SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------
3) Filing Party:
-------------------------------------------------------
4) Date Filed:
-------------------------------------------------------
SNET LOGO
Southern New England
Telecommunications Corporation
227 Church Street
New Haven, Connecticut 06510
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Dear Shareholder:
The Annual Meeting of Shareholders of Southern New England Telecommunications
Corporation ("SNET") will be held at the ITALIAN CENTER OF STAMFORD, 1620
NEWFIELD AVENUE, STAMFORD, CONNECTICUT 06905, on Wednesday May 13, 1998 at 11:30
a.m. for the following purposes:
1. To elect Class III Directors;
2. To ratify the appointment of independent auditors for the current
calendar year; and
3. To transact any other business that may properly come before the
meeting or any adjournment thereof.
Only holders of the common stock of SNET at the close of business on March 16,
1998 will be entitled to vote at the meeting or any adjournment thereof.
YOUR VOTE IS IMPORTANT, HOWEVER MANY SHARES YOU OWN. WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY CARD
PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES.
Madelyn M. DeMatteo
Secretary
March 26, 1998
SNET Proxy Statement 37
SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION
PROXY STATEMENT
1998 ANNUAL MEETING
PROXY INFORMATION
This proxy statement and the accompanying proxy are being mailed to
shareholders of Southern New England Telecommunications Corporation ("SNET") on
or about March 26, 1998, in connection with the solicitation of proxies by
SNET's Board of Directors ("Board") for the Annual Meeting of Shareholders. SNET
will bear the cost of soliciting proxies. In addition to solicitations by mail,
a number of SNET's regular employees may solicit proxies in person or by
telephone, at no additional compensation. Georgeson & Co. has been retained to
assist in the solicitation of proxies from brokers, banks, and other nominee and
institutional holders for a fee of $8,500, plus expenses.
PLEASE MARK YOUR PROXY WITH YOUR PREFERENCES SO THAT YOUR SHARES WILL
BE VOTED ACCORDINGLY. IF YOU DO NOT GIVE INSTRUCTIONS FOR ANY MATTER TO BE VOTED
UPON, THE SHARES REPRESENTED BY YOUR SIGNED PROXY WILL BE VOTED AS RECOMMENDED
BY THE BOARD.
Your shares cannot be voted unless you are present or represented by
proxy. A properly executed proxy that is not revoked will be voted according to
the instructions on the proxy. Under state law, "withheld" votes, abstentions
and votes which brokers elect not to cast under their discretionary authority
are not counted as votes in favor of any proposal. You may revoke your proxy at
any time before it is voted, either by voting in person at the meeting or by
executing and delivering a later dated proxy or written instrument revoking such
proxy. If you wish to give a proxy to someone other than the named attorneys,
you must cross out the three names appearing on the proxy and insert the name of
another person or persons (not more than three).
All proxies, ballots and voting materials that identify your vote are
kept permanently confidential, except where disclosure is needed to communicate
with you if you have returned your proxy with written comments, in election
contests should the opposing party choose not to agree in writing to abide by
this policy, or as required by law.
BENEFICIAL OWNERSHIP OF COMMON STOCK
On March 16, 1998 there were issued and outstanding 67,373,871 shares
of common stock of SNET ("Common Stock"), all of one class and each share having
one vote on all matters properly brought before the meeting. To the best
knowledge of SNET, the only beneficial owner of more than 5% of the outstanding
Common Stock is Sprint Corporation, 2330 Shawnee Mission Parkway, Westwood,
Kansas 66205 ("Sprint") who owned beneficially as of the record date, with sole
voting and dispositive powers, 4,242,928 shares or approximately 6.3% of the
outstanding Common Stock.
On January 4, 1998, SNET, SBC Communications Inc. ("SBC") and SBC (CT),
Inc. ("Merger Sub"), a Connecticut corporation and a wholly-owned subsidiary of
SBC, entered into the Agreement and Plan of Merger, dated as of January 4, 1998
(the "Merger Agreement"). The Merger Agreement provides, among other things, for
the merger of the Merger Sub with and into SNET (the "Merger") and SNET will
thereby become a wholly-owned subsidiary of SBC.
Pursuant to the Merger Agreement, at the Effective Time (as defined in
the Merger Agreement), each share of Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares of Common Stock owned
by SBC, Merger Sub or SNET or shareowners who have demanded payment for such
shares in accordance with Sections 33-855 through 33-872 of the Connecticut
Business Corporation Act) will be converted into 1.7568 shares of common stock,
par value, $1.00 per share, of SBC ("SBC Common Stock").
SBC and SNET also entered into a Stock Option Agreement, dated as of
January 4, 1998 (the "Stock Option Agreement"). Pursuant to the Stock Option
Agreement, SNET granted SBC an option (the "Option") to purchase up to
13,255,587 (subject to possible adjustment as provided therein) shares of Common
Stock at a price per share in cash equal to $65.00 (the "Option Price"). The
Stock Option Agreement provides that SBC may exercise the Option in whole or in
part, by delivering a written notice thereof within 90 days following the
occurrence of a Triggering Event (as defined below), unless prior to such
Triggering Event the Effective Time has occurred. The Option will terminate upon
either (i) the occurrence of the Effective Time or (ii) the close of business on
the earlier of (x) the day 90 days after the date that SBC becomes entitled to
receive the Termination Fee (as defined in the Merger Agreement) and (y) the
date that SBC is no longer potentially entitled to receive the Termination Fee,
in each case under the Merger Agreement.
