Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
For the quarterly period ended June 30, 1996
OR
Commission File Number 1-8608
NYNEX CORPORATION
Incorporated under the laws of the State of Delaware
I.R.S. Employer Identification Number 13-3180909
1095 Avenue of the Americas, New York, New York 10036
Telephone Number (212) 395-2121
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No ___.
At July 31, 1996, 438,444,586 common shares were outstanding.
Form 10-Q Part I
NYNEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(In millions, except per share amounts) (Unaudited)
Three Months Six Months
For the Period Ending June 30, 1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------
OPERATING REVENUES
Local services $1,674.2 $ 1,680.8 $3,343.2 $3,342.0
Long distance 263.6 255.8 538.1 513.4
Network access 915.7 906.0 1,779.4 1,789.0
Other 592.3 653.0 1,039.1 1,205.4
-------- --------- -------- --------
Total operating revenues 3,445.8 3,495.6 6,699.8 6,849.8
-------- --------- ------- --------
OPERATING EXPENSES
Maintenance and support 814.3 762.9 1,622.2 1,509.8
Depreciation and amortization 639.8 650.3 1,280.1 1,312.7
Marketing and customer services 354.5 353.6 697.9 681.6
Taxes other than income 227.2 246.0 441.3 505.5
Selling, general and administrative 500.2 857.8 1,150.0 1,429.7
Other 205.1 228.3 366.1 440.8
-------- --------- -------- --------
Total operating expenses 2,741.1 3,098.9 5,557.6 5,880.1
-------- --------- -------- --------
Operating income 704.7 396.7 1,142.2 969.7
Gain on sale of stock
by subsidiary - 264.1 - 264.1
Other income(expense) - net (28.7) (32.2) (7.2) (57.6)
Interest expense 156.4 191.4 321.5 383.0
Income(loss) from long-term investments 49.5 2.1 85.9 10.5
-------- --------- -------- -------
Earnings before income taxes, extraordinary
item and cumulative effect of change
in accounting principle 569.1 439.3 899.4 803.7
Income taxes
Federal 179.4 119.3 274.1 210.9
State, local and other 31.7 79.2 53.5 101.8
-------- --------- -------- --------
Total income taxes 211.1 198.5 327.6 312.7
-------- --------- -------- --------
Earnings before extraordinary item and
cumulative effect of change in
accounting principle 358.0 240.8 571.8 491.0
Extraordinary item for the discontinuance
of regulatory accounting principles,
net of taxes - (2,919.4) - (2,919.4)
Cumulative effect of change in accounting
for directory publishing income, net
of taxes (Note(b)) - - 131.0 -
-------- --------- -------- ---------
NET INCOME (LOSS) $ 358.0 $(2,678.6) $ 702.8 $(2,428.4)
======== ========= ======== =========
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See accompanying notes to consolidated financial statements.
Form 10-Q Part I
NYNEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Continued) (In millions, except per share amounts)
(Unaudited)
Three Months Six Months
For the Period Ending June 30, 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------
Earnings per share before extraordinary item
and cumulative effect of change in
accounting principle $ .82 $ .56 $ 1.31 $ 1.15
Extraordinary item per share - (6.84) - (6.86)
Cumulative effect, per share, of change
in accounting principle - - .30 -
-------- --------- ------- --------
Earnings (loss) per share $ .82 $ (6.28) $ 1.61 $ (5.71)
-------- --------- ------- --------
Weighted average number of shares
outstanding 437.4 426.4 435.5 425.3
-------- --------- ------- --------
Dividends declared per share $ .59 $ .59 $ 1.18 $ 1.18
-------- --------- ------- --------
Retained earnings (Accumulated deficit)
Beginning of period $ 71.8 $ 2,231.6 $ - 2,208.2
Net income (loss) 358.0 (2,678.6) 702.8 (2,428.4)
Dividends declared* (258.5) - (515.6) (251.0)
Other 24.3 (10.0) 8.4 14.2
-------- --------- ------- --------
End of period $ 195.6 $ (457.0) $ 195.6 $ (457.0)
======== ========= ======= ========
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* The second quarter 1995 dividend was declared out of Additional paid-in-capital.
See accompanying notes to consolidated financial statements.
Form 10-Q Part I
NYNEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions) (Unaudited)
June 30, December 31,
1996 1995
- -----------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and temporary cash investments $ 75.0 $ 93.2
Receivables (net of allowance of $249.6
and $221.6, respectively) 2,960.7 2,636.2
Inventories 153.6 141.3
Prepaid expenses 340.1 360.2
Deferred charges and other current assets 375.7 450.2
--------- ---------
Total current assets 3,905.1 3,681.1
--------- ---------
Property, plant and equipment - at cost 36,642.2 35,734.6
Less: accumulated depreciation (19,665.6) (18,679.3)
--------- ---------
16,976.6 17,055.3
--------- ---------
Long-term investments 3,522.9 3,286.2
Deferred charges and other assets 2,043.4 1,873.3
--------- ---------
Total Assets $26,448.0 $25,895.9
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,600.2 $ 2,902.2
Short-term debt 432.5 506.6
Other current liabilities 424.2 577.4
--------- ---------
Total current liabilities 3,456.9 3,986.2
--------- ---------
Long-term debt 9,367.1 9,336.9
Deferred income taxes 1,339.1 1,332.4
Unamortized investment tax credits 183.3 198.8
Other long-term liabilities and deferred credits 3,979.5 3,885.0
Minority interest, including a portion subject to
redemption requirements (Note (d)) 1,572.3 1,077.4
Commitments and contingencies (Notes (c), (f) and (g))
Stockholders' equity:
Preferred stock - $1 par value - -
shares authorized: 70,000,000
shares issued: None
Preferred stock - Series A Junior Participating - -
- $1 par value
shares authorized: 5,000,000
shares issued: None
Common stock - $1 par value 452.9 447.2
shares authorized: 750,000,000
shares issued:
at June 30, 1996 - 452,865,341
at December 31, 1995 - 447,174,181
Additional paid-in capital * 6,825.2 6,566.9
Retained earnings 195.6 -
Treasury stock 14,766,318 and 14,756,356 shares,
respectively, at cost) (591.5) (591.1)
Deferred compensation - LESOP Trust (332.4) (343.8)
--------- ---------
Total stockholders' equity 6,549.8 6,079.2
--------- ---------
Total Liabilities and Stockholders' Equity $26,448.0 $25,895.9
========= =========
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* The second and third quarter 1995 dividends were declared out of Additional paid-in capital.
See accompanying notes to consolidated financial statements.
Form 10-Q Part I
NYNEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions) (Unaudited)
For the Six Months Ended June 30, 1996 1995
- ---------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 702.8 $(2,428.4)
-------- ---------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Extraordinary item, net of taxes - 2,919.4
Depreciation and amortization 1,280.1 1,312.7
Amortization of unearned lease income-net (47.2) (43.3)
Deferred income taxes - net (44.8) (19.8)
Deferred tax credits - net (19.7) (14.9)
Gain on sale of stock by subsidiary - (264.1)
Changes in operating assets and liabilities:
Receivables (324.5) (84.3)
Inventories (12.3) 9.3
Prepaid expenses 20.1 (64.3)
Deferred charges and other current assets 74.5 1.5
Accounts payable (305.3) (309.8)
Other current liabilities (153.2) (25.9)
Other-net 28.6 455.8
-------- ---------
Total adjustments 496.3 3,872.3
-------- ---------
Net cash provided by operating activities 1,199.1 1,443.9
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,168.3) (1,404.3)
Investment in leased assets (91.6) (118.8)
Cash received from leasing activities 44.7 55.7
Other investing activities-net (157.6) (343.2)
-------- ---------
Net cash used in investing activities (1,372.8) (1,810.6)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of commercial paper and short-term debt 11,278.8 7,361.6
Repayment of commercial paper and short-term debt (11,249.6) (7,235.8)
Issuance of long-term debt 49.9 84.7
Repayment of long-term debt and capital leases (127.5) (108.6)
Issuance of common stock 190.9 67.1
Dividends paid (458.2) (447.9)
Minority interest 471.2 32.3
Proceeds from sale of stock by subsidiary, net - 610.3
-------- ---------
Net cash provided by financing activities 155.5 363.7
-------- ---------
Net decrease in Cash and temporary
cash investments (18.2) (3.0)
Cash and temporary cash investments at
beginning of period 93.2 137.5
-------- ---------
Cash and temporary cash investments at
end of period $ 75.0 $ 134.5
======== =========
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See accompanying notes to consolidated financial statements.
Form 10-Q Part I
NYNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(a) BASIS OF PRESENTATION - The consolidated financial statements have been prepared by NYNEX Corporation ("NYNEX") pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") and, in the opinion of Management, include all adjustments necessary for a fair presentation of the financial information for each period shown. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. Certain information in the consolidated financial statements for 1995 has been reclassified to conform to the current year's presentation. The results for interim periods are not necessarily indicative of the results for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto incorporated by reference in NYNEX's 1995 Annual Report on Form 10-K and the current year's previously issued Quarterly Report on Form 10-Q. In the second quarter of 1995, NYNEX discontinued using generally accepted accounting principles applicable to regulated entities for the operations of New York Telephone Company and New England Telephone and Telegraph Company (collectively, the "telephone subsidiaries") as disclosed in the NYNEX 1995 Annual Report on Form 10-K.
(b) CHANGE IN ACCOUNTING PRINCIPLE - Effective January 1, 1996, NYNEX Information Resources Company ("Information Resources"), a wholly owned subsidiary of NYNEX, changed the recognition of its directory publishing revenue and production expenses from the "amortized" method to the "point of publication" method. Under the point of publication method, revenues and product expenses will be recognized when the directories are published rather than over the lives of the directories (generally one year) as was the case under the amortized method. NYNEX believes the change to the point of publication method is preferable because it is the method that is generally followed by publishing companies and reflects more precisely the operations of the business. The initial effect of the change to the point of publication method is reported as a cumulative effect of a change in accounting principle which resulted in a one-time, non-cash gain of $131.0 million, or $.30 per share, in the first quarter of 1996. The impact of applying the point of publication method during the three months and the six months ended June 30, 1996 resulted in a $28.2 million, or $.06 per share and a $24.6 million, or $.06 per share increase to net income, respectively.
Form 10-Q Part I
NYNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Pro forma results, assuming the point of publication method had been applied during the second quarter and first six months of 1995, are as follows:
Three Months Ended Six Months Ended
June 30, 1995 June 30, 1995
Pro forma As Reported Pro forma As Reported
--------- ----------- --------- -----------
Net Loss (In millions) $(2,656.9) $(2,678.6) $(2,409.2) $(2,428.4)
Loss Per Share $(6.23) $(6.28) $(5.66) $(5.71)
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(c) FINANCIAL COMMITMENTS AND GUARANTEES - As of December 31, 1995, New York Telephone Company ("New York Telephone"), a wholly-owned subsidiary of NYNEX, had deferred $188 million of revenues ($161 million under a New York State Public Service Commission ("NYSPSC") approved regulatory plan associated with commitments for fair competition, universal service, service quality and infrastructure improvements, and $27 million for a service improvement plan obligation). These deferred revenues will be recognized as commitments are met or obligations are satisfied under the plans. If New York Telephone is unable to meet certain of these commitments, the NYSPSC has the authority to require New York Telephone to rebate these revenues to the customers. During the first six months of 1996, $20 million of the deferred revenues was recognized in connection with intraLATA presubscription ("ILP") commitments that were met in 1996 and $51 million of the deferred revenues was utilized primarily for rebates issued to customers for not meeting service commitments in prior periods. As of June 30, 1996, $117 million of revenues remained deferred.
(d) MINORITY INTEREST - Consistent with the terms and conditions of the December 1995 transaction, during March 1996, NYNEX monetized its investment in Viacom Inc. ("Viacom") Series B Cumulative Preferred Stock by an additional $500 million. As a result, NYNEX has monetized a total of $600 million which represents approximately 50% of NYNEX's investment in Viacom. The additional $500 million of proceeds from this transaction were used to further reduce outstanding commercial paper. These additional proceeds received by Kipling Associates L.L.C. (a 50% owned and controlled NYNEX subsidiary) from Mandalay Investors L.L.C. (a third-party owned and controlled entity) are reflected in "Minority Interest, including a portion subject to redemption requirements."
(e) SUPPLEMENTAL CASH FLOW INFORMATION - The following information is provided in accordance with Statement of Financial Accounting Standards No. 95, "Statement of Cash Flows":
Form 10-Q Part I
NYNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the Six Months Ended
June 30,
(In millions) 1996 1995
---- ----
Income tax payments - net $ 298.8 $234.7
Interest payments $ 336.4 $345.4
Non-cash transactions:
Additions to property, plant, and equipment
under capital lease obligations - .1
Common Stock issued for Dividend Reinvestment
and Stock Purchase Plan and stock compensation
plans $ 59.3 $ 57.1
Commercial paper borrowings classified as
Long-term debt $1,967.7 -
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(f) REVENUES SUBJECT TO POSSIBLE REFUND - Several state and federal regulatory matters may possibly require the telephone subsidiaries to refund a portion of the revenues collected in the current and prior periods. As of June 30, 1996, the aggregate amount of such revenues that was estimated to be subject to possible refund was approximately $342 million, plus related interest, of which approximately $261 million is attributable to affiliate transaction issues in New York Telephone's 1990 intrastate rate case. In July of 1996, New York Telephone filed with the NYSPSC a joint stipulation and settlement agreement on behalf of New York Telephone, the NYSPSC staff, the New York State Consumer Protection Board and the New York State Department of Law. The agreement provides for a refund of $83 million by New York Telephone, with no other revenues subject to refund, and resolves all pending issues, as well as certain portions of the proceeding instituted in 1992 to review New York Telephone's Directory License Agreement with Information Resources. The agreement is subject to approval by the NYSPSC. The outcome of each pending matter, as well as the time frame within which each will be resolved, is not presently determinable.
(g) LITIGATION AND OTHER CONTINGENCIES - Various legal actions and regulatory proceedings are pending that may affect NYNEX. While counsel cannot give assurance as to the outcome of any of these matters, in the opinion of Management based upon the advice of counsel, the ultimate resolution of these matters in future periods is not expected to have a material effect on NYNEX's financial position but could have a material effect on operating results.
Form 10-Q Part I
NYNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(h) SUBSEQUENT EVENT - On July 2, 1996, NYNEX and Bell Atlantic Corporation ("Bell Atlantic") executed an amendment to their definitive merger agreement, effecting a technical change in the transaction structure of the merger of equals announced on April 22, 1996. As amended, the agreement provides that a newly formed subsidiary of Bell Atlantic will merge with and into NYNEX, thereby making NYNEX a wholly owned subsidiary of Bell Atlantic. There is no change in the fundamental elements of the proposed merger. The exchange ratio for shares is restated to reflect the difference in the transaction. Each NYNEX shareholder will receive 0.768 shares of Bell Atlantic common stock in exchange for one share of NYNEX common stock. The purpose of the amendment to the merger agreement is to expedite the regulatory approval process by eliminating the need to obtain congressional approval of the merger under a 1913 District of Columbia "anti-merger" law. The merger, which is expected to qualify as a pooling of interests for accounting purposes, is subject to a number of conditions, including regulatory approvals, the approval of the shareholders of both NYNEX and Bell Atlantic and receipt of opinions that the merger will be tax free, except, in the case of NYNEX shareholders, for tax payable because of cash received for a fractional share and the payment by NYNEX of certain transfer taxes on behalf of its shareholders. The transaction is expected to close by April 1997.
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net income
Net income for the three months and six months ended June 30, 1996 was $358.0 million, or $.82 per share, and $702.8 million, or $1.61 per share, respectively. Net loss for the three months and six months ended June 30, 1995 was $2.7 billion, or $6.28 per share, and $2.4 billion, or $5.71 per share, respectively.
Net income for the second quarter of 1996 includes an after-tax charge of $30.0 million, or $.07 per share, for pension enhancements. Net income for the second quarter of 1995 included an after-tax gain of $155.1 million, or $.36 per share, as a result of the sale of stock by a subsidiary, and after-tax charges of $261.3 million, or $.61 per share, accruals related to various self insurance programs, legal and regulatory contingencies, operating tax provisions, revised benefit charges and pension enhancements and an after-tax extraordinary charge of $2.9 billion, or $6.84 per share for the discontinuance of regulatory accounting principles.
Excluding the above items, net income for the second quarter of 1996 would have been $388.0 million, or $.89 per share, an improvement of $41.0 million, or 11.8%, over adjusted net income for the second quarter of 1995.
SECOND QUARTER OF 1996 AS COMPARED TO SECOND QUARTER 1995
Operating revenues
Operating revenues for the second quarter of 1996 were $3.4 billion, a decrease of $49.8 million, or 1.4%, from the second quarter of 1995.
Included in operating revenues for the second quarter of 1995 were revenues of NYNEX Mobile Communications Company ("NYNEX Mobile"), which was deconsolidated as a result of the Bell Atlantic NYNEX Mobile ("BANM") cellular partnership formed on July 1, 1995, amounting to $210.5 million. Also included in operating revenues for the second quarter of 1995 were $17.4 million ($3.5 million intrastate and $13.9 million interstate) of revenues from interexchange carriers associated with gross receipts tax collected on behalf of the taxing authority. (New York Telephone is no longer required to collect gross receipts tax from interexchange carriers and to remit to the taxing authority.)
Excluding the items discussed above, operating revenues would have improved $178.1 million, or 5.5%, over adjusted operating revenues for the second quarter of 1995. Revenues from New York Telephone, New England Telephone and Telesector Resources Group, Inc. ("Telesector Resources") (collectively, the "telecommunications group") would have improved by 2.5% to $3.0 billion. Revenues from NYNEX's other subsidiaries (the "nontelephone subsidiaries") would have improved 33.4% to $413.8 million.
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The adjusted operating revenue improvement of $178.1 million, or 5.5%, includes the following categories:
Local service revenues decreased $3.1 million, or .2%. The $3.1 million decrease results primarily from the net of (i) a $70 million increase resulting primarily from increased demand, driven by growth in access lines and sales of calling features and (ii) a $50 million decrease resulting from the reclassification of the reduction of revenues due to service obligations pursuant to a service improvement plan implemented in 1994, from Other revenues to Local service revenues (see Other revenues) and $23 million in rate reductions primarily in New York and Massachusetts. Certain decreases in local service revenues, resulting from competition, are being partially offset by increases in network access revenues.
Long distance revenues improved $7.8 million, or 3.0%. The $7.8 million improvement results primarily from the net of (i) a $21 million increase primarily due to increased demand for message toll service and (ii) $11 million in rate reductions primarily in Maine, New York and Massachusetts. Certain decreases in long distance revenues, resulting from competition, are being partially offset by increases in network access revenues.
Network access revenues improved $23.6 million, or 2.6%. The $23.6 million improvement results primarily from the net of (i) a $54 million increase primarily due to increased demand for switched and special access including the previously mentioned shift from local and long distance revenues and (ii) a $30 million reduction in interstate and intrastate rates.
Other revenues improved $149.8 million, or 33.9%. At the telecommunications group, the $46.2 million improvement in other revenues results primarily from the net of (i) a $50 million increase resulting from the reclassification of the reduction of revenues from Other revenues to Local service revenues (see Local service revenues), a net $6 million increase due to the cessation of "setting aside" revenues in the second quarter of 1995 and the 1995 recognition of previously "set aside" revenues as a result of an NYSPSC order approving a performance-based regulatory plan (the "Plan") effective second quarter of 1995, and (ii) a $9 million decrease due to the reduction of revenues for anticipated service obligations under a service improvement plan implemented in 1995. At the nontelephone subsidiaries, the $103.6 million improvement in other revenues results primarily from an $89 million increase in publishing revenues resulting from the change in the recognition of directory publishing revenues (see Cumulative effect of change in accounting principle) and growth in traditional publishing markets, and a $25 million improvement in revenues due to significant increases in cable television customers and telecommunications lines in the United Kingdom.
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Operating expenses
Operating expenses for the second quarter of 1996 were $2.7 billion, a decrease of $357.8 million, or 11.5%, from the second quarter of 1995.
Included in operating expenses for the second quarter of 1996 were pension enhancement charges of $47.2 million. Included in operating expenses for the second quarter of 1995 were charges of $199.0 million for accruals related to various self insurance programs, legal and regulatory contingencies, operating tax provisions and revised benefit charges, pension enhancement charges of $165.9 million, NYNEX Mobile expenses amounting to $161.6 million, and $17.4 million of gross receipts tax collected and remitted to the taxing authority (see Operating revenues).
Excluding the items discussed above, operating expenses would have increased $138.9 million, or 5.4%, over adjusted operating expenses for the second quarter of 1995. Telecommunications group operating expenses would have increased $71.0 million, or 3.1% and the nontelephone subsidiaries' operating expenses would have increased $67.9 million, or 26.8%.
At the telecommunications group, the $71.0 million adjusted increase results primarily from the net of (i) a $28 million increase related to process re-engineering initiatives not covered by previously recorded reserves, a $23 million increase in employee related costs resulting from higher salaries and wages primarily due to additional labor costs attributable to initiatives to improve service quality and wage rate increases partially offset by reductions in the work force attributable to the force reduction program, a $16 million increase to implement the competitive checklist provisions of the Telecommunication Act of 1996 (see REGULATORY ENVIRONMENT - Federal) and a $4 million increase in advertising and marketing costs and (ii) an $11 million decrease due to the 1995 increase in the provision for uncollectibles. At the nontelephone subsidiaries, the $67.9 million adjusted increase results primarily from an increase in publishing expenses resulting from the change in the recognition of directory production expenses (see Cumulative effect of change in accounting principle) and growth in traditional publishing markets and significant increases in cable television customers and telecommunications lines in the United Kingdom.
The components of the pension enhancement charges for second quarter of 1996 and 1995 are as follows:
For the Three Months Ended
June 30,
(In millions) 1996* 1995*
---- ----
Pretax After-Tax Pretax After-Tax
------ --------- ------ ---------
Pension enhancement charges $50.1 $31.8 $113.1 $72.3
Postretirement medical costs (2.9) (1.8) 52.8 33.9
----- ----- ----- ------
$47.2 $30.0 $165.9 $106.2
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* 1996 - 530 management and 280 nonmanagement employees 1995 - 650 management and 500 nonmanagement employees
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Operating income
Operating income for the second quarter of 1996 was $704.7 million, an improvement of $308.0 million, or 77.6% over the second quarter of 1995.
Operating income, after adjusting for the items discussed above in Operating revenues and Operating expenses, would have been $751.9 million, an improvement of $39.2 million, or 5.5%, over adjusted operating income for the second quarter of 1995. Operating margin for the second quarter of 1996 remained consistent at 21.8% adjusted.
Other income (expense) - net
Other income (expense) - net for the second quarter of 1996 improved $3.5 million, or 10.9%, over the second quarter of 1995. The $3.5 million improvement results primarily from the net of (i) a $15.0 million decrease in minority interest expense as a result of the formation of the BANM cellular partnership, $9 million of amortization of transaction costs related to nontelephone subsidiary financing in June of 1995 and (ii) a $12 million decrease in income due to a change in the recording of capitalized interest expense for the telephone subsidiaries associated with the discontinuance of regulatory accounting principles (in 1996, capitalized interest expense is recorded as a reduction to Interest expense) and a $3 million decrease in interest and dividend income as a result of the discontinuance of a commercial paper arbitrage program.
Interest expense
Interest expense for the second quarter of 1996 decreased $35.0 million, or 18.3%, from the second quarter of 1995, primarily due to a $9 million decrease resulting from a change in the recording of capitalized interest expense for the telephone subsidiaries associated with the discontinuance of regulatory accounting principles (see Other income (expense) - net), a decrease of $8 million due to an increase in capitalized interest expense at the nontelephone subsidiaries and a $4 million decrease resulting from the reversal of interest charges on the revenues "set aside" as required by the NYSPSC in 1995. In addition, there was a $9 million decrease due to total debt decreasing from $10.0 billion at the end of the second quarter of 1995 to $9.8 billion at the end of the second quarter 1996 while average interest rates remained essentially flat at 7.0%.
Income (loss) from long-term investments
Income (loss) from long-term investments for the second quarter of 1996 improved $47.4 million over the second quarter of 1995. The $47.4 million improvement results primarily from the net of (i) equity income from the BANM cellular partnership and (ii) losses from investments in the Tele-TV Partnerships and PrimeCo Personal Communications, L.P. ("PrimeCo").
