reversed a U.S. Court of Appeals decision that
had invalidated certain aspects of the FCC rules implementing provisions of the
1996 Act. In particular, the Supreme Court reinstated the FCC's authority to
adopt rules governing the methodology to be used by state commissions in setting
prices for local interconnection and resale arrangements, and reinstated rules
that allow competitors to choose individual terms out of negotiated
interconnection agreements, and that prohibit incumbent local telephone
companies from separating network elements that already are combined in the
incumbent's own network.
The U.S. Supreme Court also decided that the FCC had applied the wrong standard
in determining what elements of their networks incumbent local telephone
companies are obligated to make available to competitors on an unbundled basis.
Among other things, the FCC failed to account for the fact that some elements
are available from other sources. As a result of the decision, the FCC must
conduct a new proceeding to apply the correct standard. Pending that proceeding,
we have informally agreed to continue offering the FCC's previously specified
list of unbundled elements. In addition, a challenge to the substantive merits
of the FCC's pricing rules remains pending in the U.S. Court of Appeals.
In April 1998, our operating telephone subsidiary in New York filed with the New
York State Public Service Commission a statement setting forth additional
commitments that we will make to the FCC in connection with our anticipated
application for permission to enter the in-region long distance market in New
York. Those commitments include terms under which we will offer combinations of
unbundled network elements and an unbundled network element platform (UNE-P) to
competitors wishing to provide basic local and ISDN-BRI service to business or
residential customers. We will offer UNE-P for basic local and ISDN-BRI service
throughout our New York operating area, but UNE-P will not be available to
competitors for other services, or for service to business customers in those
parts of New York City where there is a defined level of local competition from
two or more competitive local exchange carriers. Our commitment to offer UNE-P
will be for four years in New York City and other major urban areas and for six
years in the rest of the state. We believe that the terms of these commitments
generally are consistent with the recent Supreme Court decision.
We expect to file in the second quarter of 1999 an application with the FCC for
permission to enter the in-region long distance market in New York. We hope to
begin offering this service in the third quarter of 1999. Following our
application for New York, we expect next to file applications with the FCC for
Pennsylvania, Massachusetts, New Jersey, Virginia and Maryland and,
subsequently, for the remaining states in our region. The timing of our long
distance entry in each of our 14 jurisdictions depends on the receipt of FCC
approval.
We are unable to predict definitively the impact that the 1996 Act will
ultimately have on our business, results of operations or financial condition.
The financial impact will depend on several factors, including the timing,
extent and success of competition in our markets, the timing and outcome of
various regulatory proceedings and any appeals, and the timing, extent and
success of our pursuit of new opportunities resulting from the 1996 Act.
F-16
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis continued
- --------------------------------------------------------------------------------
We anticipate that these industry changes, together with the rapid growth,
enormous size and global scope of these markets, will attract new entrants and
encourage existing competitors to broaden their offerings. Current and potential
competitors in telecommunication services include long distance companies, other
local telephone companies, cable companies, wireless service providers, foreign
telecommunications providers, electric utilities, Internet service providers and
other companies that offer network services. Many of these companies have a
strong market presence, brand recognition and existing customer relationships,
all of which contribute to intensifying competition and may affect our future
revenue growth. In addition, a number of major industry participants have
announced mergers, acquisitions and joint ventures which could substantially
affect the development and nature of some or all of our markets. You should also
read the "Competition" section for additional information.
- --------------------------------------------------------------------------------
Recent Developments-FCC
- --------------------------------------------------------------------------------
In 1998, the FCC continued to implement reforms to the interstate access charge
system and to implement the "universal service" and other requirements of the
1996 Act.
ACCESS CHARGES
Interstate access charges are the rates long distance carriers pay for use and
availability of our operating telephone subsidiaries' facilities for the
origination and termination of interstate service. The FCC required a phased
restructuring of access charges, which began in January 1998, so that the
operating telephone subsidiaries' nonusage-sensitive costs will be recovered
from long distance carriers and end-users through flat rate charges, and
usage-sensitive costs will be recovered from long distance carriers through
usage-based rates. In addition, the FCC has required that different levels of
usage-based charges for originating and for terminating interstate traffic be
established.
PRICE CAPS
Under the FCC price cap rules that apply to interstate access rates, each year
our price cap index is adjusted downward by a fixed percentage intended to
reflect increases in productivity (the productivity factor) and adjusted upward
by an allowance for inflation (the GDP-PI). The current productivity factor is
6.5 percent. These changes will be reflected in tariff changes that will be
filed to take effect on July 1, 1999.
In October 1998, the FCC initiated a proceeding with respect to its price cap
rules to determine whether a change in the current productivity factor is
warranted, whether to continue its "market based" approach of allowing market
forces (supplemented by its price cap rules) to determine access charge levels,
and whether to afford additional pricing flexibility for access services. In
addition, we have petitioned the FCC to remove our special access services from
price cap regulation on the grounds that customers of these services have
competitive alternatives available, and a challenge to the FCC order
establishing the 6.5 percent productivity factor is pending in the U.S. Court of
Appeals. We are unable to predict the results of these further proceedings.
UNIVERSAL SERVICE
The FCC has adopted rules implementing the "universal service" provision of the
1996 Act. As of January 1, 1999, the rules require each of our operating
telephone subsidiaries to contribute approximately 2% of its interstate retail
revenues for high-cost and low-income subsidies. Each of our operating telephone
subsidiaries also will be contributing a portion of its total retail revenues
for schools, libraries and not-for-profit healthcare. Our operating telephone
subsidiaries will recover these contributions through interstate charges to long
distance carriers and end-users. Our domestic wireless subsidiary is required to
contribute to these universal service programs and will recover the cost of its
contributions from end-users.
A new federal high-cost universal service support mechanism for nonrural
carriers and an increase in the funding level for schools and libraries are
expected to become effective in 1999. The FCC currently is considering, in
conjunction with a recommendation from a joint board of federal and state
regulators, a number of issues that could affect the size of the universal
service fund for high cost areas and the amount of universal service costs that
are assessed against our operating telephone subsidiaries and domestic cellular
subsidiary for recovery.
- --------------------------------------------------------------------------------
Competition
- --------------------------------------------------------------------------------
INTRALATA TOLL SERVICES
IntraLATA toll calls originate and terminate within the same LATA, but generally
cover a greater distance than a local call. These services are generally
regulated by state regulatory commissions rather than federal authorities. All
of our state regulatory commissions (except in the District of Columbia, where
intraLATA toll service is not provided) permit other carriers to offer intraLATA
toll services within the state.
Until the implementation of presubscription, intraLATA toll calls were completed
by our operating telephone subsidiaries unless the customer dialed a code to
access a competing carrier. Presubscription changes this dialing method and
enables customers to make these toll calls using another carrier without having
to dial an access code.
The 1996 Act generally prohibits, with certain exceptions, a state from
requiring presubscription until the earlier of such time as the BOC is
authorized to provide long distance services originating in the state or three
years from the effective date of the 1996 Act.
Our operating telephone subsidiary in New York fully completed intraLATA
presubscription implementation by September 1996. By December 1997, our
operating telephone subsidiaries in Delaware, Maine, New Hampshire, New Jersey,
Pennsylvania, Rhode Island, Vermont and West Virginia had also implemented
presubscription. We expect to offer intraLATA presubscription in Massachusetts
in April 1999. In Maryland and Virginia, the state commissions have decided that
intraLATA presubscription need not occur on the third anniversary of the 1996
Act, but did not set dates for implementation. The recent Supreme Court decision
reinstated the FCC's authority to adopt rules governing intraLATA
presubscription, and
F-17
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis continued
- --------------------------------------------------------------------------------
the FCC has required that implementation be completed as early as May 1999.
Implementation of presubscription for intraLATA toll services has had a material
negative effect on intraLATA toll service revenues in those jurisdictions where,
as noted above, presubscription has been implemented before we are permitted to
offer long distance services. However, the negative effect is beginning to
subside now that presubscription has been available in most of our states for
more than one year. In addition, the adverse impact on intraLATA toll services
revenues is being partially offset by increased intraLATA network access
revenues.
LOCAL EXCHANGE SERVICES
Local exchange services have historically been subject to regulation by state
regulatory commissions. Applications from competitors to provide and resell
local exchange services have been approved in all of our state jurisdictions.
The 1996 Act is expected to significantly increase the level of competition in
all of our local exchange markets.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
Euro Common Currency
- --------------------------------------------------------------------------------
Beginning January 1, 1999, eleven European countries are participating in a
multi-step process to convert their existing sovereign currencies to the "Euro."
The process includes a transition period of three years, during which time
either the Euro or the participating countries' own currencies will be accepted
as payment. After the transition period, the countries will issue
Euro-denominated bills and coins and will withdraw their own currencies from
circulation no later than July 1, 2002, completing the conversion process. We
have investments in companies in Italy and the Netherlands, which are
participating in the Euro conversion. We do not believe that the Euro conversion
will have a material effect on these investments.
- --------------------------------------------------------------------------------
Recent Accounting Pronouncements
- --------------------------------------------------------------------------------
COSTS OF COMPUTER SOFTWARE
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued SOP No. 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." This new accounting standard provides, among other
things, guidance for determining whether computer software is for internal use
and when the cost related to such software should be expensed as incurred or
capitalized and amortized. SOP No. 98-1 is required to be applied prospectively.
We adopted SOP No. 98-1 effective January 1, 1999. We estimate that the
implementation of SOP No. 98-1 will result in a net after-tax benefit of $200
million to $250 million in 1999 results of operations due to the prospective
capitalization of costs which were previously expensed as incurred. Costs for
maintenance and training, as well as the cost of software that does not add
functionality to the existing system will continue to be expensed as incurred.
COSTS OF START-UP ACTIVITIES
In April 1998, the AICPA issued SOP No. 98-5, "Reporting on the Costs of
Start-Up Activities." This new accounting standard requires that costs of
start-up activities, including pre-operating, pre-opening and other
organizational costs, be expensed as incurred. In addition, the unamortized
balance of any previously deferred start-up costs existing at adoption must be
expensed.
We adopted SOP No. 98-5 effective January 1, 1999. The adoption of SOP No. 98-5
will not have a material effect on our results of operations or financial
condition in 1999 because our policy has been to generally expense all start-up
activities.
DERIVATIVES AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
requires that all derivatives be measured at fair value and recognized as either
assets or liabilities in our balance sheet. Changes in the fair values of the
derivative instruments will be recognized in either earnings or comprehensive
income, depending on the designated use and effectiveness of the instruments.
Bell Atlantic must adopt SFAS No. 133 no later than January 1, 2000. We are
currently evaluating the provisions of SFAS No. 133 and have not yet determined
what the impact of adopting this statement will be on our future results of
operations or financial condition.
- --------------------------------------------------------------------------------
Year "2000" Update
- --------------------------------------------------------------------------------
We have a comprehensive program to evaluate and address the impact of the Year
2000 date transition on our operations. This program includes steps to:
. inventory and assess for Year 2000 compliance our equipment, software and
systems;
. determine whether to remediate, replace or retire noncompliant items, and
establish a plan to accomplish these steps;
. remediate, replace or retire the items;
. test the items, where required; and
. provide management with reporting and issues management to support a
seamless transition to the Year 2000.
STATE OF READINESS
For our operating telephone subsidiaries, centralized services entities and
general corporate operations, the program focuses on the following project
groups: Network Elements, Applications and Support Systems, and Information
Technology Infrastructure. At this time, we have virtually completed the
inventory, assessment and detailed planning phases for these projects.
Remediation/replacement/retirement and testing activities are well underway. We
plan to fix, replace or retire those items that were not Year 2000 compliant and
that require action to avoid service impact. Our goal for these operations is to
have our network and other mission critical systems Year 2000 compliant
(including testing) by June 30, 1999. We are on schedule to achieve this goal
for substantially all of our network and other mission critical systems. What
follows is a more detailed breakdown of our efforts to date.
F-18
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis continued
- --------------------------------------------------------------------------------
. Network Elements
Approximately 350 different types of network elements (such as central office
switches) appear in over one hundred thousand instances. When combined in
various ways and using network application systems, these elements are the
building blocks of customer services and networked information transmission of
all kinds. We originally assessed approximately 70% of these element types,
representing over 90% of all deployed network elements, as Year 2000
compliant. Late in 1998, through additional testing and verification, we
determined that certain network elements, originally represented as having no
Year 2000-related service impact, were likely to cause service issues unless
remediated. As a result, we had an increase in the overall number of network
elements requiring repair. Notwithstanding the additional work effort, as of
February 1999, we have repaired or replaced approximately 50% of the deployed
network elements requiring remediation, and certification testing/evaluation
is well underway. We also have made substantial progress on the remaining
network elements. Although we are generally on track to achieve our June 30,
1999 goal for network elements, it is possible that the timeframe for
compliance of a small number of network elements may extend into July or
August, without any impact on customer service or our operations.
. Applications And Support Systems
Approximately 1,200 application and systems support: (i) the administration
and maintenance of our network and customer service functions (network
information systems); (ii) customer care and billing functions; and (iii)
human resources, finance and general corporate functions. We originally
assessed approximately 48% of these application systems as either compliant or
to be retired. As of February 1999, we have successfully completed
certification testing/evaluation of approximately 70% of all application
systems. We also have made substantial progress on the remaining application
systems. Although we are generally on track to achieve our June 30, 1999 goal
for applications and support systems, it is possible that the timeframe for
compliance of a small number of applications and support systems may extend
into July or August, without any impact on customer service or our operations.
. Information Technology Infrastructure
Approximately 40 mainframe, 1,000 mid-range, and 90,000 personal computers,
related network components, and software products comprise our information
technology (IT) infrastructure. Of the approximately 1,350 unique types of
elements in the inventory for the IT infrastructure, we originally assessed
approximately 73% as compliant or to be retired. As of February 1999, we have
successfully completed certification testing/evaluation of approximately 90%
of all element types. We have made substantial progress on the remaining items
and we are on track to achieve our June 30, 1999 goal.
For our other controlled or majority-owned subsidiaries, including Bell Atlantic
Mobile and our directory companies, the inventory, assessment and planning
efforts are substantially complete, and remediation/replacement/retirement and
testing activities are in progress. Bell Atlantic Mobile, our directory
companies and, in general, all of the other controlled or majority-owned
subsidiaries are on track to achieve our June 30, 1999 goal for substantially
all of their mission critical systems. Our Iusacell subsidiary has experienced
some delays in implementation of its Year 2000 project plan. It is currently
anticipated that required modification, replacement and retirement of
substantially all of its mission critical systems will be completed by September
30, 1999, with testing continuing throughout 1999.
Our Year 2000 program also includes a project to review and remediate affected
systems (including those with embedded technology) within our buildings and
other facilities, a project to assure Year 2000 compliance across all of our
internal business processes, and other specific projects directed towards
insuring we meet our Year 2000 objectives.
THIRD PARTY ISSUES
. Vendors
In general, our product vendors have made available either Year 2000-compliant
versions of their offerings or new compliant products as replacements of
discontinued offerings. In some cases, the compliance "status" of the product
in question is based on vendor-provided information, which remains subject to
our testing and verification activities. In several instances, vendors have
not met original delivery schedules, resulting in delayed testing and
deployment. At this time, we do not anticipate that such delays will have a
material impact on our ability to achieve Year 2000 compliance within our
desired timeframes.
We are continuing Year 2000-related discussions with utilities and similar
services providers. In general, information requests to such services
providers have yielded less meaningful information than inquiries to our
product vendors, and we do not yet have sufficient information to determine
whether key utilities and similar service providers will successfully complete
the Year 2000 transition. However, we are now beginning to engage in more
productive discussions with large utilities servicing our facilities and we
are hopeful that these discussions will provide us additional assurance of
Year 2000 compliance for those entities. At the present time, we remain unable
to determine the Year 2000 readiness of most key utilities and similar service
providers or the likelihood that those providers will successfully complete
the Year 2000 transition. We intend to monitor critical service provider
activities, as appropriate, through the completion of their respective
remediation projects.
. Customers
Our customers remain keenly interested in the progress of our Year 2000
efforts, and we anticipate increased demand for information, including
detailed testing data and company-specific responses. We are providing limited
warranties of Year 2000 compliance for certain new telecommunications services
and other offerings, but we do not expect any resulting warranty costs to be
material. We are also analyzing and addressing Year 2000 issues in customer
premise equipment (CPE), including CPE that we have
F-19
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis continued
- --------------------------------------------------------------------------------
sold or maintained. In general, the customer is responsible for CPE. However,
customers could attribute a Year 2000 malfunction of their CPE, whether or not
sold or maintained by us, to a failure of our network service. We also have a
separate effort to identify and address Year 2000 issues for CPE and other
equipment that we maintain for Public Safety Answering Points (PSAPs) and are
used in connection with the provision of E-911/911 and related services. We
are presently repairing and replacing E-911/911-related CPE, as appropriate,
that we maintain for various PSAPs.
. Interconnecting Carriers
Our network operations interconnect with domestic and international networks
of other carriers. If one of these interconnecting carriers should fail or
suffer adverse impact from a Year 2000 problem, our customers could experience
impairment of service.
COSTS
From the inception of our Year 2000 project through December 31, 1998, and based
on the cost tracking methods we have historically applied to this project, we
have incurred total pre-tax expenses of approximately $122 million ($97 million
of which was incurred in 1998), and we have made capital expenditures of
approximately $80 million (all of which was made in 1998). For 1999, we expect
to incur total pre-tax expenses for our Year 2000 project of approximately $100
million to $200 million and total capital expenditures of $125 million to $175
million. These cost estimates have been included in our earnings targets.
We have investments in various joint ventures and other interests. At this time,
we do not anticipate that the impact of any Year 2000 remediation costs that
they incur will be material to our results of operations.
RISKS
The failure to correct a material Year 2000 problem could cause an interruption
or failure of certain of our normal business functions or operations, which
could have a material adverse effect on our results of operations, liquidity or
financial condition; however, we consider such a likelihood remote. Due to the
uncertainty inherent in other Year 2000 issues that are ultimately beyond our
control, including, for example, the final Year 2000 readiness of our suppliers,
customers, interconnecting carriers, and joint venture and investment interests,
we are unable to determine at this time the likelihood of a material impact on
our results of operations, liquidity or financial condition, due to such Year
2000 issues. However, we are taking appropriate prudent measures to mitigate
that risk. We anticipate that, in the event of any material interruptions or
failures of our service resulting from actual or perceived Year 2000 problems
within or beyond our control, we could be subject to third party claims.
CONTINGENCY PLANS
As a public telecommunications carrier, we have had considerable experience
successfully dealing with natural disasters and other events requiring
contingency planning and execution. As part of our efforts to develop
appropriate Year 2000 contingency plans, we are reviewing our existing Emergency
Preparedness and Disaster Recovery plans for any necessary modifications.
We have developed, where appropriate, contingency plans for addressing delays in
remediation activities. For example, delay in the installation of a new Year
2000 compliant system could require remediation of the existing system. We are
also developing a corporate Year 2000 contingency plan to ensure that core
business functions and key support processes are in place for uninterrupted
processing and service, in the event of external (e.g. power, public
transportation, water), internal or supply chain failures (i.e. critical
dependencies on another entity for information, data or services). We anticipate
that an initial draft of our corporate contingency plan will be ready by the end
of the first quarter of 1999.
- --------------------------------------------------------------------------------
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
- --------------------------------------------------------------------------------
In this Management's Discussion and Analysis, and elsewhere in this Annual
Report, we have made forward-looking statements. These statements are based on
our estimates and assumptions and are subject to risks and uncertainties.
Forward-looking statements include the information concerning our possible or
assumed future results of operations. Forward-looking statements also include
those preceded or followed by the words "anticipates," "believes," "estimates,"
"hopes" or similar expressions. For those statements, we claim the protection of
the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
The following important factors, along with those discussed elsewhere in this
Annual Report, could affect future results and could cause those results to
differ materially from those expressed in the forward-looking statements:
. materially adverse changes in economic conditions in the markets served by us
or by companies in which we have substantial investments;
. material changes in available technology;
. the final outcome of federal, state, and local regulatory initiatives and
proceedings, including arbitration proceedings, and judicial review of those
initiatives and proceedings, pertaining to, among other matters, the terms of
interconnection, access charges, universal service, and unbundled network
element and resale rates;
. the extent, timing, success, and overall effects of competition from others
in the local telephone and toll service markets;
. the timing and profitability of our entry into the in-region long distance
market;
. the success and expense of our remediation efforts and those of our suppliers,
customers, joint ventures, noncontrolled investments, and interconnecting
carriers in achieving Year 2000 compliance; and
. the timing of, and regulatory or other conditions associated with, the
completion of the merger with GTE and our ability to combine operations and
obtain revenue enhancements and cost savings following the merger.
F-20
<PAGE>
- --------------------------------------------------------------------------------
SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Dollars in Millions, Except Per Share Amounts)
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Operating revenues $ 31,565.9 $ 30,193.9 $ 29,155.2 $ 27,926.8 $ 27,098.0
Operating income 6,627.2 5,341.5 6,078.6 5,417.4 4,522.4
Income before extraordinary items
and cumulative effect of changes
in accounting principles 2,990.8 2,454.9 3,128.9 2,826.1 2,224.9
Per common share-basic 1.90 1.58 2.02 1.85 1.47
Per common share-diluted 1.87 1.56 2.00 1.84 1.46
Net income (loss) 2,965.3 2,454.9 3,402.0 (96.8) 68.2
Per common share-basic 1.89 1.58 2.20 (.06) .05
Per common share-diluted 1.86 1.56 2.18 (.06) .04
Cash dividends declared per common share 1.54 1.51 1.44 1.40 1.38
FINANCIAL POSITION
Total assets $ 55,143.9 $ 53,964.1 $ 53,361.1 $ 50,623.1 $ 54,020.2
Long-term debt 17,646.4 13,265.2 15,286.0 15,744.1 14,590.2
Employee benefit obligations 10,384.2 10,004.4 9,588.0 9,388.4 8,980.2
Minority interest, including a portion
subject to redemption requirements 329.7 911.2 2,014.2 1,221.1 648.0
Preferred stock of subsidiary 200.5 200.5 145.0 145.0 85.0
Shareowners' investment 13,025.4 12,789.1 12,976.4 11,213.6 13,063.5
</TABLE>
All per share amounts have been adjusted to reflect a two-for-one stock split on
June 1, 1998.
Significant events affecting our historical earnings trends include the
following:
. 1998 and 1997 data include retirement incentive costs, merger-related costs
and other special items (see Notes 2 and 15 and Management's Discussion and
Analysis).
. 1996 data include retirement incentive costs, other special items (see Note
15 and Management's Discussion and Analysis), and the adoption of a change
in accounting for directory publishing (see Note 1).
. 1995 and 1994 data include retirement incentive costs (see Note 15), and an
extraordinary charge for the discontinuation of regulatory accounting
principles.
. Cash dividends declared in 1996 include a payment of $.0025 per common
share for redemption of all rights granted under our Shareholder Rights
Plan.
F-21
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME Bell Atlantic Corporation and Subsidiaries
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Dollars in Millions, Except Per Share Amounts)
Years Ended December 31, 1998 1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES $ 31,565.9 $ 30,193.9 $ 29,155.2
OPERATING EXPENSES
Employee costs, including benefits and taxes 9,265.8 9,047.2 8,703.9
Depreciation and amortization 5,870.2 5,864.4 5,379.0
Other operating expenses 9,802.7 9,940.8 8,993.7
--------------------------------------------
24,938.7 24,852.4 23,076.6
--------------------------------------------
OPERATING INCOME 6,627.2 5,341.5 6,078.6
Income (loss) from unconsolidated businesses (414.6) (124.1) 14.2
Other income and (expense), net 121.7 (3.3) (99.6)
Interest expense 1,335.4 1,230.0 1,082.0
--------------------------------------------
Income before provision for income taxes,
extraordinary item, and cumulative effect
of change in accounting principle 4,998.9 3,984.1 4,911.2
Provision for income taxes 2,008.1 1,529.2 1,782.3
--------------------------------------------
INCOME BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 2,990.8 2,454.9 3,128.9
Extraordinary item
Early extinguishment of debt, net of tax (25.5) -- --
Cumulative effect of change in
accounting principle
Directory publishing, net of tax -- -- 273.1
--------------------------------------------
NET INCOME 2,965.3 2,454.9 3,402.0
Redemption of minority interest (29.8) -- --
Redemption of investee preferred stock (2.5) -- --
--------------------------------------------
NET INCOME AVAILABLE TO COMMON SHAREOWNERS $ 2,933.0 $ 2,454.9 $ 3,402.0
============================================
BASIC EARNINGS PER COMMON SHARE:
INCOME BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE $ 1.90 $ 1.58 $ 2.02
Extraordinary item (.01) -- --
Cumulative effect of change in
accounting principle -- -- .18
--------------------------------------------
NET INCOME $ 1.89 $ 1.58 $ 2.20
============================================
Weighted-average shares outstanding
(in millions) 1,553.0 1,551.8 1,546.6
============================================
DILUTED EARNINGS PER COMMON SHARE:
INCOME BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE $ 1.87 $ 1.56 $ 2.00
Extraordinary item (.01) -- --
Cumulative effect of change in
accounting principle -- -- .18
--------------------------------------------
NET INCOME $ 1.86 $ 1.56 $ 2.18
============================================
Weighted-average shares-diluted
(in millions) 1,578.3 1,571.1 1,560.2
============================================
</TABLE>
See Notes to Consolidated Financial Statements
F-22
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS Bell Atlantic Corporation and Subsidiaries
- --------------------------------------------------------------------------------
(Dollars In Millions, Except Per Share Amounts)
At December 31, 1998 1997
- -----------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents $ 237.1 $ 322.8
Short-term investments 785.8 720.6
Accounts receivable, net of
allowances of $593.3 and $611.9 6,559.9 6,340.8
Inventories 566.0 550.3
Prepaid expenses 522.0 634.0
Other 411.5 432.3
------------------------------
9,082.3 9,000.8
------------------------------
Plant, property and equipment 83,064.1 77,437.2
Less accumulated depreciation 46,248.6 42,397.8
------------------------------
36,815.5 35,039.4
------------------------------
Investments in unconsolidated
businesses 4,276.0 5,144.2
Other assets 4,970.1 4,779.7
------------------------------
Total assets $ 55,143.9 $ 53,964.1
==============================
LIABILITIES AND SHAREOWNERS' INVESTMENT
Current liabilities
Debt maturing within one year $ 2,987.6 $ 6,342.8
Accounts payable and accrued
liabilities 6,105.0 5,966.4
Other 1,438.6 1,355.0
------------------------------
10,531.2 13,664.2
------------------------------
Long-term debt 17,646.4 13,265.2
------------------------------
Employee benefit obligations 10,384.2 10,004.4
------------------------------
Deferred credits and other liabilities
Deferred income taxes 2,253.8 2,106.2
Unamortized investment tax credits 221.8 250.7
Other 550.9 772.6
------------------------------
3,026.5 3,129.5
------------------------------
Minority interest, including a
portion subject to redemption
requirements 329.7 911.2
------------------------------
Preferred stock of subsidiary 200.5 200.5
------------------------------
Commitments and contingencies
(Notes 2, 3, 4, 6 and 7)
Shareowners' investment
Series preferred stock ($.10 par
value; none issued) -- --
Common stock ($.10 par value;
1,576,246,325 shares and
1,576,052,790 shares issued) 157.6 157.6
Contributed capital 13,368.0 13,176.8
Reinvested earnings 1,370.8 1,261.6
Accumulated other comprehensive loss (714.2) (553.3)
------------------------------
14,182.2 14,042.7
Less common stock in treasury, at cost 592.2 590.5
Less deferred compensation-employee
stock ownership plans 564.6 663.1
------------------------------
13,025.4 12,789.1
------------------------------
Total liabilities and shareowners'
investment $ 55,143.9 $ 53,964.1
==============================
See Notes to Consolidated Financial Statements
F-23
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' INVESTMENT
Bell Atlantic Corporation and Subsidiaries
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Dollars In Millions, Except Per Share Amounts, And Shares In Thousands)
Years Ended December 31, 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK
Balance at beginning of year 1,576,053 $ 157.6 1,574,001 $ 157.4 1,543,360 $ 154.3
Shares issued
Employee plans 193 -- 2,044 .2 9,084 .9
Shareowner plans -- -- 8 -- 2,968 .3
Common shares issued to subsidiary -- -- -- -- 18,796 1.9
Shares retired -- -- -- -- (207) --
-------------------------------------------------------------------------------
Balance at end of year 1,576,246 157.6 1,576,053 157.6 1,574,001 157.4
-------------------------------------------------------------------------------
CONTRIBUTED CAPITAL
Balance at beginning of year 13,176.8 13,216.3 12,375.8
Shares issued
Employee plans 178.4 (22.2) 263.1
Shareowner plans -- -- 94.0
Acquisition agreements -- (.3) --
Dividends -- -- (.2)
Common shares issued to subsidiary -- -- 489.0
Issuance of stock by subsidiaries 12.8 -- --
Other -- (17.0) (5.4)
-------------------------------------------------------------------------------
Balance at end of year 13,368.0 13,176.8 13,216.3
-------------------------------------------------------------------------------
REINVESTED EARNINGS
Balance at beginning of year 1,261.6 1,282.0 180.9
Net income 2,965.3 2,454.9 3,402.0
Dividends declared and redemption
of stock rights ($1.54, $1.51, and
$1.44 per share) (2,392.3) (2,363.4) (2,295.7)
Shares issued
Employee plans (443.3) (121.0) (19.4)
Tax benefit of dividends paid to ESOPs 11.8 12.9 14.8
Redemption of minority interest (29.8) -- --
Redemption of investee preferred stock (2.5) -- --
Other -- (3.8) (.6)
-------------------------------------------------------------------------------
Balance at end of year 1,370.8 1,261.6 1,282.0
-------------------------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS)
Balance at beginning of year (553.3) (321.6) (537.6)
-------------------------------------------------------------------------------
Foreign currency translation adjustment (146.2) (234.0) 221.9
Unrealized gains (losses) on securities 2.0 2.3 (5.9)
Minimum pension liability adjustment (16.7) -- --
-------------------------------------------------------------------------------
Other comprehensive income (loss) (160.9) (231.7) 216.0
-------------------------------------------------------------------------------
Balance at end of year (714.2) (553.3) (321.6)
-------------------------------------------------------------------------------
TREASURY STOCK
Balance at beginning of year 22,952 590.5 22,540 589.3 3,762 97.9
Shares purchased 20,743 1,001.8 24,148 919.8 3,578 118.3
Shares distributed
Employee plans (20,779) (998.8) (23,260) (899.0) (3,386) (111.6)
Shareowner plans (26) (1.2) (52) (1.8) (2) (.1)
Acquisition agreements (3) (.1) (424) (17.8) -- --
Common shares held by subsidiary -- -- -- -- 18,796 490.9
Shares retired -- -- -- -- (208) (6.1)
-------------------------------------------------------------------------------
Balance at end of year 22,887 592.2 22,952 590.5 22,540 589.3
-------------------------------------------------------------------------------
DEFERRED COMPENSATION-ESOPS
Balance at beginning of year 663.1 768.4 861.9
Amortization (98.5) (105.3) (93.5)
-------------------------------------------------------------------------------
Balance at end of year 564.6 663.1 768.4
-------------------------------------------------------------------------------
TOTAL SHAREOWNERS' INVESTMENT $ 13,025.4 $ 12,789.1 $ 12,976.4
===============================================================================
COMPREHENSIVE INCOME
Net income $ 2,965.3 $ 2,454.9 $ 3,402.0
Other comprehensive income (loss)
per above (160.9) (231.7) 216.0
-------------------------------------------------------------------------------
$ 2,804.4 $ 2,223.2 $ 3,618.0
===============================================================================
</TABLE>
See Notes To Consolidated Financial Statements
F-24
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS Bell Atlantic Corporation and Subsidiaries
- --------------------------------------------------------------------------------
(Dollars in Millions)
Years Ended December 31, 1998 1997 1996
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 2,965.3 $ 2,454.9 $ 3,402.0
Adjustments to reconcile net
income to net cash provided
by operating activities
Depreciation and amortization 5,870.2 5,864.4 5,379.0
Extraordinary item, net of tax 25.5 -- --
Cumulative effect of change in
accounting principle, net of
tax -- -- (273.1)
Loss (income) from unconsoli-
dated businesses 414.6 124.1 (14.2)
Dividends received from
unconsolidated businesses 169.4 192.1 194.8
Amortization of unearned lease
income (120.2) (110.3) (100.6)
Deferred income taxes, net 264.2 236.9 284.2
Investment tax credits (28.9) (38.1) (57.3)
Other items, net 226.5 88.2 274.1
Changes in certain assets and
liabilities, net of effects
from acquisition/disposition
of businesses
Accounts receivable (220.3) (139.5) (184.0)
Inventories (110.5) (73.8) (116.1)
Other assets (108.0) 65.2 (244.8)
Accounts payable and
accrued liabilities 376.4 (93.3) 382.6
Employee benefit obligations 354.2 415.5 206.5
Other liabilities (7.5) (127.6) (352.3)
----------------------------------------
Net cash provided by operating
activities 10,070.9 8,858.7 8,780.8
========================================
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchases of short-term investments (1,027.8) (843.6) (418.1)
Proceeds from sale of short-term
investments 968.2 426.9 132.5
Additions to plant, property and
equipment (7,446.5) (6,637.7) (6,394.7)
Proceeds from sale of plant,
property and equipment 11.9 5.5 15.4
Investment in leased assets (269.0) (161.6) (201.3)
Proceeds from leasing activities 154.9 83.0 99.9
Investment in notes receivable (7.2) -- --
Proceeds from notes receivable 21.1 63.1 213.3
Proceeds from Telecom Corporation
of New Zealand Limited share
repurchase plan -- 153.3 --
Acquisition of businesses, less
cash acquired (61.9) (61.8) (10.0)
Investments in unconsolidated
businesses, net (602.7) (833.0) (1,071.2)
Proceeds from disposition of
businesses 637.3 546.5 127.8
Other, net (63.2) (79.2) (67.6)
----------------------------------------
Net cash used in investing
activities (7,684.9) (7,338.6) (7,574.0)
========================================
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from borrowings 6,328.9 633.0 109.4
Principal repayments of
borrowings and capital
lease obligations (651.4) (901.4) (375.8)
Early extinguishment of debt (790.0) -- --
Net change in short-term
borrowings with original
maturities of three months
or less (4,038.4) 1,580.3 77.1
Dividends paid and redemption
of stock rights (2,379.5) (2,340.4) (2,204.1)
Proceeds from sale of common
stock 559.0 710.7 328.3
Purchase of common stock for
treasury (1,001.8) (919.8) (118.3)
Minority interest (631.9) (.1) 687.8
Reduction in preferred stock
of subsidiary -- (10.0) --
Proceeds from sale of
preferred stock by subsidiary -- 65.5 --
Net change in outstanding
checks drawn on controlled
disbursement accounts 133.4 (264.5) 75.3
----------------------------------------
Net cash used in financing
activities (2,471.7) (1,446.7) (1,420.3)
========================================
Increase (decrease) in cash
and cash equivalents (85.7) 73.4 (213.5)
Cash and cash equivalents,
beginning of year 322.8 249.4 462.9
----------------------------------------
Cash and cash equivalents,
end of year $ 237.1 $ 322.8 $ 249.4
========================================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-25
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1.Description of Business and Summary of Significant Accounting Policies
- --------------------------------------------------------------------------------
DESCRIPTION OF BUSINESS
Bell Atlantic is an international telecommunications company that operates in
four segments: Domestic Telecom, Global Wireless, Directory and Other
Businesses. For further information concerning our business, see Note 17.
The telecommunications industry is undergoing substantial changes as a result of
the Telecommunications Act of 1996, other public policy changes and
technological advances. These changes are bringing increased competitive
pressures, but will also open new markets to us, such as long distance services
in our geographic region, upon completion of certain requirements of the
Telecommunications Act of 1996.
CONSOLIDATION
The consolidated financial statements include our controlled or majority-owned
subsidiaries. Investments in businesses which we do not control, but have the
ability to exercise significant influence over operating and financial policies,
are accounted for using the equity method. Investments in which we do not have
the ability to exercise significant influence over operating and financial
policies are accounted for under the cost method. All significant intercompany
accounts and transactions have been eliminated.
Grupo Iusacell, S.A. de C.V.
In the first quarter of 1997, we consummated a restructuring of our investment
in Grupo Iusacell, S.A. de C.V. (Iusacell), a Mexican wireless company, to
permit us to assume control of the Board of Directors and management of
Iusacell. As a result of the restructuring, we changed the accounting for our
Iusacell investment from the equity method to full consolidation. You can find
additional information about Iusacell in Note 4.
United Kingdom Operations
In the second quarter of 1997, we transferred our interests in cable television
and telecommunications operations in the United Kingdom to Cable & Wireless
Communications plc (CWC) in exchange for an 18.5% ownership interest in CWC.
Prior to the transfer, we included the accounts of these operations in our
consolidated financial statements. We now account for our investment in CWC
under the equity method. You can find additional information about CWC in Note
3.
COMMON STOCK SPLIT
On May 1, 1998, the Board of Directors declared a two-for-one split of Bell
Atlantic common stock, effected in the form of a 100% stock dividend to
shareholders of record on June 1, 1998 and payable on June 29, 1998.
Shareholders of record received an additional share of common stock for each
share of common stock held at the record date. We retained the par value of $.10
per share for all shares of common stock. The prior period financial information
(including share and per share data) contained in this report has been adjusted
to give retroactive recognition to this common stock split.
USE OF ESTIMATES
We prepare our financial statements under generally accepted accounting
principles which require management to make estimates and assumptions that
affect the reported amounts or certain disclosures. Actual results could differ
from those estimates.
REVENUE RECOGNITION
Our operating telephone subsidiaries recognize revenues when services are
rendered based on usage of our local exchange network and facilities. Our other
subsidiaries recognize revenues when products are delivered or services are
rendered to customers.
MAINTENANCE AND REPAIRS
We charge the cost of maintenance and repairs, including the cost of replacing
minor items not constituting substantial betterments, to Operating Expenses.
EARNINGS PER COMMON SHARE
Basic earnings per common share are based on the weighted-average number of
shares outstanding during the year. Diluted earnings per common share include
the dilutive effect of shares issuable under our stock-based compensation plans,
which represent the only potential dilutive common shares.
CASH AND CASH EQUIVALENTS
We consider all highly liquid investments with a maturity of 90 days
or less when purchased to be cash equivalents, except cash equivalents held as
short-term investments. Cash equivalents are stated at cost, which approximates
market value.
SHORT-TERM INVESTMENTS
Our short-term investments consist primarily of cash equivalents held in trust
to pay for certain employee benefits. Short-term investments are stated at cost,
which approximates market value.
INVENTORIES
We include in inventory new and reusable materials of the operating telephone
subsidiaries which are stated principally at average original cost, except that
specific costs are used in the case of large individual items. Inventories of
our other subsidiaries are stated at the lower of cost (determined principally
on either an average or first-in, first-out basis) or market.
PLANT AND DEPRECIATION
We state plant, property and equipment at cost. Our operating telephone
subsidiaries' depreciation expense is principally based on the composite group
remaining life method and straight-line composite rates. This method provides
for the recognition of the cost of the remaining net investment in telephone
plant, less anticipated net salvage value, over the remaining asset lives. This
method requires the periodic revision of depreciation rates.
The asset lives used by our operating telephone subsidiaries are presented in
the following table:
Average Lives (In Years)
- --------------------------------------------------------------------------------
Buildings 20-60
Central office equipment 2-12
Outside communications plant 8-65
Furniture, vehicles and other equipment 5-15
F-26
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
NOTE 1 CONTINUED
When we replace or retire depreciable telephone plant, we deduct the carrying
amount of such plant from the respective accounts and charge accumulated
depreciation. Gains or losses on disposition are amortized with the remaining
net investment in telephone plant.
Plant, property and equipment of our other subsidiaries is depreciated on a
straight-line basis over the following estimated useful lives: buildings, 20 to
40 years, and other equipment, 1 to 20 years.
When the depreciable assets of our other subsidiaries are retired or otherwise
disposed of, the related cost and accumulated depreciation are deducted from the
plant accounts, and any gains or losses on disposition are recognized in income.
COMPUTER SOFTWARE COSTS
Our operating telephone subsidiaries capitalize initial right-to-use fees for
central office switching equipment, including initial operating system and
initial application software costs. For noncentral office equipment, only the
initial operating system software is capitalized. Subsequent additions,
modifications, or upgrades of initial software programs, whether operating or
application packages, are expensed as incurred.
CAPITALIZATION OF INTEREST COSTS
We capitalize interest associated with the acquisition or construction of plant
assets. Capitalized interest is reported as a cost of plant and a reduction in
interest cost.
GOODWILL AND OTHER INTANGIBLES
Goodwill is the excess of the acquisition cost of businesses over the fair value
of the identifiable net assets acquired. We amortize goodwill and other
identifiable intangibles on a straight-line basis over its estimated useful
life, not exceeding 40 years. We assess the impairment of other identifiable
intangibles and goodwill related to our consolidated subsidiaries under
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
and whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. A determination of impairment (if any) is made based on
estimates of future cash flows. In instances where goodwill has been recorded
for assets that are subject to an impairment loss, the carrying amount of the
goodwill is eliminated before any reduction is made to the carrying amounts of
impaired long-lived assets and identifiable intangibles.
FOREIGN CURRENCY TRANSLATION
The functional currency for nearly all of our foreign operations is the local
currency. For these foreign entities, we translate income statement amounts at
average exchange rates for the period, and we translate assets and liabilities
at end-of-period exchange rates. We record these translation adjustments in
Accumulated Other Comprehensive Loss, a separate component of Shareowners'
Investment, in our consolidated balance sheets. We report exchange gains and
losses on intercompany foreign currency transactions of a long-term nature in
Accumulated Other Comprehensive Loss. Other exchange gains and losses are
reported in income.
When a foreign entity operates in a highly inflationary economy, we use the U.S.
dollar as the functional currency rather than the local currency. We translate
nonmonetary assets and liabilities and related expenses into U.S. dollars at
historical exchange rates. We translate all other income statement amounts using
average exchange rates for the period. Monetary assets and liabilities are
translated at end-of-period exchange rates, and any gains or losses are reported
in income. For the period October 1, 1996, through December 31, 1998, we
considered Iusacell to operate in a highly inflationary economy. Beginning
January 1, 1999, we discontinued highly inflationary accounting for Iusacell and
resumed using the Mexican peso as its functional currency.
DERIVATIVE INSTRUMENTS
We have entered into derivative transactions to manage our exposure to
fluctuations in foreign currency exchange rates, interest rates, and corporate
tax rates. We employ risk management strategies using a variety of derivatives
including foreign currency forwards and options, interest rate swap agreements,
interest rate caps and floors, and basis swap agreements. We do not hold
derivatives for trading purposes.
Fair Value Method
We use the fair value method of accounting for our foreign currency derivatives,
which requires us to record these derivatives at fair value in our consolidated
balance sheets, and changes in value are recorded in income or Shareowners'
Investment. Depending upon the nature of the derivative instruments, the fair
value of these instruments may be recorded in Current Assets, Other Assets,
Current Liabilities, and Deferred Credits and Other Liabilities in our
consolidated balance sheets.
Gains and losses and related discounts or premiums arising from foreign currency
derivatives (which hedge our net investments in consolidated foreign
subsidiaries and investments in foreign entities accounted for under the equity
method) are included in Accumulated Other Comprehensive Loss and reflected in
income upon sale or substantial liquidation of the investment. Certain of these
derivatives also include an interest element, which is recorded in Interest
Expense over the lives of the contracts. Gains and losses from derivatives which
hedge our short-term transactions and cost investments are included in Other
Income and Expense, Net, and discounts or premiums on these contracts are
included in income over the lives of the contracts. Gains and losses from
derivatives hedging identifiable foreign currency commitments are deferred and
reflected as adjustments to the related transactions. If the foreign currency
commitment is no longer likely to occur, the gain or loss is recognized
immediately in income.
Earnings generated from our leveraged lease portfolio may be affected by changes
in corporate tax rates. In order to hedge a portion of this risk, we use basis
swap agreements, which we account for using the fair value method of accounting.
Under this method, these agreements are carried at fair value and included in
Other Assets or Deferred Credits and Other Liabilities in our consolidated
balance sheet. Changes in the unrealized gain or loss are included in Other
Income and Expense, Net.
F-27
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
NOTE 1 CONTINUED
Accrual Method
Interest rate swap agreements and interest rate caps and floors that qualify as
hedges are accounted for under the accrual method. An instrument qualifies as a
hedge if it effectively modifies and/or hedges the interest rate characteristics
of the underlying fixed or variable interest rate debt. Under the accrual
method, no amounts are recognized in our consolidated balance sheets related to
the principal balances. The interest differential to be paid or received, which
is accrued as interest rates change, and premiums related to caps and floors,
are recognized as adjustments to Interest Expense over the lives of the
agreements. These interest accruals are recorded in Current Assets and Current
Liabilities in our consolidated balance sheets. If we terminate an agreement,
the gain or loss is recorded as an adjustment to the basis of the underlying
liability and amortized over the remaining original life of the agreement. If
the underlying liability matures, or is extinguished and the related derivative
is not terminated, that derivative would no longer qualify for accrual
accounting. In this situation, the derivative is accounted for at fair value,
and changes in the value are recorded in income.
SALE OF STOCK BY SUBSIDIARY
We recognize in consolidation changes in our ownership percentage in a
subsidiary caused by issuances of the subsidiary's stock as adjustments to
Contributed Capital.
INCOME TAXES
Bell Atlantic and its domestic subsidiaries file a consolidated federal income
tax return. For periods prior to the merger (see Note 2), NYNEX filed its own
consolidated federal income tax return.
Our operating telephone subsidiaries use the deferral method of accounting for
investment tax credits earned prior to the repeal of investment tax credits by
the Tax Reform Act of 1986. We also defer certain transitional credits earned
after the repeal. We amortize these credits over the estimated service lives of
the related assets as a reduction to the Provision for Income Taxes.
ADVERTISING COSTS
We expense advertising costs as they are incurred.
STOCK-BASED COMPENSATION
We account for stock-based employee compensation plans under Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations, and follow the disclosure-only
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation."
CHANGE IN ACCOUNTING PRINCIPLE - DIRECTORY PUBLISHING
Effective January 1, 1996, we changed our method of accounting for directory
publishing revenues and expenses from the amortized method to the
point-of-publication method. Under the point-of-publication method, revenues and
expenses are recognized when the directories are published rather than over the
lives of the directories, as under the amortized method. We believe the
point-of-publication method is preferable because it is the method generally
followed by publishing companies. This accounting change resulted in a one-time,
noncash increase in net income of $273.1 million (net of income tax of $179.0
million), or $.18 per share on both a basic and diluted basis, which is reported
as a cumulative effect of a change in accounting principle at January 1, 1996.
On an annual basis, the financial impact of applying this method in 1996 was not
significant.
ADOPTION OF NEW ACCOUNTING STANDARDS
In 1998, we adopted SFAS No. 130, "Reporting Comprehensive Income" (see Note
20), SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (see Note 17), and SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits" (see Note 15). Prior year amounts
have been provided or restated as required. These standards require new
disclosures only and do not impact our results of operations or financial
position.
RECENT ACCOUNTING PRONOUNCEMENTS
Costs Of Computer Software
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." This new accounting
standard provides, among other things, guidance for determining whether computer
software is for internal use and when the cost related to such software should
be expensed as incurred or capitalized and amortized. SOP 98-1 is required to be
applied prospectively.
We adopted SOP No. 98-1 effective January 1, 1999. We estimate that the
implementation of SOP No. 98-1 will result in a net after-tax benefit of $200
million to $250 million in 1999 results of operations due to the prospective
capitalization of costs which were previously expensed as incurred. Costs for
maintenance and training, as well as the cost of software that does not add
functionality to the existing system will continue to be expensed as incurred.
Costs Of Start-up Activities
In April 1998, the AICPA issued SOP No. 98-5, "Reporting on the Costs of
Start-Up Activities." This new accounting standard requires that costs of
start-up activities, including pre-operating, pre-opening and other
organizational costs, be expensed as incurred. In addition, the unamortized
balance of any previously deferred start-up costs existing at adoption must be
expensed.
We adopted SOP No. 98-5 effective January 1, 1999. The adoption of SOP No. 98-5
will not have a material effect on our results of operations or financial
condition in 1999 because our policy has been to generally expense all start-up
activities.
Derivatives And Hedging Activities
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." This
statement requires that all derivatives be measured at fair value and recognized
as either assets or liabilities in our balance sheet. Changes in the fair values
of the derivative instruments will be recognized in either earnings or
comprehensive income, depending on the designated use and effectiveness of the
instruments. Bell Atlantic must adopt SFAS No. 133 no later than January 1,
2000. We are currently evaluating the provisions of SFAS No. 133 and have not
yet determined what the impact of adopting this statement will be on our future
results of operations or financial condition.
F-28
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. Bell Atlantic - NYNEX Merger
- --------------------------------------------------------------------------------
On August 14, 1997, Bell Atlantic Corporation and NYNEX Corporation completed a
merger of equals under a definitive merger agreement entered into on April 21,
1996 and amended on July 2, 1996. Under the terms of the amended agreement,
NYNEX became a wholly owned subsidiary of Bell Atlantic. NYNEX stockholders
received 0.768 of a share of Bell Atlantic common stock for each share of NYNEX
common stock that they owned. This resulted in the issuance of 700.4 million
shares of Bell Atlantic common stock.
The merger qualified as a tax-free reorganization and has been accounted for as
a pooling of interests. Under this method of accounting, the companies are
treated as if they had always been combined for accounting and financial
reporting purposes and, therefore, we restated our financial information for all
dates and periods prior to the merger.
The combined results reflect certain reclassifications to conform to the
presentation used by Bell Atlantic and certain adjustments to conform accounting
methodologies between Bell Atlantic and NYNEX. Results of operations for certain
periods prior to the merger have been combined and conformed as follows:
(Dollars In Millions)
Six months ended Year ended
June 30, 1997 December 31, 1996
- --------------------------------------------------------------------------------
(unaudited)
Operating revenues
Bell Atlantic $ 6,854.6 $ 13,081.4
NYNEX 6,815.1 13,453.8
Reclassifications .1 .7
Cellular consolidation 1,454.5 2,619.3
------------------------------------
Combined $ 15,124.3 $ 29,155.2
====================================
Net income
Bell Atlantic $ 1,014.5 $ 1,881.5
NYNEX 540.1 1,477.0
Cellular consolidation 3.3 (7.6)
SFAS No. 106 adjustment 39.1 62.4
Other adjustments (2.0) (11.3)
------------------------------------
Combined $ 1,595.0 $ 3,402.0
====================================
. Reclassifications were made to conform to our post-merger presentation.