SNET Proxy Statement 38
For purposes of the Stock Option Agreement, a "Triggering Event" will
be deemed to have occurred if the Merger Agreement is terminated and SBC becomes
entitled to receive the Termination Fee pursuant to Section 8.5(b) of the Merger
Agreement.
Prior to the exercise of the Option, SBC is not entitled to any rights
as a shareholder of SNET as to the shares of Common Stock covered by the Option.
Since the Option may only be exercised on the happening of certain events
referred to above, none of which has occurred as of this date, SBC disclaims any
beneficial ownership of the Common Stock purchasable by SBC upon exercise of the
Option. If the Option were exercised, SBC would have the sole right to vote or
to dispose of the Common Stock issued as a result of such exercise.
The following table sets forth the beneficial ownership of Common Stock
(including certain family holdings) as of March 16, 1998 for each Director,
Executive Officers named in the Summary Compensation Table on page 44, and all
Directors and Executive Officers as a group. The percentage of Common Stock
owned beneficially by any Director, or by all Directors and Executive Officers
as a group is less than 1.2% of the shares of Common Stock outstanding.
SHARES BENEFICIALLY
OWNED AS OF
NAME OF BENEFICIAL OWNER MARCH 16, 1998
- ------------------------ --------------
William F. Andrews ...................... 2,261(1)
Richard H. Ayers ........................ 2,605(1)(2)
Robert L. Bennett ....................... 1,632
Dr. Barry M. Bloom ...................... 2,674(1)
Frank J. Connor ......................... 2,267(1)
William R. Fenoglio ..................... 2,602(1)
Dr. Claire L. Gaudiani .................. 1,482(1)
Ira D. Hall ............................. 1,891(1)
Dr. Burton G. Malkiel ................... 1,632(1)(3)
Frank R. O'Keefe, Jr. ................... 2,449(1)
Joyce M. Roche .......................... 528
Daniel J. Miglio ........................ 321,440(4)
Fred T. Page ............................ 64,819(4)
Ronald M. Serrano ....................... 169,366(4)
Donald R. Shassian ...................... 154,198(4)
Directors and Executive Officers
as a group ............................. 805,328(4)
(1) Includes shares deferred for which neither investment nor voting power is
held as follows: Mr. Andrews 319; Mr. Ayers 1,608; Dr. Bloom 1,303; Mr.
Connor 770; Mr. Fenoglio 555; Dr. Gaudiani 898; Mr. Hall 1,778; Dr. Malkiel
578; and Mr. O'Keefe 293.
(2) Voting and investment powers are shared with spouse with respect to 200
shares.
(3) 754 shares are held in trust for benefit of a family member.
(4) Includes shares that may be acquired within 60 days through the exercise of
stock options pursuant to stock option plans as follows: Mr. Miglio
311,550; Mr. Page 57,850; Mr. Serrano 166,000; Mr. Shassian 150,000; and
Executive Officers as a group 751,700.
ELECTION OF DIRECTORS
(PROPOSAL 1)
In accordance with the By-Laws, the Board has set the number of
directorships at twelve. The directorships are divided into three classes with
each class having a term of three years. These classes are kept as equal in size
as possible considering retirements and other circumstances.
Nominations will be made at the Annual Meeting to reelect the five
current Class III Directors whose terms expire this year. The nominees are
Richard H. Ayers, Frank J. Connor, Ira D. Hall, Dr. Burton G. Malkiel and Frank
R. O'Keefe, Jr. If the Merger is effected, in accordance with the Merger
Agreement, the terms of office for all elected Class III Directors will cease at
the Effective Time of the Merger. If the Merger is not effected, the terms of
office will run until 2001 and until their successors are elected and qualified.
Shares represented by proxies will be voted for the nominees, except where
authority to do so is specifically withheld. Proxies cannot be voted for a
greater number of persons than the number of nominees named.
All nominees have been selected on the recommendation of the Personnel
and Board Affairs Committee. If one or more of such nominees should at the time
of the Annual Meeting be unavailable as a candidate, the shares represented by
the proxies will be voted for the remaining nominees and any substitute
nominee(s) designated by the Board on recommendation of the Committee, or, if
none, the size of the Board will be reduced. The Committee knows of no reason
why any such nominee will be unavailable or unable to serve. The Committee
deliberates on nominees at the end of the year prior to each annual meeting.
Shareholders who wish to nominate persons for election to the Board must comply
with the procedures set forth in Article II of the By-Laws and should direct
correspondence to the Secretary.
The affirmative vote of the holders of a majority of the shares of
Common Stock represented at the meeting in person or by proxy is required to
elect Class III Directors.