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Income taxes
Income taxes for the second quarter of 1996 increased $12.6 million, or 6.3%, over the second quarter of 1995 primarily attributable to an increase in pretax income partially offset by a decrease resulting from a $30 million provision for various tax issues recorded in the second quarter of 1995.
Extraordinary Item
In the second quarter of 1995, the discontinuance of regulatory accounting principles required NYNEX, for financial accounting purposes, to adjust telephone plant and equipment and to eliminate non-plant regulatory assets and liabilities from the balance sheet. This change resulted in an after-tax extraordinary charge of $2.9 billion, consisting of $2.2 billion to adjust the carrying amount of telephone plant and equipment and $0.7 billion to write off non-plant regulatory assets and liabilities.
FIRST SIX MONTHS OF 1996 AS COMPARED TO FIRST SIX MONTHS OF 1995
Operating revenues
Operating revenues for the six months ended June 30, 1996 were $6.7 billion, a decrease of $150.0 million, or 2.2%, from the same period last year.
Included in operating revenues for the first six months of 1996 were charges of $55.0 million related to customer claims and a $14.0 million refund ordered by the NYSPSC pertaining to intrastate gross receipts tax collected by New York Telephone on behalf of interexchange carriers. Included in operating revenues for the first six months of 1995 were revenues of $399.8 million for NYNEX Mobile (see second quarter discussion) and $34.2 million ($7.0 million intrastate and $27.2 million interstate) of revenues from interexchange carriers associated with gross receipts tax collected on behalf of the taxing authority. (New York Telephone is no longer required to collect gross receipts tax from interexchange carriers and to remit to the taxing authority.)
Excluding the items discussed above, operating revenues would have improved $353.0 million, or 5.5%, over adjusted operating revenues for the first six months of 1995. Revenues from the telecommunications group would have improved by 3.8% to $6.0 billion. Revenues from the nontelephone subsidiaries would have improved 22.1% to $722.7 million.
The adjusted operating revenue improvement of $353.0 million, or 5.5%, includes the following categories:
Local service revenues improved $22.2 million, or .7%. The $22.2 million improvement results primarily from the net of (i) a $126 million increase resulting primarily from increased demand, driven by growth in access lines and sales of calling features and (ii) $50 million in rate reductions primarily in New York and Massachusetts and a $50 million decrease resulting from the reclassification of the reduction of revenues due to obligations pursuant to a service improvement plan implemented in 1994, from Other
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
revenues to Local service revenues (see Other revenues). Certain decreases in local service revenues, resulting from competition, are being partially offset by increases in network access revenues.
Long distance revenues improved $24.7 million, or 4.8%. The $24.7 million improvement results primarily from the net of (i) a $50 million increase primarily due to increased demand for message toll service and (ii) $20 million in rate reductions primarily in Maine, New York and Massachusetts. Certain decreases in long distance revenues, resulting from competition, are being partially offset by increases in network access revenues.
Network access revenues improved $72.6 million, or 4.1%. The $72.6 million improvement results primarily from the net of (i) a $128 million increase primarily due to increased demand for switched and special access including the previously mentioned shift from local and long distance revenues and (ii) a $55 million reduction in interstate and intrastate rates.
Other revenues improved $233.5 million, or 29.0%. At the telecommunications group, the $102.5 million improvement in other revenues results primarily from the net of (i) a $50 million increase resulting from the reclassification of the reduction of revenues from Other revenues to Local service revenues (see Local service revenues), a net $44 million increase due to the cessation of "setting aside" revenues in the second quarter of 1995 and the 1995 recognition of previously "set aside" revenues as a result of an NYSPSC order approving a performance-based regulatory plan effective second quarter of 1995, $20 million of revenue recognized in connection with ILP commitments that were met in 1996, a $9 million increase in voice messaging services revenue primarily due to an increase in demand and (ii) a $26 million decrease due to the reduction of revenues for anticipated service obligations under a service improvement plan implemented in 1995. At the nontelephone subsidiaries, the $131.0 million improvement in other revenues results primarily from an $88 million increase in publishing revenues resulting from the change in the recognition of directory publishing revenues (see Cumulative effect of change in accounting principle) and growth in traditional publishing markets, and a $48 million improvement in revenues due to significant increases in cable television customers and telecommunications lines in the United Kingdom.
Operating expenses
Operating expenses for the first six months of 1996 were $5.6 billion, a decrease of $322.5 million, or 5.5%, from the first six months of 1995.
Included in operating expenses for the first six months of 1996 were pension enhancement charges of $155.0 million, charges of $110.0 million related to various self-insurance programs and legal and regulatory contingencies and a $14.0 million intrastate gross receipts tax refund (see Operating revenues). Included in operating expenses for the first six months of 1995 were NYNEX Mobile expenses amounting to $336.3 million, pension enhancement charges of
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
$249.7 million, charges of $199.0 million for accruals related to various self-insurance programs, legal and regulatory contingencies, operating tax provisions and revised benefit charges and $34.2 million of gross receipts tax collected and remitted to the taxing authority (see Operating revenues).
Excluding the items discussed above, operating expenses would have increased $245.7 million, or 4.9% over adjusted operating expenses for the first six months of 1995. Telecommunications group operating expenses would have increased $129.1 million, or 2.8% and the nontelephone subsidiaries' operating expenses would have increased $116.6 million or 24.6%.
At the telecommunications group, the $129.1 million adjusted increase results primarily from the net of (i) a $57 million increase in employee related costs resulting from higher salaries and wages primarily due to additional labor costs attributable to initiatives to improve service quality and wage rate increases partially offset by reductions in the work force attributable to the force reduction program, a $33 million increase related to process re-engineering costs not accrued for in 1993 business restructuring reserves, a $16 million increase to implement the competitive checklist provisions of the Telecommunication Act of 1996 (see REGULATORY ENVIRONMENT - Federal) and a $16 million increase in advertising and marketing costs and (ii) a $17 million decrease due to the 1995 increase in the provision for uncollectibles. At the nontelephone subsidiaries, the $116.6 million adjusted increase results primarily from an increase in publishing expenses resulting from the change in the recognition of directory production expenses (see Cumulative effect of change in accounting principle) and growth in traditional publishing markets and significant increases in cable television customers and in telecommunications lines in the United Kingdom.
The components of the pension enhancement charges for the first six months of 1996 and 1995 are as follows:
For the Six Months Ended
June 30,
(In millions) 1996* 1995*
---- ----
Pretax After-Tax Pretax After-Tax
------ --------- ------ ---------
Pension enhancement charges $ 137.5 $85.9 $184.7 $118.2
Postretirement medical costs 17.5 10.6 65.0 41.8
------ ----- ----- ------
$155.0 $96.5 $249.7 $160.0
====== ===== ====== ======
|
* 1996 - 910 management and 860 nonmanagement employees 1995 - 1,150 management and 900 nonmanagement employees
Operating income
Operating income for the first six months of 1996 was $1,142.2 million, an increase of $172.5 million, or 17.8%, over the same period of 1995.
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Operating income, after adjusting for the items discussed above in Operating revenues and Operating expenses, would have been $1,462.2 million, an improvement of $107.3 million, or 7.9%, over adjusted operating income for the first six months of 1995. Operating margin for the first six months of 1996 would have improved .5 of one percentage point to 21.6% from 21.1% adjusted. This improvement was a result of adjusted expense growth of 4.9% being outpaced by adjusted revenue growth of 5.5%.
Other income (expense) - net
Other income (expense) - net for the first six months of 1996 improved $50.4 million, or 87.5% over the same period of 1995. The $50.4 million improvement results primarily from the net of (i) a $66 million gain on the sale of NYNEX's interest in Vanstar Corporation ("Vanstar"), a $19 million decrease in minority interest expense as a result of the formation of the BANM cellular partnership, and $9 million of amortization of transaction costs related to nontelephone subsidiary financing in June of 1995 and (ii) $31 million of costs associated with the formation of the BANM cellular partnership and a $23 million decrease in income due to a change in the recording of capitalized interest expense (see second quarter discussion).
Interest expense
Interest expense for the first six months of 1996 decreased $61.5 million, or 16.1%, from the same period of 1995, primarily due to an $18 million decrease resulting from a change in the recording of capitalized interest expense by the telephone subsidiaries (see second quarter discussion), a decrease of $13 million due to an increase in capitalized interest expense at the nontelephone subsidiaries and a $7 million decrease resulting from the reversal of interest charges on the revenues "set aside" as required by the NYSPSC in 1995. In addition, there was a $13 million decrease due to total debt decreasing from $10.0 billion at the end of the second quarter of 1995 to $9.8 billion at the end of the second quarter 1996 while average interest rates remained essentially flat at 7.0%.
Income (loss) from long-term investments
Income (loss) from long-term investments for the first six months of 1996 improved $75.4 million over the same period of 1995. The $75.4 million improvement results primarily from the net of (i) equity income from the BANM cellular partnership and (ii) losses from investments in the Tele-TV Partnerships and PrimeCo.
Income taxes
Income taxes for the first six months of 1996 increased $14.9 million, or 4.8%, over the same period of 1995 primarily attributable to an increase in pretax income, partially offset by a decrease resulting from a $30 million provision for various tax issues recorded in the second quarter of 1995.
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Extraordinary Item
In the second quarter of 1995, the discontinuance of regulatory accounting principles required NYNEX, for financial accounting purposes, to adjust telephone plant and equipment and to eliminate non-plant regulatory assets and liabilities from the balance sheet. This change resulted in an after-tax extraordinary charge of $2.9 billion, consisting of $2.2 billion to adjust the carrying amount of telephone plant and equipment and $0.7 billion to write off non-plant regulatory assets and liabilities.
Cumulative effect of change in accounting principle
Effective January 1, 1996, Information Resources, a wholly owned subsidiary of NYNEX, changed the recognition of its directory publishing revenue and production expenses from the "amortized" method to the "point of publication" method. Under the point of publication method, revenues and product expenses will be recognized when the directories are published rather than over the lives of the directories (generally one year) as was the case under the amortized method. NYNEX believes the change to the point of publication method is preferable because it is the method that is generally followed by publishing companies and reflects more precisely the operations of the business. The initial effect of the change to the point of publication method is reported as a cumulative effect of a change in accounting principle which resulted in a one-time, non-cash after-tax gain of $131.0 million, or $.30 per share, in the first quarter of 1996. The impact of applying the point of publication method during the three months and the six months ended June 30, 1996 resulted in a $28.2 million, or $.06 per share and a $24.6 million, or $.06 per share increase to net income, respectively.
The pro forma results, assuming the point of publication method had been applied during the second quarter and first six months of 1995, are as follows:
Three Months Ended Six Months Ended
June 30, 1995 June 30, 1995
Pro forma As Reported Pro forma As Reported
--------- ----------- --------- -----------
Net Loss (In millions) $(2,656.9) $(2,678.6) $(2,409.2) $(2,428.4)
Loss Per Share $(6.23) $(6.28) $(5.66) $(5.71)
|
While the application of the point of publication method is not expected to have a material impact on total 1996 and pro forma 1995 results, the impact of the change is likely to materially effect the results of certain quarters due to the nature of the change.
SUBSEQUENT EVENT
On July 2, 1996, NYNEX and Bell Atlantic executed an amendment to their definitive merger agreement, effecting a technical change in the transaction structure of the merger of equals announced on April 22, 1996. As amended, the agreement provides that a newly formed subsidiary of Bell Atlantic will merge with and into NYNEX, thereby making NYNEX a wholly owned subsidiary of
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Bell Atlantic. There is no change in the fundamental elements of the proposed merger. The exchange ratio for shares is restated to reflect the difference in the transaction. Each NYNEX shareholder will receive 0.768 shares of Bell Atlantic common stock in exchange for one share of NYNEX common stock. The purpose of the amendment to the merger agreement is to expedite the regulatory approval process by eliminating the need to obtain congressional approval of the merger under a 1913 District of Columbia "anti-merger" law. The merger, which is expected to qualify as a pooling of interests for accounting purposes, is subject to a number of conditions, including regulatory approvals, the approval of the shareholders of both NYNEX and Bell Atlantic, and receipt of opinions that the merger will be tax free, except, in the case of NYNEX shareholders, for tax payable because of cash received for a fractional share and the payment by NYNEX of certain transfer taxes on behalf of its shareholders. The transaction is expected to close by April 1997.
It is expected that the new combined company will recognize recurring expense savings of approximately $600 million annually by the third year following the consummation of the merger as a result of consolidating operating systems and other administrative functions and reducing management positions. Of these savings, $300 million is expected to be achieved in the first year following the consummation of the merger with an additional $150 million in each of the two succeeding years. Annual capital expenditures for the new combined company should reflect approximately $250 to $300 million of incremental purchasing efficiencies. As a result of the merger, the merged companies are expected to incur certain transition and integration charges of approximately $500 million in the first year following the consummation of the merger. An additional $200 to $400 million in charges are anticipated over the two succeeding years.
Information contained above with respect to the expected financial impact of the proposed merger is forward-looking. These statements represent NYNEX's and Bell Atlantic's reasonable judgment with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially. Such factors include: materially adverse changes in economic conditions in the markets served by NYNEX and Bell Atlantic; substantial delay in the expected closing of the merger; competition from others in the local exchange and toll service markets; and the timing of entry and profitability of the new combined company in the long distance and video markets.
CURRENT STATUS OF RETIREMENT INCENTIVES
In July 1996, NYNEX extended the period for offering retirement incentives to management employees to mid-1997 in order to better coordinate force sizing with process re-engineering implementation and service improvement initiatives. It was determined in 1995 that, due to volume of business growth, the expected reduction in the number of nonmanagement employees would not be fully realized until 1998. At the present time, NYNEX expects the total number of employees who will elect to take the retirement incentives to be in the range of 19,000 to 20,000 consisting of approximately 9,000 management and 10,000 to 11,000 nonmanagement employees depending on work
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
volumes, needs of the business, and timing of the incentive offers. The increase of an estimated 2,000 additional management employees expected to leave under the retirement incentives results from higher than anticipated acceptances of the retirement incentives.
Due to the increase in management employees expected to accept the incentives, NYNEX anticipates the total additional charges for the incentives to be in the range of $2.2 billion ($1.4 billion after-tax), a slight increase over the $2.0 billion ($1.3 billion after-tax) estimated at December 31, 1995. As of June 30, 1996, the actual pretax additional charges for retirement incentives recorded to date are $1,363 million and the expected future additional pretax charges are approximately $700 to $900 million, consisting of $350 million for management and in the range of $350 to $550 million for nonmanagement employees.
CURRENT STATUS OF BUSINESS RESTRUCTURING
As a result of NYNEX's most recent experience and projections of remaining costs and work effort for process re-engineering initiatives, systems development costs are expected to exceed earlier projections by $24 million for the remainder of 1996, while work center consolidation and training costs are expected to be lower than originally planned by approximately $19 million and $5 million, respectively.
Reserve Utilization in 1996
The restructuring reserve balance at June 30, 1996, which does not include the liability for postretirement medical benefits associated with employees' leaving NYNEX under the business restructuring, was approximately $235 million. Summarized below are the components of $159 million of reserves utilized during the first six months of 1996:
(In millions)
Severance $ 59
Process Re-engineering:
Systems redesign:
Customer contact $31
Customer provisioning -
Customer operations 22
Customer support 1
---
Total systems redesign $ 54
Work center consolidation 2
Branding -
Relocation -
Training 4
Re-engineering implementation -
---
Total process re-engineering 60
Sale/discontinuance of information
products and services businesses 8
Nontelephone subsidiaries' restructuring 32
----
Total $159
====
|
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Cost Savings
Since the inception of process re-engineering and the special pension enhancement program in 1994, approximately 13,700 employees have accepted the retirement incentives. On an annualized basis, this will equate to an average reduction in wages and benefits of approximately $740 million. A portion of these cost savings will be offset by the effects of wage and price inflation, growth in volume of business and higher costs attributable to service improvements.
CAPITAL RESOURCES AND LIQUIDITY
Cash Flows
Operating activities: Net cash provided by operating activities was $1,199.1 million and $1,443.9 million for the first six months of 1996 and 1995, respectively, a decrease of $244.8 million. Changes in operating assets and liabilities used $700.7 million of cash flows in the first six months of 1996, primarily as a result of increased accounts receivable and decreased other current liabilities. Costs associated with re-engineering activities reserved for in 1993 resulted in cash outlays of approximately $38 million and $73 million in the first six months of 1996 and 1995, respectively. Pension enhancement charges in the first six months of 1996 and 1995 did not materially affect operating cash flows because the cash outflows will be incurred primarily by the NYNEX Pension Plans in future years.
Investing activities: Net cash used in investing activities was $1,372.8 million and $1,810.6 million for the first six months of 1996 and 1995, respectively, a decrease of $437.8 million.
Capital expenditures were $1,168.3 million in the first six months of 1996, a decrease of $236.0 million, from the first six months of 1995, primarily due to the deconsolidation of NYNEX Mobile and decreased purchases of computer equipment at Telesector Resources. The largest component of capital expenditures continues to be for the telecommunications group which are funded through cash generated from operations. Buildout of the cable television/telecommunications network in the United Kingdom continued.
Other investing activities: In the first six months of 1996, net cash outflows from other investing activities were $185.6 million lower than the same period of 1995. During the first six months of 1996, cash outflows for additional investments in PrimeCo, the Tele-TV Partnerships, FLAG Limited ("FLAG"), P.T. Excelcomindo Pratama, and others were partially offset by cash received for the sale of NYNEX's interest in Vanstar. During the same period of 1995, cash outflows included the initial $254 million investment in PrimeCo, investments in cellular properties and an additional investment in FLAG.
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Financing activities: Net cash provided by financing activities was $155.5 million and $363.7 million for the first six months of 1996 and 1995, respectively, a decrease of $208.2 million. This decrease is primarily due to the $610 million of proceeds from the sale of subsidiary stock in the second quarter of 1995, partially offset by the proceeds from the monetization of a portion of NYNEX's investment in Viacom Preferred Stock in 1996 (see Note (d)) which were used to reduce commercial paper.
Total debt decreased $43.9 million from December 31, 1995. As a result, the debt ratio decreased to 59.9% as of June 30, 1996, compared with 61.8% as of December 31, 1995. On April 1, 1996, $55 million of New York Telephone's 3.375%, Series I Refunding Mortgage Bonds matured. Proceeds necessary to repay these borrowings were raised through the issuance of commercial paper.
Issuance of common stock: During the first six months of 1996, NYNEX continued to issue common stock for employee savings plans, the Dividend Reinvestment and Stock Purchase Plan, stock compensation plans and employee stock option plans resulting in an increase in equity of approximately $250.2 million. The dividends for common stock remained unchanged at $.59 per share in the second quarter of 1996.
Minority interest: Financing cash flows in the first six months of 1996 included net funds of $485.1 million primarily provided by the Viacom monetization proceeds (see below).
Liquidity
Viacom: Consistent with the terms and conditions of the December 1995 transaction, during March 1996, NYNEX monetized its investment in Viacom Series B Cumulative Preferred Stock by an additional $500 million. As a result, NYNEX has monetized a total of $600 million which represents approximately 50% of NYNEX's investment in Viacom. The additional $500 million of proceeds from this transaction were used to further reduce outstanding commercial paper. The additional proceeds received by Kipling Associates L.L.C. (a 50% owned and controlled NYNEX subsidiary) from Mandalay Investors L.L.C. (a third-party owned and controlled entity) are reflected in "Minority Interest, including a portion subject to redemption requirements."
At June 30, 1996, NYNEX had $950 million of unissued, unsecured debt and equity securities registered with the SEC. The proceeds from the sale of securities would be used to provide funds to NYNEX for general corporate purposes. At June 30, 1996, NYNEX Capital Funding Company ("CFC") had $637 million of unissued medium-term debt securities registered with the SEC which, when issued, will be guaranteed by NYNEX. The proceeds from the sale of these securities may be used to provide financing for NYNEX and the nontelephone subsidiaries. At June 30, 1996, New England Telephone and New York Telephone had $500 and $250 million, respectively, of unissued, unsecured debt securities registered with the SEC.
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Following the announcement of the definitive merger agreement between NYNEX and Bell Atlantic, the credit rating agencies reaffirmed the current ratings of NYNEX (including NYNEX Credit Company and CFC), New York Telephone and New England Telephone and, in certain cases, negative outlooks were changed to credit watch positive. Management believes that the bond ratings are indicative of strong credit support for timely principal and interest payments in the foreseeable future.
$2.0 billion of outstanding commercial paper borrowings was classified as Long-term debt at June 30, 1996 under an unsecured revolving credit facility. With this facility, NYNEX has the ability (and intent) to refinance the commercial paper borrowings on a long-term basis.
REGULATORY ENVIRONMENT
On July 3, 1996, NYNEX and Bell Atlantic filed information on their proposed merger with regulators in the District of Columbia and the thirteen states in which their respective local telephone companies provide service. The filings seek the level of review mandated by the applicable provisions of the states' public service laws and seek formal regulatory approval where required. In addition, a joint filing was made with the Federal Communications Commission ("FCC") on the same date.
State
New York
Competition II Proceeding: In May, the NYSPSC issued an Order addressing four major areas that the NYSPSC views as necessary to establish a fair and open competitive market:
1. Universal Service: The NYSPSC defined the services considered essential for access to and use of the public network and stated that any carrier wishing to withdraw basic service offerings will be subject to exit requirements that will be formalized in the next phase of the proceeding. A further collaborative phase will be established to develop and recommend mechanics for funding programs such as lifeline, emergency services, and telecommunications relay service. The merits of further access charge reductions will also be considered in the next phase.
2. Level Playing Field: By November, all local exchange carriers must file reports describing the steps they have taken to support mutual billing, billing date exchange and other areas of joint cooperation. The NYSPSC stated that it expects that telephone companies will re-engineer their processes for provisioning, preparing and maintaining collocation space to assure that the terms are reasonable and costs are as low as possible. All local exchange carriers have been directed to charge prices for intraLATA usage which meet appropriate imputation standards. In a further phase of the proceeding the NYSPSC will consider the benefits and potential terms, condition, and pricing of providing directory information to third parties.
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
3. Transition Regulation: In general, non-dominant carriers will only be required to file financial data based on GAAP. Dominant carriers will continue to be subject to existing pricing rules. All local exchange carriers, including new entrants, must meet the NYSPSC's requirements with respect to lifeline, customer fair practices, open network architecture and non-discrimination.
4. Service Quality and Monitoring: The NYSPSC determined that service quality reporting should vary by company size, and performance history, but that all companies will be expected to provide service consistent with performance standards. The NYSPSC intends to initiate a review of all of its service quality standards. The NYSPSC will also institute a formal rulemaking to monitor competition.
In July, New York Telephone filed its proposed resale tariff setting forth the terms and conditions on which it proposes to offer services to resellers. Other parties are expected to file detailed comments on this tariff, and the NYSPSC is expected to rule on any disputed tariff issues prior to the October 1st effective date of the tariff.
In July, the NYSPSC issued a ruling on the interim rates New York Telephone must offer for links (the network plant connecting the customer to the central office) and services offered for resale. The NYSPSC established temporary discounts of 11% from New York Telephone's retail rates for business services offered for resale and discounts of 17% from New York Telephone's retail rates for residence services offered for resale. Certain services are excluded from the interim discounts. New York Telephone's current link rate was reduced and the lower rate was made temporary, subject to "true-up" once a permanent rate is set. Hearings on permanent rates ended in July, and an NYSPSC decision is expected before New York Telephone's resale tariffs take effect, in October, 1996.
Other: In 1991, the NYSPSC authorized a $250 million increase in New York Telephone's rates, of which $47.5 million annually remains subject to refund pending resolution of certain issues related to New York Telephone's transactions with other NYNEX affiliates in 1984-1990. At June 30, 1996, approximately $261 million was estimated to be subject to possible refund in connection with these affiliate transaction issues. In July, New York Telephone filed with the NYSPSC a joint stipulation and settlement agreement on behalf of New York Telephone, the NYSPSC staff, the New York State Consumer Protection Board and the New York State Department of Law. The agreement provides for a refund of $83 million by New York Telephone, with no other revenues subject to refund, and resolves all pending issues, as well as certain portions of the proceeding instituted in 1992 to review New York Telephone's Directory License Agreement with Information Resources. The agreement is subject to approval by the NYSPSC.
