-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, kV5zTIPVr8JpyJhGi9oljGsyMg2uAvndY5wohhyvIr7A8fTEs88/7UuPaxvbrs2p lIu9Alxp455lhi+uMxG7Yg== 0000950146-95-000052.txt : 19950301 0000950146-95-000052.hdr.sgml : 19950301 ACCESSION NUMBER: 0000950146-95-000052 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950419 FILED AS OF DATE: 19950227 SROS: BSE SROS: MSE SROS: NYSE SROS: PHLX SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AT&T CORP CENTRAL INDEX KEY: 0000005907 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 134924710 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-01105 FILM NUMBER: 95515758 BUSINESS ADDRESS: STREET 1: 32 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10013 BUSINESS PHONE: 2123875400 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN TELEPHONE & TELEGRAPH CO DATE OF NAME CHANGE: 19920703 DEF 14A 1 1995 NOTICE OF ANNUAL MEETING & PROXY STATEMENT (LOGO AT&T) 1995 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT WEDNESDAY, APRIL 19, 1995 AT 9:30 A.M. LOCAL TIME WASHINGTON STATE CONVENTION AND TRADE CENTER 800 CONVENTION PLACE SEATTLE, WASHINGTON (Logo--AT&T) 32 Avenue of the Americas New York, NY 10013-2412 Robert E. Allen Chairman of the Board February 28, 1995 Dear Shareholder: It is a pleasure to invite you to your Company's 1995 Annual Meeting in Seattle, Washington, on Wednesday, April 19, beginning at 9:30 A.M. local time, at the Washington State Convention and Trade Center. This will be AT&T's 110th Annual Meeting of Shareholders and I hope that those who find it convenient will attend. If you plan to attend the meeting, please keep the admission ticket and map that is attached to the proxy card. The Washington State Convention and Trade Center is fully accessible to disabled persons, and we will provide hearing amplification and sign interpretation for our hearing-impaired shareholders. AT&T products and services will be exhibited and employees representing various business units will be on hand to answer questions before and after the meeting. Whether you own a few or many shares of stock and whether or not you plan to attend in person, it is important that your shares be voted on matters that come before the meeting. I urge you to specify your choices by marking the enclosed proxy card and returning it promptly. If you sign and return your proxy card without specifying your choices, it will be understood that you wish to have your shares voted in accordance with the directors' recommendations. I look forward to seeing you at the meeting. Sincerely, (Signature of Robert E. Allen) NOTICE OF MEETING The 110th Annual Meeting of Shareholders of AT&T Corp. (the "Company") will be held at the Washington State Convention and Trade Center, 800 Convention Place, Seattle, Washington, on Wednesday, April 19, 1995, at 9:30 A.M. local time, for the following purposes: * To elect directors for the ensuing year (page 7); * To ratify the appointment of auditors to examine the Company's accounts for the year 1995 (page 14); * To approve the McCaw Cellular Communications, Inc. Employee Stock Purchase Plan (page 14); * To act upon such other matters, including shareholder proposals (beginning on page 19 of the accompanying proxy statement), as may properly come before the meeting. Holders of common shares of record at the close of business on February 28, 1995, will be entitled to vote with respect to this solicitation. Marilyn J. Wasser Vice President - Law and Secretary February 28, 1995 AT&T Corp. Executive Offices 32 Avenue of the Americas New York, NY 10013-2412 PROXY STATEMENT This proxy statement and the accompanying proxy/voting instruction card (proxy card) are being mailed beginning February 28, 1995, to holders of common shares in connection with the solicitation of proxies by the board of directors for the 1995 Annual Meeting of Shareholders in Seattle, Washington. Proxies are solicited to give all shareholders of record at the close of business on February 28, 1995, an opportunity to vote on matters that come before the meeting. This procedure is necessary because shareholders live in all states and abroad and most will not be able to attend. Shares can be voted only if the shareholder is present in person or is represented by proxy. When your proxy card is returned properly signed, the shares represented will be voted in accordance with your directions. You can specify your choices by marking the appropriate boxes on the enclosed proxy card. If your proxy card is signed and returned without specifying choices, the shares will be voted as recommended by the directors. Abstentions are voted neither "for" nor "against," but are counted in the determination of a quorum. If you wish to give your proxy to someone other than the Proxy Committee, all three names appearing on the enclosed proxy card must be crossed out and the name of another person or persons (not more than three) inserted. The signed card must be presented at the meeting by the person or persons representing you. You may revoke your proxy at any time before it is voted at the meeting by executing a later-dated proxy, by voting by ballot at the meeting, or by filing an instrument of revocation with the inspectors of election in care of the Vice President-Law and Secretary of the Company at the above address. 1 Your vote is important. Accordingly, you are urged to sign and return the accompanying proxy card whether or not you plan to attend the meeting. If you do attend, you may vote by ballot at the meeting, thereby cancelling any proxy previously given. As a matter of policy, proxies, ballots, and voting tabulations that identify individual shareholders are kept private by the Company. Such documents are available for examination only by the inspectors of election and certain personnel associated with processing proxy cards and tabulating the vote. The vote of any shareholder is not disclosed except as may be necessary to meet legal requirements. If a shareholder is a participant in the AT&T Shareowner Dividend Reinvestment and Stock Purchase Plan ("DRISPP"), the proxy card will represent the number of full shares in the DRISPP account on the record date, as well as shares registered in the participant's name. If a shareholder is a participant in the AT&T Employee Stock Ownership Plan ("ESOP"), AT&T Long Term Savings Plan for Management Employees, AT&T Long Term Savings and Security Plan, AT&T Retirement Savings and Profit Sharing Plan, AT&T Long Term Savings and Security Employee Stock Ownership Trust, AT&T of Puerto Rico, Inc. Long Term Savings Plan for Management Employees, AT&T of Puerto Rico, Inc. Long Term Savings and Security Plan, AT&T Capital Corporation Retirement and Savings Plan, AT&T Capital Corporation Excess Benefit Plan, AGCS Savings Plan, or AGCS Hourly Savings Plan, the proxy card will also serve as a voting instruction for the trustees of those plans where all accounts are registered in the same name. If cards representing the shares in the above-named plans are not returned, those shares will not be voted with the exception that if cards representing shares in the AT&T Long Term Savings and Security Plan and the AT&T Long Term Savings and Security Employee Stock Ownership Trust are not returned, those shares will be voted by the trustees of those plans. Shares allocated to the accounts of participants in plans of AT&T Global Information Solutions Company, a wholly owned subsidiary of AT&T, such as the Corporation Payroll Employee Stock Ownership Plan, the Savings Plan, and the Employees' Profit Sharing Plan (referred to collectively as the "Future Income Plans") may be voted 2 through separate participant direction cards that will be mailed to participants in these plans. If a participant also owns shares outside these plans, the participant must return both the proxy card and the participant direction card. The trustees of these plans will vote the number of shares allocated to a participant's account or accounts under such plans in accordance with the directions on the participant direction card if the card is duly signed and received by April 12, 1995. For participants in the Future Income Plans, allocated shares for which the trustee receives no instructions and all unallocated shares will be voted by the trustee. If you are a registered owner and plan to attend the meeting in person, please detach and retain the admission ticket which is attached to your proxy card and mark the appropriate box on the proxy card. Beneficial owners who plan to attend the meeting in person may obtain admission tickets in advance by sending written requests, along with proof of ownership, such as a bank or brokerage firm account statement, to: Manager - Shareowner Relations, AT&T Corp., 32 Avenue of the Americas, Room 2420E, New York, NY 10013-2412. Shareholders who do not present admission tickets at the meeting will be admitted upon verification of ownership at the admissions counter. Highlights of the meeting will be included in the next quarterly report. Information on obtaining a full transcript of the meeting will also be found in that quarterly report. Securities and Exchange Commission ("SEC") rules require that an annual report precede or be included with proxy materials. Shareholders with multiple accounts may be receiving more than one annual report, which is costly to AT&T and may be inconvenient to these shareholders. Such shareholders may authorize AT&T to discontinue mailing extra reports by marking the appropriate box on the proxy card for selected accounts. At least one account must continue to receive an annual report. Eliminating these duplicate mailings will not affect receipt of future proxy statements and proxy cards. To resume the mailing of an annual report to an account, please call the AT&T shareholder services number, 1-800-348-8288. 3 Comments from shareholders about the proxy material or about other aspects of the business are welcome. Space is provided on the proxy card for this purpose. Although such notes are not answered on an individual basis, they are analyzed and used to determine what kinds of additional information should be furnished in various Company publications. On January 1, 1995, there were 1,569,005,972 common shares outstanding. Each common share is entitled to one vote on each matter properly brought before the meeting. BOARD OF DIRECTORS The board of directors has the responsibility for establishing broad corporate policies and for overseeing the overall performance of the Company. However, in accordance with corporate legal principles, it is not involved in day-to-day operating details. Members of the board are kept informed of the Company's business through discussions with the Chairman and other officers, by reviewing analyses and reports sent to them each month, and by participating in board and committee meetings. The board held 10 meetings in 1994; the committees held 26 meetings. The average attendance at the aggregate of the total number of meetings of the board and the total number of committee meetings was 95%. COMMITTEES OF THE BOARD The board has established a number of committees, including the Audit Committee, the Compensation Committee, and the Committee on Directors, each of which is briefly described below. Other committees of the board are: the Corporate Public Policy Committee, the Employee Benefits Committee, the Executive Committee, the Finance Committee, and the Proxy Committee (which votes the shares represented by proxies at the annual meeting of shareholders). 