. Cellular consolidation refers to an adjustment that was made to conform
accounting methodologies and to consolidate the accounts of cellular
operations that were jointly controlled by NYNEX and Bell Atlantic prior to
the merger and accounted for by both companies using the equity method.
. An adjustment for SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," was made to reflect the adoption by NYNEX of
the immediate recognition of the transition benefit obligation effective
January 1, 1993, to conform to the method used by Bell Atlantic.
. Other adjustments were made to conform the accounting policies of the
companies, and to record the related tax effects of these adjustments.
MERGER-RELATED COSTS
In the third quarter of 1997 we recorded merger-related pre-tax costs of
approximately $200 million for direct incremental costs, and approximately $223
million for employee severance costs.
Direct incremental costs consist of expenses associated with completing the
merger transaction, such as professional and regulatory fees, compensation
arrangements, and shareowner-related costs.
Employee severance costs, as recorded under SFAS No. 112, "Employers' Accounting
for Postemployment Benefits," represent the benefit costs for the separation by
the end of 1999 of approximately 3,100 management employees who are entitled to
benefits under pre-existing separation pay plans. During 1997 and 1998, 245 and
856 management employees were separated with severance benefits. Accrued
postemployment benefit liabilities are included in our consolidated balance
sheets as a component of Employee Benefit Obligations.
OTHER INITIATIVES
During 1997, we recorded other charges and special items totaling approximately
$1,041 million (pre-tax) in connection with consolidating operations and
combining organizations, and for other special items arising during the year.
Video-Related Charges
In 1997, we recognized total pre-tax charges of approximately $243 million
related to certain video investments and operations. We determined that we would
no longer pursue a multichannel, multipoint, distribution system (MMDS) as part
of our video strategy. As a result, we recognized liabilities for purchase
commitments associated with the MMDS technology and costs associated with
closing the operations of our Tele-TV partnership because this operation no
longer supports our video strategy. We also wrote-down our remaining investment
in CAI Wireless Systems, Inc.
Write-Down of Assets and Real Estate Consolidation
In the third quarter of 1997, we recorded pre-tax charges of approximately $355
million for the write-down of obsolete or impaired fixed assets and for the cost
of consolidating redundant real estate properties. As part of our merger
integration planning, we reviewed the carrying values of long-lived assets. This
review included estimating remaining useful lives and cash flows, and
identifying assets to be abandoned. In the case of impaired assets, we analyzed
cash flows related to those assets to determine the amount of the impairment. As
a result of these reviews, we recorded charges of approximately $275 million for
the write-off of some assets and $25 million for the impairment of other assets.
These assets primarily included computers and other equipment used to transport
data for internal purposes, copper wire used to provide telecommunications
service in New York, and duplicate voice mail platforms. None of these assets
are being held for disposal. At December 31, 1998, the impaired assets had no
remaining carrying value.
F-29
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
NOTE 2 CONTINUED
In connection with our merger integration efforts, we consolidated real
estate to achieve a reduction in the total square footage of building space that
we utilize. We sold properties, subleased some of our leased facilities and
terminated other leases, for which we recorded a charge of approximately $55
million in the third quarter of 1997. Most of the charge related to properties
in Pennsylvania and New York, where corporate support functions were
consolidated into fewer work locations.
Regulatory, Tax And Legal Contingencies And Other Special Items
In 1997, we also recorded reductions to operating revenues and charges to
operating expenses totaling approximately $526 million (pre-tax), which
consisted of the following:
. Revenue reductions consisted of approximately $179 million for federal
regulatory matters. These matters relate to specific issues that are
currently under investigation by federal regulatory commissions. We believe
that it is probable that the ultimate resolution of these pending matters
will result in refunds to our customers.
. Charges to operating expenses totaled approximately $347 million and
consisted of $75 million for interest on federal and other tax
contingencies; $55 million for other tax matters; and $52 million for legal
contingencies and a state regulatory audit issue. These contingencies were
accounted for under the rules of SFAS No. 5, "Accounting for
Contingencies." These charges also included approximately $95 million
related to costs incurred in standardizing and consolidating our directory
businesses and $70 million for other post-merger initiatives.
Other charges arising in 1997 included approximately $59 million for our equity
share of formation costs previously announced by CWC. We own an 18.5% interest
in CWC and account for our investment under the equity method of accounting.
In 1997, we recognized pre-tax gains of approximately $142 million on the sales
of our ownership interests of several nonstrategic businesses. These gains
included approximately $42 million on the sale of our interest in Sky Network
Television Limited of New Zealand; $54 million on the sale of our 33% stake in
an Italian wireline venture, Infostrada; and $46 million on the sale of our
two-sevenths interest in Bell Communications Research, Inc.
We expect that the remaining direct incremental liabilities will be fully
utilized, through either payments or adjustments, by the end of 1999. The
obligation for severance benefits, which has been determined under SFAS No. 112,
represents expected payments to employees who leave the company with benefits
provided under pre-existing separation pay plans. The severance obligation is
adjusted through annual costs, which are actuarially determined based upon
financial market interest rates, experience, and management's best estimate of
future benefit payments. In 1997, the merger-related severance costs increased
our existing severance obligation. When the merger-related separations are
completed, we will continue to have an obligation for ongoing separations.
We expect to utilize the remaining video and real estate liabilities in 1999,
although some lease liabilities will extend through 2012. Liabilities for
regulatory, tax and legal contingencies, and other special items will be
utilized as the respective matter is settled.
The following table provides a reconciliation of the liabilities associated with
merger-related costs and other charges and special items at December 31, 1998
and 1997.
<TABLE>
<CAPTION>
(Dollars In Millions)
1997 1998
- -------------------------------------------------------------------------------------------------------------------------------
Charged to
Beginning Expense or End of End of
of Year Revenue Deductions Adjustments Year Deductions Adjustments Year
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MERGER-RELATED
Direct incremental costs $ -- $ 199.5 $ (164.5)a $ -- $ 35.0 $ (5.2)a $ (25.5) $ 4.3
Severance obligation 110.9 222.7 (23.6)a 19.7 329.7 (60.6)a 46.7 315.8
OTHER INITIATIVES
Video-related costs -- 242.8 (226.6)b 5.1 21.3 (3.0)a (12.8) 5.5
Write-down of fixed assets
and real estate
consolidation -- 355.0 (311.6)b -- 43.4 (17.6)b (2.5) 23.3
Regulatory, tax and legal
contingencies and other
special items -- 525.9 (144.3)b -- 381.6 (118.2)c (14.4) 249.0
------------------------------------------------------------------------------------------------
$ 110.9 $ 1,545.9 $ (870.6) $ 24.8 $ 811.0 $ (204.6) $ (8.5) $ 597.9
================================================================================================
</TABLE>
. Adjustments refer to deductions to the liability that reduced expense, or
additions to the liability that increased expense resulting from changes in
circumstances or experience in implementing the planned activities.
. Deductions refer to the utilization of the liability through payments,
asset write-offs, or refunds to customers.
a-primarily comprised of cash payments
b-primarily comprised of asset write-offs
c-comprised of cash payments of $65.9 million, refunds to customers of
$41.8 million, and asset write-offs of $10.5 million
F-30
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. Investments in Unconsolidated Businesses
- --------------------------------------------------------------------------------
Our investments in unconsolidated businesses are comprised of the following:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
1998 1997
AT DECEMBER 31, Ownership Investment Ownership Investment
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EQUITY INVESTEES
PrimeCo Personal
Communications, L.P. 50.00% $1,011.4 50.00% $ 919.9
Cable & Wireless
Communications plc 18.50 675.4 18.50 665.8
Omnitel Pronto Italia S.p.A 19.71 520.6 17.45 313.2
Telecom Corporation of
New Zealand Limited 24.95 373.0 24.95 417.7
FLAG Ltd. 37.67 178.3 37.87 236.6
Other Various 738.9 Various 714.7
-------- --------
Total equity investees 3,497.6 3,267.9
COST INVESTEES Various 778.4 Various 1,876.3
-------- --------
TOTAL $4,276.0 $5,144.2
======== ========
</TABLE>
Dividends received from investees amounted to $169.4 million in 1998, $192.1
million in 1997, and $194.8 million in 1996.
PRIMECO PERSONAL COMMUNICATIONS, L.P.
PrimeCo Personal Communications, L.P. (PrimeCo) is a partnership established in
1994 between Bell Atlantic and AirTouch Communications, which provides personal
communications services (PCS) in over 30 major cities across the United States.
PrimeCo began offering services to customers in November 1996.
Since 1994, we have invested approximately $1.6 billion in PrimeCo to fund its
operations and the build-out of its PCS network. Under the terms of the
partnership agreement, PrimeCo entered into a leveraged lease financing
arrangement for certain equipment which has been guaranteed by the partners in
the joint venture. Our share of this guarantee is approximately $139 million.
CABLE & WIRELESS COMMUNICATIONS plc
In the second quarter of 1997, we transferred our interests in cable television
and telecommunications operations in the United Kingdom to CWC in exchange for
an 18.5% ownership interest in CWC. This transaction was accounted for as a
nonmonetary exchange of similar productive assets and, as a result, no gain or
loss was recorded. We account for our investment in CWC under the equity method
because we have significant influence over CWC's operating and financial
policies. Prior to the transfer, we included the accounts of these operations in
our consolidated financial statements.
In connection with our investment in CWC, in August 1998 we issued $3,180.0
million of 4.25% senior exchangeable notes due on September 15, 2005. The notes
are exchangeable into 277.6 million ordinary shares of CWC stock that we own at
the option of the holder, beginning on July 1, 2002. You can find additional
information on the CWC exchangeable notes in Note 8.
OMNITEL PRONTO ITALIA S.p.A.
Omnitel Pronto Italia S.p.A. (Omnitel) operates a cellular mobile telephone
network in Italy. We account for this investment under the equity method because
we have significant influence over Omnitel's operating and financial policies.
Since 1994, we have invested approximately $544 million in Omnitel.
Approximately $162 million of this amount was invested in April 1998, which
increased our ownership interest from 17.45% to 19.71%. Goodwill related to this
investment totals approximately $400 million, which is being amortized on a
straight-line basis over a period of 25 years.
TELECOM CORPORATION OF NEW ZEALAND LIMITED
Telecom Corporation of New Zealand Limited (TCNZ) is that country's principal
provider of telecommunications services. At the date of acquisition of our
interest in 1990, goodwill was approximately $285 million. We are amortizing
this amount on a straight-line basis over a period of 40 years.
During 1997, we sold portions of our stock investment to TCNZ in connection with
its share repurchase plan, resulting in cash proceeds of approximately $153
million. These transactions reduced our investment and increased our ownership
interest in TCNZ. Our investment in TCNZ was also reduced by approximately $38
million as of December 31, 1998, resulting from foreign currency translation
losses. We recorded these losses as a component of Shareowners' Investment.
In connection with our investment in TCNZ, in February 1998 we issued $2,455.0
million of 5.75% senior exchangeable notes due on April 1, 2003. The notes are
exchangeable into 437.1 million ordinary shares of TCNZ stock that we own at the
option of the holder, beginning September 1, 1999. You can find additional
information on the TCNZ exchangeable notes in Note 8.
FLAG Ltd.
Fiberoptic Link Around the Globe Ltd. (FLAG) owns and operates an undersea
fiberoptic cable system, providing digital communications links between Europe
and Asia. FLAG launched commercial service in the fourth quarter of 1997. We
hold approximately a 34% equity interest in the venture and have invested
approximately $227 million in FLAG since 1994.
We have approximately a 5% interest in the parent company of FLAG, FLAG Telecom
Holdings Limited (FLAG Telecom). In the first quarter of 1999, a subsidiary of
FLAG Telecom and Global TeleSystems Group, Inc., a U.S. telecommunications
company, agreed to establish a joint venture to build and operate a transoceanic
dual cable system to carry high-speed data and video traffic across the Atlantic
Ocean. The companies expect to offer service in 2000.
FLAG had outstanding borrowings of $615.1 million as of December 31,
1997 under a limited recourse debt facility, which it refinanced in the first
quarter of 1998 through a new $800.0 million credit facility. This refinancing
resulted in an after-tax extraordinary charge of $14.7 million. The refinancing
also released us from certain obligations under a contingent sponsor support
agreement signed in connection with the debt facility outstanding in 1997.
F-31
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
Note 3 continued
OTHER EQUITY INVESTEES
We also have global wireless investments in the Czech Republic,
Slovakia, Greece, and Indonesia. These investments are in joint ventures to
build and operate cellular networks in these countries. We also have an
investment in a company in the Philippines which provides telecommunications
services in certain regions of that country. The remaining investments include
real estate partnerships, publishing joint ventures, and several other domestic
and international joint ventures.
SUMMARIZED FINANCIAL INFORMATION
The following tables display the summarized unaudited financial information for
our equity investees. These amounts are shown on a 100 percent basis.
(DOLLARS IN MILLIONS)
YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
Results of operations
Operating revenues $ 8,832.3
Operating income 1,474.3
Income before extraordinary item 577.2
Net income 520.2
Bell Atlantic's equity share of income $ 24.8
AT DECEMBER 31, 1998
- --------------------------------------------------------------------------------
Financial position
Current assets $ 4,679.6
Noncurrent assets 18,986.1
Current liabilities 4,830.0
Noncurrent liabilities 10,027.2
Minority interest 155.0
Stockholders' equity 8,653.5
Bell Atlantic's equity share of investees $ 3,497.6
COST INVESTEES
Our cost investments are carried at their original cost, except in cases where
we have determined that a decline in the estimated fair value of an investment
is other than temporary as described below under "Other Cost Investments."
Viacom Inc.
Since 1993, we have held an investment in Viacom Inc. (Viacom), an entertainment
and publishing company. This investment consisted of 24 million shares of Viacom
Series B Cumulative Preferred Stock that we purchased for $1.2 billion. The
preferred stock, which carried an annual dividend of 5%, was convertible into
shares of Viacom Class B nonvoting common stock at a price of $70 per share. In
December 1998, we accepted an offer from Viacom to repurchase one-half of our
Viacom investment, or 12 million shares of the preferred stock (with a book
value of approximately $600 million), for approximately $564 million in cash.
This transaction resulted in a small loss, which was recorded in Income (Loss)
from Unconsolidated Businesses in our consolidated statement of income in 1998.
The remaining investment in Viacom, 12 million shares of preferred stock (with a
book value of approximately $600 million), was repurchased by Viacom in a second
transaction in January 1999 for approximately $612 million in cash. This
transaction did not have a material effect on our consolidated results of
operations.
Other Cost Investments
Other cost investments consist principally of our Asian investments-TelecomAsia,
a wireline investment in Thailand, and Excelcomindo, a wireless investment in
Indonesia. In the third quarter of 1998, we recorded pre-tax charges of $485.1
million to Income (Loss) from Unconsolidated Businesses in our consolidated
statement of income to adjust the carrying values of TelecomAsia and
Excelcomindo. The charges were necessary because we determined that the decline
in the estimated fair values of each of these investments were other than
temporary. We determined the fair values of these investments by discounting
estimated future cash flows.
In the case of TelecomAsia, we recorded a charge of $348.1 million to adjust the
carrying value of the investment to its estimated fair value. We considered the
following factors in determining this charge:
. The continued weakness of the Thai currency as compared to historical
exchange rates will place additional financial burdens on the company in
servicing U.S. dollar-denominated debt.
. The economic instability and prospects for an extended recovery period have
resulted in weaker than expected growth in TelecomAsia's business. This is
indicated by slower than expected growth in total subscribers and usage.
These factors resulted in reduced expectations of future cash flows and,
accordingly, a reduction in the value of our investment.
. The business plan for TelecomAsia contemplated cash flows from several
lines of business. Given TelecomAsia's inclination to focus on its core
wireline business, these other lines of business may not contribute future
cash flows at previously expected levels.
In the case of Excelcomindo, we recorded a charge of $137.0 million to adjust
the carrying value of the investment to its estimated fair value. We considered
the following factors in determining this charge:
. The continued weakness of the Indonesian currency as compared to historical
exchange rates will place additional financial burdens on the company in
servicing U.S. dollar-denominated debt. The continuing political unrest in
Indonesia has contributed to the currency's instability.
. The economic instability and prospects for an extended recovery period have
resulted in weaker than expected growth in Excelcomindo's business. One
significant factor has been inflexible tariff regulation despite rising
costs due to inflation. This and other factors have resulted in reduced
expectations of future cash flows and, accordingly, a reduction in the
value of our investment.
. Issues with cash flow are requiring Excelcomindo's shareholders to evaluate
the future funding of the business.
F-32
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. Grupo Iusacell, S.A. de C.V.
- --------------------------------------------------------------------------------
Since 1993, we have invested $1.2 billion in Iusacell, the second largest
telecommunications company in Mexico. Goodwill related to this investment
totaled approximately $840 million and is being amortized on a straight-line
basis over a period of 25 years. In the first quarter of 1997, we consummated a
restructuring of our investment in Iusacell to permit us to assume control of
the Board of Directors and management of Iusacell. As a result of the
restructuring, we changed the accounting for our Iusacell investment from the
equity method to full consolidation.
In 1998 and 1997, we entered into several transactions which have resulted in
changes to our economic ownership percentage. As part of the initial
restructuring in the first quarter of 1997, we converted approximately $33
million of debt into Series A shares, thereby increasing our ownership
percentage from 41.9% to 42.1%. We also agreed to provide Iusacell up to $150.0
million under a subordinated convertible debt facility (the Facility) as
Iusacell may require from time to time. This obligation expires in June 1999.
In the third quarter of 1998, Iusacell and its principal shareholders entered
into another agreement (the 1998 Restructuring Agreement) to restructure
ownership of the company. This restructuring, if completed, will result in the
formation of a new holding company with two classes of shares, one of which will
trade publicly. The restructuring is intended to increase the liquidity of
Iusacell's publicly traded shares and to increase the availability of debt
financing to Iusacell. Iusacell borrowed $101.5 million from us under the
Facility during the second half of 1998. We immediately converted the debt into
145.0 million additional Series A shares at a price of $.70 per share as
contemplated by the 1998 Restructuring Agreement. However, under this same
agreement, we sold 21.4 million of those shares to the Peralta Group, the other
principal shareholder of Iusacell, for $.70 per share. As a result of this debt
conversion and sale of shares to the Peralta Group, our ownership percentage
increased to 47.1% as of December 31, 1998.
The 1998 Restructuring Agreement also contemplates that the new Iusacell holding
company will engage in a rights offering to existing shareholders, and that we
and the Peralta Group, under certain circumstances, will engage in a secondary
public offering of a portion of our respective shares. These transactions would
reduce our ownership percentage to approximately 42%. We would, however,
continue to retain management control of Iusacell through the completion of
these transactions and, therefore, would continue to consolidate the company's
results. The 1998 Restructuring Agreement also provides that any further
borrowings by Iusacell under the Facility will be immediately converted into
shares of Iusacell at a conversion price of $.70 per share. It further provides
that the Peralta Group will purchase from us one-half of any shares received
from that debt conversion for $.70 per share. Iusacell borrowed approximately
$31 million under the Facility in the first quarter of 1999, which has been
converted to equity, increasing our ownership percentage to 47.2%.
PUT OPTIONS
The Peralta Group can require us to purchase from it approximately 517 million
Iusacell shares for $.75 per share, or approximately $388 million in the
aggregate, by giving notice of exercise between November 15 and December 15,
2001.
- --------------------------------------------------------------------------------
5. Plant, Property and Equipment
- --------------------------------------------------------------------------------
The following table displays the details of plant, property and equipment, which
is stated at cost:
(DOLLARS IN MILLIONS)
AT DECEMBER 31, 1998 1997
- --------------------------------------------------------------------------------
Land $ 412.3 $ 408.5
Buildings 6,666.7 6,323.4
Central office equipment 31,440.8 29,167.2
Outside communications plant 33,604.9 31,669.7
Furniture, vehicles and other
work equipment 7,870.0 7,253.2
Other 1,356.6 1,276.5
Construction-in-progress 1,712.8 1,338.7
---------------------------------
83,064.1 77,437.2
Accumulated depreciation (46,248.6) (42,397.8)
---------------------------------
Total $ 36,815.5 $ 35,039.4
=================================
Plant, property and equipment at December 31, 1998 and 1997 includes real estate
property and equipment under operating leases (or held for lease) of $96.6
million and $52.8 million, and accumulated depreciation of $21.9 million and
$14.8 million.
- --------------------------------------------------------------------------------
6. Leasing Arrangements
- --------------------------------------------------------------------------------
AS LESSOR
We are the lessor in leveraged and direct financing lease agreements under which
commercial aircraft, rail equipment, industrial equipment, power generating
facilities, real estate property, and telecommunications and other equipment are
leased for remaining terms of 1 to 48 years. Minimum lease payments receivable
represent unpaid rentals, less principal and interest on third-party nonrecourse
debt relating to leveraged lease transactions. Since we have no general
liability for this debt, the related principal and interest have been offset
against the minimum lease payments receivable. Minimum lease payments receivable
are subordinate to the debt and the holders of the debt have a security interest
in the leased equipment.
F-33
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
NOTE 6 CONTINUED
Finance lease receivables, which are included in Current Assets - Other and
Noncurrent Assets - Other Assets in our consolidated balance sheets are
comprised of the following:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
AT DECEMBER 31, 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
Direct Direct
Leveraged Finance Leveraged Finance
Leases Leases Total Leases Leases Total
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Minimum lease payments receivable $ 2,986.3 $ 189.9 $ 3,176.2 $ 2,674.6 $ 223.5 $ 2,898.1
Estimated residual value 2,186.8 36.1 2,222.9 1,969.7 36.2 2,005.9
Unearned income (2,131.9) (58.1) (2,190.0) (1,874.7) (70.7) (1,945.4)
------------------------------------------------------------------------------
$ 3,041.2 $ 167.9 3,209.1 $ 2,769.6 $ 189.0 2,958.6
========================== ==========================
Allowance for doubtful accounts (37.3) (24.9)
---------- -----------
Finance lease receivables, net $ 3,171.8 $ 2,933.7
========== ==========
Current $ 37.2 $ 39.2
========== ==========
Noncurrent $ 3,134.6 $ 2,894.5
========== ==========
</TABLE>
Accumulated deferred taxes arising from leveraged leases, which are included in
Deferred Income Taxes, amounted to $2,445.2 million at December 31, 1998 and
$2,233.8 million at December 31, 1997.
The following table is a summary of the components of income from leveraged
leases:
(DOLLARS IN MILLIONS)
YEARS ENDED DECEMBER 31, 1998 1997 1996
- --------------------------------------------------------------------------------
Pre-tax lease income $ 99.2 $ 97.4 $ 87.5
Income tax expense 47.2 30.7 22.1
Investment tax credits 5.3 2.9 3.5
This table displays the future minimum lease payments to be received from
noncancelable leases, net of nonrecourse loan payments related to leveraged and
direct financing leases in excess of debt service requirements, for the periods
shown at December 31, 1998:
(DOLLARS IN MILLIONS)
Capital Operating
YEARS Leases Leases
- ---------------------------------------------------------------------------
1999 $ 85.7 $ 16.2
2000 64.9 6.1
2001 65.3 .6
2002 94.5 .7
2003 83.1 .2
Thereafter 2,782.8 --
------------------------------
Total $ 3,176.3 $ 23.8
==============================
AS LESSEE
We lease certain facilities and equipment for use in our operations under both
capital and operating leases. Total rent expense under operating leases amounted
to $555.7 million in 1998, $572.6 million in 1997 and $531.9 million in 1996. We
incurred initial capital lease obligations of $2.7 million in 1998, $11.4
million in 1997, and $16.4 million in 1996.
Capital lease amounts included in plant, property and equipment are as follows:
(DOLLARS IN MILLIONS)
AT DECEMBER 31, 1998 1997
- --------------------------------------------------------------------------------
Capital leases $ 296.2 $ 307.2
Accumulated amortization (169.6) (163.5)
-----------------------------
Total $ 126.6 $ 143.7
=============================
This table displays the aggregate minimum rental commitments under noncancelable
leases for the periods shown at December 31, 1998:
(DOLLARS IN MILLIONS)
Capital Operating
YEARS Leases Leases
- --------------------------------------------------------------------------------
1999 $ 36.2 $ 253.7
2000 45.0 221.1
2001 31.7 174.5
2002 25.5 148.3
2003 16.8 125.4
Thereafter 477.0 762.3
--------------------------------
Total minimum rental commitments 632.2 $ 1,685.3
Less interest and executory costs 480.4 ================
---------------
Present value of minimum
lease payments 151.8
Less current installments 15.4
---------------
Long-term obligation
at December 31, 1998 $ 136.4
===============
As of December 31, 1998, the total minimum sublease rentals to be received in
the future under noncancelable operating subleases was $289.9 million.
F-34
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. Commitments and Contingencies
- --------------------------------------------------------------------------------
In connection with certain state regulatory incentive plan commitments, we have
deferred revenues which will be recognized as the commitments are met or
obligations are satisfied under the plans. In addition, several state and
federal regulatory proceedings may require our operating telephone subsidiaries
to refund a portion of the revenues collected in the current and prior periods.
There are also various legal actions pending to which we are a party. We have
established reserves for specific liabilities in connection with regulatory and
legal matters which we currently deem to be probable and estimable.
We do not expect that the ultimate resolution of pending regulatory and legal
matters in future periods will have a material effect on our financial
condition, but it could have a material effect on our results of
operations.
- --------------------------------------------------------------------------------
8. Debt
- --------------------------------------------------------------------------------
DEBT MATURING WITHIN ONE YEAR
The following table displays the details of debt maturing within one year:
(DOLLARS IN MILLIONS)
AT DECEMBER 31, 1998 1997
- ----------------------------------------------------------------------------
Notes payable
Commercial paper $ 1,383.7 $ 5,067.7
Bank loans 299.5 509.7
Long-term debt maturing
within one year 1,304.4 765.4
------------------------------
Total debt maturing
within one year $ 2,987.6 $ 6,342.8
==============================
Weighted-average interest
rates for notes payable
outstanding at year-end 5.6% 5.9%
==============================
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, 1998, we had in excess of $4.5 billion of unused bank lines of
credit. The availability of these lines, for which there are no formal
compensating balances, is at the discretion of each bank. Certain of these lines
of credit contain requirements for the payment of commitment fees.
Substantially all of the assets of Iusacell, totaling approximately $725 million
at December 31, 1998, are subject to lien under a credit facility with certain
bank lenders.
LONG-TERM DEBT
This table shows our outstanding long-term debt obligations:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
AT DECEMBER 31, Interest Rates % Maturities 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Telephone subsidiaries' debentures 4.375 - 7.00 1999-2033 $ 4,572.0 $ 3,867.0
7.125 - 7.75 2002-2033 2,465.0 2,705.0
7.85 - 9.375 2010-2031 1,979.0 2,179.0
Unamortized discount, net of premium (56.0) (55.8)
---------- -----------
8,960.0 8,695.2
Exchangeable notes, net of unamortized
discount of $243.8 4.25 - 5.75 2003-2005 5,645.6 -
Notes payable 5.30 - 12.42 1999-2012 3,036.0 3,515.8
Refunding mortgage bonds 4.25 - 7.375 2000-2011 635.5 986.1
Mortgage and installment notes 10.50 - 11.00 1999-2005 17.2 22.5
Employee stock ownership plan loans (Note 15)
Bell Atlantic senior notes 8.17 2000 199.8 313.4
NYNEX debentures 9.55 2010 304.9 327.3
Capital lease obligations-average rate
11.0% and 10.8% 151.8 170.3
---------- -----------
Total long-term debt, including current
maturities 18,950.8 14,030.6
Less maturing within one year 1,304.4 765.4
---------- -----------
Total long-term debt $ 17,646.4 $ 13,265.2
========== ===========
</TABLE>
F-35
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
NOTE 8 CONTINUED
Telephone Subsidiaries' Debt
The telephone subsidiaries' debentures outstanding at December 31, 1998 include
$1,857.0 million that are callable. The call prices range from 101.98% to
100.00% of face value, depending upon the remaining term to maturity of the
issue. All of our refunding mortgage bonds are also callable as of December 31,
1998. In addition, our long-term debt includes $735.0 million that will become
redeemable for limited periods at the option of the holders. Of this amount,
$385.0 million becomes redeemable in 1999 and $175.0 million in 2002. One
debenture totaling $175.0 million becomes redeemable in 2000 and again in 2002.
The redemption prices will be 100.0% of face value plus accrued interest.
Substantially all of the assets of New York Telephone Company, totaling
approximately $13.3 billion at December 31, 1998, are subject to lien under New
York Telephone Company's refunding mortgage bond indenture.
Exchangeable Notes
In February 1998, our wholly owned subsidiary Bell Atlantic Financial Services,
Inc. (FSI) issued $2,455.0 million of 5.75% senior exchangeable notes due on
April 1, 2003 (TCNZ exchangeable notes). The TCNZ exchangeable notes are
exchangeable into 437.1 million ordinary shares of TCNZ stock that we own at the
option of the holder, beginning on September 1, 1999. The exchange price was
established at a 20% premium to the TCNZ share price at the pricing date of the
offering. Upon exchange by investors, we retain the option to settle in cash or
by delivery of TCNZ shares. During the period from April 1, 2001 to March 31,
2002, the TCNZ exchangeable notes are callable at our option at 102.3% of the
principal amount and, thereafter and prior to maturity at 101.15%. The proceeds
of the TCNZ exchangeable notes offering were used for the repayment of a portion
of our short-term debt.
In August 1998, FSI issued $3,180.0 million of 4.25% senior exchangeable notes
due on September 15, 2005 (CWC exchangeable notes). The CWC exchangeable notes
were issued at a discount and at December 31, 1998 the notes had a carrying
value of $3,190.6 million. The CWC exchangeable notes are exchangeable into
277.6 million ordinary shares of CWC stock that we own at the option of the
holder beginning on July 1, 2002. The exchange price was established at a 28%
premium to the CWC share price at the pricing date of the offering. Upon
exchange by investors, we retain the option to settle in cash or by delivery of
CWC shares. The CWC exchangeable notes are redeemable at our option, beginning
September 15, 2002, at escalating prices from 104.2% to 108.0% of the principal
amount. If the CWC exchangeable notes are not called or exchanged prior to
maturity, they will be redeemable at 108.0% of the principal amount at that
time. The proceeds of the CWC exchangeable notes offering were used for the
repayment of a portion of our short-term debt and other general corporate
purposes.
The TCNZ and CWC exchangeable notes must be marked-to-market if the fair value
of either the underlying TCNZ shares rises to a level greater than 120% of the
share price at the pricing date of the offering, or the underlying CWC shares
rises to a level greater than 128% of the share price at the pricing date of the
offering. If either event should occur, we are required to mark-to-market the
applicable exchangeable note liability by the amount of the increase in share
price over the exchange price. This mark-to-market transaction would reduce
income by the amount of the increase in the exchangeable note liability. If the
share price subsequently declines, the liability would be reduced (but not less
than its amortized carrying value) and income would be increased. At December
31, 1998, the fair value of neither the underlying TCNZ shares, nor the
underlying CWC shares, exceeded the recorded value of the debt liability and,
therefore, no mark-to-market adjustments were recorded to our financial
statements.
Support Agreements
The TCNZ exchangeable notes have the benefit of a Support Agreement dated
February 1, 1998, and the CWC exchangeable notes have the benefit of a Support
Agreement dated August 26, 1998, both of which are between Bell Atlantic and
FSI. In the Support Agreements, Bell Atlantic guarantees the payment of
interest, premium (if any), principal, and the cash value of exchange property
related to these notes should FSI fail to pay. Another Support Agreement between
Bell Atlantic and FSI dated October 1, 1992, guarantees payment of interest,
premium (if any), and principal on FSI's medium-term notes (aggregating $244.7
million at December 31, 1998) should FSI fail to pay. The holders of FSI's debt
do not have recourse to the stock or assets of our operating telephone
subsidiaries or TCNZ; however, they do have recourse to dividends paid to Bell
Atlantic by any of our consolidated subsidiaries as well as assets not covered
by the exclusion. The carrying value of the available assets reflected in our
consolidated financial statements was approximately $14.1 billion at December
31, 1998.
In 1998, we established a $2.0 billion Euro Medium Term Note Program under which
we may issue notes that are not registered with the Securities and Exchange
Commission. The notes will be issued from time to time from our subsidiary, Bell
Atlantic Global Funding, Inc. (BAGF), and will have the benefit of a support
agreement between BAGF and Bell Atlantic. There have been no notes issued under
this program.
Maturities of Long-Term Debt
Maturities of long-term debt outstanding at December 31, 1998, excluding capital
lease obligations and unamortized discount and premium, are $1,289.0 million in
1999, $893.6 million in 2000, $373.8 million in 2001, $941.1 million in 2002,
$3,532.6 million in 2003, and $12,068.0 million thereafter. These amounts
include the redeemable debt at the earliest possible redemption dates.
Early Extinguishment of Debt
We recorded extraordinary charges associated with the early extinguishment of
debentures and refunding mortgage bonds of the telephone subsidiaries and debt
issued by FLAG, an investment accounted for under the equity method. You can
find a description of our FLAG investment in Note 3. These charges reduced net
income by $25.5 million (net of an income tax benefit of $14.3 million) in 1998.
F-36
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
- ------------------------
9. Financial Instruments
- ------------------------
DERIVATIVES
We limit our use of derivatives to managing risk that could negatively impact
our financing and operating flexibility, making cash flows more stable over the
long run and achieving savings over other means of financing. Our risk
management strategy is designed to protect against adverse changes in interest
rates, foreign currency exchange rates, and corporate tax rates, as well as
facilitate our financing strategies. We use several types of derivatives in
managing these risks, including interest rate swap agreements, interest rate
caps and floors, foreign currency forwards and options, and basis swap
agreements. Derivative agreements are linked to specific liabilities or assets
and hedge the related economic exposures. We do not hold derivatives for trading
purposes.
We recognized pre-tax income (expense) of $(3.6) million in 1998, $17.3 million
in 1997, and $12.7 million in 1996 in our statements of income related to our
risk management activities involving derivatives.
INTEREST RATE RISK MANAGEMENT
The table that follows provides additional information about our interest rate
risk management. The notional amounts shown are used to calculate interest
payments to be exchanged. These amounts are not actually paid or received, nor
are they a measure of our potential gains or losses from market risks. They do
not represent our exposure in the event of nonperformance by a counterparty or
our future cash requirements. Our financial instruments are grouped based on the
nature of the hedging activity.
(DOLLARS IN MILLIONS)
Weighted-Average Rate
Notional --------------------------
At December 31, Amount Maturities Receive Pay
- --------------------------------------------------------------------------------
INTEREST RATE SWAP AGREEMENTS
Foreign Currency/Interest Rate Swaps
1998 $ 303.2 1999 - 2002 5.3% 6.0%
1997 $ 375.4 1998 - 2002 4.5% 6.2%
Other Interest Rate Swaps
Pay fixed
1998 $ 260.0 1999 - 2005 5.0% 5.9%
1997 $ 260.0 1999 - 2005 5.7% 5.9%
Pay variable
1998 $ 783.7 1999 - 2006 6.6% 5.3%
1997 $ 783.7 1999 - 2006 6.6% 6.1%
STRUCTURED NOTE SWAP AGREEMENTS
1998 $ 60.0 1999
1997 $ 60.0 1999
INTEREST RATE CAP/FLOOR AGREEMENTS
1998 $ 297.0 1999 - 2002
1997 $ 262.0 1999 - 2001
BASIS SWAP AGREEMENTS
1998 $ 1,001.0 2003 - 2004
1997 $ 1,001.0 2003 - 2004
We use foreign currency/interest rate swap agreements to hedge the value of
certain international investments. The agreements generally require us to
receive payments based on fixed interest rates and make payments based on
variable interest rates.
The structured note swap agreements convert several structured medium-term notes
to conventional fixed rate liabilities while reducing financing costs. The
effective fixed interest rate on these notes averaged 6.1% at December 31, 1998
and 1997.
Other interest rate swap agreements, which sometimes incorporate options, and
interest rate caps and floors are all used to adjust the interest rate profile
of our debt portfolio and allow us to achieve a targeted mix of fixed and
variable rate debt.
Earnings generated from our leveraged lease portfolio may be affected by changes
in corporate tax rates. In order to hedge a portion of this risk, we entered
into several basis swap agreements which require us to receive payments based on
a variable interest rate (LIBOR-based) and make payments based on a tax-exempt
market index (J.J.Kenney). We account for these basis swap agreements at fair
value and recognized income (expense) of $(3.7) million in 1998, $4.2 million in
1997, and $20.2 million in 1996 related to mark-to-market adjustments.
FOREIGN EXCHANGE RISK MANAGEMENT
Our foreign exchange risk management includes the use of foreign currency
forward contracts, options and foreign currency swaps. Forward contracts and
options call for the sale or purchase, or the option to sell or purchase,
certain foreign currencies on a specified future date. These contracts are
typically used to hedge short-term foreign currency transactions and
commitments. The total notional amounts of our foreign currency forward
contracts and option contracts were $2.4 million at December 31, 1998 and $14.5
million at December 31, 1997, all of which had maturities of six months or less.
Certain of the interest rate swap agreements shown in the table contain both a
foreign currency and an interest rate component. These agreements require the
exchange of payments based on specified interest rates in addition to the
exchange of currencies at the maturity of the contract. The required payments
for both components are based on the notional amounts of the contracts.
Our net equity position in unconsolidated foreign businesses as reported in our
consolidated balance sheets totaled $1,916.6 million at December 31, 1998 and
$1,784.2 million at December 31, 1997. Our most significant investments at
December 31, 1998 and 1997 had operations in the United Kingdom, Italy and New
Zealand. We have not hedged our accounting translation exposure to foreign
currency fluctuations relative to these investments except for our United
Kingdom investment which is partially hedged.
Our equity income is subject to exchange rate fluctuations when our equity
investee has balances denominated in a currency other than the investees'
functional currency. We recognized $10.5 million in 1998, $(30.1) million in
1997, and $6.8 million in 1996 related to such fluctuations in Income (Loss)
From Unconsolidated Businesses.
F-37
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
NOTE 9 CONTINUED
We continually monitor the relationship between gains and losses recognized on
all of our foreign currency contracts and on the underlying transactions being
hedged to mitigate market risk.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that subject us to concentrations of credit risk consist
primarily of temporary cash investments, short-term investments, trade
receivables, certain notes receivable, preferred stock, and derivative
contracts. Our policy is to place our temporary cash investments with major
financial institutions. Counterparties to our derivative contracts are also
major financial institutions and organized exchanges. The financial institutions
have all been accorded high ratings by primary rating agencies. We limit the
dollar amount of contracts entered into with any one financial institution and
monitor our counterparties' credit ratings. We generally do not give or receive
collateral on swap agreements due to our credit rating and those of our
counterparties. While we may be exposed to credit losses due to the
nonperformance of our counterparties, we consider the risk remote and do not
expect the settlement of these transactions to have a material effect on our
results of operations or financial condition.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The tables that follow provide additional information about our material
financial instruments:
Financial Instrument Valuation Method
- --------------------------------------------------------------------------------
Cash and cash equivalents Carrying amounts
and short-term investments
Short-and long-term debt Market quotes for similar terms
(excluding capital leases and and maturities or future cash
exchangeable notes) flows discounted at current rates
Exchangeable notes Market quotes for similar instruments
with both debt and embedded equity
components
Cost investments in Future cash flows discounted at current
unconsolidated businesses rates, market quotes for similar
and notes receivable instruments or other valuation models
Interest rate swap and other Gains or losses to terminate agreements
agreements or amounts paid to replicate agreements
at current rates
Foreign currency forward Market quotes or gains or losses to
and option contracts terminate agreements
(DOLLARS IN MILLIONS)
1998 1997
----------------------------------------------------
Carrying Fair Carrying Fair
At December 31, Amount* Value Amount* Value
- -------------------------------------------------------------------------------
Short-and
long-term debt $ 14,836.6 $ 15,928.3 $ 19,437.7 $ 19,988.9
Exchangeable notes 5,645.6 5,818.2 -- --
Cost investments
in unconsolidated
businesses 777.8 796.9 1,693.0 1,464.6
Notes receivable, net 18.4 18.3 32.9 33.2
Interest rate swap
and other agreements
Assets 6.1 26.7 26.3 31.8
Liabilities 25.5 39.7 24.8 31.8
Foreign currency
forward and
option contracts
Assets -- -- .2 --
Liabilities -- -- .2 .2
* The carrying amounts shown for derivatives include deferred gains and
losses.
In January 1999, we accepted an offer from Viacom to repurchase their preferred
stock from us. Our investment in Viacom is included in the table under "Cost
investments in unconsolidated businesses." We have used the sale price as the
fair value of our Viacom investment at December 31, 1998. The fair value of our
Viacom investment at December 31, 1997 was calculated using certain theoretical
convertible valuation models since the preferred stock was not publicly traded.
We were unable to determine the fair value of other investments, with carrying
values of $.6 million and $183.3 million at December 31, 1998 and 1997, without
incurring excessive costs.
- ------------------------
10. Minority Interest
- ------------------------
(DOLLARS IN MILLIONS)
At December 31, 1998 1997
- --------------------------------------------------------------------------------
Portion subject to
redemption requirements $ 18.6 $ 618.3
Portion nonredeemable 311.1 292.9
-------------------------
$ 329.7 $ 911.2
=========================
VIACOM TRANSACTIONS
In December 1998, we accepted an offer from Viacom to repurchase one-half of our
investment in Viacom, or 12 million shares of their preferred stock (with a book
value of approximately $600 million), for approximately $564 million in cash.
This preferred stock had been held by a fully consolidated subsidiary, which had
been created as part of a transaction to monetize a portion of our Viacom
investment during 1995 and 1996. This monetization transaction involved entering
into nonrecourse contracts whereby we raised $600.0
F-38
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
NOTE 10 CONTINUED
million based, among other things, on the value of our investment in Viacom. To
accomplish the monetization, two fully consolidated subsidiaries were created to
manage and protect certain assets for distribution at a later date. In addition,
an outside party contributed $600.0 million in cash in exchange for an interest
in one of these subsidiaries, and we contributed a $600.0 million note that was
collateralized by certain financial assets, including the 12 million shares of
Viacom preferred stock and 22.4 million shares of our common stock. The outside
party's contribution was reflected in Minority Interest, and the issuance of
common stock was reflected as Treasury Stock in our consolidated balance sheets
and statements of shareowners' investment.
The cash proceeds from the repurchase of the 12 million shares of Viacom
preferred stock, together with additional cash, was used to repay the note that
had been contributed to one of the subsidiaries. The total amount of cash was
distributed to the outside party, under a pre-existing agreement, to redeem most
of that party's interest in the subsidiary. We then purchased the remaining
portion of the outside party's interest. The transaction was accounted for as a
charge to Reinvested Earnings and a reduction from Net Income in calculating Net
Income Available to Common Shareowners in the amount of $29.8 million. As a
result of our purchase of the outside party's interest, we reduced Minority
Interest by $600.0 million in 1998. However, the subsidiaries continue to hold
shares of our common stock, which have been reported as Treasury Stock in our
consolidated balance sheet at December 31, 1998.
The remaining 12 million shares of preferred stock were repurchased by Viacom in
a second transaction in January 1999 for approximately $612 million in cash. You
can find additional information on our Viacom investment in Note 3.
OTHER MINORITY INTERESTS
Minority interest in 1998 and 1997 also included the minority interests in
certain partnerships consolidated by Bell Atlantic Mobile. The other
shareowners' interest in Iusacell is also reflected as minority interest in 1998
and 1997 as a result of our change to full consolidation for our investment in
Iusacell beginning in 1997. You can find a description of our Iusacell
investment in Note 4.
- ---------------------------------
11. Preferred Stock of Subsidiary
- ---------------------------------
Our subsidiary Bell Atlantic New Zealand Holdings, Inc. (BANZHI) has the
authority to issue 5,000,000 shares of Serial Preferred Stock. BANZHI has issued
three series of preferred stock. BANZHI owns a portion of our investment in
Iusacell and, with another subsidiary, indirectly owns our investment in TCNZ.
In 1994, BANZHI issued 850,000 shares of Series A Preferred Stock at $100 per
share with an annual dividend rate of $7.08 per share. In 1995, 600,000 shares
of Series B Preferred Stock were issued at $100 per share with an annual
dividend rate of $5.80 per share. At December 31, 1998 and 1997, 95,000 shares
($9.5 million) of Series B Preferred Stock were held by a wholly owned
subsidiary. Both series are subject to mandatory redemption on May 1, 2004 at a
redemption price per share of $100, together with any accrued and unpaid
dividends.
In 1997, 650,000 shares of Series C Variable Term Preferred Stock were issued at
$100 per share. At December 31, 1998, these shares had an annual dividend rate
of 4.24%.
- ---------------------------------
12. Shareowners' Investment
- ---------------------------------
Our certificate of incorporation provides authority for the issuance of up to
250 million shares of Series Preferred Stock, $.10 par value, in one or more
series, with such designations, preferences, rights, qualifications, limitations
and restrictions as the Board of Directors may determine.
We are authorized to issue up to 2.25 billion shares of common stock.
On January 23, 1996, the Board of Directors adopted a resolution ordering the
redemption of all rights granted under our Shareholder Rights Plan, approved by
the Board in 1989. Shareholders of record as of April 10, 1996 were paid the
redemption price of $.01 per Right ($.0025 per share after adjusting for stock
splits) on May 1, 1996.
F-39
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
- ---------------------------------
13. Earnings Per Share
- ---------------------------------
The following table is a reconciliation of the numerators and denominators used
in computing earnings per share:
<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Years Ended December 31, 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET INCOME AVAILABLE TO COMMON SHAREOWNERS
Income before extraordinary item and cumulative effect
of change in accounting principle $ 2,990.8 $ 2,454.9 $ 3,128.9
Redemption of minority interest (29.8) -- --
Redemption of investee preferred stock (2.5) -- --
--------------------------------------------------------
Income available to common shareowners* 2,958.5 2,454.9 3,128.9
Extraordinary item (25.5) -- --
Cumulative effect of change in accounting principle -- -- 273.1
--------------------------------------------------------
Net income available to common shareowners* $ 2,933.0 $ 2,454.9 $ 3,402.0
========================================================
BASIC EARNINGS PER COMMON SHARE
Weighted-average shares outstanding 1,553.0 1,551.8 1,546.6
Income before extraordinary item and cumulative effect --------------------------------------------------------
of change in accounting principle $ 1.90 $ 1.58 $ 2.02
Extraordinary item (.01) -- --
Cumulative effect of change in accounting principle -- -- .18
--------------------------------------------------------
Net income $ 1.89 $ 1.58 $ 2.20
========================================================
DILUTED EARNINGS PER COMMON SHARE
Weighted-average shares outstanding 1,553.0 1,551.8 1,546.6
Effect of dilutive securities 25.3 19.3 13.6
--------------------------------------------------------
Weighted-average shares - diluted 1,578.3 1,571.1 1,560.2
Income before extraordinary item and cumulative effect ========================================================
of change in accounting principle $ 1.87 $ 1.56 $ 2.00
Extraordinary item (.01) -- --
Cumulative effect of change in accounting principle -- -- .18
--------------------------------------------------------
Net income $ 1.86 $ 1.56 $ 2.18
========================================================
</TABLE>
* Income and Net income available to common shareowners is the same for
purposes of calculating basic and diluted earnings per share.
Stock options to purchase .2 million, .1 million and 29.9 million shares of
common stock were outstanding at December 31, 1998, 1997, and 1996, which were
not included in the computation of diluted earnings per share because the
options' exercise price was greater than the average market price of the common
shares.
F-40
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
- --------------------------------
14. Stock Incentive Plans
- --------------------------------
We have stock-based compensation plans that include fixed stock option and
performance-based share plans. We apply APB Opinion No. 25 and related
interpretations in accounting for our plans. We have adopted the disclosure-only
provisions of SFAS No. 123. We recognize no compensation expense for our fixed
stock option plans. Compensation expense charged to income for our
performance-based share plans was $14.3 million in 1998, $23.4 million in 1997,
and $10.6 million in 1996. If we had elected to recognize compensation expense
based on the fair value at the grant dates for 1996 and subsequent fixed and
performance-based plan awards consistent with the provisions of SFAS No. 123,
net income and earnings per share would have been changed to the pro forma
amounts indicated below:
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Years Ended December 31, 1998 1997 1996
- --------------------------------------------------------------------------------
Net income As reported $ 2,965.3 $ 2,454.9 $ 3,402.0
Pro forma 2,917.9 2,393.6 3,355.8
Basic earnings
per share As reported $ 1.89 $ 1.58 $ 2.20
Pro forma 1.86 1.54 2.17
Diluted earnings
per share As reported $ 1.86 $ 1.56 $ 2.18
Pro forma 1.83 1.52 2.15
-----------------------------------------------------------------
These results may not be representative of the effects on pro forma net income
for future years.
We determined the pro forma amounts using the Black-Scholes option-pricing model
based on the following weighted-average assumptions:
1998 1997 1996
- --------------------------------------------------------------------------------
Dividend yield 4.59% 4.86% 4.72%
Expected volatility 18.63% 14.87% 15.16%
Risk-free interest rate 5.55% 6.35% 5.42%
Expected lives (in years) 5 5 5
--------------------------------------------------
The weighted-average value of options granted was $6.47 per option during 1998,
$4.30 per option during 1997 and $2.96 per option during 1996.
The NYNEX stock options outstanding and exercisable at the date of the merger
were converted to Bell Atlantic stock options. The NYNEX option activity and
share prices have been restated, for all years presented, to Bell Atlantic
shares using the exchange ratio of 0.768 per share of Bell Atlantic common stock
to one share of NYNEX common stock. Our stock incentive plans are described
below:
FIXED STOCK OPTION PLANS
We have fixed stock option plans for key management employees under which
options to purchase Bell Atlantic common stock are granted at a price equal to
the market price of the stock at the date of grant.
Under the 1985 Incentive Stock Option Plan (ISO Plan), key employees (including
employees of the former NYNEX companies, after the merger) may be granted
incentive and/or nonqualified stock options to purchase shares of common stock
and certain key employees may receive reload options upon tendering shares of
common stock to exercise options. In 1994, we adopted the Options Plus Plan.
