Form of
EMPLOYMENT AGREEMENT
This Agreement, dated as of October 23, 1996, by and between AT&T
Corp., a New York Corporation with its headquarters at 32 Avenue of the
Americas, New York, New York 10013 (hereinafter called the "Company"), and John
R. Walter (hereinafter called the "Employee").
WHEREAS the Employee was employed as a senior
executive with another
company; and
WHEREAS the Employee has accepted employment with the
Company; and
WHEREAS the Company has assigned and appointed the Employee to a Senior
Management position as President and Chief Operating Officer of the Company,
reporting to the Chairman, with the contemplation that after a transition period
he will become Chief Executive Officer of the Company and later be named
Chairman of the Board. Employee has also been elected a member of the Company's
Board of Directors.
WHEREAS, it is of special importance for the Company to mitigate the
impact on Employee of early departure from the Employee's prior employer;
NOW, therefore, and in consideration of the promises
and the mutual
agreements as set forth above and hereinafter contained,
the Company and
Employee do hereby agree as follows:
1. Employment. Subject to the provisions set forth elsewhere in this
Agreement, the Company hereby employs the Employee and the Employee hereby
accepts employment with the Company as President and Chief Operating Officer of
the Company during the employment term set forth in Section 2 of this Agreement
with the contemplation that at the time periods announced by the Company,
Employee will become Chairman and Chief Executive Officer. The Company has also
elected Employee as a member of the Company's Board of Directors. Employee
represents and warrants that there are no agreements or arrangements, whether
written or oral, in effect which would prevent him from rendering exclusive
services to the Company during the term hereof, and that he has not made and
will not make any commitment, agreement or arrangement, or do any act, in
conflict with this Agreement and that entering into this Agreement will not be
in violation of any other agreement. Such employment shall be upon the terms and
conditions hereinafter contained.
2. Term of Employment. The term of employment hereunder ("the
Employment Term") shall commence on October 23, 1996 (the "Effective Date") and
will terminate at the will of either party to this Agreement upon written notice
to the other and shall be subject to the terms and conditions of the Agreement.
3. Employee's Compensation and Benefits. Subject to this Agreement and
as more fully set forth hereinbelow, during the Employment Term, the Employee
shall be treated in the same manner as, and be entitled to such benefits and
other perquisites and terms and conditions of employment no less favorable than,
Senior Managers of the Company at a similar level and with comparable
responsibilities. Employee shall receive no additional compensation for serving
as a member of the Board of Directors of the Company or as an officer or
director of any subsidiary or affiliate.
(a) Base Salary. The Company agrees to pay and the Employee
agrees to accept for services to be rendered hereunder during the Employment
Term, a base salary of not less than $975,000 a year, payable in installments on
a monthly or other periodic basis in accordance with the prevailing payroll
practices of the Company. Employee will be eligible for consideration by the
Compensation Committee of base salary increases as appropriate from time to
time.
(b) Perquisites. During the Employment Term, the Company shall
(i) provide the Employee with perquisites of employment as are commonly provided
to an employee of the Company at a similar level and with comparable
responsibilities, and (ii) reimburse the Employee for reasonable and necessary
business expenses incurred in connection with his employment, in accordance with
employee business expense practices applicable to employees of the Company at a
similar level and with comparable responsibilities.
(c) Benefits. Subject to the terms and provisions of this
Agreement, during the Employment Term, the Employee shall be entitled to
coverage under or benefits in accordance with those employee and Senior
Management benefit plans and programs as are made available, or which may
subsequently become applicable, to other Senior Managers of the Company at
comparable levels. Employee shall be entitled to five (5) weeks of annual
vacation applicable to 1997 and subsequent years, provided however, Employee may
commence taking his 1997 vacation any time after the Effective Date. Employee
shall also be entitled to:
-- Relocate under the terms of the AT&T Management
Relocation Plan
-- Utilize the assistance of one or more firms of
his choice for
purposes of the Company's financial counseling program
-- Receive death benefit coverage at a rate of two
times base salary
under the AT&T Senior Management Basic Life
Insurance Plan, a
split-dollar life insurance program, or any successor
program.
-- Commencing the month Employee closes on his New Jersey
residence, in
lieu of any Mortgage Interest or High
Housing Cost Area
Differentials under the AT&T Management Relocation
Plan, the Company
will provide a temporary (i.e., 36 month) monthly
housing allowance
of $10,500 for each of the first 12 months, 8,400
for each of the
next 12 months and $6,300 for each of the final 12
months.
