-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GTzKCJJ0vwH7e/85UBLdjy4RlVZ48FOX2QnOv8OuNNLx2hzA9He466gnEhRl7Ykm CJGYZCFghTC30YpDMH9wwA== 0000950146-96-000262.txt : 19960228 0000950146-96-000262.hdr.sgml : 19960228 ACCESSION NUMBER: 0000950146-96-000262 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960417 FILED AS OF DATE: 19960226 SROS: BSE SROS: CSX 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: 96525468 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 1996 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT [AT&T LOGO] - ------------------ 1996 Notice of Annual Meeting and Proxy Statement - ------------------ Wednesday, April 17, 1996 at 9:30 A.M. local time James L. Knight International Center Miami Convention Center 400 Southeast 2nd Avenue Miami, Florida NOTICE OF MEETING The 111th Annual Meeting of Shareholders of AT&T Corp. (the "Company") will be held at the James L. Knight International Center, Miami Convention Center, 400 Southeast 2nd Avenue, Miami, Florida, on Wednesday, April 17, 1996, at 9:30 A.M. local time, for the following purposes: (bullet) To elect directors for the ensuing year (page 7); (bullet) To ratify the appointment of auditors to examine the Company's accounts for the year 1996 (page 13); (bullet) To approve the AT&T 1996 Employee Stock Purchase Plan (page 13); (bullet) To act upon such other matters, including shareholder proposals (beginning on page 17), as may properly come before the meeting. Holders of common shares of record at the close of business on February 27, 1996, will be entitled to vote with respect to this solicitation. Marilyn J. Wasser Vice President - Law and Secretary February 27, 1996 [AT&T LOGO] 32 Avenue of the Americas New York, NY 10013-2412 ROBERT E. ALLEN Chairman of the Board February 27, 1996 Dear Shareholder: It is a pleasure to invite you to your Company's 1996 Annual Meeting in Miami, Florida, on Wednesday, April 17, beginning at 9:30 A.M. local time, at the James L. Knight International Center. This will be AT&T's 111th Annual Meeting of Shareholders and it marks a time of important transitions for the Company and its investors. I hope that those who find the time and place convenient will attend the meeting. An admission ticket, which will be required, is attached to the proxy card. The Center is fully accessible to disabled persons, and we will provide hearing amplification and sign interpretation for our hearing- impaired shareholders. 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. Thank you for your interest. Sincerely, /s/ R. E. Allen 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 27, 1996, to holders of common shares in connection with the solicitation of proxies by the board of directors for the 1996 Annual Meeting of Shareholders in Miami, Florida. Proxies are solicited to give all shareholders of record at the close of business on February 27, 1996, 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 marked on the proxy card 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. VOTING SHARES HELD IN DIVIDEND REINVESTMENT AND SAVINGS PLANS 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, 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 shares in the above-named plans are not returned, those shares will not be voted except for the AT&T Long Term Savings and Security Plan and the AT&T Long Term Savings and Security Employee Stock Ownership Trust where shares will be voted by the trustees of those plans. 2 Shares allocated to the accounts of participants in the Savings Plan of NCR Corporation, a wholly owned subsidiary of AT&T, may be voted through separate participant direction cards that will be mailed to participants in the plan. If a participant also owns shares outside the plan, the participant must return both the proxy card and the participant direction card. The trustee of the plan will vote the number of shares allocated to a participant's account in accordance with the directions on the participant direction card if the card is duly signed and received by April 10, 1996. Allocated shares for which the trustee receives no instructions and all unallocated shares will be voted by the trustee. ANNUAL MEETING ADMISSION 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 3 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. On January 1, 1996, there were 1,596,005,351 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 12 meetings in 1995; the committees held 23 meetings. The average attendance in the aggregate of the total number of meetings of the board and the total number of committee meetings was 97%. 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 five times in 1995. 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 33. The committee, which consists of five non-employee directors, met six times in 1995. 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 three times in 1995. The committee recommended this year's candidates at the January 1996 board meeting. In recommending board candidates, this committee seeks individuals of proven judgment and competence who are outstanding in their respective fields; 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%. 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. 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. Directors who are also employees of the Company or a subsidiary of the Company receive no compensation for serving as directors. 6 ELECTION OF DIRECTORS (ITEM A ON PROXY CARD) The Proxy Committee intends to vote for the election of the eleven 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, 1996. As reported previously, AT&T has announced plans to separate into three publicly traded companies: a communications services company; a systems and technology company; and a transaction- intensive computer company. To facilitate a smooth transition to the new structure and to ensure continuity of leadership and board expertise, certain of the directors elected to the AT&T board at the 1995 annual meeting will be joining the board of the systems and technology company, and will not stand for election to the AT&T board. 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 [Picture Box] Corporation; and PepsiCo, Inc. Director of AT&T since 1984; Chairman of the Executive and Proxy Committees. Age 60. KENNETH T. DERR, Chairman and Chief Executive Officer of Chevron Corporation (international oil company) since 1989. [Picture Box] Director of Chevron Corporation; Citicorp; and Potlatch Corporation. Director of AT&T since December 1995. 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.; [Picture Box] Pharmacia & Upjohn, Inc.; and Tenneco Inc. Director of AT&T since 1987; member of the Audit and Corporate Public Policy Committees. Age 56. WALTER Y. ELISHA, Chairman since 1983 and Chief Executive Officer since 1981 of Springs Industries, Inc. (textile manufacturing). Director of Springs Industries, Inc. and [Picture Box] Cummins Engine Company, Inc. Director of AT&T since 1987; member of the Compensation and Finance Committees and the Committee on Directors. Age 63. 8 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 [Picture Box] 1974; member of the Executive, Corporate Public Policy, and Proxy Committees, and the Committee on Employee Benefits. Age 66. RALPH S. LARSEN, Chairman and Chief Executive Officer of Johnson & Johnson (pharmaceutical, medical, and consumer products) since 1989. Director of Johnson & Johnson; The [Picture Box] New York Stock Exchange; and Xerox Corporation. Director of AT&T since December 1995. Age 57. ALEX J. MANDL, President and Chief Operating Officer of AT&T since January 1996. Executive Vice President of AT&T and Chief Executive Officer of AT&T Communications Services Group (1993-1995). Chief Financial Officer and Group [Picture Box] Executive of AT&T (1991-1993). Chairman and Chief Executive Officer of Sea-Land Services, Inc. (1988-1991). Director of Warner-Lambert Company. Director of AT&T since January 1996. Age 52. DONALD F. MCHENRY, President of IRC Group (international relations consultants) since 1981; University Research Professor of Diplomacy and International Relations, [Picture Box] 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 59. 9 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; and Warner-Lambert [Picture Box] Company. Director of AT&T since 1984; Chairman of the Audit Committee; member of the Compensation Committee. Age 64. 