Nominees for Election as Directors
CLASS III
PHOTO--- RICHARD H. AYERS, 55, Formerly Chairman and Chief Executive Officer,
The Stanley Works (diversified manufacturer of consumer, builder and industrial
products) (1989-1996). Director of Perkin-Elmer Corporation, Mass Mutual
Institutional Funds and MML Series Investment Fund. Director since 1986.
SNET Proxy Statement 39
PHOTO--- FRANK J. CONNOR, 67, Founder and President, Nortay Associates, Inc.
(business investment and operations management) (1987 to date). President and
Member of the Office of the Chairman, American Can Company (packaging, specialty
retailing and financial services) (1981-1987). Chairman Emeritus of Southwestern
Area Commerce & Industry Association of Connecticut and the Connecticut Business
and Industry Association. Director since 1986.
PHOTO--- IRA D. HALL, 53, Director, Business Development, Global Services,
International Business Machines Corporation (developer, manufacturer and
marketer of advanced information processing products including computers and
microelectronic technology, software, networking systems and information
technology-related services) (1996 to date); Director, International Operations
(1993-1995). Director of the Jackie Robinson Foundation. Member of the Advisory
Council of the Stanford University Graduate School of Business. Director since
1995.
PHOTO--- DR. BURTON G. MALKIEL, 65, Chemical Bank Chairman's Professor of
Economics, Princeton University (1988 to date). Director of Baker, Fentress and
Company, Amdahl Corporation, Prudential Insurance Company of America, Vanguard
Group and The Jeffrey Co. Director since 1984.
PHOTO--- FRANK R. O'KEEFE, JR., 68, Formerly President of Long Wharf Capital
Partners, Inc. (business investments) (1988-1990). Chairman, President and Chief
Executive Officer, Armtek Corporation (rubber chemicals, heat exchange
components and systems, automotive and industrial belts and hoses) (1986-1988).
Director of Aetna Inc. and The United Illuminating Company. Director since 1984.
Directors Continuing in Office
CLASS I
(TERM EXPIRES IN 1999)
PHOTO--- WILLIAM F. ANDREWS, 66, Chairman, Schrader-Bridgeport International,
Inc. (manufacturer of tire valves, cores, caps, tire pressure gauges and
pressure maintenance systems) (1995 to date). Chairman, Scovill Fasteners, Inc.
(manufacturer of fasteners for apparel and industrial applications) (1995 to
date). Chairman and Chief Executive Officer, Amdura Corporation (manufacturer
and distributor of hardware and industrial machinery and equipment) (1993-1995).
Director of Navistar International Corporation, Johnson Controls, Inc., Katy
Industries, Dayton Superior Corp., Corrections Corporation of America,
Northwestern Steel and Wire and Black Box Corporation. Director since 1982.
PHOTO--- DR. BARRY M. BLOOM, 69, Formerly Executive Vice President-Research and
Development, Pfizer Inc (research-based, diversified health care company with
global operations) (1992-1993). Director of Neurogen Corporation, Vertex
Pharmaceuticals Inc., Incyte Pharmaceuticals Inc. and Cubist Pharmaceuticals
Inc. Member of Board of Directors and Trustee, Lawrence & Memorial Hospital.
Member of Connecticut Academy of Science and Engineering. Director since 1987.
PHOTO--- WILLIAM R. FENOGLIO, 58, Formerly President and Chief Executive
Officer, Augat Inc. (designer and manufacturer of interconnection components and
subsystems for telecommunications, computer and automotive markets) (1995-1996);
President and Chief Operating Officer (1994). President and Chief Executive
Officer, Barnes Group, Inc. (diversified manufacturer and distributor of
precision springs and custom metal parts for industrial and automotive markets,
and turbine engine and airframe parts for the aerospace industry) (1991-1993).
Director of Standex International Corporation and IDG, Inc. Trustee of
Rose-Hulman Institute of Technology. Director since 1993.
SNET Proxy Statement 40
PHOTO--- DR. CLAIRE L. GAUDIANI, 53, President, Connecticut College (1988 to
date). President, New London Development Corporation (1997 to date). Director of
Municipal Bond Investment Assurance (MBIA), Citizens Bank and Public Radio
International. Trustee of American Council on Education. Chair, Campus Compact.
Member of Council on Foreign Relations and former member of NCAA Presidents
Commission. Director since 1989.
PHOTO--- DANIEL J. MIGLIO, 57, Chairman of the Board, President and Chief
Executive Officer of SNET (January 1994 to date); President and Chief Executive
Officer (1993). Director of Aristotle Corporation, Yale New Haven Health
Services Corporation, New Haven Symphony Orchestra, Connecticut Public
Broadcasting, and the United States Telephone Association. Chairman of
International Festival of Arts and Ideas. Director since 1990.
CLASS II
(TERM EXPIRES IN 2000)
PHOTO--- ROBERT L. BENNETT, 60, Principal, Bennett, Fisher, Giuliano and
Gottsman: The Electronic Publishing Group (consultation and management services
for electronic publishing businesses) (1993 to date). Director of Raytech
Corporation. Member of American Bar Association, Section of Science and
Technology, and California Bar Association. Director since 1994.
PHOTO--- JOYCE M. ROCHE, 51, President and Chief Operating Officer, Carson, Inc.