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Massachusetts
In June, New England Telephone filed its second annual price cap filing with the Massachusetts Department of Public Utilities. The filing proposes rate changes effective August 15, 1996, which would produce an overall decrease in New England Telephone's annual intrastate revenues of approximately $29.6 million. The revenue reduction includes a $16.3 million decrease in revenues from residential customers, a $15.4 million decrease in revenues from business customers, a $7.4 million decrease in revenues from access services, and a $9.3 million increase in certain miscellaneous revenues.
New Hampshire
In April, the New Hampshire Public Utilities Commission ("NHPUC") issued an Order directing local exchange carriers, including New England Telephone, to implement intraLATA presubscription in New Hampshire on or before October 1, 1996. In late May, following New England Telephone's request for clarification or reconsideration, the NHPUC clarified its Order, stating that it would "entertain evidence regarding the implementation date for each particular company." New England Telephone has filed its plan, proposing to implement presubscription in June 1997. NHPUC hearings on implementation issues were held in June and July.
In June, the NHPUC filed with the New Hampshire Legislature proposed rules to govern the authorization of competitive local exchange service. A public hearing was held in July, and comments are due in August. By statute, the rulemaking process must be completed by year-end.
In June, the NHPUC issued a proposed rule to adopt standards under which it may regulate utilities using a form of regulation other than traditional rate of return regulation. A public hearing was held and comments filed in June.
Rhode Island
In June, the Rhode Island Public Utilities Commission ("RIPUC") approved an incentive regulation plan that had been proposed by New England Telephone and the Rhode Island Division of Public Utilities and Carriers. The Plan has no set term or expiration, although there are opportunities for annual review by the RIPUC. There is no earnings cap or sharing mechanism, which was a component of the expired Trial. New England Telephone will thus be able to operate in Rhode Island with increased earnings, pricing, operational, and depreciation flexibility.
Other features of the Plan include: more stringent service quality requirements, including a financial penalty, with a maximum annual rebate of $1.25 million; and no increase in residence or business basic exchange rates through 1999.
Further hearings in the RIPUC's competition proceeding are scheduled to be completed in August, and a decision is expected in November.
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Vermont
In late May, the Vermont Public Service Board ("VPSB") issued its final Order in Phase I of its proceeding on competition. The Order directs New England Telephone to "unbundle" certain elements of its network, sets pricing rules for wholesale and retail services and adopts a mandatory "bill-and-keep" compensation arrangement for local exchange carrier interconnection. Under a bill-and-keep arrangement the carrier originating a call does not pay the terminating carrier for access to its network. The Order also stated that New England Telephone's cost of provisioning services or facilities to itself will be presumed to equal the cost of providing the same services or facilities on a wholesale basis to competitors for resale.
In mid-June, New England Telephone filed a request for reconsideration of two aspects of the VPSB's Order. New England Telephone argues that a mandatory "bill-and-keep" compensation arrangement for interconnection violates the Telecommunications Act of 1996 (the "1996 Act") by negating New England Telephone's right to mutual and reciprocal compensation for use of its network. New England Telephone also argues that the VPSB should not have prejudged the issue of New England Telephone's cost of self-provisioning, which will be definitively determined once cost studies are concluded later this year in Phase II of the proceeding.
Phase II of the proceeding will begin in September and will address specific pricing and technical questions with respect to local and intraLATA toll competition, including intraLATA presubscription. The VPSB will open a separate docket to investigate service quality, privacy and other consumer protection issues, which will create benchmark standards for all competitors in dealings with retail customers.
Federal
Telecommunications Act of 1996: On August 1, 1996, the FCC announced that it had adopted rules to begin implementing the local competition provisions of the 1996 Act. The rules address, among other matters, local exchange carrier interconnection, unbundling of network elements and provision of local exchange services for resale. These rules may impact the competitive checklist requirements for NYNEX's entry into the in-region long distance business. The effect of the rules on NYNEX's business plans cannot be assessed until the text of the rules is released by the FCC.
In July, the FCC issued interim rules that grant "nondominant carrier" status for a Regional Holding Company's ("RHC") affiliate when it offers long distance services outside of its home region. The rules impose certain minimum safeguards: the affiliate may not own network facilities jointly with the parent, must maintain separate books, and must pay tariffed rates for services from the parent. The FCC rejected the proposals of long distance competitors that sought to bar the RHC's and their affiliates from certain operating efficiencies, such as the common use of employees and premises, and that sought to impose regulatory accounting requirements on the affiliate. In view of the proposed mergers between NYNEX and Bell Atlantic and between SBC Communications and Pacific Telesis Group, the FCC decided that nondominant
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
status will not automatically apply to an RHC's affiliate providing long distance service in a state where the RHC's prospective merger partner provides local exchange service. The RHC may seek such status by a waiver request. The FCC has commenced a separate rulemaking proceeding to determine whether the minimum safeguards imposed on nondominant carriers should be continued or may be eliminated.
In July, the FCC granted NYNEX authority to provide international long distance service outside of its home region. NYNEX was afforded nondominant carrier status, subject to the FCC's interim rules.
Nondominant carriers enjoy substantial regulatory freedom, including freedom from detailed price cap regulation and flexibility to make tariff changes on one day's notice (compared with two weeks for dominant carriers) without cost support and with a presumption of lawfulness. The FCC's Order will greatly facilitate NYNEX's timely provision of out-of-region interstate and international long distance services.
In July, the FCC also commenced separate rulemaking proceedings to determine the safeguards to be applied to the affiliate of an RHC or other local exchange carrier when it offers certain services, including long distance services within its home region, manufacturing and information services, electronic publishing, alarm monitoring and telemessaging services.
In June, the FCC issued an Order adopting regulations to implement the open video systems ("OVS") provisions of the 1996 Act to provide opportunities for the distribution of video programming other than through cable systems. In its Order, the FCC adopted a streamlined process for entry, including reasonable presumptions for determining whether rates are just and reasonable. In addition, the FCC adopted capacity allocation rules that provide flexibility for OVS operators, such as NYNEX, while guaranteeing unrelated programmers access to customers. The FCC also adopted rules implementing Congressional intent to limit the role of local franchise authorities in the oversight of OVS. Many parties, including NYNEX, have sought reconsideration of aspects of the Order. Reconsideration petitions must be decided and final rules in place by early August.
In June, the FCC adopted rules that will contribute towards the development of competition in the local exchange market by allowing customers to retain their telephone numbers when switching local service providers. The FCC's rules implement the number portability obligations imposed on local exchange carriers by the Telecommunications Act of 1996. Local exchange carriers are to begin implementing number portability in the 100 largest metropolitan areas by October 1997, with completion by the end of 1998. Number portability outside of those areas must be provided within six months after receiving a specific request from a telecommunications carrier. The FCC has proposed a further inquiry into cost recovery for meeting these requirements.
Form 10-Q Part I
NYNEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Price Caps: In June, the FCC approved the Telephone Subsidiaries Annual Access Tariff Filing for the tariff period July 1996 to June 1997. In that filing the NYNEX telephone companies elected to use the highest productivity factor in their price cap formula, allowing them to retain all interstate earnings without sharing. (The price cap formula adjusts the limits on access price levels upward for inflation, downward for productivity, and up or down for certain "exogenous" costs beyond the carrier's control.) The FCC also approved the NYNEX telephone companies' petition to elect the same "no-sharing" pgoductivity factor retroactively to January 1, 1996, which will require them to make an additional $20 million permanent reduction in access price levels.
Other Federal Regulatory Matters: In July, the U.S. Court of Appeals for the District of Columbia Circuit granted petitions for review of the 1992-94 FCC orders that changed the rate structure for interstate Local Transport access services (transport between local telephone company central offices and interexchange carrier premises). The FCC orders established a mix of flat monthly rates and per-minute rates for Local Transport services and, to ease the impact of this restructure on small interexchange carriers, placed some of the costs for per-minute transport in a "residual interconnection charge," ("RIC") imposed on all interexchange carriers. The FCC described this as an interim rate structure to allow a transition to cost-based rates. However, the Court found that the FCC had made no apparent progress since 1992 in developing cost-based rates. W ile the Court did not reverse the FCC orders, it remanded the case with the instruction that the FCC must implement cost-based rates for transport services and a cost-based alternative to the RIC, or give a reasoned explanation why a departure from cost-based pricing is necessary. The FCC may deal with this case as part of the access reform proceeding that it intends to initiate in the near future. The RIC accounts for approximately $600 million of NYNEX's annual revenues.
Form 10-Q Part II
NYNEX CORPORATION
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Share Owners of NYNEX Corporation ("NYNEX") was held on May 1, 1996. The Following Directors were elected to the Board by the indicated votes:
For % * Withheld % *
L. J. R. de Vink 355,593,123 97.2 10,358,026 2.8
H. L. Kaplan 356,021,262 97.3 9,929,887 2.7
H. B. Price 355,268,180 97.1 10,682,969 2.9
I. G. Seidenberg 355,466,206 97.1 10,484,943 2.9
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* % of shares voted
The following Directors had terms of office as Directors continuing after the date of the Annual Meeting:
J. Brademas E.E. Phillips R.L. Carrion F.V. Salerno S.P. Goldstein W.V. Shipley E.T. Kennan J.R. Stafford |
The appointment of the firm of Coopers & Lybrand as independent auditors was ratified by the indicated votes:
% of Shares Voted
For: 357,619,017 shares 97.7%
Against: 5,609,283 shares 1.5%
Abstain: 2,722,849 shares 0.7%
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Changes in the Non-Employee Director Compensation Program were ratified by the indicated votes:
% of Shares Voted
For: 320,872,192 shares 87.7%
Against: 37,084,269 shares 10.1%
Abstain: 7,994,688 shares 2.2%
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Form 10-Q Part II
NYNEX CORPORATION
PART II - OTHER INFORMATION
Share Owner Proposals
1. To require the repeal of Board Classification:
% of Shares Voted
For: 137,075,635 shares 41.1%
Against: 188,422,106 shares 56.5%
Abstain: 8,229,964 shares 2.5%
2. To require a listing of corporate contributions in the Annual
report:
% of Shares Voted
For: 41,857,855 shares 12.6%
Against: 276,137,598 shares 82.8%
Abstain: 15,467,346 shares 4.6%
3. To require cumulative voting for directors:
% of Shares Voted
For: 66,571,039 shares 19.9%
Against: 228,989,208 shares 68.7%
Abstain: 37,902,549 shares 11.4%
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ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit
Number
-------
(4)(a) Rights Agreement, dated as of October 19, 1989, between NYNEX
and American Transtech Inc. (Exhibit No. 1 to the Registrant's
Current Report on Form 8-K, Date of Report, October 20, 1989,
File No. 1-8608)
(a)1 First Amendment to Rights Amendment, dated April 21, 1996,
between NYNEX and First National Bank of Boston, as successor
rights agent (Exhibit No. 4(a) to the Registrant's Quarterly
Report on Form 10-Q, for the period ended March 31, 1996)
(a)2 Second Amendment to Rights Agreement, dated July 2nd, 1996,
between NYNEX and First National Bank of Boston, as
successor rights agent
(10)iii1a Amendment to NYNEX Senior Management Short Term Incentive Plan
(10)iii5a Amendment to NYNEX Corporation Deferred Compensation Plan for
Non-Employee Directors
(10)iii8 NYNEX Senior Management Incentive Award Deferral Plan
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(10)iii13c Amendment to NYNEX Senior Management Long Term Incentive Plan
(10)iii14g Amendment to NYNEX Senior Management Non-Qualified Pension Plan
(10)iii15a NYNEX Corporation Non-Employee Director Pension Plan (Exhibit
No. 99 to the Registrant's Proxy Statement dated March 18,
1996, File No. 1-8608)
(10)iii16 NYNEX Senior Management Non-Qualified Supplemental Savings
Plan
(10)iii21 NYNEX Supplemental Life Insurance Plan
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(10)iii30a Amendment to NYNEX Executive Officer Short Term Incentive Plan
(10)iii32 NYNEX Senior Management Non-Qualified Defined Contribution Pension Plan
(10)iii32a Description of amendment to NYNEX Senior Management
Non-Qualified Defined Contribution Pension Plan
(10)iii33 NYNEX Account Balance Deferral Plan
(10)iii34 NYNEX Corporation Non-Employee Director Retainer Stock Plan
(Exhibit No. 99 to the Registrant's Proxy Statement dated
March 18, 1996, File No. 1-8608)
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(12) Computation of Ratio of Earnings to Fixed Charges
(27) Financial Data Schedule
(b) Reports on Form 8-K.
NYNEX's Current Report on Form 8-K, date of report April 21, 1996, and filed April 23, 1996, reporting on Items 5 and 7.
Form 10-Q
NYNEX CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NYNEX CORPORATION
(Principal Financial Officer)
August 7, 1996
SECOND AMENDMENT TO RIGHTS AGREEMENT
SECOND AMENDMENT, DATED JULY 2, 1996, TO RIGHTS AGREEMENT, dated as of October 19, 1989, between NYNEX Corporation, a Delaware corporation (the "Company"), and First National Bank of Boston, a Delaware corporation, as successor right agent (the "Rights Agent").
W I T N E S S E T H:
WHEREAS, concurrently with the execution hereof, the Company has entered into an Amended and Restated Agreement and Plan of Merger between the Company and Bell Atlantic Corporation, dated as of April 21, 1996 (the "Merger Agreement"); and
WHEREAS, the Board of Directors of the Company has approved, authorized and adopted the Merger Agreement and the transactions contemplated thereby, and recommended to the stockholders of the Company the approval and adoption of the Merger Agreement; and
WHEREAS, the Board of Directors of the Company has determined that in connection with the Merger Agreement and the transactions contemplated thereby, it is desirable to amend the Rights Agreement, between the Company and the Rights Agent, dated October 19, 1989, as amended by the First Amendment to Rights Agreement, dated April 21, 1996 (the "Rights Agreement") as set forth herein; and
WHEREAS, pursuant to Section 27 of the Rights Agreement, the Company and the Rights Agent desire to amend the Rights Agreement as set forth herein.
NOW THEREFORE, the Rights Agreement is amended as follows:
1. Amendment.
Section 3.1 of the Rights Agreement is hereby amended and restated in its entirety as follows:
"Section 3.1 Exempt Transaction. Notwithstanding any provision of
this Rights Agreement to the contrary, (i) no Distribution Date, Stock
Acquisition Date or Triggering Event shall be deemed to have occurred, neither
Bell Atlantic Corporation nor any of its Subsidiaries (collectively, the
"Acquisition Group") shall be deemed to have become an Acquiring Person and (ii)
no holder of Rights shall be entitled to exercise such Rights under, or be
entitled to any rights or benefits pursuant to Section 7(a), 11(a), 13(a)
(including but not limited to those rights set forth in Section 13(a)(ii)), or
any other provision of this Rights Agreement, solely by reason of (x) the
approval, execution and delivery of the Merger Agreement by the parties thereto,
(y) the approval of the Merger Agreement by the stockholders of the parties
thereto, or (z) the consummation of the transactions contemplated by the Merger
Agreement; provided that in the event that one or more members of the
Acquisition Group collectively become the Beneficial Owner of 10% or more of the
Common Stock then outstanding in any manner other than as set forth in the
Merger Agreement the provisions of this sentence (other than this proviso) shall
not be applicable."
2. Effectiveness. This Amendment shall be deemed effective as of the date first set forth above. Except as amended hereby, the Rights Agreement shall remain in full force and effect and shall be otherwise unaffected hereby.
3. Miscellaneous. This Amendment shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such state applicable to contracts to be made and performed entirely within such state. This Amendment may be executed in any number of counterparts, each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. If any term, provision, covenant or restriction of this Amendment is held by a court of competent jurisdiction or other authority to be invalid, illegal, or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Amendment shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
EXECUTED as of the date first set forth above.
NYNEX CORPORATION
/s/Jeffrey A. Bowden ---------------------------- Name: Jeffrey A. Bowden Title: Strategy & Corporate Assurance |
FIRST NATIONAL BANK OF BOSTON
/s/Murray Steinberg ---------------------------- Name: Murray Steinberg Title: Division Executive |
NYNEX Senior Management Short Term Incentive Plan
Effective April 18, 1996, the NYNEX Senior Management Short Term Incentive Plan (the "Plan") shall be amended as follows:
1. The following shall be added to the end of the first sentence of
Section 3(a) of the Plan:
"provided, further, that if during the first three months of an Award Year, (x) the Effective Time (as defined in the Amended and Restated Merger Agreement, dated as of April 21, 1996, as amended and restated as of July 2, 1996, by and between the Company and Bell Atlantic Corpoiration, as such agreement may be amended from time to time) occurs; and (y) an employee is involuntarily terminated without cause by the Company or any Associated Company as a result of or in connection with the transactions thereby contemplated, which termination would result in any forfeiture under this Plan, no forfeiture of an Award shall occur and the amount of any outstanding Award shall be prorated to the date of termination and all other provisions of the Plan shall apply.".
2. Conforming amendments in Section 3(b)(vi) are approved.
NYNEX CORPORATION
DEFERRED COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. Eligibility
Each member of the Board of Directors of NYNEX Corporation ("NYNEX") who is not an employee of NYNEX , or of any of its subsidiaries or affiliates, is eligible to participate in this Deferred Compensation Plan for Non-Employee Directors ("Plan").
2. Compensation
For the purposes of this Plan, the term "compensation" means fees payable in cash or shares of NYNEX's Common Stock ("Common Stock") for services as a Board member, including the annual retainer paid to each Director, the retainer paid to the chairperson of a committee of the Board, and meeting fees.
3. Administrator
The Plan shall be administered, construed and interpreted by a committee (the "Committee") which shall be comprised of three members of NYNEX's Board of Directors who are not eligible under Section 1 hereof to participate in the Plan, or such lesser number of such members of NYNEX's Board of Directors as there may be from time to time.
4. Participation
(a) Prior to the beginning of any calendar year (except as provided in item 4(d)), each eligible Director may elect to participate in the Plan by directing that all or any part of the compensation which would otherwise have been payable currently during such calendar year and subsequent calendar years shall be deferred subject to the terms of the Plan.
(b) An election to participate in the Plan shall be in the form of a document executed by the Director and filed with the Secretary of NYNEX. Except as provided in Item 4(d), an election related to compensation otherwise payable currently in any calendar year shall become irrevocable on the last day prior to the beginning of such calendar year. An election shall continue until a
Director ceases to be a Director of NYNEX or until he or she terminates or modifies such election by written notice. For purposes of the preceding sentence and for purposes of Items 7(a) and 7(c) hereof, a Director who resigns from the Board and within 60 days thereafter becomes a member of the board of directors of an affiliated company shall be considered to "cease to be a Director of NYNEX" upon retirement or resignation from the board of such affiliated company. Any such termination or modification shall become effective as of the end of the calendar year in which such notice is given with respect to all compensation otherwise payable in subsequent calendar years.
(c) A Director who has filed a termination of election may thereafter again file an election to participate for any calendar year or years subsequent to the filing of such election.
(d) Prior to June 1, 1996, each eligible Director may file an election described in Item 4(a) with respect to compensation otherwise payable currently for the period July 1, 1996 through December 31, 1996. Any such election (i) may terminate or modify an election previously filed with respect to such compensation; (ii) shall become irrevocable on June 1, 1996 with respect to such compensation; and (iii) shall continue in effect with respect to compensation payable after December 31, 1996 unless terminated or modified in accordance with Item 3(b).
5. Deferred Compensation Accounts
(a) All deferred amounts related to compensation which would otherwise have been payable currently in cash shall be held in the general funds of NYNEX and shall be credited to the Director's account and shall bear interest from the date such compensation would otherwise be paid. The interest credited to the account will be compounded quarterly at the end of each calendar quarter. The rate of interest so credited shall be equal to the average U.S. Treasury 10-year note rate for the previous calendar quarter.
(b) Subject to Item 6, all deferred amounts related to compensation which would otherwise have been payable currently in shares of Common Stock shall be credited to the Director's account as deferred shares of Common Stock ("Deferred Shares"). The Director's account shall also be credited on each dividend payment date for Common Stock with an amount equivalent to the dividend payable on the number of shares of Common Stock equal to the number of Deferred Shares in the Director's account on the record date for such dividend. Such amount shall then be converted to a number of additional Deferred Shares determined by dividing such amount by the price of Common Stock, as determined in the following sentence. The price of Common Stock
related to any dividend payment date shall be the average of the daily high and low sale prices of Common Stock on the New York Stock Exchange ("NYSE") for the period of five trading days ending on such dividend payment date, or the period of five trading days immediately preceding such dividend payment date if the NYSE is closed on the dividend payment date.
(c) In the event of any change in outstanding Common Stock by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares or other similar corporate change, the Committee in its sole discretion shall make such adjustments, if any, that it deems appropriate in the number of Deferred Shares then credited to Directors' accounts. Any and all such adjustments shall be conclusive and binding upon all parties concerned.
6. Issuance of NYNEX Shares to Trust
(a) In the sole discretion of the Committee, shares of Common Stock which are not currently issued to a Director as a result of such Director's election to participate in this Plan may instead be issued to and held by the NYNEX Corporation Trust for Non-Employee Directors (the "Trust"). In the event such shares are issued to the Trust, the Director's Deferred Compensation Account under this Plan shall not be credited with the amounts described in Item 5(b).
(b) The trustee under the Trust ("Trustee") will be directed to hold the shares of Common Stock issued to the Trust, receive dividends on such shares, reinvest such dividends in additional shares of Common Stock as soon as practicable after the receipt of such dividends, and, pending such reinvestment, invest the dividend proceeds in such manner as the Trustee deems appropriate. The Trustee will also be directed to establish an account within the Trust for each Director and to credit such account with (i) the number of shares of Common Stock issued to the Trust as a result of elections made by the Director under this Plan; (ii) dividends paid on such shares; and (iii) the additional shares of Common Stock or other investments acquired by the Trustee with such dividends. The Director shall have the authority to direct the Trustee's exercise of voting rights with respect to shares credited to the Director's account, but shall otherwise have no beneficial ownership in or any other rights with respect to such shares.
7. Distribution
(a) At the time of election to participate in the Plan, a Director shall also make an election with respect to the distribution of amounts deferred under the Plan plus additional amounts credited pursuant to Items 5(a), 5(b), and 6(b). A Director may elect to receive such amounts in one payment or in some other
number of approximately equal annual installments (not exceeding 10). The first installment (or the single payment if the Director has so selected) shall be paid on or as soon as practicable after the first day of the calendar year immediately following the year in which the Director ceases to be a Director of NYNEX, and subsequent installments shall be paid on or as soon as practicable after the first day of each succeeding calendar year until the entire amount credited to the Director's accounts under this Plan or the Trust shall have been paid. Amounts credited as cash plus accumulated interest pursuant to Item 5(a) shall be distributed in cash; amounts credited as Deferred Shares pursuant to Item 5(b) shall be distributed in the form of an equal number of shares of Common Stock; and shares of Common Stock held by the Trust pursuant to Item 6 shall be distributed by the Trustee. Amounts held pending distribution pursuant to this Item shall continue to be credited with additional amounts pursuant to Items 5(a), 5(b) and 5(c).
(b) The election with respect to the distribution of amounts deferred under this Plan plus additional amounts credited to the Director's accounts shall be contained in the document, referred to in Item 4(b), executed by the Director and filed with the Secretary of NYNEX. Except as provided in Item 4(d), such an election related to compensation otherwise payable currently in any calendar year shall become irrevocable on the last day prior to the beginning of such calendar year.
(c) Notwithstanding an election pursuant to Item 7(a), in the event a Director ceases to be a Director of NYNEX and becomes a proprietor, officer, partner, employee, or otherwise becomes affiliated with any business that is in competition with NYNEX or any of its affiliates, or becomes employed by any governmental agency having jurisdiction over the activities of NYNEX or any of its affiliates, the entire balance of deferred compensation, plus the additional amounts credited pursuant to Items 5(a), 5(b) and 6(b), shall be paid immediately in a single payment.
(d) If a Director should die before full payment of all amounts credited to his or her accounts under the Plan or the Trust, the balance of deferred compensation, plus the additional amounts credited pursuant to Items 5(a), 5(b), and 6(b), shall be paid as soon as reasonably practicable to the beneficiary or beneficiaries designated in writing by the Director, or if no designation has been made, to the estate of the Director.