Under this plan, we granted nonqualified stock options to approximately 800
managers below the officer level in place of a portion of each manager's annual
cash bonus in 1994 and 1995. The Options Plus Plan was discontinued after the
January 1995 grant. The Stock Compensation Plan for Outside Directors entitles
each outside director to receive up to 5,000 stock options per year. Options are
exercisable after three years or less and the maximum term is ten years.
Fixed stock option plans covering key management employees of the former NYNEX
companies include the 1990 and the 1995 Stock Option Plans. The 1990 Stock
Option Plan, which expired on December 31, 1994, permitted the grant of options
through December 1994 to purchase shares of common stock. In January 1995, NYNEX
established the 1995 Stock Option Plan. Options under the 1995 Stock Option Plan
are exercisable after three years or less and the maximum term is ten years.
Since the merger with NYNEX, the new options granted under this plan are reload
options. Both the 1990 and 1995 plans will continue to exist until the last
outstanding option has been exercised or has expired.
In 1992, 1994 and 1996, NYNEX established stock option plans for associates and
management employees other than those eligible to participate in the other stock
option plans. These employees were granted options (with the number of options
granted varying according to employee level) to purchase a fixed number of
shares of common stock at the market price of the stock on the grant date.
Options granted under these plans are exercisable after two years or less and
the maximum term is ten years.
This table is a summary of the status of the fixed stock option plans:
Weighted-Average
Stock Options Exercise Price
- --------------------------------------------------------------------------------
Outstanding, December 31, 1995 68,715,924 $ 24.93
Granted 31,866,368 33.28
Exercised (8,889,406) 24.65
Canceled/forfeited (1,099,888) 31.51
------------
Outstanding, December 31, 1996 90,592,998 27.93
Granted 15,670,210 33.10
Exercised (26,238,090) 26.40
Canceled/forfeited (885,184) 29.39
------------
Outstanding, December 31, 1997 79,139,934 29.28
Granted 24,061,468 46.40
Exercised (23,373,126) 29.01
Canceled/forfeited (1,744,531) 36.88
------------
Outstanding, December 31, 1998 78,083,745 34.87
============
Options exercisable, December 31,
1996 56,482,864 27.68
1997 63,650,570 28.27
1998 55,395,762 30.17
---------------------------------------
F-41
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
NOTE 14 CONTINUED
The following table summarizes information about fixed stock options outstanding
as of December 31, 1998:
<TABLE>
<CAPTION>
Stock Options Outstanding Stock Options Exercisable
------------------------------------------------- -------------------------
Weighted-Average
Range of Remaining Weighted-Average Weighted-Average
Exercise Prices Shares Contractual Life Exercise Price Shares Exercise Price
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 15.00 - 19.99 5,552 .1 years $ 18.00 5,552 $ 18.00
20.00 - 24.99 8,711,764 3.5 23.07 8,711,764 23.07
25.00 - 29.99 16,780,585 5.6 25.87 16,780,585 25.87
30.00 - 34.99 27,780,786 7.4 33.00 25,765,996 33.01
35.00 - 39.99 1,480,557 8.6 37.76 796,719 37.71
40.00 - 44.99 361,306 9.1 43.39 318,057 43.36
45.00 - 49.99 21,661,784 9.1 47.56 2,720,337 46.46
50.00 - 54.99 1,087,712 9.6 52.13 295,852 51.84
55.00 - 59.99 213,699 9.9 56.44 900 57.78
- ------------------------------ ----------
Total 78,083,745 7.1 34.87 55,395,762 30.17
=========== ==========
</TABLE>
PERFORMANCE-BASED SHARE PLANS
Our performance-based share plans provided for the granting of awards to certain
key employees, including employees of the former NYNEX companies in the form of
Bell Atlantic common stock. Authority to make new grants expired in December
1994. Final awards were credited to pre-merger employees of Bell Atlantic in
January 1996 and to employees of the former NYNEX companies in March 1994.
Effective January 1, 1998, the Income Deferral Plan replaced the deferred
compensation plans, including deferred performance shares, and expands the award
distribution options for those employees. Employees who were active as of
January 1, 1998 had their performance share balances transferred to the Income
Deferral Plan. Those employees who were inactive as of that date continue to
hold deferred share balances.
We also have deferred compensation plans that allow members of the Board of
Directors to defer all or a portion of their compensation. Some of these plans
provide for returns based on the performance of, and eventual settlement in,
Bell Atlantic common stock. Compensation expense for all of these plans is
recorded based on the fair market value of the shares as they are credited to
participants' accounts. The Income Deferral Plan is accounted for with our
pension plans.
The number of shares outstanding in the performance share plans were 393,491 at
December 31, 1998, 1,099,690 at December 31, 1997, and 1,252,286 at December 31,
1996.
A total of 180,560,000 shares may be distributed under the fixed stock option
plans and the performance-based share plans. As of December 31, 1998 and 1997, a
total of 56,578,766 and 69,615,880 shares of common stock were available for the
granting of stock options under the fixed stock option plans and for
distributions of shares under the performance-based share plans.
In addition to plans described above, Iusacell maintains a separate stock option
plan for its key employees in which it awards options to acquire Iusacell common
stock. The effect of this plan on our consolidated results of operations was not
significant.
- ---------------------------
15. Employee Benefits
- ---------------------------
The FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits," in February 1998. This new standard does not change
the measurement or recognition of costs for pensions or other postretirement
plans. It standardizes disclosures and eliminates those that are no longer
useful. The information provided below for 1998, 1997 and 1996 has been
presented under the requirements of the new standard.
We maintain noncontributory defined benefit pension plans for substantially all
management and associate employees, as well as postretirement healthcare and
life insurance plans for our retirees and their dependents. We also sponsor
savings plans to provide opportunities for eligible employees to save for
retirement on a tax-deferred basis and to encourage employees to acquire and
maintain an equity interest in our company.
In 1997, following the completion of the merger with NYNEX, the assets of the
Bell Atlantic and NYNEX pension and savings plans were commingled in a master
trust, and effective January 1, 1998 we established common pension and savings
plan benefit provisions for all management employees. The disclosures provided
for 1997 and 1996 were determined using weighted-average assumptions for the
combined Bell Atlantic and NYNEX benefit plans.
PENSION AND OTHER POSTRETIREMENT BENEFITS
At December 31, 1998, shares of our common stock accounted for less than 1% of
the plan assets. Substantive commitments for future amendments are reflected in
the pension costs and benefit obligations. Pension and other postretirement
benefits for our associate employees (approximately 69% of our work force) are
subject to collective bargaining agreements. Modifications in associate benefits
have been bargained from time to time, and we may also periodically amend the
benefits in the management plans.
The following tables summarize benefit costs, as well as the benefit
obligations, plan assets, funded status and rate assumptions associated with
pension and postretirement healthcare and life insurance benefit plans.
F-42
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
NOTE 15 CONTINUED
BENEFIT COST
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
Pension Healthcare and Life
Years Ended December 31, 1998 1997 1996 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 388.6 $ 355.8 $ 398.6 $ 101.1 $ 98.4 $ 122.5
Interest cost 1,855.4 1,877.3 1,831.2 593.1 626.3 653.0
Expected return on plan assets (2,544.9) (2,346.6) (2,169.5) (287.6) (249.1) (214.8)
Amortization of transition asset (82.0) (82.0) (79.6) -- -- --
Amortization of prior service cost (132.7) (136.0) (129.9) 52.7 50.0 66.1
Actuarial (gain), net (111.5) (62.5) (9.4) (101.8) (40.3) (2.5)
----------------------------------------------------------------------------
Net periodic (income) benefit cost (627.1) (394.0) (158.6) 357.5 485.3 624.3
----------------------------------------------------------------------------
Special termination benefits 1,029.3 687.7 481.3 57.9 60.0 39.8
Curtailment (gain) loss (including
recognition of prior service cost) (134.4) (221.8) (174.0) 149.9 117.9 90.6
Release of severance and postretirement
medical reserves (38.8) (68.8) (91.0) (54.6) (88.4) (126.0)
----------------------------------------------------------------------------
Retirement incentive cost, net* 856.1 397.1 216.3 153.2 89.5 4.4
----------------------------------------------------------------------------
Total benefit cost $ 229.0 $ 3.1 $ 57.7 $ 510.7 $ 574.8 $ 628.7
============================================================================
</TABLE>
* See "Retirement Incentives" section for additional information
ASSUMPTIONS
The actuarial assumptions used 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 benefit
costs and obligations. The weighted-average assumptions used in determining
expense and benefit obligations are as follows:
<TABLE>
<CAPTION>
Pension Healthcare and Life
- ------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount rate at end of year 7.00% 7.25% 7.75% 7.00% 7.25% 7.75%
Long-term rate of return on
plan assets for the year 8.90 8.90 8.60 8.90 8.70 8.35
Rate of future increases in
compensation at end of year 4.00 4.00 4.40 4.00 4.00 4.40
Medical cost trend rate at
end of year 6.00 6.50 8.30
Ultimate (year 2001 for 1998 and 1997,
year 2008 for 1996) 5.00 5.00 4.75
Dental cost trend rate at end of year 3.50 3.50 3.75
Ultimate (year 2002) 3.00 3.00 3.50
</TABLE>
The medical cost trend rate significantly affects the reported postretirement
benefit costs and benefit obligations. A one-percentage-point change in the
assumed healthcare cost trend rate would have the following effects:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
One-Percentage-Point Increase One-Percentage-Point Decrease
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Effect on total service and interest cost $ 57.7 $ (46.5)
Effect on postretirement benefit obligation 631.2 (515.8)
</TABLE>
F-43
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
Note 15 continued
<TABLE>
<CAPTION>
(DOLLARS AND MILLIONS)
Pension Healthcare and Life
- ----------------------------------------------------------------------------------------
At December 31, 1998 1997 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Benefit Obligation
Beginning of year $ 26,732.0 $ 24,935.7 $ 8,852.2 $ 8,617.2
Service cost 388.6 355.8 101.1 98.4
Interest cost 1,855.4 1,877.3 593.1 626.3
Plan amendments 38.2 (97.0) 10.9 --
Actuarial (gain) loss, net 349.9 1,173.4 (90.9) (59.8)
Benefits paid (2,370.6) (2,041.5) (549.7) (537.1)
Curtailments (96.3) (159.4) 88.5 47.2
Special termination benefits 1,029.3 687.7 57.9 60.0
Transfers 153.8 -- -- --
-------------------------------------------------------
End of year 28,080.3 26,732.0 9,063.1 8,852.2
-------------------------------------------------------
Fair Value of Plan Assets
Beginning of year 35,253.0 31,075.5 3,824.6 3,209.9
Actual return on plan assets 4,018.9 6,194.1 721.9 673.3
Company contribution 60.6 24.1 173.1 182.7
Benefits paid (2,370.6) (2,041.5) (257.0) (241.3)
Transfers 4.6 .8 -- --
-------------------------------------------------------
End of year 36,966.5 35,253.0 4,462.6 3,824.6
-------------------------------------------------------
Funded Status
End of year 8,886.2 8,521.0 (4,600.5) (5,027.6)
Unrecognized
Actuarial (gain), net (10,534.0) (9,521.4) (1,951.9) (1,512.1)
Prior service cost (1,316.7) (1,493.1) 143.2 192.3
Transition asset (357.1) (439.0) -- --
-------------------------------------------------------
Net Amount Recognized $ (3,321.6) $ (2,932.5) $ (6,409.2) $ (6,347.4)
=======================================================
Amounts recognized on the
balance sheet
Employee benefit obligation $ (3,372.7) $ (2,974.7) $ (6,409.2) $ (6,347.4)
Other assets 23.7 42.2 -- --
Accumulated other comprehensive
loss 27.4 -- -- --
-------------------------------------------------------
Net amount recognized $ (3,321.6) $ (2,932.5) $ (6,409.2) $ (6,347.4)
=======================================================
</TABLE>
The changes in benefit obligations from year to year were caused by a number
of factors, including changes in actuarial assumptions (see Assumptions), plan
amendments and special termination benefits.
RETIREMENT INCENTIVES
In 1993, we announced a restructuring plan which included an accrual of
approximately $1.1 billion (pre-tax) for severance and postretirement medical
benefits under an involuntary force reduction plan. Beginning in 1994,
retirement incentives have been offered under a voluntary program as a means of
implementing substantially all of the work force reductions planned in 1993.
Since the inception of the retirement incentive program, we recorded additional
costs totaling approximately $3.0 billion (pre-tax) through December 31, 1998.
These additional costs and the corresponding number of employees accepting the
retirement incentive offer for each year ended December 31 are as follows:
(DOLLARS IN MILLIONS)
Years Amount Employees
- --------------------------------------------------------------------------------
1994 $ 694.0 7,209
1995 514.9 4,759
1996 235.8 2,996
1997 513.1 4,311
1998 1,021.1 7,299
-----------------------------------------
$ 2,978.9 26,574
=========================================
The retirement incentive costs are included in Employee Costs in our statements
of income and the accrued liability is a component of Employee Benefit
Obligations reported in our consolidated balance sheets. The additional costs
are comprised of special termination pension and postretirement benefit amounts,
as well as employee costs for other items. These costs have been reduced by
severance and postretirement medical benefit reserves established in 1993 and
transferred to the pension and postretirement benefit liabilities as employees
accepted the retirement incentive offer.
F-44
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
NOTE 15 CONTINUED
The retirement incentive program covering management employees ended on March
31, 1997 and the program covering associate employees was completed in September
1998.
The following table provides the amounts transferred from the 1993 reserve
balance to pension and postretirement benefits (OPEB) liabilities:
(DOLLARS IN MILLIONS)
Years Pension OPEB Total
- --------------------------------------------------------------------------------
1994 $ 293.0 $ 179.0 $ 472.0
1995 81.6 72.0 153.6
1996 91.0 126.0 217.0
1997 81.6 88.4 170.0
1998 38.8 54.6 93.4
- --------------------------------------------------------------------------------
$ 586.0 $ 520.0 $ 1,106.0
=========================================================
The remaining severance and postretirement medical reserves balances associated
with the 1993 restructuring plan were as follows at December 31, 1997 and 1998:
(DOLLARS IN MILLIONS)
1997 1998
- --------------------------------------------------------------------------------
Beginning of year $ 263.4 $ 93.4
Utilization (170.0) (93.4)
----------------------------------
End of year $ 93.4 $ --
==================================
SAVINGS PLANS AND EMPLOYEE STOCK OWNERSHIP PLANS
We maintain three leveraged employee stock ownership plans (ESOPs). Under these
plans, we match a certain percentage of eligible employee contributions with
shares of our common stock. In 1989, two leveraged ESOPs were established by
Bell Atlantic to purchase Bell Atlantic common stock and fund matching
contributions. In 1990, NYNEX established a leveraged ESOP to fund matching
contributions to management employees and purchased shares of NYNEX common
stock. At the date of the merger, NYNEX common stock outstanding was converted
to Bell Atlantic shares using an exchange ratio of 0.768 per share of Bell
Atlantic common stock to one share of NYNEX common stock.
The Bell Atlantic leveraged ESOP trusts were funded by the issuance of $790.0
million in senior notes. The annual interest rate on the senior notes is 8.17%.
The senior notes are payable in semiannual installments, which began on January
1, 1990 and end in the year 2000. The NYNEX leveraged ESOP trust was established
through a company loan of $450 million, the proceeds of which were used to
purchase common shares of NYNEX stock held in treasury. NYNEX issued and
guaranteed $450 million of 9.55% debentures, the proceeds of which were
principally used to repurchase common shares in the open market. The debentures
require annual payments of principal and are due on May 1, 2010. Interest
payments are due semiannually. All of the leveraged ESOP trusts repay the debt,
including interest, with funds from our contributions to the ESOP trusts, as
well as dividends received on unallocated and allocated shares of common stock.
The obligations of the leveraged ESOP trusts, which we guarantee, 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, we reduce 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.
Common stock is allocated from all leveraged 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, 1998, the number of
unallocated and allocated shares of common stock was 18.9 million and 32.4
million. All leveraged ESOP shares are included in earnings per share
computations.
We recognize leveraged ESOP cost based on the modified shares allocated method
for the Bell Atlantic leveraged ESOP trusts which held securities before
December 15, 1989 and the shares allocated method for the NYNEX leveraged ESOP
trust which held securities after December 15, 1989.
ESOP cost and trust activity consist of the following:
(DOLLARS IN MILLIONS)
Years Ended December 31, 1998 1997 1996
- --------------------------------------------------------------------------------
Compensation $ 98.4 $ 105.4 $ 93.5
Interest incurred 48.6 57.0 69.4
Dividends (34.0) (36.9) (42.1)
Other trust earnings and
expenses, net (.4) (.5) (.2)
-------------------------------------------
Net leveraged ESOP cost 112.6 125.0 120.6
Additional (reduced) ESOP cost (8.5) (2.3) 14.6
-------------------------------------------
Total ESOP cost $ 104.1 $ 122.7 $ 135.2
===========================================
Dividends received for
debt service $ 65.6 $ 66.7 $ 68.3
===========================================
Total company contributions
to leveraged ESOP trusts $ 143.9 $ 136.5 $ 141.8
===========================================
In addition to the ESOPs described above, we maintain savings plans for
associate employees of the former NYNEX companies, and employees of certain
other subsidiaries. Compensation expense associated with these savings plans was
$80.8 million in 1998, $71.1 million in 1997, and $69.1 million in
1996.
F-45
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
- ------------------------
16. Income Taxes
- ------------------------
The components of income tax expense from continuing operations are presented in
the following table:
(DOLLARS IN MILLIONS)
YEARS ENDED DECEMBER 31, 1998 1997 1996
- --------------------------------------------------------------------------------
Current
Federal $ 1,513.9 $ 1,207.4 $ 1,450.2
State and local 368.3 222.2 195.4
-------------------------------------------------
1,882.2 1,429.6 1,645.6
-------------------------------------------------
Deferred
Federal 178.4 279.2 235.9
State and local 85.8 (42.3) 48.3
-------------------------------------------------
264.2 236.9 284.2
-------------------------------------------------
Investment tax credits (28.9) (38.1) (57.3)
Other credits (109.4) (99.2) (90.2)
-------------------------------------------------
Total income tax expense $ 2,008.1 $ 1,529.2 $ 1,782.3
=================================================
During 1997, two states in our operating region enacted significant changes in
their tax laws. In New Jersey, a law was enacted that repealed the gross
receipts tax applicable to telephone companies and extended the net-income-based
corporate business tax to include telephone companies. This resulted in a
decrease in deferred state income tax expense of $75.4 million. In Maryland, a
law was enacted that changed the determination of taxable income. This resulted
in an increase in deferred state income tax expense of $8.3 million.
The following table shows the principal reasons for the difference between the
effective income tax rate and the statutory federal income tax rate:
Years Ended December 31, 1998 1997 1996
- --------------------------------------------------------------------------------
Statutory federal income tax rate 35.0% 35.0% 35.0%
Investment tax credits (.4) (.6) (.8)
State income taxes, net of
federal tax benefits 5.5 2.6 3.1
Write-down of
foreign investments 3.8 -- --
Other, net (3.7) 1.4 (1.0)
--------------------------------------
Effective income tax rate 40.2% 38.4% 36.3%
======================================
Deferred taxes arise because of differences in the book and tax bases of certain
assets and liabilities. Significant components of deferred tax liabilities
(assets) are shown in the following table:
(DOLLARS IN MILLIONS)
At December 31, 1998 1997
- --------------------------------------------------------------------------------
Deferred tax liabilities
Depreciation $ 3,634.5 $ 3,564.5
Leveraged leases 2,437.0 2,225.3
Partnership investments 470.8 329.9
Other 631.1 1,044.2
----------------------------------
7,173.4 7,163.9
----------------------------------
Deferred tax assets
Employee benefits (4,122.8) (4,065.0)
Investment tax credits (83.9) (94.3)
Allowance for uncollectible
accounts receivable (94.1) (117.4)
Other (985.6) (1,114.8)
----------------------------------
(5,286.4) (5,391.5)
----------------------------------
Valuation allowance 317.2 79.4
----------------------------------
Net deferred tax liability $ 2,204.2 $ 1,851.8
==================================
Deferred tax assets include approximately $2,609 million at December 31, 1998
and $3,126 million at December 31, 1997 related to postretirement benefit costs
recognized under SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." This deferred tax asset will gradually be
realized over the estimated lives of current retirees and employees.
The valuation allowance primarily represents the tax benefits of capital losses,
certain state net operating loss carryforwards, and other deferred tax assets
which may expire without being utilized. During 1998, the valuation allowance
increased $237.8 million. This increase primarily relates to state net operating
losses and the write-down of certain foreign investments, for which tax benefits
may never be realized.
F-46
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
- ------------------------------
17. Segment Information
- ------------------------------
We have adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information." SFAS No. 131 establishes standards for the way companies
must determine and report information about operating segments in their annual
and interim reports.
We have four reportable segments, which we operate and manage as strategic
business units and we organize by products and services. We measure and evaluate
our reportable segments based on adjusted net income, which excludes
undistributed corporate expenses and special items arising during each period.
Special items are transactions that management has excluded from the business
units' results, but has included in reported consolidated earnings. We generally
account for intersegment sales of products and services and asset transfers at
current market prices. Intersegment revenues were not material in 1998, 1997 and
1996. We are not dependent on any single customer.
Our segments and their principal activities consist of the following:
- --------------------------------------------------------------------------------
Segment Description
- --------------------------------------------------------------------------------
Domestic Telecom Domestic wireline telecommunications services-primarily
our nine operating telephone subsidiaries that provide
local telephone services from Maine to Virginia
including voice and data transport, enhanced and custom
calling features, network access, directory assistance,
private lines and public telephones. This segment also
provides customer premises equipment distribution,
systems integration, billing and collections, and
Internet access services. Domestic Telecom represents
the aggregation of our domestic wireline business
units (consumer, enterprise, general, and network
services), which focus on specific markets to increase
revenues and customer satisfaction.
- --------------------------------------------------------------------------------
Global Wireless Wireless telecommunications services to customers in 24
states in the United States and foreign wireless
investments servicing customers in Latin America,
Europe and the Pacific Rim.
- --------------------------------------------------------------------------------
Directory Domestic and international publishing businesses
including print directories and Internet-based shopping
guides, as well as website creation and hosting and
other electronic commerce services. This segment has
operations principally in the United States and
Central Europe.
- --------------------------------------------------------------------------------
Other Businesses International wireline telecommunications investments
in Europe and the Pacific Rim and lease financing and
other businesses.
- --------------------------------------------------------------------------------
GEOGRAPHIC AREAS
Our foreign investments are located principally in Europe, Latin America and the
Pacific Rim. Domestic and foreign operating revenues are based on the location
of customers. Long-lived assets consist of property, plant and equipment (net of
accumulated depreciation) and investments in unconsolidated businesses. The
table below presents financial information by major geographic area:
(DOLLARS IN MILLIONS)
Years Ended December 31, 1998 1997 1996
- --------------------------------------------------------------------------------
DOMESTIC
Operating revenues $ 31,168.2 $ 29,760.2 $ 28,817.7
Long-lived assets 38,527.8 37,431.5 36,929.7
FOREIGN
Operating revenues 397.7 433.7 337.5
Long-lived assets 2,563.7 2,752.1 4,127.3
CONSOLIDATED
Operating revenues 31,565.9 30,193.9 29,155.2
Long-lived assets 41,091.5 40,183.6 41,057.0
-----------------------------------------------------
F-47
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
NOTE 17 CONTINUED
OPERATING SEGMENT FINANCIAL INFORMATION
(DOLLARS IN MILLIONS)
1998 1997 1996
- --------------------------------------------------------------------------------
DOMESTIC TELECOM
Operating revenues $ 25,557.5 $ 24,809.2 $ 24,136.2
Depreciation and amortization 5,195.1 4,989.6 4,911.5
Income (loss) from
unconsolidated businesses 27.2 (13.7) (71.7)
Interest income 44.6 14.6 5.9
Interest expense 972.1 906.4 840.2
Income tax expense 1,958.3 1,792.0 1,598.5
Extraordinary item (10.8) -- --
Net income 3,172.5 2,993.3 2,790.5
Segment assets 41,216.8 39,428.6 38,618.9
Investments in
unconsolidated businesses .2 3.9 151.9
Capital expenditures 6,409.4 5,485.9 4,913.8
- --------------------------------------------------------------------------------
GLOBAL WIRELESS
Operating revenues $ 3,797.9 $ 3,347.4 $ 2,684.3
Depreciation and amortization 591.6 481.0 303.3
(Loss) from
unconsolidated businesses (96.2) (195.5) (141.1)
Interest income 10.6 9.4 2.0
Interest expense 275.4 267.2 140.8
Income tax expense 114.6 65.0 99.2
Net income 228.5 95.0 79.6
Segment assets 7,738.6 7,089.7 6,093.4
Investments in
unconsolidated businesses 1,767.7 1,570.6 1,706.5
Capital expenditures 995.7 987.7 936.6
- --------------------------------------------------------------------------------
DIRECTORY
Operating revenues $ 2,263.6 $ 2,215.2 $ 2,159.3
Depreciation and amortization 36.7 39.4 33.7
Income (loss) from
unconsolidated businesses 28.6 22.7 (.5)
Interest income .8 1.1 .7
Interest expense 19.9 16.5 20.8
Income tax expense 436.2 410.7 384.2
Net income 683.9 656.6 585.1
Segment assets 1,741.0 1,474.5 906.2
Investments in
unconsolidated businesses 14.5 22.1 8.4
Capital expenditures 34.6 34.0 32.3
- --------------------------------------------------------------------------------
OTHER BUSINESSES
Operating revenues $ 123.9 $ 278.1 $ 455.8
Depreciation and amortization 2.4 47.9 103.1
Income from
unconsolidated businesses 85.9 77.7 106.8
Interest income 23.7 13.0 44.7
Interest expense 38.4 33.9 30.1
Income tax benefit (34.3) (40.7) (59.2)
Extraordinary item (14.7) -- --
Net income 135.3 48.4 11.8
Segment assets 5,353.2 5,583.3 8,081.6
Investments in
unconsolidated businesses 1,867.6 2,080.6 1,813.3
Capital expenditures 3.3 134.0 508.6
Noncash financing and investing
activities
Contributions of net assets to
unconsolidated businesses -- 681.8 --
Contributions to partnerships -- 73.0 220.1
- --------------------------------------------------------------------------------
RECONCILIATION TO CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN MILLIONS)
1998 1997 1996
- --------------------------------------------------------------------------------
OPERATING REVENUES
Domestic Telecom $ 25,557.5 $ 24,809.2 $ 24,136.2
Global Wireless 3,797.9 3,347.4 2,684.3
Directory 2,263.6 2,215.2 2,159.3
Other Businesses 123.9 278.1 455.8
-----------------------------------------------------
Total segments 31,742.9 30,649.9 29,435.6
Reconciling items (177.0) (192.9) (210.6)
Adjustments -- (263.1) (69.8)
-----------------------------------------------------
Total consolidated $ 31,565.9 $ 30,193.9 $ 29,155.2
=====================================================
NET INCOME
Domestic Telecom $ 3,172.5 $ 2,993.3 $ 2,790.5
Global Wireless 228.5 95.0 79.6
Directory 683.9 656.6 585.1
Other Businesses 135.3 48.4 11.8
-----------------------------------------------------
Total segments 4,220.2 3,793.3 3,467.0
Reconciling items 103.5 53.5 7.2
Adjustments (1,358.4) (1,391.9) (72.2)
-----------------------------------------------------
Total consolidated $ 2,965.3 $ 2,454.9 $ 3,402.0
=====================================================
SEGMENT ASSETS
Domestic Telecom $ 41,216.8 $ 39,428.6 $ 38,618.9
Global Wireless 7,738.6 7,089.7 6,093.4
Directory 1,741.0 1,474.5 906.2
Other Businesses 5,353.2 5,583.3 8,081.6
-----------------------------------------------------
Total segments 56,049.6 53,576.1 53,700.1
Reconciling items (905.7) 388.0 (339.0)
-----------------------------------------------------
Total consolidated $ 55,143.9 $ 53,964.1 $ 53,361.1
=====================================================
Reconciling items include undistributed corporate expenses, corporate assets and
intersegment eliminations. Corporate assets are comprised primarily of our
investment in Viacom. In December 1998, one-half of our investment in Viacom was
repurchased (see Note 3).
F-48
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
NOTE 17 CONTINUED
Adjustments include special items and line item reclassifications. Special items
included merger-related costs (see Note 2), retirement incentives (see Note 15),
and other charges. The effect of these special items on each of the segment's
net income is provided in the following table:
(DOLLARS IN MILLIONS)
Years Ended December 31, 1998 1997 1996
- --------------------------------------------------------------------------------
DOMESTIC TELECOM
Reported net income $ 2,382.1 $ 2,016.5 $ 2,413.4
Special items 790.4 976.8 377.1
---------------------------------------------------
Adjusted net income $ 3,172.5 $ 2,993.3 $ 2,790.5
===================================================
GLOBAL WIRELESS
Reported net income $ 50.9 $ 112.5 $ 72.9
Special items 177.6 (17.6) 6.7
---------------------------------------------------
Adjusted net income $ 228.5 $ 94.9 $ 79.6
===================================================
DIRECTORY
Reported net income $ 661.6 $ 563.7 $ 855.0
Special items 22.3 92.9 (269.9)
---------------------------------------------------
Adjusted net income $ 683.9 $ 656.6 $ 585.1
===================================================
OTHER BUSINESSES
Reported net income $ (230.2) $ 28.6 $ 56.9
Special items 365.6 19.8 (45.1)
---------------------------------------------------
Adjusted net income $ 135.4 $ 48.4 $ 11.8
===================================================
RECONCILING ITEMS
Reported net income $ 100.9 $ (266.4) $ 3.8
Special items 2.5 320.0 3.4
---------------------------------------------------
Adjusted net income $ 103.4 $ 53.6 $ 7.2
===================================================
- -----------------------------------------------
18. Proposed Bell Atlantic - GTE Merger
- -----------------------------------------------
Bell Atlantic and GTE Corporation have announced a proposed merger of equals
under a definitive merger agreement dated as of July 27, 1998. Under the terms
of the agreement, GTE shareholders will receive 1.22 shares of Bell Atlantic
common stock for each share of GTE common stock that they own. Bell Atlantic
shareholders will continue to own their existing shares after the merger.
We expect the merger to qualify as a pooling of interests. The completion of the
merger is subject to a number of conditions, including certain regulatory
approvals, receipt of opinions that the merger will be tax-free, and the
approval of the shareholders of both Bell Atlantic and GTE.
- -----------------------------------------------
19. Additional Financial Information
- -----------------------------------------------
The tables that follow provide additional financial information related to our
consolidated financial statements:
INCOME STATEMENT INFORMATION
(DOLLARS IN MILLIONS)
Years Ended December 31, 1998 1997 1996
- --------------------------------------------------------------------------------
Taxes other than income $ 1,465.9 $ 1,606.9 $ 1,499.9
Interest expense incurred,
net of amounts capitalized 1,375.9 1,275.2 1,124.1
Capitalized interest 90.4 81.0 128.5
Advertising expense 453.2 397.0 357.5
Interest expense incurred includes $40.5 million in 1998, $45.2 million in 1997
and $42.1 million in 1996 related to our lease financing business. Such interest
expense is classified as Other Operating Expenses.
BALANCE SHEET INFORMATION
(DOLLARS IN MILLIONS)
At December 31, 1998 1997
- --------------------------------------------------------------------------------
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable $ 3,401.1 $ 3,575.4
Accrued expenses 1,271.5 1,089.7
Accrued vacation pay 634.3 618.1
Accrued salaries and wages 231.9 279.9
Interest payable 329.0 245.8
Accrued taxes 237.2 157.5
--------------------------------
$ 6,105.0 $ 5,966.4
================================
OTHER CURRENT LIABILITIES
Advance billings and customer deposits $ 695.7 $ 643.0
Dividend payable 610.6 597.8
Other 132.3 114.2
--------------------------------
$ 1,438.6 $ 1,355.0
================================
CASH FLOW INFORMATION
(DOLLARS IN MILLIONS)
Years Ended December 31, 1998 1997 1996
- --------------------------------------------------------------------------------
CASH PAID
Income taxes, net of
amounts refunded $ 1,369.3 $ 1,402.8 $ 1,667.9
Interest, net of amounts
capitalized 1,201.2 1,215.4 1,162.5
F-49
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
- --------------------------------------------------------------------------------
- ----------------------------------
20. Comprehensive Income
- ----------------------------------
Effective January 1, 1998, we adopted SFAS No. 130, "Reporting Comprehensive
Income." The new rules establish standards for the reporting of comprehensive
income and its components in financial statements. Comprehensive income consists
of net income and other gains and losses affecting shareowners' equity that,
under generally accepted accounting principles, are excluded from net income.
The adoption of SFAS No. 130 did not affect our statement of income, but did
affect the presentation of our statement of changes in shareowners' investment
and balance sheet.
Changes in the components of other comprehensive income (loss), net of income
tax expense (benefit), are as follows:
(DOLLARS IN MILLIONS)
Years Ended December 31, 1998 1997 1996
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
Foreign currency translation adjustments,
taxes of $1.8, $(1.8) and $(4.7) $ (146.4) $ (234.0) $ 221.8
Less: reclassification adjustments (.2) -- (.1)
Net foreign currency translation -----------------------------------
adjustments (146.2) (234.0) 221.9
-----------------------------------
UNREALIZED GAINS (LOSSES) ON SECURITIES
Unrealized holding gains (losses), taxes
of $15.9, $0 and $(1.3) 12.0 3.5 (5.8)
Less: reclassification adjustments for
gains realized in net income, taxes
of $12.8, $.7 and $.1 10.0 1.2 .1
Net unrealized gains (losses) on -----------------------------------
securities 2.0 2.3 (5.9)
MINIMUM PENSION LIABILITY ADJUSTMENT, -----------------------------------
taxes of $(10.7) (16.7) -- --
-----------------------------------
OTHER COMPREHENSIVE INCOME (LOSS) $ (160.9) $ (231.7) $ 216.0
===================================
The components of accumulated other comprehensive income (loss) are as follows:
(DOLLARS IN MILLIONS)
AT DECEMBER 31, 1998 1997
- ---------------------------------------------------------------------
Foreign currency translation adjustments $ (699.6) $ (553.4)
Unrealized gains (losses) on securities 2.1 .1
Minimum pension liability adjustment (16.7) --
------------------------
Accumulated other comprehensive
income (loss) $ (714.2) $ (553.3)
========================
- --------------------------------------------------
21. Quarterly Financial Information (Unaudited)
- --------------------------------------------------
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Income (Loss) Before Extraordinary Item
Operating Operating --------------------------------------------------- Net
Quarter Ended Revenues Income Amount Per Share-Basic Per Share-Diluted Income (Loss)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1998
March 31 $ 7,651.1 $ 1,712.0 $ 909.6 $ .58 $ .57 $ 893.4
June 30 7,927.8 1,952.6 1,027.2 .66 .65 1,020.9
September 30* 7,909.9 1,130.1 (7.2) (.01) (.01) (8.1)
December 31 8,077.1 1,832.5 1,061.2 .66 .65 1,059.1
1997
March 31 $ 7,416.5 $ 1,458.5 $ 698.2 $ .45 $ .45 $ 698.2
June 30 7,707.8 1,847.9 896.8 .58 .57 896.8
September 30** 7,373.9 421.0 (80.1) (.05) (.05) (80.1)
December 31 7,695.7 1,614.1 940.0 .61 .60 940.0
</TABLE>
* Results of operations for the third quarter of 1998 include approximately
$1,100 million (after-tax) of costs associated with the completion of our
retirement incentive program, as well as charges to adjust the carrying
values of two Asian investments and to write-down assets.
** Results of operations for the third quarter of 1997 include approximately
$1,050 million (after-tax) of costs incurred in connection with
consolidating operations and combining the organizations of Bell Atlantic
and NYNEX and for other special items arising during the quarter, as well
as charges associated with the completion of the merger and with our
retirement incentive program.
Income (loss) before extraordinary item per common share is computed
independently for each quarter and the sum of the quarters may not equal
the annual amount.
F-50
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF MANAGEMENT
- --------------------------------------------------------------------------------
We, the management of Bell Atlantic Corporation, are responsible for the
consolidated financial statements and the information and representations
contained in this report. The financial statements have been prepared in
conformity with generally accepted accounting principles and include amounts
based on management's best estimates and judgments. Financial information
elsewhere in this report is consistent with that in the financial statements.
Management has established and maintained a system of internal control which is
designed to provide reasonable assurance that errors or irregularities that
could be material to the financial statements are prevented or would be detected
within a timely period. The system of internal control includes widely
communicated statements of policies and business practices, which are designed
to require all employees to maintain high ethical standards in the conduct of
our business. The internal controls are augmented by organizational arrangements
that provide for appropriate delegation of authority and division of
responsibility and by a program of internal audits.
The financial statements have been audited by PricewaterhouseCoopers LLP,
independent accountants. Their audit was conducted in accordance with generally
accepted auditing standards and included an evaluation of our internal control
structure and selective tests of transactions. The Report of Independent
Accountants appears on this page.
The Audit Committee of the Board of Directors, which is composed solely of
outside directors, meets periodically with the independent accountants,
management and internal auditors to review accounting, auditing, internal
controls, litigation and financial reporting matters. Both the internal auditors
and the independent accountants have free access to the Audit Committee without
management present.
/s/ Ivan G. Seidenberg
Ivan G. Seidenberg
Chairman of the Board
and Chief Executive Officer
/s/ Frederic V. Salerno
Frederic V. Salerno
Senior Executive Vice President
and Chief Financial Officer/
Strategy and Business Development
/s/ Doreen A. Toben
Doreen A. Toben
Vice President-Controller
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND SHAREOWNERS OF
BELL ATLANTIC CORPORATION
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of Bell
Atlantic Corporation and its subsidiaries at December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998, in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule listed in the accompanying index presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. These financial statements and the
financial statement schedule are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Note 1 to the consolidated financial statements, in 1996, the
Company changed its method of accounting for directory publishing revenues and
expenses.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 9, 1999
F-51
<PAGE>
BELL ATLANTIC CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1998, 1997 and 1996
(Dollars in Millions)
<TABLE>
<CAPTION>
Additions
--------------------------
Charged to
Balance at Other Balance at
Beginning Charged To Accounts-- Deductions-- End of
Description of Period Expenses Note (a) Note (b) Period
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for Uncollectible
Accounts Receivable:
Year 1998 ................... $ 611.9 $ 460.5 $ 577.9 $ 1,057.0 $ 593.3
Year 1997 ................... 566.7 530.5 557.3 1,042.6 611.9
Year 1996 ................... 475.0 493.7 554.6 956.6 566.7
Valuation Allowance for
Deferred Tax Assets:
Year 1998 ................... $ 79.4 $ 276.3 $ -- $ 38.5 $ 317.2
Year 1997 ................... 44.8 64.7 .5 30.6 79.4
Year 1996 ................... 39.3 14.2 1.3 10.0 44.8
Restructuring Reserves:
Year 1998 ................... $ 149.6 $ -- $ -- $ 95.1 $ 54.5
Year 1997 ................... 330.1 -- -- 180.5 149.6
Year 1996 ................... 700.6 -- -- 370.5 330.1
Allowance For Uncollectible
Finance Lease Receivable:
Year 1998 ................... $ 24.9 $ 5.0 $ 7.4 $ -- $ 37.3
Year 1997 ................... 23.8 12.9 -- 11.8 24.9
Year 1996 ................... 24.3 -- -- .5 23.8
</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 us. Allowance for Uncollectible Finance Lease Receivables
includes amounts transferred from other accounts.
(b) Amounts written off as uncollectible or transferred to other accounts or
utilized (except for the valuation allowance for deferred tax assets).
F-52
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number
- ------
2 Agreement and Plan of Merger by and among Bell Atlantic Corporation, Beta
Gama Corporation and GTE Corporation, dated as of July 27, 1998. (Exhibit
2.01 to Form 8-K, date of report July 30, 1998.)
3a Restated Certificate of Incorporation of Bell Atlantic Corporation ("Bell
Atlantic"). (Exhibit 3(i) to Form 8-K, date of report August 14, 1997.)
3b By-Laws of Bell Atlantic, as amended and restated as of January 1, 1999.
4 No instrument which defines the rights of holders of long-term debt of
Bell Atlantic and 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 Deferred Compensation Plan for Outside Directors, as
amended and restated as of January 1, 1998.*
10b Bell Atlantic Insurance Plan for Directors. (Exhibit 10hh to Registration
Statement on Form S-1 No. 2-87842).*
10c Description of Bell Atlantic Plan for Non-Employee Directors' Travel
Accident Insurance. (Exhibit 10ii to Registration Statement on Form S-1
No. 2-87842.)*
10d Bell Atlantic Retirement Plan for Outside Directors, as amended and
restated as of January 1, 1996. (Exhibit 10k to Form 10-K for the year
ended December 31, 1995.)*
10e Bell Atlantic Stock Compensation Plan for Outside Directors, as amended
and restated as of January 1, 1998.*
10f Bell Atlantic Corporation Directors' Charitable Giving Program. (Exhibit
10p to Form SE dated March 29, 1990.)*
10f(i) Resolutions amending and partially terminating the Program.
(Exhibit 10p to Form SE dated March 29, 1993.)*
10g Description of Changes in Compensation for Outside Directors of Bell
Atlantic, effective August 14, 1997 (Exhibit 10y to Form 10-Q for the
quarter ended September 30, 1997.)*
10h Bell Atlantic Senior Management Short Term Incentive Plan, as amended and
restated effective as of January 22 1996. (Exhibit 10a to Form 10-K for
the year ended December 31, 1996.)*
10h(i) Description of Amendment, effective August 14, 1997. (Exhibit
10a(i) to Form 10-Q for the quarter ended September 30, 1997.)*
10i Bell Atlantic Deferred Compensation Plan, as amended and restated as of
January 1, 1997. (Exhibit 10i to Form 10-K for the year ended December
31, 1996.)*
10i(i) Description of Amendments to Bell Atlantic Deferred Compensation
Plan (renamed the Bell Atlantic Senior Management Income Deferral
Plan), effective January 1, 1998. (Exhibit 10i(i) to Form 10-K for
the year ended December 31, 1997.)*
<PAGE>
10j Bell Atlantic 1985 Incentive Stock Option Plan, as amended and restated
as of July 1, 1996. (Exhibit 10j to Form 10-K for the year ended December
31, 1996.)*
10j(i) Description of Amendment and Administrative Change to Bell
Atlantic 1985 Incentive Stock Option Plan, effective August 14,
1997. (Exhibit 10a(i) to Form 10-Q for the quarter ended
September 30, 1997.)*
10k Section 6 from Bell Atlantic Cash Balance Plan regarding limitations on
payment of pension amounts which exceed the limitations contained in the
Employee Retirement Income Security Act of 1974. (Exhibit 10g to Form
10-K for the year ended December 31, 1996.)*
10l Bell Atlantic Senior Management Long-Term Disability and Survivor
Protection Plan, as amended. (Exhibit 10h to Form SE filed on March 27,
1986.)*
10l(i) Resolutions amending the Plan, effective as of January 1, 1989.
(Exhibit 10d to Form SE dated March 29, 1989.)*
10l(ii) Description of Amendments, effective January 1, 1998, to Bell
Atlantic Senior Management Long Term Disability Plan (formerly
known, as the Bell Atlantic Senior Management Long-Term
Disability and Survivor Protection Plan). (Exhibit 10b(ii) to
Form 10-K for the year ended December 31, 1997.)*
10m Bell Atlantic Salary Program for Senior Managers, effective August 14,
1997. (Exhibit 10x to Form 10-Q for the quarter ended September 30,
1997.)*
10n Description of Bell Atlantic Senior Management Estate Management Plan.*
10o Description of Bell Atlantic Senior Management Death Benefit Plan,
effective April 1, 1998. (Exhibit 10rr to Form 10-K for year ended
December 31, 1997.)*
10p Description of Bell Atlantic Senior Management Flexible Spending
Perquisite Account, effective January 1, 1998. (Exhibit 10ss to Form 10-K
for year ended December 31, 1997.)*
10q NYNEX 1984 Stock Option Plan, as amended and restated. (Post-Effective
Amendment No. 1 to NYNEX's Registration No. 2-97813, dated September 21,
1987, File No. 1-8608.)*
10r NYNEX 1987 Restricted Stock Award Plan (Exhibit No. (28) (i) 1 to NYNEX's
filing on Form SE dated March 23, 1988, File No. 1-8608.)*
10s NYNEX 1990 Stock Option Plan as amended. (Exhibit No. 2 to NYNEX's Proxy
Statement dated March 20, 1995, File No. 1-8608.)*
10t NYNEX 1995 Stock Option Plan as amended. (Exhibit No. 1 to NYNEX's Proxy
Statement dated March 20, 1995, File No. 1-8608.)*
10u NYNEX 1995 Long Term Incentive Program as amended. (Exhibit No. 3 to
NYNEX's Proxy Statement dated March 20, 1995, File No. 1-8608.)*
10v NYNEX Supplemental Life Insurance Plan. (Exhibit No. 10 iii 21 to NYNEX's
Quarterly Report on Form 10-Q for the period ended June 30, 1996, File
No. 1-8608.)*
10w NYNEX Executive Retention Agreement. (Exhibit No. 10 iii 35 to NYNEX's
Quarterly Report on Form 10-Q, for the period ended June 30, 1996, File
No. 1-8608.)*
<PAGE>
10x Employment Agreement, dated August 14, 1997, by and between Bell Atlantic
and Raymond W. Smith (Exhibit 10aa to Form 10-Q for the quarter ended
September 30, 1997.)*
10x(i) Letter dated April 16, 1998, to Raymond W. Smith concerning
employment-related issues. (Exhibit 10v(i) to Form 10-Q for the
quarter ended June 30, 1998.)*
10x(ii) Resolutions dated May 1, 1998, approving amendments to Employment
Agreement of Raymond W. Smith. (Exhibit 10v(ii) to Form 10-Q for
the quarter ended June 30, 1998.)*
10y Employment Agreement, dated as of June 1, 1998, by and between Bell
Atlantic Corporation and Lawrence T. Babbio, Jr.. (Exhibit 10a to Form
10-Q for the quarter ended June 30, 1998.)*
10z Employment Agreement, dated as of June 1, 1998, by and between Bell
Atlantic Corporation and James G. Cullen. (Exhibit 10b to Form 10-Q for
the quarter ended June 30, 1998.)*
10aa Employment Agreement, dated as of June 1, 1998, by and between Bell
Atlantic Corporation and Frederic V. Salerno. (Exhibit 10c to Form 10-Q
for the quarter ended June 30, 1998.)*
10bb Employment Agreement, dated as of June 1, 1998, by and between Bell
Atlantic Corporation and Donald J. Sacco. (Exhibit 10d to Form 10-Q for
the quarter ended June 30, 1998.)*
10cc Employment Agreement, dated as of June 1, 1998, by and between Bell
Atlantic Corporation and Morrison DeS. Webb. (Exhibit 10e to Form 10-Q
for the quarter ended June 30, 1998.)*
10dd Employment Agreement, dated as of June 1, 1998, by and between Bell
Atlantic Corporation and James R. Young. (Exhibit 10f to Form 10-Q for
the quarter ended June 30, 1998.)*
10ee Form of Amendment, dated as of October 27, 1998, to Employment Agreements
with Lawrence T. Babbio, Jr., James G. Cullen, Frederic V. Salerno,
Donald J. Sacco, Morrison DeS. Webb and James R. Young.*
10ff Employment Agreement, dated as of January 1, 1999, by and between Bell
Atlantic Corporation and Ivan G. Seidenberg.*
10gg Employment Agreement, dated as of October 27, 1998, by and between Bell
Atlantic Corporation and Alexander H. Good.*
10hh 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.)*
10ii Form of stock option grant to Lawrence T. Babbio, Jr., dated February 18,
1997, containing terms and conditions of 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 10q
to Form 10-K for the year ended December 31, 1996.)*
10jj Forms of Stay Incentive Agreement and Separation and Non-Compete
Agreement with Doreen A. Toben and Ellen C. Wolf with respect to the Bell
Atlantic-NYNEX merger. (Exhibit 10(f) to Registration Statement on Form
S-4 No. 333-11573.)*
10kk Form of Stay Incentive Agreement, dated as of November 23, 1998, with
Doreen A. Toben and Ellen C. Wolf with respect to the Bell Atlantic - GTE
Merger.*
<PAGE>
10ll Form of Stay Incentive Agreement, dated as of November 23, 1998, with
Patrick F. X. Mulhearn and Thomas J. Tauke.*
10mm Form of Stay Incentive Agreement, dated as of November 23, 1998, with
Jacquelyn B. Gates and Chester N. Watson.*
10nn Form of Merger Agreement, dated as of January 29, 1999, with Doreen A.
Toben and Ellen C. Wolf.*
10oo Form of Merger Agreement, dated as of January 29, 1999, with Patrick F.
X. Mulhearn and Thomas J. Tauke.*
10pp Form of Merger Agreement, dated as of January 29, 1999, with Jacquelyn B.
Gates and Chester N. Watson.*
10qq Stock Option Agreement, dated as of July 27, 1998, between Bell Atlantic
Corporation and GTE Corporation. (Exhibit 10.01 to Form 8-K, date of
report July 30, 1998.)
10rr Stock Option Agreement, dated as of July 27, 1998, between GTE
Corporation and Bell Atlantic Corporation. (Exhibit 10.02 to Form 8-K,
date of report July 30, 1998.)
12 Computation of Ratio of Earnings to Fixed Charges.
21 List of subsidiaries of Bell Atlantic.
23 Consent of Independent Accountants.
24 Powers of Attorney.
27 Financial Data Schedule.
- -----------
*Indicates management contract or compensatory plan or arrangement.