(manufacturer and marketer of ethnic hair care products for persons of African
descent) (1996 to date); Executive Vice President-Global Marketing (1995-1996).
Vice President-Global Marketing, Avon Products, Inc. (manufacturer and marketer
of toiletries, fragrances, cosmetics, giftware and jewelry) (1993-1994).
Director of Carson, Inc. Trustee of Dilliard University and Queens College, New
York. Director since 1997.
Compensation and Other Information Regarding Directors
Directors receive an annual retainer of 300 shares of Common Stock in
accordance with the terms of the SNET 1996 Non-Employee Director Stock Plan
("Plan") and an additional retainer of $13,500 which they may elect to receive
in cash or in Common Stock under the Plan. Directors receive a meeting fee of
$1,000 for each Board and Committee meeting, and Committee Chairs receive an
annual retainer of $2,500. Directors may elect to defer the receipt of all or a
part of their fees and retainers. In 1996, the pension plan for Directors was
terminated with pension benefits payable only to active and retired Directors as
of February 14, 1996 and the amount of accrued pension benefits was frozen.
In 1997 several Directors received payments as reimbursement for travel
expenses in connection with attendance at meetings. SNET also provides life
insurance, accidental death and dismemberment insurance and a telephone service
concession for each Director. Directors who are also employees receive no
additional compensation or benefits for serving as Directors.
The Board held 9 meetings in 1997. All Directors attended in excess of
75% of the aggregate number of meetings of the Board and the Committees on which
they served.
Committees of the Board
The Committees established by the Board to assist it in the discharge
of its responsibilities are described below.
AUDIT COMMITTEE reviews the adequacy of SNET's system of internal
control and the reliability of its financial reporting. It meets with
appropriate financial management, internal auditors and external auditors in
connection with these reviews. This Committee recommends to the Board the
appointment of the external auditors for ratification by the shareholders at the
Annual Meeting. Both the internal auditors and the external auditors
periodically meet with the Audit Committee and have unrestricted access to the
Committee. The Committee met 5 times in 1997. Directors Fenoglio (Chair),
Andrews, Bloom and Gaudiani (both as of December 1997), O'Keefe and Roche, are
members of this Committee.
COMMITTEE ON BOARD AFFAIRS AND PUBLIC POLICY advises the Board on
nomination and compensation of Directors, the functioning of the Board and
public policy. In selecting Board candidates, the Committee seeks individuals of
proven judgment and competence, outstanding in their chosen fields, and
considers factors such as anticipated participation in Board activities,
education, geographic location and other special talents. The Committee met
three times in 1997. In December 1997, the Personnel Resources Committee assumed
the duties of the Committee. Directors Gaudiani (Chair), Bloom and Fenoglio were
members of this Committee.
SNET Proxy Statement 41
EXECUTIVE COMMITTEE meets on call of the Chairman and the Chief
Executive Officer and has authority to act on matters during the intervals
between Board meetings. The Executive Committee did not meet in 1997. Directors
Miglio (Chair), Ayers, Bloom (until May 1997), Connor, Fenoglio (as of December
1997), Gaudiani (until December 1997) and Malkiel are members of this Committee.
EMPLOYEE BENEFITS PLAN COMMITTEE determines whether the actions of
management in administering the employee benefit, pension, savings and stock
ownership plans are in the best interests of the participants and beneficiaries
of such plans. The Committee, which met 4 times in 1997, reviews all material
changes in the plans prior to the presentation of such changes to the Board.
Directors Malkiel (Chair), Andrews, Ayers, Bloom, O'Keefe (as of December 1997)
and Roche are members of this Committee.
FINANCIAL RESOURCES COMMITTEE reviews SNET's financial condition and
plans to ensure responsible and effective utilization of financial resources.
The Committee, which met 4 times in 1997, recommends to the Board action on such
matters as financial plans and objectives, dividend policy, specific plans for
raising outside capital and the commitment of capital to SNET's various
businesses. Directors Ayers (Chair), Bennett, Connor, Hall, Malkiel and O'Keefe
(until December 1997) are members of this Committee.
PERSONNEL AND BOARD AFFAIRS COMMITTEE reviews management performance,
recommends to the Board executive salary treatment, and administers executive
incentive compensation plans. The Committee also examines management staffing
and recommends to the Board the election of corporate officers and as of
December 1997, includes the duties of the Committee on Board Affairs and Public
Policy. The Committee met 5 times in 1997. Directors Connor (Chair), Bennett,
Fenoglio (as of December 1997), Gaudiani and Hall are members of this Committee.
RATIFICATION OF APPOINTMENT OF AUDITORS
(PROPOSAL 2)
Subject to shareholder ratification, the Board, upon recommendation of
the Audit Committee, has appointed the firm of Coopers & Lybrand L.L.P.
("Coopers & Lybrand"), Certified Public Accountants, as independent auditors to
examine the accounts of SNET for the year 1998.
The Board recommends a vote FOR the proposal to ratify the appointment
of Coopers & Lybrand as independent auditors for the current year. If a majority
of the voting power represented at the meeting fails to ratify the appointment
of Coopers & Lybrand, the Board, upon recommendation of the Audit Committee,
will consider the appointment of another accounting firm.