(d) Incentive Plans. During the Employment Term, the Employee
will be eligible for consideration for both long term and annual incentive
awards pursuant to the terms of the Company's 1987 Long Term Incentive Program
and Short-Term Incentive Plan, respectively (the "Incentive Plans") or
replacements thereof, as are in effect from time to time, at levels and on terms
and conditions consistent with awards to other Senior Managers. Annual
incentives for AT&T Senior Managers currently take the form of AT&T Performance
Awards (APA) and Merit Awards (MA). Award levels under the APA program are
predicated on overall corporate performance and award levels under the MA
program are determined by individual and team contributions. Employee will be
eligible for a prorated 1996 Annual Incentive based on his partial service in
1996. The Company cannot make any representations regarding the continuation of
the APA/MA incentive format, or the size of Employee's APA and MA awards in any
given year, if any. Notwithstanding the foregoing, Employee's standard (or
target) annual incentive opportunity under such Incentive Plans, or those
replacement plans as may from time-to-time be in effect, for 1997 (payable in
1998) shall not be less than $1,170,000 and for 1998 and 1999 it is contemplated
such target annual incentive opportunities shall not be less than 120% of
Employee's base salary as of the first day of such year.
As of the Effective Date, the Compensation Committee has awarded 34,175
Performance Shares/Stock Units to the Employee under the Company's 1987 Long
Term Incentive Program covering the 1996 - 1998 performance period, subject to
the terms and conditions set forth in the Stock Unit Award Agreement provided to
Employee with this Agreement. Distributions of Long Term Performance
Shares/Stock Units will be in accordance with the applicable 1987 Long Term
Incentive Program and award provisions, provided, however, that as a result of
the Company's restructuring and the difficulty of setting long-term financial
targets while the restructure is in progress, the performance criteria
established for the 1996 - 1998 long-term cycle are not applicable. For such
performance period, the criteria are deemed to have been met at the target
level. However, the opportunity to earn a payout above 100% is eliminated, and
all other terms and conditions of the award continue to apply. In January 1997,
Employee will also be eligible to receive a Performance Share/Stock Unit Award
for the 1997 - 1999 performance period or a replacement long term incentive
vehicle of generally comparable value. The Compensation Committee of the Board
has not yet determined the format or magnitude of such award.
Also, as of the Effective Date of this Agreement, a Stock Option Award
with respect to 112,500 shares of AT&T Common Stock has been granted to the
Employee under the Company's 1987 Long Term Incentive Program. Such Award is
subject to the terms and conditions set forth in the Non-statutory Stock Option
Agreement provided to Employee with this Agreement. The option price is 100% of
market price on the Effective Date. In January 1997, Employee will also be
eligible to receive another Stock Option grant, the magnitude of which has not
yet been determined by the Compensation Committee.
As with the Annual Incentive Award, Long Term Incentives are closely
linked with the Company's strategy to meet the challenges of an ever changing
marketplace. Accordingly, other than the grants as made in this Agreement, the
Company cannot guarantee continuation of the Long Term Incentive Plan in its
current format, nor can it guarantee annual grant levels to individual
participants. Notwithstanding the foregoing, to further incent Employee to
achieve Company's goal of substantially enhancing shareowner wealth, it is
contemplated Employee will receive (i) Stock Option grants for Company Stock
that will average no less than 200,000 options per year (adjusted for stock
splits or other occurrences that result in adjustments of shares subject to
outstanding stock options) during 1997, 1998 and 1999 delivered through a
variety of grant forms e.g., standard annual grants, special grants and
"premium" grants and (ii) awards of Performance Shares/Stock Units or
replacement long term equity incentives that will have an average value at the
time of grant during 1997, 1998 and 1999 of at least $1,350,000, per year on
terms and conditions as the Compensation Committee shall determine at the time
of the awards, provided that such terms and conditions shall be no less
favorable to Employee than for long term equity awards being simultaneously made
to other Senior Managers.
The terms and conditions of various long-term incentive awards set
forth in the attached Award Agreements and in this Agreement, are in accordance
with the scope and provisions of the Company's 1987 Long-Term Incentive Program.