4 The Audit Committee meets with management to consider the adequacy of the internal controls and the objectivity of financial reporting; the committee also meets with the independent auditors and with appropriate Company financial personnel and internal auditors about these matters. The committee recommends to the board the appointment of the independent auditors, subject to ratification by the shareholders at the annual meeting. Both the internal auditors and the independent auditors periodically meet alone with the committee and always have unrestricted access to the committee. The committee, which consists of six non-employee directors, met six times in 1994. The Compensation Committee administers management incentive compensation plans, including stock option plans. The committee makes recommendations to the board with respect to compensation of directors and of the officers as listed on page 32. The committee, which consists of five non-employee directors, met seven times in 1994. The Committee on Directors advises and makes recommendations to the board on all matters concerning directorship and corporate governance practices and the selection of candidates as nominees for election as directors. The committee, which consists of seven non-employee directors, met two times in 1994. The committee recommended this year's candidates at the January 1995 board meeting. In recommending board candidates, this committee seeks individuals of proven judgment and competence who are outstanding in their chosen activity; it considers such factors as anticipated participation in board activities, education, geographic location, and special talents or personal attributes. Shareholders who wish to suggest qualified candidates should write to: Vice President-Law and Secretary, AT&T Corp., 32 Avenue of the Americas, Room 2420E, New York, NY 10013-2412, stating in detail the qualifications of such persons for consideration by the committee. 5 COMPENSATION OF DIRECTORS Directors who are not employees receive an annual retainer of $30,000 and a fee of $1,500 for each board, committee, and shareholder meeting attended. The chairpersons of the Audit Committee, Compensation Committee, and Finance Committee each receive an additional annual retainer of $7,500. Other non- employee directors who chair committees receive additional annual retainers of $5,000. Pursuant to the Company's Deferred Compensation Plan for Non-Employee Directors, 15% of the annual retainer for each non-employee director is deferred and credited to a portion of a deferred compensation account, the value of which is measured from time to time by the value of Company common shares (the "AT&T shares portion"). Directors may elect to defer the receipt of all or part of the remainder of their compensation into the AT&T shares portion or the cash portion of the deferred compensation account (the "cash portion"). The AT&T shares portion is credited on each dividend payment date for AT&T common shares with a number of deferred shares of common stock equivalent in market value to the amount of the quarterly dividend on the shares then credited in the accounts. The cash portion of the deferred compensation account earns interest, compounded quarterly, at an annual rate equal to the average interest rate for ten-year United States Treasury notes for the previous quarter, plus 5%. Directors who are also employees of the Company or a subsidiary of the Company receive no compensation for serving as directors. The Company also provides non-employee directors with travel accident insurance when on Company business. A non-employee director may purchase life insurance sponsored by the Company. The Company will share the premium expense with the director; however, all the Company contributions will be returned to the Company at the earlier of (a) the director's death or (b) the later of age 70 or 10 years from the policy's inception. This benefit will continue after the non-employee director's retirement from the board. 6 Non-employee directors with at least five years' service are eligible for an annual retirement benefit equal to their annual retainer at retirement. The benefit begins at age 70 and is payable for life. ELECTION OF DIRECTORS (Item A on Proxy Card) The Proxy Committee intends to vote for the election of the 15 nominees listed on the following pages unless otherwise instructed on the proxy card. These nominees have been selected by the board on the recommendation of the Committee on Directors. If you do not wish your shares to be voted for particular nominees, please identify the exceptions in the designated space provided on the proxy card. Directors will be elected by a plurality of the votes cast. Any shares not voted (whether by abstention, broker non-vote, or otherwise) have no impact on the vote. If at the time of the meeting one or more of the nominees have become unavailable to serve, shares represented by proxies will be voted for the remaining nominees and for any substitute nominee or nominees designated by the Committee on Directors or, if none, the size of the board will be reduced. The Committee on Directors knows of no reason why any of the nominees will be unavailable or unable to serve. Directors elected at the meeting will hold office until the next annual meeting or until their successors have been elected and qualified. For each nominee there follows a brief listing of principal occupation for at least the past five years, other major affiliations, and age as of January 1, 1995. 7 NOMINEES FOR ELECTION AS DIRECTORS Robert E. Allen, Chairman and Chief Executive Officer of AT&T since 1988. Director of Bristol-Myers Squibb Co.; Chrysler Corporation; and PepsiCo, Inc. Chairman of The Business Council. Director of AT&T since 1984; Chairman of the Executive and Proxy Committees. Age 59. M. Kathryn Eickhoff, President of Eickhoff Economics Inc. (economic consultants) since 1987. Associate Director for Economic Policy, U.S. Office of Management and Budget (1985-1987). Director of National Westminster Bancorp Inc.; Tenneco Inc.; and The Upjohn Company. Director of AT&T since 1987; member of the Audit and Corporate Public Policy Committees. Age 55. Walter Y. Elisha, Chairman since 1983 and Chief Executive Officer since 1981 of Springs Industries, Inc. (textile manufacturing). Director of Springs Industries, Inc. and Cummins Engine Company, Inc. Director of AT&T since 1987; member of the Compensation and Finance Committees and the Committee on Directors. Age 62. 8 Philip M. Hawley, retired Chairman and Chief Executive Officer of Broadway Stores, Inc. (formerly Carter Hawley Hale Stores, Inc.) (department stores) (1983-1993). Director of Atlantic Richfield Co.; BankAmerica Corp. and its subsidiary, Bank of America, N.T. & S.A.; Johnson & Johnson; and Weyerhaeuser Company. Director of AT&T since 1982; Chairman of the Compensation Committee; member of the Committee on Directors and the Committee on Employee Benefits. Age 69. Carla A. Hills, Chairman and Chief Executive Officer of Hills & Company (international consultants) since 1993. United States Trade Representative, Executive Office of the President (1989-1993). Partner in Weil, Gotshal & Manges (law firm) (1986-1989). Director of American International Group; Bechtel Group and its subsidiary, Bechtel Enterprises; Chevron Corp.; and Time Warner Inc. Director of AT&T since 1993; member of the Audit and Corporate Public Policy Committees and the Committee on Directors. Age 60. Belton K. Johnson, former owner of Chaparrosa Ranch for more than 19 years. Chairman of Belton K. Johnson Interests since 1981. Director of Tenneco Inc. Director of AT&T since 1974; member of the Executive, Corporate Public Policy, and Proxy Committees, and the Committee on Employee Benefits. Age 65. Drew Lewis, Chairman and Chief Executive Officer of Union Pacific Corporation (rail transportation, natural resources, and trucking) since 1987. Director of American Express Co.; FPL Group, Inc.; Ford Motor Company; and Union Pacific Corporation. Director of AT&T since 1989; member of the Audit and Corporate Public Policy Committees and the Committee on Directors. Age 63. 9 Donald F. McHenry, President of IRC Group (international relations consultants) since 1981; University Research Professor of Diplomacy and International Relations, Georgetown University, since 1981. Director of Bank of Boston Corp. and its subsidiary, First National Bank of Boston; Coca-Cola Co.; International Paper Co.; and SmithKline Beecham Corp. Director of AT&T since 1986; Chairman of the Committee on Employee Benefits; member of the Finance Committee. Age 58. Victor A. Pelson, Executive Vice President of AT&T and Chairman of the AT&T Global Operations Team since 1993; Group Executive, AT&T Communications Services (1989-1993); President, AT&T General Markets Group (1986-1989). Director of Eaton Corp.; and United Parcel Service of America, Inc. Director of AT&T since 1993; member of the Corporate Public Policy Committee. Age 57. Donald S. Perkins, Chairman of Kmart Corp. (mass merchandise retailer) since January, 1995. Retired Chairman and Chief Executive Officer of Jewel Companies, Inc. (diversified retailer) (1970-1980). Director of Aon Corp.; Cummins Engine Company, Inc.; Illinova Corporation; Inland Steel Industries; Kmart Corp.; and Time Warner Inc. Trustee of Northwestern University, the Putnam Funds, and LaSalle Street Fund. Director of AT&T since 1979; Chairman of the Committee on Directors; member of the Executive, Finance, and Proxy Committees and the Committee on Employee Benefits. Age 67. Henry B. Schacht, Chairman since 1977 and former Chief Executive Officer (1973-1994) of Cummins Engine Company, Inc. Director of Aluminum Company of America; CBS Inc.; The Chase Manhattan Corp. and its subsidiary, The Chase Manhattan Bank, N.A.; and Cummins Engine Company, Inc. Trustee of The Ford Foundation and The Yale Corporation. Director of AT&T since 1981; Chairman of the Corporate Public Policy Committee; member of the Audit Committee. Age 60. 10 Michael I. Sovern, President Emeritus and Chancellor Kent Professor of Law at Columbia University; President (1980-1993). Director of Chemical Banking Corporation and its subsidiary, Chemical Bank; Orion Pictures Corporation; and Warner-Lambert Company. Director of AT&T since 1984; Chairman of the Audit Committee; member of the Compensation Committee. Age 63. Franklin A. Thomas, President of The Ford Foundation since 1979. Director of Aluminum Company of America; CBS Inc.; Citicorp and its subsidiary, Citibank, N.A.; Cummins Engine Company, Inc.; and PepsiCo, Inc. Director of AT&T since 1988; member of the Audit and Corporate Public Policy Committees and the Committee on Directors. Age 60. Joseph D. Williams, retired Chairman and Chief Executive Officer of Warner-Lambert Company (pharmaceuticals, health care, and consumer products) (1985-1991). Director of Exxon Corp.; J.C. Penney Co., Inc.; Rockefeller Financial Services, Inc.; Rockefeller & Co.; Therapeutic Antibodies Inc.; Thrift Drug, Inc.; Warner-Lambert Company; and The Wyatt Company. Director of AT&T since 1984; Chairman of the Finance Committee; member of the Executive and Compensation Committees. Age 68. Thomas H. Wyman, Chairman of S.G. Warburg & Co. Inc. since 1992 and Vice Chairman of S.G. Warburg Group PLC (U.K.) since 1993 (investment banking). Chairman of United Biscuits (Holdings) U.S. Ltd. (food products) (1989-1992). William Donaldson Faculty Fellow, Yale University School of Organization and Management (1987-1988). Chairman and Chief Executive Officer of CBS Inc. (1983-1986). Director of General Motors Corporation; S.G. Warburg Group PLC (U.K.) and S.G. Warburg & Co. Inc.; United Biscuits (Holdings) PLC (U.K.); and Zeneca Group PLC (U.K.). Director of AT&T since 1981; member of the Compensation and Finance Committees and the Committee on Directors. Age 65. 11 STOCK OWNERSHIP OF MANAGEMENT AND DIRECTORS The following table sets forth information concerning the beneficial ownership of the Company's common stock as of January 1, 1995, for (a) each director and nominee for director; (b) each of the named officers (the "named officers" as defined in the Compensation Report, herein) not listed as a director; and (c) directors and executive officers as a group. Except as otherwise noted, the nominee or family members had sole voting and investment power with respect to such securities.