<PAGE>
EXHIBIT 3b
- --------------------------------------------------------------------------------
BELL ATLANTIC CORPORATION
BYLAWS
- --------------------------------------------------------------------------------
As Amended, effective as of January 1, 1999
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
B Y L A W S
OF
BELL ATLANTIC CORPORATION
(a Delaware Corporation)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
B Y L A W S
OF
BELL ATLANTIC CORPORATION
Table of Contents
-----------------
ARTICLE I
Offices and Fiscal Year 1
SECTION 1.01. Registered Office 1
SECTION 1.02. Fiscal Year 1
ARTICLE II
Notice - Waivers - Meetings 1
SECTION 2.01. Notice, What Constitutes 1
SECTION 2.02. Notice of Meetings of Board of Directors 1
SECTION 2.03. Notice of Meetings of Stockholders 2
SECTION 2.04. Waivers of Notice 2
SECTION 2.05. Exception to Requirements of Notice 2
SECTION 2.06. Conference Telephone Meetings 3
ARTICLE III
Meetings of Stockholders 3
SECTION 3.01. Place of Meeting 3
SECTION 3.02. Annual Meeting 3
SECTION 3.03. Special Meetings 3
SECTION 3.04. Quorum, Manner of Acting and Adjournment 3
SECTION 3.05. Organization 4
SECTION 3.06. Voting 5
SECTION 3.07. Voting Lists 5
SECTION 3.08. Inspectors of Election 6
ARTICLE IV
Board of Directors7
SECTION 4.01. Powers 7
SECTION 4.02. Number 7
SECTION 4.03. Term of Office 7
SECTION 4.04. Vacancies 7
SECTION 4.05. Resignations 7
SECTION 4.06. Organization 8
SECTION 4.07. Place of Meeting 8
SECTION 4.08. Regular Meetings 8
SECTION 4.09. Special Meetings 8
SECTION 4.10. Quorum, Manner of Acting and Adjournment 8
i
<PAGE>
SECTION 4.11. Committees of the Board 9
SECTION 4.12. Compensation of Directors 9
SECTION 4.13. Qualifications and Election of Directors 10
SECTION 4.14. Voting of Stock 11
SECTION 4.15. Endorsement of Securities for Transfer 11
ARTICLE V
Officers 11
SECTION 5.01. Number, Qualifications and Designation 11
SECTION 5.02. Election and Term of Office 11
SECTION 5.03. Subordinate Officers, Committees and Agents 11
SECTION 5.04. Officers' Bonds 11
SECTION 5.05. Salaries 12
ARTICLE VI
Certificates of Stock, Transfer, Etc. 12
SECTION 6.01. Form and Issuance 12
SECTION 6.02. Transfer 12
SECTION 6.03. Lost, Stolen, Destroyed or Mutilated Certificates 13
SECTION 6.04. Record Holder of Shares 13
SECTION 6.05. Determination of Stockholders of Record 13
ARTICLE VII
General Provisions 14
SECTION 7.01. Dividends 14
SECTION 7.02. Contracts 14
SECTION 7.03. Corporate Seal 15
SECTION 7.04. Checks, Notes, Etc. 15
SECTION 7.05. Corporate Records 15
SECTION 7.06. Amendment of Bylaws 15
ii
<PAGE>
B Y L A W S
OF
BELL ATLANTIC CORPORATION
(a Delaware Corporation)
ARTICLE I
Offices and Fiscal Year
SECTION 1.01. Registered Office. --The registered office of the
corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware until a different office is established by resolution of the board of
directors and a certificate certifying the change is filed in the manner
provided by statute.
SECTION 1.02. Fiscal Year. --The fiscal year of the corporation shall
end on the 31st day of December in each year.
ARTICLE II
Notice - Waivers - Meetings
SECTION 2.01. Notice, What Constitutes. --Whenever, under the provisions
of the Delaware General Corporation Law ("GCL") or the certificate of
incorporation or these Bylaws, notice is required to be given to any director or
stockholder, it shall not be construed to require personal notice, but such
notice may be given in writing, by mail or by telegram (with messenger service
specified), telex or TWX (with answerback received) or courier service, charges
prepaid, or by telephone or facsimile transmission to the address (or to the
telex, TWX, facsimile or telephone number) of the person appearing on the books
of the corporation, or in the case of directors, supplied to the corporation for
the purpose of notice. If the notice is sent by mail, telegram or courier
service, it shall be deemed to be given when deposited in the United States mail
or with a telegraph office or courier service for delivery to that person or, in
the case of telex or TWX, when dispatched, or in the case of facsimile
transmission, when received.
SECTION 2.02. Notice of Meetings of Board of Directors. --Notice of a
regular meeting of the board of directors need not be given. Notice of every
special meeting of the board of directors shall be given to each director in
person or by telephone or in writing at least 24 hours (in the case of notice in
person or by telephone, telex, TWX or facsimile transmission) or 48 hours (in
the case of notice by telegram, courier service or express mail) or five days
(in the case of notice by first class mail) before the time at which the meeting
is to be held. Every such notice shall state the time and place of the meeting.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the board need be specified in a notice of the meeting.
1
<PAGE>
SECTION 2.03. Notice of Meetings of Stockholders. --Written notice of
the place, date and hour of every meeting of the stockholders, whether annual or
special, shall be given to each stockholder of record entitled to vote at the
meeting not less than ten nor more than 60 days before the date of the meeting.
Every notice of a special meeting shall state the purpose or purposes thereof.
If the notice is sent by mail, it shall be deemed to have been given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at the address of the stockholder as it appears on the records of
the corporation.
SECTION 2.04. Waivers of Notice.
(a) Written Waiver. --Whenever notice is required to be given under any
provisions of the GCL or the certificate of incorporation or these Bylaws, a
written waiver, signed by the person or persons entitled to the notice, whether
before or after the time stated therein, shall be deemed equivalent to notice.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the stockholders, directors, or members of a committee of
directors need be specified in any written waiver of notice of such meeting.
(b) Waiver by Attendance. --Attendance of a person at a meeting, either
in person or by proxy, shall constitute a waiver of notice of such meeting,
except where a person attends a meeting for the express purpose of objecting at
the beginning of the meeting to the transaction of any business because the
meeting was not lawfully called or convened.
SECTION 2.05. Exception to Requirements of Notice.
(a) General Rule. --Whenever notice is required to be given, under any
provision of the GCL or the certificate of incorporation or these Bylaws, to any
person with whom communication is unlawful, the giving of such notice to such
person shall not be required and there shall be no duty to apply to any
governmental authority or agency for a license or permit to give such notice to
such person. Any action or meeting which shall be taken or held without notice
to any such person with whom communication is unlawful shall have the same force
and effect as if such notice had been duly given.
(b) Stockholders Without Forwarding Addresses. --Whenever notice is
required to be given, under any provision of the GCL or the certificate of
incorporation or these Bylaws, to any stockholder to whom (i) notice of two
consecutive annual meetings, and all notices of meetings or of the taking of
action by written consent without a meeting to such person during the period
between such two consecutive annual meetings, or (ii) all, and at least two,
payments (if sent by first class mail) of dividends or interest on securities
during a 12 month period, have been mailed addressed to such person at his
address as shown on the records of the corporation and have been returned
undeliverable, the giving of such notice to such person shall not be required.
Any action or meeting which shall be taken or held without notice to such person
shall have the same force and effect as if such notice had been duly given. If
any such person shall deliver to the corporation a written notice setting forth
the person's then current address, the requirement that notice be given to such
person shall be reinstated.
2
<PAGE>
SECTION 2.06. Conference Telephone Meetings. --One or more directors may
participate in a meeting of the board, or of a committee of the board, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other. Participation in a
meeting pursuant to this section shall constitute presence in person at such
meeting.
ARTICLE III
Meetings of Stockholders
SECTION 3.01. Place of Meeting. --All meetings of the stockholders of
the corporation shall be held at such place within or without the State of
Delaware as shall be designated by the board of directors in the notice of such
meeting (or by the Chairman calling a meeting pursuant to Section 3.03).
SECTION 3.02. Annual Meeting. --The board of directors may fix and
designate the date and time of the annual meeting of the stockholders. At said
meeting the stockholders then entitled to vote shall elect directors and shall
transact such other business as may properly be brought before the meeting.
SECTION 3.03. Special Meetings. --Special meetings of the stockholders
of the corporation may be called at any time by the chairman of the board or a
majority of the board of directors. At any time, upon the written request of any
person or persons who have duly called a special meeting, which written request
shall state the purpose or purposes of the meeting, it shall be the duty of the
secretary to fix the date of the meeting which shall be held at such date and
time as the secretary may fix, not less than ten nor more than 60 days after the
receipt of the request, and to give due notice thereof. If the secretary shall
neglect or refuse to fix the time and date of such meeting and give notice
thereof, the person or persons calling the meeting may do so.
SECTION 3.04. Quorum, Manner of Acting and Adjournment.
(a) Quorum. --The holders of a majority of the shares entitled to vote,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders except as otherwise provided by the GCL, by the
certificate of incorporation or by these Bylaws. If a quorum is not present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum is present or represented. At any such adjourned
meeting at which a quorum is present or represented, the corporation may
transact any business which might have been transacted at the original meeting.
If the adjournment is for more than 30 days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
3
<PAGE>
(b) Manner of Acting. --Directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy and entitled to
vote at the meeting on the election of directors. In all matters other than the
election of directors, the affirmative vote of the majority of shares present in
person or represented by proxy at the meeting and entitled to vote and voting
thereon shall be the act of the stockholders, unless the question is one upon
which, by express provision of the applicable statute, the certificate of
incorporation or these Bylaws, a different vote is required in which case such
express provision shall govern and control the decision of the question. The
stockholders present in person or by proxy at a duly organized meeting can
continue to do business until adjournment, notwithstanding withdrawal of enough
stockholders to leave less than a quorum.
(c) Stockholder Proposals. --Nominations by stockholders of persons for
election to the board of directors of the corporation may be made at an annual
meeting in compliance with Section 4.13 hereof. The proposal of other business
to be considered by the stockholders at an annual meeting of stockholders may be
made (i) pursuant to the corporation's notice of meeting, (ii) by or at the
direction of the board of directors, or (iii) by any stockholder of the
corporation pursuant to timely notice in writing to the secretary of the
corporation. To be timely, a stockholder's notice shall be delivered to or
mailed and received at the principal executive offices of the corporation not
less than 90 days prior to the anniversary date of the prior year's annual
meeting. Such stockholder's notice to the secretary shall set forth (a) as to
the stockholder giving notice and the beneficial owner, if any on whose behalf
the proposal is made, (i) their name and record address, and (ii) the class and
number of shares of capital stock of the corporation which are beneficially
owned by each of them, and (b) a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder giving
notice and the beneficial owner, if any, on whose behalf the proposal is made.
Only such business shall be conducted at a special meeting of stockholders as
shall have been brought before the meeting pursuant to the corporation's notice
of meeting. Only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this section.
(d) The chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that any proposal made at the meeting was not made in
accordance with the foregoing procedures and, in such event, the proposal shall
be disregarded. Any decision by the chairman of the meeting shall be conclusive
and binding upon all stockholders of the corporation for any purpose.
SECTION 3.05. Organization. --At every meeting of the stockholders, the
chairman of the board, if there be one, or in the case of a vacancy in the
office or absence of the chairman of the board, one of the following persons
present in the order stated: the president, the vice chairman, if one has been
appointed, a chairman designated by the board of directors or a chairman chosen
by the stockholders entitled to cast a majority of the votes which all
stockholders present in person or by proxy are entitled to cast, shall act as
chairman, and the secretary, or, in the absence of the secretary, an assistant
secretary, or in the absence of the secretary and the assistant secretaries, a
person appointed by the chairman, shall act as secretary.
4
<PAGE>
SECTION 3.06. Voting.
(a) General Rule. --Unless otherwise provided in the certificate of
incorporation, each stockholder shall be entitled to one vote, in person or by
proxy, for each share of capital stock having voting power held by such
stockholder.
(b) Voting and Other Action by Proxy.--
(1) A stockholder may execute a writing authorizing another person
or persons to act for the stockholder as proxy. Such execution may be
accomplished by the stockholder or the authorized officer, director,
employee or agent of the stockholder signing such writing or causing his
or her signature to be affixed to such writing by any reasonable means
including, but not limited to, by facsimile signature. A stockholder may
authorize another person or persons to act for the stockholder as proxy
by transmitting or authorizing the transmission of a telegram,
cablegram, or other means of electronic transmission to the person who
will be the holder of the proxy or to a proxy solicitation firm, proxy
support service organization or like agent duly authorized by the person
who will be the holder of the proxy to receive such transmission if such
telegram, cablegram or other means of electronic transmission sets forth
or is submitted with information from which it can be determined that
the telegram, cablegram or other electronic transmission was authorized
by the stockholder.
(2) No proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period.
(3) A duly executed proxy shall be irrevocable if it states that it
is irrevocable and if, and only so long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A proxy may
be made irrevocable regardless of whether the interest with which it is
coupled is an interest in the stock itself or an interest in the
corporation generally.
SECTION 3.07. Voting Lists. --The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting. The list shall be arranged in alphabetical order, showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
5
<PAGE>
SECTION 3.08. Inspectors of Election.
(a) Appointment. --All elections of directors shall be by written
ballot; the vote upon any other matter need not be by ballot. In advance of any
meeting of stockholders the board of directors may appoint one or more
inspectors, who need not be stockholders, to act at the meeting and to make a
written report thereof. The board of directors may designate one or more persons
as alternate inspectors to replace any inspector who fails to act. If no
inspector or alternate is able to act at a meeting of stockholders, the person
presiding at the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before entering upon the discharge of his or her
duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the person's best ability.
(b) Duties. --The inspectors shall ascertain the number of shares
outstanding and the voting power of each, shall determine the shares represented
at the meeting and the validity of proxies and ballots, shall count all votes
and ballots, shall determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors, and
shall certify their determination of the number of shares represented at the
meeting and their count of all votes and ballots. The inspectors may appoint or
retain other persons or entities to assist the inspectors in the performance of
the duties of the inspectors.
(c) Polls. --The date and time of the opening and the closing of the
polls for each matter upon which the stockholders will vote at a meeting shall
be announced at the meeting. No ballot, proxies or votes, nor any revocations
thereof or changes thereto, shall be accepted by the inspectors after the
closing of the polls unless the Court of Chancery upon application by a
stockholder shall determine otherwise.
(d) Reconciliation of Proxies and Ballots. --In determining the validity
and counting of proxies and ballots, the inspectors shall be limited to an
examination of the proxies, any envelopes submitted with those proxies, any
information transmitted in accordance with section 3.06, ballots and the regular
books and records of the corporation, except that the inspectors may consider
other reliable information for the limited purpose of reconciling proxies and
ballots submitted by or on behalf of banks, brokers, their nominees or similar
persons which represent more votes than the holder of a proxy is authorized by
the record owner to cast or more votes than the stockholder holds of record. If
the inspectors consider other reliable information for the limited purpose
permitted herein, the inspectors at the time they make their certification
pursuant to subsection (b) shall specify the precise information considered by
them including the person or persons from whom they obtained the information,
when the information was obtained, the means by which the information was
obtained and the basis for the inspectors' belief that such information is
accurate and reliable.
6
<PAGE>
ARTICLE IV
Board of Directors
SECTION 4.01. Powers. --All powers vested by law in the corporation
shall be exercised by or under the authority of, and the business and affairs of
the corporation shall be managed under the direction of, the board of directors.
SECTION 4.02. Number. --Subject to the provisions of the certificate of
incorporation, the board of directors shall consist of such number of directors
as may be determined from time to time by resolution adopted by a vote of a
majority of the entire board of directors.
SECTION 4.03. Term of Office. --Directors of the corporation shall hold
office until the next annual meeting of stockholders and until their successors
shall have been elected and qualified, except in the event of death, resignation
or removal.
SECTION 4.04. Vacancies.
(a) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and a director so chosen shall hold office until the next annual
election of the class for which such director shall have been elected and until
a successor is duly elected and qualified. If there are no directors in office,
then an election of directors may be held in the manner provided by statute.
(b) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
(c) If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the entire board (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorship, or
to replace the directors chosen by the directors then in office.
SECTION 4.05. Resignations. --Any director may resign at any time upon
written notice to the chairman, president or secretary of the corporation. The
resignation shall be effective upon receipt thereof by the corporation or at
such subsequent time as shall be specified in the notice of resignation and,
unless otherwise specified in the notice, the acceptance of the resignation
shall not be necessary to make it effective.
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SECTION 4.06. Organization. --At every meeting of the board of
directors, the chairman of the board, if there be one, or, in the case of a
vacancy in the office or absence of the chairman of the board, one of the
following officers present in the order stated: the president, the vice
chairman, if one has been appointed, the vice presidents in their order of rank
and seniority, or a chairman chosen by a majority of the directors present,
shall preside, and the secretary, or, in the absence of the secretary, an
assistant secretary, or in the absence of the secretary and the assistant
secretaries, any person appointed by the chairman of the meeting, shall act as
secretary.
SECTION 4.07. Place of Meeting. --Meetings of the board of directors,
both regular and special, shall be held at such place within or without the
State of Delaware as the board of directors may from time to time determine, or
as may be designated in the notice of the meeting.
SECTION 4.08. Regular Meetings. --Regular meetings of the board of
directors shall be held without notice at such time and place as shall be
designated from time to time by resolution of the board of directors.
SECTION 4.09. Special Meetings. --Special meetings of the board of
directors shall be held whenever called by the chairman or by three or more of
the directors.
SECTION 4.10. Quorum, Manner of Acting and Adjournment.
(a) General Rule. --At all meetings of the board one-third of the total
number of directors shall constitute a quorum for the transaction of business.
The vote of a majority of the directors present at any meeting at which a quorum
is present shall be the act of the board of directors, except as may be
otherwise specifically provided by the GCL or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present.
(b) Unanimous Written Consent. --Unless otherwise restricted by the
certificate of incorporation, any action required or permitted to be taken at
any meeting of the board of directors may be taken without a meeting, if all
members of the board consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the board.
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SECTION 4.11. Committees of the Board.
(a) Establishment. --The board of directors may, by resolution adopted
by a majority of the entire board, establish one or more other committees, each
committee to consist of one or more directors. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee and the alternate or alternates, if
any, designated for such member, the member or members of the committee present
at any meeting and not disqualified from voting, whether or not they constitute
a quorum, may unanimously appoint another director to act at the meeting in the
place of any such absent or disqualified member.
(b) Powers. --Any such committee, to the extent provided in the
resolution establishing such committee, shall have and may exercise all the
power and authority of the board of directors in the management of the business
and affairs of the corporation and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
such power or authority in reference to amending the certificate of
incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the GCL, fix the
designation and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the corporation or fix the number of shares of any series
of stock or authorize the increase or decrease of shares of any series),
adopting an agreement of merger or consolidation under Section 251, 252, 254,
255, 256, 257, 258, 263, or 264 of the GCL, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the corporation's
property and assets, recommending to the stockholders a dissolution of the
corporation or a revocation of a dissolution, or amending the Bylaws of the
corporation. Such committees shall have such name or names as may be determined
from time to time by resolution adopted by the board of directors. Each
committee so formed shall keep regular minutes of its meetings and report the
same to the board of directors when required.
(c) Committee Procedures. --The term "board of directors" or "board,"
when used in any provision of these Bylaws relating to the organization or
procedures of or the manner of taking action by the board of directors, shall be
construed to include and refer to any committee of the board.
SECTION 4.12. Compensation of Directors. --Unless otherwise restricted
by the certificate of incorporation, the board of directors shall have the
authority to fix the compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the board of directors and
may be paid a fixed sum for attendance at each meeting of the board of directors
or a stated salary as director. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving compensation
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therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
SECTION 4.13. Qualifications and Election of Directors.
(a) All directors of the corporation shall be natural persons of full
age, but need not be residents of Delaware or stockholders of the corporation.
Except in the case of vacancies, directors shall be elected by the stockholders.
If directors of more than one class are to be elected, each class of directors
to be elected at the meeting shall be nominated and elected separately. No
person who has reached 70 years of age may be elected or appointed to a term of
office as a director of the corporation. The term of office of any director
elected or appointed in conformity with the preceding sentence shall continue
(to the extent provided in the certificate of incorporation and these Bylaws)
after such director reaches 70 years of age.
(b) Nominations of persons for election to the board of directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the board of directors.
(c) Nominations of persons for election to the board of directors of the
corporation may also be made at the meeting by any stockholder of the
corporation entitled to vote for the election of directors who complies with the
notice procedures set forth in this Section 4.13 (c) and (d). Such nominations,
other than those made by or at the direction of the board, shall be made
pursuant to timely notice in writing to the secretary of the corporation. To be
timely, a stockholder's notice shall be delivered to or mailed and received at
the principal executive offices of the corporation not less than 90 days prior
to the anniversary date of the prior year's meeting for the election of
directors. Such stockholder's notice to the secretary shall set forth (a) as to
each person whom the stockholder proposes to nominate for election or
re-election as a director, (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class and number of shares of capital stock of the corporation
which are beneficially owned by the person, and (iv) any other information
relating to the person that is required to be disclosed in solicitations for
proxies for election of directors pursuant to the rules and regulations
promulgated under the Securities Exchange Act of 1934 as amended; and (b) as to
the stockholder giving the notice (i) the name and record address of the
stockholder and (ii) the class and number of shares of capital stock of the
corporation which are beneficially owned by the stockholder. The corporation may
require any proposed nominee to furnish such other information as may reasonably
be required by the corporation to determine the eligibility of such proposed
nominee to serve as a director of the corporation. No person shall be eligible
for election as a director by the stockholders of the corporation unless
nominated in accordance with the procedures set forth herein.
(d) The chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that any nomination made at the meeting was not made in
accordance with the foregoing procedures and, in such event, the nomination
shall be disregarded. Any decision by the chairman of the meeting shall be
conclusive and binding upon all stockholders of the corporation for any purpose.
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SECTION 4.14. Voting of Stock. --Unless otherwise ordered by the board
of directors, each of the chairman of the board, the president, and the
principal accounting officer (as identified in the corporation's most recent
report filed with the United States Securities and Exchange Commission) shall
have full power and authority, on behalf of the corporation, to attend and to
act and vote, in person or by proxy, at any meeting of the stockholders of any
company in which the corporation may hold stock, and at any such meeting shall
possess and may exercise any and all of the rights and powers incident to the
ownership of such stock which, as the owner thereof, the corporation might have
possessed and exercised if present. The board of directors, by resolution
adopted from time to time, may confer like powers upon any other person or
persons.
SECTION 4.15. Endorsement of Securities for Transfer. --Each of the
chairman of the board, the president, and the principal accounting officer shall
have the power to endorse and deliver for sale, assignment or transfer
certificates for stock, bonds or other securities, registered in the name of or
belonging to the corporation, whether issued by the corporation or by any other
corporation, government, state or municipality or agency thereof; and the board
of directors from time to time may confer like power upon any other officer,
agent or person by resolution adopted from time to time. Every such endorsement
shall be countersigned by the treasurer or an assistant treasurer.
ARTICLE V
Officers
SECTION 5.01. Number, Qualifications and Designation. --The corporation
shall have such officers with such titles and duties as shall be specified by
resolution of the board of directors. Any number of offices may be held by the
same person. Officers may, but need not, be directors or stockholders of the
corporation. The board of directors may elect from among the members of the
board a chairman of the board and one or more vice chairmen of the board.
SECTION 5.02. Election and Term of Office. --The officers of the
corporation, except those elected by delegated authority pursuant to section
5.03 of this Article, shall be elected annually by the board of directors, and
each such officer shall hold office for a term of one year and until a successor
is elected and qualified, or until his or her earlier resignation or removal.
Any officer may resign at any time upon written notice to the corporation.
SECTION 5.03. Subordinate Officers, Committees and Agents. --Each
officer of the corporation shall have the power to appoint subordinate officers
(including without limitation one or more assistant secretaries and one or more
assistant treasurers) and to retain or appoint employees or other agents, or
committees thereof, and to prescribe the authority and duties of such
subordinate officers, committees, employees or other agents.
SECTION 5.04. Officers' Bonds. --No officer of the corporation need
provide a bond to guarantee the faithful discharge of the officer's duties
unless the board of directors shall
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by resolution so require a bond in which event such officer shall give the
corporation a bond (which shall be renewed if and as required) in such sum and
with such surety or sureties as shall be satisfactory to the board of directors
for the faithful performance of the duties of office.
SECTION 5.05. Salaries. --The salaries of the officers and agents of the
corporation elected by the board of directors shall be fixed from time to time
by the board of directors.
ARTICLE VI
Certificates of Stock, Transfer, Etc.
SECTION 6.01. Form and Issuance.
(a) Issuance. --The shares of the corporation shall be represented by
certificates unless the board of directors shall by resolution provide that some
or all of any class or series of stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until the
certificate is surrendered to the corporation. Notwithstanding the adoption of
any resolution providing for uncertificated shares, every holder of stock
represented by certificates and upon request every holder of uncertificated
shares shall be entitled to have a certificate signed by, or in the name of the
corporation by, the chairman or vice chairman of the board of directors, or the
president or vice president, and by the treasurer or an assistant treasurer, or
the secretary or an assistant secretary, representing the number of shares
registered in certificate form.
(b) Form and Records. --Stock certificates of the corporation shall be
in such form as approved by the board of directors. The stock record books and
the blank stock certificate books shall be kept by the secretary or by any
agency designated by the board of directors for that purpose. The stock
certificates of the corporation shall be numbered and registered in the stock
ledger and transfer books of the corporation as they are issued.
(c) Signatures. --Any of or all the signatures upon the stock
certificates of the corporation may be a facsimile. In case any officer,
transfer agent or registrar who has signed, or whose facsimile signature has
been placed upon, any share certificate shall have ceased to be such officer,
transfer agent or registrar before the certificate is issued, it may be issued
with the same effect as if the signatory were such officer, transfer agent or
registrar at the date of its issue.
SECTION 6.02. Transfer. --Transfers of shares shall be made on the share
register or transfer books of the corporation upon surrender of the certificate
therefor, endorsed by the person named in the certificate or by an attorney
lawfully constituted in writing. No transfer shall be made which would be
inconsistent with the provisions of applicable law.
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SECTION 6.03. Lost, Stolen, Destroyed or Mutilated Certificates. --The
board of directors may direct a new certificate of stock or uncertificated
shares to be issued in place of any certificate theretofore issued by the
corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate or
certificates, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or the legal representative of the owner,
to give the corporation a bond sufficient to indemnify against any claim that
may be made against the corporation on account of the alleged loss, theft or
destruction of such certificate or the issuance of such new certificate or
uncertificated shares.
SECTION 6.04. Record Holder of Shares. --The corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
SECTION 6.05. Determination of Stockholders of Record.
(a) Meetings of Stockholders. --In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the board of directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the board of directors, and which record
date shall not be more than 60 nor less than ten days before the date of such
meeting. If no record date is fixed by the board of directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting unless the board of
directors fixes a new record date for the adjourned meeting.
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(b) Consent of Stockholders. --In order that the corporation may
determine the stockholders entitled to consent to corporate action in writing
without a meeting, the board of directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the board of directors, and which date shall not be more than ten
days after the date upon which the resolution fixing the record date is adopted
by the board of directors. If no record date has been fixed by the board of
directors, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the board
of directors is required by the GCL, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the corporation by delivery to its registered office in Delaware,
its principal place of business, or an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to a corporation's registered office shall be by hand or
by certified or registered mail, return receipt requested. If no record date has
been fixed by the board of directors and prior action by the board of directors
is required by the GCL, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the day on which the board of directors adopts the resolution
taking such prior action.
(c) Dividends. --In order that the corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights of the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the board of directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than 60 days
prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the board of directors adopts the resolution relating
thereto.
ARTICLE VII
General Provisions
SECTION 7.01. Dividends. --Subject to the restrictions contained in the
GCL and any restrictions contained in the certificate of incorporation, the
board of directors may declare and pay dividends upon the shares of capital
stock of the corporation.
SECTION 7.02. Contracts. --Except as otherwise provided in these Bylaws,
the board of directors may authorize any officer or officers including the
chairman and vice chairman of the board of directors, or any agent or agents, to
enter into any contract or to execute or deliver any instrument on behalf of the
corporation and such authority may be general or confined to specific instances.
Any officer so authorized may, unless the authorizing resolution otherwise
provides, delegate such authority to one or more subordinate officers, employees
or agents, and such delegation may provide for further delegation.
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SECTION 7.03. Corporate Seal. --The corporation shall have a corporate
seal, which shall have inscribed thereon the name of the corporation, the year
of its organization and the words "Corporate Seal, Delaware". The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
SECTION 7.04. Checks, Notes, Etc. --All checks, notes and evidences of
indebtedness of the corporation shall be signed by such person or persons as the
board of directors may from time to time designate.
SECTION 7.05. Corporate Records.
(a) Examination by Stockholders. --Every stockholder shall, upon written
demand under oath stating the purpose thereof, have a right to examine, in
person or by agent or attorney, during the usual hours for business, for any
proper purpose, the stock ledger, list of stockholders, books or records of
account, and records of the proceedings of the stockholders and directors of the
corporation, and to make copies or extracts therefrom. A proper purpose shall
mean a purpose reasonably related to such person's interest as a stockholder. In
every instance where an attorney or other agent shall be the person who seeks
the right to inspection, the demand under oath shall be accompanied by a power
of attorney or such other writing which authorizes the attorney or other agent
to so act on behalf of the stockholder. The demand under oath shall be directed
to the corporation at its registered office in Delaware or at its principal
place of business. Where the stockholder seeks to inspect the books and records
of the corporation, other than its stock ledger or list of stockholders, the
stockholder shall first establish (1) that the stockholder has complied with the
provisions of this section respecting the form and manner of making demand for
inspection of such documents; and (2) that the inspection sought is for a proper
purpose. Where the stockholder seeks to inspect the stock ledger or list of
stockholders of the corporation and has complied with the provisions of this
section respecting the form and manner of making demand for inspection of such
documents, the burden of proof shall be upon the corporation to establish that
the inspection sought is for an improper purpose.
(b) Examination by Directors. --Any director shall have the right to
examine the corporation's stock ledger, a list of its stockholders and its other
books and records for a purpose reasonably related to the person's position as a
director.
SECTION 7.06. Amendment of Bylaws. --Except as otherwise provided
herein, these Bylaws may be altered, amended or repealed or new Bylaws may be
adopted either (1) by vote of the stockholders at a duly organized annual or
special meeting of stockholders in accordance with the certificate of
incorporation, or (2) by vote of a majority of the entire board of directors at
any regular or special meeting of directors if such power is conferred upon the
board of directors by the certificate of incorporation.
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EXHIBIT 10a
BELL ATLANTIC DEFERRED COMPENSATION PLAN
FOR OUTSIDE DIRECTORS
(As restated January 1, 1998, to incorporate amendments through that date)
Article 1: INTRODUCTION
This Deferred Compensation Plan is maintained by Bell Atlantic
Corporation ("Bell Atlantic") for the benefit of Outside Directors (and their
Beneficiaries) who are or have been members of the Board of Directors of Bell
Atlantic. It shall be maintained according to the terms of this document. The
Plan also covers certain individuals who were formerly Outside Directors of the
Operating Telephone Company subsidiaries of Bell Atlantic at a time when the
applicable Operating Telephone Companies were participating companies in this
Plan.
Article 2. DEFINITIONS
2.1 DEFINITIONS. When used in this document, the following words and
phrases shall have the meanings 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 New York, New York.
(c) BENEFICIARY means the person or persons, natural or otherwise,
designated by an Outside Director under Section 8.1 to receive any death benefit
payable under Section 6.3.
(d) BOARD means the Board of Directors of Bell Atlantic.
(e) CASH DEFERRED FEE ACCOUNT means an account established under the
Plan in the name of an Outside Director. The Participating Companies shall
credit each Outside Director's Cash Deferred Fee Account with (1) any Director's
Fees that are deferred by the Outside Director under Section 3.1(a) and directed
into the Cash Deferred Fee Account under Section 3.1(d), and (2) any Interest
that is credited under Article 4. The Company shall debit from each Outside
Director's Cash Deferred Fee Account payments made from it under Article 6.
(f) CORPORATE SECRETARY shall refer to the Corporate Secretary of Bell
Atlantic, or any Assistant Secretary to whom responsibilities under this Plan
have been delegated by the Corporate Secretary.
(g) DEFERRED FEE ACCOUNTS means the aggregate of an Outside Director's
Cash Deferred Fee Account and Stock Deferred Fee Account.
(h) DEFERRED FEE AGREEMENT means the written agreement between the
Company and an Outside Director that, together with this Plan, governs the
Outside Director's rights to deferral and subsequent distribution of deferred
Director's Fees (adjusted for investment performance) under this Plan.
(i) DIRECTOR means a member of the Board.
- -------------------------------------------------------------------------------
DEFERRED COMPENSATION PLAN - 1 - RESTATED JANUARY 1, 1998
B705
<PAGE>
(j) DIRECTOR'S FEES means the cash portion of the annual retainer paid
to an Outside Director, any fees paid to an Outside Director for attending
meetings of the Participating Company Board or any committee of the
Participating Company Board, and any fees paid to an Outside Director for
serving as chairman of a committee of the Participating Company Board.
(k) INTEREST means the amount of interest credited to an Outside
Director's Cash Deferred Fee Account at an annual rate determined in accordance
with Section 4.2.
(l) 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.
(m) 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.
(n) OUTSIDE DIRECTOR means a Director of a Participating Company who
is not also an employee of the Participating Company or any Affiliated Company.
(o) PARTICIPATING COMPANY, as of the date of this restatement of the
Plan, means Bell Atlantic. During certain periods prior to the date of this
restatement, the Participating Companies included Bell Atlantic and the
Operating Telephone Companies.
(p) PLAN means the Bell Atlantic Deferred Compensation Plan for
Outside Directors, as set forth in this document, and as it may be amended from
time to time.
(q) PLAN ADMINISTRATOR shall have the meaning stated in Section 9.4.
(r) SHARES means phantom shares of Bell Atlantic common stock credited
to an Outside Director's Stock Deferred Fee Account under the Plan.
(s) STOCK means the common stock of Bell Atlantic.
(t) STOCK DEFERRED FEE ACCOUNT means an account established under the
Plan in the name of an Outside Director. A Participating Company shall credit
its Outside Director's Stock Deferred Fee Account with (1) Shares for any
Director's Fees that are deferred by the Outside Director under Section 3.1(a)
and directed into the Stock Deferred Fee Account under Section 3.1(d), and (2)
any additional Shares that are credited under Article 5. There shall be debited
from each Outside Director's Stock Deferred Fee Account payments made from it
under Article 6.
Article 3. DEFERRAL OF DIRECTOR'S FEES
3.1 ELECTION TO DEFER FEES.
(a) Before the beginning of any calendar year, an Outside Director may
elect to defer all or part of his or her Director's Fees to be earned in that
calendar year, in accordance with either (i), (ii) or (iii) hereof:
- -------------------------------------------------------------------------------
DEFERRED COMPENSATION PLAN - 2 - RESTATED JANUARY 1, 1998
B705
<PAGE>
(i) the Outside Director may defer such fees to any date not
earlier than the first anniversary of the final payment date for the Directors'
Fees for such calendar year;
(ii) the Outside Director may defer such fees to the first
business day of January following the year the Outside Director attains age 70;
or
(iii) the Outside Director may defer such fees to the January 1
following the year in which the Outside Director terminates his service as a
director or, if later, the year in which the Outside Director terminates his
service as a director of a Participating Company.
(b) At any time earlier than 12 months prior to the date on which a
distribution of a portion (or all) of an Outside Director's Deferred Fee Account
would be payable under the terms of an existing Deferred Fee Agreement, an
Outside Director may elect to extend the deferral of all of his Deferred Fee
Account, or of such portion of his account as would otherwise be distributed. At
the election of the Outside Director, such a second deferral under this Section
3.1(b) may extend the date of distribution of all, or such portion, of the
Deferred Fee Account to the first business day of January which first follows
either:
(i) the calendar year in which the Outside Director terminates
service as an Outside Director (or, if later, the calendar year in which the
Outside Director terminates service as a director of a Participating Company);
(ii) any calendar year subsequent to the year stated in the
previous paragraph; or
(iii) the calendar year in which the Outside Director attains age
70.
(c) At any time earlier than 12 months prior to the date on which a
distribution of a portion (or all) of an Outside Director's Deferred Fee Account
would be payable under the terms of an existing Deferred Fee Agreement, an
Outside Director may modify his or her prior election of a distribution option
for the account. An Outside Director may modify the distribution option for each
and any Deferred Fee Account once, but not more than once. A modification of the
distribution option may, but need not, be elected at the same time as the
Outside Director submits any election under Section 3.1(b).
(d) When an Outside Director elects to defer Director's Fees under
Section 3.1(a), the Outside Director shall also elect whether amounts deferred
should be credited to his Cash Deferred Fee Account, to his Stock Deferred Fee
Account, or equally to both.
(e) An election under Sections 3.1(a), (b), (c) or (d) shall be made
by an Outside Director by executing a Deferred Fee Agreement with the
Participating Company and delivering it to the Corporate Secretary or Plan
Administrator.
3.2 CREDITING TO DEFERRED FEE ACCOUNTS.
(a) When an Outside Director elects under Section 3.1(d) to have
deferred Director's Fees credited to his Cash Deferred Fee Account, the
Participating Company shall credit the Outside Director's Cash Deferred Fee
Account with the amount of such deferred Director's Fees as of the day such
deferred Director's Fees would have been paid to the Outside Director were they
not deferred under the Plan.
(b) When an Outside Director elects under Section 3.1(d) to have
deferred Director's Fees credited to his Stock Deferred Fee Account, the
Participating Company shall credit the Outside Director's Stock Deferred Fee
Account with a number of Shares as of the day such deferred Director's Fees
would have been paid to the Outside Director were they not deferred under the
Plan. The number of Shares credited to the Stock Deferred Fee Account shall be
the quotient of (1) the amount of deferred Director's Fees to be credited to the
Stock Deferred Fee Account, and (2) the mean between the highest and lowest
selling prices of Bell Atlantic Stock
- -------------------------------------------------------------------------------
DEFERRED COMPENSATION PLAN - 3 - RESTATED JANUARY 1, 1998
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on the first day of the calendar quarter in which such Shares are credited, as
reported on the New York Stock Exchange Composite Tape. However, if there are no
sales on the first day of such calendar quarter, the average of the means
between the highest and lowest selling prices of the stock on the nearest
trading day before and the nearest trading day after the first day of the
quarter will be used.
3.3 ELECTIONS FOR A SUBSEQUENT YEAR.
(a) An Outside Director may, on a prospective basis for a future
calendar year, change the amount of the Director's Fees to be deferred, or elect
not to defer any of such Director's Fees for such future year, by executing a
new Deferred Fee Agreement. No such Deferred Fee Agreement shall be effective
for the year in which it is executed or for any prior year.
(b) Notwithstanding anything in Section 3.3(a) to the contrary, a newly
elected Outside Director shall have thirty days from the date on which he is
elected to serve on a Participating Company Board to deliver a Deferred Fee
Agreement which shall be applicable to his first calendar year of service.
3.4 INVESTMENT DIRECTION FOR A SUBSEQUENT YEAR'S DEFERRALS. An Outside
Director may, by executing a Deferred Fee Agreement on a prospective basis for a
subsequent calendar year, direct the investment of the Director's Fees to be
earned and deferred in such subsequent year, without regard to the investment
direction then applicable to any deferred Director's Fees for the then-current
year. No such investment direction shall apply retroactively to amounts
previously deferred.
Article 4: INTEREST
4.1 INTEREST. Interest shall accrue on an amount credited to the Cash
Deferred Fee Account from and after the date any such amount is credited to such
account pursuant to Section 3.2(a). Interest shall be credited to each Outside
Director's Cash Deferred Fee Account, as of the end of each month, at an annual
rate determined pursuant to Section 4.2, on the amount credited to the account
on the first day of the month, or on such other periodic basis as the Plan
Administrator may find appropriate. Interest shall be credited during each such
period that an Outside Director has any amount credited to his Cash Deferred Fee
Account under the Plan.
4.2 RATE OF INTEREST. Interest shall be credited at a rate equal to the
average yield for ten-year U.S. Treasury notes for the previous quarter.
Article 5: DIVIDENDS
5.1 DIVIDEND REINVESTMENT. Additional Shares shall be credited to each
Outside Director's Stock Deferred Fee Account, as of each payment date for
dividends on Bell Atlantic Stock, in an amount determined pursuant to Section
5.2, on the basis of the number of Shares credited to the Outside Director's
Stock Deferred Fee Account on the record date for such dividends. Additional
Shares shall be credited for each record date that an Outside Director has any
amount credited to his Stock Deferred Fee Account under the Plan.
5.2 NUMBER OF DIVIDEND REINVESTMENT SHARES. The number of additional
Shares credited to an Outside Director's Stock Deferred Fee Account as of any
dividend payment date shall be the quotient of : (1) the product of the number
of Shares credited to the Outside Director's Stock Deferred Fee Account on the
dividend record date for such dividend and the dividend per share on Bell
Atlantic Stock, divided by (2) the fair market value of Bell Atlantic Stock on
the dividend payment date. The fair market value of Bell Atlantic Stock on the
dividend payment date shall be the mean between the highest and lowest selling
prices of the Stock on the
- -------------------------------------------------------------------------------
DEFERRED COMPENSATION PLAN - 4 - RESTATED JANUARY 1, 1998
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<PAGE>
dividend payment date, as reported on the New York Stock Exchange Composite
Tape. However, if there are no sales on the dividend payment date, the fair
market value of the Stock shall be the 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 dividend payment date, as reported on the New York Stock Exchange
Composite Tape.
Article 6: PAYMENT OF DEFERRED FEES
6.1 DEFERRED FEES AND INTEREST. At the time and in the manner provided
in Section 6.2 or 6.3,
(a) amounts credited to an Outside Director's Cash Deferred Fee Account
shall be paid in cash, and
(b) amounts credited to an Outside Director's Stock Deferred Fee
Account shall be paid in an equal number of shares of Bell Atlantic Stock, and
any fractional share of Stock shall be paid in cash.
6.2 PAYMENT.
(a) Unless an Outside Director elects under Section 3.1 to receive the
distribution of his deferred fees for a calendar year in installments, the
appropriate portion of the amount credited to the Outside Director's Deferred
Fee Accounts for that calendar year shall be paid in a lump sum.
(b) At the election of an Outside Director, as described in Section
3.1, the appropriate portion of the amount credited to the Outside Director's
Deferred Fee Accounts shall be paid either in a single total distribution, or in
approximately equal annual distributions for a number of years elected by the
Outside Director. The first such installment shall be payable on the
distribution commencement date determined under Section 3.1. In the case of a
distribution in the form of two or more annual installments, an Outside
Director's Deferred Fee Accounts shall bear interest at the rate specified in
Article 4, or be credited with dividends in accordance with Article 5 (whichever
is applicable), during the installment payout period.
(c) Notwithstanding the terms of any elections pursuant to Section 3.1,
the entire balance of the accounts of an Outside Director shall be distributed,
with interest and earnings to date, in the event that the Bell Atlantic Board
determines that any of the following circumstances has occurred:
(i) the Outside Director, at any time after he ceases to
serve as a director of a Participating Company, becomes employed by any
governmental agency having regulatory jurisdiction over the business of an
Operating Telephone Company;
(ii) the Outside Director has engaged in knowing and willful
misconduct in connection with his or her service as a director; or
(iii) 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 Bell Atlantic or any
Affiliated Company.
- -------------------------------------------------------------------------------
DEFERRED COMPENSATION PLAN - 5 - RESTATED JANUARY 1, 1998
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<PAGE>
6.3 DEATH OF A DIRECTOR. If an Outside Director dies with any amount
credited to his Deferred Fee Accounts, then his Beneficiary shall be entitled to
receive the entire amount in a lump sum. The payment shall be made no later than
sixty days following the Outside Director's death.
Article 7: EARLY WITHDRAWALS SUBJECT TO PENALTY
7.1 WITHDRAWALS FROM DEFERRED FEE ACCOUNTS. Except as provided in
Section 7.1(b), neither the Outside Director, his Beneficiary, nor any other
individual or entity shall have any right to make any withdrawals from the
Outside Director's Deferred Fee Accounts contrary to the initial elections or
modified elections made in accordance with Section 3.1.
7.2 EARLY WITHDRAWAL PENALTY. An Outside Director 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
director's Deferred Fee Accounts which the Outside Director 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.
Article 8: BENEFICIARIES
8.1 DESIGNATION OF BENEFICIARY. Each Outside Director may designate
from time to time any person or persons, natural or otherwise, as his
Beneficiary or Beneficiaries to whom benefits under Section 6.3 are to be paid
if he dies while entitled to benefits. Each Beneficiary designation shall be
made either in the Deferred Fee Agreement or on a form prescribed by the Plan
Administrator and shall be effective only when filed with the Corporate
Secretary or Plan Administrator during the Outside Director's lifetime. Each
Beneficiary designation filed with the Corporate Secretary or Plan Administrator
shall revoke all Beneficiary designations previously made by the Outside
Director. The revocation of a Beneficiary designation shall not require the
consent of any designated Beneficiary.
Article 9: ADMINISTRATION
9.1 RIGHT TO AMEND OR TERMINATE. The Board may amend or terminate the
Plan at any time in whole or in part. The Governance and Board Affairs Committee
of the Board shall have authority to recommend Plan amendments for approval by
the Board; provided, however, that the Board retains authority to amend or
terminate the Plan in the absence of a recommendation by the Governance and
Board Affairs Committee. No amendment or termination of the Plan shall reduce
the amount credited to an Outside Director's Deferred Fee Accounts, the amount
owed to him under the Plan as of the date of amendment or termination, or the
amount of Interest or number of Shares to be credited to his account. The
Executive Vice President - Human Resources of Bell Atlantic 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.
9.2 NO FUNDING OBLIGATION. Except as otherwise provided in this Section
9.2, 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
- -------------------------------------------------------------------------------
DEFERRED COMPENSATION PLAN - 6 - RESTATED JANUARY 1, 1998
B705
<PAGE>
(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.
9.3 APPLICABLE LAW. This Plan shall be construed and enforced in
accordance with the laws of the state of Delaware, except to the extent
superseded by federal law.
9.4 ADMINISTRATION AND INTERPRETATION. The Executive Vice President -
Human Resources of Bell Atlantic, or, in the event of a vacancy in that
position, the most senior officer of Bell Atlantic in the Human Resources
organization (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, or by
a person to whom the Plan Administrator delegates discretion for the day-to-day
administration of the Plan, in cooperation with the Corporate Secretary.
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, with the advice of counsel, 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 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 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.
- -------------------------------------------------------------------------------
DEFERRED COMPENSATION PLAN - 7 - RESTATED JANUARY 1, 1998
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<PAGE>
FORM 1
------
BELL ATLANTIC DEFERRED COMPENSATION PLAN
OUTSIDE DIRECTOR'S PROSPECTIVE DEFERRED FEE AGREEMENT
-----------------------------------------------------
This election by __________________ (the "Outside Director") is made under the
terms of the Bell Atlantic Deferred Compensation Plan for Outside Directors (the
"Plan").
1. TERMS OF THE DEFERRED FEE PLAN. The Outside Director agrees to the terms and
------------------------------
conditions of the Plan, a copy of which has been delivered to the Outside
Director and constitutes part of this Agreement. Capitalized words and phrases
in this Agreement shall have the meaning given to them in the Plan, unless the
context clearly indicates otherwise. (Check one box only.)
- - The Outside Director does not wish to defer next year's fees under the plan.
- - The Outside Director wishes to defer next year's fees in accordance with the
instructions marked below.
2. ELECTION TO DEFERRED FEES. The Outside Director authorizes and directs the
-------------------------
Company to defer ____ [insert a percentage, e.g., 100%, or a dollar amount,
e.g., $10,000] of the Outside Director's Fees to be earned in calendar year
19__.
3. INVESTMENT OF DEFERRED FEES. The Outside Director elects to have deferred
---------------------------
Director's Fees credited: (check one box only):
- - entirely to the Stock Deferred Fee Account
- - entirely to the Cash Deferred Fee Account
- - half to the Stock Deferred Fee Account, and half to the Cash Deferred Fee
Account
4. DEFERRAL DATE. The Outside Director elects to defer the Director's Fees
-------------
earned in the year shown in Item 2 to the following distribution date: (check
one box only)
- - December of 19__ (minimum deferral: 1 year)
- - January 1 of the year following the year the Outside Director terminates his
or her service as a Director of the Company (or, if later, his or her service
as a Director of a subsidiary)
- - January 1 of the year following the Outside Director's 70th birthday
5. FORM OF PAYMENT. On the distribution date indicated in Item 4, the Outside
---------------
Director elects to receive the proceeds of the Deferred Fee Account(s) for the
fees deferred under this Agreement, as follows: (check one box only)
- - in a single payment
- - in ___ approximately equal annual installments (select two or more)
6. BENEFICIARY. The Outside Director requests that, not later than 60 days after
-----------
his or her death, the balance of his or her Deferred Fee Account(s) (including
interest or dividends) shall be paid in a lump sum: (check one box only)
- - to the Beneficiary or Beneficiaries named on the Outside Director's most
recent beneficiary designation, on file with the Secretary of the Company
- - to the following Beneficiary or Beneficiaries:
- --------------------------------------- --------------------------------------
Name of Beneficiary Percent Name of Beneficiary Percent
- --------------------------------------- --------------------------------------
Address Address
- --------------------------------------- --------------------------------------
Relationship Relationship
Note: The Outside Director may change the Beneficiary(ies) at any time by
executing another copy of this portion of FORM 1 or FORM 2, or by written notice
to the Secretary of the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the ____
day of _______________, 19___
- -------------------------------- -----------------------------------------
Witness Outside Director
Deliver this signed form to the Secretary or Assistant Secretary of the Company.
- --------------------------------------------------------------------------------
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<PAGE>
FORM 2
------
BELL ATLANTIC DEFERRED COMPENSATION PLAN
OUTSIDE DIRECTOR'S ELECTION TO MODIFY A PRIOR ELECTION TO DEFER FEES
--------------------------------------------------------------------
This election by ________________ (the "Outside Director") is made under the
terms of the Bell Atlantic Deferred Compensation Plan for Outside Directors (the
"Plan").
Instructions: Complete Section A, B, C and/or D, whichever is or are applicable.
Then sign under Section E.