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 [Picture Box] Financial Services, Inc.; Rockefeller & Co.; Therapeutic Antibodies Inc.; Thrift Drug, Inc.; and Warner-Lambert Company. Director of AT&T since 1984; Chairman of the Finance Committee; member of the Executive and Compensation Committees. Age 69. THOMAS H. WYMAN, Chairman of S.G. Warburg & Co. Inc. since 1992 and Vice Chairman of S.G. Warburg Group plc (1993- 1995) (investment banking). Chairman of UB Investments US Inc. (food products). Chairman and Chief Executive Officer of CBS Inc. (1983-1986). William H. Donaldson Faculty Fellow, Yale School of Management [Picture Box] (1987-1989). Director of General Motors Corporation, Hughes Electronics Corp., United Biscuits (Holdings) plc (Edinburgh); 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 66. 10 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, 1996, for (a) each director elected to the board in 1995 and each of the nominees for director; (b) each of the named officers (the "named officers" as defined in the Compensation Committee 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 ............. 716,482(3) 64,301 780,783 Kenneth T. Derr ............. 1,000 17 1,017 M. Kathryn Eickhoff ......... 3,000 408 3,408 Walter Y. Elisha ............ 8,619 1,858 10,477 Philip M. Hawley ............ 1,000(4) 1,440 2,440 Carla A. Hills ............. 400 3,061 3,461 Belton K. Johnson .......... 6,016 252 6,268 Ralph S. Larsen ............. 1,000 135 1,135 Drew Lewis .................. 4,000 252 4,252 Alex J. Mandl ............... 283,235(5) 2,227 285,462 Donald F. McHenry .......... 653 473 1,126 Victor A. Pelson ............ 161,749(6) 10,179 171,928 Donald S. Perkins .......... 2,254(7) 252 2,506 Henry B. Schacht ............ 1,055 1,584 2,639 Michael I. Sovern .......... 1,200 252 1,452 Franklin A. Thomas .......... 1,110 2,511 3,621 Joseph D. Williams .......... 20,000 252 20,252 Thomas H. Wyman ............. 1,000 842 1,842 (b) William B. Marx, Jr. ....... 150,396(8) 12,406 162,802 Richard W. Miller .......... 71,481(9) 0 71,481 (c) Directors and Executive Officers as a Group ..... 5,176,964(10) 134,517 5,311,481
11 FOOTNOTES 1. No individual director or 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 631,766 shares which may be acquired within 60 days pursuant to stock options and 12,000 restricted shares awarded under employee incentive compensation plans. 4. Mr. Hawley disclaims beneficial ownership of 455 common shares held by Mrs. Hawley. 5. Includes beneficial ownership of 268,573 shares which may be acquired within 60 days pursuant to stock options awarded under employee incentive compensation plans. 6. Includes beneficial ownership of 157,913 shares which may be acquired within 60 days pursuant to stock options awarded under employee incentive compensation plans. 7. Mr. Perkins as an investment company trustee also has shared voting and investment power over 3,251,450 common shares. 8. Includes beneficial ownership of 147,238 shares which may be acquired within 60 days pursuant to stock options awarded under employee incentive compensation plans. 9. Includes beneficial ownership of 62,187 shares which may be acquired within 60 days pursuant to stock options awarded under employee incentive compensation plans. 10. Includes beneficial ownership of 1,894,585 shares which may be acquired within 60 days pursuant to stock options awarded under employee incentive compensation plans as well as 3,251,450 shares over which they have sole or shared voting and investment power as trustee. 12 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 1996. 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 requires 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 1995, 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 AT&T 1996 EMPLOYEE STOCK PURCHASE PLAN (ITEM C ON PROXY CARD) In December 1995, the board adopted, subject to shareholder approval, the AT&T 1996 Employee Stock Purchase Plan (the "Plan"). If approved by shareholders, the Plan provides eligible employees (defined below) with an opportunity to purchase AT&T common stock (the "Common Stock") through payroll deductions. The Plan is intended to assist eligible employees in acquiring a stock ownership interest in the Company pursuant to a plan that is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code") to help eligible employees provide for their future security and to encourage them to remain in the employment of the Company and participating subsidiaries. 13 SHARES RESERVED FOR THE PLAN The aggregate number of shares of Common Stock which may be purchased under the Plan shall not exceed 50 million, subject to adjustment in the event of stock dividends, stock splits, combination of shares, recapitalizations, or other changes in the outstanding Common Stock. Any such adjustment will be made by the board. Shares issued under the Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares. ELIGIBLE PARTICIPANTS Full-time employees of the Company (or a subsidiary designated by the Company) are eligible if they meet certain conditions. To be eligible the employee must have completed six months of employment and the employee's customary employment must be greater than 20 hours per week. Approximately 200,000 employees would have been eligible to participate as of December 31, 1995. MATERIAL FEATURES OF THE PLAN Beginning July 1, 1996, the Company may make grants of options on January 1 and/or July 1 of each year the Plan is in effect or on such other date as the Committee (as defined herein) shall designate. Each option period shall last for six months ending on the June 30 or December 31 immediately following the grant of options or on such dates as the Committee determines. Each eligible employee on a date of exercise shall be entitled to purchase shares of Common Stock at a purchase price equal to 85% of the average of the reported highest and lowest sale prices of shares of Common Stock on the New York Stock Exchange on the applicable date of exercise. Dates of exercise shall take place on the last day of each month Common Stock is traded on the New York Stock Exchange during the applicable option period. Payment for shares of Common Stock purchased under the Plan will be made by authorized payroll deductions from an eligible employee's Eligible Compensation (as defined herein) or, when authorized by the Committee, an eligible employee may pay an equivalent amount for such shares. "Eligible Compensation" means 14 an eligible employee's total regular compensation payable from the Company or a participating subsidiary of the Company during an option period. Eligible employees who elect to participate in the Plan will designate a stated whole percentage equaling at least 1%, but no more than 10% of Eligible Compensation, to be deposited into a periodic deposit account. On each date of exercise, the entire periodic deposit account of each participant in the Plan is used to purchase whole and/or fractional shares of Common Stock. The Company shall maintain a stock purchase account for each participant to reflect the shares of Common Stock purchased under the Plan by each participant. No participant in the Plan is permitted to purchase Common Stock under the Plan at a rate that exceeds $25,000 in fair market value of Common Stock, determined at the time options are granted, for each calendar year. All funds received by the Company from the sale of Common Stock under the Plan may be used for any corporate purpose. NEW PLAN BENEFITS It is not possible to determine how many eligible employees will participate in the Plan in the future. Therefore, it is not possible to determine with certainty the dollar value or number of shares of Common Stock that will be distributed under the Plan. The Company anticipates, however, that on the average approximately 10 million shares of Common Stock will be distributed annually during the five- year term of the Plan. Based on a per share price of $645/8 (the average of the reported highest and lowest sale prices for Common Stock on the New York Stock Exchange on December 29, 1995), the benefits of the Plan during 1995 would have been as follows: AT&T 1996 EMPLOYEE STOCK PURCHASE PLAN
NAME DOLLAR VALUE ($) NUMBER OF SHARES ---- --------------- ---------------- Robert E. Allen ........ 3,750 387 Victor A. Pelson ....... 3,750 387 Alex J. Mandl ........... 3,750 387 William B. Marx, Jr. .... 3,750 387 Richard W. Miller ..... 3,750 387 Executive Group ........ 41,250 4,257 Non-Executive Officer Employee Group ....... 96,896,233 9,995,743