One or more members of Coopers & Lybrand will attend the Annual
Meeting, have an opportunity to make a statement, and be available to respond to
questions.
The affirmative vote of the holders of a majority of the shares of
Common Stock represented at the meeting in person or by proxy is required to
ratify the appointment of Coopers & Lybrand as independent auditors for the
current year.
SHAREHOLDER PROPOSALS
Mr. Nick Rossi, a shareholder, submitted a proposal, which he has since
withdrawn, recommending that the Board engage the services of an investment
banker to explore alternatives to enhance the value of SNET.
If the Merger is not effected, proposals intended for inclusion in next
year's proxy statement should be sent to the Secretary, Room 1500, 227 Church
Street, New Haven, Connecticut 06510 and must be received by November 27, 1998.
OTHER MATTERS TO COME
BEFORE THE MEETING
If any business not described herein should properly come before the
meeting for shareholder action, the shares represented by proxies will be voted
in accordance with the best judgment of the persons voting them. At the time
this Proxy Statement went to press on March 23, 1998, SNET knew of no other
matters which may be properly presented for a vote to the shareholders.
Shareholders who wish to submit a proposal for action at the Annual Meeting must
comply with the procedures set forth in Article I of the By-Laws.
REPORT OF PERSONNEL AND BOARD AFFAIRS COMMITTEE OF THE BOARD OF
DIRECTORS ON EXECUTIVE COMPENSATION
Decisions on executive compensation are reviewed and approved by the
Personnel and Board Affairs Committee ("Committee") of the Board of Directors,
which is composed entirely of non-employee Directors who have no direct or
indirect material interest in SNET or relationship with the top executives. The
Committee recommends compensation levels of senior executives including the
Chief Executive Officer (CEO) for approval by the entire
SNET Proxy Statement 42
Board. Executive compensation policy is designed to attract, retain and motivate
executives, reward contribution to SNET's business mission and key
accomplishments and to enhance shareholder value.
1997 Executive Compensation
Executive Compensation paid in 1997 included base salary, annual short
term incentive awards and long term compensation in the form of stock options.
Compensation levels are set initially relative to the external market place,
which is derived from national survey data that includes many companies similar
to SNET in size, industry or location. An executive's compensation is based
primarily on the executive's performance and position market value, and the
attainment of corporate and unit goals. In 1997, executives were granted salary
increases, commensurate with SNET's strong performance and further supported by
continuing competitive pressures for executive talent in the external
marketplace.
Corporate goals for short term incentive compensation consisted of
evenly weighted financial and corporate effectiveness objectives. A threshold
level of minimum performance had to be met in the financial category for any
payout to occur. In 1997, short term awards, in aggregate, for executives were
above targeted levels. SNET achieved its financial objective for economic
contribution, measured as an increase in earnings after capital costs. The
corporate effectiveness objectives encompassed specific customer focused
accomplishments, culture change, business development and public policy goals.
SNET exceeded its objectives with important progress in positioning for the
future, with increases in market relationships for key customer segments,
improved market penetration of key products and better margins in the wireless
business. SNET's flagship long distance service achieved top rating in a J.D.
Powers survey of satisfaction among mainstream users. Cost per access line was
better than objective and much improved in 1997 over prior years due to cost
containment measures. SNET negotiated a merger agreement with SBC that is
expected to close during 1998. The announcement of the merger has been well
received by Wall Street, with a significant increase in market price of the
stock at the time of the agreement.
Overall, long term incentives, in the form of market value stock
options, were awarded above guideline levels in 1997. This was in recognition of
the skill and experience level of our executives and the need to retain that
talent.
CEO Compensation
Mr. Miglio's annual compensation is based on corporate performance and
his contribution to that performance as well as market survey information for
comparable positions in other companies. In 1997, Mr. Miglio received a salary
increase. This increase was in recognition of strong financial and non-financial
results under his leadership and success in positioning SNET for the future. He
received a short term incentive award which was above target, based on
performance against the Board approved corporate objectives. His long term
incentive, in the form of stock option grants, was at the guideline level in
recognition that in combination with past grants, Mr. Miglio's cumulative option
grants were within the targeted level.
Submitted by:
Robert L. Bennett
Frank J. Connor
William R. Fenoglio
Dr. Claire L. Gaudiani
Ira D. Hall
SNET Proxy Statement 43
The following table covers compensation for the Chief Executive Officer and
the other four most highly compensated executive officers at the end of the last
fiscal year.
