FORM 10-K/A
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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(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, 1996
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 1-8608
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NYNEX Corporation
A Delaware Corporation I.R.S. Employer
Identification No. 13-3180909
1095 Avenue of the Americas, New York, New York 10036
Telephone Number (212) 395-2121
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
---------------------------------- ----------------------------------
Common Stock (par value New York, Boston, Chicago,
$1.00 per share) Pacific and Philadelphia
Stock Exchanges
Twenty year 9.55% Debentures
due May 1, 2010 New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
At February 28, 1997, approximately 439,936,176 shares of Common Stock were
outstanding.
At February 28, 1997, the aggregate market value of the voting stock held by
nonaffiliates was approximately $22,634,954,000.
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. | X |
AMENDMENT NO. 1
The registrant hereby amends the following item of its Annual Report for the
fiscal year ended December 31, 1996, as set forth in the pages attached hereto:
Part III - Item 11. "Executive Compensation"
<PAGE>
Item 11. EXECUTIVE COMPENSATION.
Compensation of Directors
Directors who are not employees receive an annual retainer fee of $30,000
(one-half mandatorily paid in shares of NYNEX Common Stock), an annual grant of
250 shares of NYNEX Common Stock and a fee of $1,500 for each Board and
committee meeting attended. Non-employee Directors who serve as chairpersons of
the committees of the Board receive an additional annual retainer fee of $5,000.
Non-employee Directors may elect to defer the receipt of all or a part of their
fees (cash only) and retainers, whether payable in cash and/or stock. Currently,
amounts so deferred in cash earn interest, compounded quarterly, at a rate equal
to the average interest rate for ten-year United States Treasury notes for the
previous quarter. With respect to compensation deferred in the form of shares of
NYNEX Common Stock, the associated dividends are reinvested to purchase
additional shares.
Non-employee Directors are entitled to reimbursement for out-of-pocket expenses
incurred in connection with attendance at Board of Directors and committee
meetings. In addition, NYNEX provides non-employee Directors with travel
accident insurance when on NYNEX business. The total cost of the travel accident
insurance policy for 1996 was approximately $1,900.
The NYNEX Non-Employee Director Pension Plan was amended upon Share Owner
approval at the May 1, 1996 Annual Meeting, to terminate the accrual of
benefits, effective August 1, 1996, based on a non-employee Director's election
made prior to February 1, 1996. Under the election, any non-employee Director
with at least five years' service was given the option to convert the present
value of his or her benefits under the Director Pension Plan into NYNEX Common
Stock. Directors who chose the conversion election are not entitled to any other
benefits under the Director Pension Plan; all non-employee Directors who were
eligible for the conversion, in fact, so elected. The present value of the
non-employee Directors' benefit was determined as of August 1, 1996. With
respect to each Director who made the conversion election, the number of shares
of NYNEX Common Stock determined upon the conversion (30,488 shares in total)
were deposited by NYNEX into a trust, which holds the Common Stock, receives
dividends thereon, reinvests such dividends in additional shares of NYNEX Common
Stock as soon as practicable after the receipt of such dividends and, pending
such reinvestment, invests the dividend proceeds in such manner as the trustee
deems appropriate. Directors have the authority to direct the trustee's exercise
of voting rights with respect to NYNEX Common Stock credited to the Director's
account, but have no other rights with respect to such NYNEX Common Stock. The
total number of shares of NYNEX Common Stock which may be granted under the
Director Pension Plan may not exceed 50,000, subject to equitable adjustment by
the Executive Committee of the NYNEX Board.
Prior to the Director Pension Plan amendment, each non-employee Director who
served on the Board of NYNEX, or any of its subsidiaries, and retired from the
NYNEX Board with a minimum of five years' combined service on such Boards as a
non-employee Director qualified for a yearly pension equal to 50% of the
Director's annual retainer fee (excluding the retainer received for chairing a
committee of the Board). Pension payments increased by 10% of the annual
retainer fee for each additional year served up to 100% of such fee. The pension
was adjusted
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to reflect the first subsequent increase, if any, in the annual retainer for
service on the Board following the Director's retirement. Such pension was
payable to a qualified Director upon (i) retirement from the NYNEX Board and
(ii) the attainment of age 65.
Directors are eligible to participate in the Directors' Charitable Award
Program, which is designed to acknowledge the service of Directors and to
recognize the mutual interest of NYNEX and its Directors in supporting worthy
educational and charitable institutions. Under the program, NYNEX will
contribute up to $1 million to tax-exempt organization(s) designated by a
Director, payable over a ten-year period, on behalf of a participating Director
who retires or attains age 65 (whichever occurs later) after five years of
service on the Board of NYNEX, or dies or becomes disabled while serving as a
Director. All charitable deductions accrue to NYNEX and the individual Directors
derive no financial benefit from the program. NYNEX has purchased life insurance
on the Directors, naming NYNEX as beneficiary, which is expected to recover the
costs of contributions and the premium payments.
Directors who are also employees of NYNEX or one of its subsidiaries receive no
remuneration for serving as Directors.
Committee on Benefits Report on Executive Compensation
A primary role of the Committee on Benefits ("Committee") is to determine and
oversee the administration of compensation for NYNEX's Executive Officers. In
this capacity, the Committee is dedicated to ensuring that NYNEX's compensation
policies and practices are used effectively to support the achievement of
NYNEX's short and long term business objectives. In carrying out its
responsibilities, the Committee reviews the recommendations of compensation
consulting firms engaged by NYNEX. There are several principles that guide the
Committee in its decision-making capacity. The Committee:
[bullet] Emphasizes a pay-for-performance philosophy, ensuring that overall
compensation paid to Executive Officers reflects the fulfillment of NYNEX's key
goals.