(e) The Committee may take into account the financial hardship or other unforeseen circumstances of a Director making an election under this Plan and in its absolute discretion may accelerate or otherwise modify the distribution of
deferred compensation, plus the additional amounts credited pursuant to Items
5(a), 5(b), and 6(b).
8. Miscellaneous
(a) The right of a Director to any deferred fees or additional amounts credited pursuant to Items 5(a), 5(b) and 6(b) shall not be subject to assignment, attachment, or alienation by the Director.
(b) NYNEX shall not be required to reserve, or otherwise set aside, funds for the payment of its obligations hereunder.
(c) The Board of Directors may at any time amend or terminate the Plan, but such amendments or termination shall not adversely affect the rights of any Director, without his or her consent, to any benefit under the Plan to which such Director may have previously become entitled prior to the effective date of such amendment or termination. The Committee, with the approval of the Executive Vice President and General Counsel of NYNEX (or any successor position), shall be authorized to make minor or administrative amendments to the Plan, as well as amendments required by federal or state statutes applicable to the Plan.
(d) Copies of the Plan and any and all amendments thereto shall be made available at all reasonable times to all Directors at the office of the Secretary of NYNEX.
NYNEX Senior Management Incentive Award Deferral Plan
(Effective March 1, 1996)
Outline of the NYNEX Senior Management Incentive Award Deferral Plan
The Plan provides Senior Managers the opportunity to defer receipt of amounts which otherwise would be paid in cash each year under the NYNEX Account Balance Deferral Plan, and to receive such deferred amounts after termination of employment.
Participation in the Plan begins when amounts first are credited as a result of a Senior Manager's deferral election under the NYNEX Account Balance Deferral Plan.
Deferrals will be credited to the Senior Manager's Account as of March 1 of the year for which the deferral election is made, and will be credited with earnings or losses as if invested in certain Funds maintained under the NYNEX Corporation Savings Plan for Salaried Employees, as designated by the Senior Manager. All deferrals will be before-tax savings and the entire Account balance will be subject to income taxes when distributed.
After termination of employment, a Senior Manager receives his or her balances in the form previously elected, i.e., as a single lump sum, in various annuity forms, or part as a lump sum and part as an annuity. Or, a Senior Manager may have elected an annual lifetime income equal to the greater of current "earnings" (to the extent the current balance exceeds the balance at commencement of distribution), or 8 percent of the balance at commencement of distribution.
To the extent that an annuity form is elected, post-retirement survivor benefits (if any) shall be determined exclusively by the terms of the annuity payment form.
To provide for the possibility of death prior to termination of employment, a Senior Manager can designate one of several forms of payment to his or her surviving Beneficiary or Beneficiaries.
Payments from the Senior Manager's Account balance commence at the end of the month following the month of his or her termination of employment. The form of payment must be elected in the year in which the deferral election is made. All amounts will be paid in cash and will be subject to applicable tax withholding requirements.
All deferred amounts will vest immediately. However, because of Internal Revenue Service regulations, the right of any Senior Manager to receive future payouts under the Plan will be a contractual obligation of the Company that is not evidenced by notes or secured in any way.
Notes: [bullet] The above is only a broad outline of the major features of
the Plan. Any benefits or rights under the Plan will be
determined by the specific Plan provisions as they apply to
each case.
[bullet] The tax and other ramifications of deferral arrangements are
complex and have been subject to considerable change in
recent years. Senior Managers contemplating Compensation
deferrals are strongly urged to consult their financial
and/or legal advisors.
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NYNEX Senior Management Incentive Award Deferral Plan
(Effective March 1, 1996)
Contents
- -------------------------------------------------------------------------------------------------
Section Page
Article I. Purpose 1
Article II. Definitions; Administration
2.1 Definitions 2
2.2 Plan Administration 3
2.3 Gender and Number 3
Article III. Eligibility
3.1 Eligibility 4
3.2 Nature of Plan 4
Article IV. Amounts Credited to Accounts
4.1 Deferrals Credited to Accounts 5
4.2 Earnings Credited to Participant's Account 5
Article V. Distribution at Termination of Employment
5.1 Commencement 6
5.2 Form of Payment 6
5.3 Lump Sum Distribution 6
5.4 Appreciation Only 6
5.5 Annuity Options 7
5.6 Partial Lump Sum Option 7
Article VI. Death Prior to Termination of Employment
6.1 In General 8
6.2 Forms of Payment 8
6.3 Lump Sum Distribution 8
6.4 Annuity Options 8
6.5 Partial Lump Sum Option 9
3415LPLN.4/02 0496 i
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NYNEX Senior Management Incentive Award Deferral Plan
(Effective March 1, 1996)
Contents
- -------------------------------------------------------------------------------------------------
Section Page
Article VII. Amendment or Termination
7.1 Administrative Amendments 10
7.2 Amendments and Termination 10
7.3 Participant Rights 10
7.4 Successors 10
Article VIII. Other Provisions
8.1 Uniform Elections 11
8.2 No Assignment or Alienation 11
8.3 Source of Benefits 11
8.4 Notices 11
8.5 Applicable Laws 11
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3415LPLN.4/02 0496 ii
Article I. Purpose
The purpose of the NYNEX Senior Management Incentive Award Deferral Plan (the "Plan") is to provide Senior Managers of NYNEX Corporation (the "Company") and subsidiaries of the Company which shall have elected to participate in the Plan an annual opportunity to defer the amounts otherwise payable each March from the NYNEX Account Balance Deferral Plan, and to receive those amounts after termination of employment.
3415LPLN.4/02 0496 1
Article II. Definitions; Administration
2.1 Definitions
(a) "Account" shall mean an unfunded bookkeeping account established for each
Senior Manager who participates under this Plan. Such account shall be
credited with--
(1) accumulations credited under the prior version of the Plan
through July 31, 1995, and
(2) deferrals under section 4.1.
The Account shall be adjusted daily to reflect the investment performance
of the Funds designated by the Senior Manager under section 4.2.
(b) "Beneficiary" shall mean one or more Beneficiaries designated by the
Senior Manager on a form provided by the Committee for the appropriate
purpose. The most recent Beneficiary designation submitted by the Senior
Manager shall override all previous designations.
(c) "Funds" shall mean the investment Funds (other than the NYNEX
Shares Fund) into which Senior Managers can direct their accounts
under the NYNEX Savings Plan for Salaried Employees. Initially, such
Funds include the Government Obligations Fund, the Interest Income
Fund, the U.S. Balanced Fund, the Global Balanced Fund, the
Diversified Equity Portfolio, the Active U.S. Equity Fund, the
Telecommunications Fund, the International Equity Fund, and the U.S.
Small Cap Fund. Amounts credited under this Plan are not actually
invested in such Funds or in any other manner. Rather, hypothetical
accounts are credited with hypothetical earnings (or debited for
hypothetical losses) as if invested in such Funds.
(d) "Participating Company" shall mean NYNEX Corporation and any subsidiary
of NYNEX Corporation which shall have determined with the concurrence of
the Committee to participate in this Plan.
(e) "Plan Year" shall have the same meaning as the calendar year i.e.,
January 1 to December 31.
(f) "Senior Manager" shall mean an employee of a Participating Company, who
has attained a level higher than department level or equivalent fifth
level, and who holds a position that the Participating Company's Board of
Directors has designated to be within that Company's Senior Management
Compensation Group.
(g) "Termination of Employment" shall mean any termination of
employment with a Participating Company.
3415LPLN.4/02 0496 2
2.2 Plan Administration
The authority to control and manage the day-to-day operation and administration of the Plan is vested in the Company's Vice President-Human Resources (or any successor to that officer's responsibilities) (the "Plan Administrator"), subject to the direction of the Committee on Benefits of the Company's Board of Directors (the "Committee").
2.3 Gender and Number
Where the context admits, words in one gender shall include the other gender, words in the singular shall include the plural and words in the plural shall include the singular.
3415LPLN.4/02 0496 3
Article III. Eligibility
3.1 Eligibility
A Senior Manager who has not previously become a Participant under the prior version of this Plan shall become a Participant as of the date on which his or her initial deferral election becomes effective.
3.2 Nature of Plan
The Plan does not constitute a contract of employment, and nothing in the Plan will give any Senior Manager the right to be retained in the employ of the Company or a Subsidiary, nor any right or claim to any benefit under the Plan, except to the extent specifically provided under the terms of the Plan.
3415LPLN.4/02 0496 4
Article IV. Amounts Credited to Accounts
4.1 Deferrals Credited to Accounts
As of each March 1, with respect to which an amount is deferred pursuant to an election made by the Senior Manager under the NYNEX Account Balance Deferral Plan, such deferred amount shall be credited to an Account under this Plan.
4.2 Earnings Credited to Participant's Account
Subject to the provisions of the Plan, each Senior Manager's Account shall be adjusted to reflect the performance of Funds designated by the Senior Manager. The Committee shall provide a choice of Funds, and shall impose rules regarding percentage amounts and frequency of election changes, which shall be similar to those applicable to participant-directed investments under the NYNEX Corporation Savings Plan for Salaried Employees.
Notwithstanding the foregoing, a Senior Manager may not direct the hypothetical investment of his or her Account to reflect the performance of the NYNEX Shares Fund maintained under the NYNEX Corporation Savings Plan for Salaried Employees.
3415LPLN.4/02 0496 5
Article V. Distribution at Termination of Employment
5.1 Commencement
Effective as of the last business day of the month following the month in which a Senior Manager's Termination of Employment occurs, the distribution of his or her Account shall commence in the form and amount determined under this Article V.
5.2 Form of Payment
Distribution shall be made in the form designated by the Senior Manager in an election made by the later of December 31, 1995, or the end of the year in which the Senior Manager's initial Compensation deferral election under section 4.1 is made. In the event that no election is in effect on such date, payment of the Senior Manager's entire Account balance shall be made as an immediate lump sum distribution. The forms of payment that may be elected by a Senior Manager are those described in sections 5.3 through 5.6, below. The form of payment initially elected shall apply to each subsequent year's deferral. Such distribution form may not be revoked by the Senior Manager, but prior to commencement it may be changed by the Committee in its sole and absolute discretion in the event of a lifestyle change, such as marriage or divorce.
5.3 Lump Sum Distribution
Under this option, a lump sum distribution shall be made, in the amount equal to the aggregate Account balance as of the last business day of the month in which Termination of Employment occurs.
5.4 Appreciation Only
(a) In General. Under this option, a payment shall be made to the Senior
Manager for each month up to and including the month of the Senior
Manager's death, at which time the remaining Account balance (adjusted to
reflect such monthly distributions) shall be paid in a single lump sum to
his or her Beneficiary.
(b) Monthly Amount. The amount payable for any given month during
the Senior Manager's lifetime shall be equal to the greater of--
(1) a fixed amount equal to two-thirds of one percent of the Account
balance as of the last business day of the month in which
Termination of Employment occurs, or
3415LPLN.4/02 0496 6
(2) the amount by which the current balance exceeds the Account balance
as of date on which distribution commenced.
(c) Investments. Prior to the death of a Senior Manager who has elected this
Appreciation-Only option, the Senior Manager shall continue to elect
which Funds determine the hypothetical investment performance of his or
her Account balance under the Plan.
5.5 Annuity Options
(a) In General. Under this option, monthly payments will be made from the
Participating Company's general assets in amounts determined under the
annuity payment form specified under this section 5.5. No annuity
contract of any kind shall be purchased or provided.
(b) Single Life Annuity. A Senior Manager who elects a single life
annuity option shall receive a level monthly amount for his or her
lifetime, which is actuarially equivalent to the Senior Manager's
Account balance as of the last business day of the month following the
month in which Termination of Employment occurs, determined by
assuming interest equal to the average 30-year Treasury Bill rate for
the November prior to the year of such termination, and life
expectancy under the 1983 GATT Mortality Table.
(c) Other Annuity Payment Forms. A Senior Manager may elect payment
in any Joint and Survivor Annuity Form, or Period Certain and Life
Annuity Form, specified under section 6.1 of the NYNEX Management
Pension Plan. The amount payable under any such form shall be equal
to the amount that would be payable in such form under the NYNEX
Management Pension Plan if the single life annuity payable under
such Plan were equal to the single life annuity determined under
section 5.5(b) hereof.
(d) Death of Senior Manager. With respect to an annuity payment form, no
amount shall be payable for any month after the Senior Manager's death
except as specifically provided to designated Beneficiaries under such
annuity payment form.
5.6 Partial Lump Sum Option
Under this option, the Senior Manager shall designate a portion of his or her Account balance to be paid as a lump sum under section 5.3, and the remaining portion to be paid as an actuarially equivalent annuity amount under section 5.5.
3415LPLN.4/02 0496 7
Article VI. Death Prior to Termination of Employment
6.1 In General
If the Senior Manager dies before commencement of benefits under Article V, benefits shall be paid under this Article VI.
6.2 Forms of Payment
(a) In General. Distribution shall be made in such form, and to such
Beneficiaries, as shall have been elected pursuant to the Pre-Retirement
Beneficiary Designation Form which was most recently submitted by
the Senior Manager, commencing with the last business day of the
month following the date on which NYNEX is notified of the Senior
Manager's death. In the event no payment form election is effective, an
amount equal to the Senior Manager's entire Account balance shall be
paid in a lump sum. The forms of payment of pre-retirement death
benefits that may be elected by the Senior Manager are those
described in sections 6.3 through 6.5, below.
(b) No Beneficiary. In the event that no Beneficiary has been designated, or
no Beneficiary survives the Senior Manager, an amount equal to the Senior
Manager's entire Account balance shall be paid to his or her estate in a
single lump sum payment.
6.3 Lump Sum Distribution
The Senior Manager may elect that his or her Beneficiary shall receive payment of a lump sum distribution equal to the amount of the Account balance determined as of the last business day of the month following the month in which NYNEX is notified of his or her death.
6.4 Annuity Options
(a) In General. Under this option, monthly payments will be made from the
Participating Company's general assets in amounts determined under the
annuity payment form specified by the Senior Manager under this section
6.4. No annuity contract of any kind shall be purchased or provided.
(b) Single Life Annuity. Under this single life annuity payment form, a
level monthly amount shall be paid to the Beneficiary for his or her
lifetime. Payments shall be actuarially equivalent to the Account
balance on the last business day of the month following the month in
which NYNEX is notified of the Senior Manager's death, determined
by assuming interest equal to the 30-year Treasury Bill rate for the
November prior to the year of death, and the life expectancy of the
Beneficiary under the 1983 GATT Mortality Table.
3415LPLN.4/02 0496 8
(c) Period Certain and Life Annuity.
(1) In General. A Senior Manager may elect payment under the Period
Certain and Life Annuity Form specified under section 6.1 of the
NYNEX Management Pension Plan. Under this form, payments shall be
made to the Beneficiary for his or her lifetime, provided that if
the Beneficiary dies during the Period Certain, payments shall
continue to the Beneficiary's estate.
(2) Conversion Basis. The amount payable in the form of a Period
Certain and Life Annuity shall be determined by using conversion
procedures that would be applied under the NYNEX Management Pension
Plan in order to convert a Single Life Annuity in an amount
determined under section 6.4(b) to a Period Certain and Life
Annuity.
6.5 Partial Lump Sum Option
Under this option, the Senior Manager shall designate a portion of his or her Account balance to be paid as an immediate lump sum, and the remaining portion to be paid as an actuarially equivalent annuity amount under section 6.4.
3415LPLN.4/02 0496 9
Article VII. Amendment or Termination
7.1 Administrative Amendments
Subject to the provisions of section 7.3, the Company's Vice President-Human Resources (or any successor to that officer's responsibilities) may make minor or administrative amendments to the Plan and, with the concurrence of the Company's Executive Vice President and General Counsel (or any successor to that officer's responsibilities), make any changes necessary or advisable to comply with applicable law or government regulations.
7.2 Amendments and Termination
Subject to the provisions of section 7.3, the Company's Board of Directors may amend or terminate the Plan at any time and any Subsidiary may, by action of its Board of Directors, terminate its participation in the Plan at any time.
7.3 Participant Rights
No action under this Article VII shall, without the consent of the affected Participant or, in the event of his death, his Beneficiary, adversely affect the rights of any Participant with respect to any amount which was credited to him under the Plan prior to the date of such action.
7.4 Successors
The obligations of the Company and each Subsidiary under the Plan shall be binding upon any assignee or successor in interest thereto. Neither the Company nor any Subsidiary shall merge or consolidate with any other corporation, or liquidate or dissolve, without making suitable arrangement for the payment of any benefits payable under the Plan.
3415LPLN.4/02 0496 10
Article VIII. Other Provisions
8.1 Uniform Elections
A Senior Manager shall make uniform elections regarding choice of investment Funds and distribution forms, death benefits, and Beneficiary designations under this Plan, the NYNEX Senior Manager Nonqualified Supplemental Savings Plan, and the NYNEX Senior Management Nonqualified Defined Contribution Pension Plan.
8.2 No Assignment or Alienation
Benefits payable to any person under the Plan may not be voluntarily or involuntarily assigned or alienated.
8.3 Source of Benefits
Subject to the terms and conditions of the Plan, any amount payable to or on account of a Participant under this Plan shall be paid from the general assets of the Company or applicable Subsidiary. The obligations of the Company and the Subsidiaries under the Plan are solely contractual, and no trust or other separate fund shall be established for purposes of paying any benefits under the Plan.
8.4 Notices
Any notice or document required to be given to or filed with the Plan Administrator shall be considered to be given or filed if delivered to the Vice President-Human Resources or mailed by registered mail, postage prepaid to the Vice President-Human Resources, in care of the Company, at 1095 Avenue of the Americas, New York, New York 10036.
8.5 Applicable Laws
The Plan shall be construed and administered in accordance with the laws of the State of New York.
3415LPLN.4/02 0496 11
NYNEX Senior Management Long Term Incentive Plan
Effective April 18, 1996, the NYNEX Senior Management Long Term Incentive Plan (the "Plan") shall be amended as follows:
1. The following shall be added to the end of Section 5(c) of the Plan:
"provided, further, however, that if during any outstanding Performance Periods, (x) the Effective Time (as defined in the Amended and Restated Merger Agreement, dated as of April 21, 1996, as amended and restated as of July 2, 1996, by and between the Company and Bell Atlantic Corporation, as such agreement may be amended from time to time) occurs; and (y) an employee is involuntarily terminated without cause by the Company or any Participating Company as a result of or in connection with the transactions thereby contemplated, which termination would result in any forfeiture under this Plan, no forfeiture of Units shall occur and the Units with respect to all outstanding Performance Periods shall be prorated to the date of termination and all other provisions of the Plan shall apply.".
NYNEX Senior Management Non-Qualified Pension Plan
1. Effective April 18, 1996, the NYNEX Senior Management Non-Qualified Pension Plan shall be amended to replace the last sentence of Section 8 with the following:
"Such modification shall not affect or reduce (a) the benefits of retired Senior Managers or their annuitants or (b) benefits accrued as of the date of such modification for active Senior Managers."
NYNEX Senior Management Non-Qualified Supplemental Savings Plan (Amended and Restated Effective August 1, 1995)
Outline of the NYNEX Senior Management Non-Qualified Supplemental Savings Plan
The Plan provides Senior Managers the opportunity to save up to 6 percent of their basic Salary and receive a matching company contribution of 66 2/3 percent of their allotment. A deferral election applies only to Salary in excess of the maximum dollar amount ($150,000 in 1995) recognized under the NYNEX Corporation Savings Plan for Salaried Employees, as permitted by section 401(a)(17) of the Internal Revenue Code.
Participation in the Plan must be elected by the Senior Manager, since enrollment is not automatic. An individual who becomes a Senior Manager during a calendar year may elect to participate in the Plan during that calendar year, by making an election within 30 days after becoming a Senior Manager. Otherwise a Salary deferral election (or change of election) must be made prior to the first day of the calendar year for which it is to be effective. Deferral elections shall continue in effect for all subsequent years until changed.
Salary deferrals will be made each applicable pay period and will be credited with earnings or losses as if invested in certain Funds maintained under the NYNEX Corporation Savings Plan for Salaried Employees, as designated by the Senior Manager. All Salary deferrals will be before-tax savings and all Plan amounts (Salary deferrals, matching company contributions, and interest) will be subject to income taxes when distributed.
Payments commence to the Senior Manager as of the last business day of the month following the month of his or her termination of employment. The form of payment must be elected when the election to participate is made, although a one-time opportunity was given in 1995 to elect one of the payment forms added to the Plan as of that date. All amounts will be paid in cash and will be subject to the applicable tax withholding requirements.
A Senior Manager receives his or her Account balance in the payment form previously elected, i.e., as a single lump sum, in various annuity forms, or part as a lump sum and part as an annuity. Or, a Senior Manager may have elected an annual lifetime income equal to the greater of current "earnings" (to the extent the current balance exceeds the balance at commencement of distribution), or 8 percent of the balance at commencement of distribution. This selection of payment forms was added to the Plan effective August 1, 1995.
To the extent that an annuity form is elected, post-retirement survivor benefits (if any) shall be determined exclusively by the terms of the annuity payment form.
To provide for the possibility of death prior to termination of employment, a Senior Manager can designate one of several forms of payment to his or her surviving Beneficiary or Beneficiaries.
All deferred amounts will vest immediately. However, because of Internal Revenue Service regulations, the right of any participant to receive future payouts under the Plan will be a contractual obligation of the Company that is not evidenced by notes or secured in any way.
Notes: [bullet] The above is only a broad outline of the major features of the Plan. Any benefits or rights under the Plan will be determined by the specific Plan provisions as they apply to each case.
[bullet] The tax and other ramifications of deferral arrangements are complex and have been subject to considerable change in recent years. Senior Managers contemplating Salary deferrals are strongly urged to consult their financial and/or legal advisors.
NYNEX Senior Management Non-Qualified
Supplemental Savings Plan
(Amended and Restated Effective August 1, 1995)
Contents
- -------------------------------------------------------------------------------------------------
Section Page
Article I. Purpose and Background
1.1 Purpose 1
1.2 Background 1
Article II. Definitions; Administration
2.1 Definitions 2
2.2 Plan Administration 3
2.3 Gender and Number 3
Article III. Eligibility
3.1 Eligibility 4
3.2 Transfer From Management Plan 4
3.3 Nature of Plan 4
3.4 Rehire of Manager 4
Article IV. Salary Deferrals and Supplemental
Savings Plan Credit
4.1 Salary Deferrals 5
4.2 Supplemental Matching Credit 5
4.3 Earnings Credited to Participant's Account 5
4.4 Interest Through July 31, 1995 6
Article V. Distribution at Termination of Employment
5.1 Commencement 7
5.2 Form of Payment 7
5.3 Lump Sum Distribution 7
5.4 Appreciation Only 7
5.5 Annuity Options 8
5.6 Partial Lump Sum Option 8
3415LPLN.2/02 0496 i
|
NYNEX Senior Management Non-Qualified
Supplemental Savings Plan
(Amended and Restated Effective August 1, 1995)
Contents
- -------------------------------------------------------------------------------------------------
Section Page
Article VI. Death Prior to Termination of Employment
6.1 In General 9
6.2 Forms of Payment 9
6.3 Lump Sum Distribution 9
6.4 Annuity Options 9
6.5 Partial Lump Sum Option 10
Article VII. Amendment or Termination
7.1 Administrative Amendments 11
7.2 Amendments and Termination 11
7.3 Participant Rights 11
7.4 Successors 11
Article VIII. Other Provisions
8.1 Uniform Elections 12
8.2 No Assignment or Alienation 12
8.3 Source of Benefits 12
8.4 Notices 12
8.5 Applicable Laws 12
|
3415LPLN.2/02 0496 ii
Article I. Purpose and Background
1.1 Purpose
The purpose of the NYNEX Senior Management Non-Qualified Supplemental Savings Plan (the "Plan") is to provide eligible Senior Managers (as defined in Article III, below) of NYNEX Corporation (the "Company") and subsidiaries of the Company which shall have elected to participate in the Plan an opportunity to make up the full basic allotment permitted under the NYNEX Corporation Savings Plan for Salaried Employees ("Savings Plan") and to receive the 66 2/3 percent Employing Company matching contributions permitted under the Savings Plan where a Participant is prevented from making a basic salary allotment due to the dollar limitation imposed by section 401(a)(17) of the Internal Revenue Code of 1986 (the "Code").