SUMMARY COMPENSATION TABLE
Long-term
Compensation
------------
Annual Compensation Awards
- --------------------------------------------------------------------------------------------------------------------------
Other Securities
Annual Underlying All Other
Name and Compen- Options/ Compen-
principal Salary Bonus sation SARs sation
position Year ($) (1) ($) (2) ($) (#) ($) (3)
- --------------------------------------------------------------------------------------------------------------------------
Daniel J. Miglio 1997 $508,269 $440,000 $ 3,035 85,000 $11,992
Chairman, President and 1996 465,769 280,500 11,432 53,000 11,782
Chief Executive Officer 1995 404,380 176,000 4,668 150,000 11,568
Jean M. LaVecchia (4) 1997 216,923 130,000 0 40,000 7,120
Senior Vice President-- 1996 189,615 66,500 2,232 10,000 6,677
Organization Development 1995 178,449 54,000 4,532 40,000 7,092
Fred T. Page 1997 224,231 134,000 3,685 50,000 7,200
Senior Vice President-- 1996 186,923 65,600 4,073 10,000 7,046
Network Services
Ronald M. Serrano 1997 310,000 185,000 4,119 20,000 7,200
Senior Vice President-- 1996 307,308 107,600 4,188 15,000 7,200
Communication, Inform- 1995 303,469 92,400 8,027 70,000 7,200
ation and Entertainment Group
Donald R. Shassian 1997 320,961 191,000 3,032 30,000 7,200
Senior Vice President and 1996 307,308 107,600 4,212 15,000 7,200
Chief Financial Officer 1995 303,469 92,400 8,766 60,000 6,600
- ----------
(1) Includes imputed income for benefits provided under the Corporation's
employee benefit plans.
(2) Represents incentive compensation under the SNET Short Term Incentive Plan
for achieving performance-based objectives.
(3) In 1997, for Mr. Miglio, Ms. LaVecchia, Mr. Page, Mr. Serrano and Mr.
Shassian, respectively, includes the following dividend equivalents earned
on shares deferred under the SNET Long Term Incentive Plan; $4,792, $0, $0,
$0 and $0; and matching company contributions credited to participants'
accounts under the SNET Management Retirement Savings Plan; $7,200, $7,120,
$7,200, $7,200 and $7,200.
(4) Ms. LaVecchia terminated employment with SNET on December 31, 1997.
SNET Proxy Statement 44
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
- ---------------------------------------------------------------------------------------------------------------------------
Individual Grants
---------------------------------
Number of % of Total
Securities Options/SARs Grant Date
Underlying Granted to Exercise or Present
Options/SARs Employees in Base Price Expiration Value
Name Granted (#)(1) Fiscal Year ($/Sh) Date ($) (2)
- ---------------------------------------------------------------------------------------------------------------------------
Daniel J. Miglio 85,000 9.79 $36.9375 2-12-07 $557,413
Chairman, President and
Chief Executive Officer
Jean M. LaVecchia 20,000 2.30 36.9375 2-12-07 131,156
Senior Vice President-- 20,000 2.30 40.3755 7-9-07 158,076
Organization Development
Fred T. Page 25,000 2.88 36.9375 2-12-07 163,945
Senior Vice President-- 25,000 2.88 40.3755 7-9-07 197,596
Network Services
Ronald M. Serrano 20,000 2.30 36.9375 2-12-07 131,156
Senior Vice President--
Communication, Information
and Entertainment Group
Donald R. Shassian 30,000 3.45 36.9375 2-12-07 196,734
Senior Vice President and
Chief Financial Officer
- ---------------------------------------------------------------------------------------------------------------------------
(1) Under the SNET 1995 Stock Incentive Plan and 1986 Stock Option Plan,
executive officers are eligible to receive Incentive or Non-qualified
Stock Options to purchase Common Stock. Each option's exercise price must
equal or exceed the fair market value of Common Stock on the date of the
option's grant. The term of an option cannot exceed ten years from the
date of grant. Options vest annually in twenty-five percent installments
beginning one year after the grant date. Upon a change in control, all
options previously granted become immediately exercisable and remain
exercisable and non-cancellable for a period of six months and seven days
(1986 Plan), or seven months (1995 Plan), following a termination of
employment provided those options do not expire within the ten-year
period established under the plan.
(2) The Black-Scholes option pricing model was used to estimate the options'
grant date present value. Assumptions for options granted on 2/12/97 are
as follows: 20% volatility; risk free rate of return of 6.2% based on
five-year U.S. Treasury securities; dividend yield of 4.7648%; and an
estimated period to exercise of 5 years. Assumptions for options granted
on 7/9/97 are as follows: 20% volatility; risk free rate of return of
6.37% based on five-year U.S. Treasury securities; dividend yield of
4.3591%; and an estimated period to exercise of 5 years.