[bullet] Reinforces the central importance of Share Owner value creation through
the use of several key compensation plans, each of which provides Executive
Officers with value when Share Owners realize corresponding gains.
[bullet] Encourages NYNEX stock ownership by Executive Officers with the
objective of strengthening the common interests of management and Share Owners,
thereby promoting the maximization of Share Owner value.
[bullet] Targets executive compensation levels at rates that are consistent with
levels at comparable companies ("Comparable Companies"), consisting of thirteen
telecommunications companies which includes the six other Regional Holding
Companies, as well as 123 large industrial companies with revenues in excess of
$1 billion, and 24 industrial companies with sales of approximately $15 billion,
selected by compensation consulting firms advising the Committee.
[bullet] Maintains a total compensation perspective on executive pay in judging
the appropriateness of rewards for NYNEX's Executive Officers.
The compensation program for NYNEX's Executive Officers is characterized by long
intervals between salary adjustments; a strong and direct connection between
compensation and NYNEX's stock price; a single, streamlined compensation plan to
replace the prior Executive and Senior Management Short and Long Term Incentive
Plans; mandatory deferral of a portion of incentive earnings; and an enhanced
emphasis on stock options.
The Committee believes that the new compensation program is a powerful catalyst
for directing Executive Officer activities in support of NYNEX's goal
achievement and that it appropriately recognizes the contributions of the
Executive Officer group.
Description of Executive Compensation Policies
It is NYNEX's policy to target levels of Executive Officer compensation to
reflect pay rates that are typical at Comparable Companies. Consistent with
NYNEX's pay-for-performance orientation, actual compensation levels
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may lead or lag target rates, but such variances depend on NYNEX's stock price
appreciation and demonstrated operating success.
The principal elements of the new compensation program are a merit-driven base
salary; a single, value creation based, variable compensation opportunity; and
stock options. NYNEX replaced its supplemental executive defined-
benefit pension for all compensation in excess of $150,000 per year and offers
Executive Officers a defined contribution plan in which one-half of all annual
contributions to an Executive Officer's account must be invested in shares of
NYNEX Common Stock.
Using survey data provided by compensation consulting firms, the Committee
compares NYNEX's Executive Officer compensation to the median paid by Comparable
Companies. The Committee used this comparison to assist it in setting 1996
salary levels, variable compensation award target levels, and stock option
grants.
Section 162(m) of the Internal Revenue Code of 1986 (the "Code") generally
denies a tax deduction to any publicly-held corporation for compensation that
exceeds $1 million paid in a taxable year to any executive whose compensation is
required to be disclosed under Securities and Exchange Commission rules ("Named
Executive Officer"), subject to an exception for "performance-based
compensation" as defined in the Code and subject to certain transition
provisions. Base salaries paid to such NYNEX Executive Officers for 1996 will
continue to be tax-deductible since no such amount will exceed the $1 million
limit. Compensation for such NYNEX Executive Officers for 1996 received under
the variable compensation plan also should qualify for the "performance-based
compensation" exception since the Share Owner-approved terms of the Executive
Officer Short Term Incentive Plan, detailed herein, comply with the stipulated
requirements of Section 162(m) governing the tax deductibility of such income.
Gains on the exercise of non-qualified stock options granted through December
31, 1996 should be fully deductible since the Share Owner approved terms of the
1995 Stock Option Plan also comply with the stipulated requirements of Section
162(m). However, the payout in 1996 to Mr. Seidenberg under the Senior
Management Long Term Incentive Plan, which reflected the award made in 1993
before Section 162(m) became effective, brought his annual compensation for
Section 162(m) purposes over the threshold for deductibility. It is believed
that this will have a minimal impact on NYNEX for 1996. In any event, the
Committee reserves the right to pay compensation that is not tax-deductible if
it is determined to be in the best interests of NYNEX and its Share Owners.
Salary. The Committee reviews the salary level of each Executive Officer once
every 18 months. This is a longer interval between salary actions than is
typical in external markets, but allows the Committee to assess the
contributions of each Executive Officer and to make salary decisions
accordingly.
NYNEX's executive compensation policy is to establish new Executive Officer
salaries at levels that reflect the median salaries paid by Comparable
Companies. In determining salary levels paid by Comparable Companies, NYNEX
reviews a number of executive compensation surveys conducted by various
consulting firms which include information regarding salaries paid by the
companies shown in the Share Owner Return Performance Graph as set forth on page
77 herein.
Salaries for experienced Executive Officers are expected to vary from those of
entry level Executive Officers, reflecting the incumbent's demonstrated
contributions to NYNEX's goal achievement. In assessing whether salary increases
are warranted, the Committee's principal consideration is the Executive
Officer's performance on the job, including the impact such Executive Officer
has had on effecting strategic change. The Committee also reviews any or all of
the following factors in assessing salary actions:
[bullet] Internal compensation equity;
[bullet] Compensation practices for Comparable Companies; and
[bullet] The Executive Officer's level of responsibility, experience and
expertise.
Short Term Incentive Plans. The Committee believes that the NYNEX Short Term
Plans consisting of the Senior Management Short Term Incentive Plan and the
Executive Officer Short Term Incentive Plan ("Executive Short Term Plan"), form
the cornerstone in reinforcing NYNEX's pay for performance philosophy. Awards
from these
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programs represent the only cash-based incentive compensation opportunity
available to Executive Officers. The Short Term Plans are characterized by
solely rewarding accomplishments that create value for all NYNEX Share Owners.
The Short Term Plan provides the Named Executive Officers with the opportunity
to earn incentive compensation from two sources:
[bullet] Achievement of annual performance goals that correlate with value
creation; and
[bullet] NYNEX's Total Share Owner Return compared to the returns generated by
the Comparable Companies.