(e) Hiring Bonus. To recognize certain
forfeitures Employee
will incur when he leaves his current employer and to incent
him to join the
Company, the Compensation Committee has as of the Effective
Date of this
Agreement granted the following one time special arrangements to
Employee:
-- An award of 34,175 "Seasoned" 1995 - 1997
AT&T Performance
Shares/Stock Units (i.e., Performance
Shares/Stock Units which
would have been granted to Employee had he
been with the
Company in 1995) under the AT&T Long Term
Incentive Program,
as set forth in the Stock Unit Award
Agreement provided to
Employee with this Agreement. As a result
of Company's
restructuring and the difficulty of
setting long-term
financial targets while the restructure is in
progress, the
performance criteria established for the 1995 -
1997 cycle are
not applicable and for this performance
period, the criteria
are deemed to have been met at the target
level. However, the
opportunity to earn a payout above 100% is
eliminated, and all
other terms and conditions of the award continue
to apply.
-- A $5,000,000 cash bonus payable within
ten days of the
Effective Date. Employee has expressed a
desire that he will
use a substantial portion of the after-tax
proceeds of the
bonus to purchase, with the intent to retain
for long term
investment purposes, 50,000 shares of AT&T
Common Stock.
-- A stock option award on the Effective Date
with respect to
112,500 shares of AT&T Common Stock, subject to
the terms and
conditions set forth in the Non-statutory
Stock Option
Agreement provided to Employee with this
Agreement, which
terms include, but are not limited to, an
option exercise
price equal to the market price per share of
AT&T Common Stock
on the Effective Date.
-- An award of 75,000 AT&T Restricted Stock Units,
subject to the
terms and conditions set forth in the
Stock Unit Award
Agreement provided to Employee with this Agreement.
-- Two "premium" stock option awards on the
Effective Date, each
with respect to 100,000 shares of AT&T Common
Stock, subject
to the terms and conditions set forth in the
Non-statutory
Stock Option Agreements provided to
Employee with this
Agreement, which terms include, but are not
limited to, an
option exercise price equal to the market
price per share of
AT&T Common Stock on the Effective Date.
-- Establishment of a Deferred Account to be
maintained and paid
to Employee in accordance with the following
provisions: On
the Effective Date, the Company shall
credit the Deferred
Account with an initial balance of
$7,000,000. The Deferred
Account will be maintained as a bookkeeping
account on the
records of the Company and the Employee will
have no ownership
interest in the Deferred Account, nor in
any asset of the
Company with respect thereto. The Deferred
Account may not be
assigned, pledged or otherwise alienated by
the Employee and
any attempt to do so, or any garnishment,
execution or levy of
any kind with respect to the Deferred
Account, will not be
recognized. Employee shall not have any right
to receive any
payment with respect to the Deferred
Account, except as
expressly provided below. The Company shall
credit interest to
the Deferred Account as of the end of each
calendar quarter
(and compounded quarterly) at a rate equal to
one quarter of
120% of the Applicable Annual Federal Mid-Term
Rate in effect
for the last month of such quarter. The vesting,
forfeiture or
distribution of the Deferred Account shall be
in accordance
with the following provisions:
In the event of termination of Employee's
employment prior to
the fifth anniversary of the Effective Date:
-- For any reason other than death, "Long
Term Disability"
(as defined below), Company-initiated
termination for
other than "Cause" (as defined below),
or Employee-
initiated termination for "Good
Reason" (as defined
below), then all amounts in the Deferred
Account shall
be cancelled and Employee shall
not receive any
distribution with respect to the
Deferred Account; or
have any further interest in the Deferred
Account
-- By reason of death or Long-Term
Disability, all amounts
credited through the last day of the
first calendar
quarter of the calendar year
following the year in
which such termination of employment
occurs shall be
paid to Employee (or, in the event of
the Employee's
death to Employee's beneficiary
designated on a Company
form filed with Executive Human
Resources, or to his
estate if no beneficiary has been
designated), within
30 business days of the end of such
calendar quarter;
or
-- By reason of Company-initiated
termination for other
than Cause, or Employee-initiated
termination for Good
Reason, amounts credited to the Deferred
Account shall
continue to accrue interest through
the later of (i)
the last day of the calendar quarter in
which the fifth
anniversary of this Agreement occurs or
(ii) the last
day of the first calendar quarter of the
calendar year
following the year in which such
termination occurs, at
which time the balance credited to the
Deferred Account
shall be paid to the Employee (or
his designated
beneficiary or estate, as described
above, in the event
of his death) within 30 business days
after the end of
such quarter;
In the event of termination of Employee's employment after the fifth
anniversary of the Effective Date for any reason, all amounts credited to the
Deferred Account through the last day of the first calendar quarter of the
calendar year following the year in which such termination of employment occurs
shall be paid to the Employee (or his designated beneficiary, or estate, as
described above, in the event of his death) within 30 business days after the
end of such quarter.