SNET Proxy Statement 45
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
- ----------------------------------------------------------------------------------------------------------------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)*
-------------------------------------------
Shares Acquired Exercisable/ Exercisable/
Name On Exercise(#) Value Realized ($) Unexercisable Unexercisable
- ----------------------------------------------------------------------------------------------------------------------------
Daniel J. Miglio 4,200 $67,463 220,800/218,500 $3,482,947/$2,987,641
Chairman, President and
Chief Executive Officer
Jean M. LaVecchia 5,650 86,664 45,300/0 712,172/0
Senior Vice President--
Organization Development
Fred T. Page -- -- 39,100/72,500 631,984/891,719
Senior Vice President--
Network Services
Ronald M. Serrano -- -- 129,750/76,250 2,074,578/1,103,984
Senior Vice President--
Communication, Information
and Entertainment Group
Donald R. Shassian -- -- 113,750/81,250 1,765,391/1,156,172
Senior Vice President and
Chief Financial Officer
- ----------------------------------------------------------------------------------------------------------------------------
* Based upon 1997 fiscal year end stock price of $50.3125
PENSION PLAN
Pension benefits are paid to executive officers under the SNET
Management Pension Plan ("Pension Plan") cash balance ("CB") formula. Under the
CB formula, pension credits are allocated annually to each executive's account
based upon the sum of executive's age and service at year-end and eligible
compensation for that year. The following chart shows the annual credits:
SUM OF AGE CREDIT APPLIED TO
AND SERVICE ELIGIBLE COMPENSATION
----------- ---------------------
35-44 4.0%
45-54 5.0%
55-64 6.0%
65-74 7.0%
75-84 8.0%
85-94 9.0%
An executive's account will be credited with a supplemental pay credit
determined by multiplying the amount of compensation in excess of 80% of the
Social Security Wage Base (for such year) by the same credit percentage.
At the end of each year, an executive's CB account is also credited
with interest. For the period from January 1, 1997 through December 31, 1998,
the annual rate of interest is 7.0% for an executive with less than 30 years of
service, and 3.0% for an executive with 30 or more years of service. After
December 31, 1998, the annual rate of interest shall be not less than 3.0%.
An executive may receive a portion of the CB pension benefits under the
SNET Pension Benefit Plan ("PBP") which provides benefits that plan participants
do not receive under the Pension Plan because of Internal Revenue Code limits.
Executive officers must retire at age 65 under the Pension Plan and can choose
to retire before age 65 under certain conditions.
Assuming no change in the CB formula, compensation at the current
level, continuation in their present positions, retirement at age 65, and
straight life annuity amounts notwithstanding the availability of joint
survivorship provision, each executive officer listed would receive the
following estimated annual pension amount under the Pension Plan and PBP: Mr.
Miglio $648,663, Ms. LaVecchia $266,662, Mr. Page $254,703, Mr. Serrano
$228,482, and Mr. Shassian $214,755.
SNET Proxy Statement 46
CHANGE-IN-CONTROL AGREEMENTS
Change-in-Control agreements have been entered into with certain
executives designed to afford these executives limited employment and
compensation protection in the event of a substantial change in ownership of
SNET. SNET has agreed to continue to employ the affected executives for a period
of two years following such a change in ownership, and, in the event of early
termination of such an executive, to pay severance benefits of no greater than
two times the executive's salary and incentive compensation. The agreements
contain other provisions designed to prevent the loss of retirement, insurance,
and other benefits arising from a termination before the end of the term of
employment and to reimburse the executive for any excise tax imposed by Section
4999 of the Internal Revenue Code. SNET has entered into such agreements with
Mr. Miglio, Mr. Page, Mr. Serrano and Mr. Shassian who are listed in the Summary
Compensation Table. The Merger would activate such agreements. SNET will also
provide compensation to Mr. Miglio, Mr. Page, Mr. Serrano and Mr. Shassian,
provided these executives are employed at the closing of the Merger, equal to
their base salary and 1998 target amount (or such larger amount actually earned)
under the SNET Short Term Incentive Plan.
CERTAIN TRANSACTIONS
Effective February 1, 1994, SNET's major subsidiary entered into a
services agreement with North Supply Company ("North Supply"), a subsidiary of
Sprint, a beneficial owner of more than 5% of the outstanding Common Stock, for
the purchase of general materials and supplies supporting SNET's telephone
operations, including warehousing. North Supply also entered into agreements
with other subsidiaries of SNET for general equipment purchases and warehousing
services. During 1997 total purchases from North Supply were approximately
$54,967,288.
PERFORMANCE GRAPH
The following line graph compares five-year cumulative total returns of
SNET, the Standard and Poor's 500 Index and the Telephone segment of the
Standard and Poor's Utility Index. (The comparison assumes $100 was invested on
December 31, 1992, with dividends reinvested.)
S&P
Telephone
S&P 500 Index SNET
------- ------ -----
1992 100.00 100.00 100.00
1993 110.08 115.49 106.88
1994 111.53 110.71 101.29
1995 153.45 166.78 130.59
1996 188.68 168.45 133.52
1997 251.63 235.22 180.36
FINANCIAL STATEMENTS
The consolidated financial statements of SNET for 1997 are included
herein in SNET's 1997 Annual Report to Shareholders. A COPY OF SNET'S ANNUAL
REPORT ON FORM 10-K, INCLUDING FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES, ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR
ENDED DECEMBER 31, 1997, WILL BE FURNISHED, WITHOUT CHARGE, ON REQUEST DIRECTED
TO SNET'S TRANSFER AGENT AND REGISTRAR, STATE STREET BANK AND TRUST COMPANY,
P.O. BOX 8200, BOSTON, MASSACHUSETTS 02266-8200.