The sum of the awards earned relative to these accomplishments comprises the
Named Executive Officer's overall incentive compensation reward. Payment of
one-half of the incentive award is mandatorily deferred, and deferred account
balances are credited with interest each year at a rate equal to NYNEX's
annualized Total Share Owner Return over the preceding three-year period.
One-half of the Named Executive Officer's deferred account balance is
distributed after the end of each year; the remaining deferred account balance
carries over to future years. Carryover account balances are paid out in full
only upon the Named Executive Officer's retirement or other termination from
service.
Annual Performance Goals. Each year, the Committee reviews Management's
suggestions and recommends for approval by the Board of Directors ("Board")
certain performance goals, the achievement of which will enhance NYNEX's value.
The Committee also reviews and recommends to the Board maximum levels of
performance for determining the ultimate payment of awards. For this purpose,
maximum means the level of performance above which no incremental incentive
awards will be paid. Achievement of the maximum performance level results in an
award that is equal to one-half of the maximum possible incentive compensation
payment.
For Named Executive Officers in 1996, the approved goals were exclusively
financial and related to pre-established levels of NYNEX Net Income and Cash
Flow Return on Investment. In 1996, there were no other performance goals the
Committee considered in determining Named Executive Officer incentive
compensation awards.
Total Share Owner Return. Named Executive Officers also earn incentive awards
based on NYNEX's Total Return to Share Owners (stock price growth and dividends
paid over the previous twelve-month period) compared to the returns generated by
thirteen companies in the telecommunications industry. Top relative ranking by
NYNEX yields awards equal in size to one-half of the maximum incentive payment
permissible for the Named Executive Officer under the plan. Lower NYNEX rankings
generate proportionally smaller awards.
The levels of incentive compensation earned by the Named Executive Officers for
the 1996 fiscal year are reflected in the "Bonus" column of the Summary
Compensation Table set forth on page 72 herein. For the 1996 performance year,
the Committee determined that the Corporate Net Income goal had been achieved,
the Cash Flow Return on Investment had been achieved, and taking into account
performance against Service Quality imperatives, the Committee awarded Named
Executive Officers 42% of their maximum incentive awards. The Committee also
determined that NYNEX's Total Share Owner Return for the year placed it tied for
ninth relative to the Comparable Companies and, therefore, awarded 15% of the
maximum incentive award for this factor for a total award of 57% of the maximum
award payable to Named Executive Officers. Mr. Seidenberg's total award was
adjusted to 51% of his maximum possible award. These awards were deferred in
accordance with the terms of the Executive Short Term Plan, and the bonuses
actually paid represented one-half of the account balances held in the name of
each Named Executive Officer.
The Executive Officers other than the Named Executive Officers are covered by a
short term incentive award plan whose criteria are similar to those under the
Executive Officer Short Term Plan but include an operational and stragetic
component.
Senior Management Long Term Incentive Plan. No grants were made under this plan
in 1996, and no future grants are planned; however, the payout of the 1993-1996
performance period is reflected in the Summary Compensation Table set forth on
page 72 herein. The payout of the 1994-1997 performance period will be
disclosed, if appropriate, following the completion of the performance period.
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Each year, the Committee recommends to the Board for approval grants of long
term incentive awards to Executive Officers. The Committee establishes a maximum
award based on an assessment of the average long term award levels at Comparable
Companies. Long term incentive opportunities reinforce NYNEX's policy of
requiring stock ownership by Executive Officers in support of building Share
Owner value.
Plan participants have the opportunity to earn incentive compensation over a
four-year performance period based on two factors, each accorded equal weight:
[bullet] Return to Share Owners
[bullet] Corporate achievement of strategic objectives
Return to Share Owners. Payment of one-half of the maximum award is determined
by reference to NYNEX's Total Return to Share Owners (stock price growth and
dividends paid over a four-year period) as compared with the returns generated
by the six other Regional Holding Companies. A top relative ranking of NYNEX
yields awards equal in size to one-half of the maximum long term incentive
awards payable under this plan. Lower rankings of NYNEX generate proportionally
smaller awards.
Strategic Objectives. Payment of the remaining one-half of the maximum award
reflects the Committee's assessment of management's effectiveness during the
four-year period in positioning NYNEX for future success. In conducting its
assessment, the Committee considers: regulatory and legislative progress,
business growth and focus, customer service and quality, and employee-related
issues, each accorded approximately equal weight.
The Committee can recommend to the Board for its approval payment of up to
one-half of the maximum long term incentive award payable under this plan for
strategic accomplishments.
Awards are paid at the completion of each performance period in a combination of
cash and shares of NYNEX stock. Participants may elect the extent to which they
are paid in stock. However, to encourage stock ownership among Executive
Officers, a minimum of one-half of the value of the award must be paid in NYNEX
stock.
For the 1993-1996 performance period, the Committee determined that NYNEX's
Total Return to Share Owners over the period relative to the other six Regional
Holding Companies was below the target level and, therefore, awarded 16.7% of
the maximum long term incentive award for this factor. The Committee also
determined that there was significant progress in implementing NYNEX's strategic
objectives, that the target objective level had been exceeded and, therefore,
awarded to Executive Officers a payout of 50% of the maximum long term award for
this factor, for a total payout of 66.7% of the maximum award payable to
Executive Officers.
Stock Option Plan. Each year, the Committee recommends to the Board for approval
grants of stock options to Executive Officers. Stock options provide Executive
Officers with the opportunity to acquire an equity interest in NYNEX and to
participate in the creation of Share Owner value as reflected in growth in the
price of NYNEX Common Stock. Under the terms of the plan, the option exercise
price is equal to 100% of the fair market value of NYNEX Common Stock on the
date of option grant, thereby ensuring that plan participants will derive
benefits only as Share Owners realize corresponding gains. To ensure a long term
perspective, options have a ten-year term and become exercisable at the
cumulative rate of one-third per year for the first three years.