A. MODIFY PAY-OUT OF DEFERRAL ACCOUNT. I elect to modify the date on which
----------------------------------
payments will commence under my deferral account, as follows
(check box 1, 2 or 3):
1. - Commence pay-outs as of January 1 following the year of my
termination of service on the board of directors of any Bell
Atlantic Company
2. - Commence pay-outs as of January 1, 19__
3. - Commence pay-outs as of January 1 following my 70th birthday
B. FORM OF PAY-OUT. I elect to modify the form of payment of all my deferral
---------------
account, as follows (check box 1 or 2):
1. - a single payment
2. - annual installments (select two or more)
C. EARLY WITHDRAWAL. Subject to a 6% early-withdrawal penalty, I elect to make
----------------
an early withdrawal, as follows:
Cash Deferral Stock Deferral Total Dollar Amount
Account Account to Withdraw
------- ------- -----------
___% withdrawal ___% withdrawal $_________
Withdrawals will be processed as soon as practicable. Withdrawals from stock
deferral accounts will be distributed in shares; withdrawals from cash
deferral accounts will be paid in cash.
D. CHANGE OF BENEFICIARY(IES). In the event of my death, any remaining balance
--------------------------
in my deferral account under the Plan is to be paid, as soon as practicable in a
single payment, as follows:
- -------------------------------------- -------------------------------------
Name of Beneficiary Percent Name of Beneficiary Percent
- -------------------------------------- -------------------------------------
Address Address
- -------------------------------------- -------------------------------------
Relationship Relationship
Note: Attach additional sheet of paper if needed.
I understand that I may modify my beneficiary designation under the plan at any
time by submitting a new Form 1 or 2, or by written notice to the Plan
Administrator, c/o Greg Riker, Room 3878, 1095 Avenue of the Americas, New York,
New York 10036.
E. SIGNATURE.
---------
I agree to the terms and conditions of the Plan, a copy of which has been
delivered to me.
Date: Name:
-------------------------------- ----------------------------------
Witness: Signed:
----------------------------- --------------------------------
Deliver this signed form to the Secretary or Assistant Secretary of the Company.
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 10e
BELL ATLANTIC STOCK COMPENSATION PLAN
FOR OUTSIDE DIRECTORS
Restated as of January 1, 1998,
to incorporate amendments adopted through December 31, 1997
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. As of January 1, 1998, the Corporation
is the sole company participating in the Plan.
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 remuneration under the Plan.
6. COMPENSATION IN STOCK AND OPTIONS
(a) Annual Grant or Award. On an annual basis, for each individual
who is in active service as an Outside Director of the Corporation as of the
close of the regular January meeting of the Board of Directors of the
Corporation (the "Board"), each such Outside Director shall have a right to
receive remuneration under both Sections 6(a)(1) and 6(a)(2) of this Plan, as
follows:
(1) Grant of Options. The annual remuneration provided under
this Section 6(b)(1) of the Plan shall consist of a grant of
nonqualified stock options ("Options") which bestows on each such
Outside Director a right 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. "Fair Market Value" 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").
(2) Election between Options and Shares. Pursuant to this
Section 6(b)(2) of the Plan, each such Outside Director shall have a
right to elect on an annual basis to receive, in addition to the grant
of Options described in Section 6(b)(1), either: (i) a grant of Options
to purchase 1,500 shares of Stock at an exercise price per Option equal
to the Fair Market Value of the Stock on the date of grant, or (ii) an
award of a number of shares of Stock having an aggregate Average Market
Value (as hereinafter defined) equal to the aggregate value (as
determined by the Plan Administrator) of the Options described in clause
"(i)" of this paragraph, rounding up to a whole number of shares.
- --------------------------------------------------------------------------------
Stock Compensation Plan for Outside Directors Page 1
B706
<PAGE>
"Average Market Value" means the average of the high and low trading
prices per share of Stock during the last five trading days of the
calendar month prior to the month in which the award is made.
(3) Rules Applicable to Annual Grants of Options. Options
granted on an annual basis 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; provided, however, that the Plan
Administrator shall afford each eligible Outside Director an opportunity
to elect in advance, in writing, prior to the date of the applicable
grant of Options or award of Stock, which of the two forms of
remuneration the individual Outside Director wishes to receive, as
described in Section 6(a)(2). The Board 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. In the case of an
individual who is first elected to the Board as of an effective date which is
later in any calendar year than the regular January meeting, then, as of the
first trading day in the calendar month first following the effective date of
the election of the said Outside Director, Options to purchase 1,000 shares of
Stock shall be granted under this Plan to the Outside Director, and the said
Options shall have an exercise price equal to the Fair Market Value of the Stock
as of the date of grant.
7. Terms Applicable to Grants of Options and Awards of Stock
(a) Terms of Options. Options granted pursuant to Section 6(a) and
6(b) of this Plan 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;
- --------------------------------------------------------------------------------
Stock Compensation Plan for Outside Directors Page 2
B706
<PAGE>
(v) In the event of the death of an Outside Director at a
time when Options are outstanding, any such Options shall be
exercisable from the day following the date of death until the
earlier of the first anniversary of the date of death or the
tenth anniversary of the date of grant, without regard to (A)
whether or not the options were otherwise exercisable on the
date of death, and (B) whether or not any other limitation upon
the period of exercise may otherwise have been applicable in the
absence of death; and
(vi) The exercise price for Options shall be payable solely in
cash.
(b) 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
7(a) 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 Agreement which
has been modified in a manner unacceptable to the Plan Administrator, the
Optionee shall forfeit the Options stated on said Option Agreement.
(c) 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.
(d) Election to Transfer Shares to Direct Invest Plan. Each Outside
Director who elects to receive an award of Stock pursuant to clause "(ii)" of
Section 6(a)(2) of the Plan for a given plan year shall, prior to the date of
the award for such 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 credit the Stock directly into an
account, which shall be solely in the name of the Outside Director, under the
Corporation's Direct Invest Plan. For an Outside Director who elects to deposit
the award in a Direct Invest Plan account, the terms of Direct Invest Plan shall
thereafter apply and the shares awarded under this Plan shall be treated no
differently than any other shares held under the Direct Invest Plan.
(e) No Accrued Interest In Subsequent Awards or Grants. Until the
applicable date of an award of Stock or a grant of Options under the Plan, an
eligible Outside Director shall have no accrued right to receive all or any
portion of any subsequent award. An eligible Outside Director shall have no
right to assign or alienate any interest in any award of Stock which has not yet
been presented under this Plan, and an Outside Director may not assign or
transfer any Options granted under this Plan other than by beneficiary
designation in the event of death. Options granted under this Plan shall not be
subject to attachment or alienation and, during the life of the Outside Director
to whom the Options are granted, the Options may be exercised solely by the
Outside Director in accordance with their terms.
- --------------------------------------------------------------------------------
Stock Compensation Plan for Outside Directors Page 3
B706
<PAGE>
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. NOT ELIGIBLE FOR DEFERRAL. Neither the Options nor the Stock
received under this Plan shall be eligible for deferral under the Bell Atlantic
Deferred Compensation 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, and
to determine in its discretion whether any other company affiliated with the
Corporation may participate in the Plan from time to time; 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. The Governance and Board Affairs Committee of
the Board may recommend amendments to the Plan for the approval of the full
Board.
(b) Authority of Plan Administrator. The Executive Vice President -
Human Resources of the Corporation (or, in the event of a vacancy in that
position, the most senior Human Resources executive of the Corporation), or any
person to whom that officer or executive delegates administrative responsibility
for 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, and (iv) with advice of
counsel, to submit the Plan, or amendments to the Plan, to the shareowners of
the Corporation for approval.
- --------------------------------------------------------------------------------
Stock Compensation Plan for Outside Directors Page 4
B706
<PAGE>
EXHIBIT 10n
DESCRIPTION OF THE ESTATE MANAGEMENT PLAN FOR SENIOR MANAGERS
The Estate Management Plan provides life insurance protection to Senior Managers
both before and after retirement. The life insurance coverage under the Plan
replaces any basic and supplemental life insurance coverage that would be
received under Bell Atlantic's Employee Life and AD&D Insurance Plan (or another
group life insurance plan offered by the Senior Manager's employing company).
The Plan provides life insurance coverage equal to five times annual base salary
plus 50% of the maximum Short Term Incentive Award. Coverage increases
automatically if the participant's salary and maximum Short Term Incentive Award
increase.
Under the Plan, a participant purchases a universal life insurance policy using
a split-dollar arrangement. Under the split-dollar arrangement, the participant
collaterally assigns his or her policy to the company when he or she begins
participating in the Plan. This collateral assignment remains in effect for 15
years or until the participant reaches age 65, whichever is later. The
collateral assignment also terminates if the participant leaves the company
before becoming eligible for retiree benefits.
While the collateral assignment is in effect, the company will pay the majority
of the annual premium on the policy. The company's portion of the premium is
intended to build the cash value through investment The participant pays the
premium for the death benefit, based on the carrier's term life insurance rates.
While the collateral assignment is in effect, the policy will be used only to
provide the participant with the targeted level of life insurance coverage.
Although the policy's cash value will grow, the participant will not have access
to the cash value until after the collateral assignment ends.
When the collateral assignment ends, the company will recover its premiums from
the policy but not any investment earnings associated with those premiums. Once
the collateral assignment ends, the remaining cash value of the policy (derived
from the policy's investment earnings) is the participant's to use, either to
continue insurance coverage or to provide additional income.
<PAGE>
EXHIBIT 10ee
FORM OF
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") is made as of
the 27th day of October, 1998, by and between Bell Atlantic Corporation, its
successors and assigns ("Bell Atlantic"), and ___________., ___________ of Bell
Atlantic (the "Key Executive").
WHEREAS, Bell Atlantic and the Key Executive have entered into an
Employment Agreement dated as of June 1, 1998 (the "Agreement");
WHEREAS, pursuant to the terms of an Agreement and Plan of Merger, dated
as of July 27, 1998, among Bell Atlantic, GTE Corporation ("GTE") and Beta Gamma
Corporation (the "Definitive Agreement"), Bell Atlantic contemplates a merger of
the Bell Atlantic and GTE businesses (the "Merger") on a date which is yet to be
decided (the "Closing Date");
WHEREAS, Bell Atlantic considers the Key Executive to be an employee
whose continuing services, leadership and support are and will be valuable,
especially during the period prior to the Closing Date; and
WHEREAS, Bell Atlantic wishes to amend the Agreement to provide an
additional incentive for the Key Executive to remain an Employee in Good
Standing during the period prior to the Closing Date;
NOW, THEREFORE, for good and valuable consideration, Bell Atlantic and
the Key Executive hereby agree as follows:
1. Certain Definitions. Terms which are defined in the Agreement shall
-------------------
have the same meaning in this Amendment.
2. Stay Bonus.
----------
(a) Closing of Merger. If the Merger occurs pursuant to the
-----------------
Definitive Agreement, and if the Key Executive has remained an Employee in Good
Standing of a Bell Atlantic Company from the date of this Amendment to the
Closing Date, then, not later than 30 calendar days following the Closing Date,
Bell Atlantic shall cause the Bell Atlantic Company which then employs the Key
Executive to pay the Key Executive a special bonus (a "Stay Bonus") consisting
of a single cash payment in an amount equal (before withholding of taxes) to 1.5
multiplied by the sum, as of the Closing Date, of (i) the Key Executive's annual
rate of base salary, and (ii) 50% of the Key Executive's maximum short-term
incentive under the STIP.
(b) Merger Plan is Terminated. If the Definitive Agreement is
-------------------------
terminated without the Merger occurring, the Key Executive shall have no right
to receive the Stay Bonus or any portion of such bonus.
<PAGE>
3. Termination of Employment.
-------------------------
(a) Voluntary Resignation, Retirement, or Discharge for Cause. In the
---------------------------------------------------------
event that, prior to the Closing Date of the Merger, the Key Executive
voluntarily resigns or retires for any reason (except a constructive discharge),
or is discharged by a Bell Atlantic Company for cause, the Key Executive shall
forfeit any and all rights to receive the Stay Bonus.
(b) Involuntary Terminations. In the event that a Bell Atlantic
------------------------
Company discharges the Key Executive other than for cause, or the Key Executive
is constructively discharged, and the Merger subsequently occurs pursuant to the
Definitive Agreement, then the Key Executive shall be entitled to receive, as
liquidated damages (in addition to the damages provided for in Section 7(c) of
the Agreement), a single cash payment which shall be equal (before withholding
of taxes) to the Stay Bonus which would otherwise have become payable under
Section 2(a) of this Amendment, provided that such cash payment shall be
contingent upon the absence, at the time of payment, of any act by the Key
Executive that would constitute a material breach of the Agreement, and provided
further that the date of discharge shall be substituted for the Closing Date of
the Merger for purposes of calculating the dollar amount of such payment. Such
payment shall be made not later than 30 calendar days following the Closing
Date.
(c) Payment in Case of Death or Disability. In the event that the Key
--------------------------------------
Executive dies, or terminates his employment on account of disability (within
the meaning of the applicable disability benefit plan in which the Key Executive
participates from time to time) on a date on which the Key Executive was an
Employee in Good Standing, and the Merger subsequently occurs pursuant to the
Definitive Agreement, Bell Atlantic shall cause the Key Executive's last
employing Bell Atlantic Company to pay the Key Executive, or the Key Executive's
estate in the event of death, a single cash payment which shall be equal (before
withholding of taxes) to the Stay Bonus multiplied by the following fraction:
the numerator shall be the number of days that have elapsed between the date of
this Amendment and the date of the Key Executive's death or disability, and the
denominator shall be the number of days that have elapsed between the date of
this Amendment and the Closing Date of the Merger. Such payment shall be made
not later than 30 calendar days following the Closing Date, substituting the
date of death or disability for the Closing Date for purposes of calculating the
dollar amount of the payment.
4. Deferrals under IDP. Amounts otherwise payable to the Key
-------------------
Executive under Sections 2 or 3 of this Amendment may be deferred under the IDP
or any successor plan in accordance with the terms of the IDP.
5. Business Discretion of Bell Atlantic. Nothing in this Amendment is
------------------------------------
intended to limit the discretion of any Bell Atlantic Company to take any action
with regard to the Merger which Bell Atlantic may consider appropriate,
including, without limitation, postponing the Closing Date or terminating the
Definitive Agreement.
6. Non-Benefit Bearing Payments. Any amount to be paid under Sections
----------------------------
2 or 3 of this Amendment shall not be treated as compensation for purposes of
computing or determining any additional benefit payable under any savings plan,
insurance plan, pension plan, or other employee benefit plan maintained by any
Bell Atlantic Company.
2
<PAGE>
7. Effect on Agreement. Nothing in this Amendment is intended to
-------------------
override or supercede any of the provisions of the Agreement. The terms and
conditions of this Amendment shall be considered additional terms and conditions
of the Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first set forth above.
BELL ATLANTIC CORPORATION
By:
------------------------------------
Ivan Seidenberg
Chief Executive Officer
THE KEY EXECUTIVE
By:
------------------------------------
3
<PAGE>
EXHIBIT 10ff
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of the 1st day of
January, 1999, by and between Bell Atlantic Corporation, its successors and
assigns ("Bell Atlantic"), and Ivan G. Seidenberg, Chief Executive Officer of
Bell Atlantic (the "Key Executive"). In this Agreement, "Bell Atlantic
Companies" means all of, and "Bell Atlantic Company" means any one of, Bell
Atlantic, all corporate subsidiaries or other companies affiliated with Bell
Atlantic, all companies in which Bell Atlantic directly or indirectly owns a
substantial equity interest, and their successors and assigns.
WHEREAS, Bell Atlantic and the Key Executive have previously entered
into an Executive Retention Agreement last amended March 14, 1997 (the
"Retention Agreement") and an Employment Agreement dated as of August 14, 1997
(the "Prior Employment Agreement"); and
WHEREAS, Bell Atlantic and the Key Executive wish to supersede, in their
entirety, the Retention Agreement and Prior Employment Agreement;
NOW, THEREFORE, for good and valuable consideration, the Key Executive
and Bell Atlantic hereby agree as follows:
1. Term of Employment. The term of employment under this Agreement
------------------
(the "Term of Employment") shall commence on January 1, 1999 and end on December
31, 2003.
2. Obligations of the Bell Atlantic Companies. During the Term of
------------------------------------------
Employment, the Bell Atlantic Companies shall have the following obligations and
duties and shall provide the following compensation to the Key Executive.
(a) Salary. Bell Atlantic shall employ the Key Executive as
------
Chief Executive Officer and shall compensate the Key Executive at a base
salary of not less than $1,200,000 per year, subject to annual review by
the Board of Directors of Bell Atlantic (the "Board") in January, 2000
and each January thereafter during the Term of Employment.
(b) STIP. The Key Executive shall participate in the Bell
----
Atlantic Senior Management Short Term Incentive Plan or any successor to
that plan ("STIP") and shall be eligible for a potential maximum award
which, for each performance year during the Term of Employment, shall be
equal to or greater than 2.25 multiplied by the Key Executive's base
salary in effect on January 1 of each such year.
(c) Stock Options. The Key Executive shall participate in the
-------------
Bell Atlantic 1985 Incentive Stock Option Plan or any successor to that
plan (the "Stock Option Plan") and shall receive an annual grant of
options thereunder with a value equal to or greater than 2.5 multiplied
by the Key Executive's base salary in effect on the date of grant.
- --------------------------------------------------------------------------------
Employment Agreement Page 1 Ivan G. Seidenberg
<PAGE>
(d) Vacation. The Key Executive shall have the same holidays
--------
per calendar year recognized by Bell Atlantic for its management
employees and shall have an aggregate of 4 management personal days and
5 weeks vacation per calendar year, provided that such management
personal days and vacation days shall be scheduled with due regard to
the needs of the business.
(e) Corporate Aircraft. The Key Executive and his immediate
------------------
family shall use Bell Atlantic corporate aircraft for all business and
personal travel, except that the Key Executive may use commercial
aircraft where use of corporate aircraft is not practical. The Key
Executive shall be responsible for the payment of taxes on imputed
income attributable to personal use of corporate aircraft, except that,
whenever the Key Executive uses corporate aircraft for business purposes
and is accompanied by an immediate family member whose use of corporate
aircraft results in the imputation of income to the Key Executive, the
Company shall pay the Key Executive additional cash compensation in an
amount sufficient to allow the Key Executive to pay taxes on (i) such
additional compensation, plus (ii) the income imputed to the Key
Executive because of such family member's use of corporate aircraft.
(f) Other Benefit Plans. To the extent not otherwise modified
-------------------
by the terms of this Agreement, the Key Executive shall be eligible to
participate in all of the benefit and compensation plans, and the
programs or perquisites, applicable to senior managers of Bell Atlantic,
as those plans and programs may be amended, supplemented, replaced or
terminated from time to time.
(g) Board of Directors. The Key Executive shall be nominated
------------------
for election to the Board at each annual meeting of shareowners which
occurs prior to the end of the Term of Employment, and shall be
appointed as Chairman of the Board.
3. Obligations of the Key Executive. During the Term of Employment,
--------------------------------
the Key Executive shall have the following obligations and duties.
(a) Director and Officer. The Key Executive shall fully and
--------------------
faithfully perform his duties and responsibilities (i) as Chairman of
the Board, and (ii) as the Chief Executive Officer of Bell Atlantic,
reporting only to the Board.
(b) Entire Business Efforts. The Key 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, 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 Key Executive's termination of employment, except to the extent
specifically permitted by the Board, and except for memberships on
boards of directors which the Key Executive holds on the date of this
Agreement, the Key Executive shall not, directly or indirectly, render
any services of a 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.
- --------------------------------------------------------------------------------
Employment Agreement Page 2 Ivan G. Seidenberg
<PAGE>
4. Potential Interim Amount. Effective January 1, 1999, Bell
------------------------
Atlantic shall credit $3,224,483 to the Company Contribution sub-account
contained within the Key Executive's account under the Bell Atlantic Income
Deferral Plan ("IDP"). This credit shall be allocated in full to the Bell
Atlantic Shares Fund maintained under the IDP. The Key Executive shall have the
right to change this allocation from the Bell Atlantic Shares Fund to any other
permitted investment option in accordance with the terms of the IDP. The parties
acknowledge that such credit is in complete satisfaction of and will fully
discharge any right or entitlement that the Key Executive may have, now or in
the future, to a Potential Interim Amount ("PIA") under the IDP or under any
other benefit plan maintained by any Bell Atlantic Company.
5. Retention Agreement Payments.
----------------------------
(a) Retention Award. Effective January 1, 1999, the Key
---------------
Executive will forfeit any right or entitlement that he may have, now or
in the future, to the Retention Award provided for in Section 3(e) of
the Retention Agreement. In lieu thereof, Bell Atlantic shall credit the
Key Executive's account under the IDP with the number of Bell Atlantic
shares comprising, as of January 1, 1999, the Retention Award. This
credit valued as $1,016,636 shall be allocated in full to the Bell
Atlantic Shares Fund maintained under the IDP, provided that the Key
Executive shall have the right to change this allocation from the Bell
Atlantic Shares Fund to any other permitted investment option in
accordance with the terms of the IDP.
(b) Severance. Effective January 1, 1999, Bell Atlantic shall
---------
credit the Key Executive's account under the IDP with the value of the
Severance Payment, including the Global Balanced Fund Account, provided
for in Section 3(h) of the Retention Agreement. Such value shall be
determined in accordance with the provisions of the Retention Agreement,
except that the value shall be determined as of December 31, 1998. This
credit shall be allocated to the following investment funds maintained
under the IDP: a) $136,146 of the Severance Payment shall be credited to
the Bell Atlantic Shares Fund; and b) the balance of the Severance
Payment in the amount of $4,377,290 shall be credited to the Government
Money Market Fund. The Key Executive shall have the right to change
these allocations to any other permitted investment option in accordance
with the terms of the IDP. The parties acknowledge that these credits to
the IDP shall be in complete satisfaction of, and will fully discharge,
any right or entitlement that the Key Executive may have, now or in the
future, to the Severance Payment.
6. Special Incentive.
-----------------
(a) Incentive Accounts. Bell Atlantic shall establish three
------------------
sub-accounts within the Key Executive's account under the IDP. These
sub-accounts shall consist of the 2001 Account, the 2002 Account and the
2003 Account (together, the "Incentive Accounts").
(b) Credit. Effective January 1, 1999, Bell Atlantic shall
------
credit $6,000,000 to the 2001 Account, $2,000,000 to the 2002 Account,
and $2,000,000 to the 2003 Account. These credits shall be allocated to
the Global Balanced Fund maintained under the IDP, and shall continue to
be allocated to such Fund until the credits vest as provided in Section
6(c) of this Agreement. The credits, plus any earnings or losses, shall
constitute the "Incentive Awards". The Key Executive shall have no right
or
- --------------------------------------------------------------------------------
Employment Agreement Page 3 Ivan G. Seidenberg
<PAGE>
entitlement to these Awards unless, and only to the extent that, rights
to these Awards vest under Section 6(c) of this Agreement.
(c) Vesting. Provided the Key Executive is an "employee in
good standing" (as hereinafter defined) on the respective vesting dates
described in clauses (i) through (iii), the Key Executive's rights under
the IDP to the Incentive Awards shall vest as follows:
(i) 2001 Account: if "adjusted earnings per share"
(or "AEPS"), as hereinafter defined, for Bell Atlantic for the
fiscal year ending December 31, 2001 are less than 121.0% of the
AEPS for the fiscal year ending December 31, 1998 (the "1998
Base Year"), the Key Executive shall forfeit any right or
entitlement to the Incentive Award in the 2001 Account; if such
earnings are equal to 121.0% of the 1998 Base Year AEPS, the Key
Executive's rights to 70% of such Incentive Award shall vest as
of December 31, 2001; if such earnings are equal to or greater
than 136.0% of the 1998 Base Year AEPS, the Key Executive's
rights to 130% of such Incentive Award shall vest as of December
31, 2001; and, if such earnings are between 121.0% and 136.0% of
the 1998 Base Year AEPS, the Key Executive's rights to a pro
rated amount of between 70% to 130% of such Incentive Award
shall vest as of December 31, 2001;
(ii) 2002 Account: if AEPS for Bell Atlantic for the
fiscal year ending December 31, 2002 are less than 107.0% of the
AEPS for the fiscal year ending December 31,2001 (the "2001 Base
Year"), the Key Executive shall forfeit any right or entitlement
to the Incentive Award in the 2002 Account; if such earnings are
equal to 107.0% of the 2001 Base Year AEPS, the Key Executive's
rights to 70% of such Incentive Award shall vest as of December
31, 2002; if such earnings are equal to or greater than 112.0%
of the 2001 Base Year AEPS, the Key Executive's rights to 130%
of such Retention Award shall vest as of December 31, 2002; and,
if such earnings are between 107.0% and 112.0% of the 2001 Base
Year AEPS, the Key Executive's rights to a pro rated amount of
between 70% and 130% of such Incentive Award shall vest as of
December 31, 2002; and
(iii) 2003 Account: if AEPS for Bell Atlantic for the
fiscal year ending December 31, 2003 are less than 107.0% of the
AEPS for the fiscal year ending December 31, 2002 (the "2002
Base Year"), the Key Executive shall forfeit any right or
entitlement to the Incentive Award in the 2003 Account; if such
earnings are equal to 107.0% of the 2002 Base Year AEPS, the Key
Executive's rights to 70% of such Incentive Award shall vest as
of December 31, 2003; if such earnings are equal to or greater
than 112.0% of the 2002 Base Year AEPS, the Key Executive's
rights to 130% of such Incentive Award shall vest as of December
31, 2003; and, if such earnings are between 107.0% and 112.0% of
the 2002 Base Year AEPS, the Key Executive's rights to a pro
rated amount of between 70% and 130% of such Incentive Award
shall vest as of December 31, 2003.
(d) Adjusted Earnings Per Share and Earnings Targets.
------------------------------------------------
"Adjusted earnings per share" for any year shall be the earnings per
share of Bell Atlantic adjusted,
- --------------------------------------------------------------------------------
Employment Agreement Page 4 Ivan G. Seidenberg
<PAGE>
in the discretion of the Board, to eliminate or modify any
extraordinary, non-reoccurring, one-time or other such items necessary
to more appropriately reflect the ongoing results of the Bell Atlantic
businesses. In addition, the Board, in its discretion, may modify or
change the earnings targets set forth in Section 6(c) of this Agreement
to take into account acquisitions, mergers, dispositions,
reorganizations, changes in capital structure, or other such events.
(e) Definition of Employee in Good Standing. For purposes of
---------------------------------------
this Agreement, the Key Executive will be considered to be an "employee
in good standing" on a given date if, on or before that date, the Key
Executive has not terminated employment for any reason (other than
"constructive discharge" as defined in Section 8(d) of this Agreement),
has not tendered oral or written notice of intent to resign or retire
effective as of a date on or before the given date (other than pursuant
to a "constructive discharge"), and has not behaved in a manner that
would be grounds for discharge with "cause" as defined in Section 8(b)
of this Agreement.
7. Stay Bonus.
----------
(a) Closing of Merger. If Bell Atlantic and GTE Corporation
-----------------
("GTE") merge their businesses (the "Merger") pursuant to the terms of
the Agreement and Plan of Merger dated as of July 27, 1998, among Bell
Atlantic, GTE, and Beta Gamma Corporation (the "Definitive Agreement"),
and if the Key Executive has remained an Employee in Good Standing of a
Bell Atlantic Company from the date of this Agreement to the closing
date of the Merger (the "Closing Date"), then, not later than 30
calendar days following the Closing Date, Bell Atlantic shall pay the
Key Executive a special bonus (a "Stay Bonus") consisting of a single
cash payment in an amount equal (before withholding of taxes) to 1.5
multiplied by the sum, as of the Closing Date, of (i) the Key
Executive's annual rate of base salary, and (ii) 50% of the Key
Executive's maximum short-term incentive under the STIP.
(b) Business Discretion of Bell Atlantic/Termination of
---------------------------------------------------
Merger Plan. Nothing in this Agreement is intended to limit the
-----------
discretion of any Bell Atlantic Company to take any action with regard
to the Merger which Bell Atlantic may consider appropriate, including,
without limitation, postponing the Closing Date or terminating the
Definitive Agreement. If the Definitive Agreement is terminated without
the Merger occurring, the Key Executive shall have no right to receive
the Stay Bonus or any portion of such bonus.
8. Terminations of Employment.
--------------------------
(a) Voluntary Resignation, Retirement, or Discharge for
---------------------------------------------------
Cause. In the event that, prior to the end of the Term of Employment,
-----
the Key Executive voluntarily resigns or retires for any reason (except
a "constructive discharge"), or is discharged by Bell Atlantic for
"cause", the Key Executive shall forfeit any and all rights to receive
the compensation and benefits set forth in Sections 2, 6 and 7 of this
Agreement which as of the relevant date have not yet been earned under
this Agreement, but shall otherwise be eligible to receive any and all
compensation and benefits for which a senior manager would be eligible
under the applicable provisions of the compensation and benefit plans
- --------------------------------------------------------------------------------
Employment Agreement Page 5 Ivan G. Seidenberg
<PAGE>
in which he is then eligible to participate, as those plans may be
amended from time to time.
(b) Cause. For purposes of this Agreement, the term "cause"
-----
shall mean (i) grossly incompetent performance or substantial or
continuing inattention to or neglect of the duties and responsibilities
assigned to the Key Executive; fraud, misappropriation or embezzlement
involving any Bell Atlantic Company; or a material breach of the
Employee Code of Business Conduct or Paragraphs 10 (Non-Compete/No
Solicitation), 11 (Return of Property; Intellectual Property Rights) or
12 (Proprietary and Confidential Information) of this Agreement; each of
the foregoing as determined in the reasonable discretion and judgment of
the Board, or (ii) commission of any felony of which the Key Executive
is finally adjudged guilty in a court of competent jurisdiction. In the
event that Bell Atlantic terminates the employment of the Key Executive
for Cause, it will state in writing the grounds for such termination and
provide this statement to the Key Executive within 10 business days
after the date of termination.
(c) Involuntary Terminations. Except in the case of a
------------------------
discharge for Cause, in the event that Bell Atlantic discharges the Key
Executive, or the Key Executive is "constructively discharged", prior to
the end of the Term of Employment, then the Key Executive shall be
entitled to receive, as liquidated damages, subject to signing and
delivering the Release (attached as Exhibit A), the following payments,
credits and benefits in lieu of any payment, credit or benefit otherwise
provided in Sections 2, 6 and 7 of this Agreement, provided that each
payment, credit and benefit shall be contingent upon the absence, at the
time such payment, credit or benefit is due, of any act that would
constitute a material breach of this Agreement:
(i) Salary: through the Term of Employment, on a
monthly basis, an amount equal to the monthly salary which would
have been paid to the Key Executive under Section 2 of this
Agreement, assuming that his annual rate of salary would have
been increased each January 1 by the greater of (A) 5%, or (B)
the general percentage increase, if any, approved by the Human
Resources Committee ("HRC") of the Board for comparable
positions in the senior management group based on the HRC's
review of market-median values for such comparable positions;
(ii) Short-Term Incentives: through the Term of
Employment, on an annual basis, 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, an amount equal to the
value of the potential maximum award which the Key Executive
would have been entitled to receive under the STIP based on the
maximum STIP award for comparable positions in the senior
management group, without adjustment for individual performance;
(iii) Special Incentive: if the separation from service
occurs prior to December 31, 2001, vested rights under the IDP
to 100% of the Incentive Awards in each of the Incentive
Accounts; if the separation from service occurs after December
31, 2001 but before December 31, 2002, vested rights under the
IDP to 100% of the Retention Awards in the 2002 and 2003
Incentive Accounts; and,
- --------------------------------------------------------------------------------
Employment Agreement Page 6 Ivan G. Seidenberg
<PAGE>
if the separation from service occurs after December 31, 2002,
vested rights under the IDP to 100% of the Incentive Award in
the 2003 Incentive Account;
(iv) Stock Options: through the Term of Employment,
on an annual basis, within 30 days of the granting of stock
options for the year to senior managers, an amount equal to 2.5
multiplied by the annual salary amount determined in accordance
with clause (i) above; provided further, with respect to any and
all Bell Atlantic stock options which are outstanding on the
date of the Key Executive's separation from service, the Key
Executive shall be deemed, for purposes of determining the
duration of the Key Executive's right to exercise any and all
such stock options, to have remained in active service with Bell
Atlantic continuously through the Term of Employment, and then
to have separated from service with whatever rights would then
be applicable to a holder of such options under the Stock Option
Plan;
(v) IDP Benefits: through the Term of Employment,
company credits to the Company Contribution sub-account
contained within the Key Executive's account under the IDP to
the fullest extent provided, and at the same time such amounts
would have been credited, as if the Key Executive had remained
actively employed until the end of the Term of Employment and
received the salary and maximum STIP awards determined in
accordance with clauses (i) and (ii) above; provided further,
that Bell Atlantic shall also credit to such IDP sub-account an
amount each year equal to the sum of (A) the amount which the
Key Executive would otherwise have been eligible to receive as
company matching contributions under the Bell Atlantic Savings
Plan or any successor to that plan (if he had fully participated
in contributions to that plan) and (B) the pay credits which the
Key Executive would otherwise have been eligible to receive
under the Bell Atlantic Cash Balance Plan or any successor to
that plan;
(vi) Split- Dollar Benefits: regardless of whether
the Key Executive is retirement eligible at the time of his
separation from service, split-dollar life insurance benefits
applicable to a retiring participating senior manager, under the
terms of the Bell Atlantic Senior Management Estate Management
Program;
(vii) Flexible Perquisites: through the Term of
Employment, on a monthly basis, $3,000 in lieu of the Flexible
Perquisites Account allowance that the Key Executive would have
been entitled to receive;
(viii) Stay Bonus: if the Merger subsequently occurs
pursuant to the Definitive Agreement, a single cash payment, not
later than 30 days after the Closing Date of the Merger, which
shall be equal (before withholding of taxes) to the Stay Bonus
which would otherwise have become payable under Section 7(a) of
this Agreement, provided that the date of separation from
service shall be substituted for the Closing Date for purposes
of calculating the dollar amount of such payment; and
(ix) Other: accommodations for travel, office support
and facilities, executive assistance and other perquisites as
provided previous retiring Chairmen.
- --------------------------------------------------------------------------------
Employment Agreement Page 7 Ivan G. Seidenberg
<PAGE>
(d) Constructive Discharge. The Key Executive shall be deemed
----------------------
to have been "constructively discharged" for purposes of this Agreement
if the Key Executive is an Employee in Good Standing and he terminates
his employment for any of the following reasons: Bell Atlantic (or the
Key Executive's employing company) has materially breached this
Agreement; the Key Executive's responsibilities have been significantly
reduced in type or scope; there has been a significant adverse change in
the Key Executive's reporting relationship; there has been a significant
adverse change in the Key Executive's relative compensation (including a
negative individual performance adjustment which causes the Key
Executive's STIP award for a particular year to be reduced by 10% or
more); the Key is removed from the position of Chairman of the Board
during the Term of Employment; or there has been a "change of control"
of Bell Atlantic. For purposes of this Agreement, a "change of control"
of Bell Atlantic shall mean that any of the following events or
circumstances has occurred:
(i) any "Person" (as such term is used in sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934)
becomes a beneficial owner, directly or indirectly, of shares of
one or more classes of stock of Bell Atlantic representing 20%
or more of the total voting power of Bell Atlantic's then
outstanding voting stock, provided, however, that if such
beneficial ownership is acquired in a transaction that has been
negotiated and approved by the Board, such acquisition of
beneficial ownership shall not be treated as a change of control
of Bell Atlantic for purpose of this Agreement;
(ii) a tender offer (for which a filing has been or is
required to be made with the Securities and Exchange Commission
under section 14(d) of the Securities Exchange Act of 1934) is
made for the stock of Bell Atlantic, and the Person making the
offer owns or has accepted for payment shares of one or more
classes of Bell Atlantic stock which represent, when combined
with any shares otherwise acquired and owned by such Person, 20%
or more of the total voting power of Bell Atlantic's then
outstanding stock, provided, however, that if such tender offer
has been negotiated and approved by the Board, such tender offer
and stock acquisition shall not be treated as a change of
control of Bell Atlantic for purposes of this Agreement; or
(iii) there ceases to be a majority of the Board
comprised of individuals who either (A) have been members of the
Board continuously for a period of not less than two years, or
(B) are new directors whose election by the Board or nomination
for election by shareowners of Bell Atlantic was approved by a
vote of at least two-thirds of the directors then in office who
either were directors described in clause (A) hereof or whose
election or nomination for election was previously so approved.
(e) Disability or Death. If, during the Term of Employment at
-------------------
a time when the Key Executive is an Employee in Good Standing, the Key
Executive terminates employment on account of disability (within the
meaning of the applicable disability benefit plans in which the Key
Executive participates from time to time) or dies, and provided Bell
Atlantic receives a Release in the form of Exhibit A from the Key
Executive
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Employment Agreement Page 8 Ivan G. Seidenberg
<PAGE>
(in the case of disability) or from his estate (in the case of death),
then Bell Atlantic shall pay to the Key Executive (in the case of
disability) or pay to the Key Executive's estate (in the case of death)
the amounts determined as if, at the date of termination of employment
on account of disability or death, the Key Executive had been terminated
without cause under Section 8(c) of this Agreement; provided, however,
that in lieu of the amount described in Section 8(c)(viii) of this
Agreement (the "Stay Bonus Amount"), the Key Executive (or his estate)
shall receive the Stay Bonus Amount multiplied by the following
fraction: the numerator shall be the number of days that have elapsed
between the date of this Agreement and the date of the Key Executive's
death or disability, and the denominator shall be the number of days
that have elapsed between the date of this Agreement and the Closing
Date of the Merger; and, provided further, that in the case of a
termination of employment on account of disability, the amounts paid
pursuant to Sections 8(c)(i) and (ii) of this Agreement shall reduce
dollar for dollar the disability benefits which would otherwise be
payable to the Key Executive during the remainder of the Term of
Employment under the various disability benefit plans in which he
participates.
9. Payments Subject to Excise Tax. In the event that it shall be
------------------------------
determined, in the manner described in Exhibit B, that any payment or
distribution by any Bell Atlantic Company to or for the benefit of the Key
Executive, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, Bell
Atlantic shall pay the Key Executive an additional amount, determined in
accordance with and subject to the provisions of Exhibit B, to compensate the
Key Executive for his excise tax cost.
10. Prohibition Against Competitive Activities.
------------------------------------------
(a) Prohibited Conduct by the Key Executive. During the
---------------------------------------
period of the Key Executive's employment with any Bell Atlantic Company,
and for a period of 24 months following the Key Executive's termination
of employment for any reason from all Bell Atlantic Companies, the Key
Executive, without the prior written consent of the Board, shall not:
(i) personally engage in "Competitive Activities" (as
defined in Section 9(b) of this Agreement); or
(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, or any company or person
affiliated with such person or entity engaged in Competitive
Activities; provided, however, that the Key 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 Key Executive's equity interest in any such company
is less than a controlling interest.
(b) Competitive Activities. For purposes of this Agreement,
----------------------
"Competitive Activities" means business activities relating to products
or services of the same or similar type as the products or services
which (i) are sold (or, pursuant to an existing
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Employment Agreement Page 9 Ivan G. Seidenberg
<PAGE>
business plan, will be sold) to paying customers of one or more Bell
Atlantic Companies, and (ii) for which the Key Executive then has
responsibility to plan, develop, manage, market or oversee, or had any
such responsibility within the prior 24 months. Notwithstanding the
previous sentence, a business activity will not be treated as a
Competitive Activity if the geographic marketing area of the relevant
products or services sold by the Key Executive or a third party does not
overlap with the geographic marketing area for the applicable products
and services of the Bell Atlantic Companies.
(c) No Solicitation of Bell Atlantic Employees. During the
------------------------------------------
period of the Key Executive's employment with any Bell Atlantic Company,
and for a period of 24 months following the Key Executive's termination
of employment for any reason from all Bell Atlantic Companies, the Key
Executive shall not, without the consent of the Board:
(i) recruit or solicit any active employee of any Bell
Atlantic Company for employment or for retention as a consultant
or service provider;
(ii) hire or participate (with another company or third
party) in the process of hiring (other than for a Bell Atlantic
Company) any person who is then an active employee of any Bell
Atlantic Company, or provide names or other information about
Bell Atlantic employees to any person or business (other than a
Bell Atlantic Company) under circumstances which could lead to
the use of that information for purposes of recruiting or
hiring; or
(iii) interfere with the relationship of any Bell
Atlantic Company with any of its employees, agents, or
representatives.
(d) Waiver. Nothing in this Agreement shall bar the Key
------
Executive from requesting, at the time of the Key Executive's
termination of employment or at any time thereafter, that the Board
waive, in its sole discretion, Bell Atlantic's rights to enforce some or
all of this Section.
11. Return of Property; Intellectual Property Rights. The Key
------------------------------------------------
Executive agrees that on or before the Key Executive's termination of employment
for any reason with all Bell Atlantic Companies, the Key Executive shall return
to the appropriate Bell Atlantic Company all property owned by each such company
or in which any such company has an interest. The Key Executive acknowledges
that Bell Atlantic or an applicable Bell Atlantic Company is the rightful owner
of any programs, ideas, inventions, discoveries, copyright material or
trademarks which the Key Executive may have originated or developed, or assisted
in originating or developing, during the Key Executive's period of employment
with any Bell Atlantic Company, where any such origination or development
involved the use of company time or resources, or the exercise of the Key
Executive's responsibilities for or on behalf of any such company. The Key
Executive shall at all times, both before and after termination of employment,
cooperate with Bell Atlantic in executing and delivering documents requested by
any Bell Atlantic Company, and taking any other actions, that are necessary or
requested by Bell Atlantic to assist any Bell Atlantic Company in patenting,
copyrighting or registering any programs, ideas, inventions, discoveries,
copyright material or trademarks, and to vest title thereto in the applicable
company.
12. Proprietary and Confidential Information. The Key Executive
----------------------------------------
shall at all times preserve the confidentiality of all proprietary information
and trade secrets of any and all Bell
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Employment Agreement Page 10 Ivan G. Seidenberg
<PAGE>
Atlantic Companies, except to the extent that disclosure of such information is
legally required. "Proprietary information" means information that has not been
disclosed to the public, and which is treated as confidential within the
business of any Bell Atlantic Company.
13. Nondisclosure. Unless and until the precise terms of this Agreement,
-------------
and the precise amount of any payment eligible to be paid or actually paid under
this Agreement, are disclosed in writing to the public by any Bell Atlantic
Company, the Key Executive shall hold the terms of this Agreement and the amount
of any payment, benefit, credit, or right hereunder in strict confidence, except
that the Key Executive may disclose such details (i) on a confidential basis to
his spouse (if any), and to any financial counselor, tax adviser or legal
counsel retained by the Key Executive, or (ii) to the extent such disclosure is
legally required.
14. Assignment by Bell Atlantic. The obligations of Bell Atlantic
---------------------------
hereunder shall be the obligations of any and all successors and assigns of Bell
Atlantic. Bell Atlantic may assign this Agreement without the Key Executive's
consent to any company that acquires all or substantially all of the stock or
assets of Bell Atlantic, or into which or with which Bell Atlantic is merged or
consolidated. This Agreement may not be assigned by the Key Executive, and no
person other than the Key Executive (or the Key Executive's estate) may assert
the rights of the Key Executive under this Agreement.
15. Non-Benefit Bearing Payments. The amounts to be paid, provided or
----------------------------
credited under Sections 4, 5, 6, 7, 8, and 9 of this Agreement shall not be
treated as compensation for purposes of computing or determining any additional
benefit payable under any savings plan, insurance plan, pension plan, or other
employee benefit plan maintained by any Bell Atlantic Company.
16. Deferrals under IDP. Amounts otherwise payable to the Key Executive
-------------------
under Sections 7 or 8 of this Agreement may be deferred under the IDP or any
successor plan, but only if and to the extent that a valid deferral election is
in place and deferral of such amounts is permitted under the terms of the IDP or
successor plan.
17. Forfeiture of IDP Amounts. The Key Executive acknowledges that if he
-------------------------
breaches Section 10 (Non-Compete/No Solicitation) of this Agreement or engages
in serious misconduct that is contrary to written policies of Bell Atlantic and
is harmful to any Bell Atlantic Company or its reputation, he may forfeit any
balance remaining in any Company Contribution sub-account contained within his
account under the IDP.
18. Waiver. Failure to insist upon strict compliance with any of the
------
terms, covenants or conditions of this Agreement shall not be deemed a waiver of
such term, covenant or condition, nor shall any waiver or relinquishment of any
right or power hereunder at any one or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
19. Additional Remedies. In addition to any other rights or remedies,
-------------------
whether legal, equitable or otherwise, which each of the parties may have, the
Key Executive acknowledges that Sections 10 (Non-Compete/No Solicitation), 11
(Return of Property), 12 Proprietary and Confidential Information), and 13
(Nondisclosure) of this Agreement are essential to the continued good will and
profitability of Bell Atlantic and further acknowledges that the application and
operation thereof shall not involve a substantial hardship upon the Key
Executive's future
- --------------------------------------------------------------------------------
Employment Agreement Page 11 Ivan G. Seidenberg
<PAGE>
livelihood. The parties hereto further recognize that irreparable damage to Bell
Atlantic will result in the event that these sections of the Agreement are not
specifically enforced and that monetary damages will not adequately protect Bell
Atlantic from a breach of these sections of the Agreement. If any dispute arises
concerning the violation by the Key Executive of these sections of the
Agreement, the parties hereto agree that an injunction may be issued restraining
such violation pending the determination of such controversy, and no bond or
other security may be required in connection therewith.
20. Reformation and Severability. The Key Executive and Bell Atlantic
----------------------------
agree that the agreements contained herein and within the Release shall each
constitute a separate agreement independently supported by good and adequate
consideration, and shall each be severable from the other provisions of the
Agreement and the Release. If an arbitrator or court of competent jurisdiction
determines that any term, provision or portion of this Agreement or the Release
is void, illegal or unenforceable, the other terms, provisions and portions of
this Agreement or the Release shall remain in full force and effect and the
terms, provisions and portions that are determined to be void, illegal or
unenforceable shall either be limited so that they shall remain in effect to the
extent permissible by law, or such arbitrator or court shall substitute, to the
extent enforceable, provisions similar thereto or other provisions, so as to
provide to Bell Atlantic, to the fullest extent permitted by applicable law, the
benefits intended by this Agreement and the Release.
21. GTE Merger. If the Merger occurs pursuant to the Definitive
----------
Agreement, any action taken to implement succession as contemplated under
Section 7.10 of the Definitive Agreement shall not result in a breach of this
Agreement or constitute grounds for Constructive Discharge under Section 8(d) of
this Agreement, and this Agreement shall be amended to the extent necessary to
permit such succession.
22. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed to have been duly given if delivered by hand or
messenger, transmitted by telex or telegram or mailed by registered or certified
mail, return receipt requested and postage prepaid, as follows:
(a) If to Bell Atlantic, to:
Bell Atlantic Corporation
1095 Avenue of the Americas
New York, New York 10036
Attention: Executive Vice President
and General Counsel
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Employment Agreement Page 12 Ivan G. Seidenberg
<PAGE>
(b) If to the Key Executive, to:
5 Quail Hollow Lane
West Nyack, NY 10994
or to such other person or address as either of the parties shall hereafter
designate to the other from time to time by similar notice.
23. Arbitration. Any dispute arising out of or relating to this
-----------
Agreement, except any dispute arising out of or relating to Sections 10 through
13 of this Agreement, shall be settled by final and binding arbitration, which
shall be the exclusive means of resolving any such dispute, and the parties
specifically waive all rights to pursue any other remedy, recourse or relief.
With respect to disputes by Bell Atlantic arising out of or relating to Sections
10 through 13 of this Agreement, Bell Atlantic has retained all its rights to
legal and equitable recourse and relief, including but not limited to injunctive
relief. Notice of the existence of a dispute which a party wishes to have
resolved by arbitration shall be provided pursuant to Section 22 of this
Agreement. The arbitration shall be expedited and conducted in New York, New
York pursuant to the Center for Public Resources ("CPR") Rules for
Non-Administered Arbitration of Employment Disputes in effect at the time of
notice of the dispute before one neutral arbitrator appointed by CPR from the
CPR Panel of Neutrals unless the parties mutually agree to the appointment of a
different neutral arbitrator. The arbitration shall be governed by the United
States Arbitration Act, 9 U.S.C. Sections 1-16, and judgment upon the award
rendered by the arbitration may be entered by any court having jurisdiction. The
finding of the arbitrator may not change the express terms of this Agreement and
shall be consistent with the arbitrator's understanding of the findings a court
of proper jurisdiction would make in applying the applicable law to the facts
underlying the dispute. In no event whatsoever shall such an arbitration award
include any award of damages other than the amounts in controversy under this
Agreement. The parties waive the right to recover, in such arbitration, punitive
damages.
24. Governing Law. This Agreement shall be construed and enforced in
-------------
accordance with the laws of the State of New York.
25. Entire Agreement. Except for the terms of other compensation and
----------------
benefit plans in which the Key Executive participates, this Agreement shall set
forth the entire understanding of Bell Atlantic and the Key Executive and shall
supersede all prior agreements and communications, whether oral or written,
between Bell Atlantic and the Key Executive including, without limitation, the
Retention Agreement and the Prior Employment Agreement. This Agreement shall not
be modified except by written agreement of the Key Executive and Bell Atlantic.
26. Tax Withholding. Any payment made pursuant to this Agreement will be
---------------
subject to applicable withholding taxes under federal, state and local law.
- --------------------------------------------------------------------------------
Employment Agreement Page 13 Ivan G. Seidenberg
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
BELL ATLANTIC CORPORATION
By:
-------------------------
THE KEY EXECUTIVE
----------------------------
Ivan G. Seidenberg
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Employment Agreement Page 14 Ivan G. Seidenberg
<PAGE>
EXHIBIT A
---------
THIS RELEASE (the "Release") is entered into by _____________________
(the "Key Executive"), for the benefit of BELL ATLANTIC CORPORATION (the
"Company"), and all companies, and their officers, directors and employees,
which are affiliated with the Company or in which the Company owns a substantial
economic interest, and any benefit plan maintained by any Bell Atlantic Company
(or any plan administrator of any such plan). Capitalized terms in this document
which are not otherwise defined herein shall have the respective meanings
assigned to them in the Employment Agreement between the Company and the Key
Executive, dated ____________, _____ (the "Agreement").
WHEREAS, the Key Executive has separated from service with the Key
Executive's employing company (the "Employer") on __________ , _____ (the
"Separation Date") pursuant to the terms of the Agreement, and the Key Executive
wishes to execute this Release as contemplated under the terms of the Agreement.
