May 7, 1997
Mr. John D. Zeglis
1 Colonial Way
Madison, NJ 07940
Dear John:
This letter agreement (hereinafter Agreement) will establish an
individual non-qualified pension arrangement (hereinafter Individual Pension)
which, subject to the terms and conditions below, will provide you with a
pension payable upon your termination/retirement from the Company, in the same
form as applicable to the AT&T Non-Qualified Pension Plan. As part of the
Individual Pension, survivor benefits may be provided to your spouse upon your
death. Moreover, subject to the terms and conditions below, related
post-retirement/termination benefits (hereinafter Post-Retirement Benefits) will
be provided to you (hereinafter the Individual Pension and Post-Retirement
Benefits are collectively referred to as the Special Benefits).
If you terminate your Company employment prior to your age 52, the
Special Benefits provisions of this Agreement will be null and void in their
entirety, provided, however, such provisions will continue to apply in the event
of a termination for (i) "Disability" (as defined) or (ii) a Company initiated
termination for other than "Cause" (as defined), or you terminate your Company
employment for "Good Reason" (as defined) both (i) and (ii) terminations
hereinafter referred to as a "Termination".
Individual Pension:
The Individual Pension formula assumes you commenced Company employment
on January 1, 1973 and utilizes the pension/retirement benefit formulas in the
AT&T Management Pension Plan (AT&TMPP) and the AT&T Non-Qualified Pension Plan
(AT&TNQPP), and plan amendments implemented in 1997 and thereafter provided,
however, that in no event will the Individual Pension benefits be less than
those Minimum Pension Schedule detailed in Appendix A:
In addition, the Individual Pension will also provide for an Automatic
Survivor Annuity. In the event of your death as an active employee, your spouse
will receive 50% of your accrued Individual Pension benefit which you would have
received in the event a Termination had occurred on your date of death.
(Assuming the annuitant's pension was not declined.)
In the event you do not decline the post-departure/Termination
annuitant's pension, then under this Individual Pension your spouse will
receive, after your death, an annuitant's pension for her lifetime. Under this
provision, the benefit payable to you during your lifetime will be reduced for
early retirement, if applicable (i.e., for pre-age 55 retirement), and reduced
by the cost of the annuitant's pension (such annuitant's pension cost determined
in accordance with the terms and conditions of the AT&TMPP and AT&TNQP at the
time of your departure or Termination). The annuitant's pension will be a
percentage of your lifetime benefit, such percentage determined in accordance
with the terms and conditions of the AT&TMPP and AT&TNQPP at the time of your
departure/Termination.
Moreover, in the event the value of the survivor benefits under the
AT&TMPP and AT&TNQPP, as amended in 1997, exceeds the value of the Automatic
Survivor Annuity or elected Survivor Annuity as described in the two prior
paragraphs, such higher amounts will be payable to your survivor.
All AT&T qualified (e.g., AT&TMPP) and non-qualified (e.g., AT&TNQPP
and AT&T Mid Career Pension Plan) pension/retirement plan benefits (except the
AT&T Long Term Savings Plan and AT&T Incentive Award Deferral Plan) are offsets
to (i.e., subtracted from) the amount of the Individual Pension (payable to
you and/or your surviving spouse). It is further understood and agreed that
any payment under the Individual Pension made as a result of a Disability will
be an offset (subtracted from) the Disability Allowance payable under the AT&T
SMLTD&SP or successor plan.
Post-Retirement Benefits:
If upon your termination of Company employment, you are eligible to
receive an Individual Pension, you shall also be eligible, except as indicated
in the following sentence, for such Post-Retirement Benefits as are then
available (i.e., at your departure/Termination date) to Service Pension eligible
Senior Managers. Any post-retirement benefit available to Service Pension
eligible Senior Mangers which the Company is legally precluded from extending to
non-Service Pensioners will not be part of your Post -Retirement Benefit
package.
Other Provisions:
"Cause" shall be defined as follows: (1) conviction (including a plea
of guilty or nolo contendere) of a felony or any crime or theft, dishonesty or
moral turpitude; or (2) gross omission or gross dereliction of any statutory or
common law duty of loyalty to the Company or (3) violation of AT&T's Code of
Conduct.
"Disability" shall be defined as being disabled after the first
fifty-two week period following the onset of a physical or mental impairment as
detailed in the AT&T Senior Management Long Term Disability and Survivor
Protection Plan
(AT&T SMLTD&SP).
"Good Reason" shall be defined as any termination of your Company
employment, initiated by you prior to reaching your 52nd birthday, resulting
from any of the following events which are not cured by the Company within 20
days of your giving the Company written notice thereof:
a) A reduction in annual total compensation (i.e., annual base
salary rate, target annual incentive, "Long Term Incentive" as
valued below) to less than $2,267,000. For purposes of the
prior sentence, the dollar value of your annual "Long Term
Incentive" grants shall be determined by valuing Performance
Shares, Performance Units, Stock Units, Restricted Stock,
Restricted Stock Units, etc., at the market price when the
Compensation Committee approves such grants, and assuming 100%
performance achievement if such grants include performance
criteria, and Stock Options and SARs will be valued at 30%
of the market price of the shares or related shares when the
Compensation Committee approves such grants, as applicable.
b) The assignment to you, without your expressed written consent,
of any duties inconsistent with, or, any substantial
alteration in, your status or responsibilities as in effect as
of the date of this Agreement.
It is understood and agreed that until this Agreement becomes part of
the public record (e.g. Proxy, 10K), you will not talk about, write about or
otherwise publicize the terms or existence of this Agreement or any fact
concerning its negotiation, execution or implementation. You may, however,
discuss its contents with your spouse, legal and/or financial counselor.
This Agreement is subject to the AT&T Non-Competition Guideline
(Attachment B).
The Special Benefits provided by this Agreement are made in lieu of
all Company severance benefits and are conditioned upon you, within thirty days
of your termination of Company employment, signing and not revoking, a Release
and Agreement not to sue the Company. The form of this Release and Agreement
will be that then (i.e., upon your Termination/retirement) in use for departing
AT&T Senior Managers.)
This Agreement reflects the entire understanding regarding the terms
and conditions of the Special Benefits. Accordingly, it supersedes and
completely replaces any prior oral or written communication on this subject.
Moreover, the Agreement shall not be amended or modified without specific
written provision to that effect, signed by you and the Company. This Agreement
is not an employment contract and should not be construed or interpreted as
containing any guarantee of continued employment. The employment relationship at
AT&T 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. The Agreement shall be construed
and enforced in accordance with the laws of the State of New Jersey without
reference to any applicable conflict of law provisions. The incentive plans, as
well as the employee and the Senior Management benefit plans, programs and
practices (as may be mentioned in this Agreement), reflect their current
provisions. The Company reserves the right to discontinue or modify any such
plans, programs and practices at any time.
At your or the Company's option, any dispute, controversy, or question
arising under, out of or relating to this Agreement or the breach thereof, 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 one 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 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 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 in equity shall be instituted or, if instituted, further
prosecuted by either party other than to enforce the award of the neutral
arbitrator. Both parties shall each bear all their own costs and attorney fees
relating to any arbitration, except that the Company shall pay the costs of any
arbitrator appointed hereunder.
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 sign this Agreement
in the space provided below and return the executed copy to me.
Sincerely,
Attachments
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Acknowledged and Agreed to Date
J. D. Zeglis