The number of options the Committee may grant in a plan year to the Chief
Executive Officer and other Named Executive Officers is limited by the plan, in
each case, to 250,000 options. The actual number of options granted is based
upon competitive compensation practices, as reflected in the surveys of
Comparable Companies as prepared by the consulting firm, and the individual
Executive Officer's performance as compared to the performance of the other
Executive Officers.
The Committee believes that the practice of granting stock options annually
reinforces NYNEX's policy of requiring stock ownership by Executive Officers in
support of building Share Owner value. Furthermore, options only provide value
to Executive Officers when Share Owners realize positive returns on their
investment in NYNEX. In this way, stock option grants reward Executive Officers
only in conjunction with value creation for Share Owners.
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Restricted Stock Award Plan. The Committee also administers the Restricted Stock
Award Plan and determines the key employees to whom Restricted Stock awards will
be granted, the number of shares of NYNEX Common Stock with respect to which
Restricted Stock awards will be made, the applicable restriction periods and any
other terms and conditions of each award. The purpose of the plan is to attract
and retain selected individuals of exceptional skill. The grant criteria reflect
the Committee's assessment of the requirements for hiring and retaining the
particular individual. Restricted Stock awards were granted in 1996 to certain
newly appointed NYNEX Officers, but none to the Named Executive Officers.
Rationale for Chief Executive Officer ("CEO") Compensation in Last Fiscal Year
Salary. The CEO's salary is based solely upon competitive compensation
practices. Mr. Seidenberg was named President and CEO of NYNEX on January 1,
1995, at which time his annual salary rate was increased to $640,000 to bring it
more in line with compensation of other CEOs in Comparable Companies. A more
recent assessment of pay levels in other organizations, coupled with his
contributions since January 1, 1995, led the Committee to approve a new salary
level of $750,000, effective July 1, 1996.
Short Term Incentive Compensation. Mr. Seidenberg's variable incentive award for
1996 reflected NYNEX's financial performance discussed above. In accordance with
the terms of the plan, the Committee recommended to the Board that it approve an
award for Mr. Seidenberg equal to 51% of his maximum possible award.
Long Term Incentive Compensation. Mr. Seidenberg's available long term incentive
awards are also a function of salary and are based on compensation practices for
similar jobs in Comparable Companies. As discussed above under the heading
Senior Management Long Term Incentive Plan, Return to Share Owners and strategic
objectives are each accorded equal weight in determining long term incentive
compensation. In 1997, the Committee recommended to the Board a long term payout
for the 1993-1996 performance period under the Senior Management Long Term
Incentive Plan. It was the Committee's assessment that there was significant
progress in implementing NYNEX's strategic objectives. The Committee believes
that such strategic accomplishment should serve as a platform for future
business success and resultant appreciation of Share Owners' investment over the
long term. The Committee also weighed the financial performance of NYNEX (Total
Return to Share Owners) which was below the target level over the period
relative to the other six Regional Holding Companies.
Stock Options. In January 1996, the Committee awarded Mr. Seidenberg options to
purchase 125,000 shares of NYNEX Common Stock at a price of $50.69 per share,
which was the fair market value at that time. The number of options granted
reflected the Committee's assessment of competitive compensation practices and
Mr. Seidenberg's individual contribution toward the achievement of NYNEX's
strategic objectives.
Summary
The Committee is responsible for reviewing, monitoring and approving for
presentation to the non-employee Directors of the Board, for their approval, all
compensation decisions affecting NYNEX Executive Officers. The Committee
endeavors to ensure that the entire remuneration paid to Executive Officers is
consistent with NYNEX's interest in providing market competitive compensation
opportunities, reflective of its pay-for-performance philosophy, and supportive
of its business mission.
John R. Stafford, Richard L. Carrion
Chairperson
Lodewijk J.R. de Vink Helene L. Kaplan
Compensation Committee Interlocks and Insider Participation
Mr. Ivan Seidenberg, Chairman of the Board and Chief Executive Officer of NYNEX,
is a Director of CVS Corporation and serves as a member of its Compensation
Committee. Mr. Stanley Goldstein, Chairman of the Board and Chief Executive
Officer of CVS Corporation, serves on the NYNEX Board of Directors but does not
serve on NYNEX's Committee on Benefits.
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Summary Compensation Table
The following table shows, for the fiscal years ending December 31, 1994, 1995
and 1996, the cash compensation, as well as certain other compensation, paid or
accrued to the named Executive Officers by NYNEX and its subsidiaries.