15 TAX TREATMENT The Plan is intended to qualify as an employee stock purchase plan within the meaning of Section 423 of 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, or (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 a capital gain or loss, either short-term or long-term, depending on the holding period for such shares. In such event, the Company (or the subsidiary by which the employee is employed) will not be entitled to any tax 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 a capital gain or loss, either short-term or long-term, depending on the holding period for such shares. In the event of a disposition within such two-year or one-year period, the Company (or the subsidiary by which the employee is employed) will be entitled to a tax deduction from income equal to the amount the employee is required to include in income as a result of such disposition. 16 An employee who is a nonresident of the United States will generally not be subject to the U.S. federal income tax rules described above with respect to the shares of Common Stock purchased under the Plan. PLAN ADMINISTRATION AND TERMINATION The board of directors of the Company, or its delegate, shall appoint a committee (the "Committee"), which shall be composed of one or more employees, to administer the Plan on behalf of the Company. The Committee may delegate any or all of the administrative functions under the Plan to such individuals, subcommittees, or entities as the Committee considers appropriate. The Committee may adopt rules and procedures not inconsistent with the provisions of the Plan for its administration. The Committee's interpretation and construction of the Plan is final and conclusive. The board may at any time, or from time to time, alter or amend the Plan in any respect, except that, without approval of the shareholders of AT&T, no amendment may increase the number of shares reserved for purchase, or reduce the purchase price per share under the Plan, other than as described above. The board shall have the right to terminate the Plan or any offering at any time for any reason. The Plan is anticipated to continue in effect through June 30, 2001. 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 AT&T 1996 EMPLOYEE STOCK PURCHASE PLAN. SHAREHOLDER PROPOSALS AT&T receives many suggestions from shareholders, some as formal shareholder proposals. All are given careful consideration. After discussion with Company representatives and clarification of the Company's position, many proposals are withdrawn. 17 Proponents of three 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 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 18 shareholders as a group and they are entitled to know how they are being spent. Last year the owners of 65,947,312 shares, representing approximately 6.3% of shares voting, voted FOR this proposal. "If you AGREE, please mark your proxy FOR this resolution." -------------------- YOUR DIRECTORS RECOMMEND A VOTE AGAINST THE ABOVE PROPOSAL. Last year this proposal was defeated by more than 93% of the shares voted. Corporate contributions to political candidates are barred under federal law and many state laws. It is AT&T's policy to comply fully with the contribution laws of those jurisdictions. Employees may contribute their own funds to candidates or to political action committees ("PACs") that the Company has established for eligible management employees who wish to participate in the political process. Participation in the PACs is strictly voluntary and the PACs operate under the regulations of federal and state election laws. Under these laws, PACs must publicly disclose information about PAC contributions. Therefore, this information about political expenditures is already available without any additional disclosures by AT&T. AT&T corporate expenditures in support of federal and state government affairs activities on legislative and regulatory matters are a legitimate business expense. These activities assure that public officials understand AT&T's position on matters that are significant to the future of the Company. It is AT&T's policy to comply fully with all rules governing the proper accounting for these expenses on the Company's books. Moreover, some jurisdictions require that various types of lobbying expenses be publicly disclosed. Aside from complying with these legal disclosure obligations, AT&T does not disclose sub-segments of its business expenses and does not believe any useful shareholder purpose would be served by such disclosure. Because many political expenditures are already disclosed to government agencies, which make these disclosures publicly available, AT&T believes that the additional incremental disclosure required by this proposal is not justified by the time and costs associated with such disclosures. In addition, this proposal would 19 have the Company incur the costs of placing advertisements in newspapers even if "no such disbursements" were made. For the reasons given above, your directors believe that the proposal serves no useful purpose and would clearly result in a waste of Company resources. THEREFORE, YOUR DIRECTORS AGAIN RECOMMEND THAT SHAREHOLDERS VOTE AGAINST THIS PROPOSAL. -------------------- SHAREHOLDER PROPOSAL 2: Robert D. Morse, 212 Highland Ave., Moorestown, NJ 08057-2717, has submitted the following proposal: "That the company directors consider the discontinuance of all options, rights, SAR's, etc. after termination of existing agreements with management and directors. This does not include other employees of the company. "REASONS: These increased benefits have failed to produce the claim that they hold and retain qualified personnel. "Notice the increasing number of management persons who have left simply because of better corporate offers. "We as shareowners are being gradually undervalued with each issuance. Call a halt by voting YES! "Many pages of a proxy are expended to promote self-benefits; then there are unmentioned administrative costs of distribution and record keeping. "Executives and directors are compensated enough to buy stock on the open market, just as you and I, if we are so inclined. "Again: Vote YES!" -------------------- YOUR DIRECTORS RECOMMEND A VOTE AGAINST THE ABOVE PROPOSAL. As indicated in the compensation philosophy statement on pages 25 through 30 of this proxy statement, the Company's overall executive compensation levels are designed to be competitive with a select group of large, market-focused, progressive organizations with whom the Company competes for executive talent. These overall compensation levels have two basic components: (1) an annual component, made up of base salary and 20 bonus, and (2) a long-term component, which may include such features as performance shares and restricted stock, as well as stock options. Through this compensation program, the Company has successfully recruited new executives and retained executives key to the execution of its strategy. In a company as large as AT&T, it is inevitable that some individuals nonetheless will leave to join other firms. The fact is that, frequently, AT&T's highly talented performers are approached by other firms. To attract and retain a talented cadre of key executives, we must have a competitive compensation package. We disagree with Mr. Morse's assertion that the long-term component of our executive compensation program does nothing to minimize the loss of talented people and does not provide value for the shareowner. Absent such competitive compensation, AT&T would be at risk of losing far greater numbers of talented employees. In addition, from the perspective of creating shareowner value, these long-term components of the compensation plan are designed to create shareholder value because they are directly linked to an appreciation in the price of the Company's common shares over a number of years. THEREFORE, YOUR DIRECTORS RECOMMEND THAT SHAREHOLDERS VOTE AGAINST THIS PROPOSAL. -------------------- SHAREHOLDER PROPOSAL 3: Mark Seidenberg, P.O. Box 6102, Woodland Hills, CA 91365, has submitted the following proposal: "The stockowners hereby recommend that the Board of Directors adopt the following policies for all dealings with China and the former Soviet Union: 1. Goods or services produced in whole or part by slave or forced labor shall not be acceptable for delivery to the corporation, its subsidiaries, affiliates, or joint ventures. A suitable certificate of origin shall be required. 2. Goods provided by the corporation, its subsidiaries, affiliates, or joint ventures shall not be sold to or otherwise provided to any facility utilizing slave or forced labor. A suitable certificate of use shall be required. 21 3. The right of on-site inspection to determine the existence of slave or forced labor shall be vigorously pursued. 