Number of Shares ---------------------------------------------- Beneficially Deferral Name Owned (1) Plans (2) Total - ------------------------- --------------- ----------- ------------ (a) Robert E. Allen 641,400(3) 50,158 691,558 M. Kathryn Eickhoff 3,000 318 3,318 Walter Y. Elisha 8,531 1,199 9,730 Philip M. Hawley 1,000(4) 804 1,804 Carla A. Hills 400 1,858 2,258 Belton K. Johnson 5,016 166 5,182 Drew Lewis 4,000 166 4,166 Donald F. McHenry 637 166 803 Victor A. Pelson 198,938(5) 4,699 203,637 Donald S. Perkins 2,248(6) 166 2,414 Henry B. Schacht 1,055 1,006 2,061 Michael I. Sovern 1,200 166 1,366 Franklin A. Thomas 1,083 2,369 3,452 Joseph D. Williams 15,500 166 15,666 Thomas H. Wyman 1,000 552 1,552 (b) Alex J. Mandl 228,850(7) 2,173 231,023 William B. Marx, Jr. 177,863(8) 6,872 184,735 Jerre L. Stead 94,652(9) 12,442 107,094 (c) Directors and Executive Officers as a Group 5,095,810(10) 123,207 5,219,017
12 Footnotes 1. No individual director and nominee for director or named officer beneficially owns 1% or more of the Company's outstanding common shares or the common shares of AT&T Capital Corporation, a majority-owned subsidiary of the Company, nor do the directors and executive officers as a group. 2. Share units held in deferred compensation accounts. 3. Includes beneficial ownership of 549,805 shares which may be acquired within 60 days pursuant to stock options and 24,000 restricted shares awarded under employee incentive compensation plans. 4. Mr. Hawley disclaims beneficial ownership of 444 common shares held by Mrs. Hawley. 5. Includes beneficial ownership of 186,174 shares which may be acquired within 60 days pursuant to stock options awarded under employee incentive compensation plans. Mr. Pelson disclaims beneficial ownership of 725 common shares held in a trust of which Mrs. Pelson is a co-trustee and co-remainder beneficiary. 6. Mr. Perkins as an investment company trustee also has shared voting and investment power over 2,979,150 common shares. 7. Includes beneficial ownership of 218,245 shares which may be acquired within 60 days pursuant to stock options awarded under employee incentive compensation plans. 8. Includes beneficial ownership of 174,706 shares which may be acquired within 60 days pursuant to stock options awarded under employee incentive compensation plans. 9. Includes beneficial ownership of 34,470 shares which may be acquired within 60 days pursuant to stock options and 23,000 restricted shares awarded under employee incentive compensation plans. 10. Includes beneficial ownership of 1,834,749 shares which may be acquired within 60 days pursuant to stock options awarded under employee incentive compensation plans as well as 2,979,150 shares over which they have sole or shared voting and investment power as trustee. As required by Securities and Exchange Commission rules under Section 16 of the Securities Exchange Act of 1934, the Company notes that during 1994 two directors filed untimely reports on transactions in the Company's common stock as follows: M. Kathryn Eickhoff, one report regarding two transactions and Joseph D. Williams, one report regarding one transaction. 13 RATIFICATION OF APPOINTMENT OF AUDITORS (Item B on Proxy Card) Subject to shareholder ratification, the board of directors, upon recommendation of the Audit Committee, has reappointed the firm of Coopers & Lybrand L.L.P. ("Coopers & Lybrand") as the independent auditors to examine the Company's financial statements for the year 1995. Coopers & Lybrand has audited the Company's books for many years. Your directors recommend that shareholders vote FOR such ratification. Ratification of the appointment of auditors would require a majority of the votes cast thereon. Any shares not voted (whether by abstention, broker non-vote, or otherwise) have no impact on the vote. If the shareholders do not ratify this appointment, other independent auditors will be considered by the board upon recommendation of the Audit Committee. Representatives of Coopers & Lybrand are expected to attend the annual meeting and will have the opportunity to make a statement if they desire and to respond to appropriate questions. For the year 1994, Coopers & Lybrand also examined the financial statements of the Company's subsidiaries and provided other audit services to the Company and subsidiaries in connection with SEC filings, review of financial statements, and audits of pension plans. DIRECTORS' PROPOSAL TO APPROVE THE McCAW CELLULAR COMMUNICATIONS, INC. EMPLOYEE STOCK PURCHASE PLAN (Item C on Proxy Card) In connection with the September 1994 merger whereby McCaw Cellular Communications, Inc. ("McCaw") became an AT&T wholly owned subsidiary (the "McCaw Merger"), AT&T assumed the McCaw Cellular Communications, Inc. Employee Stock Purchase Plan (the "Plan"). In December 1994, the board adopted the Plan and approved a two-year extension of the Plan through December 31, 1999, subject to AT&T shareholder approval. McCaw has had a stock purchase plan in place for over seven years. 14 Shares Reserved for the Plan The Plan provides eligible employees of McCaw with a means to purchase, through payroll deductions, shares of AT&T common stock (the "Common Stock") at a discount, subject to adjustments under certain circumstances such as stock splits, stock dividends, recapitalization, or other changes in the outstanding Common Stock. The total number of shares that may be purchased under the Plan is 3,000,000, an increase of 2,000,000 over the number of shares authorized when AT&T assumed the Plan as part of the merger with McCaw. Eligible Participants Full-time employees of McCaw or any of its subsidiaries are eligible to participate, on a purely voluntary basis, in the Plan if they meet certain conditions. To be eligible, an employee's customary employment must be greater than both 20 hours per week and five months per calendar year. The employee must also have completed six months of employment and be scheduled to work at least 1,000 hours during the option period. In addition, no employee will be permitted to purchase Common Stock under the Plan at a rate which exceeds $25,000 of fair market value of such stock (determined at the time the option is granted) for each calendar year in which such option is outstanding. Approximately 8,500 employees would have been eligible to participate as of January 1, 1995. Material Features of the Plan Eligible employees participate in the Plan through exercising options to purchase Common Stock. Options may be granted each month to eligible employees and will expire on the last trading day of each such month unless they are exercised on that date. Common Stock will be purchased through a participant's payroll deductions at a stated whole percentage from 2% to 10% of compensation, determined by the participant, at a price that shall be an amount equal to 85% of the fair market value of the Common Stock as of the last trading day of each month that the option is outstanding. The fair market value of the Common Stock is determined in relation to market price in accordance with certain procedures set forth in the Plan. Each eligible employee who elects to participate in the Plan automatically and without any act on his or her part will be deemed to 15 have exercised his or her option on the last trading day of each month if he or she is then employed, to the extent that the amount withheld from his or her compensation under the Plan is sufficient to purchase, at the option price, one or more whole shares of Common Stock. Any balance remaining in an employee's account after payment of the purchase price of those whole shares will be refunded or carried over to the next month at the direction of the employee. All funds received or held by the Company under the Plan are general assets of the Company, free of any trust or other restriction, and may be used for any corporate purpose. No interest on such funds will be credited to or paid to any participant under the Plan. An option granted under the Plan shall not be transferable other than by will or by the laws of descent and distribution and is exercisable during his or her lifetime only by the employee. A participant may withdraw from the Plan at any time and the entire amount credited to his or her account will be refunded. If a participant terminates employment, the entire amount credited to his or her account will be used to purchase shares of Common Stock on the last day of the purchase period unless the participant's termination of employment occurs at least three months prior to the end of the purchase period, in which event the entire amount in his or her account will be refunded. The revocation of the designated subsidiary status of a McCaw subsidiary by which a participant is employed will cause the entire amount credited to the participant's account to be refunded to him or her. New Plan Benefits It is not possible to determine how many eligible employees will participate in the Plan in the future. The following table presents the aggregate fair market value and the number of shares purchased under the Plan during the four-month period (September 1994 through December 1994) following the McCaw Merger in September 1994. McCaw Cellular Communications, Inc. Employee Stock Purchase Plan (September 1994 - December 1994)
Name and Position Dollar Value ($) Number of Shares Non-Executive Officer Employee Group $3,353,800 64,200
16 Tax Treatment The Plan is intended to qualify as an employee stock purchase plan within the meaning of Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). Under the Code, an employee who elects to participate in an offering under the Plan will not realize income at the time the offering commences or when the shares purchased under the Plan are transferred to him or her. If an employee disposes of such shares after two years from the date the offering of such shares commences and after one year from the date of the transfer of such shares to him or her, the employee will be required to include in income, as compensation for the year in which such disposition occurs, an amount equal to the lesser of (i) the excess of the fair market value of such shares at the time of disposition over the purchase price and (ii) 15% of the fair market value of such shares at the time the offering commenced. The employee's basis in the shares disposed of will be increased by an amount equal to the amount so includable in his or her income as compensation, and any gain or loss computed with reference to such adjusted basis which is recognized at the time of the disposition will be long-term capital gain or loss. In such event, McCaw (or the subsidiary by which the employee is employed) will not be entitled to any deduction from income. If any employee disposes of the shares purchased under the Plan within such two-year or one-year period, the employee will be required to include in income, as compensation for the year in which such disposition occurs, an amount equal to the excess of the fair market value of such shares on the date of purchase over the purchase price. The employee's basis in such shares disposed of will be increased by an amount equal to the amount includable in his or her income as compensation, and any gain or loss computed with reference to such adjusted basis which is recognized at the time of disposition will be capital gain or loss, either short-term or long-term, depending on the holding period for such shares. In the event of a 17 disposition within such two-year or one-year period, McCaw (or the subsidiary by which the employee is employed) will be entitled to a deduction from income equal to the amount the employee is required to include in income as a result of such disposition. An employee who is a nonresident of the United States will generally not be subject to the U.S. federal income tax with respect to the shares of Common Stock purchased under the Plan. Plan Administration and Termination The Plan provides for administration of the Plan by a committee of the board of directors of McCaw. The board of directors of McCaw may terminate or suspend the Plan at any time and, with the approval of the Senior Vice President--Human Resources of AT&T, amend it in any respect, except that the approval of AT&T shareholders is required for any amendment to increase the number of shares available for purchase under the Plan or to decrease the purchase price. Unless earlier terminated, the Plan will continue in effect until December 31, 1999, except that if at the end of any purchase period the aggregate funds available for purchase of Common Stock would purchase a greater number of shares than is available for purchase, the number of shares that would otherwise be purchased by each participant at the end of the purchase period will be proportionately reduced in order to eliminate the excess. The Plan would then automatically terminate after such purchase period. Upon expiration or termination of the Plan, any amount not applied toward the purchase of Common Stock will be refunded to the participant. Adoption of this proposal requires an affirmative vote by the holders of a majority of the outstanding Common Stock. Any shares not voted (whether by abstention, broker non-vote, or otherwise) have the effect of a negative vote. The directors recommend that shareholders vote FOR the approval of the McCaw Cellular Communications, Inc. Employee Stock Purchase Plan. 18 SHAREHOLDER PROPOSALS AT&T receives many suggestions from shareholders, some as formal shareholder proposals. All are given careful attention. Formal proposals are sometimes withdrawn by proponents after discussions with the Company. For example, The Domestic and Foreign Missionary Society of the Protestant Episcopal Church submitted a proposal requesting AT&T to endorse the CERES Principles and the Grey Nuns of the Sacred Heart submitted a proposal requesting the Company to initiate