Payments from the Deferred Account are in addition to and not in lieu
of any pension, savings, or other defined benefit or defined contribution plan,
program or arrangement covering Employee, including other provisions of this
Agreement. The Company shall pay to Employee an additional amount which, after
gross-up for applicable Federal and state income, payroll and other withholding
taxes in accordance with the Company's tax gross-up policies applicable to
Senior Management, is equal to the FICA Medicare tax withholding due from
Employee on the initial $7,000,000 deferral (but not earnings thereon) upon the
establishment of the Deferred Account or, if not then so taxable, when such FICA
Medicare tax becomes due.
For purposes of this Agreement:
"Long Term Disability" shall mean termination of Employee's employment
with the Company with eligibility to receive a disability allowance under the
AT&T Senior Management Long Term Disability and Survivor Protection Plan or a
replacement plan.
"Good Reason" shall mean a material breach of this Agreement by the
Company which is not cured within twenty days of the giving of written notice
thereof by Employee. Good reason shall include any uncured failure by the
Company to provide the compensation and benefits required hereunder, to provide
the contemplated equity and incentive awards as stated hereunder (except those
that cannot legally be continued) or awards that the Compensation Committee
believes in good faith provide substantially, in the aggregate, equivalent
pre-tax economic benefits and opportunities to the foregoing, to elect the
Employee to the future offices contemplated by this Agreement within the time
framework announced by the Company, to maintain Employee in such positions, or
to effect an assumption as provided in Section 10(b). Employee's sole remedy for
any breach of this Agreement by the Company during the Employment Term which
would provide him with a right to terminate with Good Reason, including but not
limited to failures referred to in the prior sentence, shall be a termination
for Good Reason and the amounts and benefits provided hereunder upon such
termination (as well as any accrued but unpaid base salary, accrued vacation and
amounts due under the terms of any plan or program upon such termination), and
in no event shall the Company or its affiliates be liable for any other damages
of any kind whatsoever as a result of any such breach. The amounts paid and
benefits provided upon such a Good Reason termination shall be deemed to include
liquidated damages for such breach, and Employee shall not be entitled to any
actual damages (which the parties agree would be difficult, if not impossible,
to determine). Any notice of termination of employment for Good Reason shall be
given within 180 days after the occurrence of the event on which such Good
Reason termination is to be based.
For purposes of this Agreement, any award agreement, and any other
agreement, plan or program of the Company to which Employee is a party or by
which he is covered, "Cause" or "cause" (or words of similar import) shall mean:
(i) The Employee is convicted (including a plea of
guilty or nolo
contendere) of a felony involving theft or
moral turpitude,
other than a felony predicated on
Employee's vicarious
liability. Vicarious liability means, and
only means, any
liability which is based on acts of the Company
for which the
Employee is charged solely as a result of
his offices with
the Company and in which he was not directly
involved or did
not have prior knowledge of such actions or
intended actions.
(ii) The Employee engages in conduct that constitutes
willful gross
neglect or willful gross misconduct in carrying
out his duties
under this Agreement, resulting, in either
case, in material
economic harm to the Company.
4. Special Pension and Other Post-Termination
Arrangements.
(a) In the event Employee's employment terminates on or after
Employee's 55th birthday for any reason other than for a Company-initiated
termination for Cause, the Company will provide an immediate pension benefit
(the "Special Pension") based on (1) the greater of the pension amounts
reflected in Attachment A or (2) actual Company Net Credited Service and
compensation calculated under the then-existing Company qualified and
non-qualified pension formulas, but without reference to age and service
eligibility requirements for purposes of determining benefit commencement,
(i.e., such accrued pension benefits would normally under plan provisions be
payable at age 65, therefore waiving the age and service eligibility requirement
will facilitate payment of such accrued benefits commencing as early as age 55).
Non-qualified pensions affected by these practices would include those provided
under the AT&T Non-Qualified Pension Plan, the AT&T Mid-Career Pension Plan, but
specifically would exclude the minimum retirement benefit and surviving spouse
benefit payable under the AT&T Senior Management Long-Term Disability and
Survivor Protection Plan. Special Pension payments shall be paid to the Employee
from Company operating income and Employee shall be a general creditor of the
Company with regard to such benefits. Such benefits may not be assigned, pledged
or otherwise alienated by the Employee and any attempt to do so, or any
garnishment, execution or levy of any kind with respect to the Special Pension,
will not be recognized. The total pension amount which results from application
of the preceding provisions of this Section 4 will be reduced by (1) the pension
payable by Employee's former employer and (2) all amounts actually received by
Employee or his surviving spouse under any other Company or affiliate's
qualified or non-qualified pension, retirement, disability or annuity plan or
program, except the AT&T Long-Term Savings Plan for Management Employees and the
AT&T Senior Management Incentive Award Deferral Plan. Special Pension benefits
payable under this Section 4 will be afforded the same post employment "ad hoc"
inflation adjustments, if any, as may be applicable to the AT&T Non-Qualified
Pension Plan from time to time.