1.2 Background
This document reflects amendments made as of August 1, 1995, which changed the manner in which earnings are credited (or debited), and the manner in which distributions are paid.
3415LPLN.2/02 0496 1
Article II. Definitions; Administration
2.1 Definitions
(a) "Account" shall mean an unfunded bookkeeping account established for each
Senior Manager who participates under this Plan. Such account shall be
credited with Salary deferrals under section 4.1 and Supplemental
Matching Credits under section 4.2. The account shall be adjusted
periodically to reflect the investment performance of the Funds
designated by the Senior Manager under section 4.3.
(b) "Beneficiary" shall mean one or more Beneficiaries designated by the
Senior Manager on a form provided by the Committee for the appropriate
purpose. The most recent Beneficiary designation submitted by the Senior
Manager shall override all previous designations.
(c) "Funds" shall mean the investment Funds (other than the NYNEX
Shares Fund) into which Senior Managers can direct their accounts
under the NYNEX Savings Plan for Salaried Employees. Initially, such
Funds include the Government Obligations Fund, the Interest Income
Fund, the U.S. Balanced Fund, the Global Balanced Fund, the
Diversified Equity Portfolio, the Active U.S. Equity Fund, the
Telecommunications Fund, the International Equity Fund, and the U.S.
Small Cap Fund. Amounts credited under this Plan are not actually
invested in such Funds or in any other manner. Rather, hypothetical
accounts are credited with hypothetical earnings (or debited for
hypothetical losses) as if invested in such Funds.
(d) "Participating Company" shall mean NYNEX Corporation and any subsidiary
of NYNEX Corporation which shall have determined with the concurrence of
the Committee to participate in this Plan.
(e) "Plan Year" shall have the same meaning as the calendar year i.e.,
January 1 to December 31.
(f) "Salary" shall mean base salary amounts, commissions, vacation buy-
outs in connection with a Termination of Employment, which are paid
currently to a Senior Manager, and also shall include any
aforementioned amount which would have been paid but for a salary
reduction election by the Senior Manager under this Plan or any other
plan maintained by a Participating Company. Solely for purposes of
determining when a Senior Manager's Salary exceeds the
compensation limit under section 401(a)(17), of the Code, there shall
be taken into account both:
(1) the amount of any incentive award paid in the current year but
earned in the preceding year prior to the time the participant was
designated as a Senior Manager, and
(2) the amount of any Salary paid in the current year prior to the time
3415LPLN.2/02 0496 2
the participant was designated as a Senior Manager.
(g) "Termination of Employment" shall mean any termination of
employment with a Participating Company.
2.2 Plan Administration
The authority to control and manage the day-to-day operation and administration of the Plan is vested in the Company's Vice President-Human Resources (or any successor to that officer's responsibilities) (the "Plan Administrator"), subject to the direction of the Committee on Benefits of the Company's Board of Directors (the "Committee").
2.3 Gender and Number
Where the context admits, words in one gender shall include the other gender, words in the singular shall include the plural and words in the plural shall include the singular.
3415LPLN.2/02 0496 3
Article III. Eligibility
3.1 Eligibility
Each Senior Manager (as defined below) shall become a Participant in the Plan as of the date on which he or she elects to participate in the Plan. The term "Senior Manager" means a person employed by the Company or any Subsidiary in active service at or above the sixth level of management and who has been designated by the Board of Directors of the Company or Subsidiary as a member of its Senior Management Compensation Group.
3.2 Transfer From Management Plan
In the case of a Senior Manager who becomes a Participant in this Plan after
having previously participated under the NYNEX Management Non-Qualified
Supplemental Savings Plan:
(a) amounts credited under such latter plan shall be transferred to this
Plan, and
(b) prior elections regarding deferral percentages and investment Funds
shall remain in effect until changed by the Participant, and
(c) prior elections regarding forms of distribution shall continue in effect,
and shall continue to be irrevocable.
3.3 Nature of Plan
The Plan does not constitute a contract of employment, and nothing in the Plan will give any employee or Participant the right to be retained in the employ of the Company or a Subsidiary, nor any right or claim to any benefit under the Plan, except to the extent specifically provided under the terms of the Plan.
3.4 Rehire of Manager
A Senior Manager who is rehired after a Termination of Employment under this Plan shall be treated in the same manner as a newly hired employee of NYNEX. Thus, distributions under Article V attributable to post-rehire deferrals shall be determined without regard to any election in effect prior to the initial Termination of Employment, and distributions which previously shall have commenced shall not be affected by the rehire.
3415LPLN.2/02 0496 4
Article IV. Salary Deferrals and Supplemental Savings Plan Credit
4.1 Salary Deferrals
Each eligible Senior Manager of a Participating Company who timely elects to participate in the Plan and whose Salary exceeds the compensation limitation imposed by section 401(a)(17) of the Code, may make a pre-tax Salary deferral in an amount up to the basic six percent (6%) of his Salary in excess of such limitation. An election must be filed in writing, in such manner as the Plan Administrator may determine. For the first year in which a Senior Manager is eligible under the Plan, an election to defer must be made (if at all) within the 30-day period following the earliest date of eligibility. For each subsequent year, any election or change of election must be filed prior to the first day of the calendar year for which it is to be effective. A Salary deferral election, once made, will continue in effect for all subsequent years until changed. Any such election shall be effective no earlier than the first payroll period beginning after the filing of the election form.
4.2 Supplemental Matching Credit
For each applicable payroll period, each Participant's Account shall be credited with a "Supplemental Matching Credit" in an amount equal to 66 2/3 percent of his Salary deferral allotments under the Plan during that period. A Participant shall be fully vested in all Supplemental Matching Credits regardless of the extent to which he is vested in his Participating Company contributions under the Savings Plan.
4.3 Earnings Credited to Participant's Account
Subject to the provisions of the Plan, for periods after July 31, 1995, each Participant's Account shall be adjusted to reflect the performance of Funds designated by the Senior Manager. The Committee shall provide a choice of Funds, and shall impose rules regarding percentage amounts and frequency of election changes, which shall be similar to those applicable to participant-directed investments under the NYNEX Corporation Savings Plan for Salaried Employees.
Notwithstanding the foregoing, a Senior Manager may not direct the hypothetical investment of his or her Account to reflect the performance of the NYNEX Shares Fund.
3415LPLN.2/02 0496 5
4.4 Interest Through July 31, 1995
For periods through July 31, 1995, interest was calculated and compounded quarterly at one-fourth of the average 10-year U.S. Treasury Note rate for the previous calendar quarter.
3415LPLN.2/02 0496 6
Article V. Distribution at Termination of Employment
5.1 Commencement
Effective as of the last business day of the month following the month in which a Senior Manager's Termination of Employment occurs, the distribution of his or her Account shall commence in the form and amount determined under this Article V.
5.2 Form of Payment
Distribution shall be made in the form designated by the Senior Manager in an election made on or before the later of December 31, 1995, or the last day of the year in which the Senior Manager's initial Salary deferral election under section 4.1 is made. Such an election shall be irrevocable for a Participant's entire Account balance except that prior to the commencement of a distribution, a change may be approved by the Committee, in its sole discretion, in the event of a lifestyle change such as divorce or marriage. In the event that no election is in effect on the later of such dates, payment of the Participant's entire Account balance shall be made as an immediate lump sum distribution. The forms of payment that may be elected by a Senior Manager are those described in sections 5.3 through 5.6, below.
5.3 Lump Sum Distribution
Under this option, a lump sum distribution shall be made, in the amount equal to the aggregate Account balance as of the last business day of the month following the month in which Termination of Employment occurs.
5.4 Appreciation Only
(a) In General. Under this option, a payment shall be made to the Senior
Manager for each month up to and including the month of the Senior
Manager's death, at which time the remaining Account balance (adjusted to
reflect such monthly distributions) shall be paid in a single lump sum to
his or her Beneficiary.
(b) Monthly Amount. The amount payable for any given month during
the Senior Manager's lifetime shall be equal to the greater of--
(1) a fixed amount equal to two-thirds of one percent of the Account
balance as of the last business day of the month in which
Termination of Employment occurs, or
(2) the amount by which the current balance exceeds the Account balance
as of date on which distribution commenced.
3415LPLN.2/02 0496 7
(c) Investments. Prior to the death of a Senior Manager who has elected this Appreciation-Only option, the Senior Manager shall continue to elect which Funds determine the hypothetical investment performance of his or her Account balance under the Plan.
5.5 Annuity Options
(a) In General. Under this option, monthly payments will be made from the
Participating Company's general assets in amounts determined under the
annuity payment form specified under this section 5.5. No annuity
contract of any kind shall be purchased or provided.
(b) Single Life Annuity. A Senior Manager who elects a single life
annuity option shall receive a level monthly amount for his or her
lifetime, which is actuarially equivalent to the Senior Manager's
Account balance as of the last day of the month following the month
in which Termination of Employment occurs, determined by assuming
interest equal to the average 30-year Treasury Bill rate for the
November prior to the year of such termination, and life expectancy
under the 1983 GATT Mortality Table.
(c) Other Annuity Payment Forms. A Senior Manager may elect payment
in any Joint and Survivor Annuity Form, or Period Certain and Life
Annuity Form, specified under section 6.1 of the NYNEX Management
Pension Plan. The amount payable under any such form shall be equal
to the amount that would be payable in such form under the NYNEX
Management Pension Plan if the single life annuity payable under
such Plan were equal to the single life annuity determined under
section 5.5(b) hereof.
(d) Death of Senior Manager. With respect to an annuity payment form, no
amount shall be payable for any month after the Senior Manager's death
except as specifically provided to designated Beneficiaries under such
annuity payment form.
5.6 Partial Lump Sum Option
Under this option, the Senior Manager shall designate a portion of his or her Account balance to be paid as a lump sum under section 5.3, and the remaining portion to be paid as an actuarially equivalent annuity amount under section 5.5.
3415LPLN.2/02 0496 8
Article VI. Death Prior to Termination of Employment
6.1 In General
If the Senior Manager dies before commencement of benefits under Article V, benefits shall be paid under this Article VI.
6.2 Forms of Payment
(a) In General. Distribution shall be made in such form, and to such
Beneficiaries, as shall have been elected pursuant to the Pre-Retirement
Beneficiary Designation Form which was most recently submitted by
the Senior Manager, commencing with the last business day of the
month next following the notification of NYNEX of the Senior
Manager's death. In the event no payment form election is effective, an
amount equal to the Senior Manager's entire Account balance shall be
paid in a lump sum. The forms of payment of pre-retirement death
benefits that may be elected by the Senior Manager are those
described in sections 6.3 through 6.5, below.
(b) No Beneficiary. In the event that no Beneficiary has been designated, or
no Beneficiary survives the Senior Manager, an amount equal to the Senior
Manager's entire Account balance shall be paid to his or her estate in a
single lump sum payment.
6.3 Lump Sum Distribution
The Senior Manager may elect that his or her Beneficiary shall receive payment of a lump sum distribution equal to the amount of the Account balance determined as of the last business day of the month following the month in which NYNEX is notified of his or her death.
6.4 Annuity Options
(a) In General. Under this option, monthly payments will be made from the
Participating Company's general assets in amounts determined under the
annuity payment form specified by the Senior Manager under this section
6.4. No annuity contract of any kind shall be purchased or provided.
(b) Single Life Annuity. Under this single life annuity payment form, a level
monthly amount shall be paid to the Beneficiary for his or her lifetime.
Payments shall be actuarially equivalent to the Account balance on the
last business day of the month following the month in which NYNEX is
notified of the Senior Manager's death, determined
3415LPLN.2/02 0496 9
by assuming interest equal to the 30-year Treasury Bill rate for the
November prior to the year of death, and the life expectancy of the
Beneficiary under the 1983 GATT Mortality Table.
(c) Period Certain and Life Annuity.
(1) In General. A Senior Manager may elect payment under the Period
Certain and Life Annuity Form specified under section 6.1 of the
NYNEX Management Pension Plan. Under this form, payments shall be
made to the Beneficiary for his or her lifetime, provided that if
the Beneficiary dies during the Period Certain, payments shall
continue to the Beneficiary's estate.
(2) Conversion Basis. The amount payable in the form of a Period
Certain and Life Annuity shall be determined by using conversion
procedures that would be applied under the NYNEX Management Pension
Plan in order to convert a Single Life Annuity in an amount
determined under section 6.4(b) to a Period Certain and Life
Annuity.
6.5 Partial Lump Sum Option
Under this option, the Senior Manager shall designate a portion of his or her Account balance to be paid as an immediate lump sum, and the remaining portion to be paid as an actuarially equivalent annuity amount under section 6.4.
3415LPLN.2/02 0496 10
Article VII. Amendment or Termination
7.1 Administrative Amendments
Subject to the provisions of section 7.3, the Company's Vice President-Human Resources (or any successor to that officer's responsibilities) may make minor or administrative amendments to the Plan and, with the concurrence of the Company's Executive Vice President and General Counsel (or any successor to that officer's responsibilities), make any changes necessary or advisable to comply with applicable law or government regulations.
7.2 Amendments and Termination
Subject to the provisions of section 7.3, the Company's Board of Directors may amend or terminate the Plan at any time and any Subsidiary may, by action of its Board of Directors, terminate its participation in the Plan at any time.
7.3 Participant Rights
No action under this Article VII shall, without the consent of the affected Participant or, in the event of his death, his Beneficiary, adversely affect the rights of any Participant with respect to any amount which was credited to him under the Plan prior to the date of such action.
7.4 Successors
The obligations of the Company and each Subsidiary under the Plan shall be binding upon any assignee or successor in interest thereto. Neither the Company nor any Subsidiary shall merge or consolidate with any other corporation, or liquidate or dissolve, without making suitable arrangement for the payment of any benefits payable under the Plan.
3415LPLN.2/02 0496 11
Article VIII. Other Provisions
8.1 Uniform Elections
A Senior Manager shall make uniform elections regarding choice of investment Funds and forms of pre-retirement death benefits under this Plan, the NYNEX Senior Management Nonqualified Defined Contribution Pension Plan, and the NYNEX Incentive Award Deferral Plan. He or she also shall make uniform elections regarding post-retirement distribution forms under this Plan and the NYNEX Incentive Award Deferral Plan.
8.2 No Assignment of Alienation
Benefits payable to any person under the Plan may not be voluntarily or involuntarily assigned or alienated.
8.3 Source of Benefits
Subject to the terms and conditions of the Plan, any amount payable to or on account of a Participant under this Plan shall be paid from the general assets of the Company or applicable Subsidiary. The obligations of the Company and the Subsidiaries under the Plan are solely contractual, and no trust or other separate fund shall be established for purposes of paying any benefits under the Plan.
8.4 Notices
Any notice or document required to be given to or filed with the Plan Administrator shall be considered to be given or filed if delivered to the Vice President-Human Resources or mailed by registered mail, postage prepaid to the Vice President-Human Resources, in care of the Company, at 1095 Avenue of the Americas, New York, New York 10036.
8.5 Applicable Laws
The Plan shall be construed and administered in accordance with the laws of the State of New York.
3415LPLN.2/02 0496 12
NYNEX Supplemental Life Insurance Plan
(Effective August 1, 1992)
NYNEX Supplemental Life Insurance Plan
(Effective August 1, 1992)
Contents
- -------------------------------------------------------------------------------------------------
Section Page
Outline Of The NYNEX Supplemental Life Insurance Plan
Article I. The Plan
1.1 Purpose of the Plan 1
1.2 Coordination With Other Documents 1
Article II. Definitions
2.1 Anniversary Date 2
2.2 Beneficiary 2
2.3 Committee 2
2.4 Competition 2
2.5 Discharge 2
2.6 Eligible Executive 2
2.7 ERISA 2
2.8 Incentive Award 2
2.9 Insurer 2
2.10 Maturity Date 3
2.11 NYNEX 3
2.12 Participant 3
2.13 Participating Company 3
2.14 Pension Plan 3
2.15 Plan 3
2.16 Policy 3
2.17 Position Rate 3
2.18 Retired or Retirement 3
2.19 Senior Manager 3
2.20 Split Dollar Matrix 4
2.21 Termination of Employment 4
3415LPLN.11A/02 0496 i
|
NYNEX Supplemental Life Insurance Plan
(Effective August 1, 1992)
Contents
- -------------------------------------------------------------------------------------------------
Section Page
Article III. Administration
3.1 General Administration 5
3.2 Plan Administrative Committee 5
3.3 Claims Procedures 5
3.4 Committee Determinations Conclusive 5
3.5 Named Fiduciaries 5
3.6 Allocation of Duties 6
Article IV. Participation
4.1 Eligibility 7
4.2 Enrollment 7
4.3 Prior Plans 7
4.4 Special Rule for 1992 Enrollments 7
Article V. Life Insurance Benefit
5.1 Benefit If Enrollment Is Before October 1, 1992 8
5.2 Benefit If Enrollment Is After September 30, 1992 8
5.3 Annual Adjustment 8
5.4 Death Benefit 9
5.5 Ownership of Policy 9
Article VI. Financing
6.1 Participating Company Contributions 10
6.2 Participant Premium Payments 10
Article VII. Participating Company Recovery of Premiums
7.1 Recovery of Premiums 11
3415LPLN.11A/02 0496 ii
|
NYNEX Supplemental Life Insurance Plan
(Effective August 1, 1992)
Contents
- -------------------------------------------------------------------------------------------------
Section Page
Article VIII. General Provisions
8.1 Effective Date 12
8.2 Source of Payments 12
8.3 Rights to Benefit 12
8.4 Attachment, Assignment, or Alienation 12
8.5 Determination of Eligibility 12
8.6 Withdrawal from Plan 12
Article IX. Plan Modification 13
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3415LPLN.11A/02 0496 iii
Outline Of The NYNEX Supplemental Life Insurance Plan
The NYNEX Supplemental Life Insurance Plan (the "Plan") is a split dollar life insurance arrangement for fifth level executives and Senior Managers, which provides a death benefit while it accumulates cash value.
For eligible executives who are employed on or after August 1, 1992 and who elect to participate in the Plan, the Plan completely replaces the company-paid basic life insurance under the NYNEX Management Group Life Insurance Plan.
The death benefit provided under this Plan is a fully portable individual universal life policy. The coverage level is equal to five times a covered compensation amount which is specified in the Plan, with a 5 percent automatic increase each year to the earlier of age 60, or retirement with a service pension under the NYNEX Management Pension Plan.
The premiums for the policy are partially paid by the executive and partially by the company. The company is reimbursed for its cumulative premiums on a date specified in the Plan. The executive may continue to pay premiums on the policy and/or use the cash withdrawal or policy loan provisions.
Note: The above is only a broad outline of the major features of the Plan. Any benefits or rights under the Plan will be determined by the specific Plan provisions as they apply to each case.
Article I. The Plan
1.1 Purpose of the Plan
The purpose of the NYNEX Supplemental Life Insurance Plan (the "Plan") is to provide death benefit coverage while it accumulates cash value. The Plan covers fifth level executives and Senior Managers of NYNEX Corporation and such of the subsidiaries of NYNEX Corporation which have determined, with the concurrence of NYNEX Corporation, to participate in the Plan.
1.2 Coordination With Other Documents
The Plan set forth herein is intended to operate in conjunction with insurance policy contracts issued by the Insurer, and thus shall be interpreted in a manner consistent with such contracts, and with the split dollar agreements, collateral assignment agreements, and administrative guides issued in connection with such contracts.
3415LPLN.11A/02 0496 1
Article II. Definitions
2.1 "Anniversary Date" shall mean--
(a) August 1 for a Participant who was eligible to participate in the Plan
on August 1, 1992, and
(b) January 1 for all other Participants.
2.2 "Beneficiary" shall mean one or more beneficiaries designated by the Participant on a form provided by the Insurer. The most recent beneficiary designation submitted by the Participant shall override all previous designations.
2.3 "Committee" shall mean the Employees' Benefit Committee appointed by the Company.
2.4 "Competition" shall mean that the Participant, without the consent of the Participating Company which employs or last employed the Participant, at any time is employed by, becomes associated with, renders service to, or owns an interest in, any business (other than as a shareholder with a nonsubstantial interest in such business) that is competitive with a Participating Company or with any business in which a Participating Company has a substantial interest, as determined by the Board of Directors of such Participating Company.
2.5 "Discharge" shall mean discharge by a Participating Company for cause or a determination by the Board of Directors of a Participating Company that the Participant engaged in misconduct in connection with his or her employment with such Participating Company.
2.6 "Eligible Executive" shall mean a fifth level executive or Senior Manager of NYNEX or a Participating Company.
2.7 "ERISA" shall mean the Employee Retirement Income Security Act, as amended from time to time.
2.8 "Incentive Award" shall mean the standard incentive award or its equivalent, available to an eligible fifth level executive, determined and fixed as of August 1, 1992.
2.9 "Insurer" shall mean Metropolitan Life Insurance Company.
3415LPLN.11A/02 0496 2
2.10 "Maturity Date" shall mean the later of:
(a) the Anniversary Date following the date of the Participant's 65th
birthday or,
(b) the Anniversary Date following 15 years of participation in the Plan.
2.11 "NYNEX" shall mean the NYNEX Corporation, a Delaware
corporation, or its successors.
2.12 "Participant" shall mean an individual who--
(a) has enrolled in the Plan as an Eligible Executive, as provided under
section 4.2, and
(b) is in the active employ of a Participating Company, has Retired, or for
whom contributions are being made by a Participating Company pursuant to
section 6.1(c).
|
2.13 "Participating Company" shall mean NYNEX Corporation, or any subsidiary of NYNEX Corporation which shall have determined with the concurrence of the Committee to participate in this Plan.
2.14 "Pension Plan" shall mean the NYNEX Management Pension Plan, as such plan is in effect on the applicable date.
2.15 "Plan" shall mean the NYNEX Supplemental Life Insurance Plan, as set forth herein.
2.16 "Policy" shall mean the Participant's individual universal life insurance policy which is issued by the Insurer pursuant to the terms of this Plan.
2.17 "Position Rate" shall mean the rate of pay for a Participant's position, including geographic differentials (but not adjusted for geographic movements), determined as of August 1, 1992.
2.18 "Retired" or "Retirement" or "Retires" shall mean a Participant's termination of employment with a Participating Company after becoming entitled to a Service Pension or Disability Pension under the Pension Plan, or after the Participant would have become entitled to a service or disability pension under the Pension Plan if the Participant's Participating Company had participated in the Pension Plan.
2.19 "Senior Manager" shall mean an employee on the active payroll of any Participating Company on or after August 1, 1992, who has attained a
3415LPLN.11A/02 0496 3
level higher than fifth level executive, and who holds a position that a Participating Company's Board of Directors has designated to be within that company's Senior Management Compensation Group.
2.20 "Split Dollar Matrix" shall mean a matrix which shows death benefit coverage amounts applicable in 1992 for Eligible Executives at various grades and positions, based on the benefit formula in section 5.1 of the Plan, and which shows the amounts to which such 1992 coverage amounts would increase (at 5 percent per annum) for each year subsequent to 1992.
2.21 "Termination of Employment" shall mean any termination of employment with a Participating Company prior to Retirement.
3415LPLN.11A/02 0496 4
Article III. Administration
3.1 General Administration
NYNEX shall be the "plan administrator" and the "sponsor" of the Plan as those terms are defined in ERISA. The Committee and the Participating Companies shall have the administrative responsibilities set forth below.
3.2 Plan Administrative Committee
(a) The Committee shall have the specific powers elsewhere herein granted to
it and shall have such other powers as may be necessary in order to
enable it to administer this Plan, except for powers herein granted or
provided to be granted to others.
(b) The Committee shall determine the amount to be paid by the Eligible
Executives and the frequency of payments. Adequate notice, pursuant to
applicable law and prescribed Participating Company practices, shall be
provided in writing to any Eligible Executive or Beneficiary whose claim
has been denied, setting forth the specific reasons for such denial.
3.3 Claims Procedures
The review and appeal procedures for Eligible Executives whose claims have been denied shall be the same as those procedures set forth in the Pension Plan.
3.4 Committee Determinations Conclusive
The Committee shall determine conclusively for all parties all questions arising in the administration of the Plan and any decision of such Committee shall not be subject to further review.