a review of its maquiladora operations and issue a report to shareholders. Both proposals have been withdrawn based on mutual agreements to engage in dialogue to seek to find common ground on these issues. Proponents of two shareholder proposals have stated that they intend to present the following proposals at the annual meeting. Information on the shareholdings of the proponents is available by writing to: Manager - Shareowner Relations, AT&T Corp., 32 Avenue of the Americas, Room 2420E, New York, NY 10013-2412. The proposals and supporting statements are quoted below. The board has concluded it cannot support these proposals for the reasons given. Shareholder Proposal 1: Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Ave., N.W., Suite 215, Washington, DC 20037, has submitted the following proposal: "RESOLVED: That the shareholders recommend that the Board direct management that within five days after approval by the shareholders of this proposal, the management shall publish in newspapers of general circulation in the cities of New York, Washington, D.C., Detroit, Chicago, San Francisco, Los Angeles, Dallas, Houston and Miami, and in the Wall Street Journal and U.S.A. Today, a detailed statement of each contribution made by the Company, either directly or indirectly, within the immediately preceding fiscal year, in respect of a political campaign, political party, referendum or citizens' initiative, or attempts to influence legislation, specifying the date and amount of each such contribution, and the person or organization to whom the 19 contribution was made. Subsequent to this initial disclosure, the management shall cause like data to be included in each succeeding report to shareholders. And if no such disbursements were made, to have that fact publicized in the same manner. "REASONS: This proposal, if adopted, would require the management to advise the shareholders how many corporate dollars are being spent for political purposes and to specify what political causes the management seeks to promote with those funds. It is therefore no more than a requirement that the shareholders be given a more detailed accounting of these special purpose expenditures than they now receive. These political contributions are made with dollars that belong to the shareholders as a group and they are entitled to know how they are being spent. "If you AGREE, please mark your proxy FOR this resolution." Your directors recommend a vote against the above proposal. In 1984 94% and in 1985 92% of the voted shares opposed this proposal. Under numerous laws, corporate contributions to political candidates are illegal. Therefore, AT&T does not contribute directly to candidates. Employees may contribute to candidates through political action committees (PACs) which the Company has established for eligible management employees who wish to participate in the political process. Participation is voluntary and the PACs operate under the strict regulations of federal and state election laws. Information about PAC contributions is publicly available. Therefore, there is no need for AT&T to also provide such information. AT&T expenditures in support of federal and state government affairs activities on legislative and regulatory matters are a legitimate business expense and properly accounted for in the Company's books. These activities assure that public officials are made aware of AT&T's position on matters that are significant to the future of the Company. AT&T does not disclose specific sub-segments of its 20 business expenses and believes no useful shareholder purpose would be served by such disclosures. In addition, this proposal would have the Company place advertisements in newspapers even if "no such disbursements" were made. Your directors believe this would serve no useful purpose and would clearly be a waste of Company resources. Therefore, your directors again recommend that shareholders vote AGAINST this proposal. Shareholder Proposal 2: Richard A. Dee, 115 East 89th Street, New York, NY 10128, has submitted the following proposal: "Stockholders of publicly-owned corporations do not 'elect' directors. Directors are selected by incumbent directors and managements - stockholders merely 'ratify' or approve those selections much as they ratify selections of auditors. "The term 'Election of Directors' has been misused in corporate proxy materials for many years to refer to the process by which directors are empowered. The term is not only inappropriate - it is misleading. With no choice of candidates, there is no election. "Understandably, incumbent directors are anxious to protect their absolute power over corporate activities. The root of that power is control of Corporate Governance - which is assured by control of board composition. Unfortunately, the 'Elective process rights' of stockholders are being ignored. "Approval of this Corporate Governance proposal will provide AT&T stockholders with a choice of director candidates each year - and an opportunity to vote for those whose qualifications and stated intentions they favor. Its approval will provide stockholders with 'duly' elected representatives. "Public officials are duly elected - and are held accountable. Continuing in office depends upon satisfying constituents, not simply nominators. Corporate directors take office unopposed and answer only to fellow directors. Far too many directors divide their 21 time between many masters. Perhaps the 'pool' from which directors are selected should be expanded to include many younger highly-qualified business executives and more individuals with other backgrounds that well-qualify them to represent stockholders. "As long as incumbents are allowed to select and to propose only the number of so-called candidates as there are directorships to be filled, and as long as it is impossible, realistically, for stockholders to utilize successfully what is supposed to be their right to nominate and elect directors, no practical means will exist for stockholders to bring about director turnover - - until this or a similar proposal is approved. Turnover is desirable because it reduces the possibility of inbreeding and provides sources for new ideas and new approaches to problems. "It is hereby proposed that the Board of Directors, at its next regular meeting, adopt a resolution requiring the Committee on Directors to nominate two candidates for each directorship to be filled by the voting of stockholders at annual meetings. In addition to customary personal background information, Proxy Statements shall include a statement by each candidate as to why he or she believes they should be elected. "Although all nominees would continue to be selected by incumbents, approval of this proposal would enable stockholders to replace any or all directors if they become dissatisfied with them or with the results of corporate policies and/or performance. Not a happy prospect even for those able to nominate their possible successors. "Any burden that a company may claim would be imposed upon it by having to provide a choice of able director candidates is far outweighed by the benefits that would accrue to its stockholders from a democratically-elected board - a board composed of representatives willing to have their respective qualifications reviewed and weighed carefully by those whose interests they are to serve. "Please vote FOR this proposal." 22 Your directors recommend a vote against this proposal. Selection of directors for a company's board is different from political elections that involve two or more parties with dissimilar local or national agendas. AT&T shareowners have similar interests stemming from their investment objectives. Investors expect a board comprised of members who have outstanding qualifications, proven ability to work effectively together and the commitment to further the common interests of the owners. It is the obligation of the Committee on Directors to identify director candidates who fulfill that expectation. Each year the committee reviews the performance and qualifications of existing board members and other possible candidates, including those suggested by shareowners. The committee considers the evolving needs of the business as it confronts global competition, identifies the best-qualified people and recommends their selection. Such candidates also frequently are approached by other companies seeking proven director talent; the candidates often must decline such invitations because of time demands or conflicts of interest resulting from their commitment to AT&T. In our view, it is counterproductive to ask such potential candidates to set aside other directorships without assurance that they have in fact been identified as the existing directors' best recommendations for the AT&T board. We find the proposal misleading in suggesting that there is little or no turnover in AT&T board membership. In fact, approximately one third of the directors elected in 1990 are no longer on the board. This turnover provides a mix of benefits from directors with seasoned experience in the unique problems and opportunities of AT&T, as well as the fresh perspective of new member directors. We believe that the present director selection procedure appropriately addresses the interests of AT&T shareholders. Therefore, your directors recommend that shareholders vote AGAINST this proposal. 23 Approval of the preceding shareholder proposals would require a majority of the votes cast thereon. Any shares not voted (whether by abstention, broker non-vote, or otherwise) have no impact on the vote. SUBMISSION OF SHAREHOLDER PROPOSALS Proposals intended for inclusion in next year's proxy statement should be sent to: Vice President-Law and Secretary, AT&T Corp., 32 Avenue of the Americas, New York, NY 10013-2412, and must be received by October 31, 1995. OTHER MATTERS TO COME BEFORE THE MEETING In addition to the matters described above, there will be an address by the Chairman of the Board and a general discussion period during which shareholders will have an opportunity to ask questions about the business. If any matter not described herein should come before the meeting, the Proxy Committee will vote the shares represented by it in accordance with its best judgment. At the time this proxy statement went to press, the Company knew of no other matters which might be presented for shareholder action at the meeting. BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Compensation Committee is composed of five independent non-employee directors. The committee is responsible for setting and administering executive officer salaries and the annual bonus and long-term incentive plans that govern the compensation paid to all senior managers of the Company, except that the full board (other than directors who are employees) is responsible for setting and administering salaries and the annual bonus for the officers listed on page 32 (the "named officers") based upon recommendations of the committee. The following report represents the actions of the committee and the board regarding compensation paid to the named officers during 1994. 24 Compensation Philosophy The Company's compensation programs are designed to link executives' compensation to the performance of the Company. For example, the Chairman's annual bonus and long-term awards are performance-driven incentives and account for 77% of his total compensation structure. The other named officers have approximately 70% of their total compensation at risk in performance-driven incentive plans. AT&T targets executive competitive compensation levels at the mean of a select group of large, market-focused, progressive companies with whom it competes for senior executive talent. The Company's competitors for executive talent are not necessarily the same companies that would be included in a peer group established to compare shareholder returns because the Company requires skills and perspectives from a broader range of backgrounds. Thus, the comparable companies for purposes of executive compensation are not the same as the peer group index used in the Five-Year Performance Comparison graph included in this proxy statement. The target executive compensation levels determined with reference to the comparable market survey sample described above require that the compensation to each of the Company's top five officers exceeds the annual limit for deductibility under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). The Company, however, has taken steps to mitigate the negative impact of this tax provision on the shareholders. For example, elements of compensation under our annual bonus and long-term incentive plans qualify for exemption from the limit on tax deductibility as shareholder-approved performance-driven plans. In addition, we have a salary and incentive deferral plan which permits compensation deferred under the plan to be exempt from the limit on tax deductibility. The committee has developed executive compensation governing principles that provide guidance in the design and operation of the senior management compensation plans. These principles address key areas of AT&T senior executive compensation policy such as the identification of the markets to be surveyed, and the degree of flexibility of the compensation programs to facilitate strategic executive hires in global markets. 