NOW, THEREFORE, the Key Executive affirms as follows:
1. The Key Executive hereby waives any and all claims which the Key
Executive might have against any Bell Atlantic Company, and any benefit plan
maintained by any Bell Atlantic Company (or any plan administrator of any such
plan), for salary payments, vacation pay, incentives, bonuses, or other
remuneration or employee benefits of any kind, with the exception of any
obligations of the Company or Employer arising after the Separation Date under
Sections 8 and 9 of the Agreement.
2. Except as provided in Section 1 hereof, the Key Executive hereby
voluntarily releases and discharges each and every Bell Atlantic Company and
their successors and assigns, and the directors, officers, employees, and agents
of each of them, and any benefit plan maintained by any Bell Atlantic Company
(or any plan administrator of any such plan), 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 which the Key
Executive might have or assert against any of said entities or persons as of the
Separation Date by reason of the Key Executive's employment by any Bell Atlantic
Company or the termination of said employment, and all circumstances related
thereto, including but not limited to, any and all claims, demands, rights and
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, the Employee Retirement Income
Security Act ("ERISA") or any other applicable federal, state or local
employment discrimination statute or ordinance.
<PAGE>
3. The Key Executive hereby reaffirms all covenants and promises given
by the Key Executive under the Agreement, and all other 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 KEY EXECUTIVE WHO IS SIGNING BELOW: THE COMPANY HAS
---------------------------------------------------
ADVISED ME IN WRITING TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS
RELEASE. THE COMPANY HAS FULFILLED ITS DUTIES TO ME UNDER THE OLDER WORKERS
BENEFITS PROTECTION ACT, AND I ACKNOWLEDGE THAT THIS RELEASE IS LEGALLY
ENFORCEABLE BY THE COMPANY. 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 _________, _____, that being the Key Executive's
Separation Date.
THE KEY EXECUTIVE
Signed:
--------------------------------
THIS IS A RELEASE
READ CAREFULLY BEFORE SIGNING
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Employment Agreement Page 16 Ivan G. Seidenberg
<PAGE>
EXHIBIT B
---------
Determination of Gross-Up Payment. In the event that any payment or
---------------------------------
benefit received or to be received by the Key Executive pursuant to the terms of
the Agreement (the "Contract Payments") or of any other plan, arrangement or
agreement of any Bell Atlantic Company ("Other Payments" and, together with the
Contract Payments, the "Payments") would be subject to the excise tax (the
"Excise Tax") imposed by section 4999 of the Internal Revenue Code (the "Code")
as determined in accordance with this paragraph, Bell Atlantic shall pay to the
Key Executive, at the time specified below, an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Key Executive, after
deduction of the Excise Tax on Payments and any federal, state and local income
tax and the Excise Tax upon the Gross-Up Payment, and any interest, penalties or
additions to tax payable by the Key Executive with respect thereto, shall be
equal to the total present value (using the applicable federal rate (as defined
in Section 1274(d) of the Code) in such calculation) of the Payments at the time
such Payments are to be made. For purposes of determining whether any of the
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(i) the total amount of the Payments shall be treated as "parachute payments"
within the meaning of section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of section 280G(b)(1) of the Code shall be treated
as subject to the Excise Tax, except to the extent that, in the written opinion
of independent counsel selected by Bell Atlantic and reasonably acceptable to
the Key Executive ("Independent Counsel"), a Payment (in whole or in part) does
not constitute a "parachute payment" within the meaning of section 280G(b)(2) of
the Code, or such "excess parachute payments" (in whole or in part) are not
subject to the Excise Tax; (ii) the amount of the Payments that shall be treated
as subject to the Excise Tax shall be equal to the lesser of (A) the total
amount of the Payments or (B) the amount of "excess parachute payments" within
the meaning of section 280G(b)(1) of the Code (after applying clause (i)
hereof); and (iii) the value of any noncash benefits or any deferred payment or
benefit shall be determined by Independent Counsel in accordance with the
principles of sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the Key Executive shall be
deemed to pay federal income taxes at the highest marginal rates of federal
income taxation applicable to individuals in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rates of taxation applicable to individuals as are in effect in the
state and locality of the Key Executive's residence in the calendar year in
which the Gross-Up Payment is to be made, net of the maximum reduction in
federal income taxes that can be obtained from deduction of such state and local
taxes, taking into account any limitations applicable to individuals subject to
federal income tax at the highest marginal rates.
Timing of Gross-Up Payment. The Gross-Up Payments provided for in this
--------------------------
Exhibit B shall be made upon the earlier of (i) the payment to the Key Executive
of any Payment or (ii) the imposition upon the Key Executive or payment by the
Key Executive of any Excise Tax.
Adjustments to Gross-Up Payment. If it is established pursuant to a
-------------------------------
final determination of a court or an Internal Revenue Service proceeding or the
written opinion of Independent Counsel that the Excise Tax is less than the
amount previously taken into account hereunder, the Key Executive shall repay to
Bell Atlantic within thirty (30) days of
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Employment Agreement Page 17 Ivan G. Seidenberg
<PAGE>
the Key Executive's receipt of notice of such final determination or opinion the
portion of the Gross-Up Payment attributable to such reduction (plus the portion
of the Gross-Up Payment attributable to the Excise Tax and federal, state and
local income tax imposed on the Gross-Up Payment being repaid by the Key
Executive if such repayment results in a reduction in Excise Tax or a federal,
state and local income tax deduction) plus any interest received by the Key
Executive on the amount of such repayment, provided, however, that if any such
amount has been paid by the Key Executive as an Excise Tax or other tax, the Key
Executive shall cooperate with Bell Atlantic in seeking a refund of any tax
overpayments, and shall not be required to make repayments to Bell Atlantic
until the overpaid taxes and interest thereon are refunded to the Key Executive.
If it is established pursuant to a final determination of a court or an Internal
Revenue Service proceeding or the written opinion of Independent Counsel that
the Excise Tax exceeds the amount taken into account hereunder (including by
reason of any payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), Bell Atlantic shall make an additional
Gross-Up Payment in respect of such excess within thirty (30) days of Bell
Atlantic's receipt of notice of such final determination or opinion.
Change in Law or Interpretation. In the event of any change in, or
-------------------------------
further interpretation of, sections 280G or 4999 of the Code and the regulations
promulgated thereunder, the Key Executive shall be entitled, by written notice
to Bell Atlantic, to request a written opinion of Independent Counsel regarding
the application of such change to any of the foregoing, and Bell Atlantic shall
use its best efforts to cause such opinion to be rendered as promptly as
practicable. All fees and expenses of Independent Counsel incurred in connection
with this Exhibit B shall be borne by Bell Atlantic.
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Employment Agreement Page 18 Ivan G. Seidenberg
<PAGE>
EXHIBIT 10gg
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of the 27th day
of October, 1998, by and between Bell Atlantic Corporation, its successors and
assigns ("Bell Atlantic"), and Alexander H. Good, the Executive Vice President -
Strategy and Corporate Development of Bell Atlantic (the "Key Executive"). In
this Agreement, "Bell Atlantic Companies" means all of, and "Bell Atlantic
Company" means any one of, Bell Atlantic, all corporate subsidiaries or other
companies affiliated with Bell Atlantic, all companies in which Bell Atlantic
directly or indirectly owns a substantial equity interest, and their successors
and assigns.
WHEREAS, Bell Atlantic and the Key Executive have previously entered
into a Separation and Non-Compete Agreement dated May 3, 1996 (the "Prior
Agreement"); and
WHEREAS, Bell Atlantic and the Key Executive wish to supersede, in its
entirety, the Prior Agreement;
NOW, THEREFORE, for good and valuable consideration, the Key Executive
and Bell Atlantic hereby agree as follows:
1. Term of Employment. The term of employment under this
------------------
Agreement (the "Term of Employment") shall commence on the date first set forth
above and end on May 31, 2001.
2. Obligations of the Bell Atlantic Companies. During the Term of
------------------------------------------
Employment, the Bell Atlantic Companies shall have the following obligations and
duties and shall provide the following compensation to the Key Executive.
(a) Salary. One or more Bell Atlantic Companies shall employ
------
the Key Executive as an officer and senior manager, and shall
compensate the Key Executive at a base salary of not less than his
current base salary
(b) STIP. The Key Executive shall participate in the Bell
----
Atlantic Senior Management Short Term Incentive Plan or any successor
to that plan ("STIP") and shall be eligible each year during the Term
of Employment for a potential maximum award which shall not be less
than the potential maximum award he is eligible to receive for the
performance year 1998.
(c) Stock Options. The Key Executive shall participate in the
-------------
Bell Atlantic 1985 Incentive Stock Option Plan or any successor to that
plan (the "Stock Option Plan") and shall receive an annual grant of
options thereunder with a value equal to or greater than 1.2 multiplied
by the Key Executive's base salary on the date of grant.
(d) Vacation. The Key Executive shall have the same holidays
--------
per calendar year recognized by his employing company for its
management employees and shall have an aggregate of 4 management
personal days and 5 weeks vacation per calendar
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Employment Agreement Page 1 Alexander H. Good
<PAGE>
year, provided that such management personal days and vacation days
shall be scheduled with due regard to the needs of the business.
(e) Other Benefit Plans. To the extent not otherwise modified
-------------------
by the terms of this Agreement, the Key Executive shall be eligible to
participate in all of the benefit and compensation plans, and the
programs or perquisites, applicable to similarly-situated senior
managers of Bell Atlantic, as those plans and programs may be amended,
supplemented, replaced or terminated from time to time.
3. Obligations of the Key Executive. During the Term of
--------------------------------
Employment, the Key Executive shall have the following obligations and duties.
(a) Officer. The Key Executive shall continue to fully and
-------
faithfully perform his duties and responsibilities as an officer,
reporting only to the Chief Executive Officer, provided that, for
purposes of this Agreement, the term "Chief Executive Officer" shall
include a Co-Chief Executive Officer.
(b) Executive. The Key Executive shall serve in such
---------
executive capacities, with such titles and authorities, as the Board of
Directors of Bell Atlantic (the "Board") or the Chief Executive Officer
may from time to time prescribe, and the Key Executive shall perform
all duties incidental to such positions, shall cooperate fully with the
Board and the Chief Executive Officer, and shall work cooperatively
with the other officers of the Bell Atlantic Companies.
(c) Entire Business Efforts. The Key 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, 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 Key Executive's termination of employment, except to the extent
specifically permitted by the Chief Executive Officer or the Board, and
except for memberships on boards of directors which the Key Executive
holds on the date of this Agreement, the Key Executive shall not,
directly or indirectly, render any services of a 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.
4. Retention Award.
---------------
(a) Credit. As of the date of this Agreement, Bell Atlantic
------
shall credit $1,000,000 to the Key Executive's account under the Bell
Atlantic Income Deferral Plan ("IDP"). This credit shall be allocated
to the Global Balanced Fund maintained under the IDP, and shall
continue to be allocated to such fund until the credit becomes vested
as provided in Section 4(b) of this Agreement. The $1,000,000 credit,
plus any earnings or loss credited thereto, shall constitute the
"Retention Award".
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Employment Agreement Page 2 Alexander H. Good
<PAGE>
(b) Vesting. Provided the Key Executive remains an "Employee
-------
in Good Standing" (as hereinafter defined) of a Bell Atlantic Company
from the date of this Agreement to May 31, 2001, the Key Executive's
rights under the IDP to the Retention Award shall vest on May 31, 2001,
and the amount of the Retention Award shall be paid to the Key
Executive in accordance with any distribution election or elections
that the Key Executive has made pursuant to the terms of the IDP.
(c) Definition of Employee in Good Standing. For purposes of
---------------------------------------
this Agreement, the Key Executive will be considered to be an "Employee
in Good Standing" on a given date if, on or before that date, the Key
Executive has not terminated employment for any reason (other than
"constructive discharge" as defined in Section 6(d) of this Agreement),
has not tendered oral or written notice of intent to resign or retire
effective as of a date on or before the given date (other than pursuant
to a "constructive discharge" as defined in Section 6(d) of this
Agreement), and has not behaved in a manner that would be grounds for
discharge with cause as defined in Section 6(b) of this Agreement.
5. Stay Bonus.
----------
(a) Closing of Merger. If Bell Atlantic and GTE Corporation
-----------------
("GTE") merge their businesses (the "Merger") pursuant to the terms of
the Agreement and Plan of Merger dated as of July 27, 1998, among Bell
Atlantic, GTE, and Beta Gamma Corporation (the "Definitive Agreement"),
and if the Key Executive has remained an Employee in Good Standing of a
Bell Atlantic Company from the date of this Agreement to the closing
date of the Merger (the "Closing Date"), then, not later than 30
calendar days following the Closing Date, Bell Atlantic shall cause the
Bell Atlantic Company which then employs the Key Executive to pay the
Key Executive a special bonus (a "Stay Bonus") consisting of a single
cash payment in an amount equal (before withholding of taxes) to 1.5
multiplied by the sum, as of the Closing Date, of (i) the Key
Executive's annual rate of base salary, and (ii) 50% of the Key
Executive's maximum short-term incentive under the STIP.
(b) Business Discretion of Bell Atlantic/Termination of
---------------------------------------------------
Merger Plan. Nothing in this Agreement is intended to limit the
-----------
discretion of any Bell Atlantic Company to take any action with regard
to the Merger which Bell Atlantic may consider appropriate, including,
without limitation, postponing the Closing Date or terminating the
Definitive Agreement. If the Definitive Agreement is terminated without
the Merger occurring, the Key Executive shall have no right to receive
the Stay Bonus or any portion of such bonus.
6. Terminations of Employment.
--------------------------
(a) Voluntary Resignation, Retirement, or Discharge for
---------------------------------------------------
Cause. In the event that, prior to the end of the Term of Employment,
-----
the Key Executive voluntarily resigns or retires for any reason (except
a "constructive discharge", as hereinafter defined, or is discharged by
Bell Atlantic for "cause" (as hereinafter defined), the Key Executive
shall forfeit any and all rights to receive the compensation and
benefits set forth in Sections 2 and 5 of this Agreement which as of
the relevant date have not yet
- --------------------------------------------------------------------------------
Employment Agreement Page 3 Alexander H. Good
<PAGE>
been earned under this Agreement, and shall forfeit the right to
receive the Retention Award set forth in Section 4 of this Agreement,
but shall otherwise be eligible to receive any and all compensation and
benefits for which a similarly-situated senior manager would be
eligible under the applicable provisions of the compensation and
benefit plans in which he is then eligible to participate, as those
plans may be amended from time to time.
(b) Cause. For purposes of this Agreement, the term "cause"
-----
shall mean (i) grossly incompetent performance or substantial or
continuing inattention to or neglect of the duties and responsibilities
assigned to the Key Executive; fraud, misappropriation or embezzlement
involving any Bell Atlantic Company; or a material breach of the
Employee Code of Business Conduct or Sections 8 (Non-Compete/No
Solicitation), 9 (Return of Property; Intellectual Property Rights) or
10 (Proprietary and Confidential Information) of this Agreement; each
of the foregoing as determined in the reasonable discretion and
judgment of the Chief Executive Officer of Bell Atlantic, or (ii)
commission of any felony of which the Key Executive is finally adjudged
guilty in a court of competent jurisdiction. In the event that Bell
Atlantic terminates the employment of the Key Executive for cause, it
will state in writing the grounds for such termination and provide this
statement to the Key Executive within 10 business days after the date
of termination.
(c) Involuntary Terminations. Except in the case of a
------------------------
discharge for cause, in the event that Bell Atlantic discharges the Key
Executive, or the Key Executive is "constructively discharged" (as
hereinafter defined), prior to the end of the Term of Employment, then
the Key Executive shall be entitled to receive, as liquidated damages,
subject to signing and delivering the Release (attached as Exhibit A),
the following payments, credits and benefits in lieu of any payment,
credit, or benefit otherwise provided in Sections 2, 4 and 5 of this
Agreement, provided that each payment, credit and benefit shall be
contingent upon the absence, at the time such payment, credit or
benefit is due, of any act that would constitute a material breach of
this Agreement:
(i) Salary: through the Term of Employment, on a
monthly basis, an amount equal to the monthly salary which
would have been paid to the Key Executive under Section 2 of
this Agreement, assuming that his annual rate of salary would
have been increased each January 1 by the greater of (A) 5%,
or (B) the general percentage increase, if any, approved by
the Human Resources Committee ("HRC") of the Board for
comparable positions in the senior management group based on
the HRC's review of market-median values for such comparable
positions;
(ii) Short-Term Incentives: through the Term of
Employment, on an annual basis, 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, an amount
equal to the value of the potential maximum award which the
Key Executive would have been entitled to receive under the
STIP based on the maximum STIP award for comparable positions
in the senior management group, without adjustment for
individual performance;
(iii) Retention Award: immediate vesting under the
IDP of the Retention Award provided for in Section 4 of this
Agreement;
- --------------------------------------------------------------------------------
Employment Agreement Page 4 Alexander H. Good
<PAGE>
(iv) Stay Bonus: if the Merger subsequently occurs
pursuant to the Definitive Agreement, a single cash payment,
not later than 30 days after the Closing Date of the Merger,
which shall be equal (before withholding of taxes) to the Stay
Bonus which would otherwise have become payable under Section
5(a) of this Agreement, provided that the date of discharge
shall be substituted for the Closing Date for purposes of
calculating the dollar amount of such payment;
(v) Stock Options: through the Term of Employment, on
an annual basis, within 30 days of the granting of stock
options for the year to senior managers, an amount equal to
1.2 multiplied by the annual salary amount determined in
accordance with clause (i) above; provided further, with
respect to any and all Bell Atlantic stock options which are
outstanding on the date of the Key Executive's separation from
service, the Key Executive shall be deemed, for purposes of
determining the duration of the Key Executive's right to
exercise any and all such stock options, to have remained in
active service with Bell Atlantic continuously through the
Term of Employment, and then to have separated from service
with whatever rights would then be applicable to a holder of
such options under the Stock Option Plan;
(vi) IDP Benefits: through the Term of Employment,
company credits to the Company Contribution sub-account
contained within the Key Executive's account under the IDP to
the fullest extent provided, and at the same time such amounts
would have been credited, as if the Key Executive had remained
actively employed until the end of the Term of Employment and
received the salary and maximum STIP awards determined in
accordance with clauses (i) and (ii) above; provided further,
that Bell Atlantic shall also credit to such IDP sub-account
an amount each year equal to the sum of (A) the amount which
the Key Executive would otherwise have been eligible to
receive as company matching contributions under the Bell
Atlantic Savings Plan or any successor to that plan (if he had
fully participated in contributions to that plan) and (B) the
pay credits which the Key Executive would otherwise have been
eligible to receive under the Bell Atlantic Cash Balance Plan
or any successor to that plan;
(vii) Split- Dollar Benefits: regardless of whether
the Key Executive is retirement eligible at the time of his
separation from service, split-dollar life insurance benefits
applicable to a retiring participating senior manager, under
the terms of the Bell Atlantic Senior Management Estate
Management Program; and
(viii) Flexible Perquisites: through the Term of
Employment, on a monthly basis, $2,000 in lieu of the Flexible
Perquisites Account allowance that the Key Executive would
have been entitled to receive.
(d) Constructive Discharge. The Key Executive shall be deemed
----------------------
to have been "constructively discharged" for purposes of this Agreement
if the Key Executive is an Employee in Good Standing and he terminates
his employment for any of the following reasons: Bell Atlantic (or the
Key Executive's employing company) has materially breached this
Agreement; the Key Executive's responsibilities have been significantly
reduced in type or scope; there has been a significant adverse change
in the
- --------------------------------------------------------------------------------
Employment Agreement Page 5 Alexander H. Good
<PAGE>
Key Executive's reporting relationship; there has been a significant
adverse change in the Key Executive's relative compensation (including
a negative individual performance adjustment which causes the Key
Executive's STIP award for a particular year to be reduced by 10% or
more); Ivan Seidenberg is not elected Chairman of the Board by December
31, 1998 or is removed from or resigns from that position during the
Term of Employment (unless the Board determines that such event results
from Mr. Seidenberg's death, "Disability" (as defined in Section 4(a)
of his Employment Agreement, dated as of August 14, 1998), or his
election to terminate his employment "without Good Reason" (as provided
in Section 4(c) of his Employment Agreement); or there has been a
"change of control" of Bell Atlantic. For purposes of this Agreement, a
change of control of Bell Atlantic shall mean that any of the following
events or circumstances has occurred:
(i) any "Person" (as such term is used in sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934)
becomes a beneficial owner, directly or indirectly, of shares
of one or more classes of stock of Bell Atlantic representing
20% or more of the total voting power of Bell Atlantic's then
outstanding voting stock, provided, however, that if such
beneficial ownership is acquired in a transaction that has
been negotiated and approved by the Board, such acquisition of
beneficial ownership shall not be treated as a change of
control of Bell Atlantic for purpose of this Agreement;
(ii) a tender offer (for which a filing has been or
is required to be made with the Securities and Exchange
Commission under section 14(d) of the Securities Exchange Act
of 1934) is made for the stock of Bell Atlantic, and the
Person making the offer owns or has accepted for payment
shares of one or more classes of Bell Atlantic stock which
represent, when combined with any shares otherwise acquired
and owned by such Person, 20% or more of the total voting
power of Bell Atlantic's then outstanding stock, provided,
however, that if such tender offer has been negotiated and
approved by the Board, such tender offer and stock acquisition
shall not be treated as a change of control of Bell Atlantic
for purposes of this Agreement; or
(iii) there ceases to be a majority of the Board
comprised of individuals who either (A) have been members of
the Board continuously for a period of not less than two
years, or (B) are new directors whose election by the Board or
nomination for election by shareowners of Bell Atlantic was
approved by a vote of at least two-thirds of the directors
then in office who either were directors described in clause
(A) hereof or whose election or nomination for election was
previously so approved.
(e) Disability or Death. If, during the Term of Employment
-------------------
at a time when the Key Executive is an Employee in Good Standing, the
Key Executive terminates employment on account of disability (within
the meaning of the applicable disability benefit plans in which the Key
Executive participates from time to time) or dies, and provided Bell
Atlantic receives a Release in the form of Exhibit A from the Key
Executive (in the case of disability) or from his estate (in the case
of death), then Bell Atlantic shall continue to pay to the Key
Executive (in the case of disability) or pay to the Key Executive's
estate (in the case of death) the amounts determined as if, at the date
of termination of employment on account of disability or death, the Key
Executive had been
- --------------------------------------------------------------------------------
Employment Agreement Page 6 Alexander H. Good
<PAGE>
terminated without cause under Section 6(c) of this Agreement;
provided, however, that in lieu of the amount described in Section
6(c)(iv) of this Agreement (the "Stay Bonus Amount"), the Key Executive
(or his estate) shall receive the Stay Bonus Amount multiplied by the
following fraction: the numerator shall be the number of days that have
elapsed between the date of this Agreement and the date of the Key
Executive's death or disability, and the denominator shall be the
number of days that have elapsed between the date of this Agreement and
the Closing Date of the Merger; and, provided further, that in the case
of a termination of employment on account of disability, the amounts
paid pursuant to Sections 6(c)(i) and (ii) of this Agreement shall
reduce dollar for dollar the disability benefits which would otherwise
be payable to the Key Executive during the remainder of the Term of
Employment under the various disability benefit plans in which he
participates.
7. Payments Subject to Excise Tax. In the event that it shall be
------------------------------
determined, in the manner described in Exhibit B, that any payment or
distribution by any Bell Atlantic Company to or for the benefit of the Key
Executive, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, Bell
Atlantic shall pay the Key Executive an additional amount, determined in
accordance with and subject to the provisions of Exhibit B, to compensate the
Key Executive for his excise tax cost.
8. Prohibition Against Competitive Activities.
------------------------------------------
(a) Prohibited Conduct by the Key Executive. During the period
---------------------------------------
of the Key Executive's employment with any Bell Atlantic Company, and
for a period of 24 months following the Key Executive's termination of
employment for any reason from all Bell Atlantic Companies, the Key
Executive, without the prior written consent of the Chief Executive
Officer of Bell Atlantic shall not:
(i) personally engage in "Competitive Activities" (as
defined in Section 8(b) of this Agreement); or
(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, or any company or person affiliated with such person or
entity engaged in Competitive Activities; provided, however, that
the Key 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 Key Executive's equity interest in any such
company is less than a controlling interest.
(b) Competitive Activities. For purposes of this Agreement,
"Competitive Activities" means business activities relating to products
or services of the same or similar type as the products or services
which (i) are sold (or, pursuant to an existing business plan, will be
sold) to paying customers of one or more Bell Atlantic Companies, and
(ii) for which the Key Executive then has responsibility to plan,
develop, manage, market or oversee, or had any such responsibility
within the prior 24 months. Notwithstanding the previous sentence, a
business activity will not be treated as a
- --------------------------------------------------------------------------------
Employment Agreement Page 7 Alexander H. Good
<PAGE>
Competitive Activity if the geographic marketing area of the relevant
products or services sold by the Key Executive or a third party does
not overlap with the geographic marketing area for the applicable
products and services of the Bell Atlantic Companies.
(c) No Solicitation of Bell Atlantic Employees. During the
------------------------------------------
period of the Key Executive's employment with any Bell Atlantic
Company, and for a period of 24 months following the Key Executive's
termination of employment for any reason from all Bell Atlantic
Companies, the Key Executive shall not, without the consent of the
Chief Executive Officer of Bell Atlantic:
(i) recruit or solicit any active employee of any
Bell Atlantic Company for employment or for retention as a
consultant or service provider;
(ii) hire or participate (with another company or
third party) in the process of hiring (other than for a Bell
Atlantic Company) any person who is then an active employee of
any Bell Atlantic Company, or provide names or other
information about Bell Atlantic employees to any person or
business (other than a Bell Atlantic Company) under
circumstances which could lead to the use of that information
for purposes of recruiting or hiring; or
(iii) interfere with the relationship of any Bell
Atlantic Company with any of its employees, agents, or
representatives.
(d) Waiver. Nothing in this Agreement shall bar the Key
Executive from requesting, at the time of the Key Executive's
termination of employment or at any time thereafter, that the Chief
Executive Officer of Bell Atlantic waive, in his sole discretion, Bell
Atlantic's rights to enforce some or all of this Section.
9. Return of Property; Intellectual Property Rights. The Key
------------------------------------------------
Executive agrees that on or before the Key Executive's termination of employment
for any reason with all Bell Atlantic Companies, the Key Executive shall return
to the appropriate Bell Atlantic Company all property owned by each such company
or in which any such company has an interest, including files, documents, data
and records (whether on paper or in tapes, disks, or other machine-readable
form), office equipment, credit cards and employee identification cards. The Key
Executive acknowledges that Bell Atlantic or an applicable Bell Atlantic Company
is the rightful owner of any programs, ideas, inventions, discoveries, copyright
material or trademarks which the Key Executive may have originated or developed,
or assisted in originating or developing, during the Key Executive's period of
employment with any Bell Atlantic Company, where any such origination or
development involved the use of company time or resources, or the exercise of
the Key Executive's responsibilities for or on behalf of any such company. The
Key Executive shall at all times, both before and after termination of
employment, cooperate with Bell Atlantic in executing and delivering documents
requested by any Bell Atlantic Company, and taking any other actions, that are
necessary or requested by Bell Atlantic to assist any Bell Atlantic Company in
patenting, copyrighting or registering any programs, ideas, inventions,
discoveries, copyright material or trademarks, and to vest title thereto in the
applicable company.
10. Proprietary and Confidential Information. The Key Executive shall
----------------------------------------
at all times preserve the confidentiality of all proprietary information and
trade secrets of any and all Bell Atlantic Companies, except to the extent that
disclosure of such information is legally required.
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Employment Agreement Page 8 Alexander H. Good
<PAGE>
"Proprietary information" means information that has not been disclosed to the
public, and which is treated as confidential within the business of any Bell
Atlantic Company, such as strategic or tactical business plans; 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; undisclosed information concerning any past, pending or
threatened legal dispute; 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 the Key
Executive knows a Bell Atlantic Company is bound to protect.
11. Nondisclosure. Unless and until the precise terms of this
-------------
Agreement, and the precise amount of any payment eligible to be paid or actually
paid under this Agreement, are disclosed in writing to the public by any Bell
Atlantic Company, the Key Executive shall hold the terms of this Agreement and
the amount of any payment, benefit, credit, or right hereunder in strict
confidence, except that the Key Executive may disclose such details (i) on a
confidential basis to his spouse (if any), and to any financial counselor, tax
adviser or legal counsel retained by the Key Executive, or (ii) to the extent
such disclosure is legally required.
12. Assignment by Bell Atlantic. The obligations of Bell Atlantic
---------------------------
hereunder shall be the obligations of any and all successors and assigns of Bell
Atlantic. Bell Atlantic may assign this Agreement without the Key Executive's
consent to any company that acquires all or substantially all of the stock or
assets of Bell Atlantic, or into which or with which Bell Atlantic is merged or
consolidated. This Agreement may not be assigned by the Key Executive, and no
person other than the Key Executive (or the Key Executive's estate) may assert
the rights of the Key Executive under this Agreement.
13. Non-Benefit Bearing Payments. The amounts to be paid, provided or
----------------------------
credited under Sections 4, 5, 6, and 7 of this Agreement shall not be treated as
compensation for purposes of computing or determining any additional benefit to
be paid, provided or credited under any savings plan, insurance plan, pension
plan, or other employee benefit plan maintained by any Bell Atlantic Company.
14. Deferrals under IDP. Amounts otherwise payable to the Key Executive
-------------------
under Section 5 and 6 of this Agreement may be deferred under the IDP or any
successor plan, but only if and to the extent that a valid deferral election is
in place and deferral of such amounts is permitted under the terms of the IDP or
successor plan.
15. Forfeiture of IDP Amounts. The Key Executive acknowledges that if
-------------------------
he breaches Section 8 (Non-Compete/No Solicitation) of this Agreement or engages
in serious misconduct that is contrary to written policies of Bell Atlantic and
is harmful to any Bell Atlantic Company or its reputation, he may forfeit any
balance remaining in any Company Contribution sub-account contained within his
account under the IDP.
16. Waiver. Failure to insist upon strict compliance with any of the
------
terms, covenants or conditions of this Agreement shall not be deemed a waiver of
such term, covenant or condition, nor shall any waiver or relinquishment of any
right or power hereunder at any one or
- --------------------------------------------------------------------------------
Employment Agreement Page 9 Alexander H. Good
<PAGE>
more times be deemed a waiver or relinquishment of such right or power at any
other time or times.
17. Additional Remedies. In addition to any other rights or remedies,
-------------------
whether legal, equitable or otherwise, which each of the parties may have, the
Key Executive acknowledges that Sections 8 (Non-Compete/No Solicitation), 9
(Return of Property), 10 (Proprietary and Confidential Information), and 11
(Nondisclosure) of this Agreement are essential to the continued good will and
profitability of Bell Atlantic and further acknowledges that the application and
operation thereof shall not involve a substantial hardship upon the Key
Executive's future livelihood. The parties hereto further recognize that
irreparable damage to Bell Atlantic will result in the event that these sections
of the Agreement are not specifically enforced and that monetary damages will
not adequately protect Bell Atlantic from a breach of these sections of the
Agreement. If any dispute arises concerning the violation by the Key Executive
of these sections of the Agreement, the parties hereto agree that an injunction
may be issued restraining such violation pending the determination of such
controversy, and no bond or other security may be required in connection
therewith.
18. Reformation and Severability. The Key Executive and Bell Atlantic
----------------------------
agree that the agreements contained herein and within the Release shall each
constitute a separate agreement independently supported by good and adequate
consideration, and shall each be severable from the other provisions of the
Agreement and the Release. If an arbitrator or court of competent jurisdiction
determines that any term, provision or portion of this Agreement or the Release
is void, illegal or unenforceable, the other terms, provisions and portions of
this Agreement or the Release shall remain in full force and effect and the
terms, provisions and portions that are determined to be void, illegal or
unenforceable shall either be limited so that they shall remain in effect to the
extent permissible by law, or such arbitrator or court shall substitute, to the
extent enforceable, provisions similar thereto or other provisions, so as to
provide to Bell Atlantic, to the fullest extent permitted by applicable law, the
benefits intended by this Agreement and the Release. If Bell Atlantic's
Independent Certified Public Accountants determine that Section 6(d) of this
Agreement, in whole or in part, prevents Bell Atlantic from complying with the
provisions of Section 7.16 of the Definitive Agreement, then the Key Executive
agrees to amend Section 6(d) of this Agreement to the extent necessary to permit
compliance with such Section 7.16.
19. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed to have been duly given if delivered by hand or
messenger, transmitted by telex or telegram or mailed by registered or certified
mail, return receipt requested and postage prepaid, as follows:
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Employment Agreement Page 10 Alexander H. Good
<PAGE>
(a) If to Bell Atlantic, to:
Bell Atlantic Corporation
1095 Avenue of the Americas
New York, New York 10036
Attention: Executive Vice President
Human Resources
(b) If to the Key Executive, to:
412 Prince Street
Alexandria, Virginia 22314
or to such other person or address as either of the parties shall hereafter
designate to the other from time to time by similar notice.
20. Arbitration. Any dispute arising out of or relating to this
-----------
Agreement, except any dispute arising out of or relating to Sections 8 through
11 of this Agreement, shall be settled by final and binding arbitration, which
shall be the exclusive means of resolving any such dispute, and the parties
specifically waive all rights to pursue any other remedy, recourse or relief.
With respect to disputes by Bell Atlantic arising out of or relating to Sections
8 through 11 of this Agreement, Bell Atlantic has retained all its rights to
legal and equitable recourse and relief, including but not limited to injunctive
relief, as referred to in Section 17 of this Agreement. Notice of the existence
of a dispute which a party wishes to have resolved by arbitration shall be
provided pursuant to Section 20 of this Agreement. The arbitration shall be
expedited and conducted in New York, New York pursuant to the Center for Public
Resources ("CPR") Rules for Non-Administered Arbitration of Employment Disputes
in effect at the time of notice of the dispute before one neutral arbitrator
appointed by CPR from the CPR Panel of Neutrals unless the parties mutually
agree to the appointment of a different neutral arbitrator. The arbitration
shall be governed by the United States Arbitration Act, 9 U.S.C. Sections 1-16,
and judgment upon the award rendered by the arbitration may be entered by any
court having jurisdiction. The finding of the arbitrator may not change the
express terms of this Agreement and shall be consistent with the arbitrator's
understanding of the findings a court of proper jurisdiction would make in
applying the applicable law to the facts underlying the dispute. In no event
whatsoever shall such an arbitration award include any award of damages other
than the amounts in controversy under this Agreement. The parties waive the
right to recover, in such arbitration, punitive damages.
21. Governing Law. This Agreement shall be construed and enforced in
-------------
accordance with the laws of the State of New York.
22. Entire Agreement. Except for the terms of other compensation and
----------------
benefit plans in which the Key Executive participates, this Agreement shall set
forth the entire understanding of Bell Atlantic and the Key Executive and shall
supersede all prior agreements and communications, whether oral or written,
between Bell Atlantic and the Key Executive including, without limitation, the
Prior Agreement. This Agreement shall not be modified except by written
agreement of the Key Executive and Bell Atlantic.
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Employment Agreement Page 11 Alexander H. Good
<PAGE>
23. Tax Withholding. Any payment made pursuant to this Agreement will
---------------
be subject to applicable withholding taxes under federal, state and local law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
BELL ATLANTIC CORPORATION
By: _______________________
Ivan Seidenberg
Chief Executive Officer
THE KEY EXECUTIVE
By: _______________________
Alexander H. Good
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Employment Agreement Page 12 Alexander H. Good
<PAGE>
EXHIBIT A
---------
THIS RELEASE (the "Release") is entered into by _____________________
(the "Key Executive"), for the benefit of BELL ATLANTIC CORPORATION (the
"Company"), and all companies, and their officers, directors and employees,
which are affiliated with the Company or in which the Company owns a substantial
economic interest, and any benefit plan maintained by any Bell Atlantic Company
(or any plan administrator of any such plan). Capitalized terms in this document
which are not otherwise defined herein shall have the respective meanings
assigned to them in the Employment Agreement between the Company and the Key
Executive, dated ____________, _____ (the "Agreement").
WHEREAS, the Key Executive has separated from service with the Key
Executive's employing company (the "Employer") on __________ , _____ (the
"Separation Date") pursuant to the terms of the Agreement, and the Key Executive
wishes to execute this Release as contemplated under the terms of the Agreement.
NOW, THEREFORE, the Key Executive affirms as follows:
1. The Key Executive hereby waives any and all claims which the Key
Executive might have against any Bell Atlantic Company, and any benefit plan
maintained by any Bell Atlantic Company (or any plan administrator of any such
plan), for salary payments, vacation pay, incentives, bonuses, or other
remuneration or employee benefits of any kind, with the exception of any
obligations of the Company or Employer arising after the Separation Date under
Sections 5 or 6 of the Agreement.
2. Except as provided in Section 1 hereof, the Key Executive hereby
voluntarily releases and discharges each and every Bell Atlantic Company and
their successors and assigns, and the directors, officers, employees, and agents
of each of them, and any benefit plan maintained by any Bell Atlantic Company
(or any plan administrator of any such plan), 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 which the Key
Executive might have or assert against any of said entities or persons as of the
Separation Date by reason of the Key Executive's employment by any Bell Atlantic
Company or the termination of said employment, and all circumstances related
thereto, including but not limited to, any and all claims, demands, rights and
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, the Employee Retirement Income
Security Act ("ERISA") or any other applicable federal, state or local
employment discrimination statute or ordinance.
<PAGE>
3. The Key Executive hereby reaffirms all covenants and promises given
by the Key Executive under the Agreement, and all other 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 KEY EXECUTIVE WHO IS SIGNING BELOW: THE COMPANY HAS
---------------------------------------------------
ADVISED ME IN WRITING TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS
RELEASE. THE COMPANY HAS FULFILLED ITS DUTIES TO ME UNDER THE OLDER WORKERS
BENEFITS PROTECTION ACT, AND I ACKNOWLEDGE THAT THIS RELEASE IS LEGALLY
ENFORCEABLE BY THE COMPANY. 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 _________, _____, that being the Key Executive's
Separation Date.
THE KEY EXECUTIVE
Signed:
-----------------------------
THIS IS A RELEASE
READ CAREFULLY BEFORE SIGNING
- --------------------------------------------------------------------------------
Exhibits to Employment Agreement Page 14 Alexander H. Good
<PAGE>
EXHIBIT B
---------
Determination of Gross-Up Payment. In the event that any payment or
---------------------------------
benefit received or to be received by the Key Executive pursuant to the terms of
the Agreement (the "Contract Payments") or of any other plan, arrangement or
agreement of any Bell Atlantic Company ("Other Payments" and, together with the
Contract Payments, the "Payments") would be subject to the excise tax (the
"Excise Tax") imposed by section 4999 of the Internal Revenue Code (the "Code")
as determined in accordance with this paragraph, Bell Atlantic shall pay to the
Key Executive, at the time specified below, an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Key Executive, after
deduction of the Excise Tax on Payments and any federal, state and local income
tax and the Excise Tax upon the Gross-Up Payment, and any interest, penalties or
additions to tax payable by the Key Executive with respect thereto, shall be
equal to the total present value (using the applicable federal rate (as defined
in Section 1274(d) of the Code) in such calculation) of the Payments at the time
such Payments are to be made. For purposes of determining whether any of the
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(i) the total amount of the Payments shall be treated as "parachute payments"
within the meaning of section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of section 280G(b)(1) of the Code shall be treated
as subject to the Excise Tax, except to the extent that, in the written opinion
of independent counsel selected by Bell Atlantic and reasonably acceptable to
the Key Executive ("Independent Counsel"), a Payment (in whole or in part) does
not constitute a "parachute payment" within the meaning of section 280G(b)(2) of
the Code, or such "excess parachute payments" (in whole or in part) are not
subject to the Excise Tax; (ii) the amount of the Payments that shall be treated
as subject to the Excise Tax shall be equal to the lesser of (A) the total
amount of the Payments or (B) the amount of "excess parachute payments" within
the meaning of section 280G(b)(1) of the Code (after applying clause (i)
hereof); and (iii) the value of any noncash benefits or any deferred payment or
benefit shall be determined by Independent Counsel in accordance with the
principles of sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the Key Executive shall be
deemed to pay federal income taxes at the highest marginal rates of federal
income taxation applicable to individuals in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rates of taxation applicable to individuals as are in effect in the
state and locality of the Key Executive's residence in the calendar year in
which the Gross-Up Payment is to be made, net of the maximum reduction in
federal income taxes that can be obtained from deduction of such state and local
taxes, taking into account any limitations applicable to individuals subject to
federal income tax at the highest marginal rates.
Timing of Gross-Up Payment. The Gross-Up Payments provided for in this
--------------------------
Exhibit B shall be made upon the earlier of (i) the payment to the Key Executive
of any Payment or (ii) the imposition upon the Key Executive or payment by the
Key Executive of any Excise Tax.
Adjustments to Gross-Up Payment. If it is established pursuant to a
-------------------------------
final determination of a court or an Internal Revenue Service proceeding or the
written opinion of Independent Counsel that the Excise Tax is less than the
amount previously taken into account hereunder, the Key Executive shall repay to
Bell Atlantic within thirty (30) days of
- --------------------------------------------------------------------------------
Exhibits to Employment Agreement Page 15 Alexander H. Good
<PAGE>
the Key Executive's receipt of notice of such final determination or opinion the
portion of the Gross-Up Payment attributable to such reduction (plus the portion
of the Gross-Up Payment attributable to the Excise Tax and federal, state and
local income tax imposed on the Gross-Up Payment being repaid by the Key
Executive if such repayment results in a reduction in Excise Tax or a federal,
state and local income tax deduction) plus any interest received by the Key
Executive on the amount of such repayment, provided, however, that if any such
amount has been paid by the Key Executive as an Excise Tax or other tax, the Key
Executive shall cooperate with Bell Atlantic in seeking a refund of any tax
overpayments, and shall not be required to make repayments to Bell Atlantic
until the overpaid taxes and interest thereon are refunded to the Key Executive.
If it is established pursuant to a final determination of a court or an Internal
Revenue Service proceeding or the written opinion of Independent Counsel that
the Excise Tax exceeds the amount taken into account hereunder (including by
reason of any payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), Bell Atlantic shall make an additional
Gross-Up Payment in respect of such excess within thirty (30) days of Bell
Atlantic's receipt of notice of such final determination or opinion.
Change in Law or Interpretation. In the event of any change in, or
-------------------------------
further interpretation of, sections 280G or 4999 of the Code and the regulations
promulgated thereunder, the Key Executive shall be entitled, by written notice
to Bell Atlantic, to request a written opinion of Independent Counsel regarding
the application of such change to any of the foregoing, and Bell Atlantic shall
use its best efforts to cause such opinion to be rendered as promptly as
practicable. All fees and expenses of Independent Counsel incurred in connection
with this Exhibit B shall be borne by Bell Atlantic.
- --------------------------------------------------------------------------------
Exhibits to Employment Agreement Page 16 Alexander H. Good
<PAGE>
EXHIBIT 10kk
FORM OF
STAY INCENTIVE AGREEMENT
(Doreen A. Toben, Ellen C. Wolf)
THIS STAY INCENTIVE AGREEMENT (the "Agreement") is made as of the 23rd
day of November, 1998, by and between Bell Atlantic Corporation, its successors
and assigns ("Bell Atlantic"), and ________________________________, an employee
of a Bell Atlantic Company (the "Key Employee"). In this Agreement, "Bell
Atlantic Company" means any or all of the following: Bell Atlantic, a corporate
subsidiary or other company affiliated with Bell Atlantic, a company in which
Bell Atlantic owns directly or indirectly an equity interest of at least ten
percent, and the successors and assigns of any such company.
WHEREAS, pursuant to the terms of an Agreement and Plan of Merger,
dated as of July 27, 1998, among Bell Atlantic, GTE Corporation ("GTE") and Beta
Gamma Corporation (the "Definitive Agreement"), Bell Atlantic contemplates a
merger of the Bell Atlantic and GTE businesses (the "Merger") on a date which is
yet to be decided (the "Closing Date");
WHEREAS, Bell Atlantic considers the Key Employee to be an employee
whose continuing services, leadership and support are and will be valuable,
especially during the period prior to the Closing Date; and
WHEREAS, subject to the terms of this Agreement, Bell Atlantic wishes
to incent the Key Employee to remain an employee in good standing during this
period;
NOW, THEREFORE, for good and valuable consideration, the Key Employee
and Bell Atlantic hereby agree as follows:
1. Stay Incentive.
--------------
(a) Stay Incentive Bonus at Closing. If the Merger occurs pursuant to
-------------------------------
the Definitive Agreement, and if the Key Employee has remained an "Employee in
Good Standing" (as defined in Section 1(c) of this Agreement) of a Bell Atlantic
Company from the date of this Agreement to the Closing Date, then, not later
than 30 calendar days following the Closing Date, Bell Atlantic will cause the
Bell Atlantic Company which then employs the Key Employee to pay the Key
Employee a special stay incentive bonus (a "Stay Bonus") consisting of a single
cash payment in an amount equal (before withholding of taxes) to 1.5 multiplied
by the greater of (i) the sum of the Key Employee's annual rate of base salary
and 50% of the Key Employee's maximum short-term incentive under the Bell
Atlantic Short Term Incentive Plan (or other applicable short-term incentive
plan), both as of the date of this Agreement, or (ii) the sum of such items,
both as of the Closing Date.
(b) Adjusted Stay Incentive Bonus if Merger Plan is Terminated. If the
----------------------------------------------------------
Definitive Agreement is terminated without the Merger occurring, and the Key
Employee has remained an "Employee in Good Standing" of a Bell Atlantic Company
from the date of this Agreement to the date the Definitive Agreement is
terminated, then, not later than 30 calendar days following the date of
termination of the Definitive Agreement, Bell Atlantic will cause the Bell
Atlantic Company which then employs the Key Employee to pay the Key Employee a
special adjusted stay
<PAGE>
incentive bonus (an "Adjusted Stay Bonus") consisting of a single cash payment
in an amount equal (before withholding of taxes) to 25 percent of the Stay Bonus
described in Section 1(a) of this Agreement, except that the date of termination
of the Definitive Agreement shall be substituted for the Closing Date for
purposes of calculating such amount.
(c) Definition of Employee in Good Standing. For purposes of this
---------------------------------------
Agreement, the Key Employee will be considered to be an "Employee in Good
Standing" on a given date if, on that date, the Key Employee is employed by a
Bell Atlantic Company, has not tendered oral or written notice of intent to
resign or retire effective as of a date on or before the given date, and has not
behaved in a manner that would be grounds for discharge for "Cause" as defined
in Section 1(d) of this Agreement.
(d) Definition of Cause. For purposes of this Agreement, the term
-------------------
"Cause" shall mean grossly incompetent performance or substantial or continuing
inattention to or neglect of the duties and responsibilities assigned to the Key
Employee as determined by the Key Employee's current supervisor, with the
concurrence of the Executive Vice President - Human Resources of Bell Atlantic;
fraud, misappropriation or embezzlement involving any Bell Atlantic Company; a
material breach of the Employee Code of Business Conduct or this Agreement; or
commission of any felony of which the Key Employee is finally adjudged guilty in
a court of competent jurisdiction.
2. Termination of Employment.
-------------------------
(a) Voluntary Resignation, Retirement, or Discharge for Cause. In the
---------------------------------------------------------
event that, prior to the Closing Date or termination of the Definitive
Agreement, the Key Employee voluntarily resigns or retires for any reason or is
discharged by a Bell Atlantic Company for Cause, the Key Employee shall forfeit
any and all rights to receive a Stay Bonus or an Adjusted Stay Bonus under
Section 1 of this Agreement.
(b) Involuntary Terminations. In the event that a Bell Atlantic
------------------------
Company discharges the Key Employee other than for Cause, and either (i) the
Merger subsequently occurs pursuant to the Definitive Agreement, or (ii) the
Definitive Agreement is terminated without the Merger occurring, then Bell
Atlantic shall cause the Key Employee's last employing Bell Atlantic Company to
pay the Key Employee a bonus equal in amount to the Stay Bonus or Adjusted Stay
Bonus which would otherwise have become payable under Section 1 (a) or (b) of
this Agreement, provided that the payment of such bonus shall be contingent upon
the absence, at the time of payment, of any act by the Key Employee that would
constitute a material breach of this Agreement, and provided further that the
date of discharge shall be substituted for the dates described in Section 1 (a)
or (b) for purposes of calculating the dollar amount of such bonus. Such bonus
shall be paid not later than the date on which the Stay Bonus or Adjusted Stay
Bonus would otherwise have become payable.
(c) Payment in Case of Death or Disability. In the event that the Key
--------------------------------------
Employee dies, or terminates his or her employment on account of disability
(within the meaning of the applicable disability benefit plan in which the Key
Employee participates from time to time) on a date on which the Key Employee was
an Employee in Good Standing, and the Merger subsequently occurs pursuant to the
Definitive Agreement, Bell Atlantic shall cause the Key Employee's last
employing Bell Atlantic Company to pay the Key Employee, or the Key Employee's
estate in the event of death, a single cash payment which shall be equal (before
withholding of taxes) to the Stay Bonus multiplied by the following fraction:
the numerator shall
2
<PAGE>
be the number of days that have elapsed between the date of this Agreement and
the date of the Key Employee's death or disability, and the denominator shall be
the number of days that have elapsed between the date of this Agreement and the
Closing Date of the Merger. Such payment shall be made in accordance with the
timetable prescribed in Section 1(a) of this Agreement, substituting the date of
death or disability for the date described in Section 1(a) for purposes of
calculating the dollar amount of the payment. If the Definitive Agreement is
terminated without the Merger occurring after the Key Employee's death or
disability, and if the Key Employee was an Employee in Good Standing on the date
of such death or disability, a single cash payment shall be made to the Key
Employee, or the Key Employee's estate in the event of death, in an amount equal
(before withholding of taxes) to the Adjusted Stay Bonus. Such payment shall be
made in accordance with the timetable prescribed in Section 1(b) of this
Agreement, substituting the date of death or disability for the date described
in Section 1(b) for purposes of calculating the dollar amount of the payment.
3. Prohibition Against Recruiting or Hiring. Commencing on the
----------------------------------------
effective date of this Agreement and at all times thereafter through the second
anniversary of the Key Employee's termination of employment for any reason from
all Bell Atlantic Companies, the Key Employee shall not, without the consent of
the Executive Vice President - Human Resources of Bell Atlantic:
(i) recruit or solicit any active employee of any Bell
Atlantic Company for employment or for retention as a
consultant or service provider;
(ii) hire, or participate (with another company or third
party) in the process of hiring (other than for a Bell
Atlantic Company) any person who is then an active employee of
any Bell Atlantic Company, or provide names or other
information about Bell Atlantic employees to any person or
business (other than a Bell Atlantic Company) under
circumstances which the Key Employee knows or should know
could lead to the use of that information for purposes of
recruiting or hiring; or
(iii) interfere with the relationship of any Bell Atlantic
Company with any of its employees, agents, or representatives.