4. The corporation shall cooperate promptly, energetically, and fully with the United States government and any international organization in their laws or policies to discourage the use of slave or forced labor. "For purposes of this resolution, the term 'former Soviet Union' shall mean the countries of, and any combination thereof, Russia, Ukraine, Kazakhstan, Georgia, Armenia, Azerbaijan, Uzbekistan, Belarus (Byelorussia), Kyrgyzstan (Kirghizia), Moldova (Moldavia), Tajikistan (Tadzhikistan), and Turkmenistan (Turkmenia)." SUPPORTING STATEMENT: "The outrageous arrest, incarceration, trial, and expulsion of American Harry Wu last summer by the Chinese Communist regime put the spotlight on the immense Chinese laogai forced labor system. Mr. Wu has been exposing this hideous system for years. "Slave and forced labor are widespread in China and the former Soviet Union. China's laogai camps and factories include about 20,000,000 slave and forced laborers, and the gulags of the former Soviet Union have about 4,000,000. They produce a wide range of products, including sophisticated machinery and electronics, and much of it is intended for export. "AT&T has multi-million dollar deals with China and the former Soviet Union, but has no comprehensive anti-slave labor policies, as proposed by this resolution. Here's what AT&T's current policy lacks: - --No by-law or corporate article includes it. - --No board resolution includes it. - --No agreement with joint ventures or affiliates includes it. - --No specific written guideline for buyers, sales personnel, or other employees or agents covers all sales or purchases. - --No standard clause on it is in all purchase or sales contracts. - --No specific penalty for violations by customers, suppliers, employees, or agents exists. 22 - --No relevant certificates of origin (for all purchases) or use (for all sales) are utilized. - --No mention is made in AT&T's Code of Conduct booklet 'A Personal Responsibility' regarding the U.S. statute banning the importation of slave-made goods, while several other laws are specifically enumerated. "Much of AT&T's business is conducted overseas and is beyond the reach of U.S. law, but not beyond managerial control. "If you can imagine any convincing argument against having this anti-slave labor policy, I can't. But, believe me, AT&T's board will think of something. Please read the board's argument thoroughly to see if it has any substance, and then vote your own conscience." -------------------- YOUR DIRECTORS RECOMMEND A VOTE AGAINST THIS PROPOSAL. In 1994 this proposal was opposed by more than 94% of the shares voted. AT&T understands the international human rights concerns voiced in Mr. Seidenberg's proposal. AT&T believes that it can best contribute to continuing progress in human rights in China and the former Soviet Union by demonstrating and practicing them in the workplace and in its business dealings. In connection with our practices in the workplace and business dealings, AT&T has a new Code of Conduct entitled "Living Our Common Bond" that addresses most, if not all, of Mr. Seidenberg's concerns. This Code of Conduct contains AT&T's operating principles for its global business operations including China and the countries of the former Soviet Union. These principles apply to all persons associated with AT&T including its subsidiaries and affiliates. Under the Code of Conduct, all AT&T employees are to treat each person with respect and dignity, valuing individual as well as cultural differences. Additionally, the Code of Conduct requires that AT&T employees be honest and ethical in all of the Company's business dealings. Concerning the specific issue of slave or forced labor, the Company confirms that it does not use components manufactured by prison labor. Most of the components in our products are imported into China from the U.S., Europe, or elsewhere in Asia. For those 23 components that we procure in China, all of our suppliers must pass a procurement qualification process, which includes on-site inspection. AT&T undertakes substantial efforts to remain in compliance with all domestic and foreign laws, including laws relating to human rights, employment, and domestic and foreign customs and trade laws. In our view, the proposal is unnecessary because these issues are already addressed by current Company practices and policies and by applicable domestic and foreign laws. THEREFORE, YOUR DIRECTORS RECOMMEND THAT SHAREHOLDERS VOTE AGAINST THIS PROPOSAL. -------------------- 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 30,1996. 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. 24 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 board consisting of "outside directors" within the meaning of Section 162(m) of the Code (other than directors who are employees) is responsible for setting and administering salaries and the annual bonus for the officers listed on page 33 (the "named officers") based upon recommendations of the committee. On September 20, 1995, the AT&T CEO announced a strategic restructuring of AT&T designed to make AT&T more valuable to its customers, better able to focus on its markets and as a result more valuable to its shareowners. This restructuring will separate AT&T into three stand-alone companies each focused on a major segment of the global information industry: communications services (including wireless); communications systems and technology (from infrastructure to end-user); and transaction-intensive computing. To protect the AT&T talent base and ensure a smooth transition to this new environment the Compensation Committee approved certain special equity incentive/retention awards to key managers. The committee also recommended some changes in the 1995 and 1996 compensation plans that will govern management actions throughout the transition. These awards and changes are described in the appropriate sections of this report. The following report represents the actions of the committee and the board regarding compensation paid to the named officers during 1995. 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 80% of his total compensation structure. The other named officers have approximately 72% of their total compensation at risk in performance-driven incentive plans. AT&T targets executive compensation levels at the mean of a 25 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 described above for each of the Company's top five officers exceed the annual limit for deductibility under Section 162(m) of 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 markets to be surveyed and the flexibility of the compensation programs to facilitate strategic executive hires in global markets. The committee also has utilized these governing principles for review of officer performance. Among other things, these principles ensure that executive officer compensation is linked to corporate performance levels. 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. 26 (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 for the named officers to the board for approval. 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: (bullet) financial performance with a balance between long- and short-term earnings and revenue growth; (bullet) long-term strategic decisions; (bullet) initiatives to globalize the Company; (bullet) development of the leadership team; (bullet) response to a rapidly changing competitive environment; and (bullet) relative position to salary structure. Annual Bonus: The annual bonus for the Chairman and for the other 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 attitude measures are determined by an index called People Value Added ("PVA"). There are two components of the measurement: leadership of people and contributions to the 27 diversity of the Company. 