3.5 Named Fiduciaries
NYNEX and the Committee are each a "named fiduciary" as that term is used in ERISA with respect to the particular duties and responsibilities herein provided to be allocated to each of them.
3415LPLN.11A/02 0496 5
3.6 Allocation of Duties
NYNEX may allocate responsibilities for the operation and administration of the Plan consistent with the Plan's terms. NYNEX and other named fiduciaries may designate in writing other persons to carry out their respective responsibilities under the Plan, and may employ persons to advise them with regard to any such responsibilities.
3415LPLN.11A/02 0496 6
Article IV. Participation
4.1 Eligibility
Each Eligible Executive in the active employ of a Participating Company on or after August 1, 1992 shall be eligible to participate under the Plan unless the Insurer determines in its sole discretion that the Eligible Executive is not insurable for purposes of this Plan.
4.2 Enrollment
(a) Initial Eligibility. Each individual who is an Eligible Executive on
August 1, 1992 and intends to participate must enroll no later than
September 30, 1992. If such Eligible Executive does not enroll by such
date, he or she shall cease to be eligible to participate in the Plan and
cannot again become eligible.
(b) Subsequent Eligibility. Each individual who first becomes an Eligible
Executive after August 1, 1992 and who intends to participate must enroll
within 30 days of being notified that the individual is eligible for the
Plan. If such Eligible Executive does not enroll by such date, he or she
shall cease to be eligible for the Plan and cannot again become eligible.
(c) Agreements. To enroll under the Plan, an Eligible Employee must complete,
sign, and submit to the Insurer in the form required by the Insurer the
following: (1) an application for insurance, (2) a split dollar
agreement, and (3) a collateral assignment agreement.
4.3 Prior Plans
A Participant in this Plan shall not be entitled to coverage under the NYNEX Management Group Life Insurance Plan. Such coverage shall cease on the day before the day coverage begins under this Plan, except as provided under section 4.4.
4.4 Special Rule for 1992 Enrollments
Notwithstanding section 4.3, if a Participant who was eligible on August 1, 1992 enrolls on or before September 30, 1992, such Participant shall continue basic life insurance coverage under the NYNEX Management Group Life Insurance Plan through December 31, 1992.
3415LPLN.11A/02 0496 7
Article V. Life Insurance Benefit
5.1 Benefit If Enrollment Is Before October 1, 1992
(a) In General. In the case of the initial eligibility group described in
section 4.2(a), the death benefit amount of an Eligible Executive shall
be determined under this section, based on the job level he or she shall
have attained at Termination of Employment, adjusted in accordance with
section 5.3 below.
(b) Initial Amount For Fifth Level Executives. For a fifth level executive,
the initial death benefit shall be equal to five times the sum (increased
to the next higher multiple of $1000) of the applicable Position Rate
plus the applicable Incentive Award.
(c) Initial Amount For Senior Managers. For a Senior Manager, the initial
death benefit shall be equal to the applicable Position Rate (increased
to the next higher multiple of $1000), times five.
5.2 Benefit Amount If Enrollment Is After September 30, 1992
(a) In General. In the case of an Eligible Executive who enrolls after
September 30, 1992, the death benefit amount shall be determined under
this section on the basis of the Split Dollar Matrix established and
maintained by the Plan Administrator for such purpose.
(b) Fifth Level Executives. For a fifth level executive, the Plan
Administrator shall identify the coverage level that would have applied
for an individual in a comparable position in 1992. The initial death
benefit shall be the amount shown on the Split Dollar Matrix for such
comparable position for the calendar year of enrollment.
(c) Senior Managers. For a Senior Manager, the death benefit amount shall be
an amount listed on the Split Dollar Matrix, determined by the Plan
Administrator by calculating the coverage level that would be determined
under section 5.1(c) if the Senior Manager's base salary rate at the time
of enrollment were treated as his or her applicable Position Rate.
5.3 Annual Adjustment
On the first Anniversary Date following the Participant's commencement of participation in the Plan, the amount determined under section 5.1 or 5.2 shall be increased by 5 percent. On each Anniversary Date thereafter, the amount determined as the life insurance amount on the previous Anniversary Date shall be increased by 5 percent; provided, however, that
3415LPLN.11A/02 0496 8
all increases shall cease with the Anniversary Date that is coincident with or immediately following the earlier of the Participant's Retirement or attainment of age 60.
5.4 Death Benefit
Subject to the terms of the Policy, upon the Participant's death, his or her Beneficiary shall receive the amount determined under this Article V.
5.5 Ownership of Policy
The Participant shall be the owner of any Policy purchased under this Plan, but may assign ownership as provided under the Policy.
3415LPLN.11A/02 0496 9
Article VI. Financing
6.1 Participating Company Contributions
(a) In General. In accordance with the following sentence, premium
payments shall be made by the Participating Company that:
(1) currently employs a Participant, or
(2) last employed a Participant prior to such Participant's Retirement
or Termination of Employment.
Subject to the provisions of subsection (b), such Participating Company
shall make premium payments in amounts determined under the Policy during
any period for which the Participant makes premium payments in amounts
determined under the Policy.
(b) Events Causing Participating Company Payments to Cease. A
Participating Company's premium payments shall cease upon the first
to occur of the following events:
(1) Occurrence of the Maturity Date;
(2) Prior to Retirement, the Participant leaves the eligible group by
reason of a Termination of Employment or otherwise;
(3) The Participant's Retirement occurs after he or she has
participated under the Plan for 15 years;
(4) After Retirement, the Participant completes his or her 15th year
of participation;
(5) The Participant's premium payments cease; (6) The Participant dies;
(7) The Participant's Discharge; or
(8) A determination that the Participant has engaged in Competition
which is not authorized by his or her Participating Company.
(c) Exception. In the sole and absolute discretion of the Chairman of the
NYNEX Corporation Board of Directors (or any successor to that position's
responsibilities), a Participating Company shall continue to make premium
payments (but not beyond the Participant's 15th year of participation),
notwithstanding that the Participant's Termination of Employment is for
reasons other than Retirement.
6.2 Participant Premium Payments
A Participant shall make premium payments in such amount and for such periods as are provided under the Policy. As provided under section 6.1(b), however, Participating Company premium payments shall cease when a Participant's premium payments cease.
3415LPLN.11A/02 0496 10
Article VII. Participating Company Recovery of Premiums
7.1 Recovery of Premiums
A Participating Company shall recover an amount attributable to its premium payments as provided under the Policy, on the first to occur of any of the events described in section 6.1(b) above.
3415LPLN.11A/02 0496 11
Article VIII. General Provisions
8.1 Effective Date
This Plan is effective August 1, 1992 and applies only to individuals who are actively employed as Eligible Executives on or after that date.
8.2 Source of Payments
All benefits payable under this Plan shall be paid by the Insurer, pursuant to the terms of the Policy issued to the Participant.
8.3 Rights to Benefit
There is no right to any benefit under this Plan except as may be provided by the Policy.
8.4 Attachment, Assignment, or Alienation
Attachment, assignment, or alienation of benefits under this Plan will not be permitted or recognized except as otherwise required by law.
8.5 Determination of Eligibility
In all questions relating to eligibility for any benefit under the Plan, or relating to the Participant's employment position, Position Rate, and Incentive Award for determining the life insurance amount, the decision of the Committee, based upon this Plan and upon the records of the Participating Company last employing such individual and insofar as permitted by applicable law, shall be final.
8.6 Withdrawal from Plan
Each Participating Company retains the right to withdraw from this Plan, at any time, for any reason, with or without notice. Said withdrawal may result, at the discretion of NYNEX or another Participating Company, as applicable, in the cessation of premium payments by the Participating Company on behalf of active or Retired Participants.
3415LPLN.11A/02 0496 12
Article IX. Plan Modification
NYNEX may in its sole discretion from time to time make any changes in the Plan as it deems appropriate may discontinue contributions, and may terminate the Plan, without prior notice to Participants. The Vice President-Human Resources of NYNEX (or any successor to that officer's responsibilities), with the approval of the Vice President and General Counsel of NYNEX (or any successor to that officer's responsibilities), is hereby authorized to make any changes to the Plan necessary or advisable to comply with applicable law or government regulations. Such modification may affect Participants in the Plan at the time as well as future Participants.
3415LPLN.11A/02 0496 13
NYNEX Executive Officer Short Term Incentive Plan
Effective April 18, 1996, the NYNEX Executive Officer Short Term Incentive Plan (the "Plan") shall be amended as follows:
1. The following shall be added to the end of the first sentence of
Section 3(a) of the Plan:
"provided, further, that if during the first three months of an Award Year, (x) the Effective Time (as defined in the Amended and Restated Merger Agreement, dated as of April 21, 1996, as amended and restated as of July 2, 1996, by and between the Company and Bell Atlantic Corporation, as such agreement may be amended from time to time) occurs; and (y) an employee is involuntarily terminated without cause by the Company or any Associated Company as a result of or in connection with the transactions thereby contemplated, which termination would result in any forfeiture under this Plan, no forfeiture of an Award shall occur and the amount of any outstanding Award shall be prorated to the date of termination and all other provisions of the Plan shall apply.".
2. Conforming amendments in Section 3(b)(vi) are approved.
NYNEX Senior Management Nonqualified Defined Contribution Pension Plan
(Effective January 1, 1995)
NYNEX Senior Management Nonqualified Defined Contribution
Pension Plan
(Effective January 1, 1995)
Contents
- -------------------------------------------------------------------------------------------------
Section Page
Outline Of The NYNEX Senior Management Nonqualified Defined
Contribution Pension Plan
Article I. Statement of Purpose 1
Article II. Definitions
2.1 Beneficiary 2
2.2 Cause 2
2.3 Committee 2
2.4 ERISA 2
2.5 Funds 2
2.6 NYNEX 2
2.7 Participating Company 3
2.8 Plan 3
2.9 Prior Plans 3
2.10 Salary 3
2.11 Senior Manager 3
2.12 Termination of Employment 3
Article III. Administration
3.1 General Administration 4
3.2 Plan Administrative Committee 4
3.3 Claims Procedures 4
3.4 Committee Determinations Conclusive 4
3.5 Named Fiduciaries 4
3.6 Allocation of Duties 5
3415LPLN.1/02 0496 i
|
NYNEX Senior Management Nonqualified Defined Contribution
Pension Plan
(Effective January 1, 1995)
Contents
- -------------------------------------------------------------------------------------------------
Section Page
Article IV. Participation
4.1 Eligibility 6
4.2 Prior Plans 6
4.3 Termination During 1995 6
4.4 Rehire of Senior Manager 6
Article V. Accounts
5.1 Establishment of Accounts 7
5.2 NYNEX Shares Account 7
5.3 Directed Investment Account 7
5.4 Designation of Funds Under Directed Investment Account 7
Article VI. Amounts Credited to Accounts
6.1 Pay-Based Credits 8
6.2 Conversion Credits 9
6.3 Annual Transition Credits 9
6.4 Potential Interim Amount 9
Article VII. Distribution at Termination of Employment
7.1 Commencement 11
7.2 Form of Payment 11
7.3 Lump Sum Distribution 11
7.4 Appreciation Only 11
7.5 Annuity Options 12
7.6 Partial Lump Sum Option 13
Article VIII. Death Prior to Termination of Employment
8.1 In General 14
8.2 Forms of Payment 14
8.3 Lump Sum Distribution 14
8.4 Annuity Options 14
8.5 Partial Lump Sum Option 15
3415LPLN.1/02 0496 ii
|
NYNEX Senior Management Nonqualified Defined Contribution
Pension Plan
(Effective January 1, 1995)
Contents
- -------------------------------------------------------------------------------------------------
Section Page
Article IX. Supplement to Death Benefits Payable Under NYNEX
Management Pension Plan
9.1 Supplemental Death Benefits 16
9.2 Definition of Wages 16
Article X. General Provisions
10.1 Effective Date 17
10.2 Source of Payments 17
10.3 Rights to Benefit 17
10.4 Forfeiture of Benefits 17
10.5 Attachment, Assignment, or Alienation 17
10.6 Determination of Eligibility 18
10.7 Payments to Others 18
10.8 Claims Release 18
10.9 Damage Claims or Suits 18
10.10 Judgment or Settlement 19
10.11 Payment Under Law 19
10.12 Plan Termination 19
Article XI. Plan Modification 20
Appendix A
Conversion Credits
Appendix B
Annual Transition Credits
Appendix C
Potential Interim Amounts
|
3415LPLN.1/02 0496 iii
Outline Of The NYNEX Senior Management Nonqualified Defined Contribution Pension Plan
The NYNEX Senior Management Nonqualified Defined Contribution Pension Plan (the "Plan") provides nonqualified pension payments to eligible Senior Managers, and permits eligible Senior Managers to elect among various forms of survivor benefits for their designated beneficiaries. The Plan also is known as the Executive Retirement Account Plan (the "ERA Plan").
The Plan became effective January 1, 1995, but only for eligible Senior Managers who were actively employed on or after January 1, 1996. For such individuals, the Plan completely replaces (beginning in 1995) three nonqualified defined benefit pension plans previously in effect. These are the Senior Management Non-Qualified Pension Plan, the ERISA Excess Plan, and the Mid-Career Pension Plan (the "Prior Plans").
The Plan uses a defined contribution approach to facilitate linking a portion of each eligible Senior Manager's retirement income to the performance of NYNEX stock. For each of the first 15 years in which a Senior Manager participates, his or her Executive Retirement Account ("ERA") is credited with 25 percent of the amount by which his or her base salary exceeds $150,000, plus 25 percent of each Short-Term Incentive Award. Half of this pay-based credit accumulates based on the investment performance of funds elected by the Senior Manager from among a group of nine funds designated by NYNEX Corporation for this purpose. The other half of this pay-based credit accumulates on the basis of the performance of NYNEX stock.
In addition, for Senior Managers who commenced participation on January 1, 1995, the projected income replacement provided under the Prior Plans at retirement age 60 was used as a target for purposes of determining three special credits. First, the benefit accrued under the Prior Plans as of December 31, 1994 was converted to a lump sum Conversion Credit which is included in the opening ERA balance. Second, because the rate of increase in retirement benefits in a defined contribution approach otherwise would not replicate the rate of increase under the Prior Plans' defined benefit formulas, an Annual Transition Credit is scheduled for Senior Managers whose projected ERA balance at age 60 would fall short of their projected Prior Plan benefits at age 60. Third, for Senior Managers retiring before age 60, the ERA concept still may provide a benefit level lower than the Prior Plans. To correct for this shortfall, a Potential Interim Amount may be credited at retirement, if certain conditions are met. The special credits described in this paragraph are available only to certain Senior Managers who commenced participation under the Plan on January 1, 1995.
Any special credits described in the preceding paragraph will accumulate based on the performance of funds selected by the Senior Manager from
among a group of nine funds designated by NYNEX Corporation for this purpose.
In order to avoid adverse income tax consequences, no assets shall be set aside for the benefit of Senior Managers, and no assets shall actually be invested in funds which a Senior Manager selects as a measure for accumulations under this Plan. All payments are made entirely from the general assets of NYNEX Corporation or another Participating Company.
In a year prior to the year of retirement or other termination of employment, a Senior Manager can elect to receive his or her ERA balances immediately upon retirement or other termination of employment as a single lump sum, in various annuity forms, or part as a lump sum and part as an annuity. Or, a Senior Manager can elect an annual lifetime income equal to the greater of current "earnings" (to the extent the current ERA balance exceeds the ERA balance at commencement of distribution), or 8 percent of the ERA balance at commencement of distribution, provided that at the Senior Manager's death, any remaining ERA balance shall be paid to his or her designated beneficiaries.
To the extent that a life annuity form is elected, post-retirement survivor benefits (if any) shall be determined exclusively by the terms of the annuity payment form.
To provide for the possibility of death prior to retirement, a Senior Manager can designate one of several forms of payment to his or her surviving beneficiary or beneficiaries.
Note: The above is only a broad outline of the major features of the Plan. Any benefits or rights under the Plan will be determined by the specific Plan provisions as they apply to each case.
Article I. Statement of Purpose
The purpose of the NYNEX Senior Management Nonqualified Defined Contribution Pension Plan (the "Plan") is to provide supplementary retirement income through a nonqualified account balance plan under which a portion of the ultimate benefit will be based on the performance of NYNEX stock. The Plan covers Senior Managers of NYNEX Corporation and such of the subsidiaries of NYNEX Corporation which have determined, with the concurrence of the Committee to participate in the Plan.
3415LPLN.1/02 0496 1
Article II. Definitions
2.1 "Beneficiary" shall mean one or more beneficiaries designated by the Senior Manager on a form provided by NYNEX for the appropriate purpose. The most recent beneficiary designation submitted by the Senior Manager shall override all previous designations.
2.2 "Cause" The term "cause" shall mean grossly incompetent performance or substantial or continuing inattention to or neglect of the duties and responsibilities assigned to the Senior Manager as determined in the sole discretion and judgment of the Chairman and Chief Executive Officer of NYNEX (or by the NYNEX Board of Directors in the case of the Chairman and Chief Executive Officer of NYNEX), including but not limited to fraud, misappropriation and embezzlement, involving NYNEX or any of its subsidiaries or affiliates, or commission of any felony of which the Senior Manager is finally adjudged guilty in a court of competent jurisdiction, or a violation of the provisions of the Senior Manager's Executive Retention Agreement or Employment Agreement entitled Non- Competition and Non-Solicitation, Intellectual Property and Proprietary Information, Company Rules, Code of Business Conduct, and Modification of Final Judgment.
2.3 "Committee" shall mean the Employees' Benefit Committee appointed by the Company to administer the Pension Plan.
2.4 "ERISA" shall mean the Employee Retirement Income Security Act, as amended from time to time.
2.5 "Funds" shall mean the investment funds (other than the NYNEX Shares Fund) into which Senior Managers can direct their accounts under the NYNEX Savings Plan for Salaried Employees. As of August 1, 1995, such funds include the Government Obligations Fund, the Interest Income Fund, the U.S. Balanced Fund, the Global Balanced Fund, the Diversified Equity Portfolio, the Active U.S. Equity Fund, the Telecommunications Fund, the International Equity Fund, and the U.S. Small Cap Fund. Amounts credited under this Plan are not actually invested in such funds or in any other manner. Rather, hypothetical accounts are credited with hypothetical earnings (or debited for hypothetical losses) as if invested in such Funds.
2.6 "NYNEX" shall mean the NYNEX Corporation, a Delaware corporation, or its successors.
2.7 "Participating Company" shall mean NYNEX Corporation, or any
3415LPLN.1/02 0496 2
subsidiary of NYNEX Corporation which shall have determined with the concurrence of the Committee to participate in this Plan.
2.8 "Plan" shall mean the NYNEX Senior Management Nonqualified Defined Contribution Pension Plan, as set forth herein.
2.9 "Prior Plans" shall mean the NYNEX Senior Management Non-Qualified Pension Plan, the NYNEX ERISA Excess Plan, and the NYNEX Mid-Career Pension Plan as such plans were in effect on December 31, 1994.
2.10 "Salary" shall mean base salary amounts which have been received currently while an individual is a Senior Manager, or would have been received currently but for a salary reduction election by the Senior Manager.
2.11 "Senior Manager" shall mean an employee on the active roll of any Participating Company on or after January 1, 1995, who has attained a level higher than Department Level or equivalent Fifth Level, and who holds a position that a Participating Company's Board of Directors has designated to be within that Company's Senior Management Compensation Group.
2.12 "Termination of Employment" shall mean any termination of employment with a Participating Company.
3415LPLN.1/02 0496 3
Article III. Administration
3.1 General Administration
NYNEX shall be the Plan Administrator and the Sponsor of the Plan as those terms are defined in ERISA. The Committee shall have the administrative responsibilities set forth below.
3.2 Plan Administrative Committee
(a) The Committee shall have the specific powers elsewhere herein granted to
it and shall have such other powers as may be necessary in order to
enable it to administer this Plan, except for powers herein granted or
provided to be granted to others.
(b) The Committee shall grant or deny claims for benefits under the Plan with
respect to Senior Managers of each Participating Company, shall
adjudicate appeals, and shall authorize disbursements according to the
Plan. Adequate notice, pursuant to applicable law and prescribed
Participating Company practices, shall be provided in writing to any
Senior Manager or beneficiary whose claim has been denied, setting forth
the specific reasons for such denial.
3.3 Claims Procedures
The review and appeal procedures for Senior Managers whose claims have been denied shall be the same as those procedures set forth in the NYNEX Management Pension Plan.
3.4 Committee Determinations Conclusive
The Committee shall determine conclusively for all parties all questions arising in the administration of the Plan and any decision of such Committee shall not be subject to further review.
3.5 Named Fiduciaries
NYNEX and the Committee are each a named fiduciary as that term is used in ERISA with respect to the particular duties and responsibilities herein provided to be allocated to each of them.
3415LPLN.1/02 0496 4
3.6 Allocation of Duties
NYNEX may allocate responsibilities for the operation and administration of the Plan consistent with the Plan's terms. NYNEX and other named fiduciaries may designate in writing other persons to carry out their respective responsibilities under the Plan, and may employ persons to advise them with regard to any such responsibilities.
3415LPLN.1/02 0496 5
Article IV. Participation
4.1 Eligibility
Each Senior Manager in the active employ of a Participating Company on or after January 1, 1995 shall participate under the Plan unless such Senior Manager shall decline participation.
4.2 Prior Plans
A Senior Manager who participates under this Plan shall not be entitled to a benefit of any kind under any Prior Plan, except as provided under section 4.3.
4.3 Termination During 1995
Notwithstanding any other provision of this Plan, with respect to a Senior
Manager whose employment with the applicable Participating Company terminates
prior to January 1, 1996, (a) no amounts shall be payable under this Plan, and
(b) the Prior Plans shall be applied as if this Plan had not been adopted.
4.4 Rehire of Senior Manager
A Senior Manager who is rehired after a Termination of Employment under this
Plan shall be treated in the same manner as a newly hired employee of NYNEX,
except that prior participation shall be taken into account for purposes of
applying the 180-month duration limit under section 6.1(a). In particular,
(a) after such rehire, no additional credits shall be allocated under
sections 6.2 through 6.4, and
(b) distributions under Article VII attributable to post-rehire credits shall
be determined without regard to elections in effect prior to the original
Termination of Employment, and
(c) distributions which previously shall have commenced shall not be
affected by the rehire.
3415LPLN.1/02 0496 6
Article V. Accounts
5.1 Establishment of Accounts
At commencement of a Senior Manager's participation under the Plan, two unfunded bookkeeping accounts shall be established. One shall be the NYNEX Shares Account described under section 5.2. The other shall be a Directed Investment Account described under section 5.3. In the aggregate, these two accounts shall be referred to as the Executive Retirement Account ("ERA").
5.2 NYNEX Shares Account
A Senior Manager's NYNEX Shares Account shall be credited with one-half of the amount of each applicable Pay-Based Credit, in accordance with section 6.1. Such NYNEX Shares Account shall be adjusted periodically to reflect the investment performance of the NYNEX Shares Fund maintained under the NYNEX Savings Plan for Salaried Employees. No transfers either to or from the NYNEX Shares Account shall be permitted, except as provided in section 7.4(c).
5.3 Directed Investment Account
A Senior Manager's Directed Investment Account shall be:
(a) credited with one-half of each applicable Pay-Based Credit made in
accordance with section 6.1, and
(b) credited with the full amount of any Conversion Credit, Annual Transition
Credit, or Potential Interim Amount Credit made for the Senior Manager
under sections 6.2, 6.3, and 6.4, respectively, and
(c) adjusted periodically to reflect the investment performance of the Funds
designated by the Senior Manager under section 5.4.
5.4 Designation of Funds Under Directed Investment Account
Adjustments to amounts credited to a Senior Manager's Directed Investment Account shall be made to reflect the performance of Funds designated by the Senior Manager. NYNEX shall provide a choice of Funds, and shall impose rules regarding transfers, percentage amounts, and frequency of election changes, which shall be substantially similar to those applicable to participant-directed investments under the NYNEX Savings Plan for Salaried Employees, but shall not include the NYNEX Shares Fund.
3415LPLN.1/02 0496 7
Article VI. Amounts Credited to Accounts
6.1 Pay-Based Credits
(a) Duration. Pay-Based Credits described in this section 6.1 shall be made
during the 180-month period following a Senior Manager's commencement of
participation under the Plan or the period of such Senior Manager's
actual participation, if less.