25 The committee also has developed governing principles for review of officer performance. Among other things, these principles ensure that executive officer compensation is linked to corporate performance levels. These principles are used to design, approve, and implement AT&T senior executive compensation programs. The Company's executive compensation program consists of two key elements: (1) an annual component, i.e., base salary and annual bonus and (2) a long-term component, i.e., performance shares, stock options, and restricted stock. The policies with respect to each of these elements, as well as the basis for determining the compensation of the Chairman of the Board and CEO, Mr. Allen, are described below. (1) Annual Component: Base Salary and Annual Bonus Base Salary: Base salaries for executive officers are determined with reference to a position rate for each officer. These position rates are determined annually by evaluating the responsibilities of the position and comparing it with other executive officer positions in the marketplace. Annual salary adjustments are determined by the Company's performance and the individual's contribution to that performance. For those executive officers responsible for particular business units, the financial and non-financial results (e.g., recognition within respective industries) of their business units are also considered. The committee presents the salary recommendations to the board for the named officers. While there are no individual performance matrices or pre-established weightings given to each factor, these salary recommendations are based on performance criteria such as: * financial performance with a balance between long- and short-term earnings and revenue growth, * long-term strategic decisions, * initiatives to globalize the Company, * development of the leadership team, * response to a rapidly changing competitive environment, and * relative position to salary structure. 26 Annual Bonus: The annual bonus for the Chairman and for the rest of the named officers is (i) .4% of the Company's "Net Cash Provided by Operating Activities", for the annual performance period as adjusted, divided by the total number of named officers with respect to such period, or (ii) a lesser amount based on factors including the Company's performance relative to pre-set financial, employee, customer, and individual performance targets. The pre-set financial target is based on Economic Value Added ("EVA"), which measures the return on investment that enhances shareholder value. Employee attitudes are measured by an index called People Value Added ("PVA"). There are two components of the measurement: leadership of people and diversity. Components of this measurement are derived from an annual employee survey that measures employee perceptions of executive behavior such as: sharing roles and responsibilities, leadership, empowerment, and respect for individuals. The customer measure is Customer Value Added ("CVA") and it measures the relative value that customers perceive when our products are compared with those of our competitors. Targets for these measures were reviewed and approved by the committee. Payments under the Company's annual incentive plan tied to the Company's level of achievement of annual EVA, PVA, and CVA targets comprise approximately 92% of the annual bonus. Payments under the Company's annual incentive plan tied to individual achievement, considering the same factors as those used for base salary, comprise approximately 8% of the annual bonus. Award targets are related to survey results of comparable companies and are based on a percent of base salary. Actual awards to individuals are determined by the committee and presented to the board for approval. (2) Long-Term Component: Performance Shares, Stock Options, and Restricted Stock To align shareholder and executive officer interests, the longterm component of the Company's executive compensation program uses grants whose value is related to the value of Company common shares. Grants of performance shares, stock options, and 27 restricted stock are made under the AT&T 1987 Long Term Incentive Program which was approved by the shareholders. Historically, performance shares and stock options have been granted annually based on position rate, while restricted stock awards are granted on a selective basis. The size of annual performance share and stock option award levels are related to survey results of award levels of comparable companies in the marketplace. The size of previous grants and the number of shares held by an executive are not considered in determining annual award levels. Our target is to deliver approximately half of this long-term incentive value via performance shares and half via stock options. The awards provide rewards to executives upon creation of incremental shareholder value and the attainment of long-term goals. Performance Shares: Performance shares, which are awards of units equivalent in value to AT&T common shares, are awarded annually in numbers based on an executive's position rate. Payout of 0% to 150% of such performance shares is made in the form of cash and/or AT&T common shares at the end of a three-year performance period based on the Company's return-to-equity ("RTE") performance compared with a target. However, if an executive's annual compensation is subject to the limit on tax deductibility, under Section 162(m) of the Code, in the last year of a performance period, then the executive shall receive an Other Stock Unit Award payout, in lieu of the performance share payout, and the value of the payout to each such executive for the performance period shall be (i) 0.13% of the Company's "Net Cash Provided by Operating Activities," as adjusted, for each year in the performance period, divided by the total number of executives receiving such payouts, or (ii) a lesser amount, based on factors, including targets for the Company's RTE established for performance shares for such performance period. Stock Options: Stock options are granted annually to executive officers also in numbers based on their position rate. Like performance shares, the magnitude of such awards is determined annually by the committee. Stock options are granted with an exercise price equal to or greater than the fair market value of AT&T 28 common shares on the day of grant. Stock options are exercisable between one and ten years from the date granted. Such stock options provide incentive for the creation of shareholder value over the long term since the full benefit of the compensation package cannot be realized unless an appreciation in the price of Company common shares occurs over a specified number of years. Restricted Stock: Restricted stock awards are granted occasionally to executive officers under the AT&T 1987 Long Term Incentive Program. Restricted stock is subject to forfeiture and may not be disposed of by the recipient until certain restrictions established by the committee lapse. Recipients of restricted stock are not required to provide consideration other than the rendering of services or the payment of any minimum amount required by law. CEO Compensation During 1994, the Company's most highly compensated officer was Robert E. Allen, Chairman of the Board and CEO. Mr. Allen's 1994 performance was reviewed by the committee and discussed with the non-employee directors and Mr. Allen. The committee also made recommendations to the board concerning the annual component (base salary and annual bonus) and approved the long- term component (performance shares, stock options, and restricted stock) of his compensation. These actions were predicated on the considerations discussed below. A substantial portion of Mr. Allen's annual bonus is based on measurements of success with our three key stakeholders: shareholders, customers, and employees. The shareholder element was measured by success relative to an EVA target for the year of $2.4 billion. Final results for 1994 indicate that this target was exceeded. The 1994 employee survey results for PVA measurement targets were met as was the CVA target of exceeding 1993 results and of making further progress in implementing a Company-wide customer satisfaction measurement program. (EVA, PVA and CVA are defined on page 27.) This work will continue in 1995. 29 An AT&T performance share payout was made in 1994 based on an aggressive average RTE target for the performance period from 1991 to 1993. The actual average return achieved was 96.2% of the RTE target and these results yielded a payout of 86.7% of the performance shares awarded to Mr. Allen at the beginning of 1991. In addition to leading the Company through its most financially successful year since divestiture and achieving his employee and customer satisfaction targets, Mr. Allen strengthened the Company's global position by entering into a number of alliances that complement our technology and extend the reach of our services. The completion of our acquisition of McCaw places AT&T in one of the most rapidly growing segments of our industry. In addition, the Company has regained customers in the intensely competitive consumer communications services market. Our position in the equipment business also improved with the award of major contracts in the United States and abroad. Moreover, during 1994 AT&T was awarded the coveted Deming Prize and its third Malcolm Baldrige National Quality Award. In these and other accomplishments, Mr. Allen continues to strengthen the confidence and dedication of employees and to position the Company to share in the future growth of our industry. The Compensation Committee Philip M. Hawley, Chairman Walter Y. Elisha Michael I. Sovern Joseph D. Williams Thomas H. Wyman 30 FIVE-YEAR PERFORMANCE COMPARISON The graph below provides an indicator of cumulative total shareholder returns for the Company as compared with the S&P 500 Stock Index and a Peer Group((1)) (Plot points for line graph) Peer S&P 500 AT&T Group Comp LTD 1989 100 100 100 1990 69 94 97 1991 93 101 125 1992 124 105 138 1993 131 127 150 1994 128 134 152 Assumes $100 invested on December 31, 1989 in AT&T Common Stock, the S&P 500 Index and Peer Group Common Stock Total Shareholder Returns Assume Reinvestment of Dividends Footnote 1. The peer group comprises the largest companies worldwide which compete against the Company in its two industry segments of information movement and management, and financial services and leasing. None of the companies competing with AT&T in information movement and management offers a fully comparable range of products and services, although each is widely recognized as a competitor of AT&T. The returns of each company have been weighted according to their respective stock market capitalization for purposes of arriving at a peer group average. The members of the peer group are as follows: American Express Company; Ameritech Corporation; Apple Computer, Inc.; Bell Atlantic Corporation; BellSouth Corporation; Cable & Wireless p.l.c.; Digital Equipment Corp.; GTE Corporation; Hewlett-Packard Co.; Intel Corp.; International Business Machines Corporation; ITT Corporation; L. M. Ericsson Telefonaktiebolaget; MCI Communications Corp.; Motorola, Inc.; NEC Corp.; Northern Telecom Limited; NYNEX Corporation; Pacific Telesis Group; SBC Communications Inc.; Sprint Corporation; Texas Instruments Incorporated; U S WEST, Inc.; and Xerox Corporation. 31 SUMMARY COMPENSATION TABLE
Annual Compensation(2) Long-Term Compensation(2) ----------------------------------------- --------------------------------- Awards Payouts ----------------------------------- Other Annual Restricted All Other Compen- Stock LTIP Compen- Name and sation(3) Award(s)(4) Options/ Payouts(5) sation(6) Principal Position (1) Year Salary ($) Bonus ($) ($) ($) SARs (#) ($) ($) - ------------------------------ ----- ----------- ---------- -------- ---------- --------- --------- ----------- Robert E. Allen 1994 1,109,000 2,253,600 136,898 0 72,854 1,885,567 104,422 Chairman of the Board and CEO 1993 1,032,000 1,356,700 128,082 0 72,854 1,348,458 118,166 1992 983,000 1,155,700 119,785 0 72,854 1,190,226 79,941 Victor A. Pelson 1994 685,000 972,600 66,979 0 34,629 502,640 57,278 Executive Vice President -- 1993 606,334 489,600 60,601 0 34,629 226,726 56,422 AT&T and Chairman of the 1992 541,000 441,200 49,008 0 30,220 262,360 34,425 Global Operations Team Jerre L. Stead (7) 1994 634,000 807,700 81,724 2,605,563 30,220 502,640 64,383 Executive Vice President -- 1993 578,000 466,000 209,985 0 30,220 294,631 86,795 AT&T and CEO of 1992 -- -- -- -- -- -- -- Global Information Solutions Alex J. Mandl 1994 629,000 853,100 102,640 0 30,220 387,137 58,010 Executive Vice President -- 1993 554,167 442,900 43,036 0 30,220 226,726 45,347 AT&T and CEO of 1992 492,000 344,100 148,813 0 23,318 260,043 7,607 Communications Services Group William B. Marx, Jr. 1994 598,000 830,400 55,926 0 30,220 502,640 51,408 Executive Vice President -- 1993 545,000 452,067 51,043 0 30,220 226,725 51,378 AT&T and CEO of 1992 507,000 397,100 44,780 0 30,220 262,360 28,141 Multimedia Products Group ---- ---------- --------- -------- ---------- ------ -------- ------