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. For the first three quarters of 1995 the executive officers had approximately 90% of their annual bonus tied to a level of achievement of annual EVA, CVA, and PVA targets. In connection with the restructuring transition effort described above, for the fourth quarter of 1995, the senior executive incentive plan for annual bonuses was adjusted to provide 50% of the incentive on the EVA level of achievement and 50% based on successful accomplishment of the restructuring transition work, including the impact on PVA and CVA. The Compensation Committee approved senior executive performance criteria for the restructuring transition work to assure accountability for meeting shareowner, financial, customer, and employee objectives through the transition. (2) Long-Term Component: Performance Shares, Stock Options, and Restricted Stock To align shareholder and executive officer interests, the long- term 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 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 28 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. The committee recognizes that the Company's impending restructure will render obsolete the performance criteria established for the long-term cycles 1994-1996 and 1995-1997. To address this transition period, and the difficulty of setting long-term financial targets while the restructure is in process, the committee has recommended and approved that the criteria for performance periods 1994-1996 and 1995-1997 are deemed to have been met at the target level. The opportunity to earn a payout above 100% is eliminated, and all other terms and conditions of the award continue to apply. Stock Options and Restricted Stock: 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 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 29 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 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. Following the September 20, 1995 restructuring announcement, the Compensation Committee awarded special equity incentive/ retention grants of stock options and restricted stock units to key employees. These special grants are targeted to retain selected people during the three-to-four-year transition period of restructuring. The size of the grants ranges from 1.5 to 4.5 times total compensation and the options are governed by price performance terms. The grants vest after four years provided that aggressive price performance criteria have been satisfied. These special grants will replace the normal annual stock option grants these employees would have received for 1996. Details of these grants for named officers are on page 37. CEO COMPENSATION During 1995, the Company's most highly compensated officer was Robert E. Allen, Chairman of the Board and CEO. Mr. Allen's 1995 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 $2.2 billion. Because of adjustments for the NCR (formerly AT&T Global Information Solutions) 30 writedown, the 1995 EVA target was not met and the portion of the Chairman's annual bonus which relates to this target was reduced accordingly. The 1995 results for the PVA, CVA, and restructuring transition measurements were met. An AT&T performance share payout was made in 1995 based on an aggressive average RTE target for the performance period 1992-1994. The actual average return achieved was 99.7% of the RTE target and these results yielded a payout of 99.0% of the performance shares awarded to Mr. Allen at the beginning of 1992. During 1995, Mr. Allen also led AT&T in bold strategic actions, including: (bullet) Initiation of a massive restructuring of the Company into three stand-alone, global, strategically focused companies; (bullet) Strengthening of the Company's presence in the wireless arena by transitioning McCaw Cellular into AT&T Wireless Services, developing combined packages of wireless and other services, and acquiring licenses for new wireless services known as personal communication services, thereby extending AT&T's reach to 80 percent of the U.S. population; (bullet) Launching a new business, AT&T Solutions, to offer consulting, systems integration and outsourcing services to large global enterprises; (bullet) Reaching agreement on a new three-year labor contract, a process considered a model for building on common goals and shared commitment. THE COMPENSATION COMMITTEE Philip M. Hawley, Chairman Walter Y. Elisha Michael I. Sovern Joseph D. Williams Thomas H. Wyman 31 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)) [GRAPH] DOLLARS 1990 1991 1992 1993 1994 1995 Plot Points for AT&T CORP. 100 135 181 190 187 246 Plot Points for S&P 500 100 130 140 154 156 215 Plot Prints for PEER GROUP 100 108 112 135 142 202 ASSUMES $100 INVESTED ON DECEMBER 31, 1990 IN AT&T COMMON STOCK, THE S&P 500 INDEX, AND PEER GROUP COMMON STOCK TOTAL SHAREHOLDER RETURNS ASSUME REINVESTMENT OF DIVIDENDS FOOTNOTE 1. The peer group comprises the largest companies worldwide which compete against the Company in its two industry segments of information movement and management, and financial services and leasing. None of the companies competing with AT&T in information movement and management offers a fully comparable range of products and services, although each is widely recognized as a competitor of AT&T. The returns of each company have been weighted according to their respective stock market capitalization for purposes of arriving at a peer group average. The members of the peer group are as follows: American Express Company; Ameritech Corporation; Apple Computer, Inc.; Bell Atlantic Corporation; BellSouth Corporation; Cable & Wireless p.l.c.; Digital Equipment Corp.; GTE Corporation; Hewlett-Packard Co.; Intel Corp.; International Business Machines Corporation; L. M. Ericsson Telefonaktiebolaget; MCI Communications Corp.; Motorola, Inc.; NEC Corp.; Northern Telecom Limited; NYNEX Corporation; Pacific Telesis Group; SBC Communications Inc.; Sprint Corporation; Texas Instruments Incorporated; U S WEST, Inc.; and Xerox Corporation. ITT Corporation has been removed from the peer group because it restructured its business in 1995 into three new publicly owned companies. 32 SUMMARY COMPENSATION TABLE
--------------------------------------------------------------------------------------- ANNUAL COMPENSATION (2) LONG-TERM COMPENSATION (2) ------------------------------ ------------------------------ AWARDS PAYOUTS ------------------ -------- OTHER ANNUAL RESTRICTED ALL OTHER COMPEN- STOCK LTIP COMPEN- SATION AWARD(S) OPTIONS/ PAYOUTS SATION NAME AND SALARY BONUS (3) (4) SARS (5) (6) PRINCIPAL POSITION(1) YEAR ($) ($) ($) ($) (#) ($) ($) - ------------------------ ---- --------- --------- ------- ---------- -------- -------- --------- Robert E. Allen 1995 1,153,000 1,524,400 581,079 0 858,000 1,855,396 102,989 Chairman of the Board 1994 1,109,000 2,253,600 467,636 0 72,854 1,885,567 104,422 and CEO 1993 1,032,000 1,356,700 341,402 0 72,854 1,348,458 118,166 Victor A. Pelson 1995 732,000 538,600 221,540 0 44,055 523,783 61,497 Executive Vice 1994 685,000 972,600 173,555 0 34,629 502,640 57,278 President- 1993 606,334 489,600 127,267 0 34,629 226,726 56,422 AT&T and Chairman of the Global Operations Team Alex J. Mandl President and Chief 1995 670,000 543,700 79,047 2,540,000 438,484 403,424 70,391 Operating Officer of 1994 629,000 853,100 104,014 0 30,220 387,137 58,010 AT&T 1993 554,167 442,900 43,345 0 30,220 226,726 45,347 William B. Marx, Jr. 1995 659,000 440,500 176,782 571,500 138,484 523,783 62,500 Senior Executive Vice 1994 598,000 830,400 134,662 0 30,220 502,640 51,408 President (7) 1993 545,000 452,067 96,130 0 30,220 226,725 51,378 Richard W. Miller (8) Senior Executive Vice President-AT&T and 1995 595,000 466,200 82,658 1,333,500 281,281 439,703 133,022 Chief Financial 1994 572,000 712,800 50,881 0 25,880 421,951 131,652 Officer 1993 214,773 383,800 9,598 0 75,880 0 54,456 ------------------------------------------------------------------------------------------
33 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, and other earnings on long-term incentive compensation paid during the year, (c) tax payment reimbursements, and (d) the value of personal benefits and perquisites. 4. On December 31, 1995 Mr. Allen held an outstanding grant of restricted stock, and Messrs. Mandl, Marx, and Miller held outstanding grants of restricted stock units. Mr. Allen held 12,000 shares with a value of $777,000. On September 25, 1995, an award of restricted stock units was granted to Messrs. Mandl, Marx, and Miller as part of the Company's special equity incentive/retention program in the amounts of 40,000 units, 9,000 units, and 21,000 units, respectively, with a value at December 31, 1995 of $2,590,000, $582,750, and $1,359,750, respectively. These grants vest four years after the date of grant provided that aggressive price performance criteria have been satisfied and carry stringent penalties for competition and other adverse activities against the Company. The value at grant of these units is reflected in the table above. 5. Includes distribution in 1995 to Messrs. Allen, Pelson, Mandl, Marx, and Miller of performance shares whose three-year performance period ended December 31, 1994. The value of 12,000 AT&T Restricted Shares which vested in 1995 is also reflected in the payout for that year for Mr. Allen. 6. In 1995, includes (a) Company contributions to savings plans (Mr. Allen $6,000; Mr. Pelson $6,000; Mr. Mandl $6,000; Mr. Marx $6,000; and Mr. Miller $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 $58,883; Mr. Pelson $34,296; Mr. Mandl $45,413; Mr. Marx $38,756; and Mr. Miller $127,022), and (c) payments equal to lost Company savings match caused by IRS limitations (Mr. Allen $38,106; Mr. Pelson $21,201; Mr. Mandl $18,978; and Mr. Marx $17,744). 7. Mr. Marx will serve in this role for the to be separated systems and technology company. 8. Mr. Miller was hired by the Company and became an executive officer of the Company in August 1993. The compensation disclosed for 1993 relates only to a partial year. 34 AGGREGATED OPTION/STOCK APPRECIATION RIGHTS ("SAR") EXERCISES IN 1995 AND YEAR-END VALUES