By Order of the Board of Directors
MADELYN M. DEMATTEO
Secretary
March 26, 1998
SNET Proxy Statement 47
SNET [LOGO]
We go beyond the call
APPENDIX
(Pursuant to Rule 304 of Regulation S-T)
1. Page 47 contains a description in tubular form of a graph entitled
"Performance Graph" which represents the comparison of the cumulative total
shareholder return on the Company's Common Stock against the cumulative total
return of the Standard & Poor's 500 Stock Index and the Standard and Poor's
Telephone Index for the period of five years commencing December 31, 1992 and
ending December 31, 1997, which graph is contained in the paper format of this
Proxy Statement being sent to Shareholders.
SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION
Proxy Solicited by the Board of Directors for the
Annual Meeting to be held on May 13, 1998 at 11:30 a.m.
at the Italian Center of Stamford,
1620 Newfield Avenue, Stamford, Connecticut 06905
The undersigned hereby appoints Barry M. Bloom, Daniel J. Miglio and Frank R.
O'Keefe, Jr., and each or any of them, as attorneys, with full power to vote all
common stock of the undersigned in Southern New England Telecommunications
Corporation at the annual meeting of its shareholders on May 13, 1998, and at
any adjournment thereof, upon all matters that may properly come before the
meeting, including all matters described in the proxy statement furnished
herewith. At their discretion, the attorneys are authorized to vote upon such
other business as may properly come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
- --------------------------------------------------------------------------------
PLEASE SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY,
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING.
YOU MAY, NEVERTHELESS, VOTE IN PERSON IF YOU ATTEND.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ---------------------------------------- -------------------------------------
- ---------------------------------------- -------------------------------------
- ---------------------------------------- -------------------------------------
SEE REVERSE SIDE
[X] PLEASE MARK VOTE 1. Election of Directors
AS IN THIS EXAMPLE R. Ayers
F. Connor For All With- For All
The Board of Directors recommends I. Hall Nominees hold Except
a vote FOR Proposals 1 and 2 B. Malkiel
F. O'Keefe, Jr. [ ] [ ] [ ]
NOTE: If you do not wish your shares voted
"For" a particular nominee, mark the "For All
Except" box and strike a line through the
name(s) of the nominee(s). Your shares will be
voted for the remaining nominee(s).
RECORD DATE SHARES:
2. Ratification of For Against Abstain
Auditors [ ] [ ] [ ]
______________________
Please be sure to sign and date this Proxy. | Date |
- ---------------------------------------------------------------------
| |
| |
| |
- ---------Shareholder sign here--------Co-owner sign here-------------
Mark box at right if an address change or comment has [ ]
been noted on the reverse side of this card.
SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS - MAY 13, 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
BOSTON SAFE DEPOSIT AND TRUST COMPANY, TRUSTEE UNDER THE
SNET EMPLOYEE STOCK PLANS
Return this form promptly in the enclosed, postage-paid
envelope to:
Boston Safe Deposit and Trust Company, Trustee,
Box 1997 G.P.O.
New York, N.Y. 10117-0024
I hereby instruct the Trustee to vote all the shares of Common Stock of Southern
New England Telecommunications Corporation credited to my accounts, indicated
below, under the SNET Management Retirement Savings Plan ("MRSP"), the SNET
Bargaining Unit Retirement Savings Plan ("BRSP"), the Employee Stock Ownership
Plan ("ESOP") incorporated in the MRSP and BRSP, and the Tax Reduction Act Stock
Ownership Plan ("TRASOP") at the Annual Meeting of its shareholders to be held
on May 13, 1998, and at any adjournment thereof, upon all matters that may
properly come before the meeting, including the matters described in the Proxy
Statement furnished herewith.
If signed and returned, the shares represented by these voting instructions will
be voted in accordance with the specifications given. Shares which are not
allocated and shares for which no written instruction is received by May 8,
1998, for the MRSP, BRSP and ESOP will be voted by the Trustee with respect to
each plan in the same proportion as its votes shares of other participants of
such plan for which instructions are received. YOUR SHARES IN TRASOP WILL NOT BE
VOTED BY THE TRUSTEE UNLESS YOU SIGN AND RETURN THIS FORM AND IT IS RECEIVED BY
THE TRUSTEE BY 11:30 A.M. ON MAY 13, 1998.
The Board of Directors recommends a vote FOR proposals 1 and 2 and the shares
represented by this voting instruction will be so voted unless otherwise
indicated.
[MRSP Shares][MRSP ESOP Shares][BRSP Shares][BRSP ESOP Shares][TRASOP Shares]
X Please mark your vote as in this example. THE BOARD RECOMMENDS A VOTE FOR
PROPOSALS 1 AND 2.
----------
Mark Only One Choice
FOR AGAINST ABSTAIN
1. Election of Directors 2. Ratification of [ ] [ ] [ ]
Auditors
Nominees: [ ] Vote for All
R. Ayers [ ] Withhold Vote From All
F. Connor
I. Hall
B. Malkiel
F. O'Keefe, Jr.
[ ] Vote For All Except as Marked:
(draw a line through name of nominee(s)
from whom you are withholding your vote)
------------------------------------------- ------------------
Signature Date
Please sign exactly as name appears hereon.
BE SURE TO SIGN AND DATE THIS FORM.
FOLD FORM IN HALF AND MAIL PROMPTLY IN THE ENVELOPE PROVIDED.