Employee may elect, prior to the commencement of the Special
Pension (or, if earlier, such earlier date such that the election would not be
subject to constructive receipt treatment) to receive the benefit in the form of
a joint and 50% survivor annuity with his spouse (or under any other optional
form of benefit then available under the AT&T Management Pension Plan or
replacement plan) at the time of such election, subject to the adjustments as
provided for in Attachment A. To the extent any adjustments in form of any
benefit are required to calculate an offset, the actuarial practices applicable
to the AT&T Management Pension Plan or replacement plan shall be used. Any
benefits with a later starting date than this Special Pension benefit shall be
offset only when such offsetting benefits commence. In the event termination is
as a result of the Employee's death, a 50% survivor annuity shall be paid to
Employee's spouse, if any, assuming, for benefit calculation purposes, he had
terminated his employment and commenced benefits in the form of a joint and 50%
survivor annuity on the day before his death.
(b) Conditioned upon termination and eligibility to an
immediate pension under Section 4(a), Employee will be entitled to the following
post-termination ancillary entitlements, administered in a manner consistent
with the then-current treatment of Service Pension eligible Senior Managers and
in accordance with the terms and conditions applicable to each Senior Management
plan, program or practice (or replacement therefor) as they may exist from time
to time.
-- Two times base salary Senior Management Basic
Life Insurance
-- One and one half times salary Senior
Management Individual
Life Insurance
-- One times salary plus annual incentive death
benefit normally
payable under the AT&T Management Pension
Plan and AT&T
Non-Qualified Pension Plan to certain
qualified survivors,
e.g., spouse or dependent child of a Service
Pensioner. In the
event: (1) such benefit is available to
Service Pensioners
upon Employee's death and (2) Employee is
not eligible for
such benefit, then in such case a death benefit
equal to such
benefit will be paid from the Company's
operating income to a
qualified survivor, if any, per comparable
death benefit
provisions under the AT&T Management Pension
Plan. Any lump
sum death benefit payable under the AT&T
Senior Management
Long Term Disability and Survivor Protection
Plan will be an
offset to the death benefit payable under this
provision.
-- Participation in the post-retirement Senior
Management benefit
or prerequisite plans, programs and practices
as well as any
employee benefit plan, (except those for
which alternate
coverage is made available in the Agreement
or through a
special Senior Management plan, program or
practice), but only
to the extent and under such terms and
conditions as such
employee benefits and Senior Management
benefits and
perquisites are available to Service Pension
eligible Senior
Managers at the time of Employee's termination.
-- Immediate (or, if later, six months from the
date of grant)
vesting and exercisability of all outstanding
Stock Options
granted under this Agreement as of the
Effective Date, other
than premium options, without regard to
any prorated
cancellation under the Award Agreements of
awards granted in
the year of termination of employment or
retirement
-- Immediate vesting in all outstanding
Performance Share/Stock
Units awards granted under this Agreement as of
the Effective
Date with payout thereof being made as
if Employee's
employment continued through payout at
the end of the
applicable Performance Period.
-- Acceleration or continuation of vesting and/or
exercisabilit
of other awards under this Agreement or
any long-term
incentive plan to the extent and under the
same terms and
conditions applicable to Service Pension
eligible Senior
Managers at the time such awards were
granted, all as set
forth in the applicable long-term award
agreements.
-- Immediate vesting of the 75,000
Restricted Stock Units
described in Section 3(e) of this Agreement.
-- Retention of the two "premium" Stock Option
grants described
in Section 3(e) of this Agreement,
with vesting and
exercisability as if Employee had remained an
active employee
of the Company.