32 Footnotes 1. Includes Chairman of the Board and Chief Executive Officer and the four other most highly compensated executive officers as measured by salary and bonus. 2. Compensation deferred at the election of named officers is included in the category (e.g., bonus, LTIP payouts) and year it would have otherwise been reported had it not been deferred. 3. Includes (a) payments of above-market interest on deferred compensation, (b) dividend equivalents paid with respect to long-term performance shares prior to end of three-year performance period, or other earnings on long- term incentive compensation paid during the year, (c) tax payment reimbursements, and (d) the value of personal benefits and perquisites (Mr. Mandl had personal benefits and perquisites in 1994 of $41,801). 4. On December 31, 1994, Messrs. Allen and Stead held outstanding grants of restricted stock. Mr. Allen held 24,000 shares with a value of $1,221,000. On January 19, 1994, an award of 70,000 restricted shares was made to Mr. Stead. 47,000 shares were to vest based solely on continued employment with 35,250 vested on December 31, 1994, and 11,750 shares were cancelled upon Mr. Stead's resignation. The value at grant of the 47,000 shares is reflected in the table above. The remaining 23,000 restricted shares were to vest based on both continued employment and performance as reflected on pages 34 and 35. 5. Includes distribution in 1994 to Messrs. Allen, Pelson, Stead, Mandl, and Marx of performance shares whose three-year performance period ended December 31, 1993. The value of 12,000 AT&T Restricted Shares which vested in 1994 is also reflected in the payout for that year for Mr. Allen. 6. In 1994, includes (a) Company contributions to savings plans (Mr. Allen $6,000; Mr. Pelson $6,000; Mr. Stead $6,000; Mr. Mandl $6,000; and Mr. Marx $6,000), (b) dollar value of the benefit of premiums paid for split-dollar life insurance policies (unrelated to term life insurance coverage) projected on an actuarial basis (Mr. Allen $66,737; Mr. Pelson $36,424; Mr. Stead $44,789; Mr. Mandl $39,550; and Mr. Marx $33,168), and (c) payments equal to lost Company savings match caused by IRS limitations (Mr. Allen $31,685; Mr. Pelson $14,854; Mr. Stead $13,594; Mr. Mandl $12,460, and Mr. Marx $12,240). 7. Mr. Stead resigned from the Company effective January 1, 1995. He became an executive officer of the Company in 1993; therefore his compensation for 1992 is not required to be disclosed. 33 AGGREGATED OPTION/STOCK APPRECIATION RIGHTS ("SAR") EXERCISES IN 1994 AND YEAR-END VALUES
Value of Unexercised In-the-Money Options/SARs Options/SARs at Year End (#) at Year End ($) --------------- ----------------- Shares Acquired Exercisable/ Exercisable/ Name (1) on Exercise (#) Value Realized ($) Unexercisable Unexercisable -------------- --------------- ------------------ --------------- ----------------- Robert E. Allen 0 0 476,951/ 7,108,150/ 260,354 314,450 Victor A. Pelson 0 0 151,545/ 1,510,986/ 165,879 220,115 Jerre L. Stead 82,910 1,019,104 4,250/ 0/ 30,220 0 Alex J. Mandl 0 0 188,025/ 1,893,797/ 142,720 188,670 William B. Marx, Jr. 0 0 144,486/ 1,469,249/ 161,470 220,115
LONG-TERM INCENTIVE PLANS--AWARDS IN 1994
Estimated Future Payouts of Performance Shares Under Non-Stock Price Performance Based Plan (2) Number of Period Until ------------------------------------ Performance Maturation Threshold Target Maximum Name (1) Shares or Payout (#) (#) (#) - ---------------------- ------------ -------------- ---------- -------- ---------- Robert E. Allen 21,114 1994-1996 5,279 21,114 31,671 Victor A. Pelson 10,047 1994-1996 2,512 10,047 15,071 Jerre L. Stead 8,783 1994-1996 2,196 8,783 13,175 23,000(3) 1994 2,875 23,000 23,000 Alex J. Mandl 8,783 1994-1996 2,196 8,783 13,175 William B. Marx, Jr. 8,783 1994-1996 2,196 8,783 13,175
34 Footnotes 1. Includes Chairman of the Board and Chief Executive Officer and the four other most highly compensated executive officers as measured by salary and bonus. 2. Payout of awards is tied to achieving specified levels of return-to-equity ("RTE"). The target amount will be earned if 100% of the targeted RTE rate is achieved. The threshold amount will be earned at the achievement of 83% of the targeted RTE rate and the maximum award amount will be earned at achieving 109% of the targeted RTE rate. If less than 83% of the targeted RTE rate is achieved, an award payout will not be earned. Awards will be distributed as common stock of the Company, or as cash in an amount equal to the value of those shares, or partly in common stock and partly in cash. However, if an executive's annual compensation is subject to the limit on tax deductibility, under Section 162(m) of the Code, in the last year of a performance period, then the executive shall receive an Other Stock Unit Award payout, in lieu of the performance share payout, and the value of the payout to each such executive for the performance period shall be (i) 0.13% of the Company's "Net Cash Provided by Operating Activities," as adjusted, for each year in the performance period, divided by the total number of executives receiving such payouts, or (ii) a lesser amount, based on factors, including targets for the Company's RTE established for performance shares for such performance period. 3. 12,179 of the 23,000 restricted shares vested in January, 1995 based on continued employment through 1994 and on the achievement of certain financial and other performance targets of AT&T Global Information Solutions in 1994. The remaining 10,821 of the 23,000 restricted shares were cancelled upon Mr. Stead's resignation. 35 OPTION GRANTS IN 1994
Individual Grants ----------------------------------------------------------------------- Number of Shares Grant Underlying % of Total Date Options Options Exercise Present Granted (2) Granted to Price Expiration Value (3) Name (1) # Employees ($/Sh) Date ($) -------------------- ------------ ----------- --------- ----------- ------------ Robert E. Allen 72,854 1.33 52.8125 1-4-04 850,935 Victor A. Pelson 34,629 .63 52.8125 1-4-04 404,467 Jerre L. Stead 30,220 .55 52.8125 1-4-04 352,970 Alex J. Mandl 30,220 .55 52.8125 1-4-04 352,970 William B. Marx, Jr. 30,220 .55 52.8125 1-4-04 352,970
Footnotes 1. Includes Chairman of the Board and Chief Executive Officer and the four other most highly compensated executive officers as measured by salary and bonus. 2. Options become exercisable one year after the grant date. 3. In accordance with Securities and Exchange Commission rules, the Black-Scholes option pricing model was chosen to estimate the grant date present value of the options set forth in this table. The Company's use of this model should not be construed as an endorsement of its accuracy at valuing options. All stock option valuation models, including the Black-Scholes model, require a prediction about the future movement of the stock price. The following assumptions were made for purposes of calculating the Grant Date Present Value: An option term of seven years, volatility at .1817, dividend yield at 2.98%, and interest rate at 5.61%. The real value of the options in this table depends upon the actual performance of the Company's stock during the applicable period. 36 PENSION PLANS The Company maintains the AT&T Management Pension Plan, a non-contributory pension plan which covers all management employees, including Messrs. Allen, Pelson, Mandl, and Marx. The normal retirement age under this plan is 65; however, retirement before age 65 can be elected under certain conditions. Under the AT&T Management Pension Plan, annual pensions are computed on an adjusted career average pay basis. The adjusted career average pay formula is the sum of (a) 1.6% of the average annual pay for the six years ending December 31, 1992, times the number of years of service prior to January 1, 1993, plus (b) 1.6% of pay subsequent to December 31, 1992. Only the basic salary is taken into account in the formula used to compute pension amounts. As a result of an amendment to the plan in 1989, an enhanced pension benefit is available to certain eligible employees. The enhanced pension benefit, which is calculated as of December 31, 1989, by adding five to the age and number of years of service of these employees, remains in effect until the employee's actual age, service, and compensation yield a greater pension benefit. Federal laws place limitations on pensions that may be paid from the pension trust related to the AT&T Management Pension Plan. Pension amounts based on the AT&T Management Pension Plan formula which exceed the applicable limitations will be paid as an operating expense. The Company also maintains the AT&T Non-Qualified Pension Plan. Under the plan, annual pensions for Messrs. Allen, Pelson, Mandl, Marx, and other senior managers are computed based primarily on actual annual bonus awards under the Company's Short Term Incentive Plan. Pension benefits under this plan will generally commence at the same time as benefits under the AT&T Management Pension Plan. The annual pension amounts payable under this plan are equal to the greater of the amounts computed under the Basic or Alternate Formula described below. Basic Formula: The sum of (a) 1.5% of the average of the actual annual bonus awards for the three-year period ending December 31, 1989, 37 times the number of years of service prior to January 1, 1990, plus (b) 1.6% of the actual annual bonus awards subsequent to December 31, 1989. Alternate Formula: The excess of (a) 1.7% of the adjusted career average pay, over (b) 0.8% of the covered compensation base, times years of service to retirement, minus the benefit calculated under the AT&T Management Pension Plan formula (without regard to limitations imposed by the Internal Revenue Code). For purposes of this formula, adjusted career average pay is determined by dividing the sum of the employee's total adjusted career income by the employee's actual term of employment at retirement. Total adjusted career income is the sum of (A) and (B), where (A) is the employee's years of service prior to January 1, 1993, multiplied by the sum of (i) the employee's average annual compensation (within the meaning of the AT&T Management Pension Plan) for the three-year period ending December 31, 1992, without regard to the limitations imposed by the Internal Revenue Code, and (ii) the average of the employee's actual annual bonus awards for the three-year period ending December 31, 1992, and (B) is the sum of the employee's actual compensation (within the meaning of the AT&T Management Pension Plan) after December 31, 1992, without regard to the limitations imposed by the Internal Revenue Code, and actual annual bonus awards subsequent to December 31, 1992. The covered compensation base used in this formula is the average of the maximum wage amount on which an employee was liable for social security tax for each year beginning with 1960 and ending with 1994. In 1994, the covered compensation base was $24,600. In 1993, an Alternative Minimum Formula ("AMF"), applicable to active senior managers with five years of service who are participants in the AT&T Non-Qualified Pension Plan as of December 31, 1993, was established. The annual pension amount payable under the AMF is equal to the greater of the amounts computed under formulas A and B plus an additional percent increase factor as described below: 38 Formula A: The sum of (a) 1.5% of the average of the total compensation for the three-year period ending December 31, 1992, times the number of years of service prior to January 1, 1993, plus (b) 1.6% of the total compensation from January 1, 1993, to December 31, 1993. For purposes of this Formula A, total compensation shall be basic salary plus actual annual bonus awards. The pension amounts resulting from this Formula A will be reduced to reflect retirements prior to age 55. Formula B: The excess of (a) 1.7% of the adjusted career average pay, over (b) 0.8% of the covered compensation base, times years of service to December 31, 1993. For purposes of this Formula B, adjusted career average pay is determined by dividing the sum of the employee's total adjusted career income used for purposes of Formula A, by the employee's actual term of employment to December 31, 1993. The covered compensation base used in this Formula B is the average of the maximum wage amounts on which an employee was liable for social security tax for each year beginning with 1959 and ending with 1993. In 1993, the covered compensation base was $22,800. The pension amounts resulting from this Formula B will be reduced to reflect retirements prior to age 60. An additional percent increase factor based on age and service is applied to the pension amount resulting from the higher of Formula A or B. The total AMF pension results in a fixed benefit and such amount is reduced by the amount payable under the AT&T Management Pension Plan. It is anticipated that after 1997, a senior manager's normal pension increases resulting from additional age and service as well as possible future pension plan amendments could cause the regular accrued pension benefit to exceed the fixed AMF benefit. Pensions resulting from the AMF will be payable under the AT&T Non-Qualified Pension Plan. As part of his employment agreement, the Company entered into a supplemental pension arrangement with Mr. Mandl. Pursuant to such 39 arrangement, if employment is terminated on or after age 55 for any reason other than Company-initiated termination for "cause," as defined, Mr. Mandl will be entitled to immediate pension benefits based on the higher of (1) a pension determined by his actual net credited service and calculated under the then-existing Company qualified and non-qualified pension formulas, but without reference to age and service eligibility requirements, or (2) a fixed minimum monthly pension schedule which ranges from $30,432 at age 55 to $74,459 at age 65. Pension benefits payable under this arrangement will be paid out of the Company's operating income, and will be offset by all amounts actually received by Mr. Mandl under any other Company qualified or non- qualified retirement plan or arrangement. In addition, Mr. Mandl will be entitled to certain other post-retirement benefits that are generally made available to retired executive officers and service pension-eligible senior managers from time to time. In the event Mr. Mandl's employment is terminated by the Company for any reason other than for "cause," as defined, prior to age 55, he will be eligible for a severance benefit equal to 200% of his then base salary under the provisions of his employment agreement. Senior managers (including Mr. Mandl) and certain other management employees who are hired at age 35 or over are covered by a supplemental AT&T Mid-Career Pension Plan. For specified managers retiring with at least five years in level, the plan provides additional pension credits equal to the difference between age 35 and their maximum possible years of service attainable at age 65, but not to exceed actual net credited service, at approximately one-half the rate in the AT&T Management Pension