4. Confidentiality. The Key Employee agrees not to disclose or
---------------
discuss, other than with the Key Employee's legal counsel, financial or tax
adviser, and spouse (if any) either the existence of or any details of this
Agreement. The Key Employee will make a good faith effort to ensure that any
such legal counsel, financial or tax adviser, or spouse will not disclose or
discuss the existence or any details of this Agreement with any other person.
5. Proprietary Information. The Key Employee shall at all times
-----------------------
preserve the confidentiality of all proprietary information and trade secrets of
any and all Bell Atlantic Companies. "Proprietary information" means information
obtained or developed by the Key Employee during the Key Employee's employment
with any Bell Atlantic Company that has not been fully disclosed in a writing
generally circulated to the public at large, and which is treated as
confidential within the business of any Bell Atlantic Company.
6. Deferrals under IDP. Amounts otherwise payable to the Key
-------------------
Employee under Sections 1 or 2 of this Agreement may be deferred under the Bell
Atlantic Income Deferral Plan ("IDP") or any successor plan in accordance with
the terms of the IDP.
3
<PAGE>
7. Assignment by Bell Atlantic. Bell Atlantic may assign this
---------------------------
Agreement without the Key Employee's consent to any company that acquires all or
substantially all of the stock or assets of Bell Atlantic, or into which or with
which Bell Atlantic is merged or consolidated. This Agreement may not be
assigned by the Key Employee, and no person other than the Key Employee (or the
Key Employee's estate) may assert the rights of the Key Employee under this
Agreement.
8. Business Discretion of Bell Atlantic. Nothing in this
------------------------------------
Agreement is intended to limit the discretion of any Bell Atlantic Company to
take any action with regard to the Merger which Bell Atlantic may consider
appropriate, including, without limitation, postponing the Closing Date or
terminating the Definitive Agreement. This Agreement is not a contract to retain
the Key Employee in the employ of any Bell Atlantic Company for any prescribed
period or term. This Agreement does not modify the employment-at-will status of
the Key Employee.
9. Non-Benefit Bearing Payments. Any amount to be paid under
----------------------------
Section 1 or Section 2 of this Agreement shall not be treated as compensation
for purposes of computing or determining any additional benefit payable under
any savings plan, insurance plan, pension plan, or other employee benefit plan
maintained by any Bell Atlantic Company.
10. Remedies. The Key Employee acknowledges that irreparable
--------
injury will result to Bell Atlantic, and other Bell Atlantic Companies, and to
their business, in the event of a material breach by the Key Employee of any of
the Key Employee's covenants and commitments under this Agreement. In the event
of a material breach of any of the Key Employee's covenants and commitments
under this Agreement, the Key Employee, in the sole discretion of Bell Atlantic,
may forfeit any amount otherwise payable to the Key Employee under Sections 1 or
2 of this Agreement. In addition, Bell Atlantic and any affected Bell Atlantic
Company reserves all rights to seek any and all remedies and damages permitted
under law, including, but not limited to, injunctive relief, equitable relief
and compensatory damages.
11. Governing Law. This Agreement shall be interpreted and
-------------
enforced in accordance with the law of the State of New York.
12. 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, this shall not affect or
render invalid or unenforceable the remainder of this Agreement. Furthermore, in
the event that a court of law or equity determines that the duration of any
restrictions under this Agreement is not enforceable, this Agreement shall be
deemed to be amended to the extent necessary, but only to the extent necessary,
to permit the enforcement of the terms of this Agreement, as so amended.
13. Waiver: The waiver by Bell Atlantic of a breach by the Key
------
Employee of any provision of this Agreement shall not be construed as a waiver
of any subsequent breach.
14. Entire Agreement: This Agreement sets forth the entire
----------------
understanding of Bell Atlantic and the Key Employee, and supersedes all prior
agreements and communications, whether oral or written, pertaining to
eligibility for stay incentives of the type described herein, and covenants
pertaining to recruiting or hiring, and proprietary information. This Agreement
shall not be modified except by written agreement of the Key Employee and Bell
Atlantic.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
BELL ATLANTIC CORPORATION
By:
-------------------------------------
THE KEY EMPLOYEE
----------------------------------------
5
<PAGE>
EXHIBIT 10ll
FORM OF
STAY INCENTIVE AGREEMENT
(Patrick F.X. Mulhearn, Thomas J. Tauke)
THIS STAY INCENTIVE AGREEMENT (the "Agreement") is made as of the 23rd
day of November, 1998, by and between Bell Atlantic Corporation, its successors
and assigns ("Bell Atlantic"), and ________________________________, an employee
of a Bell Atlantic Company (the "Key Employee"). In this Agreement, "Bell
Atlantic Company" means any or all of the following: Bell Atlantic, a corporate
subsidiary or other company affiliated with Bell Atlantic, a company in which
Bell Atlantic owns directly or indirectly an equity interest of at least ten
percent, and the successors and assigns of any such company.
WHEREAS, pursuant to the terms of an Agreement and Plan of Merger,
dated as of July 27, 1998, among Bell Atlantic, GTE Corporation ("GTE") and Beta
Gamma Corporation (the "Definitive Agreement"), Bell Atlantic contemplates a
merger of the Bell Atlantic and GTE businesses (the "Merger") on a date which is
yet to be decided (the "Closing Date");
WHEREAS, Bell Atlantic considers the Key Employee to be an employee
whose continuing services, leadership and support are and will be valuable,
especially during the period prior to the Closing Date; and
WHEREAS, subject to the terms of this Agreement, Bell Atlantic wishes
to incent the Key Employee to remain an employee in good standing during this
period;
NOW, THEREFORE, for good and valuable consideration, the Key Employee
and Bell Atlantic hereby agree as follows:
1. Stay Incentive.
--------------
(a) Stay Incentive Bonus at Closing. If the Merger occurs pursuant to
-------------------------------
the Definitive Agreement, and if the Key Employee has remained an "Employee in
Good Standing" (as defined in Section 1(c) of this Agreement) of a Bell Atlantic
Company from the date of this Agreement to the Closing Date, then, not later
than 30 calendar days following the Closing Date, Bell Atlantic will cause the
Bell Atlantic Company which then employs the Key Employee to pay the Key
Employee a special stay incentive bonus (a "Stay Bonus") consisting of a single
cash payment in an amount equal (before withholding of taxes) to the greater of
(i) the sum of the Key Employee's annual rate of base salary and 50% of the Key
Employee's maximum short-term incentive under the Bell Atlantic Short Term
Incentive Plan (or other applicable short-term incentive plan), both as of the
date of this Agreement, or (ii) the sum of such items, both as of the Closing
Date.
(b) Adjusted Stay Incentive Bonus if Merger Plan is Terminated. If the
----------------------------------------------------------
Definitive Agreement is terminated without the Merger occurring, and the Key
Employee has remained an "Employee in Good Standing" of a Bell Atlantic Company
from the date of this Agreement to the date the Definitive Agreement is
terminated, then, not later than 30 calendar days following the date of
termination of the Definitive Agreement, Bell Atlantic will cause the Bell
Atlantic Company which then employs the Key Employee to pay the Key Employee a
special adjusted stay
<PAGE>
incentive bonus (an "Adjusted Stay Bonus") consisting of a single cash payment
in an amount equal (before withholding of taxes) to 25 percent of the Stay Bonus
described in Section 1(a) of this Agreement, except that the date of termination
of the Definitive Agreement shall be substituted for the Closing Date for
purposes of calculating such amount.
(c) Definition of Employee in Good Standing. For purposes of this
---------------------------------------
Agreement, the Key Employee will be considered to be an "Employee in Good
Standing" on a given date if, on that date, the Key Employee is employed by a
Bell Atlantic Company, has not tendered oral or written notice of intent to
resign or retire effective as of a date on or before the given date, and has not
behaved in a manner that would be grounds for discharge for "Cause" as defined
in Section 1(d) of this Agreement.
(d) Definition of Cause. For purposes of this Agreement, the term
-------------------
"Cause" shall mean grossly incompetent performance or substantial or continuing
inattention to or neglect of the duties and responsibilities assigned to the Key
Employee as determined by the Key Employee's current supervisor, with the
concurrence of the Executive Vice President - Human Resources of Bell Atlantic;
fraud, misappropriation or embezzlement involving any Bell Atlantic Company; a
material breach of the Employee Code of Business Conduct or this Agreement; or
commission of any felony of which the Key Employee is finally adjudged guilty in
a court of competent jurisdiction.
2. Termination of Employment.
-------------------------
(a) Voluntary Resignation, Retirement, or Discharge for Cause. In the
---------------------------------------------------------
event that, prior to the Closing Date or termination of the Definitive
Agreement, the Key Employee voluntarily resigns or retires for any reason or is
discharged by a Bell Atlantic Company for Cause, the Key Employee shall forfeit
any and all rights to receive a Stay Bonus or an Adjusted Stay Bonus under
Section 1 of this Agreement.
(b) Involuntary Terminations. In the event that a Bell Atlantic Company
------------------------
discharges the Key Employee other than for Cause, and either (i) the Merger
subsequently occurs pursuant to the Definitive Agreement, or (ii) the Definitive
Agreement is terminated without the Merger occurring, then Bell Atlantic shall
cause the Key Employee's last employing Bell Atlantic Company to pay the Key
Employee a bonus equal in amount to the Stay Bonus or Adjusted Stay Bonus which
would otherwise have become payable under Section 1 (a) or (b) of this
Agreement, provided that the payment of such bonus shall be contingent upon the
absence, at the time of payment, of any act by the Key Employee that would
constitute a material breach of this Agreement, and provided further that the
date of discharge shall be substituted for the dates described in Section 1 (a)
or (b) for purposes of calculating the dollar amount of such bonus. Such bonus
shall be paid not later than the date on which the Stay Bonus or Adjusted Stay
Bonus would otherwise have become payable.
(c) Payment in Case of Death or Disability. In the event that the Key
--------------------------------------
Employee dies, or terminates his or her employment on account of disability
(within the meaning of the applicable disability benefit plan in which the Key
Employee participates from time to time) on a date on which the Key Employee was
an Employee in Good Standing, and the Merger subsequently occurs pursuant to the
Definitive Agreement, Bell Atlantic shall cause the Key Employee's last
employing Bell Atlantic Company to pay the Key Employee, or the Key Employee's
estate in the event of death, a single cash payment which shall be equal (before
withholding of taxes) to the Stay Bonus multiplied by the following fraction:
the numerator shall
2
<PAGE>
be the number of days that have elapsed between the date of this Agreement and
the date of the Key Employee's death or disability, and the denominator shall be
the number of days that have elapsed between the date of this Agreement and the
Closing Date of the Merger. Such payment shall be made in accordance with the
timetable prescribed in Section 1(a) of this Agreement, substituting the date of
death or disability for the date described in Section 1(a) for purposes of
calculating the dollar amount of the payment. If the Definitive Agreement is
terminated without the Merger occurring after the Key Employee's death or
disability, and if the Key Employee was an Employee in Good Standing on the date
of such death or disability, a single cash payment shall be made to the Key
Employee, or the Key Employee's estate in the event of death, in an amount equal
(before withholding of taxes) to the Adjusted Stay Bonus. Such payment shall be
made in accordance with the timetable prescribed in Section 1(b) of this
Agreement, substituting the date of death or disability for the date described
in Section 1(b) for purposes of calculating the dollar amount of the payment.
3. Prohibition Against Recruiting or Hiring. Commencing on the
----------------------------------------
effective date of this Agreement and at all times thereafter through the second
anniversary of the Key Employee's termination of employment for any reason from
all Bell Atlantic Companies, the Key Employee shall not, without the consent of
the Executive Vice President - Human Resources of Bell Atlantic:
(i) recruit or solicit any active employee of any Bell Atlantic
Company for employment or for retention as a consultant or
service provider;
(ii) hire, or participate (with another company or third party)
in the process of hiring (other than for a Bell Atlantic
Company) any person who is then an active employee of any Bell
Atlantic Company, or provide names or other information about
Bell Atlantic employees to any person or business (other than
a Bell Atlantic Company) under circumstances which the Key
Employee knows or should know could lead to the use of that
information for purposes of recruiting or hiring; or
(iii) interfere with the relationship of any Bell Atlantic Company
with any of its employees, agents, or representatives.
4. Confidentiality. The Key Employee agrees not to disclose or discuss,
---------------
other than with the Key Employee's legal counsel, financial or tax adviser, and
spouse (if any) either the existence of or any details of this Agreement. The
Key Employee will make a good faith effort to ensure that any such legal
counsel, financial or tax adviser, or spouse will not disclose or discuss the
existence or any details of this Agreement with any other person.
5. Proprietary Information. The Key Employee shall at all times
-----------------------
preserve the confidentiality of all proprietary information and trade secrets of
any and all Bell Atlantic Companies. "Proprietary information" means information
obtained or developed by the Key Employee during the Key Employee's employment
with any Bell Atlantic Company that has not been fully disclosed in a writing
generally circulated to the public at large, and which is treated as
confidential within the business of any Bell Atlantic Company.
6. Deferrals under IDP. Amounts otherwise payable to the Key Employee
-------------------
under Sections 1 or 2 of this Agreement may be deferred under the Bell Atlantic
Income Deferral Plan ("IDP") or any successor plan in accordance with the terms
of the IDP.
3
<PAGE>
7. Assignment by Bell Atlantic. Bell Atlantic may assign this
---------------------------
Agreement without the Key Employee's consent to any company that acquires all or
substantially all of the stock or assets of Bell Atlantic, or into which or with
which Bell Atlantic is merged or consolidated. This Agreement may not be
assigned by the Key Employee, and no person other than the Key Employee (or the
Key Employee's estate) may assert the rights of the Key Employee under this
Agreement.
8. Business Discretion of Bell Atlantic. Nothing in this Agreement is
------------------------------------
intended to limit the discretion of any Bell Atlantic Company to take any action
with regard to the Merger which Bell Atlantic may consider appropriate,
including, without limitation, postponing the Closing Date or terminating the
Definitive Agreement. This Agreement is not a contract to retain the Key
Employee in the employ of any Bell Atlantic Company for any prescribed period or
term. This Agreement does not modify the employment-at-will status of the Key
Employee.
9. Non-Benefit Bearing Payments. Any amount to be paid under Section 1
----------------------------
or Section 2 of this Agreement shall not be treated as compensation for purposes
of computing or determining any additional benefit payable under any savings
plan, insurance plan, pension plan, or other employee benefit plan maintained by
any Bell Atlantic Company.
10. Remedies. The Key Employee acknowledges that irreparable injury
--------
will result to Bell Atlantic, and other Bell Atlantic Companies, and to their
business, in the event of a material breach by the Key Employee of any of the
Key Employee's covenants and commitments under this Agreement. In the event of a
material breach of any of the Key Employee's covenants and commitments under
this Agreement, the Key Employee, in the sole discretion of Bell Atlantic, may
forfeit any amount otherwise payable to the Key Employee under Sections 1 or 2
of this Agreement. In addition, Bell Atlantic and any affected Bell Atlantic
Company reserves all rights to seek any and all remedies and damages permitted
under law, including, but not limited to, injunctive relief, equitable relief
and compensatory damages.
11. Governing Law. This Agreement shall be interpreted and enforced in
-------------
accordance with the law of the State of New York.
12. 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, this shall not affect or render invalid
or unenforceable the remainder of this Agreement. Furthermore, in the event that
a court of law or equity determines that the duration of any restrictions under
this Agreement is not enforceable, this Agreement shall be deemed to be amended
to the extent necessary, but only to the extent necessary, to permit the
enforcement of the terms of this Agreement, as so amended.
13. Waiver: The waiver by Bell Atlantic of a breach by the Key Employee
------
of any provision of this Agreement shall not be construed as a waiver of any
subsequent breach.
14. Entire Agreement: This Agreement sets forth the entire
----------------
understanding of Bell Atlantic and the Key Employee, and supersedes all prior
agreements and communications, whether oral or written, pertaining to
eligibility for stay incentives of the type described herein, and covenants
pertaining to recruiting or hiring, and proprietary information. This Agreement
shall not be modified except by written agreement of the Key Employee and Bell
Atlantic.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
BELL ATLANTIC CORPORATION
By:
---------------------------
THE KEY EMPLOYEE
------------------------------
5
<PAGE>
EXHIBIT 10mm
FORM OF
STAY INCENTIVE AGREEMENT
(Jacquelyn B. Gates, Chester N. Watson)
THIS STAY INCENTIVE AGREEMENT (the "Agreement") is made as of the 23rd
day of November, 1998, by and between Bell Atlantic Corporation, its successors
and assigns ("Bell Atlantic"), and ________________________________, an employee
of a Bell Atlantic Company (the "Key Employee"). In this Agreement, "Bell
Atlantic Company" means any or all of the following: Bell Atlantic, a corporate
subsidiary or other company affiliated with Bell Atlantic, a company in which
Bell Atlantic owns directly or indirectly an equity interest of at least ten
percent, and the successors and assigns of any such company.
WHEREAS, pursuant to the terms of an Agreement and Plan of Merger,
dated as of July 27, 1998, among Bell Atlantic, GTE Corporation ("GTE") and Beta
Gamma Corporation (the "Definitive Agreement"), Bell Atlantic contemplates a
merger of the Bell Atlantic and GTE businesses (the "Merger") on a date which is
yet to be decided (the "Closing Date");
WHEREAS, Bell Atlantic considers the Key Employee to be an employee
whose continuing services, leadership and support are and will be valuable,
especially during the period prior to the Closing Date; and
WHEREAS, subject to the terms of this Agreement, Bell Atlantic wishes
to incent the Key Employee to remain an employee in good standing during this
period;
NOW, THEREFORE, for good and valuable consideration, the Key Employee
and Bell Atlantic hereby agree as follows:
1. Stay Incentive.
--------------
(a) Stay Incentive Bonus at Closing. If the Merger occurs pursuant to
-------------------------------
the Definitive Agreement, and if the Key Employee has remained an "Employee in
Good Standing" (as defined in Section 1(c) of this Agreement) of a Bell Atlantic
Company from the date of this Agreement to the Closing Date, then, not later
than 30 calendar days following the Closing Date, Bell Atlantic will cause the
Bell Atlantic Company which then employs the Key Employee to pay the Key
Employee a special stay incentive bonus (a "Stay Bonus") consisting of a single
cash payment in an amount equal (before withholding of taxes) to the greater of
the Key Employee's annual rate of base salary on the date of this Agreement, or
such salary as of the Closing Date.
(b) Adjusted Stay Incentive Bonus if Merger Plan is Terminated. If the
----------------------------------------------------------
Definitive Agreement is terminated without the Merger occurring, and the Key
Employee has remained an "Employee in Good Standing" of a Bell Atlantic Company
from the date of this Agreement to the date the Definitive Agreement is
terminated, then, not later than 30 calendar days following the date of
termination of the Definitive Agreement, Bell Atlantic will cause the Bell
Atlantic Company which then employs the Key Employee to pay the Key Employee a
special adjusted stay incentive bonus (an "Adjusted Stay Bonus") consisting of a
single cash payment in an amount equal (before withholding of taxes) to 25
percent of the Stay Bonus described in Section 1(a) of
<PAGE>
this Agreement, except that the date of termination of the Definitive Agreement
shall be substituted for the Closing Date for purposes of calculating such
amount.
(c) Definition of Employee in Good Standing. For purposes of this
---------------------------------------
Agreement, the Key Employee will be considered to be an "Employee in Good
Standing" on a given date if, on that date, the Key Employee is employed by a
Bell Atlantic Company, has not tendered oral or written notice of intent to
resign or retire effective as of a date on or before the given date, and has not
behaved in a manner that would be grounds for discharge for "Cause" as defined
in Section 1(d) of this Agreement.
(d) Definition of Cause. For purposes of this Agreement, the term
-------------------
"Cause" shall mean grossly incompetent performance or substantial or continuing
inattention to or neglect of the duties and responsibilities assigned to the Key
Employee as determined by the Key Employee's current supervisor, with the
concurrence of the Executive Vice President - Human Resources of Bell Atlantic;
fraud, misappropriation or embezzlement involving any Bell Atlantic Company; a
material breach of the Employee Code of Business Conduct or this Agreement; or
commission of any felony of which the Key Employee is finally adjudged guilty in
a court of competent jurisdiction.
2. Termination of Employment.
-------------------------
(a) Voluntary Resignation, Retirement, or Discharge for Cause. In the
---------------------------------------------------------
event that, prior to the Closing Date or termination of the Definitive
Agreement, the Key Employee voluntarily resigns or retires for any reason or is
discharged by a Bell Atlantic Company for Cause, the Key Employee shall forfeit
any and all rights to receive a Stay Bonus or an Adjusted Stay Bonus under
Section 1 of this Agreement.
(b) Involuntary Terminations. In the event that a Bell Atlantic Company
------------------------
discharges the Key Employee other than for Cause, and either (i) the Merger
subsequently occurs pursuant to the Definitive Agreement, or (ii) the Definitive
Agreement is terminated without the Merger occurring, then Bell Atlantic shall
cause the Key Employee's last employing Bell Atlantic Company to pay the Key
Employee a bonus equal in amount to the Stay Bonus or Adjusted Stay Bonus which
would otherwise have become payable under Section 1 (a) or (b) of this
Agreement, provided that the payment of such bonus shall be contingent upon the
absence, at the time of payment, of any act by the Key Employee that would
constitute a material breach of this Agreement, and provided further that the
date of discharge shall be substituted for the dates described in Section 1 (a)
or (b) for purposes of calculating the dollar amount of such bonus. Such bonus
shall be paid not later than the date on which the Stay Bonus or Adjusted Stay
Bonus would otherwise have become payable.
(c) Payment in Case of Death or Disability. In the event that the Key
--------------------------------------
Employee dies, or terminates his or her employment on account of disability
(within the meaning of the applicable disability benefit plan in which the Key
Employee participates from time to time) on a date on which the Key Employee was
an Employee in Good Standing, and the Merger subsequently occurs pursuant to the
Definitive Agreement, Bell Atlantic shall cause the Key Employee's last
employing Bell Atlantic Company to pay the Key Employee, or the Key Employee's
estate in the event of death, a single cash payment which shall be equal (before
withholding of taxes) to the Stay Bonus multiplied by the following fraction:
the numerator shall be the number of days that have elapsed between the date of
this Agreement and the date of the Key Employee's death or disability, and the
denominator shall be the number of days that
2
<PAGE>
have elapsed between the date of this Agreement and the Closing Date of the
Merger. Such payment shall be made in accordance with the timetable prescribed
in Section 1(a) of this Agreement, substituting the date of death or disability
for the date described in Section 1(a) for purposes of calculating the dollar
amount of the payment. If the Definitive Agreement is terminated without the
Merger occurring after the Key Employee's death or disability, and if the Key
Employee was an Employee in Good Standing on the date of such death or
disability, a single cash payment shall be made to the Key Employee, or the Key
Employee's estate in the event of death, in an amount equal (before withholding
of taxes) to the Adjusted Stay Bonus. Such payment shall be made in accordance
with the timetable prescribed in Section 1(b) of this Agreement, substituting
the date of death or disability for the date described in Section 1(b) for
purposes of calculating the dollar amount of the payment.
3. Prohibition Against Recruiting or Hiring. Commencing on the
----------------------------------------
effective date of this Agreement and at all times thereafter through the second
anniversary of the Key Employee's termination of employment for any reason from
all Bell Atlantic Companies, the Key Employee shall not, without the consent of
the Executive Vice President - Human Resources of Bell Atlantic:
(i) recruit or solicit any active employee of any Bell Atlantic
Company for employment or for retention as a consultant or
service provider;
(ii) hire, or participate (with another company or third party) in
the process of hiring (other than for a Bell Atlantic Company)
any person who is then an active employee of any Bell Atlantic
Company, or provide names or other information about Bell
Atlantic employees to any person or business (other than a Bell
Atlantic Company) under circumstances which the Key Employee
knows or should know could lead to the use of that information
for purposes of recruiting or hiring; or
(iii) interfere with the relationship of any Bell Atlantic Company
with any of its employees, agents, or representatives.
4. Confidentiality. The Key Employee agrees not to disclose or
---------------
discuss, other than with the Key Employee's legal counsel, financial or tax
adviser, and spouse (if any) either the existence of or any details of this
Agreement. The Key Employee will make a good faith effort to ensure that any
such legal counsel, financial or tax adviser, or spouse will not disclose or
discuss the existence or any details of this Agreement with any other person.
5. Proprietary Information. The Key Employee shall at all times
-----------------------
preserve the confidentiality of all proprietary information and trade secrets of
any and all Bell Atlantic Companies. "Proprietary information" means information
obtained or developed by the Key Employee during the Key Employee's employment
with any Bell Atlantic Company that has not been fully disclosed in a writing
generally circulated to the public at large, and which is treated as
confidential within the business of any Bell Atlantic Company.
6. Deferrals under IDP. Amounts otherwise payable to the Key
-------------------
Employee under Sections 1 or 2 of this Agreement may be deferred under the Bell
Atlantic Income Deferral Plan ("IDP") or any successor plan in accordance with
the terms of the IDP.
3
<PAGE>
7. Assignment by Bell Atlantic. Bell Atlantic may assign this
---------------------------
Agreement without the Key Employee's consent to any company that acquires all or
substantially all of the stock or assets of Bell Atlantic, or into which or with
which Bell Atlantic is merged or consolidated. This Agreement may not be
assigned by the Key Employee, and no person other than the Key Employee (or the
Key Employee's estate) may assert the rights of the Key Employee under this
Agreement.
8. Business Discretion of Bell Atlantic. Nothing in this Agreement
------------------------------------
is intended to limit the discretion of any Bell Atlantic Company to take any
action with regard to the Merger which Bell Atlantic may consider appropriate,
including, without limitation, postponing the Closing Date or terminating the
Definitive Agreement. This Agreement is not a contract to retain the Key
Employee in the employ of any Bell Atlantic Company for any prescribed period or
term. This Agreement does not modify the employment-at-will status of the Key
Employee.
9. Non-Benefit Bearing Payments. Any amount to be paid under Section
----------------------------
1 or Section 2 of this Agreement shall not be treated as compensation for
purposes of computing or determining any additional benefit payable under any
savings plan, insurance plan, pension plan, or other employee benefit plan
maintained by any Bell Atlantic Company.
10. Remedies. The Key Employee acknowledges that irreparable injury
--------
will result to Bell Atlantic, and other Bell Atlantic Companies, and to their
business, in the event of a material breach by the Key Employee of any of the
Key Employee's covenants and commitments under this Agreement. In the event of a
material breach of any of the Key Employee's covenants and commitments under
this Agreement, the Key Employee, in the sole discretion of Bell Atlantic, may
forfeit any amount otherwise payable to the Key Employee under Sections 1 or 2
of this Agreement. In addition, Bell Atlantic and any affected Bell Atlantic
Company reserves all rights to seek any and all remedies and damages permitted
under law, including, but not limited to, injunctive relief, equitable relief
and compensatory damages.
11. Governing Law. This Agreement shall be interpreted and enforced
-------------
in accordance with the law of the State of New York.
12. 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, this shall not affect or
render invalid or unenforceable the remainder of this Agreement. Furthermore, in
the event that a court of law or equity determines that the duration of any
restrictions under this Agreement is not enforceable, this Agreement shall be
deemed to be amended to the extent necessary, but only to the extent necessary,
to permit the enforcement of the terms of this Agreement, as so amended.
13. Waiver: The waiver by Bell Atlantic of a breach by the Key
------
Employee of any provision of this Agreement shall not be construed as a waiver
of any subsequent breach.
14. Entire Agreement: This Agreement sets forth the entire
----------------
understanding of Bell Atlantic and the Key Employee, and supersedes all prior
agreements and communications, whether oral or written, pertaining to
eligibility for stay incentives of the type described herein, and covenants
pertaining to recruiting or hiring, and proprietary information. This Agreement
shall not be modified except by written agreement of the Key Employee and Bell
Atlantic.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
BELL ATLANTIC CORPORATION
By:
-------------------------------------
THE KEY EMPLOYEE
----------------------------------------
pmgteret5.doc
5
<PAGE>
EXHIBIT 10nn
FORM OF
MERGER AGREEMENT
(Doreen A. Toben, Ellen C. Wolf)
THIS MERGER AGREEMENT (the "Agreement) is made as of the 29th day of
January, 1999, by and between Bell Atlantic Corporation, its successors and
assigns ("Bell Atlantic"), and ________________________, an employee of a Bell
Atlantic Company (the "Key Employee"). In this Agreement, "Bell Atlantic
Company" means any or all of the following: Bell Atlantic, a corporate
subsidiary or other company affiliated with Bell Atlantic, a company in which
Bell Atlantic owns directly or indirectly an equity interest of at least ten
percent, and the successors and assigns of any such company.
WHEREAS, pursuant to the terms of an Agreement and Plan of Merger, dated as
of July 27, 1998, among Bell Atlantic, GTE Corporation ("GTE") and Beta Gamma
Corporation (the "Definitive Agreement"), Bell Atlantic contemplates a merger of
the Bell Atlantic and GTE businesses (the "Merger") on a date which is yet to be
decided (the "Closing Date");
WHEREAS, the period from the date of this Agreement to at least the second
anniversary of the Closing Date is likely to be a period of difficult
transition, with heightened concern about job security due to possible
reductions in force in connection with the Merger;
WHEREAS, Bell Atlantic wishes to provide additional financial security to
the Key Employee in the form of eligibility for post-separation payments, which
the Key Employee would be eligible to receive in case of a termination of
employment without cause during such period; and
WHEREAS, Bell Atlantic and the Key Employee wish to set forth the terms and
conditions applicable to such post-separation payments.
NOW, THEREFORE, for good and valuable consideration, the Key Employee and
Bell Atlantic hereby agree as follows:
1. Period of Agreement. The Period of this Agreement shall be the
-------------------
period beginning on August 15, 1999 and ending on the second anniversary of the
Closing Date; provided, however, that, in the event that the Definitive
Agreement is terminated without the Merger occurring, the Period of this
Agreement shall end on the date on which the Definitive Agreement is terminated.
2. Post-Separation Payments.
------------------------
(a) Two Times Pay. If, during the Period of this Agreement, a Bell
-------------
Atlantic Company discharges the Key Employee without "Cause" (as defined in
Section 2(d) of this Agreement), or the Key Employee is "Constructively
Discharged" (as defined in Section 2(e) of this Agreement), Bell Atlantic shall
cause the Bell Atlantic Company which then employs the Key Employee to pay
<PAGE>
to the Key Employee, in cash, an aggregate amount equal (before withholding of
taxes) to two times "Pay" (as defined in Section 2(b) of this Agreement).
(b) Pay. For purposes of this Agreement, "Pay" means an amount equal
---
(before withholding of taxes) to the greater of (i) the sum of the Key
Employee's annual rate of base salary and 50% of the Key Employee's maximum
short term incentive under the Bell Atlantic Senior Management Short Term
Incentive Plan (or other applicable short-term incentive plan), both as of the
date of this Agreement, or (ii) the sum of such items, both as of the date the
Key Employee's employment is terminated.
(c) Payment of Installments. The payment described in this Section
-----------------------
shall be payable in cash, less applicable withholding taxes, in a series of 24
approximately equal monthly installments, with the first installment commencing
within 30 days of the eighth day following delivery of the legal release
provided for in Section 2(g) of this Agreement. If the Key Employee dies after
termination of employment, all unpaid installments will be paid in a lump sum to
the Key Employee's estate.
(d) Cause. For purposes of this Agreement, the term "Cause" shall
-----
mean grossly incompetent performance or substantial or continuing inattention to
or neglect of the duties and responsibilities assigned to the Key Employee as
determined by the Key Executive's current supervisor, with the concurrence of
the Executive Vice President - Human Resources of Bell Atlantic; fraud,
misappropriation or embezzlement involving any Bell Atlantic Company; a material
breach of the Employee Code of Business Conduct or this Agreement; or commission
of any felony of which the Key Employee is finally adjudged guilty in a court of
competent jurisdiction.
(e) Constructive Discharge. The Key Employee shall be deemed to have
----------------------
been "Constructively Discharged" for purposes of this Agreement if the Key
Employee is an "Employee in Good Standing" (as defined in Section 2(f) of this
Agreement) and terminates his or her employment for either of the following
reasons: (i) the Key Employee has refused to relocate to a new principal place
of work which would require a commute of more than 35 miles greater than the Key
Employee's existing commute; or (ii) the Key Employee is assigned to a position
where the sum of the annual rate of base salary plus the maximum amount of
annual short term incentive the Key Employee would be eligible to receive per
year is less than 90% of the sum of the corresponding items of salary and short
term incentive for the Key Employee's existing position.
(f) Employee in Good Standing. For purposes of this Agreement, the
-------------------------
Key Employee will be considered to be an "Employee in Good Standing" on a given
date if, on that date, the Key Employee is employed by a Bell Atlantic Company,
has not tendered oral or written notice of intent to resign or retire effective
as of a date on or before the given date (other than pursuant to a Constructive
Discharge), and has not behaved in a manner that would be grounds for discharge
with Cause.
(g) Legal Release. Notwithstanding any provision of this Agreement to
-------------
the contrary, no post-separation payments shall be payable under the terms of
this Agreement unless the Key Employee executes a legal release in a form
contained in Exhibit A.
2
<PAGE>
3. Prohibition Against Recruiting, Hiring or Solicitation.
------------------------------------------------------
Commencing on the effective date of this Agreement and at all times thereafter
through the second anniversary of the Key Employee's termination of employment
for reasons which entitle the Key Employee to receive separation payments under
Section 2 of this Agreement, the Key Employee shall not, without the consent of
the Executive Vice President - Human Resources of Bell Atlantic:
(i) recruit or solicit any active employee of any Bell Atlantic
Company for employment or for retention as a consultant or
service provider;
(ii) hire, or participate (with another company or third party) in
the process of hiring (other than for a Bell Atlantic Company)
any person who is then an active employee of any Bell Atlantic
Company, or provide names or other information about Bell
Atlantic employees to any person or business (other than a
Bell Atlantic Company) under circumstances which the Key
Employee knows or should know could lead to the use of that
information for purposes of recruiting or hiring;
(iii) approach any customer of any Bell Atlantic Company in an
effort to persuade such customer to purchase, from a competing
company, products or services of the same or similar type as
the products or services which are sold (or, pursuant to an
existing business plan, will be sold) to paying customers of
one or more Bell Atlantic Companies; or
(iv) interfere with the relationship of any Bell Atlantic Company
with any of its customers, employees, agents, or
representatives.
4. Competition.
-----------
(a) Prohibited Conduct. During the period of the Key Employee's
------------------
employment with any Bell Atlantic Company through the second anniversary of the
Key Employee's termination of employment for reasons which entitle the Key
Employee to receive separation payments under Section 2 of this Agreement, the
Key Employee, without the prior written consent of the Executive Vice President
- - Human Resources of Bell Atlantic, shall not:
(i) personally engage in "Competitive Activities" (as defined in
Section 4(b) of this Agreement; or
(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; provided, however, that the Key
Employee'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 Key Employee's equity interest
in any such company is less than a controlling interest.
(b) Competitive Activities. For purposes of this Agreement,
----------------------
"Competitive Activities" means business activities relating to products or
services of the same or similar type as the products or services which (i) are
sold (or, pursuant to an existing business plan, will be sold) to paying
customers of one or more Bell Atlantic Companies, and (ii) for which the Key
Employee had
3
<PAGE>
responsibility to plan, develop, manage, market or oversee, within the prior 24
months or, if the Key Employee's employment has been terminated, within the 24
months preceding termination of employment. Notwithstanding the previous
sentence, a business activity will not be treated as a Competitive Activity if
the geographic marketing area of the relevant products or services does not
overlap with the Bell Atlantic territory (as such territory exists at the time
the Key Employee's employment is terminated).
(c) Notice. Bell Atlantic shall send the Key Employee written
------
notice in the event that Bell Atlantic believes that the Key Employee has
violated any of the prohibitions of this Section, 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.
(d) Waiver. Nothing in this Agreement shall bar the Key Employee
------
from requesting that the Executive Vice President - Human Resources of Bell
Atlantic, in that officer's sole discretion, waive in writing Bell Atlantic's
rights to enforce the competition covenant of this Section with respect to an
opportunity or activity contemplated by the Key Employee and which the Key
Employee describes in writing to said officer.
5. Confidentiality. The Key Employee agrees not to disclose or
---------------
discuss, other than with the Key Employee's legal counsel, financial or tax
adviser, and spouse (if any) either the existence of or any details of this
Agreement. The Key Employee will make a good faith effort to ensure that any
such legal counsel, financial or tax adviser, or spouse will not disclose or
discuss the existence or any details of this Agreement with any other person.
6. Proprietary Information. The Key Employee shall at all times
-----------------------
preserve the confidentiality of all proprietary information and trade secrets of
any and all Bell Atlantic Companies. "Proprietary information" means information
obtained or developed by the Key Employee during the Key Employee's employment
with any Bell Atlantic Company that has not been fully disclosed in a writing
generally circulated to the public at large, and which is treated as
confidential within the business of any Bell Atlantic Company.
7. Assignment by Bell Atlantic. Bell Atlantic may assign this
---------------------------
Agreement without the Key Employee's consent to any company that acquires all or
substantially all of the stock or assets of Bell Atlantic, or into which or with
which Bell Atlantic is merged or consolidated. This Agreement may not be
assigned by the Key Employee, and no person other than the Key Employee (or the
Key Employee's estate) may assert the rights of the Key Employee under this
Agreement.
8. Non-Benefit Bearing Payments. The amounts to be paid under
----------------------------
Section 2 of this Agreement shall not be treated as compensation for purposes of
computing or determining any additional benefit payable under any savings plan,
insurance plan, pension plan, or other employee benefit plan maintained by any
Bell Atlantic Company.
9. Certain Limitations Upon Payments.
---------------------------------
(a) Tax Code Limitations. Anything in this Agreement to the
--------------------
contrary notwithstanding, in the event that it shall be determined that any
payment or distribution by Bell
4
<PAGE>
Atlantic to or for the benefit of the Key Employee, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would constitute an "excess parachute payment" within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), the aggregate present value of amounts payable or distributable to
or for the benefit of the Key Employee pursuant to this Agreement (such payments
or distributions pursuant to this Agreement are hereinafter referred to as
"Agreement Payments") shall be reduced (but not below zero) to the Reduced
Amount. The "Reduced Amount" shall be an amount expressed in present value which
maximizes the aggregate present value of Agreement Payments without causing any
Payment to be subject to taxation under Section 4999 of the Code. For purposes
of this Section, present value shall be determined in accordance with Section
280G(d)(4) of the Code.
(b) Determinations by Outside Counsel. All determinations to be
---------------------------------
made under this Section of the Agreement shall be made by Bell Atlantic's
outside counsel ("Outside Counsel"). Outside Counsel shall provide its
determinations and any supporting calculations both to Bell Atlantic and the Key
Employee within 10 days of the effective date of termination of employment. Any
such determination by Outside Counsel shall be binding upon Bell Atlantic and
the Key Employee. Within five days after this determination, Bell Atlantic or
the appropriate Bell Atlantic Company shall commence to pay to or for the
benefit of the Key Employee such amounts (if any) as are then due to the Key
Employee under this Agreement.
(c) Overpayments and Underpayments. As a result of uncertainty in
------------------------------
the application of Section 280G of the Code at the time of the initial
determination by Outside Counsel hereunder, it is possible that Agreement
Payments will either have been made by Bell Atlantic which should not have been
made ("Overpayment"), or that additional Agreement Payments which have not been
made by Bell Atlantic could have been made ("Underpayment"), in each case,
consistent with the calculations required to be made hereunder. Within two years
after the effective date of termination of employment, Outside Counsel shall
review any determination made by it pursuant to Section 9(b) of this Agreement.
In the event that Outside Counsel determines that an Overpayment has been made,
any such Overpayment shall be treated for all purposes as a loan to the Key
Employee which the Key Employee shall repay to Bell Atlantic together with
interest at the applicable Federal rate provided for in Section 7872(f)(2) of
the Code (the "Federal Rate"); provided, however, that no amount shall be
payable by the Key Employee to Bell Atlantic if and to the extent such payment
would not reduce the amount which is subject to taxation under Section 4999 of
the Code. In the event that Outside Counsel determines that an Underpayment has
occurred, any such Underpayment shall be promptly paid by the appropriate Bell
Atlantic Company to or for the benefit of the Key Employee together with
interest at the Federal Rate.
(d) Outside Counsel Fees. All of the fees and expenses of Outside
--------------------
Counsel in performing the determinations referred to in Sections 9(b) and (c) of
this Agreement shall be borne solely by Bell Atlantic.
10. Remedies. The Key Employee acknowledges that irreparable
--------
injury will result to Bell Atlantic and other Bell Atlantic Companies, and to
their business, in the event of any breach by the Key Employee of any of the Key
Employee's covenants and commitments under this Agreement. In the event of a
breach of any of the Key Employee's covenants and commitments under this
Agreement, Bell Atlantic and any affected Bell Atlantic Company reserves all
rights to seek any and all remedies and damages permitted under law, including,
but not limited to,
5
<PAGE>
injunctive relief, equitable relief and compensatory damages. In addition to the
foregoing, the Key Employee shall forfeit all unpaid installment payments under
Section 2 of this Agreement, and shall have an obligation to immediately repay
any installment payment previously received.
11. Governing Law. This Agreement shall be interpreted and
-------------
enforced in accordance with the law of the State of New York.
12. Severability. If any clause, phrase or provision of this
------------
Agreement or the application thereto to any person or circumstances shall be
invalid or unenforceable under any applicable law, this shall not affect or
render invalid or unenforceable the remainder of this Agreement. Furthermore, in
the event that a court of law or equity determines that the geographic scope of
any covenants, or the duration of any of the restrictions under this Agreement,
are not enforceable, or if any provision of this Agreement conflicts with any
applicable requirement of a code of conduct that pertains to an employee
licensed to practice a profession governed by such code, this Agreement shall be
deemed to be amended to the extent necessary, but only to the extent necessary,
to permit the enforcement of the terms of this Agreement, as so amended, and to
avoid a conflict with said code of conduct.
13. Waiver. The waiver by Bell Atlantic of a breach by the Key
------
Employee of any provision of this Agreement shall not be construed as a waiver
of any subsequent breach.
14. Entire Agreement.
----------------
(a) Post-Separation Payments. This Agreement sets forth the entire
------------------------
understanding of Bell Atlantic and the Key Employee and supersedes all prior
agreements and communications, whether oral or written, pertaining to
eligibility for post-separation payments, except as follows. This Agreement (i)
is not intended to modify or supersede any provisions of the prior agreement
between the Key Employee and Bell Atlantic pertaining to eligibility for
post-separation payments upon termination of the Key Employee's employment
through August 14, 1999 (the "Prior Separation Agreement"), and (ii) shall not
affect the rights of the Key Employee under the compensation and benefit plans
in which the Key Employee participates, provided, however, that in exchange for
the separation payments described in this Agreement, the Key Employee hereby
waives, during the Period of this Agreement, any rights he or she may have to
participate in the Bell Atlantic Executive Separation Pay Plan or any other Bell
Atlantic plan that provides for severance payments.
(b) Certain Covenants. Except for the Prior Separation Agreement,
-----------------
and except for the terms of other compensation and benefit plans in which the
Key Employee participates, Sections 3 (Prohibition Against Recruiting, Hiring or
Solicitation), 4 (Competition), and 6 (Proprietary Information) of this
Agreement shall supersede the terms or provisions of any prior covenant or
agreement between the Key Employee and any Bell Atlantic Company covering the
same subject matter; provided, however, that any such prior covenants or
agreements shall again be enforceable to the full extent of their terms if (i)
the Key Employee remains employed by a Bell Atlantic Company subsequent to the
Period of this Agreement (or any extension of such Period), or (ii) during the
Period of this Agreement, the Key Employee terminates his employment, or such
employment is terminated by Bell Atlantic, for reasons which do not entitle the
Key Employee to receive separation payments under Section 2 of this Agreement.
6
<PAGE>
(c) Modification of Agreement. This Agreement shall not be
-------------------------
modified except by written agreement of the Key Employee and Bell Atlantic.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first set forth above.
BELL ATLANTIC CORPORATION
By:
----------------------------------
THE KEY EMPLOYEE
-------------------------------------
7
<PAGE>
EXHIBIT A
RELEASE
-------
THIS RELEASE (the "Release") is entered into by _____________________
(the "Key Employee"), for the benefit of BELL ATLANTIC CORPORATION (the
"Company"), and all companies, and their officers, directors and employees,
which are affiliated with the Company or in which the Company owns a substantial
economic interest, and any benefit plan maintained by any Bell Atlantic Company
(or any plan administrator of any such plan). Capitalized terms in this document
which are not otherwise defined herein shall have the respective meaning
assigned to them in the Separation Agreement between the Company and the Key
Employee, dated as of January 29, 1999 (the "Agreement").
WHEREAS, the Key Employee has separated from service with the Key
Employee's employing company (the "Employer") on __________ , _______(the
"Separation Date") pursuant to the terms of the Agreement, and the Key Employee
wishes to execute this Release as contemplated under the terms of the Agreement.
NOW, THEREFORE, the Key Employee affirms as follows:
1. The Key Employee hereby waives any and all claims which the Key
Employee might have against any Bell Atlantic Company, and any benefit plan
maintained by any Bell Atlantic Company (or any plan administrator of any such
plan), for salary payments, vacation pay, incentives, bonuses, or other
remuneration or employee benefits of any kind, with the exception of any
unfulfilled obligations of the Company or Employer under Section 2 of the
Agreement.
2. Except as provided in Section 1 hereof, the Key Employee hereby
voluntarily releases and discharges each and every Bell Atlantic Company and
their successors and assigns, and the directors, officers, employees, and agents
of each of them, and any benefit plan maintained by any Bell Atlantic Company
(or any plan administrator of any such plan), 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 which the Key
Employee might have or assert against any of said entities or persons by reason
of the Key Employee's employment by any Bell Atlantic Company or the termination
of said employment, and all circumstances related thereto, 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, the Employee Retirement Income
Security Act ("ERISA") or any other applicable federal, state, or local or
foreign employment discrimination statute or ordinance.
<PAGE>
3. The Key Employee hereby reaffirms all covenants and promises given
by the Key Employee under the Agreement, and all other 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 KEY EMPLOYEE WHO IS SIGNING BELOW: THE COMPANY HAS
--------------------------------------------------
ADVISED ME IN WRITING TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS
RELEASE. THE COMPANY HAS FULFILLED ITS DUTIES TO ME UNDER THE OLDER WORKERS
BENEFITS PROTECTION ACT, AND I ACKNOWLEDGE THAT THIS RELEASE AND THE AGREEMENT
ARE LEGALLY ENFORCEABLE BY THE COMPANY. 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 _________, ____, that being the Key Employee's
Separation Date.
THE KEY EMPLOYEE
Signed:
-----------------------------
THIS IS A RELEASE
READ CAREFULLY BEFORE SIGNING
<PAGE>
EXHIBIT 10oo
FORM OF
MERGER AGREEMENT
(Patrick F.X. Mulhearn, Thomas J. Tauke)
THIS MERGER AGREEMENT (the "Agreement) is made as of the 29th day of
January, 1999, by and between Bell Atlantic Corporation, its successors and
assigns ("Bell Atlantic"), and ________________________, an employee of a Bell
Atlantic Company (the "Key Employee"). In this Agreement, "Bell Atlantic
Company" means any or all of the following: Bell Atlantic, a corporate
subsidiary or other company affiliated with Bell Atlantic, a company in which
Bell Atlantic owns directly or indirectly an equity interest of at least ten
percent, and the successors and assigns of any such company.
WHEREAS, pursuant to the terms of an Agreement and Plan of Merger, dated as
of July 27, 1998, among Bell Atlantic, GTE Corporation ("GTE") and Beta Gamma
Corporation (the "Definitive Agreement"), Bell Atlantic contemplates a merger of
the Bell Atlantic and GTE businesses (the "Merger") on a date which is yet to be
decided (the "Closing Date");
WHEREAS, the period from the date of this Agreement to at least the second
anniversary of the Closing Date is likely to be a period of difficult
transition, with heightened concern about job security due to possible
reductions in force in connection with the Merger;
WHEREAS, Bell Atlantic wishes to provide additional financial security to
the Key Employee in the form of eligibility for post-separation payments, which
the Key Employee would be eligible to receive in case of a termination of
employment without cause during such period; and
WHEREAS, Bell Atlantic and the Key Employee wish to set forth the terms and
conditions applicable to such post-separation payments.
NOW, THEREFORE, for good and valuable consideration, the Key Employee and
Bell Atlantic hereby agree as follows:
1. Period of Agreement. The Period of this Agreement shall be the period
-------------------
beginning on the date of this Agreement and ending on the second anniversary of
the Closing Date; provided, however, that, in the event that the Definitive
Agreement is terminated without the Merger occurring, the Period of this
Agreement shall end on the date on which the Definitive Agreement is terminated.
2. Post-Separation Payments.
------------------------
(a) Two Times Pay. If, during the Period of this Agreement, a Bell
-------------
Atlantic Company discharges the Key Employee without "Cause" (as defined in
Section 2(d) of this Agreement), or the Key Employee is "Constructively
Discharged" (as defined in Section 2(e) of this Agreement), Bell Atlantic shall
cause the Bell Atlantic Company which then employs the Key Employee to pay to
the Key Employee, in cash, an aggregate amount equal (before withholding of
taxes) to two times "Pay" (as defined in Section 2(b) of this Agreement).
<PAGE>
(b) Pay. For purposes of this Agreement, "Pay" means an amount equal
---
(before withholding of taxes) to the greater of (i) the sum of the Key
Employee's annual rate of base salary and 50% of the Key Employee's maximum
short term incentive under the Bell Atlantic Senior Management Short Term
Incentive Plan (or other applicable short-term incentive plan), both as of the
date of this Agreement, or (ii) the sum of such items, both as of the date the
Key Employee's employment is terminated.
