October 30, 1997
Mr. John C. Petrillo
295 No. Maple Ave., Rm 5204A2
Basking Ridge, NJ 07920
Dear John:
The purpose of this letter agreement (hereinafter "Agreement") is to
detail and document a special individual non-qualified supplemental retirement
arrangement we have developed for you. Under this Agreement, a deferred account
(hereinafter "Deferred Account") will be established in your name. The
maintenance, vesting, forfeiture and distribution of the Deferred Account shall
be in accordance with the following terms and conditions.
On November 1, 1997 (hereinafter the "Effective Date"), AT&T Corp.
(hereafter "the Company") shall credit the Deferred Account with an initial
balance of Eight Hundred and Seventy Thousand Dollars ($870,000). The Company
shall credit interest to the Deferred Account as of the end of each calendar
quarter at a rate equal to one-quarter of the average 30 Year Treasury Bond Rate
in effect for the last previous quarter.
The Deferred Account will be maintained as a bookkeeping account on the
records of the Company and you will have no present ownership right or interest
in the Deferred Account, nor in any assets of the Company with respect thereto.
The Deferred Account may not be assigned, pledged or otherwise alienated by you
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. You shall not have any
right to receive any payment with respect to the Deferred Account, except as
expressly provided below.
In the event you cease to be a Company employee prior to the sixth
anniversary of the Effective Date:
(a) by reason of death or Long-Term Disability (as defined
below), all amounts credited to the Deferred Account
through the date of such termination, shall be paid to you
[or, upon your death to your beneficiary, as designated
on a form filed with Executive Human Resources, or
to your estate if no beneficiary has been designated,
(hereinafter your Survivors)] within the calendar quarter
immediately following the quarter which includes the
date of your termination of Company employment;
(b) by reason of Company-initiated termination for other than
Cause (as defined below), all amounts credited to the
Deferred Account through the sixth anniversary of the
Effective Date shall be paid to you (or to your Survivors)
within the calendar quarter immediately following the
quarter which includes such sixth anniversary;
(c) by reason of your election to terminate your Company
employment for Good Reason (as defined below), all amounts
credited to the Deferred Account through the sixth
anniversary of the Effective Date shall be paid to you (or
to your Survivors) within the calendar quarter
immediately following the quarter which includes such
sixth anniversary; and
(d) for any reason other than death, "Long Term Disability,"
Company-initiated termination for other than "Cause," or
your election to terminate your employment for "Good
Reason," then all amounts in the Deferred Account shall
be canceled and you shall not receive any distribution
with respect to the Deferred Account or have any further
interest in the Deferred Account.
In the event you cease to be a Company employee on or after the sixth
anniversary of the Effective Date for any reason other than your death, all
amounts credited to the Deferred Account will be paid to you in ____ (1 to 10)
_____ (initials) approximately equal annual installments commencing within the
first calendar quarter of the calendar year following the year in which your
termination of employment occurs. Unpaid Deferred Account balances after
termination continue to be credited with interest. In the event of your death
prior to either commencement or completion of Deferred Account payment(s) to
you, the unpaid balance of the Deferred Account as of your death shall be paid
to your Survivors in a lump sum within the calendar quarter immediately
following the quarter which includes the date of your death.
For purposes of this Agreement:
(a) "Long Term Disability" shall mean termination of your 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;
(b) "Cause" shall mean:
(i) your breach of any of the terms of this Agreement;
(ii) your conviction (including a plea of guilty or nolo
contendere) of a crime involving theft, fraud, dishonesty or
moral turpitude;
(iii) gross omission or gross dereliction of any statutory, common
law or other duty of loyalty to the Company or any of its
affiliates;
(iv) violation by you of the Company's Code of Conduct or
Non-Competition Guideline; or
(v) repeated failure to carry out the duties of your position
despite specific instruction to do so.
(c) "Good Reason" shall mean the occurrence without your express written
consent of any of the following events:
(i) Your demotion to a position which is not of a rank and
responsibility comparable to members of the current Senior
Management Team or those of a similar/replacing governance
body; provided, however, that the Company's decision not to
continue a Senior Management Team shall not be Good Reason,
and provided, further, that (1) changes in reporting
relationships shall not, alone, constitute Good Reason and/or
(2) a reduction in your business unit's budget or a reduction
in your business unit's head count, by themselves, do not
constitute Good Reason; or
(ii) a reduction in your "Total Annual Compensation" (defined as
the sum of your Annual Base Salary Rate, Target Annual
Incentive and "Target Annual Long Term Incentive Grants") for
any calendar or fiscal year, as applicable, to an amount that
is less than the Total Annual Compensation that existed in the
prior calendar or fiscal year, as applicable. For purposes of
this paragraph (c)(ii) the dollar value of the "Target Annual
Long Term Incentive Grants" shall exclude the value of any
special one-time or periodic long-term incentive grants, and
shall be determined by valuing Performance Shares, Stock
Units, Restricted Stock, Restricted Stock Units, etc., at
the market share price utilized in valuing the annual
Senior Management compensation structures in the materials
presented to the Compensation and Employee Benefits Committee
of the Company's Board of Directors when authorizing such
grants, and assuming 100% performance achievement if such
grants include performance criteria. Stock Options and Stock
Appreciation Rights will be valued by the Black Scholes
methodology (and related share price) as utilized in the
materials presented to such Compensation and Employee Benefits
Committee when authorizing such grants.