VALUE OF UNEXERCISED IN-THE-MONEY OPTIONS/SARS OPTIONS/SARS AT YEAR END AT YEAR END (#) ($) ------------ -------------- SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/ NAME (1) ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE - -------------------- ----------------- ------------------ ------------ -------------- Robert E. Allen ..... 16,539 629,516 595,766 15,002,754 983,000 3,737,806 Victor A. Pelson ..... 86,696 2,004,221 143,228 2,408,519 131,555 1,562,522 Alex J. Mandl ........ 0 0 255,745 5,462,737 513,484 1,799,918 William B. Marx, Jr... 84,046 1,983,425 134,410 2,352,580 225,984 1,593,198 Richard W. Miller .... 0 0 51,760 344,528 331,281 815,690
LONG-TERM INCENTIVE PLANS--AWARDS IN 1995
ESTIMATED FUTURE PAYOUTS OF PERFORMANCE SHARES UNDER NON-STOCK PRICE PERFORMANCE BASED PLAN (2) NUMBER OF PERIOD UNTIL -------------------------- PERFORMANCE MATURATION TARGET NAME (1) SHARES OR PAYOUT (#) - -------------------- --------- ----------------- -------------------------- Robert E. Allen ..... 27,257 1995-1997 27,257 Victor A. Pelson .... 12,084 1995-1997 12,084 Alex J. Mandl ....... 10,555 1995-1997 10,555 William B. Marx, Jr.. 10,555 1995-1997 10,555 Richard W. Miller ... 8,704 1995-1997 8,704
35 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. In January 1995, the Performance Shares listed in the table were awarded. Normally, the payout of awards is tied to achieving specified levels of return-to-equity ("RTE"). The target amount would be earned if 100% of the targeted RTE rate is achieved. At its December 1995 meeting, the Compensation Committee recommended and approved that the performance criteria for the 1995-1997 performance cycle be deemed to have been met at the target level. This action was taken in acknowledgment that the Company's restructuring had rendered the original performance criteria inapplicable and of the difficulty of establishing revised criteria while the restructuring was in progress. 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. 36 OPTION GRANTS IN 1995
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 108,000} 49.9375 1/3/05 1,138,320 750,000} 6.46 63.5000 9/25/05 9,705,000 Victor A. Pelson 44,055 0.33 49.9375 1/3/05 464,340 Alex J. Mandl 38,484} 49.9375 1/3/05 405,621 400,000} 3.30 63.5000 9/25/05 5,176,000 William B. Marx, Jr. 38,484} 49.9375 1/3/05 405,621 100,000} 1.04 63.5000 9/25/05 1,294,000 Richard W. Miller 31,281} 49.9375 1/3/05 329,702 250,000} 2.12 63.5000 9/25/05 3,235,000
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. Includes the regular annual grant of options as well as a special equity incentive/retention grant following the announcement of the Company's intended restructuring. Options granted 1/3/95 become exercisable to the extent of one-third of the grant on 1/3/96, 1/3/97, and 1/3/98, respectively. Options granted 9/25/95 become exercisable four years after the date of grant provided that aggressive price performance criteria have been satisfied. 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: for the January grant, an option term of 7 years, volatility at .1769, dividend yield at 2.77%, interest rate at 7.83%, and a 3% per year discount for each year in the vesting period for risk of forfeiture over the 3-year vesting schedule, and for the September grant, an option term of 7 years, volatility at .1572, dividend yield at 2.66%, interest rate at 6.40%, and a 3% per year discount for each year in the vesting period for risk of forfeiture over the 4-year vesting schedule. The real value of the options in this table depends upon the actual performance of the Company's stock during the applicable period. 37 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, Marx, and Miller. 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. 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 Miller, 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, 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. 38 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 sum of (i) the employee's years of service prior to January 1, 1993, multiplied by 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, plus (ii) the employee's years of service prior to January 1, 1990, multiplied by the average of the employee's actual annual bonus awards for the three-year period ending December 31, 1989, 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, 1989. 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 1961 and ending with 1995. In 1995, the covered compensation base was $25,800. 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: 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 39 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 their employment agreements, the Company entered into a supplemental pension arrangement with Messrs. Mandl and Miller. Pursuant to his arrangement, if Mr. Mandl's employment is terminated on or after age 55 for any reason other than Company- 40 initiated termination for "cause," as defined, he 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. Pursuant to Mr. Miller's arrangement, if employment is terminated for any reason other than Company- initiated termination for "cause," as defined, after completion of eight years of Company service, he will be entitled to immediate pension benefits based on 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. Pension benefits payable under these arrangements will be paid out of the Company's operating income, and will be offset by all amounts actually received by Messrs. Mandl and Miller under any other Company qualified or non-qualified retirement plan or arrangement. In addition, Messrs. Mandl and Miller 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. The year 1996 is the final year of a three-year severance agreement with Mr. Miller. In the event Mr. Miller's employment is terminated by the Company for any reason other than for "cause," as defined, anytime prior to August 9, 1996, he will be eligible for a severance benefit which ranges from 189% to 100% of base salary. Senior managers (including Messrs. Mandl and Miller) 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 41 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 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 $1,471,000, and $571,600, respectively. Mr. Pelson announced his retirement effective the second quarter of 1996 and his pension at such retirement would approximate $587,300. For Messrs. Mandl and Miller, the estimated annual pension amounts payable under the AT&T Management Pension Plan formula, the AT&T Non-Qualified Pension Plan, and the AT&T Mid-Career Pension Plan would be $624,900 and $384,600, respectively. 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. 42 OTHER INFORMATION A Directors' and Officers' Liability Policy was renewed effective July 1, 1995, 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 $1,416,000. 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 27, 1996 43 [BLANK PAGE] [AT&T LOGO] 32 Avenue of the Americas New York, NY 10013-2412 Recycled [LOGO] Paper PROXY [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 17, 1996 ============================================================================= The undersigned hereby appoints R.E. Allen, B.K. Johnson and T.H. Wyman, 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 James L. Knight International Center in Miami, Florida, at 9:30 A.M. on April 17, 1996, 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, K.T. Derr, M.K. Eickhoff, W.Y. Elisha, B.K. Johnson, R.S. Larsen, A.J. Mandl, D.F. McHenry, M.I. Sovern, 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. ============================================================================= DETACH HERE FROM PROXY VOTING CARD 111th ANNUAL MEETING OF AT&T SHAREHOLDERS --------------------------------------- Wednesday, April 17, 1996 9:30 am James L. Knight International Center [Travel Guide Map] Miami Convention Center 400 Southeast 2nd Avenue Miami, Florida Public transportation is available by Metromover, which stops at the Knight Center. Public parking is available in garages adjacent to the building. [BOX-W/X] 8777 DIRECTORS RECOMMEND A VOTE "FOR" ---------------------------------- WITHHELD FOR ALL FROM ALL nominees nominees A. Election of Directors (page 7) [BOX] [BOX] FOR ALL EXCEPT the following nominee(s): - ------------------------------------------------------------------------------ FOR AGAINST ABSTAIN B. Ratification of Auditors (page 13) [BOX] [BOX] [BOX] C. AT&T 1996 Employee Stock Purchase Plan (page 13) [BOX] [BOX] [BOX] DIRECTORS RECOMMEND