<TABLE>
<CAPTION>
Annual Compensation
--------------------------------------------------
Name and Principal Position
at December 31, 1996 Year Salary ($) Bonus($)(2) Other($)(3)
- ------------------------------------- ------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Ivan G. Seidenberg 1996 695,000 1,063,400 40,892
Chairman of the Board and 1995 640,000 844,000 50,613
Chief Executive Officer 1994 540,000 189,000 62,598
Frederic V. Salerno 1996 530,000 604,200 41,660
Vice Chairman of the Board - 1995 530,000 699,600 48,332
Finance and Business Development 1994 491,000 278,000 64,636
Richard A. Jalkut 1996 500,000 510,000 39,675
President and Group Executive - 1995 500,000 620,000 47,090
NYNEX Telecommunications 1994 464,000 153,000 58,888
Donald B. Reed 1996 370,000 379,600 27,454
President and Group Executive - 1995 370,000 429,600 29,028
External Affairs & Communications 1994 341,000 194,000 32,599
Richard W. Blackburn 1996 350,000 352,800 27,660
President and Group Executive - 1995 350,000 403,200 21,227
NYNEX Worldwide Communications 1994 317,000 148,500 27,608
and Media Group
- ------------------------------------- ------ ------------ ------------ ------------
Alan Z. Senter (1) 1996 411,000 342,000 41,189
Former Executive Vice President and 1995 411,000 396,000 49,747
Chief Financial Officer 1994 133,000 100,000 11,183
</TABLE>
[restubbed table]
<TABLE>
<CAPTION>
Long Term Compensation
-----------------------------------------
Awards Payouts
--------------------------- -----------
Restricted
Stock Securities Long Term All Other
Name and Principal Position Awards Underlying Incentive Compen-
at December 31, 1996 ($)(4) Options(#) Payouts($) sation($)(5)
- ------------------------------------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C>
Ivan G. Seidenberg 0 125,000 332,771 446,256
Chairman of the Board and 0 105,727 288,480 369,552
Chief Executive Officer 380,520 40,248 231,312 26,371
Frederic V. Salerno 0 87,500 339,899 287,401
Vice Chairman of the Board - 0 87,555 289,438 305,330
Finance and Business Development 380,520 40,248 233,478 26,967
Richard A. Jalkut 0 87,500 378,095 252,375
President and Group Executive - 0 82,599 334,561 276,393
NYNEX Telecommunications 359,520 37,302 215,353 24,566
Donald B. Reed 0 55,000 140,856 192,608
President and Group Executive - 0 55,011 152,344 199,783
External Affairs & Communications 272,500 27,420 99,647 18,355
Richard W. Blackburn 0 55,000 137,791 182,878
President and Group Executive - 0 52,037 119,102 189,259
NYNEX Worldwide Communications 218,892 19,758 94,533 18,669
and Media Group
- ------------------------------------- ------------ ------------ ----------- -------------
Alan Z. Senter (1) 0 60,000 0 1,080,382
Former Executive Vice President and 0 60,573 0 222,108
Chief Financial Officer 600,000 56,000 0 1,500
</TABLE>
(1) Mr. Senter resigned as Executive Vice President and Chief Financial
Officer, as of May 31, 1996.
(2) As described in the Committee on Benefits Report on Executive Compensation,
one-half of the Short Term Incentive award is mandatorily deferred under
the Senior Management Account Balance Deferral Plan; however, the amount
shown above includes the deferral.
(3) These amounts include dividend equivalents paid pursuant to the Senior
Management Long Term Incentive Plan, dividends pursuant to the 1987
Restricted Stock Award Plan and amounts reimbursed for the payment of taxes
in connection with personal benefits.
(4) On December 31, 1996, the number and value of all outstanding grants of
restricted NYNEX Shares held by Named Executive Officers were as follows:
Mr. Seidenberg 11,063/$540,096; Mr. Salerno 11,063/$540,096; Mr. Jalkut
10,412/$508,314; Mr. Reed 7,923/$386,801; Mr. Blackburn 6,570/$320,747 and
Mr. Senter 10,406/ $508,021, these figures include dividends that have been
reinvested in additional restricted NYNEX Shares. These NYNEX Shares
represent the Retention Awards described below on page 75. Dividends are
paid on Mr. Senter's restricted NYNEX Shares and are included in the Other
Annual Compensation column for 1996.
(5) These amounts include company contributions to tax qualified and
non-qualified savings plans; company contributions to Executive Retirement
Accounts (described under the heading Retirement Plans on page 74 herein);
plus the value of premiums paid by NYNEX for split-dollar life insurance
coverage. The company contributions to the tax qualified savings plan for
Messrs. Seidenberg, Salerno, Jalkut, Reed, Blackburn and Senter were:
$6,750, $6,750, $6,750, $6,750, $6,750 and $5,209, respectively. The
company contributions to
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the Non-Qualified Savings Plan for Messrs. Seidenberg, Salerno, Jalkut,
Reed, Blackburn and Senter were: $21,800, $15,200, $14,000, $8,800, $8,000
and $12,834, respectively. Company contributions to the Executive
Retirement Account for Messrs. Seidenberg, Salerno, Jalkut, Reed, Blackburn
and Senter were $402,100, $246,050, $215,000, $164,897, $154,776 and
$150,500, respectively. The amount of the dollar benefit for 1996,
projected on an actuarial basis, which represents the excess of the amount
needed to fund the death benefit under the split-dollar life insurance
policy for each of Messrs. Seidenberg, Salerno, Jalkut, Reed, Blackburn and
Senter was: $15,606, $19,401, $16,625, $12,161, $13,352 and $0,
respectively. Included in Mr. Senter's amount is a severance payment of
$822,000, outplacement services of $30,000 and a vacation buyout of $59,839
pursuant to the terms of his agreement (described on page 76, below).
Aggregated Option Exercises in Fiscal Year 1996 and 1996 FY-End Option Values
The following table shows information with respect to the named Executive
Officers concerning the exercise of options to purchase Shares of NYNEX Common
Stock during 1996 and unexercised stock options held as of the end of 1996.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at 1996 Options at 1996
Fiscal Year-End Fiscal Year-End($)(1)
------------------------------- ------------------------------
Shares Acquired Value
Name of Individual on Exercise Realized($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------- ----------------- ------------ ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Ivan G. Seidenberg 109,508 1,291,428 55,223 208,900 369,388 1,000,989
Frederic V. Salerno 0 0 177,789 159,286 1,829,796 849,564
Richard A. Jalkut 0 0 141,412 152,493 1,434,875 777,072
Donald B. Reed 26,775 315,772 57,020 100,814 420,527 540,137
Richard W. Blackburn 5,906 63,907 26,277 79,360 152,885 253,066
- --------------------- ----------------- ------------ ------------- --------------- ------------- ---------------
Alan Z. Senter 0 0 57,525 119,048 639,915 698,528
</TABLE>
(1) Amounts reflect potential gains on outstanding options based upon the
December 31, 1996 average NYNEX Common Stock price of $48.82.