It is understood and agreed that you will not talk about, write about
or otherwise publicize the terms or existence of this Agreement or any fact
concerning its execution or implementation. You may, however, discuss its
contents with your spouse, legal and/or financial counselor. IN ADDITION,
DEFERRED ACCOUNT AMOUNTS PROVIDED UNDER THIS AGREEMENT ARE SUBJECT TO FORFEITURE
(OR REPAYMENT IF SUCH AMOUNTS ALREADY HAVE BEEN PAID) IF YOU VIOLATE THE AT&T
NON-COMPETITION GUIDELINE IN EFFECT AT THE TIME OF THE VIOLATION ANYTIME PRIOR
TO THE THIRD ANNIVERSARY OF YOUR TERMINATION OF COMPANY EMPLOYMENT. (THE CURRENT
GUIDELINE SUMMARY IS ATTACHED.)
THIS AGREEMENT IS NOT AN EMPLOYMENT CONTRACT AND SHOULD NOT BE
CONSTRUED OR INTERPRETED AS CONTAINING ANY GUARANTEE OF CONTINUED EMPLOYMENT.
THE EMPLOYMENT RELATIONSHIP WITH THE COMPANY IS BY MUTUAL CONSENT
("EMPLOYMENT-AT-WILL"). THIS MEANS THAT EMPLOYEES HAVE THE RIGHT TO TERMINATE
THEIR EMPLOYMENT AT ANY TIME AND FOR ANY REASON. LIKEWISE, THE COMPANY RESERVES
THE RIGHT TO DISCONTINUE YOUR EMPLOYMENT WITH OR WITHOUT CAUSE AT ANY TIME AND
FOR ANY REASON.
Payments from the Deferred Account are in addition to and not in lieu
of any qualified or non-qualified pension, savings, or other retirement plan,
program or arrangement covering you, nor are such payments in lieu of any
payments or other benefits which may be provided to you under the AT&T Senior
Officer Severance Plan. The Deferred Account payments provided under this
Agreement are subject to payroll tax withholding and reporting, and amounts
credited to the Deferred Account are not included in the base for calculating
benefits under any employee or Senior Management benefit plan, program or
practice.
Any dispute, controversy, or question arising under, out of, or
relating to this Agreement or the breach thereof, shall be referred for
arbitration in the State of New Jersey to a neutral arbitrator selected by you
and the Company. The proceeding shall be governed by the Commercial 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) and the decision of the
arbitrator shall be governed by the rule of law. If the parties are unable to
agree upon a neutral arbitrator within thirty (30) days after each 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 the appointment of a neutral arbitrator,
or, if such Association is not then in existence or does not desire to act in
the matter, either party may apply to the Presiding Judge of the Superior Court
of any county in New Jersey for the appointment of a neutral arbitrator to hear
the parties and settle the dispute, controversy or question, and such right to
submit a dispute arising hereunder to arbitration and the decision of the
neutral arbitrator shall be final, conclusive and binding on all interested
persons and no action at law or in equity shall be instituted, or, if
instituted, further prosecuted by either party other than to enforce the award
of the neutral arbitrator. You and the Company shall each bear all your and its
own costs and attorney fees, except that the Company shall pay the costs of any
arbitrator appointed hereunder as well as the copy of any official transcript of
the proceeding.
The construction, interpretation and performance of this Agreement
shall be governed by the laws of the State of New Jersey, without regard to its
conflict of laws rule.
John, I am happy to present this special arrangement to you. It
recognizes the extraordinary contribution you have made to our business. If you
agree with the terms and conditions detailed above, please enter your payout
election and initial in the spaces provided on page 2, sign and date this
Agreement in the spaces provided below and, prior to November 14, 1997, return
the original executed copy to me.
Sincerely,
Attachment
______________________________ ______________________________
Acknowledged and Agreed to Date
John C. Petrillo