A VOTE "AGAINST" THE SHAREHOLDER PROPOSALS REGARDING -------------------------------------- FOR AGAINST ABSTAIN 1. Political Contributions (page 18) [BOX] [BOX] [BOX] 2. Executive Compensation (page 20) [BOX] [BOX] [BOX] 3. China and former Soviet Union operations (page 21) [BOX] [BOX] [BOX] SPECIAL ATTENTION Mark here if you have noted [BOX] voting limitations. ANNUAL REPORT Mark here to discontinue [BOX] extra annual report (page 3). ANNUAL MEETING Mark here if you plan to [BOX] attend the annual meeting. SIGNATURE(S) DATE , 1996 ----------------------------------------- ------------ 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] ANNUAL MEETING OF SHAREHOLDERS Wednesday, April 17, 1996 Admission Ticket 9:30 am - ---------------------------------- -------------------------------------- AGENDA 8:30 am Doors Open 9:30 Introduction and Welcome Chairman's Remarks Election of Directors Ratification of Auditors Directors' Proposal Shareholder Proposals 11:00 Voting General Discussion Adjournment (noon) - ------------------------------------------------------------------------------ Please present this ticket for admittance of shareholder(s) named above and a guest. See reverse for map of area. Hearing-amplification equipment and sign interpretation will be provided. EX-99.1 2 AT&T 1996 EMPLOYEE STOCK PURCHASE PLAN AT&T Corp., a New York corporation, hereby adopts this AT&T 1996 Employee Stock Purchase Plan (the "Plan") as of the Effective Date. The purposes of this Plan are as follows: (1) To assist employees of the Company and its Participating Subsidiaries in acquiring a stock ownership interest in 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 Participating Subsidiaries. 1. Definitions Whenever any of the following terms is 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" means the committee appointed to administer the Plan pursuant to paragraph 10. (c) "Company" means AT&T Corp., a New York corporation. (d) "Dates of Exercise" means the dates as of which an Option is exercised and the Stock subject to that Option is purchased. With respect to any Option, the Dates of Exercise are the last day of each month on which Stock is traded on the New York Stock Exchange during the Option Period in which that Option was granted. (e) "Date of Grant" means the date as of which an Option is granted, as set forth in paragraph 3(a). (f) "Eligible Compensation" means total cash compensation received from the Company or a Participating Subsidiary as regular compensation during an Option Period. By way of illustration, and not by way of limitation, Eligible Compensation includes regular compensation such as salary, wages, overtime, shift differentials, bonuses, commissions, and incentive compensation, but excludes relocation expense reimbursements, foreign service premiums, tuition or other reimbursements, income realized as a result of participation in any stock option, stock purchase, or similar plan of the Company or any Participating Subsidiary. AT&T 1996 EMPLOYEE STOCK PURCHASE PLAN (continued) (g) "Effective Date" means July 1, 1996. (h) "Eligible Employee" means any employee of the Company or a Participating Subsidiary who meets the following criteria: (1) the employee does not, immediately after the Option is granted, own (within the meaning Code ss.ss. 423(b)(3) and 424(d)) stock possessing five percent or more of the total combined voting power or value of all classes of stock of the Company or of a Subsidiary; (2) the employee has completed six months of employment for the Company or a Subsidiary; and (3) the employee's customary employment is 20 hours or more a week. (i) "Option" means an option granted under the Plan to an Eligible Employee to purchase shares of Stock. (j) "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, whichever is earlier, or ending on such other date as the Committee shall determine. No Option Period may exceed 5 years from the Date of Grant. (k) "Option Price" with respect to any Option has the meaning set forth in paragraph 4(b). (l) "Participant" means an Eligible Employee who has complied with the provisions of paragraph 3(b). (m) "Participating Subsidiary" means any present or future Subsidiary that the Committee designates to be eligible to participate in the Plan, and that elects to participate in the Plan. (n) "Periodic Deposit Account" means the account established and maintained by the Company to which shall be credited pursuant to Section 3(c) amounts received from Participants for the purchase of Stock under the Plan. (o) "Plan" means this AT&T 1996 Employee Stock Purchase Plan. (p) "Plan Year" means the calendar year. (q) "Stock" means shares of common stock, par value $1.00 per share, of the Company. (r) "Stock Purchase Account" means the account established and maintained by the Company to which shall be credited pursuant to Section 4(c) Stock purchased upon exercise of an Option under the Plan. AT&T 1996 EMPLOYEE STOCK PURCHASE PLAN (Continued) (s) "Subsidiary" 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 8 (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 50,000,000 shares, and may be newly issued shares or treasury shares or shares bought in the market, or otherwise, for purposes of the Plan. 3. Grant of Options (a) General Statement The Company may grant Options under the Plan to all Eligible Employees on January 1 and/or July 1 of each Plan Year or on such other date as the Committee shall designate. The term of each Option shall end on the last day of the Option Period with respect to which the Option is granted. With respect to each Offering Period, each Eligible Employee shall be granted an Option, on the Date of Grant, for as many full and fractional shares of Stock as the Eligible Employee may purchase with up to 10% of the Compensation he or she receives during the Option Period (or during any portion of the Option Period as the Eligible Employee may elect to participate). (b) Election to Participate Each Eligible Employee who elects to participate in the Plan shall communicate to the Company, in accordance with procedures established by the Committee, an election to participate in the Plan whereby the Eligible Employee designates a stated whole percentage equaling at least 1%, but no more than 10% of his or her Eligible Compensation during the Option Period to be deposited periodically in his or her Periodic Deposit Account under subparagraph (c). The cumulative amount deposited in the Periodic Deposit Account during a Plan Year with respect to any Eligible Employee may not exceed the limitation stated in subparagraph (d). A Participant's election to participate in the Plan shall continue in effect during the current and subsequent Option Periods until changed pursuant to subparagraph 3(c). (c) Periodic Deposit Accounts The Company shall maintain a Periodic Deposit Account for each Participant and shall credit to that account in U.S. dollars all amounts received under the Plan from the Participant. No interest will be paid to any Participant or credited to his or her Periodic Deposit Account AT&T 1996 EMPLOYEE STOCK PURCHASE PLAN (Continued) under the Plan with respect to such funds. All amounts credited to a Participant's Periodic Deposit Account shall be used to purchase Stock under subparagraph 4(c) and no portion of a Participant's Periodic Deposit Account shall be refunded to him or her. Credits to an Eligible Employee's Periodic Deposit Account shall be made by payroll deduction or by other alternate payment arrangements, in accordance with rules and procedures established by the Committee. An Eligible Employee may increase, decrease or eliminate the periodic credits to his or her Periodic Deposit Account for future periods by filing a new election amount at any time during an Option Period. The change shall become effective in accordance with the Committee's rules and procedures as soon as practicable after the Company receives the election, but the change will not affect the amounts deposited with respect to Eligible Compensation sooner than the Eligible Compensation payable with respect to the next pay period after the Company receives the authorization. (d) $25,000 Limitation No Eligible Employee shall be permitted to purchase Stock under the Plan or under any other employee stock purchase plan of the Company or of any Subsidiary which is intended to qualify under Code ss. 423, 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. 