5. Powers and Duties. The Employee shall devote his full business time
and best efforts and abilities to the performance of duties under this
Agreement, it being understood in connection therewith that he may, in his
discretion and subject to not interfering with his duties and responsibilities
hereunder, devote time to civic, public and professional activities and may
serve as a director of other business corporations not engaged in competition
with the Company or any subsidiary or affiliate of the Company; provided,
however, that he shall not accept directorships on more than three boards of
other business corporations; and provided, further, that for purposes of the
immediately preceding clause, directorships on the boards of two or more
companies with at least 50% common ownership shall count as a single company.
Furthermore, so long as it does not interfere with his Company duties and
subject to the AT&T Non-Competition Guideline, Employee may continue to manage
his passive investments.
6. Indemnification. The Company and Employee shall
promptly enter
into the Indemnity Agreement annexed hereto as Attachment B.
7. Restrictive Convenants.
(a) Competition. Notwithstanding any other provisions of this
Agreement, any and all payments (except those made from Company-sponsored Tax
Qualified Pension or Welfare Plans), benefits or other entitlements to which the
Employee may be eligible in accordance with the terms hereof, may be forfeited,
whether or not in pay status, at the discretion of the Company, if the Employee
at any time without the consent of the Company "establishes a relationship with
a competitor" or "engages in an activity" which is in conflict with or adverse
to the interest of the Company, all within the meaning of the Non-Competition
Guidelines referred to below (a "Competitive Activity"). The payments, benefits
and other entitlements hereunder are being made in part in consideration of the
obligations of this Section 7 and in particular the post-employment payments,
benefits and other entitlements are being made in consideration of, and
dependent upon, compliance with this Section 7(a) and, to the extent set forth
in Section 8, the Release and Agreement referred to in Section 8. Attachment C
is a copy of the Non-Competition Guideline.
(b) Confidentiality. The Employee agrees that he will not, at
any time during his employment pursuant to this Agreement or thereafter,
disclose or use any trade secret, proprietary or confidential information of the
Company or any subsidiary or affiliate of the Company, obtained during the
course of his employment, except as required in the course of such employment or
with the written permission of the Company or, as applicable, any subsidiary or
affiliate of the Company or as may be required by law, provided that, if
Employee receives legal process with regard to disclosure of such information,
he shall promptly notify the Company and cooperate with the Company in seeking a
protective order.
The Employee agrees that at the time of the termination of his
employment with the Company, whether at the instance of the Employee or the
Company, and regardless of the reasons therefore, he will deliver to the
Company, and not keep or deliver to anyone else, any and all notes, files,
memoranda, papers and, in general, any and all physical matter containing
information, including any and all documents significant to the conduct of the
business of the Company or any subsidiary or affiliate of the Company which are
in his possession, except for any documents for which the Company or any
subsidiary or affiliate of the Company has given written consent to removal at
the time of the termination of the Employee's employment and his personal
rolodex, phone book and similar items.
Employee agrees that the Company's remedies at law would be inadequate
in the event of a breach or threatened breach of this Paragraph (b);
accordingly, the Company shall be entitled, in addition to its rights at law, to
an injunction and other equitable relief without the need to post a bond.
(c) Any Competitive Activity by the Employee not permitted by
the provisions of Section 7(a) above shall result, at the discretion of the
Company, in the cancellation of all rights and entitlements of the Employee
hereunder (including but not limited to those for payments or benefits),
provided that: (i) the Deferred Account in such event shall not be forfeited,
but may at the Company's discretion be immediately paid out and (ii) no
forfeiture or cancellation (or accelerated payout of the Deferred Account) shall
take place with respect to any payments, benefits or entitlements hereunder or
under any other award agreement, plan or practice unless the Company shall have
first given the Employee written notice of its intent to so forfeit, or cancel
or pay out and Employee has not, within thirty (30) days of giving such notice,
ceased such unpermitted Competitive Activity, provided that the foregoing prior
notice procedure shall not be required with respect to (x) a Competitive
Activity which Employee initiated after the Company had informed the Employee in
writing that it believed such Competitive Activity violated Section 7(a) or the
AT&T Non-Competition Guidelines, (y) any Competitive Activity regarding local,
regional or long distance telephone services or other products or services which
are part of a line of business which represents more than 5% percent of the
Company's consolidated gross revenues for its most recent completed fiscal year
at the time the Competitive Activity commences.
8. Termination Provision.
(a) If, at any time during the period beginning with the
Effective Date and ending on the day prior to the Employee's 55th birthday,
Employee is terminated by the Company for any reason other than Cause or Long
Term Disability or Employee terminates his Company employment for Good Reason,
the Employee will be entitled to:
-- Monthly payments for a 12 month period
following termination,
each such payment in an amount equal to one
twelfth of the
greater of (1) $3,217,500 or (2) 150% of the sum
of Employee's
annual base salary rate plus target Annual
Incentive rate in
effect as of the date of Employee's termination.