Option Grants in Fiscal Year 1996
The following table contains information concerning the grant of options under
the NYNEX 1995 Stock Option Plan to the named Executive Officers during 1996.
<TABLE>
<CAPTION>
Number of % of Total
Securities Options
Underlying Granted to Exercise of Grant Date
Options Granted Employees Base Price Expiration Present
Name of Individual (#)(1) in 1995 ($/Shares)(2) Date(3) Value($)(4)
- --------------------- ----------------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Ivan G. Seidenberg 125,000 4.514 50.69 1/11/06 921,250
Frederic V. Salerno 87,500 3.159 50.69 1/11/06 644,785
Richard A. Jalkut 87,500 3.159 50.69 1/11/06 644,785
Donald B. Reed 55,000 1.986 50.69 1/11/06 405,350
Richard W. Blackburn 55,000 1.986 50.69 1/11/06 405,350
- --------------------- ----------------- ------------ -------------- ------------ ------------
Alan Z. Senter 60,000 2.168 50.69 1/11/06 442,200
</TABLE>
(1) The date of grant for options subject to this footnote is January 12, 1996.
(2) The exercise price of the option is equal to the fair market value of NYNEX
Common Stock on the date of grant of the options. The exercise price may be
paid in cash, or by tendering already owned NYNEX Shares with a fair market
value on the date of exercise equal to the exercise price. For exercises
where NYNEX Shares have been tendered in payment of the exercise price, a
new grant of options will be made equal to the number of Shares tendered. A
grant made under these circumstances will have an exercise price equal to
the fair market value on the date of such exercise and grant.
8
<PAGE>
(3) Options expire ten years from date of grant or in case of retirement, the
fifth anniversary date of the cessation of employment. Options become
one-third exercisable one year after the date of grant, two-thirds
exercisable two years after the date of grant, and fully exercisable three
years after the date of grant. To the extent not already exercisable, the
options become fully exercisable in the event of a "change in control", as
defined in the NYNEX 1995 Long Term Incentive Program.
(4) As permitted by SEC rules, the Black-Scholes method of option valuation has
been used to determine grant date present value. The assumptions used in
the Black-Scholes option valuation calculation are: estimated future annual
stock price volatility of 0.153; risk-free rate of return 5.96%; and
estimated future dividend yield of 4.66%. NYNEX does not advocate or
necessarily agree that the Black-Scholes method, or any other method
permitted by the SEC, can properly determine the value of an option.
However, no gain to the optionees is possible without an increase in the
stock price, which will benefit all Share Owners. Thus, a zero increase or
decrease in stock price, compared to the exercise price, will not produce
any gain for the optionee.
Retirement Plans
NYNEX replaced its supplemental executive defined benefit non-qualified pension
plan with a defined contribution plan. The annual company contribution to the
defined contribution plan is determined as 25% of base salary that exceeds
$150,000, plus 25% of bonus. This amount is included in the All Other
Compensation column of the Summary Compensation Table located on page 72 herein.
Pension Table
This table provides the estimated annual benefits payable upon retirement under
the NYNEX qualified pension plan. Pensions are computed on a straight-life
annuity basis and are not reduced for Social Security or other offset amounts
except in cases where a joint or survivor annuity is selected. Participants
receive a pension based upon average compensation up to $150,000 multiplied by
1.6%. Average compensation is determined as five-year average base pay for the
period January 1, 1986 to December 31, 1990, times years of service on
December 31, 1990, plus all future base pay. The table below sets forth the
benefits the named Executive Officers are entitled to receive upon retirement.
In addition, the named Executive Officers receive an annual credit under the
defined contribution plan which has been included in the All Other Compensation
column of the Summary Compensation Table. Pensions are subject to reduction for
retirement prior to age 60.
Years of Service
-----------------------------------------------------
Average Compensation 15 20 25 30 35
- --------------------- -------- -------- -------- -------- --------
$300,000 $36,000 $48,000 $60,000 $72,000 $84,000
400,000 36,000 48,000 60,000 72,000 84,000
500,000 36,000 48,000 60,000 72,000 84,000
600,000 36,000 48,000 60,000 72,000 84,000
700,000 36,000 48,000 60,000 72,000 84,000
800,000 36,000 48,000 60,000 72,000 84,000
900,000 36,000 48,000 60,000 72,000 84,000
Current Base Credited Years
Name of Individual Compensation* of Service*
- --------------------- --------------- ----------------
Ivan G. Seidenberg $ 695,000 30
Frederic V. Salerno 530,000 31
Richard A. Jalkut 500,000 30
Donald B. Reed 370,000 30
Richard W. Blackburn 350,000 29
- --------------------- --------------- ----------------
Alan Z. Senter** 411,000 2
* as of 12/31/96
** Although not service pension eligible under the age or service requirements
of the NYNEX pension plans, the amounts shown for Mr. Senter are as if he
were pension eligible.
Note: Benefits shown in this table may be further limited under the
Internal Revenue Code of 1986, as amended.
9
<PAGE>
Employment Contracts, Termination of Employment and Change in Control Agreements
- --------------------------------------------------------------------------------
Severance Pay Plan and Executive Retention Agreements. On December 16, 1993, the
Board of Directors approved the NYNEX Executive Severance Pay Plan (the
"Severance Plan") and the Executive Retention Agreement (the "Executive
Retention Agreement") to be entered into with certain NYNEX Executive Officers
as well as certain Officers of NYNEX companies. The purpose of the Severance
Plan and the Executive Retention Agreement is to enable NYNEX and its
subsidiaries to remain competitive in attracting and retaining the very best
executive talent. The Executive Retention Agreement provides the Executive
Officer with certain benefits, pursuant to the Severance Plan, upon termination
of employment under specified conditions.