4. Exercise of Options (a) General Statement On each Date of Exercise, the entire Periodic Deposit Account of each Participant shall be used to purchase at the Option Price whole and/or fractional shares of Stock subject to the Option. Each Participant automatically and without any act on his or her part will be deemed to have exercised his or her Option on each such Date of Exercise to the extent that the amounts then credited to the Participant's Periodic Deposit Account under the Plan are used to purchase Stock. (b) Option Price Defined The Option Price per share of Stock to be paid by each Participant on each exercise of his or her Option shall be an amount in U.S. dollars 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 an applicable Date of Exercise shall be the average of the high and low price of a share of Stock on the New York Stock Exchange on such date. (c) Stock Purchase Accounts; Stock Certificates The Company shall maintain a Stock Purchase Account for each Participant to reflect the Stock purchased under the Plan by the Participant. Upon exercise of an Option by a AT&T 1996 EMPLOYEE STOCK PURCHASE PLAN (Continued) Participant pursuant to subparagraph 4(a), the Company shall credit to the Participant's Stock Purchase Account the whole or fractional shares of Stock purchased at that time. Except as provided in paragraph 5, certificates with respect to Stock credited to a Participant's Stock Purchase Account shall be issued only on request by the Participant for a distribution of whole shares or when necessary to comply with the transaction requirements outside the United States. Upon issuance of such a Stock certificate to a Participant, the Participant's Stock Purchase Account shall be adjusted to reflect the number of shares of Stock distributed to the Participant. 5. Rights on Retirement, Death, Termination of Employment If a Participant retires, dies, or otherwise terminates employment, or if the corporation that employs a participant ceases to be a Participating Subsidiary, then to the extent practicable, no further amounts shall be credited to the Participant's Periodic Deposit Account from any pay due and owing with respect to the Participant after such retirement, death, or other termination of employment. All amounts credited to such a Participant's Periodic Deposit Account shall be used on the next Date of Exercise in that Option Period to purchase Stock under paragraph 4. Such a Participant's Stock Purchase Account shall be terminated, and Stock certificates with respect to whole shares of Stock and cash with respect to fractional shares of Stock shall be distributed as soon as practicable after such Date of Exercise. Notwithstanding anything in this Plan to the contrary and except to the extent permitted under Code ss. 423(a), a Participant's Option shall not be exercisable more than three months after the Participant retires or otherwise ceases to be employed by the Company or a Participating Subsidiary, including as a result of the corporation ceasing to be a Participating Subsidiary. 6. 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. 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. 7. No Rights of Stockholder Until Exercise of Option A Participant shall not be deemed to be a stockholder of the Company, nor have any rights or privileges of a stockholder, with respect to the number of shares of Stock subject to an Option. A Participant shall have the rights and privileges of a stockholder of the Company when, but not until, the Participant's Option is exercised pursuant to paragraph 4(a) and the Stock purchased by the Participant at that time has been credited to the Participant's Stock Purchase Account. AT&T 1996 EMPLOYEE STOCK PURCHASE PLAN (Continued) 8. Changes in the Stock; Adjustments of an Option If, while any Options are outstanding, the outstanding shares of Stock have increased, decreased, changed into, or been exchanged for a different number or kind of shares or securities of the Company, or there has been any other change in the capitalization of the Company, through reorganization, merger, recapitalization, reclassification, stock split, reverse stock split, spinoff or similar transaction, appropriate and proportionate adjustments may be made by the Committee in the number and/or kind of shares which are subject to purchase under outstanding Options and to the Option Exercise Price or prices applicable to such outstanding Options, including, if the Committee deems appropriate, the substitution of similar options to purchase shares of another company (with such other company's consent). In addition, in any such event, the number and/or kind of shares which may be offered in the Options shall also be proportionately adjusted. No adjustments to outstanding Options shall be made for dividends paid in the form of stock. 9. Use of Funds; Repurchase of Stock 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. The Company shall not be required to repurchase from any Eligible Employee shares of Stock which such Eligible Employee acquires under the Plan. 10. Administration by Committee (a) Appointment of Committee The board of directors of the Company, or its delegate, shall appoint a Committee, which shall be composed of one or more members, to administer the Plan on behalf 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, or its delegate, and continuing until he or she dies or resigns or is removed from office by such board of directors, or its delegate. (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: (1) determine when the initial and subsequent Option Periods will commence; (2) interpret the Plan and the Options; (3) adopt such rules for the administration, interpretation, and application of the Plan as are consistent with the Plan and Code ss. 423; and AT&T 1996 EMPLOYEE STOCK PURCHASE PLAN (Continued) (4) interpret, amend, or revoke any such rules. In its absolute discretion, the board of the directors of the Company may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan. The Committee may delegate any of its responsibilities under the Plan by designating in writing other persons to carry out any or all of such responsibilities. (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 Each member of the Committee who is an employee of the Company or a Subsidiary shall receive no additional compensation for his or her services under the Plan. Each Committee member who is not an employee of the Company or a Subsidiary shall receive such compensation for his or her services under the Plan as may be determined by the board of directors of the Company, or its delegate. 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 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. 11. No Rights as an Employee Nothing in the Plan nor any Option 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 Subsidiary or to affect the right of the Company and Subsidiaries to terminate the employment of any person (including any Eligible Employee or Participant) at any time with or without cause, to the extent otherwise permitted under law. 12. Term of Plan No Option may be granted during any period of suspension of the Plan or after termination of the Plan, and in no event may any Option be granted under the Plan after five years from the commencement of the initial Option Period. AT&T 1996 EMPLOYEE STOCK PURCHASE PLAN (Continued) 13. Amendment of the Plan The board of directors of the Company, or its delegate, may amend, suspend, or terminate the Plan at any 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 to reduce the Exercise Price or increase the number of shares of Stock reserved for the Options under the Plan. 14. 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 Subsidiary, except to the extent required by law. Nothing in this Plan shall be construed to limit the right of the Company or any Subsidiary (a) to establish any other forms of incentives or compensation for employees of the Company or any Subsidiary 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. 15. Notices Any notice to be given under the terms of the Plan to the Company shall be addressed to the Company in care of the Committee and any notice to be given to the Eligible Employee shall be addressed to the Eligible Employee at his or her last address as reflected in the Company's records. By a notice given pursuant to this paragraph, either party may hereafter designate a different address for notices to be given to it or the Eligible Employee. Any notice which is required to be given to the Eligible Employee shall, if the Eligible Employee is then deceased, be given to the Eligible Employee's personal representative if such representative has previously informed the Company of his or her status and address by written notice under this paragraph. 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, branch post office, or other depository regularly maintained by the United States Postal Services. 16. 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-----