-- An annual incentive award for the year of
termination payable at
the target amount but prorated to the nearest half
month based on
actual service in the final performance year
and payable to
Employee within fifteen (15) business
days after such
termination.
-- Distribution of the Deferred Account as
provided for in
Section 3(e).
-- The Special Pension provided for in Section
4(a) of this
Agreement determined on the basis that
Employee's age at
termination was the greater of age 55 or his
actual age plus two
years, and further provided that such pension
will commence no
earlier than his actual attainment of age 55.
-- The post-termination benefits and entitlements
as described in
Section 4(b)
(b) If, at any time during the period beginning with the
Effective Date of this Agreement and ending on the day prior to the Employee's
55th birthday, Employee's employment terminates because of Long
Term Disability, the Employee will be entitled to:
-- Distribution of the Deferred Account as provided
for in Section
3(e)
-- The Special Pension provided for in Section
4(a) of this
Agreement assuming Employee's age at termination
was the greater
of age 55 or his actual age plus two years, and
further provided
that such pension will commence no earlier than his
actual
attainment of age 55.
-- The post-termination benefits entitlements as
described in
Section 4(b)
(c) In the event Employee's employment terminates because of
Employee's death at any time during the period beginning with the Effective Date
and ending on the day prior to the Employee's 55th birthday:
-- Employee's surviving spouse shall be entitled
to a survivor
pension for her lifetime commencing the month
after the month
which includes the date of Employee's death. The
amount of such
pension shall be $29,000 per month. This survivor
pension will be
offset by the minimum surviving spouse pension
benefit (or lump
sum alternate if such becomes available) payable
under the AT&T
Senior Management Long Term Disability and
Survivor Protection
Plan (or replacement plan) and any other
benefit under any
Company qualified or non-qualified retirement
or annuity plan
payable to the surviving spouse.
-- In addition, amounts and benefits shall be paid
or provided as
otherwise specified herein or as provided in
the applicable
Company programs and plans upon an in-service death.
(d) In the event Employee's employment terminates voluntarily
(other than for Good Reason) or as the result of a Company-initiated termination
for Cause, at any time during the period beginning with the Effective Date and
ending on the day prior to the Employee's 55th birthday, Employee shall only
receive such amounts and benefits as are provided under the Company's programs
and plans.
(e) Any payments or benefits made pursuant to this Section 8
are: (1) subject to the provisions, restrictions and limitations of Section 7(a)
and (c) above, but not otherwise subject to offset or mitigation, (2) subject to
Employee signing a Release and Agreement not to sue the Company in the form of
Attachment D hereto with such changes therein or additions thereto as needed
under then applicable law to give effect to the intent of the Release and
Agreement and (3) receipt of Employee's resignation from all offices,
directorships and fiduciary positions with the Company, its affiliates and their
respective benefit plans. Notwithstanding the due date of any post-employment
payment, any amounts due under this Section 8 shall not be due until after the
end of any applicable revocation period with regard to the Release and
Agreement.
9. Dispute Resolution. At the option of the Employee or the Company,
any dispute, controversy, or question arising under, out of or relating to this
Agreement or the breach thereof, other than that for injunctive relief under
Section 7(b), shall be referred for decision by arbitration in the State of New
Jersey by a neutral arbitrator selected by the parties hereto. The proceeding
shall be governed by the Rules of the American Arbitration Association then in
effect or such rules last in effect (in the event such Association is no longer
in existence). If the parties are unable to agree upon such a neutral arbitrator
within thirty (30) days after either party has given the other written notice of
the desire to submit the dispute, controversy or question for decision as
aforesaid, then either party may apply to the American Arbitration Association
for an appointment of a neutral arbitrator, or if such Association is not then
in existence or does not act in the matter within 30 days of application, either
party may apply to the Presiding Judge of the Superior Court of any county in
New Jersey for an appointment of a neutral arbitrator to hear the parties and
settle the dispute, controversy or question, and such Judge is hereby authorized
to make such appointment. In the event that either party exercises the right to
submit a dispute arising hereunder to arbitration, the decision of the neutral
arbitrator shall be final, conclusive and binding on all interested persons and
no action at law or equity shall be instituted or, if instituted, further
prosecuted by either party other than to enforce the award of the neutral
arbitrator. The award of the neutral arbitrator may be entered in any court that
has jurisdiction. In the event that the Employee is successful in pursuing any
claim or dispute arising out of this Agreement, the Company shall reimburse all
of the Employee's attorney's fees and costs, including the compensation and
expenses of any arbitrator, relating solely, or allocable, to such successful
claim. In any other case, the Employee and the Company shall each bear all their
own costs and attorneys fees, except the Company shall pay the costs of any
arbitrator appointed hereunder.