(c) Payment of Installments. The payment described in this Section
-----------------------
shall be payable in cash, less applicable withholding taxes, in a series of 24
approximately equal monthly installments, with the first installment commencing
within 30 days of the eighth day following delivery of the legal release
provided for in Section 2(g) of this Agreement. If the Key Employee dies after
termination of employment, all unpaid installments will be paid in a lump sum to
the Key Employee's estate.
(d) Cause. For purposes of this Agreement, the term "Cause" shall mean
-----
grossly incompetent performance or substantial or continuing inattention to or
neglect of the duties and responsibilities assigned to the Key Employee as
determined by the Key Executive's current supervisor, with the concurrence of
the Executive Vice President - Human Resources of Bell Atlantic; fraud,
misappropriation or embezzlement involving any Bell Atlantic Company; a material
breach of the Employee Code of Business Conduct or this Agreement; or commission
of any felony of which the Key Employee is finally adjudged guilty in a court of
competent jurisdiction.
(e) Constructive Discharge. The Key Employee shall be deemed to have
----------------------
been "Constructively Discharged" for purposes of this Agreement if the Key
Employee is an "Employee in Good Standing" (as defined in Section 2(f) of this
Agreement) and terminates his or her employment for either of the following
reasons: (i) the Key Employee has refused to relocate to a new principal place
of work which would require a commute of more than 35 miles greater than the Key
Employee's existing commute; or (ii) the Key Employee is assigned to a position
where the sum of the annual rate of base salary plus the maximum amount of
annual short term incentive the Key Employee would be eligible to receive per
year is less than 90% of the sum of the corresponding items of salary and short
term incentive for the Key Employee's existing position.
(f) Employee in Good Standing. For purposes of this Agreement, the Key
-------------------------
Employee will be considered to be an "Employee in Good Standing" on a given date
if, on that date, the Key Employee is employed by a Bell Atlantic Company, has
not tendered oral or written notice of intent to resign or retire effective as
of a date on or before the given date (other than pursuant to a Constructive
Discharge), and has not behaved in a manner that would be grounds for discharge
with Cause.
(g) Legal Release. Notwithstanding any provision of this Agreement to
-------------
the contrary, no post-separation payments shall be payable under the terms of
this Agreement unless the Key Employee executes a legal release in a form
contained in Exhibit A.
3. Prohibition Against Recruiting, Hiring or Solicitation. Commencing
------------------------------------------------------
on the effective date of this Agreement and at all times thereafter through the
second anniversary of the Key Employee's termination of employment for reasons
which entitle the Key Employee to
2
<PAGE>
receive separation payments under Section 2 of this Agreement, the Key Employee
shall not, without the consent of the Executive Vice President - Human Resources
of Bell Atlantic:
(i) recruit or solicit any active employee of any Bell Atlantic
Company for employment or for retention as a consultant or
service provider;
(ii) hire, or participate (with another company or third party) in
the process of hiring (other than for a Bell Atlantic Company)
any person who is then an active employee of any Bell Atlantic
Company, or provide names or other information about Bell
Atlantic employees to any person or business (other than a
Bell Atlantic Company) under circumstances which the Key
Employee knows or should know could lead to the use of that
information for purposes of recruiting or hiring;
(iii) approach any customer of any Bell Atlantic Company in an
effort to persuade such customer to purchase, from a competing
company, products or services of the same or similar type as
the products or services which are sold (or, pursuant to an
existing business plan, will be sold) to paying customers of
one or more Bell Atlantic Companies; or
(iv) interfere with the relationship of any Bell Atlantic Company
with any of its customers, employees, agents, or
representatives.
4. Competition.
-----------
(a) Prohibited Conduct. During the period of the Key Employee's
------------------
employment with any Bell Atlantic Company through the second anniversary of the
Key Employee's termination of employment for reasons which entitle the Key
Employee to receive separation payments under Section 2 of this Agreement, the
Key Employee, without the prior written consent of the Executive Vice President
- - Human Resources of Bell Atlantic, shall not: or
(i) personally engage in "Competitive Activities" (as defined in
Section 4(b) of this Agreement; or
(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; provided, however, that the Key
Employee'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 Key Employee's equity interest
in any such company is less than a controlling interest.
(b) Competitive Activities. For purposes of this Agreement,
----------------------
"Competitive Activities" means business activities relating to products or
services of the same or similar type as the products or services which (i) are
sold (or, pursuant to an existing business plan, will be sold) to paying
customers of one or more Bell Atlantic Companies, and (ii) for which the Key
Employee had responsibility to plan, develop, manage, market or oversee, within
the prior 24 months or, if the Key Employee's employment has been terminated,
within the 24 months preceding termination of employment. Notwithstanding the
previous sentence, a business activity will not be treated as a
3
<PAGE>
Competitive Activity if the geographic marketing area of the relevant products
or services does not overlap with the Bell Atlantic territory (as such territory
exists at the time the Key Employee's employment is terminated).
(c) Notice. Bell Atlantic shall send the Key Employee written notice in
------
the event that Bell Atlantic believes that the Key Employee has violated any of
the prohibitions of this Section, 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.
(d) Waiver. Nothing in this Agreement shall bar the Key Employee from
------
requesting that the Executive Vice President - Human Resources of Bell Atlantic,
in that officer's sole discretion, waive in writing Bell Atlantic's rights to
enforce the competition covenant of this Section with respect to an opportunity
or activity contemplated by the Key Employee and which the Key Employee
describes in writing to said officer.
5. Confidentiality. The Key Employee agrees not to disclose or
---------------
discuss, other than with the Key Employee's legal counsel, financial or tax
adviser, and spouse (if any) either the existence of or any details of this
Agreement. The Key Employee will make a good faith effort to ensure that any
such legal counsel, financial or tax adviser, or spouse will not disclose or
discuss the existence or any details of this Agreement with any other person.
6. Proprietary Information. The Key Employee shall at all times
-----------------------
preserve the confidentiality of all proprietary information and trade secrets of
any and all Bell Atlantic Companies. "Proprietary information" means information
obtained or developed by the Key Employee during the Key Employee's employment
with any Bell Atlantic Company that has not been fully disclosed in a writing
generally circulated to the public at large, and which is treated as
confidential within the business of any Bell Atlantic Company.
7. Assignment by Bell Atlantic. Bell Atlantic may assign this
---------------------------
Agreement without the Key Employee's consent to any company that acquires all or
substantially all of the stock or assets of Bell Atlantic, or into which or with
which Bell Atlantic is merged or consolidated. This Agreement may not be
assigned by the Key Employee, and no person other than the Key Employee (or the
Key Employee's estate) may assert the rights of the Key Employee under this
Agreement.
8. Non-Benefit Bearing Payments. The amounts to be paid under
----------------------------
Section 2 of this Agreement shall not be treated as compensation for purposes of
computing or determining any additional benefit payable under any savings plan,
insurance plan, pension plan, or other employee benefit plan maintained by any
Bell Atlantic Company.
9. Certain Limitations Upon Payments.
---------------------------------
(a) Tax Code Limitations. Anything in this Agreement to the contrary
--------------------
notwithstanding, in the event that it shall be determined that any payment or
distribution by Bell Atlantic to or for the benefit of the Key Employee, whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (a "Payment"), would constitute an "excess parachute
payment" within the meaning of Section 280G of the Internal
4
<PAGE>
Revenue Code of 1986, as amended (the "Code"), the aggregate present value of
amounts payable or distributable to or for the benefit of the Key Employee
pursuant to this Agreement (such payments or distributions pursuant to this
Agreement are hereinafter referred to as "Agreement Payments") shall be reduced
(but not below zero) to the Reduced Amount. The "Reduced Amount" shall be an
amount expressed in present value which maximizes the aggregate present value of
Agreement Payments without causing any Payment to be subject to taxation under
Section 4999 of the Code. For purposes of this Section, present value shall be
determined in accordance with Section 280G(d)(4) of the Code.
(b) Determinations by Outside Counsel. All determinations to be made
---------------------------------
under this Section of the Agreement shall be made by Bell Atlantic's outside
counsel ("Outside Counsel"). Outside Counsel shall provide its determinations
and any supporting calculations both to Bell Atlantic and the Key Employee
within 10 days of the effective date of termination of employment. Any such
determination by Outside Counsel shall be binding upon Bell Atlantic and the Key
Employee. Within five days after this determination, Bell Atlantic or the
appropriate Bell Atlantic Company shall commence to pay to or for the benefit of
the Key Employee such amounts (if any) as are then due to the Key Employee under
this Agreement.
(c) Overpayments and Underpayments. As a result of uncertainty in the
------------------------------
application of Section 280G of the Code at the time of the initial determination
by Outside Counsel hereunder, it is possible that Agreement Payments will either
have been made by Bell Atlantic which should not have been made ("Overpayment"),
or that additional Agreement Payments which have not been made by Bell Atlantic
could have been made ("Underpayment"), in each case, consistent with the
calculations required to be made hereunder. Within two years after the effective
date of termination of employment, Outside Counsel shall review any
determination made by it pursuant to Section 9(b) of this Agreement. In the
event that Outside Counsel determines that an Overpayment has been made, any
such Overpayment shall be treated for all purposes as a loan to the Key Employee
which the Key Employee shall repay to Bell Atlantic together with interest at
the applicable Federal rate provided for in Section 7872(f)(2) of the Code (the
"Federal Rate"); provided, however, that no amount shall be payable by the Key
Employee to Bell Atlantic if and to the extent such payment would not reduce the
amount which is subject to taxation under Section 4999 of the Code. In the event
that Outside Counsel determines that an Underpayment has occurred, any such
Underpayment shall be promptly paid by the appropriate Bell Atlantic Company to
or for the benefit of the Key Employee together with interest at the Federal
Rate.
(d) Outside Counsel Fees. All of the fees and expenses of Outside
--------------------
Counsel in performing the determinations referred to in Sections 9(b) and (c) of
this Agreement shall be borne solely by Bell Atlantic.
10. Remedies. The Key Employee acknowledges that irreparable injury
--------
will result to Bell Atlantic and other Bell Atlantic Companies, and to their
business, in the event of any breach by the Key Employee of any of the Key
Employee's covenants and commitments under this Agreement. In the event of a
breach of any of the Key Employee's covenants and commitments under this
Agreement, Bell Atlantic and any affected Bell Atlantic Company reserves all
rights to seek any and all remedies and damages permitted under law, including,
but not limited to, injunctive relief, equitable relief and compensatory
damages. In addition to the foregoing, the Key Employee shall forfeit all unpaid
installment payments under Section 2 of this Agreement, and shall have an
obligation to immediately repay any installment payment previously received.
5
<PAGE>
11. Governing Law. This Agreement shall be interpreted and enforced in
-------------
accordance with the law of the State of New York.
12. Severability. If any clause, phrase or provision of this Agreement
------------
or the application thereto to any person or circumstances shall be invalid or
unenforceable under any applicable law, this shall not affect or render invalid
or unenforceable the remainder of this Agreement. Furthermore, in the event that
a court of law or equity determines that the geographic scope of any covenants,
or the duration of any of the restrictions under this Agreement, are not
enforceable, or if any provision of this Agreement conflicts with any applicable
requirement of a code of conduct that pertains to an employee licensed to
practice a profession governed by such code, this Agreement shall be deemed to
be amended to the extent necessary, but only to the extent necessary, to permit
the enforcement of the terms of this Agreement, as so amended, and to avoid a
conflict with said code of conduct.
13. Waiver. The waiver by Bell Atlantic of a breach by the Key Employee
------
of any provision of this Agreement shall not be construed as a waiver of any
subsequent breach.
14. Entire Agreement.
----------------
(a) Post-Separation Payments. This Agreement sets forth the entire
------------------------
understanding of Bell Atlantic and the Key Employee and supersedes all prior
agreements and communications, whether oral or written, pertaining to
eligibility for post-separation payments, except as follows. This Agreement
shall not affect the rights of the Key Employee under the compensation and
benefit plans in which the Key Employee participates; provided, however, that in
exchange for the separation payments described in this Agreement, the Key
Employee hereby waives, during the Period of this Agreement, any rights he or
she may have to participate in the Bell Atlantic Executive Separation Pay Plan
or any other Bell Atlantic plan that provides for severance payments.
(b) Certain Covenants. Except for the terms of compensation and benefit
-----------------
plans in which the Key Employee participates, Sections 3 (Prohibition Against
Recruiting, Hiring or Solicitation), 4 (Competition), and 6 (Proprietary
Information) of this Agreement shall supersede the terms or provisions of any
prior covenant or agreement between the Key Employee and any Bell Atlantic
Company covering the same subject matter; provided, however, that any such prior
covenants or agreements shall again be enforceable to the full extent of their
terms if (i) the Key Employee remains employed by a Bell Atlantic Company
subsequent to the Period of this Agreement (or any extension of such Period), or
(ii) during the Period of this Agreement, the Key Employee terminates his
employment, or such employment is terminated by Bell Atlantic, for reasons which
do not entitle the Key Employee to receive separation payments under Section 2
of this Agreement.
(c) Modification of Agreement. This Agreement shall not be modified
-------------------------
except by written agreement of the Key Employee and Bell Atlantic.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
BELL ATLANTIC CORPORATION
By:
---------------------------
THE KEY EMPLOYEE
-------------------------------
7
<PAGE>
EXHIBIT A
RELEASE
-------
THIS RELEASE (the "Release") is entered into by _____________________
(the "Key Employee"), for the benefit of BELL ATLANTIC CORPORATION (the
"Company"), and all companies, and their officers, directors and employees,
which are affiliated with the Company or in which the Company owns a substantial
economic interest, and any benefit plan maintained by any Bell Atlantic Company
(or any plan administrator of any such plan). Capitalized terms in this document
which are not otherwise defined herein shall have the respective meaning
assigned to them in the Separation Agreement between the Company and the Key
Employee, dated as of January 29, 1999 (the "Agreement").
WHEREAS, the Key Employee has separated from service with the Key
Employee's employing company (the "Employer") on __________ , _______(the
"Separation Date") pursuant to the terms of the Agreement, and the Key Employee
wishes to execute this Release as contemplated under the terms of the Agreement.
NOW, THEREFORE, the Key Employee affirms as follows:
1. The Key Employee hereby waives any and all claims which the Key
Employee might have against any Bell Atlantic Company, and any benefit plan
maintained by any Bell Atlantic Company (or any plan administrator of any such
plan), for salary payments, vacation pay, incentives, bonuses, or other
remuneration or employee benefits of any kind, with the exception of any
unfulfilled obligations of the Company or Employer under Section 2 of the
Agreement.
2. Except as provided in Section 1 hereof, the Key Employee hereby
voluntarily releases and discharges each and every Bell Atlantic Company and
their successors and assigns, and the directors, officers, employees, and agents
of each of them, and any benefit plan maintained by any Bell Atlantic Company
(or any plan administrator of any such plan), 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 which the Key
Employee might have or assert against any of said entities or persons by reason
of the Key Employee's employment by any Bell Atlantic Company or the termination
of said employment, and all circumstances related thereto, 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, the Employee Retirement Income
Security Act ("ERISA") or any other applicable federal, state, or local or
foreign employment discrimination statute or ordinance.
<PAGE>
3. The Key Employee hereby reaffirms all covenants and promises given
by the Key Employee under the Agreement, and all other 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 KEY EMPLOYEE WHO IS SIGNING BELOW: THE COMPANY HAS
--------------------------------------------------
ADVISED ME IN WRITING TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS
RELEASE. THE COMPANY HAS FULFILLED ITS DUTIES TO ME UNDER THE OLDER WORKERS
BENEFITS PROTECTION ACT, AND I ACKNOWLEDGE THAT THIS RELEASE AND THE AGREEMENT
ARE LEGALLY ENFORCEABLE BY THE COMPANY. 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 _________, ____, that being the Key Employee's
Separation Date.
THE KEY EMPLOYEE
Signed:
--------------------
THIS IS A RELEASE
READ CAREFULLY BEFORE SIGNING
<PAGE>
EXHIBIT 10pp
FORM OF
MERGER AGREEMENT
(Jacquelyn B. Gates, Chester N. Watson)
THIS MERGER AGREEMENT (the "Agreement) is made as of the 29th day of
January, 1999, by and between Bell Atlantic Corporation, its successors and
assigns ("Bell Atlantic"), and ________________________, an employee of a Bell
Atlantic Company (the "Key Employee"). In this Agreement, "Bell Atlantic
Company" means any or all of the following: Bell Atlantic, a corporate
subsidiary or other company affiliated with Bell Atlantic, a company in which
Bell Atlantic owns directly or indirectly an equity interest of at least ten
percent, and the successors and assigns of any such company.
WHEREAS, pursuant to the terms of an Agreement and Plan of Merger, dated as
of July 27, 1998, among Bell Atlantic, GTE Corporation ("GTE") and Beta Gamma
Corporation (the "Definitive Agreement"), Bell Atlantic contemplates a merger of
the Bell Atlantic and GTE businesses (the "Merger") on a date which is yet to be
decided (the "Closing Date");
WHEREAS, the period from the date of this Agreement to at least the second
anniversary of the Closing Date is likely to be a period of difficult
transition, with heightened concern about job security due to possible
reductions in force in connection with the Merger;
WHEREAS, Bell Atlantic wishes to provide additional financial security to
the Key Employee in the form of eligibility for post-separation payments, which
the Key Employee would be eligible to receive in case of a termination of
employment without cause during such period; and
WHEREAS, Bell Atlantic and the Key Employee wish to set forth the terms and
conditions applicable to such post-separation payments.
NOW, THEREFORE, for good and valuable consideration, the Key Employee and
Bell Atlantic hereby agree as follows:
1. Period of Agreement. The Period of this Agreement shall be the
-------------------
period beginning on the date of this Agreement and ending on the second
anniversary of the Closing Date; provided, however, that, in the event that the
Definitive Agreement is terminated without the Merger occurring, the Period of
this Agreement shall end on the date on which the Definitive Agreement is
terminated.
2. Post-Separation Payments.
------------------------
(a) Pay. If, during the Period of this Agreement, a Bell Atlantic
---
Company discharges the Key Employee without "Cause" (as defined in Section 2(d)
of this Agreement), or the Key Employee is "Constructively Discharged" (as
defined in Section 2(e) of this Agreement), Bell Atlantic shall cause the Bell
Atlantic Company which then employs the Key Employee to pay to the Key Employee,
in cash, an aggregate amount equal (before withholding of taxes) to "Pay" (as
defined in Section 2(b) of this Agreement).
<PAGE>
(b) Pay. For purposes of this Agreement, "Pay" means an amount
---
equal (before withholding of taxes) to the greater of (i) the sum of the Key
Employee's annual rate of base salary and 50% of the Key Employee's maximum
short term incentive under the Bell Atlantic Senior Management Short Term
Incentive Plan (or other applicable short-term incentive plan), both as of the
date of this Agreement, or (ii) the sum of such items, both as of the date the
Key Employee's employment is terminated.
(c) Payment of Installments. The payment described in this Section
-----------------------
shall be payable in cash, less applicable withholding taxes, in a series of 12
approximately equal monthly installments, with the first installment commencing
within 30 days of the eighth day following delivery of the legal release
provided for in Section 2(g) of this Agreement. If the Key Employee dies after
termination of employment, all unpaid installments will be paid in a lump sum to
the Key Employee's estate.
(d) Cause. For purposes of this Agreement, the term "Cause" shall
-----
mean grossly incompetent performance or substantial or continuing inattention to
or neglect of the duties and responsibilities assigned to the Key Employee as
determined by the Key Executive's current supervisor, with the concurrence of
the Executive Vice President - Human Resources of Bell Atlantic; fraud,
misappropriation or embezzlement involving any Bell Atlantic Company; a material
breach of the Employee Code of Business Conduct or this Agreement; or commission
of any felony of which the Key Employee is finally adjudged guilty in a court of
competent jurisdiction.
(e) Constructive Discharge. The Key Employee shall be deemed to
----------------------
have been "Constructively Discharged" for purposes of this Agreement if the Key
Employee is an "Employee in Good Standing" (as defined in Section 2(f) of this
Agreement) and terminates his or her employment for either of the following
reasons: (i) the Key Employee has refused to relocate to a new principal place
of work which would require a commute of more than 35 miles greater than the Key
Employee's existing commute; or (ii) the Key Employee is assigned to a position
where the sum of the annual rate of base salary plus the maximum amount of
annual short term incentive the Key Employee would be eligible to receive per
year is less than 90% of the sum of the corresponding items of salary and short
term incentive for the Key Employee's existing position.
(f) Employee in Good Standing. For purposes of this Agreement, the
-------------------------
Key Employee will be considered to be an "Employee in Good Standing" on a given
date if, on that date, the Key Employee is employed by a Bell Atlantic Company,
has not tendered oral or written notice of intent to resign or retire effective
as of a date on or before the given date (other than pursuant to a Constructive
Discharge), and has not behaved in a manner that would be grounds for discharge
with Cause.
(g) Legal Release. Notwithstanding any provision of this Agreement
-------------
to the contrary, no post-separation payments shall be payable under the terms of
this Agreement unless the Key Employee executes a legal release in a form
contained in Exhibit A.
3. Prohibition Against Recruiting, Hiring or Solicitation.
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Commencing on the effective date of this Agreement and at all times thereafter
through the second anniversary of the Key Employee's termination of employment
for reasons which entitle the Key Employee to
2
<PAGE>
receive separation payments under Section 2 of this Agreement, the Key Employee
shall not, without the consent of the Executive Vice President - Human Resources
of Bell Atlantic:
(i) recruit or solicit any active employee of any Bell Atlantic
Company for employment or for retention as a consultant or
service provider;
(ii) hire, or participate (with another company or third party) in
the process of hiring (other than for a Bell Atlantic Company)
any person who is then an active employee of any Bell Atlantic
Company, or provide names or other information about Bell
Atlantic employees to any person or business (other than a
Bell Atlantic Company) under circumstances which the Key
Employee knows or should know could lead to the use of that
information for purposes of recruiting or hiring;
(iii) approach any customer of any Bell Atlantic Company in an
effort to persuade such customer to purchase, from a competing
company, products or services of the same or similar type as
the products or services which are sold (or, pursuant to an
existing business plan, will be sold) to paying customers of
one or more Bell Atlantic Companies; or
(iv) interfere with the relationship of any Bell Atlantic Company
with any of its customers, employees, agents, or
representatives.
4. Competition.
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(a) Prohibited Conduct. During the period of the Key Employee's
------------------
employment with any Bell Atlantic Company through the first anniversary of the
Key Employee's termination of employment for reasons which entitle the Key
Employee to receive separation payments under Section 2 of this Agreement, the
Key Employee, without the prior written consent of the Executive Vice President
- - Human Resources of Bell Atlantic, shall not:
(i) personally engage in "Competitive Activities" (as defined in
Section 4(b) of this Agreement; or
(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; provided, however, that the Key
Employee'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 Key Employee's equity interest
in any such company is less than a controlling interest.
(b) Competitive Activities. For purposes of this Agreement,
----------------------
"Competitive Activities" means business activities relating to products or
services of the same or similar type as the products or services which (i) are
sold (or, pursuant to an existing business plan, will be sold) to paying
customers of one or more Bell Atlantic Companies, and (ii) for which the Key
Employee had responsibility to plan, develop, manage, market or oversee, within
the prior 24 months or, if the Key Employee's employment has been terminated,
within the 24 months preceding termination of employment. Notwithstanding the
previous sentence, a business activity will not be treated as a
3
<PAGE>
Competitive Activity if the geographic marketing area of the relevant products
or services does not overlap with the Bell Atlantic territory (as such territory
exists at the time the Key Employee's employment is terminated).
(c) Notice. Bell Atlantic shall send the Key Employee written
------
notice in the event that Bell Atlantic believes that the Key Employee has
violated any of the prohibitions of this Section, 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.
(d) Waiver. Nothing in this Agreement shall bar the Key Employee
------
from requesting that the Executive Vice President - Human Resources of Bell
Atlantic, in that officer's sole discretion, waive in writing Bell Atlantic's
rights to enforce the competition covenant of this Section with respect to an
opportunity or activity contemplated by the Key Employee and which the Key
Employee describes in writing to said officer.
5. Confidentiality. The Key Employee agrees not to disclose or
---------------
discuss, other than with the Key Employee's legal counsel, financial or tax
adviser, and spouse (if any) either the existence of or any details of this
Agreement. The Key Employee will make a good faith effort to ensure that any
such legal counsel, financial or tax adviser, or spouse will not disclose or
discuss the existence or any details of this Agreement with any other person.
6. Proprietary Information. The Key Employee shall at all times
-----------------------
preserve the confidentiality of all proprietary information and trade secrets of
any and all Bell Atlantic Companies. "Proprietary information" means information
obtained or developed by the Key Employee during the Key Employee's employment
with any Bell Atlantic Company that has not been fully disclosed in a writing
generally circulated to the public at large, and which is treated as
confidential within the business of any Bell Atlantic Company.
7. Assignment by Bell Atlantic. Bell Atlantic may assign this
---------------------------
Agreement without the Key Employee's consent to any company that acquires all or
substantially all of the stock or assets of Bell Atlantic, or into which or with
which Bell Atlantic is merged or consolidated. This Agreement may not be
assigned by the Key Employee, and no person other than the Key Employee (or the
Key Employee's estate) may assert the rights of the Key Employee under this
Agreement.
8. Non-Benefit Bearing Payments. The amounts to be paid under
----------------------------
Section 2 of this Agreement shall not be treated as compensation for purposes of
computing or determining any additional benefit payable under any savings plan,
insurance plan, pension plan, or other employee benefit plan maintained by any
Bell Atlantic Company.
9. Certain Limitations Upon Payments.
---------------------------------
(a) Tax Code Limitations. Anything in this Agreement to the
--------------------
contrary notwithstanding, in the event that it shall be determined that any
payment or distribution by Bell Atlantic to or for the benefit of the Key
Employee, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise (a "Payment"), would constitute an
"excess parachute payment" within the meaning of Section 280G of the Internal
4
<PAGE>
Revenue Code of 1986, as amended (the "Code"), the aggregate present value of
amounts payable or distributable to or for the benefit of the Key Employee
pursuant to this Agreement (such payments or distributions pursuant to this
Agreement are hereinafter referred to as "Agreement Payments") shall be reduced
(but not below zero) to the Reduced Amount. The "Reduced Amount" shall be an
amount expressed in present value which maximizes the aggregate present value of
Agreement Payments without causing any Payment to be subject to taxation under
Section 4999 of the Code. For purposes of this Section, present value shall be
determined in accordance with Section 280G(d)(4) of the Code.
(b) Determinations by Outside Counsel. All determinations to be
---------------------------------
made under this Section of the Agreement shall be made by Bell Atlantic's
outside counsel ("Outside Counsel"). Outside Counsel shall provide its
determinations and any supporting calculations both to Bell Atlantic and the Key
Employee within 10 days of the effective date of termination of employment. Any
such determination by Outside Counsel shall be binding upon Bell Atlantic and
the Key Employee. Within five days after this determination, Bell Atlantic or
the appropriate Bell Atlantic Company shall commence to pay to or for the
benefit of the Key Employee such amounts (if any) as are then due to the Key
Employee under this Agreement.
(c) Overpayments and Underpayments. As a result of uncertainty in
------------------------------
the application of Section 280G of the Code at the time of the initial
determination by Outside Counsel hereunder, it is possible that Agreement
Payments will either have been made by Bell Atlantic which should not have been
made ("Overpayment"), or that additional Agreement Payments which have not been
made by Bell Atlantic could have been made ("Underpayment"), in each case,
consistent with the calculations required to be made hereunder. Within two years
after the effective date of termination of employment, Outside Counsel shall
review any determination made by it pursuant to Section 9(b) of this Agreement.
In the event that Outside Counsel determines that an Overpayment has been made,
any such Overpayment shall be treated for all purposes as a loan to the Key
Employee which the Key Employee shall repay to Bell Atlantic together with
interest at the applicable Federal rate provided for in Section 7872(f)(2) of
the Code (the "Federal Rate"); provided, however, that no amount shall be
payable by the Key Employee to Bell Atlantic if and to the extent such payment
would not reduce the amount which is subject to taxation under Section 4999 of
the Code. In the event that Outside Counsel determines that an Underpayment has
occurred, any such Underpayment shall be promptly paid by the appropriate Bell
Atlantic Company to or for the benefit of the Key Employee together with
interest at the Federal Rate.
(d) Outside Counsel Fees. All of the fees and expenses of Outside
--------------------
Counsel in performing the determinations referred to in Sections 9(b) and (c) of
this Agreement shall be borne solely by Bell Atlantic.
10. Remedies. The Key Employee acknowledges that irreparable
--------
injury will result to Bell Atlantic and other Bell Atlantic Companies, and to
their business, in the event of any breach by the Key Employee of any of the Key
Employee's covenants and commitments under this Agreement. In the event of a
breach of any of the Key Employee's covenants and commitments under this
Agreement, Bell Atlantic and any affected Bell Atlantic Company reserves all
rights to seek any and all remedies and damages permitted under law, including,
but not limited to, injunctive relief, equitable relief and compensatory
damages. In addition to the foregoing, the Key Employee shall forfeit all unpaid
installment payments under Section 2 of this Agreement, and shall have an
obligation to immediately repay any installment payment previously received.
5
<PAGE>
11. Governing Law. This Agreement shall be interpreted and
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enforced in accordance with the law of the State of New York.
12. Severability. If any clause, phrase or provision of this
------------
Agreement or the application thereto to any person or circumstances shall be
invalid or unenforceable under any applicable law, this shall not affect or
render invalid or unenforceable the remainder of this Agreement. Furthermore, in
the event that a court of law or equity determines that the geographic scope of
any covenants, or the duration of any of the restrictions under this Agreement,
are not enforceable, or if any provision of this Agreement conflicts with any
applicable requirement of a code of conduct that pertains to an employee
licensed to practice a profession governed by such code, this Agreement shall be
deemed to be amended to the extent necessary, but only to the extent necessary,
to permit the enforcement of the terms of this Agreement, as so amended, and to
avoid a conflict with said code of conduct.
13. Waiver. The waiver by Bell Atlantic of a breach by the Key
------
Employee of any provision of this Agreement shall not be construed as a waiver
of any subsequent breach.
14. Entire Agreement.
----------------
(a) Post-Separation Payments. This Agreement sets forth the entire
------------------------
understanding of Bell Atlantic and the Key Employee and supersedes all prior
agreements and communications, whether oral or written, pertaining to
eligibility for post-separation payments, except as follows. This Agreement
shall not affect the rights of the Key Employee under the compensation and
benefit plans in which the Key Employee participates; provided, however, that in
exchange for the separation payments described in this Agreement, the Key
Employee hereby waives, during the Period of this Agreement, any rights he or
she may have to participate in the Bell Atlantic Executive Separation Pay Plan
or any other Bell Atlantic plan that provides for severance payments.
(b) Certain Covenants. Except for the terms of compensation and
-----------------
benefit plans in which the Key Employee participates, Sections 3 (Prohibition
Against Recruiting, Hiring or Solicitation), 4 (Competition), and 6 (Proprietary
Information) of this Agreement shall supersede the terms or provisions of any
prior covenant or agreement between the Key Employee and any Bell Atlantic
Company covering the same subject matter; provided, however, that any such prior
covenants or agreements shall again be enforceable to the full extent of their
terms if (i) the Key Employee remains employed by a Bell Atlantic Company
subsequent to the Period of this Agreement (or any extension of such Period), or
(ii) during the Period of this Agreement, the Key Employee terminates his
employment, or such employment is terminated by Bell Atlantic, for reasons which
do not entitle the Key Employee to receive separation payments under Section 2
of this Agreement.
(c) Modification of Agreement. This Agreement shall not be
-------------------------
modified except by written agreement of the Key Employee and Bell Atlantic.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
BELL ATLANTIC CORPORATION
By:
--------------------------------
THE KEY EMPLOYEE
----------------------------------
7
<PAGE>
EXHIBIT A
RELEASE
-------
THIS RELEASE (the "Release") is entered into by _____________________
(the "Key Employee"), for the benefit of BELL ATLANTIC CORPORATION (the
"Company"), and all companies, and their officers, directors and employees,
which are affiliated with the Company or in which the Company owns a substantial
economic interest, and any benefit plan maintained by any Bell Atlantic Company
(or any plan administrator of any such plan). Capitalized terms in this document
which are not otherwise defined herein shall have the respective meaning
assigned to them in the Separation Agreement between the Company and the Key
Employee, dated as of January 29, 1999 (the "Agreement").
WHEREAS, the Key Employee has separated from service with the Key
Employee's employing company (the "Employer") on __________ , _______(the
"Separation Date") pursuant to the terms of the Agreement, and the Key Employee
wishes to execute this Release as contemplated under the terms of the Agreement.
NOW, THEREFORE, the Key Employee affirms as follows:
1. The Key Employee hereby waives any and all claims which the Key
Employee might have against any Bell Atlantic Company, and any benefit plan
maintained by any Bell Atlantic Company (or any plan administrator of any such
plan), for salary payments, vacation pay, incentives, bonuses, or other
remuneration or employee benefits of any kind, with the exception of any
unfulfilled obligations of the Company or Employer under Section 2 of the
Agreement.
2. Except as provided in Section 1 hereof, the Key Employee hereby
voluntarily releases and discharges each and every Bell Atlantic Company and
their successors and assigns, and the directors, officers, employees, and agents
of each of them, and any benefit plan maintained by any Bell Atlantic Company
(or any plan administrator of any such plan), 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 which the Key
Employee might have or assert against any of said entities or persons by reason
of the Key Employee's employment by any Bell Atlantic Company or the termination
of said employment, and all circumstances related thereto, 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, the Employee Retirement Income
Security Act ("ERISA") or any other applicable federal, state, or local or
foreign employment discrimination statute or ordinance.
<PAGE>
3. The Key Employee hereby reaffirms all covenants and promises
given by the Key Employee under the Agreement, and all other 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 KEY EMPLOYEE WHO IS SIGNING BELOW: THE COMPANY HAS
--------------------------------------------------
ADVISED ME IN WRITING TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS
RELEASE. THE COMPANY HAS FULFILLED ITS DUTIES TO ME UNDER THE OLDER WORKERS
BENEFITS PROTECTION ACT, AND I ACKNOWLEDGE THAT THIS RELEASE AND THE AGREEMENT
ARE LEGALLY ENFORCEABLE BY THE COMPANY. 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 _________, ____, that being the Key Employee's
Separation Date.
THE KEY EMPLOYEE
Signed:
--------------------------
THIS IS A RELEASE
READ CAREFULLY BEFORE SIGNING
<PAGE>
EXHIBIT 12
BELL ATLANTIC CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
<TABLE>
<CAPTION>
Years ended December 31
-----------------------------------------------------------------
1998 1997* 1996* 1995* 1994*
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income before provision for income taxes,
extraordinary items, and cumulative effect of
changes in accounting principles ............ $ 4,998.9 $ 3,984.1 $ 4,911.2 $ 4,535.0 $ 3,430.8
Minority interest .............................. 32.3 45.6 130.9 130.2 48.7
Loss (income) from unconsolidated businesses ... 414.6 124.1 (14.2) 22.1 (65.9)
Dividends from unconsolidated businesses ....... 169.4 192.1 194.8 179.0 168.4
Interest expense, including interest related to
lease financing activities .................. 1,375.9 1,275.2 1,124.1 1,305.0 1,298.4
Portion of rent expense representing interest .. 185.2 190.9 177.3 177.1 165.6
Amortization of capitalized interest ........... 21.7 16.4 10.0 5.4 3.1
-----------------------------------------------------------------
Income, as adjusted ............................ $ 7,198.0 $ 5,828.4 $ 6,534.1 $ 6,353.8 $ 5,049.1
=================================================================
Fixed charges:
Interest expense, including interest related to
lease financing activities .................. $ 1,375.9 $ 1,275.2 $ 1,124.1 $ 1,305.0 $ 1,298.4
Portion of rent expense representing interest .. 185.2 190.9 177.3 177.1 165.6
Capitalized interest ........................... 90.4 81.0 128.5 73.2 19.1
Priority distributions ......................... -- 18.8 58.5 47.1 29.9
Preferred stock dividend requirement ........... 20.5 15.5 14.9 9.8 5.4
-----------------------------------------------------------------
Fixed Charges .................................. $ 1,672.0 $ 1,581.4 $ 1,503.3 $ 1,612.2 $ 1,518.4
=================================================================
Ratio of Earnings to Fixed Charges ............. 4.31 3.69 4.35 3.94 3.33
=================================================================
</TABLE>
* Restated as required by revision of Item 503(d) of Regulation S-K
<PAGE>
EXHIBIT 21
Principal Subsidiaries of Bell Atlantic Corporation
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Name State of Organization
- ---- ---------------------
Bell Atlantic - Delaware, Inc. Delaware
Bell Atlantic - Maryland, Inc. Maryland
Bell Atlantic - New Jersey, Inc. New Jersey
Bell Atlantic - Pennsylvania, Inc. Pennsylvania
Bell Atlantic - Virginia, Inc. Virginia
Bell Atlantic - Washington, D.C., Inc. New York
Bell Atlantic - West Virginia, Inc. West Virginia
New England Telephone and Telegraph Company New York
(d/b/a Bell Atlantic - New England)
New York Telephone Company New York
(d/b/a Bell Atlantic - New York)
Cellco Partnership Delaware
(d/b/a Bell Atlantic Mobile)
<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-8 (File No. 333-66785), Form S-8 (File No.
333-66459), Form S-8 (File No. 333-66349), Form S-3 (File No. 33-49085), Form
S-3 (File No. 333-48083), Form S-3 (File No. 33-30642), 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-8 (File No. 33-36551), Form S-3 (File No. 33-62393), Form S-4
(File No. 333-11573), Form S-8 (File No. 333-33747), Form S-8 (File No. 333-
41593), Form S-3 (File No. 333-42801), and Form S-8 (File No. 333-45985) of our
report dated February 9, 1999, on our audits of the consolidated financial
statements and financial statement schedule of the Company and its subsidiaries
as of December 31, 1998 and December 31, 1997, and for each of the three years
in the period ended December 31, 1998, which report is included in this Annual
Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 29, 1999
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
NOW, THEREFORE, the undersigned hereby appoints each of Doreen A.
Toben, Frederic V. Salerno and Ivan G. Seidenberg as attorney for the
undersigned for the purpose of executing and filing such registration statement
and any amendment or amendments or other necessary documents, hereby giving to
each said attorney full authority to perform all acts necessary thereto as fully
as the undersigned could do if personally present, and hereby ratifying all that
said attorney may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 23rd day of March, 1999.
/s/ Lawrence T. Babbio, Jr.
---------------------------
Lawrence T. Babbio, Jr.
<PAGE>
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
NOW, THEREFORE, the undersigned hereby appoints each of Doreen A.
Toben, Frederic V. Salerno and Ivan G. Seidenberg as attorney for the
undersigned for the purpose of executing and filing such registration statement
and any amendment or amendments or other necessary documents, hereby giving to
each said attorney full authority to perform all acts necessary thereto as fully
as the undersigned could do if personally present, and hereby ratifying all that
said attorney may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 23rd day of March, 1999.
/s/ Richard L. Carrion
----------------------
Richard L. Carrion
<PAGE>
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
NOW, THEREFORE, the undersigned hereby appoints each of Doreen A.
Toben, Frederic V. Salerno and Ivan G. Seidenberg as attorney for the
undersigned for the purpose of executing and filing such registration statement
and any amendment or amendments or other necessary documents, hereby giving to
each said attorney full authority to perform all acts necessary thereto as fully
as the undersigned could do if personally present, and hereby ratifying all that
said attorney may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 23rd day of March, 1999.
/s/ James G. Cullen
-------------------
James G. Cullen
<PAGE>
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
NOW, THEREFORE, the undersigned hereby appoints each of Doreen A.
Toben, Frederic V. Salerno and Ivan G. Seidenberg as attorney for the
undersigned for the purpose of executing and filing such registration statement
and any amendment or amendments or other necessary documents, hereby giving to
each said attorney full authority to perform all acts necessary thereto as fully
as the undersigned could do if personally present, and hereby ratifying all that
said attorney may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 23rd day of March, 1999.
/s/ Lodewijk J.R. de Vink
-------------------------
Lodewijk J.R. de Vink
<PAGE>
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
NOW, THEREFORE, the undersigned hereby appoints each of Doreen A.
Toben, Frederic V. Salerno and Ivan G. Seidenberg as attorney for the
undersigned for the purpose of executing and filing such registration statement
and any amendment or amendments or other necessary documents, hereby giving to
each said attorney full authority to perform all acts necessary thereto as fully
as the undersigned could do if personally present, and hereby ratifying all that
said attorney may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 23rd day of March, 1999.
/s/ James H. Gilliam, Jr.
-------------------------
James H. Gilliam, Jr.
<PAGE>
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
NOW, THEREFORE, the undersigned hereby appoints each of Doreen A.
Toben, Frederic V. Salerno and Ivan G. Seidenberg as attorney for the
undersigned for the purpose of executing and filing such registration statement
and any amendment or amendments or other necessary documents, hereby giving to
each said attorney full authority to perform all acts necessary thereto as fully
as the undersigned could do if personally present, and hereby ratifying all that
said attorney may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 23rd day of March, 1999.
/s/ Stanley P. Goldstein
------------------------
Stanley P. Goldstein
<PAGE>
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
NOW, THEREFORE, the undersigned hereby appoints each of Doreen A.
Toben, Frederic V. Salerno and Ivan G. Seidenberg as attorney for the
undersigned for the purpose of executing and filing such registration statement
and any amendment or amendments or other necessary documents, hereby giving to
each said attorney full authority to perform all acts necessary thereto as fully
as the undersigned could do if personally present, and hereby ratifying all that
said attorney may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 23rd day of March, 1999.
/s/ Helene L. Kaplan
--------------------
Helene L. Kaplan
<PAGE>
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
NOW, THEREFORE, the undersigned hereby appoints each of Doreen A.
Toben, Frederic V. Salerno and Ivan G. Seidenberg as attorney for the
undersigned for the purpose of executing and filing such registration statement
and any amendment or amendments or other necessary documents, hereby giving to
each said attorney full authority to perform all acts necessary thereto as fully
as the undersigned could do if personally present, and hereby ratifying all that
said attorney may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 23rd day of March, 1999.
/s/ Thomas H. Kean
----------------------------
Thomas H. Kean
<PAGE>
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
NOW, THEREFORE, the undersigned hereby appoints each of Doreen A.
Toben, Frederic V. Salerno and Ivan G. Seidenberg as attorney for the
undersigned for the purpose of executing and filing such registration statement
and any amendment or amendments or other necessary documents, hereby giving to
each said attorney full authority to perform all acts necessary thereto as fully
as the undersigned could do if personally present, and hereby ratifying all that
said attorney may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 23rd day of March, 1999.
/s/ Elizabeth T. Kennan
---------------------------
Elizabeth T. Kennan
<PAGE>
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
NOW, THEREFORE, the undersigned hereby appoints each of Doreen A.
Toben, Frederic V. Salerno and Ivan G. Seidenberg as attorney for the
undersigned for the purpose of executing and filing such registration statement
and any amendment or amendments or other necessary documents, hereby giving to
each said attorney full authority to perform all acts necessary thereto as fully
as the undersigned could do if personally present, and hereby ratifying all that
said attorney may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 23rd day of March, 1999.
/s/ John F. Maypole
------------------------
John F. Maypole
<PAGE>
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
NOW, THEREFORE, the undersigned hereby appoints each of Doreen A.
Toben, Frederic V. Salerno and Ivan G. Seidenberg as attorney for the
undersigned for the purpose of executing and filing such registration statement
and any amendment or amendments or other necessary documents, hereby giving to
each said attorney full authority to perform all acts necessary thereto as fully
as the undersigned could do if personally present, and hereby ratifying all that
said attorney may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 23rd day of March, 1999.
/s/ Joseph Neubauer
-------------------
Joseph Neubauer
<PAGE>
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
NOW, THEREFORE, the undersigned hereby appoints each of Doreen A.
Toben, Frederic V. Salerno and Ivan G. Seidenberg as attorney for the
undersigned for the purpose of executing and filing such registration statement
and any amendment or amendments or other necessary documents, hereby giving to
each said attorney full authority to perform all acts necessary thereto as fully
as the undersigned could do if personally present, and hereby ratifying all that
said attorney may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 23rd day of March, 1999.
/s/ Eckhard Pfeiffer
------------------------
Eckhard Pfeiffer
<PAGE>
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
NOW, THEREFORE, the undersigned hereby appoints each of Doreen A.
Toben, Frederic V. Salerno and Ivan G. Seidenberg as attorney for the
undersigned for the purpose of executing and filing such registration statement
and any amendment or amendments or other necessary documents, hereby giving to
each said attorney full authority to perform all acts necessary thereto as fully
as the undersigned could do if personally present, and hereby ratifying all that
said attorney may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 23rd day of March, 1999.
/s/ Hugh B. Price
----------------------
Hugh B. Price
<PAGE>
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
NOW, THEREFORE, the undersigned hereby appoints each of Doreen A.
Toben, Frederic V. Salerno and Ivan G. Seidenberg as attorney for the
undersigned for the purpose of executing and filing such registration statement
and any amendment or amendments or other necessary documents, hereby giving to
each said attorney full authority to perform all acts necessary thereto as fully
as the undersigned could do if personally present, and hereby ratifying all that
said attorney may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 23rd day of March, 1999.
/s/ Rozanne L. Ridgway
--------------------------
Rozanne L. Ridgway
<PAGE>
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
NOW, THEREFORE, the undersigned hereby appoints each of Doreen A. Toben
and Ivan G. Seidenberg as attorney for the undersigned for the purpose of
executing and filing such registration statement and any amendment or amendments
or other necessary documents, hereby giving to each said attorney full authority
to perform all acts necessary thereto as fully as the undersigned could do if
personally present, and hereby ratifying all that said attorney may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 23rd day of March, 1999.
/s/ Frederic V. Salerno
-----------------------
Frederic V. Salerno
<PAGE>
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
NOW, THEREFORE, the undersigned hereby appoints each of Doreen A. Toben
and Frederic V. Salerno as attorney for the undersigned for the purpose of
executing and filing such registration statement and any amendment or amendments
or other necessary documents, hereby giving to each said attorney full authority
to perform all acts necessary thereto as fully as the undersigned could do if
personally present, and hereby ratifying all that said attorney may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 23rd day of March, 1999.
/s/ Ivan G. Seidenberg
----------------------
Ivan G. Seidenberg
<PAGE>
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
NOW, THEREFORE, the undersigned hereby appoints each of Doreen A.
Toben, Frederic V. Salerno and Ivan G. Seidenberg as attorney for the
undersigned for the purpose of executing and filing such registration statement
and any amendment or amendments or other necessary documents, hereby giving to
each said attorney full authority to perform all acts necessary thereto as fully
as the undersigned could do if personally present, and hereby ratifying all that
said attorney may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 23rd day of March, 1999.
/s/ Walter V. Shipley
---------------------
Walter V. Shipley
<PAGE>
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
NOW, THEREFORE, the undersigned hereby appoints each of Doreen A.
Toben, Frederic V. Salerno and Ivan G. Seidenberg as attorney for the
undersigned for the purpose of executing and filing such registration statement
and any amendment or amendments or other necessary documents, hereby giving to
each said attorney full authority to perform all acts necessary thereto as fully
as the undersigned could do if personally present, and hereby ratifying all that
said attorney may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 23rd day of March, 1999.
/s/ Thomas H. O'Brien
---------------------
Thomas H. O'Brien
<PAGE>
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
NOW, THEREFORE, the undersigned hereby appoints each of Doreen A.
Toben, Frederic V. Salerno and Ivan G. Seidenberg as attorney for the
undersigned for the purpose of executing and filing such registration statement
and any amendment or amendments or other necessary documents, hereby giving to
each said attorney full authority to perform all acts necessary thereto as fully
as the undersigned could do if personally present, and hereby ratifying all that
said attorney may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 23rd day of March, 1999.
/s/ John R. Stafford
--------------------
John R. Stafford
<PAGE>
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
NOW, THEREFORE, the undersigned hereby appoints each of Doreen A.
Toben, Frederic V. Salerno and Ivan G. Seidenberg as attorney for the
undersigned for the purpose of executing and filing such registration statement
and any amendment or amendments or other necessary documents, hereby giving to
each said attorney full authority to perform all acts necessary thereto as fully
as the undersigned could do if personally present, and hereby ratifying all that
said attorney may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 23rd day of March, 1999.
/s/ Morrison DeS. Webb
----------------------
Morrison DeS. Webb
<PAGE>
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
NOW, THEREFORE, the undersigned hereby appoints each of Doreen A.
Toben, Frederic V. Salerno and Ivan G. Seidenberg as attorney for the
undersigned for the purpose of executing and filing such registration statement
and any amendment or amendments or other necessary documents, hereby giving to
each said attorney full authority to perform all acts necessary thereto as fully
as the undersigned could do if personally present, and hereby ratifying all that
said attorney may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 23rd day of March, 1999.
/s/ Shirley Young
-----------------
Shirley Young
<PAGE>
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC CORPORATION, a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
NOW, THEREFORE, the undersigned hereby appoints each of Frederic V.
Salerno and Ivan G. Seidenberg as attorney for the undersigned for the purpose
of executing and filing such registration statement and any amendment or
amendments or other necessary documents, hereby giving to each said attorney
full authority to perform all acts necessary thereto as fully as the undersigned
could do if personally present, and hereby ratifying all that said attorney may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 23rd day of March, 1999.
/s/ Doreen A. Toben
--------------------
Doreen A. Toben
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1998 AND THE
CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1998 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,023
<SECURITIES> 0
<RECEIVABLES> 7,153
<ALLOWANCES> 593
<INVENTORY> 566
<CURRENT-ASSETS> 9,082
<PP&E> 83,064
<DEPRECIATION> 46,248
<TOTAL-ASSETS> 55,144
<CURRENT-LIABILITIES> 10,531
<BONDS> 17,646
0
0
<COMMON> 158
<OTHER-SE> 12,867
<TOTAL-LIABILITY-AND-EQUITY> 55,144
<SALES> 0
<TOTAL-REVENUES> 31,566
<CGS> 0
<TOTAL-COSTS> 24,939
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,335
<INCOME-PRETAX> 4,999
<INCOME-TAX> 2,008
<INCOME-CONTINUING> 2,991
<DISCONTINUED> 0
<EXTRAORDINARY> (26)
<CHANGES> 0
<NET-INCOME> 2,965
<EPS-PRIMARY> 1.89
<EPS-DILUTED> 1.86
</TABLE>