(b) Bonus Credits. As of March 1 of each year, a Pay-Based Credit shall be
made in an amount equal to 25 percent of the Senior Management Short-Term
Incentive Award or Executive Short-Term Incentive Award earned in the
prior year. Such credit shall be made whether or not the Senior Manager's
Termination of Employment has occurred prior to such March 1.
(c) Salary Credits.
(1) In the month in which a Senior Manager's accumulated Salary for a
calendar year first exceeds $150,000 (adjusted as provided under
section 401(a)(17)(B) of the Code), a Pay-Based Credit equal to 25
percent of such excess shall be made.
(2) In each subsequent month of such calendar year, a Pay-Based Credit
equal to 25 percent of that month's Salary shall be made.
(3) With respect to the year in which an individual is promoted to
Senior Manager, for purposes of determining when "accumulated
Salary" exceeds $150,000, there shall be taken into account both:
(A) the amount of any incentive award paid in the current year
but earned in the prior year prior to the time the participant
was designated as a Senior Manager, and
(B) the amount of any Salary paid in the current year prior to
the time the participant was designated as a Senior Manager.
(d) Pay-Based Credits for 1995.
(1) General Rule. For the 1995 calendar year, periodic crediting shall
not occur prior to August 1, 1995, but thereafter all
determinations shall take into account accumulated Salary paid on
or after January 1, 1995.
(2) Opening Credit. As of August 1, 1995, an amount shall be credited
to reflect Pay-Based Credits that would have been made earlier in
1995 had the Plan been in effect, plus interest at 8 percent per
annum through July 31, 1995. Notwithstanding section 5.2, the
entire amount of the opening credit described in this subsection
(d)(2) shall be allocated to the Senior Manager's Directed
Investment Account.
3415LPLN.1/02 0496 8
6.2 Conversion Credits
(a) In General. In the case of a Senior Manager for whom a Conversion
Credit amount is designated in Appendix A, such credit shall be made
as of January 1, 1995.
(b) Earnings Credit Prior to August 1, 1995. Notwithstanding section 5.3, for
the period from January 1, 1995 through July 31, 1995 earnings shall be
credited at 8 percent per annum.
6.3 Annual Transition Credits
(a) In General. In the case of a Senior Manager for whom an Annual Transition
Credit is designated in Appendix B for one or more calendar years, such
amounts shall be credited to his or her Directed Investment Account as of
December 31 of the year for which they are designated.
(b) Credit For 1995. Any Annual Transition Credit amount designated in
Appendix B for 1995 shall be credited as of January 1, 1995 and shall
accrue interest through July 31, 1995 at 8 percent per annum,
notwithstanding section 5.3.
(c) Year of Termination. An Annual Transition Credit shall be made for the
year of termination as of the last business day of the month following
the month in which Termination of Employment occurs, but shall not be
made for any year thereafter.
6.4 Potential Interim Amount
(a) In General. If a Potential Interim Amount credit is designated in Appendix C for a Senior Manager for the year in which the Senior Manager's Termination of Employment occurs, such credit shall be made as of the last business day of the month following the month in which such Termination of Employment occurs, except as provided in subsection (b). The amounts shown in Appendix C represent the amount payable for December terminations for the year shown. For terminations during the year, a pro rata determination of the PIA will be made based on the difference in the PIA from the year prior to termination and the year of termination. The difference will be multiplied by the number of full and partial months remaining in the year and beginning after termination and divided by 12. This amount will then be used as an adjustment to the December PIA amount shown in the schedule for the year of termination.
3415LPLN.1/02 0496 9
(b) Denial of PIA Credit. An amount which otherwise would have been credited under subsection (a) shall not be credited in the case of a Senior Manager--
(1) whose employment with a Participating Company is terminated
for Cause,
(2) who fails to comply with a request by his Participating Company to
remain in employment for a reasonable additional period of time not
to exceed 12 months from the date on which the Senior Manager has
requested to retire, or
(3) who fails to sign a noncompete agreement provided by NYNEX, which
prohibits employment with a competitor during the two-year period
following Termination of Employment.
3415LPLN.1/02 0496 10
Article VII. Distribution at Termination of Employment
7.1 Commencement
Effective as of the last business day of the month following the month in which a Senior Manager's Termination of Employment occurs, the distribution of his or her accumulated ERA balance shall commence in the form and amount determined under this Article VII.
7.2 Form of Payment
All amounts shall be paid solely from the general assets of a Participating Company. Distribution shall be made in the form designated by the Senior Manager in such election as shall be in effect as of the last day of the year preceding the year of his or her Termination of Employment. In the event that no election is in effect on such date, payment of the entire applicable ERA balance shall be made as a lump sum distribution as described in section 7.3. The forms of payment that may be elected by a Senior Manager are those described in sections 7.3 through 7.6, below.
7.3 Lump Sum Distribution
Under this option, a lump sum distribution shall be made, in the amount equal to the aggregate ERA balance as of the last business day of the month following the month in which Termination of Employment occurs.
7.4 Appreciation Only
(a) In General. Under this option, a payment shall be made to the Senior
Manager for each month up to and including the month of the Senior
Manager's death, at which time the remaining ERA balance (adjusted to
reflect such monthly distributions) shall be paid in a single lump sum to
his or her Beneficiary. Payments shall commence as of the last business
day of the month following the month in which Termination of Employment
occurs.
(b) Monthly Amount. The amount payable for any given month during
the Senior Manager's lifetime shall be equal to the greater of--
(1) a fixed amount equal to two-thirds of one percent of the ERA
balance as of the last business day of the month following the
month in which Termination of Employment occurs, or
(2) the amount by which the current balance exceeds the balance as of
date on which distribution commenced.
3415LPLN.1/02 0496 11
(c) Investments. Prior to the death of a Senior Manager who has elected this Appreciation-Only option, the Senior Manager shall continue to elect which Funds determine the hypothetical investment performance of his or her Directed Investment Account. Solely for purposes of this section 7.4, at any time following Termination of Employment, a Senior Manager also may elect to transfer part or all of his or her balance in the hypothetical NYNEX Shares Account to the Directed Investment Account.
7.5 Annuity Options
(a) In General. Under this option, monthly payments will be made from the
Participating Company's general assets in amounts determined under the
annuity payment form specified under this section 7.5. No annuity
contract of any kind shall be purchased or provided.
(b) Single Life Annuity. A Senior Manager who elects a single life
annuity option shall receive a level monthly amount for his or her
lifetime, which is actuarially equivalent to the Senior Manager's ERA
balance as of the last business day of the month following the month
in which Termination of Employment occurs, determined by assuming
interest equal to the 30-year Treasury Bill rate for the November prior
to the year of such termination, and life expectancy under the 1983
GATT Mortality Table.
(c) Other Annuity Payment Forms. A Senior Manager may elect payment
in any Joint and Survivor Annuity Form, or Period Certain and Life
Annuity Form, specified under section 6.1 of the NYNEX Management
Pension Plan. The amount payable under any such form shall be equal
to the amount that would be payable in such form under the NYNEX
Management Pension Plan if the single life annuity payable under
such Plan were equal to the single life annuity determined under
section 7.5(b) hereof.
(d) Commencement of Payments. Payments under this section 7.5 shall commence
as of the last business day of the month following the month in which
Termination of Employment occurs.
(e) Credits Allocated After Annuity Commences. In the case of a credit
allocated under section 6.1(b) after commencement of annuity payments,
payments shall be made in a lump sum in lieu of adjusting annuity payment
amounts.
(f) Death of Senior Manager. With respect to the portion of the ERA balance
to which an annuity payment form election shall have been in effect, no
amount shall be payable for any month after the Senior Manager's death
except as specifically provided to designated Beneficiaries under such
annuity payment form.
3415LPLN.1/02 0496 12
7.6 Partial Lump Sum Option
Under this option, the Senior Manager shall designate a portion of his or her ERA balance to be paid as a lump sum under section 7.3, and the remaining portion to be paid as an actuarially equivalent annuity amount under section 7.5.
3415LPLN.1/02 0496 13
Article VIII. Death Prior to Termination of Employment
8.1 In General
If the Senior Manager dies before commencement of benefits under Article VII, benefits shall be paid under this Article VIII. All such payments shall be made from the general assets of a Participating Company.
8.2 Forms of Payment
(a) In General. Distribution shall be made in such form, and to such
Beneficiaries, as shall have been elected pursuant to the Pre-Retirement
Beneficiary Designation Form which was most recently submitted by
the Senior Manager. The forms of payment of pre-retirement death
benefits that may be elected by the Senior Manager are those
described in sections 8.3, 8.4, and 8.5, below. In the event no payment
form election is in effect, an amount equal to the Senior Manager's
entire ERA balance shall be paid in a lump sum to the Senior
Manager's designated Beneficiary.
(b) No Beneficiary. In the event that no Beneficiary has been designated, or
no Beneficiary survives the Senior Manager, an amount equal to the Senior
Manager's entire ERA balance shall be paid to his or her estate in a
single lump sum payment.
8.3 Lump Sum Distribution
The Senior Manager may elect that his or her Beneficiary shall receive payment of a lump sum distribution equal to the amount of the ERA balance determined as of the last business day of the month following the month in which NYNEX is notified of his or her death.
8.4 Annuity Options
(a) In General. Under this option, monthly payments will be made from the
Participating Company's general assets in amounts determined under the
annuity payment form specified by the Senior Manager under this section
8.4. No annuity contract of any kind shall be purchased or provided.
(b) Single Life Annuity. Under this single life annuity payment form, a level
monthly amount shall be paid to the Beneficiary for his or her lifetime.
Payments shall be actuarially equivalent to the ERA balance as of the
date of the Senior Manager's death, determined by assuming interest equal
to the 30-year Treasury Bill rate for the November prior to the year of
death, and the life expectancy of the Beneficiary under the 1983 GATT
Mortality Table.
3415LPLN.1/02 0496 14
(c) Period Certain and Life Annuity.
(1) In General. A Senior Manager may elect payment under the Period
Certain and Life Annuity Form specified under section 6.1 of the
NYNEX Management Pension Plan. Under this form, payments shall be
made to the Beneficiary for his or her lifetime, provided that if
the Beneficiary dies during the Period Certain, payments shall
continue to the Beneficiary's estate.
(2) Conversion Basis. The amount payable in the form of a Period
Certain and Life Annuity shall be determined by using conversion
procedures that would be applied under the NYNEX Management Pension
Plan in order to convert a Single Life Annuity in an amount
determined under section 8.4(b) hereof to a Period Certain and Life
Annuity.
(d) Commencement. Payments under this section 8.4 shall commence as of the
last business day of the month following the month in which the Senior
Manager's death occurs.
(e) Credits Made After Annuity Commencement. In the case of credits allocated
under section 6.1(b) or 6.3 after commencement of annuity payments under
this section 8.4, payment shall be made in a lump sum in lieu of
adjusting annuity payment amounts.
8.5 Partial Lump Sum Option
Under this option, the Senior Manager shall designate a portion of his or her ERA balance to be paid as a lump sum under section 8.3, and the remaining portion to be paid as an actuarially equivalent annuity amount under section 8.4.
3415LPLN.1/02 0496 15
Article IX. Supplement to Death Benefits Payable Under NYNEX Management Pension Plan
9.1 Supplemental Death Benefits
The death benefit payable under this Article IX shall be equal to the additional amount which would have been payable under Article VIII (Other Death Benefits) of the NYNEX Management Pension Plan if the wages described under section 9.2 below were taken into account under Article VIII of such plan. All other provisions of Article VIII of such plan shall apply for purposes of determining the manner of payment of supplemental death benefits under this Article IX.
9.2 Definition of Wages
For purposes of Death Benefits under this Article IX, wages shall include:
(a) For a Senior Manager who dies while an active employee and is
entitled to the accident death benefit as defined in section 8.1 of the
NYNEX Management Pension Plan, the lesser of the Senior Manager's
standard award in effect as of death, or 60% of his position rate as of
death.
(b) For a Senior Manager who dies while an active employee or retires on
or after July 1, 1985 and is entitled to a sickness or pensioner death
benefit as defined in sections 8.2 or 8.3 of the NYNEX Management
Pension Plan, the lesser of the Senior Manager's standard award in
effect as of June 30, 1985 or 60% of his position rate as of June 30,
1985. In the event that such Senior Manager was employed by Bell
Communications Research Inc. (Bellcore) on June 30, 1985, this
subsection (b) shall apply to the comparable standard award or
position rate at Bellcore.
3415LPLN.1/02 0496 16
Article X. General Provisions
10.1 Effective Date
This Plan is effective January 1, 1995 and applies only to individuals who are actively employed as Senior Managers on or after that date.
10.2 Source of Payments
All benefits payable under this Plan shall be paid from NYNEX or Participating Company general assets.
10.3 Rights to Benefit
There is no right to any benefit under this Plan except as may be provided by NYNEX or a Participating Company. Benefits previously awarded may be discontinued at any time at the sole discretion of NYNEX or any Participating Company.
10.4 Forfeiture of Benefits
All benefits for which a Senior Manager would be otherwise eligible hereunder
may be forfeited, at the discretion of the NYNEX Board of Directors, under the
following circumstances:
(a) The Senior Manager is discharged by a Participating Company for
Cause; or
(b) Determination by the Board of Directors of a Participating Company that
the Senior Manager engaged in misconduct in connection with his
employment with such Participating Company; or
(c) The Senior Manager or an annuitant, without the consent of the
Participating Company otherwise obligated to pay him a benefit
hereunder, at any time is employed by, becomes associated with,
renders service to, or owns an interest in any business that is
competitive with a Participating Company with any business in which
a Participating Company has a substantial interest (other than as a
shareholder with a nonsubstantial interest in such business) as
determined by the Board of Directors of such Participating Company.
10.5 Attachment, Assignment, or Alienation
Attachment, assignment, or alienation of pensions or other benefits under this Plan will not be permitted or recognized except as otherwise required by law.
3415LPLN.1/02 0496 17
10.6 Determination of Eligibility
In all questions relating to the determination of any benefit hereunder, the decision of the Committee, based upon this Plan and upon the records of the Participating Companies, insofar as permitted by applicable law, shall be final.
10.7 Payments to Others
Benefits payable to a former employee or retiree unable to execute a proper receipt may be paid to other person(s) in accordance with the standards and procedures set forth in the NYNEX Management Pension Plan.
10.8 Claims Release
In case of accident resulting in the death of a Senior Manager which entitles his beneficiaries or his annuitant to benefits under this Plan, such beneficiaries or annuitant shall, prior to the payment of any such benefits, sign a release, releasing NYNEX or other Participating Companies, as applicable, from all claims and demands which the Senior Manager had, and his beneficiaries or his annuitant may have against them, otherwise than under this Plan, on account of such accident. If any persons other than the beneficiaries under this Plan might legally assert claims against a Participating Company on account of the death of the Senior Manager, no part of the death benefit under this Plan shall be due or payable until there have also been delivered to NYNEX, good and sufficient releases of all claims, arising from or growing out of the death of the Senior Manager, which such other persons might legally assert against any Participating Company. The Committee, in its discretion, may require that the releases above described shall release any other company, connected with the accident, including NYNEX or any other Participating Company, as applicable.
10.9 Damage Claims or Suits
To the extent permitted by law, should a claim other than under the Plan be presented or suit brought against NYNEX or any Participating Company for damages on account of death of a Senior Manager, nothing shall be payable under the Plan on account of such death except as provided in section 10.10; provided, however, that the Committee may in its discretion, and upon such terms as it may prescribe, waive this provision if such claims be withdrawn or if such suit be discontinued.
3415LPLN.1/02 0496 18
10.10 Judgment or Settlement
In case any judgment is recovered against any Participating Company or any settlement is made of any claim or suit on account of the death of a Senior Manager, and the amount paid to the Beneficiaries who would have received benefits under the Plan is less than what would otherwise have been payable under the Plan, the difference between the two amounts may, in the discretion of the Committee, be distributed to such Beneficiaries.
10.11 Payment Under Law
In case any benefit, which the Committee shall determine to be of the same general character as a payment provided by the Plan, shall be payable under any law now in force or hereafter enacted to any Senior Manager of a Participating Company, to his Beneficiaries or his annuitant under such law, the excess only, if any, of the amount prescribed in the Plan above the amount of such payment prescribed by law shall be payable under the Plan; provided, however, that no benefit payable under this Plan shall be reduced by reason of any governmental benefit or pension payable on account of military service or by reason of any benefit which the recipient would be entitled to receive under the Social Security Act. In those cases, because of differences in the Beneficiaries, or differences in the time or methods of payment, or otherwise, whether or not there is such excess is not ascertainable by mere comparison but adjustments are necessary, the Committee has discretion to determine whether or not in fact any such excess exists and to make the adjustments necessary to carry out in a fair and equitable manner the spirit of the provision for the payment of such excess.
10.12 Plan Termination
NYNEX retains the right to terminate the Plan in whole or in part and each
Participating Company retains the right to withdraw from this Plan, at any time,
for any reason, with or without notice. Such withdrawal or termination, as
applicable, shall not affect or reduce--
(a) the benefits of retired Senior Managers or their annuitants, or
(b) benefits accrued as of the date of such withdrawal or termination for
active Senior Managers.
3415LPLN.1/02 0496 19
Article XI. Plan Modification
NYNEX may in its sole discretion from time to time make any changes in the Plan
as it deems appropriate, and may terminate the Plan, without notice to
participants. The Vice President-Human Resources of NYNEX (or any successor to
that officer's responsibilities), with the approval of the Vice President and
General Counsel of NYNEX (or any successor to that officer's responsibilities),
is hereby authorized to make any changes to the Plan necessary or advisable to
comply with applicable law or government regulations. Such modification may
affect participants in the Plan at the time as well as future participants, but
shall not affect or reduce--
(a) the benefit of retired Senior Mangers or their annuitants, or
(b) benefits accrued as of the date of such modification for active Senior
Managers.
3415LPLN.1/02 0496 20
Appendix A
Conversion Credits
3415LPLN.1/02 0496 21
Appendix B
Annual Transition Credits
3415LPLN.1/02 0496 22
Appendix C
Potential Interim Amounts
3415LPLN.1/02 0496 23
NYNEX Account Balance Deferral
Plan
(Effective March 1, 1996)
Outline of the NYNEX Account Balance Deferral Plan
This Plan provides for the deferral and ultimate distribution of a Senior Manager's short-term incentive awards, beginning with the amount earned in 1995 and payable in 1996.
The entire amount of each year's short-term incentive award is credited to a "TSR Account," the value of which fluctuates to reflect NYNEX Corporation's annualized total shareholder return for a three-year period.
Awards are first credited to the TSR Account as of March 1, 1996. Then, on March 1, 1997 and on each succeeding March 1, the following adjustments are made to the TSR Account.
First, the amount of the award that the Senior Manager earned during the preceding calendar year is credited to the TSR Account.
Second, one-half of the TSR Account balance is debited from the adjusted TSR Account balance.
Third, according to the Senior Manager's prior irrevocable election, all or a designated portion of the amount debited is paid immediately to the Senior Manager in cash, and the remaining portion is credited to the Senior Manager's Account under the NYNEX Senior Management Incentive Award Deferral Plan.
When the Senior Manager terminates employment with NYNEX Corporation or another applicable Participating Company, the full remaining balance in his or her TSR Account is paid to the Senior Manager immediately in a single cash payment. Amounts previously transferred to the NYNEX Senior Management Incentive Award Deferral Plan are paid under the terms of that plan.
At termination of employment, any short-term incentive award that had not previously been credited under this Plan is paid in cash on March 1 of the year following the year following the year in which the services were performed that gave rise to the award.
Note: the above is only a broad outline of the major features of the Plan. Any benefits or rights under the Plan will be determined by the specific Plan provisions as they apply to each case.
NYNEX Account Balance Deferral Plan
(Effective March 1, 1996)
Contents
- -------------------------------------------------------------------------------------------------
Section Page
Article I. Purpose 1
Article II. Definitions
2.1 Definitions 2
Article III. Participation
3.1 Eligibility 3
3.2 Nature of Plan 3
Article IV. TSR Accounts
4.1 Establishment of TSR Account 4
4.2 TSR Account Adjusted For Shareholder Return 4
4.3 Awards Credited to TSR Account 4
Article V. Cash or Deferral Election
5.1 Annual 50-Percent Cash or Deferral Election 5
Article VI. Payment of TSR Account Balance
6.1 Payment of TSR Account Balance on Termination of
Employment or Death 6
6.2 Recipient of Payment 6
Article VII. Amendment or Termination
7.1 Administrative Amendments 7
7.2 Amendments and Termination 7
7.3 Participant Rights 7
7.4 Successors 7
3415LPLN.3/02 0496 i
|
NYNEX Account Balance Deferral Plan
(Effective March 1, 1996)
Contents
- -------------------------------------------------------------------------------------------------
Section Page
Article VIII. Other Provisions
8.1 No Assignment or Alienation 8
8.2 Source of Benefits 8
8.3 Notices 8
8.4 Applicable Laws 8
|
3415LPLN.3/02 0496 ii
Article I. Purpose
The purpose of the NYNEX Account Balance Deferral Plan (the "Plan") is to provide for the deferral and ultimate distribution of a Senior Manager's short-term incentive amounts, beginning with the amount earned in 1995 and awarded in 1996.
3415LPLN.3/02 0496 1
Article II. Definitions
2.1 Definitions
(a) "Beneficiary" shall mean one or more Beneficiaries designated by the
Senior Manager on a form provided by the Committee for the appropriate
purpose. The most recent Beneficiary designation submitted by the Senior
Manager shall override all previous designations.
(b) "Participating Company" shall mean NYNEX Corporation and any subsidiary
of NYNEX Corporation which shall have determined with the concurrence of
the Committee to participate in this Plan.
(c) "Plan Year" shall have the same meaning as the calendar year i.e.,
January 1 to December 31.
(d) "Senior Manager" shall mean an employee of a Participating Company, who
has attained a level higher than department level or equivalent fifth
level, and who holds a position that the Participating Company's Board of
Directors has designated to be within that Company's Senior Management
Compensation Group.
(e) "Termination of Employment" shall mean any termination of
employment with a Participating Company.
(f) "TSR Account" shall mean an unfunded bookkeeping account established for
each Senior Manager who participates under this Plan. Such account shall
be credited with short-term incentive awards under section 4.3, and
adjusted to reflect total shareholder return under section 4.2.
3415LPLN.3/02 0496 2
Article III. Participation
3.1 Eligibility
Each Senior Manager shall become a participant in the Plan as of March 1, 1996 or, if later, the March 1 next following the date on which he or she becomes a Senior Manager.
3.2 Nature of Plan
The Plan does not constitute a contract of employment, and nothing in the Plan will give any Senior Manager the right to be retained in the employ of the Company or a Subsidiary, nor any right or claim to any benefit under the Plan, except to the extent specifically provided under the terms of the Plan.
3415LPLN.3/02 0496 3
Article IV. TSR Accounts
4.1 Establishment of TSR Account
For each Senior Manager, a Total Shareholder Return Account ("TSR Account"), which shall be an unfunded bookkeeping account, shall be established under this Plan by the Plan Administrator.
4.2 TSR Account Adjusted For Shareholder Return
On each business day, each Senior Manager's TSR Account under this Plan shall be increased to reflect NYNEX Corporation's annualized total shareholder return, as determined by the Committee, to the extent such return is positive. For each 12-month period commencing on March 1, 1996 or any subsequent March 1 (the "allocation period"), the amount allocated shall be based on the annualized rate of such total shareholder return for the three-calendar-year period which precedes the commencement of such allocation period.
4.3 Awards Credited to TSR Account
As of March 1 of each year, after the adjustment described in section 4.2, the entire amount of any short-term incentive award relating to services performed by the Senior Manager in the preceding calendar year shall be credited to his or her TSR Account.