Plan. Pension amounts under either the AT&T Management Pension Plan formula, the AT&T Non-Qualified Pension Plan, or the AT&T Mid-Career Pension Plan are not subject to reductions for social security benefits or other offset amounts. If Messrs. Allen, Pelson, and Marx continue in the positions given above and retire at the normal retirement age of 65, the estimated annual pension amounts payable under the AT&T Management Pension Plan formula and the AT&T Non-Qualified Pension Plan would be $1,647,300, $759,900, and $717,700, respectively. For Mr. Mandl, the estimated annual pension amounts payable under the AT&T Management Pension 40 Plan formula, the AT&T Non-Qualified Pension Plan, and the AT&T Mid-Career Pension Plan would be $754,200. Amounts shown are straight-life annuity amounts not reduced by a joint and survivorship provision which is available to these officers named. The Company has reserved the right to purchase annuity contracts to satisfy its unfunded obligations to any of these officers under the AT&T Non-Qualified Pension Plan. In the event the Company purchases an annuity contract for any officer, the pension payments for such officer will vary from that set forth above. Then there would be a tax gross-up payment to the officer and annuity benefits paid by the annuity provider will be reduced to offset the tax gross-up payment. The after-tax pension benefit will be the same as the after-tax benefit the participant would otherwise have received under the AT&T Non-Qualified Pension Plan. OTHER INFORMATION A Directors' and Officers' Liability Policy was renewed effective July 1, 1994, with Lloyds of London and other carriers. The policy insures AT&T for certain obligations incurred in the indemnification of its directors and officers under New York law or under contract and insures directors and officers when such indemnification is not provided by AT&T. The one-year policy's cost is $1,600,000. The cost of soliciting proxies in the accompanying form will be borne by the Company. In addition to solicitations by mail, a number of regular employees of the Company and of its subsidiaries may solicit proxies in person or by telephone. The Company also has retained Morrow & Co. to aid in the solicitation of proxies, at an estimated cost of $18,000 plus reimbursement of reasonable out-of-pocket expenses. The above notice and proxy statement are sent by order of the board of directors. Marilyn J. Wasser Vice President-Law and Secretary Dated: February 28, 1995 41 (Logo--AT&T) 32 Avenue of the Americas New York, NY 10013-2412 Recycled Paper P R O X Y AT&T LOGO AT&T Corp. 32 Avenue of the Americas, New York, NY 10013 This proxy is solicited on behalf of the Board of Directors for the Annual Meeting on April 19, 1995. - ------------------------------------------------------------------------------- The undersigned hereby appoints R.E. Allen, B.K. Johnson and D.S. Perkins, and each of them, proxies, with the powers the undersigned would possess if personally present, and with full power of substitution, to vote all common shares of the undersigned in AT&T Corp. at the annual meeting of shareholders to be held at the Washington State Convention and Trade Center in Seattle, Washington, at 9:30 a.m. on April 19, 1995, and at any adjournment thereof, upon all subjects that may properly come before the meeting, including the matters described in the proxy statement furnished herewith, subject to any directions indicated on the other side of this card. If no directions are given, the proxies will vote for the election of all listed nominees, in accord with the directors' recommendations on the other subjects listed on the other side of this card and, at their discretion, on any other matter that may properly come before the meeting. (If you have indicated any changes or voting limitations on this side of the card, please mark the "Special Attention" box on the other side.) This card also provides voting instructions for shares held in the dividend reinvestment plan and, if registrations are identical, shares held in the various employee stock purchase and savings plans as described in the proxy statement. Your vote for the election of directors may be indicated on the other side. Nominees are--R.E. Allen, M.K. Eickhoff, W.Y. Elisha, P.M. Hawley, C.A. Hills, B.K. Johnson, D. Lewis, D.F. McHenry, V.A. Pelson, D.S. Perkins, H.B. Schacht, M.I. Sovern, F.A. Thomas, J.D. Williams, and T.H. Wyman. Please sign on the other side and return promptly to P.O. Box 8872, Edison, NJ 08818-9241. If you do not sign and return a proxy, or attend the meeting and vote by ballot, your shares cannot be voted. Comments: _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ (If you have written in the above space, please mark the "Special Attention" box on the other side of this card.) Detach here from proxy voting card (THIS PAGE CONTAINS A MAP AND DIRECTIONS TO THE SHAREHOLDER MEETING) [X] Please mark your 8777 vote with an X. Directors recommend a vote "FOR" - -------------------------------- WITHHELD FOR ALL FROM ALL nominees nominees A. Election of [ ] [ ] Directors (page 7) FOR ALL EXCEPT the following nominee(s): _______________________________________ FOR AGAINST ABSTAIN B. Ratification [ ] [ ] [ ] of Auditors (page 14) C. McCaw Employee [ ] [ ] [ ] Stock Purchase Plan (page 14) Directors recommend a vote "AGAINST" the shareholder proposals regarding - ---------------------------------------- FOR AGAINST ABSTAIN 1. Political Contributions [ ] [ ] [ ] (page 19) 2. Provide Choice of [ ] [ ] [ ] Director Nominees (page 21) SPECIAL ATTENTION [ ] Mark here if you have written a comment on reverse. ANNUAL REPORT [ ] Mark here to discontinue extra annual report (page 3). ANNUAL MEETING [ ] Mark here if you plan to attend the annual meeting. SIGNATURE(S)_______________________________ DATE ______________ , 1995 Please sign this proxy as name(s) appears above and return it promptly whether or not you plan to attend the meeting. If signing for a corporation or partnership or as agent, attorney or fiduciary, indicate the capacity in which you are signing. If you do attend the meeting and decide to vote by ballot, such vote will supersede this proxy. Detach here from proxy voting card AT&T LOGO Admission Ticket - ------------------ Please present this ticket for admittance of shareholder(s) named above and a guest. See reverse for map of area. Annual Meeting of Shareholders Wednesday, April 19, 1995 Washington State Convention and Trade Center Exhibit Hall 4B 800 Convention Place Seattle, Washington - ----------------------- Agenda 8:00 a.m. Doors and Exhibit Areas Open 9:30 Introduction and Welcome Chairman's Remarks Election of Directors Ratification of Auditors Director Proposal Shareholder Proposals 11:00 Voting General Discussion Adjournment (noon) Hearing-amplification equipment and sign interpretation will be provided. EX-99 2 PLAN AMENDED AND RESTATED McCAW CELLULAR COMMUNICATIONS, INC. EMPLOYEE STOCK PURCHASE PLAN1 McCAW CELLULAR COMMUNICATIONS, INC., a corporation organized under the laws of the State of Delaware, hereby adopts this Amended and Restated McCaw Cellular Communications, Inc. Employee Stock Purchase Plan (the "Plan") as of January 1, 1995. The purposes of this plan are as follows: (1) To assist employees of McCaw Cellular Communications, Inc. and its subsidiary corporations in acquiring a stock ownership interest in AT&T Corp., parent of the Company pursuant to a plan which is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code of 1986, as amended. (2) To help employees provide for their future security and to encourage them to remain in the employment of the Company and its subsidiary corporations. 1. Definitions Whenever any of the following terms are used in the Plan with the first letter or letters capitalized, it shall have the following meaning unless the context clearly indicates to the contrary (such definitions to be equally applicable to both the singular and plural forms of the terms defined): (a) "Code" means the Internal Revenue Code of 1986, as amended. (b) "Committee" shall mean the committee appointed to administer the Plan pursuant to paragraph 12. (c) "Company" means McCaw Cellular Communications, Inc., a Delaware corporation. (d) "Date of Exercise" means with respect to any Option the last trading day of each month during the Option Period in which that Option was granted. - -------- * This document sets forth the Amended and Restated McCaw Cellular Communications, Inc. Employee Stock Purchase Plan and incorporates all amendments to the original Employee Stock Purchase Plan adopted on August 14, 1987. The amendments contained herein were adopted May 11, 1988, February 13, 1989, March 5, 1991, May 7, 1991, March 4, 1992, September 8, 1994, and February __, 1995. (e) "Date of Grant" means the date upon which an Option is granted, as set forth in paragraph 3(a). (f) "Eligible Compensation" means regular rate of pay, overtime pay, and commissions on the Date of Grant. (g) "Eligible Employee" means any employee who meets the following criteria: (1) the employee does not, immediately after the option is granted, own stock (as defined by Sections 423(b)(3) and 424(d) of the Code) possessing five percent or more of the total combined voting power or value of all classes of stock of the Company or of a Parent or Subsidiary of the Company; (2) the employee's customary employment is not 20 hours or less per week; (3) the employee's customary employment is for more than five months in any calendar year; and (4) the employee is either (a) employed by the Company or a Subsidiary of the Company on September 8, 1994 or (b) has completed six months of employment for the Company or any present or future Subsidiary of the Company. (h) "Option" means an option granted under the Plan to an Eligible Employee to purchase shares of Stock. (i) "Option Period" means with respect to any Option the period beginning upon the Date of Grant and ending on the June 30 or December 31 immediately following the Date of Grant. (j) "Option Price" has the meaning set forth in paragraph 4(b). (k) "Parent of the Company" means any corporation, other than the Company, in an unbroken chain of corporations ending with the Company if, at the time of the granting of the Option, each of the corporations, other than the Company, owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. (l) "Participant" means an Eligible Employee who has complied with the provisions of paragraph 3(b). (m) "Plan" means this Amended and Restated McCaw Cellular Communications, Inc. Employee Stock Purchase Plan. (n) "Plan Year" means the fiscal year beginning on January 1 and ending on December 31. (o) "Stock" shall mean shares of common stock, par value $1.00 per share, of AT&T Corp. (p) "Subsidiary of the Company" means any corporation, other than the Company, in an unbroken chain of corporations beginning with the Company, if at the time of the granting of the Option, each of the corporations, other than the last corporation, in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 2. Stock Subject to Plan Subject to the provisions of paragraph 10 (relating to adjustment upon changes in the Stock), the Stock which may be sold pursuant to options granted under the Plan shall not exceed in the aggregate 3,000,000 shares, and may be newly issued shares or reacquired shares or shares bought on the market for purposes of the Plan; provided, however, the additional 500,000 shares authorized by the board of directors of the Company on September 8, 1994 subject to shareholder approval shall only be sold pursuant to grants made on or after September 8, 1994, and the additional 2,000,000 shares authorized by the board of directors of AT&T Corp. on December 21, 1994 (subject to shareholder approval) shall only be sold pursuant to grants made on or after July 1, 1995. 3. Grant of Options (a) General Statement The Company may grant Options under the Plan to all Eligible Employees on September 8, 1994. Thereafter, Options may be granted on January 1 and/or July 1 of each Plan Year commencing July 1, 1995. The term of each Option shall end on the last trading day of the earlier of June or December immediately after the Option is granted. As of any Date of Exercise, the number of shares of Stock subject to each Option shall be the quotient of the payroll deductions authorized by each Participant during the Option Period in accordance with subparagraph (b) for the month ended on such Date of Exercise, divided by the Option Price of the Stock. (b) Election to Participate: Payroll Deduction Authorization Except as provided in subparagraph (e), an Eligible Employee may participate in the Plan only by means of payroll deduction. Each Eligible Employee who elects to participate in the Plan shall deliver to the Company during the calendar month next preceding a Date of Grant a written payroll deduction authorization in a form prepared by the Company whereby the Eligible Employee gives notice of his or her election to participate in the Plan as of the next following Date of Grant, and whereby the Eligible Employee designates a stated whole percentage (or amount) equaling from 2% to 10% of his or her Eligible Compensation to be withheld on each payday. The stated amount may not be less than a sum which will result in the payment into the Plan of at least $5.00 each payday and may not exceed the limitation stated in subparagraph (d). (c) Changes in Payroll Authorization The payroll deduction authorization referred to in subparagraph (b) may be changed effective on January 1 or July 1 of each Plan Year or at such other time as may be designated by the Committee. (d) $25,000 Limitation No Eligible Employee shall be permitted to purchase the Stock under the Plan or under any other employee stock purchase plan of the Company or of any Parent or Subsidiary of the Company which is intended to qualify under Section 423 of the Code, at a rate which exceeds $25,000 in fair market value of Stock (determined at the time the option is granted) for each calendar year in which any such Option granted to such Participant is outstanding at any time. (e) Leaves of Absence During leaves of absence approved by the Company and meeting the requirements of Treasury Regulation Section 1.421-7(h)(2) a Participant may continue participation in the Plan by making cash payments to the Company on his or her normal paydays equal to the amount of his or her payroll deductions under the Plan had the Participant not taken a leave of absence. 