10. Assignment.
(a) Employee. This Agreement is a personal contract and the
rights and interests of the Employee hereunder may not be sold, transferred,
assigned, pledged or hypothecated by him, but shall be binding upon and inure to
the benefit of his heirs, administrators, and executors..
(b) Company. This Agreement shall inure to the benefit of and
be binding upon the Company, its successors and assigns, provided that the
Company may not assign this Agreement except in connection with an assignment of
all or substantially all of the assets of the Company or by law as a result of a
merger or consolidation. In the event of such assignment, a failure by the
successor to specifically assume in writing, delivered to the Employee, the
obligations and liabilities of the Company hereunder shall be deemed a material
breach of this Agreement.
11. Taxes. It is understood that all payments and
benefits provided
under this Agreement are subject to withholding for applicable
federal, state
and local income (or similar) taxes.
12. Other. The Company reserves the right to prospectively discontinue
or modify its compensation, incentive, benefit and perquisite plans, programs
and practices, but any such discontinuance or modification shall not diminish
any specified right of Employee hereunder. Moreover, the very brief summaries
contained herein are subject to the terms of such plans, programs and practices.
For purposes of the employee benefit plans, the definition of compensation is as
stated in the plans. Currently, pensions are based on base salary and annual
incentives. Other benefits are based on either base salary or base salary plus
annual incentives. All other compensation and payments included in this
Agreement are not included in the base for calculation of employee benefits. The
amounts paid under this Agreement upon a termination of employment are in lieu
of and inclusive of any amounts payable under any other plan, program or
practice of the Company with regard to termination of employment.
13. Entire Agreement; Amendments. This Agreement, which may be executed
in two or more counterparts, comprises 23 pages, 16 Sections and 4 Attachments
and represents the entire Agreement between Employee and the Company in respect
of the subject matter contained herein and supersedes all prior agreements,
promises, convenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto. No amendments or modifications to this Agreement may be
made except in writing signed by the Company, by the Chairman of the
Compensation Committee or his specially authorized representative, and the
Employee.
14. Survivorship. The respective rights and
obligations of the
parties hereunder shall survive any termination of the Employee's
employment to
the extent necessary to the intended preservation of
such rights and
obligations.
15. Notices. Any notice given to a party shall be in writing and shall
be deemed to have been given when delivered personally or two days after mailing
if sent by certified or registered mail, postage prepaid, return receipt
requested, duly addressed to the party concerned at the address indicated below
or to such changed address as such party may subsequently give such notice of:
If to the Company:
AT&T
295 North Maple Ave.
Basking Ridge, NJ 07920
Attn: Executive Vice President, Human
Resources
If to the Employee:
John R. Walter
President and Chief Operating Officer
AT&T
295 North Maple Avenue
Basking Ridge, NJ 07920
With a copy to:
Robert J. Stucker
Vedder, Price, Kaufman & Kammholz
222 N. LaSalle St., Suite 2600
Chicago, IL 60601
16. Governing Law. This Agreement shall be construed
and enforced in
accordance with the laws of the State of New Jersey without
consideration
of conflict of law principles.
In Witness Whereof, the parties hereto have executed this Agreement and
Company has affixed its corporate seal as of the day and year first above
written.
Company:
By: ________________________
H. W. Burlingame
Date: ________________________
Witnessed: ________________________
Date: ________________________
Employee: ________________________
Date: ________________________
Witnessed: ________________________
Date: ________________________
Attachment A
MINIMUM PENSION SCHEDULE
(Amounts Assume 50% Joint and Survivor Pension is
declined)*
Retirement Age# Total Monthly
Pension**
---------------
- ---------------------
55 $ 69,444
56 75,000
57 80,554
58 86,109
59 91,664
60 97,219
61 102,774
62 108,329
63 113,884
64 119,433
65 125,000
* If survivor annuity is elected, amounts will be
decreased to reflect
practices in effect upon Employee's termination.
** The above Minimum Pension Schedule is subject to offsets
provided for in
Section 4(a) of the Agreement.
# Minimum Pension amounts will be prorated to the nearest whole
month.