Certain NYNEX Executive Officers, including Messrs. Seidenberg, Jalkut, Reed and
Blackburn but excluding Messrs. Salerno and Senter, entered into an Executive
Retention Agreement with NYNEX, effective January 3, 1994, for a term of
employment to continue day to day. Mr. Salerno entered into an employment
agreement with NYNEX on terms substantially similar to those in the Executive
Retention Agreement, but for a minimum term commencing August 1, 1994 through
December 31, 1996. A retention award ("Retention Award") consisting of a grant
of restricted stock was made to each such NYNEX Executive Officer at the time of
signing the Executive Retention Agreement. The value of the Retention Award
equals 50% of the sum of the Executive Officer's 1994 annual salary and the
standard award granted under the NYNEX Senior Management Short Term Incentive
Plan for 1994 performance. During the term of the Executive Retention Agreement,
dividends on the restricted stock will be reinvested in additional NYNEX
restricted stock.
The Executive Retention Agreements provide that in the event the executive (i)
voluntarily separates from employment with the consent of the Chairman and Chief
Executive Officer of NYNEX (or, in the case of Mr. Seidenberg, with the consent
of the Board of Directors), (ii) is terminated by NYNEX without cause, (iii)
dies, or (iv) becomes totally disabled, the shares of restricted stock granted
to an executive in connection with a Retention Award will no longer be
restricted and, in addition, the executive (or his heirs) will receive a
severance payment pursuant to the NYNEX Executive Severance Pay Plan equal to
the monetary value of the Retention Award on the executive's last day of
employment.
On February 1, 1996, the Committee on Benefits of the Board of Directors
authorized an additional severance payment to be paid to Executive Officers as
well as certain Officers of NYNEX companies. This additional severance payment
will be equal to the balance on the executive's last day of employment in an
account which is credited with earnings and losses based on the Global Balanced
Fund investment option of the NYNEX Savings Plan for Salaried Employees, but in
no event will this severance payment be less than three times annual base salary
as of July 1, 1996 for Mr. Seidenberg, two times annual base salary for Messrs.
Salerno, Jalkut, Reed, Blackburn and Senter and either two or one times annual
base salary as of July 1, 1996 for other Executive Officers and certain Officers
of NYNEX Companies.
On April 21, 1996, the NYNEX Board authorized NYNEX to enter into new retention
agreements (the "Restated Agreements") with the parties to the Executive
Retention Agreements. The Restated Agreements replace the Executive Retention
Agreements (including the agreement entered into with Mr. Salerno, described
above) and Severance Plan. The Restated Agreements continue the Retention Award
and severance payments under substantially the same terms and conditions
described above. An executive is not eligible to receive benefits or payments
under the Restated Agreements if he or she has separated from active service for
cause, has separated from active service in connection with the sale or transfer
of NYNEX or one of its affiliates if within 60 days of such separation the
transferee or purchaser hires or offers employment to such executive,
voluntarily terminates employment without the consent of the Chairman and Chief
Executive Officer of NYNEX (or, in the case of Mr. Seidenberg, without the
consent of the Board of Directors), or has an employment agreement other than
the Restated Agreement with NYNEX or one of its subsidiaries. The Restated
Agreement also provides that in the event that any payment received or to be
received thereunder (including the Retention Award or the severance payments
described above) would be subject to any excise tax on an "excess parachute
payment" (in whole or in part) under Section 4999 of the Code, such payment
shall be reduced until no portion of such payment would be subject to the excise
tax, other than with respect to any such payment due to Mr. Seidenberg pursuant
to the employment agreement with Bell Atlantic Corporation ("Bell Atlantic")
described below. If such individuals meet the
10
<PAGE>
requirements for payment of the Retention Award and the additional severance as
described above, the number of shares and amount of severance (computed as of
December 31, 1996 and assuming no reduction due to the imposition of an excise
tax under Section 4999 of the Code) which would be payable to each of Messrs.
Seidenberg, Salerno, Jalkut, Reed and Blackburn would be 11,063 and $3,084,301,
11,063 and $1,738,625, 10,412 and $1,639,002, 7,923 and $1,223,510, and 6,570
and $1,112,229, respectively.
Agreement with Mr. Senter. As of May 31, 1996, Mr. Senter resigned as Executive
Vice President and Chief Financial Officer of NYNEX and entered into an
agreement with NYNEX to replace in its entirety the three-year employment
agreement with NYNEX commencing September 1, 1994. The agreement provides for
Mr. Senter to receive monthly payments equal to his base salary until the end of
the term of the prior agreement and other amounts consistent with the prior
agreement. In addition, Mr. Senter received a severance payment equal to two
times his salary, on substantially the same terms as authorized by the Committee
on Benefits of the NYNEX Board on February 1, 1996, as described above.
NYNEX Discretionary Bonus. On April 21, 1996, the NYNEX Board approved a
discretionary bonus arrangement for NYNEX Executive Officers as well as certain
Officers of NYNEX companies who are actively employed by NYNEX at the Effective
Time (as defined in the Merger Agreement). The NYNEX Board will determine the
bonus, if any, to be paid to Mr. Seidenberg, and delegated the authority to him
to determine the amount of the bonuses, if any, to be paid to each other
Officer. The actual amount of each bonus will be based on achieving business
objectives and the extent to which the Officer's efforts contribute to the
completion of the Merger. The bonus payable at the Effective Time to Mr.