4. Exercise of Options (a) General Statement Each Participant automatically and without any act on his or her part will be deemed to have exercised his or her Option on each Date of Exercise to the extent that the balance then in the Participant's account under the Plan is sufficient to purchase at the Option Price whole and/or fractional shares of Stock subject to the Option. (b) Option Price Defined The option price per share of the Stock (the "Option Price") to be paid by each Participant on each exercise of his or her Option shall be an amount equal to 85% of the fair market value of a share of Stock as of the applicable Date of Exercise. The fair market value of a share of Stock as of a given date shall be the closing price of a share of Stock on the principal exchange on which the Stock is then trading, if any, on such date, or, if the Stock was not traded on such date, then on the next preceding trading day during which a sale occurred. (c) Delivery of Share Certificates As soon as practicable after each Date of Exercise, the Company will cause to be delivered to each Participant a certificate, or its equivalent, issued in his or her name for the number of shares of the Stock with respect to which his or her Option was exercised and for which the Participant has paid the Option Price. In the event the Company is required to obtain from any commission or agency authority to issue any such certificate, or its equivalent, the Company will seek to obtain such authority. The inability of the Company to obtain from any such commission or agency authority which counsel for the Company deems necessary for the lawful issuance of any such certificate, or its equivalent, shall relieve the Company from liability to any Participant except to return to him or her the amount of the balance in his or her account. 5. Withdrawal From the Plan (a) General Statement Any Participant may withdraw from the Plan at any time. A Participant who wishes to withdraw from the Plan must deliver to the Company a notice of withdrawal in a form prepared by the Company. The Company, as soon as practicable following receipt of a Participant's notice of withdrawal, will refund to the Participant the amount of the balance in his or her account under the Plan. Upon receipt of a Participant's notice of withdrawal from the Plan, automatically and without any further act on the part of the Participant, his or her payroll deduction authorization, his or her interest in the Plan, and his or her Option under the Plan shall terminate. (b) Eligibility Following Withdrawal A Participant who withdraws from the Plan shall be eligible to participate again in the Plan upon expiration of the Option Period during which he or she withdrew. 6. Termination of Employment (a) Termination of Employment Other Than by Retirement or Death If the employment of a Participant terminates other than by retirement or death, his or her participation in the Plan automatically and without any act on the Participant's part shall terminate as of the date of the termination of his or her employment. As soon as practicable after such Participant's termination of employment, the Company will refund to the Participant the amount of the balance in his or her account under the Plan. Upon a participant's termination of employment, his or her interest in the Plan and his or her Option under the Plan shall terminate. (b) Termination by Retirement A Participant who retires may, by written notice to the Company, request payment of the balance in his or her account under the Plan, in which event the Company shall make such payment as soon as practicable after receiving such notice; upon receipt of such notice, the Participant's interest in the Plan and his or her Option under the Plan shall terminate. If the Company does not receive such notice prior to the next Date of Exercise, such Participant's Option will be deemed to have been exercised on such Date of Exercise. (c) Termination by Death If the employment of a Participant is terminated by his or her death, the executor of the Participant's will or the administrator of the Participant's estate, by written notice to the Company, may request payment of the balance in the Participant's account under the Plan, in which event the Company shall make such payment as soon as practicable after receiving such notice; upon receipt of such notice, the Participant's interest in the Plan and his or her Option under the Plan shall terminate. If the Company does not receive such notice prior to the Date of Exercise, such Participant's Option will be deemed to have been exercised on such Date of Exercise. 7. Restriction Upon Assignment An Option granted under the Plan shall not be transferable otherwise than by will or the laws of descent and distribution, and is exercisable during the Participant's lifetime only by the Participant. Except as provided in Section 6(c), an Option may not be exercised to any extent except by the Participant. The Company will not recognize and shall be under no duty to recognize any assignment or purported assignment by a Participant, other than by will or the laws of descent and distribution, of the Participant's interest in the Plan or of his or her Option or of any rights under his or her Option. 8. No Rights of Stockholder Until Certificate Issued With respect to shares of Stock subject to an Option, a Participant shall not be deemed to be a stockholder of the Company, and he or she shall not have any of the rights or privileges of a stockholder. A Participant shall have the rights and privileges of a stockholder of the Company when, but not until, a certificate, or its equivalent, for shares has been issued to the Participant following exercise of his or her Option. 9. Changes in the Stock; Adjustments of an Option Whenever any change is made in the number of shares of Stock or to the number of Options outstanding under the Plan, by reason of stock dividend or by reason of subdivision, combinations, or reclassification of shares, appropriate action will be taken by the board of directors of the Company and of AT&T Corp. to adjust accordingly the number of shares of Stock subject to the Plan and the number and the Option Price of shares of Stock subject to the Options outstanding under the Plan. 10. Use of Funds; No Interest Paid All funds received or held by the Company under the Plan will be included in the general funds of the Company free of any trust or other restriction and may be used for any corporate purpose. No interest will be paid to any Participant or credited to his or her account under the Plan with respect to such funds. 11. Amendment of the Plan The board of directors of the Company may amend, suspend, or terminate the Plan at any time and from time to time; provided that approval by the vote of the holders of more than 50% of the outstanding shares of the Stock entitled to vote shall be required to amend the Plan (i) to change the number of shares of Stock reserved for the Options under the Plan, (ii) to decrease the Option Price below a price computed in the manner stated in paragraph 4(b), or (iii) to alter the requirements for eligibility to participate in the Plan. 12. Administration by Committee; Rules and Regulations (a) Appointment of Committee The Plan shall be administered by the Committee, which shall be composed of one or more members of the board of directors of the Company. Each member of the Committee shall serve for a term commencing on the date specified by the board of directors of the Company and continuing until he or she dies or resigns or is removed from office by such board of directors. (b) Duties and Powers of Committee It shall be the duty of the Committee to conduct the general administration of the Plan in accordance with its provisions. The Committee shall have the power to interpret the Plan and the Options and to adopt such rules for the administration, interpretation, and application of the Plan as are consistent therewith and to interpret, amend, or revoke any such rules. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan. (c) Majority Rule The Committee shall act by a majority of its members in office. The Committee may act either by vote at a meeting or by a memorandum or other written instrument signed by a majority of the Committee. (d) Compensation; Professional Assistance; Good Faith Actions Members of the Committee shall receive such compensation for their services as members as may be determined by the board. All expenses and liabilities incurred by members of the Committee in connection with the administration of the Plan shall be borne by the Company. The Committee may, with the approval of the board, employ attorneys, consultants, accountants, appraisers, brokers, or other persons. The Committee, the Company and its officers and directors shall be entitled to rely upon the advice, opinions, or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon all Participants, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Options, and all members of the Committee shall be fully protected by the Company in respect to any such action, determination or interpretation. 13. No Rights as an Employee Nothing in the Plan shall be construed to give any person (including any Eligible Employee or Participant) the right to remain in the employ of the Company or a Parent or Subsidiary of the Company or to affect the right of the Company and Parents and Subsidiaries of the Company to terminate the employment of any person (including any Eligible Employee or Participant) at any time with or without cause. 14. Merger, Acquisition or Liquidation of the Company In the event of the merger or consolidation of the Company into another corporation, the acquisition by another corporation of all or substantially all of the Company's assets or 80% or more of the Company's then outstanding voting stock or the liquidation or dissolution of the Company, the Date of Exercise with respect to outstanding Options shall be the business day immediately preceding the effective date of such merger, consolidation, acquisition, liquidation or dissolution unless the Committee shall, in its sole discretion, provide for the assumption or substitution of such Options in a manner complying with Section 424(a) of the Code. In the event of the merger or consolidation of AT&T Corp. into another corporation, the acquisition by another corporation of all or substantially all of AT&T Corp.'s assets or 80% or more of AT&T Corp.'s then outstanding voting stock or the liquidation or dissolution of AT&T Corp., the Date of Exercise with respect to outstanding Options shall be the business day immediately preceding the effective date of such merger, consolidation, acquisition, liquidation or dissolution unless the Committee shall, with the consent of the board of directors of AT&T Corp. (or its delegate), provide for the assumption or substitution of such Options in a manner complying with Section 424(a) of the Code. 15. Term; Approval by Stockholders No Option may be granted during any period of suspension or after termination of the Plan, and in no event may any Option be granted under the Plan after December 31, 1999. The Plan will be submitted for the approval of AT&T Corp.'s stockholders within 12 months after December 21, 1994. Options may be granted prior to such stockholder approval, provided, however, that such Options shall not be exercisable prior to the time when the Plan is approved by the stockholders; provided, further, that if such approval has not been obtained by the end of said 12-month period, all Options previously granted under the Plan shall thereupon be canceled and become null and void. 16. Effect Upon Other Plans The adoption of the Plan shall not affect any other compensation or incentive plans in effect for the Company or any Parent or Subsidiary of the Company. Nothing in this Plan shall be construed to limit the right of the Company or any Parent or Subsidiary of the Company (a) to establish any other forms of incentives or compensation for employees of the Company or any Parent or Subsidiary of the Company or (b) to grant or assume options otherwise than under this Plan in connection with any proper corporate purpose, including, but not by way of limitation, the grant or assumption of options in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, firm or association. 17. Notices Any notice to be given under the terms of the Plan to the Company shall be addressed to the Company in care of its Secretary and any notice to be given to the Employee shall be addressed to the Employee at his or her last address as reflected in the Company's records. By a notice given pursuant to this Section, either party may hereafter designate a different address for notices to be given to it or the Employee. Any notice which is required to be given to the Employee shall, if the Employee is then deceased, be given to the Employee's personal representative if such representative has previously informed the Company of his or her status and address by written notice under this Section. Any notice shall have been deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the Untied States Postal Services. 18. Titles Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan. -----END PRIVACY-ENHANCED MESSAGE-----