Seidenberg can range from zero to 100% of annual base salary plus the maximum
payout under the Short Term Plans, to Messrs. Salerno and Jalkut and one other
Executive Officer can range from zero to 100% of annual base salary plus a
portion of the maximum payout under the Short Term Plans, to Messrs. Reed and
Blackburn and certain other Executive Officers can range from zero to 100% of
annual base salary, and to all other Officers, including certain Executive
Officers, can range from zero to 75% of annual base salary. Based upon current
salary and maximum payout under the Short Term Plans, the bonus payable upon
completion of the Merger to Mr. Seidenberg could range from zero to $3.0 million
and the bonus payable to Mr. Salerno could range from zero to $1.06 million. The
purpose of the bonus arrangement is to retain key employees through the
consummation of the Merger and to help ensure the availability of their services
to NYNEX during the critical transition period and Bell Atlantic thereafter.
Bell Atlantic Agreement. The Merger Agreement provides that, at the closing of
the Effective Time, Mr. Seidenberg will enter into an employment agreement with
Bell Atlantic. The agreement provides for the employment of Mr. Seidenberg by
Bell Atlantic through July 2002, at base compensation which is not less than Mr.
Seidenberg's base compensation at the Effective Time. The agreement also
provides for various termination benefits under certain circumstances.
Deferred Compensation Trust. NYNEX maintains various plans pursuant to which
NYNEX Executive Officers and certain other Officers of NYNEX companies defer (on
a voluntary and, in certain cases, involuntary basis) the receipt of all or part
of certain specified compensation payments. NYNEX also maintains certain
non-qualified pension, savings and retirement plans for such individuals.
Amounts credited to the accounts of such individuals accrue earnings based upon
various investment options selected by such individuals. To safeguard these
benefits and other non-qualified benefits for other Officers, NYNEX established
a trust which will become fully funded and irrevocable upon a Change of Control.
As defined in the trust, a Change of Control occurs if (a) any person (other
than a trustee or other fiduciary of securities held under an employee benefit
plan of NYNEX) becomes the beneficial owner of 15% or more of the NYNEX voting
stock, (b) a tender offer is made and the offerer owns or has accepted payment
for 15% or more of the NYNEX voting stock, or (c) during any period of
twenty-four consecutive months members of the Board at the beginning of such
period, together with new Directors nominated or appointed during that period by
a vote of at least two-thirds of such existing Directors (or of Directors whose
election or nomination for election was previously so approved), cease to
comprise a majority of the Board of Directors. The assets in the trust, however,
remain subject to the claims of NYNEX's general creditors in the event of
insolvency. On April 21, 1996, the Board determined that the Merger will not
constitute a Change of Control as defined above.
Long Term Incentive Program. In the event of a Change in Control (defined
substantially identical to "Change of Control" above), NYNEX's 1995 Long Term
Incentive Program provides that all stock options and stock appreciation rights
previously granted will become fully exercisable, the restrictions on restricted
stock previously
11
<PAGE>
granted will terminate, and performance units under the Senior Management Long
Term Incentive Plan will be immediately valued based on the highest fair market
value of NYNEX Common Stock during the period beginning thirty days prior to and
ending thirty days after the Change in Control.
NYNEX Executive Officer Short Term Incentive Plan and NYNEX Senior Management
Short Term Incentive Plan. The Short Term Plans were amended as of April 21,
1996 to provide that if, during the first three months of an Award Year (as
defined in the Short Term Plans) (x) the Effective Time occurs or (y) an
executive is involuntarily terminated without cause by NYNEX or one of its
subsidiaries as a result of the Merger which, in either case, would result in a
forfeiture under the Short Term Plans, there will be no forfeiture of an Award
(as defined in the Short Term Plans) and the amount of any outstanding Award
will be prorated to the date of the Effective Time or the executive's
termination. The Short Term Plans already provide for such result if the
Effective Time or such a termination occurs other than during the first three
months of an Award Year.
NYNEX Senior Management Long Term Incentive Plan. The NYNEX Senior Management
Long Term Incentive Plan was amended by the NYNEX Board as of April 21, 1996 to
provide that if, during any performance period not yet completed (x) the
Effective Time occurs or (y) an executive is involuntarily terminated without
cause by NYNEX or one of its subsidiaries as a result of the Merger which, in
either case, would result in a forfeiture under the Long Term Plan, there shall
be no forfeiture of any awards thereunder and the awards with respect to all
outstanding performance periods shall be prorated to the date of the Effective
Time or the executive's termination. The Long Term Plan already provides for
such result if an executive is eligible to retire with a full service pension at
termination of employment.
Share Owner Return Performance Graph
- ------------------------------------
The following line graph compares the yearly percent change in the cumulative
Total Share Owner Return of NYNEX Common Stock against the cumulative total
return of the Standard & Poor's 500 Stock Index and the Regional Holding Company
peer group stock index for the period of five fiscal years (1992-1996).
Comparison of 5-Year Cumulative Total Return*
[GRAPHIC OMITTED]
* Assumes $100 invested on December 31, 1991 in NYNEX Common Stock, Standard &
Poor's 500 Index and Peer Group Index, with all dividends reinvested; also
assumes retention by Pacific Telesis Group stockholders of the Airtouch
Communications stock spin-off, effective April 1, 1994, and conversion of US
WEST's common stock into Communications Stock and Media Stock effective
November 1, 1995.
December 31 1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
NYNEX 100.0 110.0 111.1 108.1 168.1 157.3
PEERS** 100.0 111.0 133.3 130.8 190.2 190.1
S&P 500 100.0 107.6 118.5 120.1 165.2 203.1
** Composite of 6 Regional Holding Companies: Ameritech, Bell Atlantic,
BellSouth, Pacific Telesis, SBC & US WEST.
12
<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.
NYNEX CORPORATION
By /s/ M. Meskin
----------------------
Mel Meskin
Vice President and Comptroller
March 28, 1997