3415LPLN.3/02 0496 4
Article V. Cash or Deferral Election
5.1 Annual 50-Percent Cash or Deferral Election
As of March 1 of each year, after the adjustments described in sections 4.2 and 4.3, the TSR Account shall be debited by 50 percent of the TSR Account balance. Based on the Senior Manager's prior election, all or a portion of such debited amount shall be paid in cash by the Participating Company to the Senior Manager as soon as is practicable, and the remaining portion shall be credited to an account maintained on behalf of the Senior Manager under the NYNEX Incentive Award Deferral Plan. Notwithstanding the foregoing, the entire debited amount shall be paid in cash unless the Senior Manager shall have made an irrevocable election, prior to the calendar year preceding the year in which the cash would be paid, to further defer receipt of the amount by crediting it under the NYNEX Incentive Award Deferral Plan. Such deferral election made for a year shall continue in effect and shall apply for each subsequent year until it is revoked by the Senior Manager.
3415LPLN.3/02 0496 5
Article VI. Payment of TSR Account Balance
6.1 Payment of TSR Account Balance on Termination of Employment or Death
Upon the Termination of Employment or death of a Senior Manager, the applicable Participating Company shall make a cash payment in an amount equal to the Senior Manager's TSR Account balance determined as of the last business day of the month following such Termination of Employment or death.
6.2 Recipient of Payment
In the event of a Senior Manager's Termination of Employment, the payment under section 6.1 shall be made in cash to the Senior Manager. In the event of a Senior Manager's death, such payment shall be made to his or her designated Beneficiary.
3415LPLN.3/02 0496 6
Article VII. Amendment or Termination
7.1 Administrative Amendments
Subject to the provisions of section 7.3, the Company's Vice President-Human Resources (or any successor to that officer's responsibilities) may make minor or administrative amendments to the Plan and, with the concurrence of the Company's Executive Vice President and General Counsel (or any successor to that officer's responsibilities), make any changes necessary or advisable to comply with applicable law or government regulations.
7.2 Amendments and Termination
Subject to the provisions of section 7.3, the Company's Board of Directors may amend or terminate the Plan at any time and any Subsidiary may, by action of its Board of Directors, terminate its participation in the Plan at any time.
7.3 Participant Rights
No action under this Article VII shall, without the consent of the affected Participant or, in the event of his death, his Beneficiary, adversely affect the rights of any Participant with respect to any amount which was credited to him under the Plan prior to the date of such action.
7.4 Successors
The obligations of the Company and each Subsidiary under the Plan shall be binding upon any assignee or successor in interest thereto. Neither the Company nor any Subsidiary shall merge or consolidate with any other corporation, or liquidate or dissolve, without making suitable arrangement for the payment of any benefits payable under the Plan.
3415LPLN.3/02 0496 7
Article VIII. Other Provisions
8.1 No Assignment or Alienation
Benefits payable to any person under the Plan may not be voluntarily or involuntarily assigned or alienated.
8.2 Source of Benefits
Subject to the terms and conditions of the Plan, any amount payable to or on account of a Participant under this Plan shall be paid from the general assets of the Company or applicable Subsidiary. The obligations of the Company and the Subsidiaries under the Plan are solely contractual, and no trust or other separate fund shall be established for purposes of paying any benefits under the Plan.
8.3 Notices
Any notice or document required to be given to or filed with the Plan Administrator shall be considered to be given or filed if delivered to the Vice President-Human Resources or mailed by registered mail, postage prepaid to the Vice President-Human Resources, in care of the Company, at 1095 Avenue of the Americas, New York, New York 10036.
8.4 Applicable Laws
The Plan shall be construed and administered in accordance with the laws of the State of New York.
3415LPLN.3/02 0496 8
NYNEX Senior Management Non-Qualified Defined Contribution Pension Plan
Effective April 18, 1996, the NYNEX Senior Management Non-Qualified Defined
Contribution Pension Plan (Executive Retirement Account Plan) was amended to
conform to the amendment to the NYNEX Senior Management Non-Qualified Pension
Plan effective April 18, 1996, and to the amendment to the NYNEX Senior
Management Non-Qualified Pension Plan approved by the Board of Directors on
September 21, 1995 which provided that any withdrawal of a Participating Company
from, or termination of, that Plan, as applicable, shall not affect or reduce
(a) the benefits of retired Senior Managers or their annuitants or (b) benefits
accrued as of the date of such withdrawal or termination for active Senior
Managers.
EXECUTIVE RETENTION AGREEMENT
AGREEMENT, effective as of January 3, 1994, between NYNEX Corporation, a Delaware corporation (the "Company"), and FirstName LastName an individual (the "Executive").
WHEREAS, the Company and the Executive previously entered into an Executive Retention Agreement; and
WHEREAS, the Company and the Executive desire to amend and to restate in its entirety, such Executive Retention Agreement.
In consideration of the mutual agreements and covenants contained herein, the Company and the Executive hereby agree as follows:
1. Executive Duties. The Company hereby employs the Executive, and the Executive hereby agrees to serve the Company in the capacity of JobTitle and that the Executive's entire business time and best efforts during the Term of Employment (as hereinafter defined) will be devoted to the performance of the Executive's duties, as now or hereafter assigned to the Executive by the Chairman of the Board and Chief Executive Officer of the Company or in the case of a subsidiary that subsidiary's Board of Directors.
2. Term of Employment. The term of employment (the "Term of Employment") shall commence on January 3,1994, and shall continue day to day.
3. Compensation. Except as hereinafter provided, the Company shall pay to the Executive, and the Executive shall accept from the Company, for the services and duties to be rendered and performed by the Executive during the Term of Employment:
(a) Base Compensation. During the Term of Employment, base compensation at the annual rate determined by the NYNEX Board of Directors or the Board of Directors of the company to which this Agreement has been assigned (subject to applicable withholding and other taxes), (i) payable in equal monthly installments on or before the first day of the month following each of the months during such period, and (ii) as subsequently adjusted by the NYNEX Board of Directors or the Board of Directors
of the company to which this Agreement has been assigned.
(b) Short Term Incentive Plan. During the Term of Employment, the Executive shall participate in the Company's Senior Management Short Term Incentive Plan (the "STIP").
(c) Long Term Incentive Plan. During the Term of Employment, the Executive shall participate in the NYNEX Senior Management Long Term Incentive Plan (the "LTIP").
(d) Stock Options. During the Term of Employment, the Executive will be eligible to participate in the NYNEX Stock Option Plan.
(e) Retention Award. As of January 3,1994, the Company will award the Executive Shares shares of restricted stock (the "Award"), pursuant to the terms of the NYNEX 1987 Restricted Stock Award Plan, (1987 Plan) under the following terms:
(i) dividends on the Award will be used to purchase additional shares of restricted stock (the additional shares and the Awarded shares shall be referred to collectively as the "Retention Award");
(ii) the shares which comprise the Retention Award shall be subject to the terms and conditions provided in the 1987 Plan.
(iii) the Restriction Period for the Retention Award as defined in the 1987 Plan shall end when the Executive:
(a) voluntarily separates from service with the Company with the consent of the Chairman and Chief Executive Officer of the Company;
(b) dies; or
(c) is terminated without cause.
(f) Benefits. In addition to the compensation, STIP, LTIP and Stock Option Plan grants and awards payable to the Executive pursuant to this paragraph 3, the Company shall provide the following benefits to the Executive during the Term of Employment:
(i) The Executive, to the extent eligible, shall participate in the Company's current and future employee benefit plans and programs for members of the Senior Management Compensation Group and employees generally.
(ii) The Executive, as a member of the Senior Management Compensation Group as defined by the NYNEX Board of Directors, shall be entitled to all perquisites and benefits available to members of the Senior Management Compensation Group of the Company.
(g) Termination of Payments and Severance Pay. Compensation and benefits under this sub-paragraph 3 shall terminate as follows:
(i) If the Executive voluntarily separates from service with the Company without the consent of the Chairman and Chief Executive Officer of the Company:
(A) the Company shall make no further payments to the Executive under sub-paragraph 3(a) for any period of time subsequent to the date of such separation;
(B) grants and awards previously made to the Executive under the LTIP, STIP and the Stock Option Plan shall be governed by the terms of those plans;
(C) the Retention Award under sub-paragraph
3(e), shall be forfeited;
(D) all benefits provided under sub-paragraph 3(f) hereof shall cease as of the date of such separation, except as may be provided in the plans and programs; and
(E) the Executive shall not be entitled to the Severance Payment defined in subparagraph 3(h) below.
(ii) If the Executive voluntarily separates from employment with the Company with the consent of the Chairman and Chief Executive Officer of the Company:
(A) the Company shall make no further payments to the Executive under sub-paragraph 3(a) for any period of time subsequent to the date of separation,
(B) grants and awards previously made to the Executive pursuant to the LTIP, STIP, and the Stock Option Plan shall be governed by the terms of those plans;
(C) the restrictions on the Retention Award, under sub-paragraph 3(e), shall lapse; and
(D) all benefits provided under sub-paragraph
(f) hereof shall cease as of the date of
such separation, except as may be provided
in the plans and programs; and
(E) The Executive shall be entitled to the Severance Payment 7 days after the Executive signs and delivers to the Company a release substantially in the form attached as Exhibit A.
(iii) If the Executive dies at any time during the Term of Employment:
(A) the Company shall make no payments under sub-paragraph 3(a) of this Agreement to the Executive or the Executive's executors, administrators, assigns, beneficiaries or estate for any period of time subsequent to the date of the Executive's death;
(B) grants and awards previously made to the Executive pursuant to the LTIP, STIP and the Stock Option Plan shall be governed by the terms of those plans;
(C) the restrictions on the Retention Award, under sub-paragraph 3(e), shall lapse;
(D) the continuation, expiration and termination of the benefits provided under sub-paragraph 3(f) shall be governed by the terms of the Company's employee benefit plans and programs applicable in the event of the death of an employee as in effect on the date of death; and
(E) the Executive's heirs shall be entitled to the Severance Payment 7 days after the Executive's heirs sign and deliver to the Company a release substantially in the form attached as Exhibit A.
(iv) If the Executive's employment is terminated for cause as defined in Paragraph 4 below:
(A) the Company shall make no payments under sub-paragraph 3(a) for periods of time subsequent to the date of such termination;
(B) grants and awards previously made to the Executive pursuant to the LTIP, STIP and the Stock Option Plan shall be governed by the terms of those plans;
(C) the Retention Award, under sub-paragraph
3(e), shall be forfeited;
(D) all benefits provided under sub-paragraph 3(f) shall cease as of the date of such termination except as may be provided in the plans and programs; and
(E) the Executive shall not be entitled to the Severance Payment.
(v) If the Executive becomes disabled as defined in the NYNEX Senior Management Long Term Disability and Survivor Protection Plan (the "LTD Plan") such that the Executive is eligible for a disability allowance pursuant to the LTD Plan:
(A) the Company shall make no payments under sub-paragraph 3(a) for periods of time subsequent to the onset of such disability, but the Executive shall eligible for a disability allowance in accordance with the LTD Plan;
(B) grants and awards previously made to the Executive pursuant to the LTIP, STIP and the Stock Option Plan shall be governed by the terms of those plans;
(C) the Retention Award under sub-paragraph 3(e)
shall be continued until the expiration of
the period described in paragraph 1(a) of
Section 2 of the LTD Plan; if the Executive
remains disabled during a period described
in paragraph 1(b) of Section 2 of the LTD
Plan, the Term of Employment shall end, the
Executive shall be deemed to have
voluntarily separated from service with the
Company with the consent of the Chairman and
Chief Executive Officer of the Company, and
the restrictions on
the Retention Award under sub-paragraph 3(e) shall lapse;
(D) all benefits provided under sub-paragraph 3(f) hereof shall be governed by the terms of the Company's employee benefit plans and programs; and
(E) at the end of the Term of Employment, the Executive shall be entitled to the Severance Payment 7 days after the Executive signs and delivers to the Company a release substantially in the form attached as Exhibit A.
(vi) If the Executive's employment is terminated by the Company without cause:
(A) the Company shall make no payments specified under sub-paragraph 3(a) to the Executive after the date of termination;
(B) grants and awards previously made to the Executive pursuant to the LTIP, STIP, and the Stock Option Plan shall be governed by the terms of those plans;
(C) the restrictions on the Retention Awards under sub-paragraph 3(e) shall lapse;
(D) the continuation, expiration and termination of all other benefits provided under sub-paragraph 3(f) shall be governed by the terms of the Company's employee benefit plans and programs as in effect on the date of such termination;
(E) the Executive shall be entitled to the Severance Payment 7 days after the Executive signs and delivers to the
Company a release substantially in the form attached as Exhibit A.
(h) Severance Payment. For purposes of this Agreement, the Severance Payment shall be equal to the sum of (i) and (ii) as follows:
(i) The monetary value of the Retention Award on the Executive's last day of employment. For this purpose, value shall be the mean between the high and low sale prices of the shares which comprise the Retention Award as quoted by the New York Stock Exchange-Composite Transactions listing for the last day of employment, or such other appropriate measurement of fair market value as the Committee on Benefits of the Company's Board of Directors shall select. If the last day of employment is a non-trading day, then the high and low sale prices for the last trading day prior to such date shall be used.
(ii) The balance on the Executive's last day of employment in the Executive's phantom Global Balanced Fund Account specified as of February 1, 1996 by the Committee on Benefits of the Board of Directors of the Company, but in no event shall this be less than the amount specified for the Executive as of February 1, 1996, which such amount is Dollars.
(i) Certain Terminations of Employment. Notwithstanding anything in this Agreement to the contrary, unless otherwise determined by the Chairman and Chief Executive Officer, the following shall not constitute grounds for a termination of employment by the Company without cause for purposes of sub-paragraph 3(g)(vi):
(A) Relocation by the Company or any affiliate of the Company of the Executive's primary work location anywhere within the operating geography of the Company and its affiliates within the area encompassing the states from Maine to Virginia;
(B) Changes in the Executive's job responsibilities, unless they are so substantially reduced that the Executive has materially less status and rank; and
(C) Changes in the Executive's reporting relationships.
(j) The Severance Payment shall not be payable if the Executive is terminated by the Company as a consequence of the sale or transfer to another party of the stock or assets of the Company or any affiliate of the Company under circumstances where the Executive is hired or offered employment by the purchaser or transferee or its affiliates, successors or assignees within (60) days of the date the Executive is terminated by the Company.
(k) If the Executive is re-employed by the Company or any affiliate prior to the end of one year, a pro rata share of the Severance Payment shall be repaid by the Executive to the Company.
4. Termination of Employment.
(a) The Executive may voluntarily terminate employment with the Company at any time with or without cause at the sole discretion of the employee.
(b) The Executive's employment may be terminated by the
Company at any time with or without cause at the sole
discretion of the Company. The Company shall give the
Executive 90 days' notice if the Executive's employment
is being terminated without cause. If the Company
terminates the Executive's employment without cause and
without 90 days notice, notwithstanding the provisions of
paragraph 3(g)(vi)(A), the Company will pay the
Executive's Base Compensation for each day that the
period between notice and termination of employment is
less than 90 days. The term "cause" in this subparagraph
(b) shall mean grossly incompetent performance or
substantial or continuing inattention to or neglect of
the duties and responsibilities assigned to the
Executive, as determined in the sole discretion and judgment of the Chairman and Chief Executive Officer of the Company: fraud, misappropriation, embezzlement, involving the Company or any of its subsidiaries or affiliates; or commission of any felony of which the Executive is finally adjudged guilty in a court of competent jurisdiction; or a breach of Paragraphs 8 (Non-Competition and Non-Solicitation), 9 (Intellectual Property and Proprietary Information), 10 (Company Rules; Code of Business Conduct), or 11 (Modification of Final Judgment) of this Agreement. In the event that the Company terminates the employment of the Executive for cause, it will state in writing the grounds for such termination and provide this statement to the Executive within 10 business days after the date of termination, except that, in the event that the reason for termination for cause is grossly incompetent performance or substantial or continuing inattention to or neglect of the duties and responsibilities assigned to the Executive, the Company will give the Executive 60 calendar days prior written notice and an opportunity to cure the performance within these 60 calendar days. Evidence of such cause or evidence of other cause discovered after the notice may also be considered to support the termination decision and will, by itself, be sufficient to constitute cause.
5. Expenses, Tax Withholding and Cap On Parachute Payments.
(a) Expenses.
In accordance with the Company's usual practices and procedures, the Company agrees to reimburse the Executive for reasonable travel expenses (other than normal commutation expenses) and other reasonable out-of-pocket expenses directly related to the Executive's work for the Company.
(b) Tax Withholding.
All amounts payable under this Agreement are subject to the withholding of federal, state and local
taxes, FICA and FUTA and SUTA (unemployment taxes) at the time of payment and will be reported on IRS form W-2.
(c) Cap On Parachute Payments.
Notwithstanding anything in this Agreement to the contrary, Exhibit B shall apply to all payments under this Agreement.
6. Holidays and Vacation. The Executive shall have the same holidays per calendar year recognized by the Company for its management employees (presently 11). During each calendar year during the Term of Employment, the Executive shall have an aggregate of 4 Management Personal Days and 5 weeks vacation. Notwithstanding the foregoing, such Management Personal Days and vacation days shall be scheduled at such times and in such number with due regard to the needs of the business.
7. Capacity.
(a) The Executive hereby warrants and represents that the Executive is legally capable and now physically capable (with or without reasonable accommodation) of performing the duties contemplated in this Agreement and that such performance will not violate any agreements the Executive has with, or breach any duties owed to, any other employer or organization.
(b) The Company hereby warrants and represents that this Agreement has been duly and validly authorized, executed, and delivered.
8. Non-Competition and Non-Solicitation.
(a) Without the prior written consent of the Company, the Executive shall not, during the Term of Employment and for a period of two years from the date of termination of employment with the Company, or its Affiliates, either for himself or herself or as an agent, partner, joint venturer or employee of any Person, other than the Company, or its Affiliates, or in any other capacity, directly or indirectly:
(i) engage in Competitive Services for any Customer or any Prospective Customer; or
(ii) contact, solicit or attempt to solicit, whether for the Executive's own account or for the account of any Person other than the Company, or its Affiliates, any Customer or any Prospective Customer; or
(iii) induce away from the Company, or its Affiliates, or facilitate the inducement away from the Company, or its Affiliates of, any personnel of the Company, or its Affiliates, or interfere with the faithful discharge by such personnel of their contractual and fiduciary obligations to serve the interests of the Company, or its Affiliates and their Customers; or
(iv) invest in or otherwise be connected with, in any manner, any Person that provides or intends to provide products or services of the type provided by the Company for any Customers or any Prospective Customer.
(b) For purposes of this Paragraph 8, the following terms shall have the following definitions:
(i) "Affiliate" of a Person means any Person directly or indirectly controlling, controlled by, or under common control with, such other Person.
(ii) "Customer" means any Person for whom the Company performed Competitive Services within the 18 months immediately preceding such engagement, contact, solicitation attempted solicitation or inducement, or the Executive's termination of employment.
(iii) "Competitive Services" means any business activity which is, being conducted or planned during the Term of Employment or was being conducted or planned by the Company at the
time of the Executive's termination of employment.
(iv) "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity, including a government or political subdivision or an agency or instrumentality thereof.
(v) "Prospective Customer" means any Person to whom the Company submitted, or assisted in the submission of, a proposal for Competitive Services during the 18 months immediately preceding such (x) engagement, contact, solicitation, attempted solicitation or inducement, or (y) the Executive's termination of employment.
(c) Ownership of less than 5% of the securities in a publicly traded corporation shall not constitute a violation of this Agreement.
9. Intellectual Property and Proprietary Information. The Executive has executed the NYNEX Employee Agreement Regarding Intellectual Property and Proprietary Information which is made a part of this Agreement.
10. Company Rules; Code of Business Conduct. The Executive agrees to abide by all of the rules applicable to Company employees as such rules are made known to the Executive from time to time. The Executive has received and read the publication entitled the NYNEX Code of Business Conduct.
11. Modification of Final Judgment. The Executive has received and read the publication entitled NYNEX Policy for Compliance with the Modification of Final Judgment (August 1988) and has executed the Acknowledgment attached thereto. Such Acknowledgment is made a part of this Agreement.
12. Additional Remedies. In addition to any other rights or remedies, whether legal, equitable or otherwise, which each of the parties may have:
(a) The Executive acknowledges that Paragraphs 8, 9, 10 and 11 of this Agreement are essential to the
continued good will and profitability of the Company and its subsidiaries and affiliates and further acknowledges that the application and operation thereof shall not involve a substantial hardship upon the Executive's future livelihood. Should any court determine that any or all of such paragraphs of this Agreement are unenforceable in respect of scope, duration or geographic area, such court shall substitute, to the extent enforceable, provisions similar thereto or other provisions, so as to provide to the Company and its subsidiaries and affiliates, to the fullest extent permitted by applicable law, the benefits intended by this Agreement.
(b) The parties hereto further recognize that irreparable damage to the Company and its subsidiaries and affiliates will result in the event that Paragraphs 8, 9, 10 and 11 of this Agreement are not specifically enforced and that monetary damages will not adequately protect the Company and its subsidiaries and affiliates from a breach of this Agreement. If any dispute arises concerning the violation by the Executive of this Agreement, the parties hereto agree that an injunction may be issued restraining such violation pending the determination of such controversy, and no bond or other security may be required in connection therewith.
13. Waiver. Failure to insist upon strict compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver or relinquishment of any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times.
14. Reformation and Severability. The Executive and the Company agree that the agreements contained herein shall each constitute a separate agreement independently supported by good and adequate consideration, shall each be severable from the other provisions of the Agreement, and shall survive the Agreement. If an arbitrator or court of competent jurisdiction determines that any term, provision or portion of this Agreement is void, illegal or unenforceable, the other terms, provisions and portions of this Agreement shall remain in full force and effect and the terms, provisions and portions that are determined to be void, illegal or unenforceable shall be limited so that they shall remain in effect to the extent permissible by law.
15. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or messenger, transmitted by telex or telegram or mailed by registered or certified mail, return receipt requested and postage prepaid, as follows:
(a) If to the Company, to:
NYNEX Corporation 1095 Avenue of the Americas New York, New York 10036 Attention: Executive Vice President and General Counsel
(b) If to the Executive, to:
Address1
City State PostalCode
or to such other person or address as either of the parties shall hereafter designate to the other from time to time by similar notice.
16. Assignability. This Agreement is personal in nature. The Executive shall have no right to assign or transfer this Agreement. In the event of any attempted assignment or transfer by the Executive of the Executive's duties and obligations contrary to this paragraph, all the Executive's rights under this Agreement shall be forfeited, and the Company shall have no further liability under this Agreement. The Company may assign or transfer its rights under this Agreement only to a subsidiary or affiliate of the Company. No assignment by the Company shall relieve the Company of the liabilities and responsibilities created by this Agreement.
17. Entire Understanding. This Agreement constitutes the entire understanding between the Company and the Executive with respect to the subject matter hereof, superseding any and all prior written or oral understandings which may have existed.
18. Amendment. This Agreement may be amended or modified, in whole or in part, only by an agreement in writing signed by the Company and the Executive.
19. Headings. The headings in this Agreement are inserted for convenience of reference only and are not to be considered in the construction of the provisions herein.
20. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without regard to the principles of conflicts of laws of that State.
21. Arbitration. Any dispute arising out of or relating to this Agreement, except any dispute by the Company arising out of or relating to paragraphs 8, 9, 10 and 11 of this Agreement, shall be settled by final and binding arbitration, which shall be the exclusive means of resolving any such dispute, and the parties specifically waive all rights to pursue any other remedy, recourse or relief. With respect to disputes by the Company arising out of or relating to paragraphs 8, 9, 10 and 11 of this Agreement, the Company has retained all its rights to legal and equitable recourse and relief, including but not limited to injunctive relief, as referred to in paragraph 12 of this Agreement. Notice to the Company or the Executive of the existence of a dispute which a party wishes to have resolved by arbitration shall be provided pursuant to paragraph 15 of this Agreement. The arbitration shall be expedited and conducted in New York, New York pursuant to the Center for Public Resources ("CPR") Rules for Non-Administered Arbitration of Employment Disputes in effect at the time of notice of the dispute before one neutral arbitrator appointed by CPR from the CPR Panel of Neutrals unless the parties mutually agree to the appointment of a different neutral arbitrator. The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. Sections 1-16, and judgment upon the award rendered by the arbitration may be entered by any court having jurisdiction. The finding of the arbitrator may not change the express terms of this Agreement and shall be consistent with the arbitrator's understanding of the findings a court of proper jurisdiction would make in applying the applicable law to the facts underlying the dispute. In no event whatsoever shall such an arbitration award include any award of damages other than the amounts in controversy under this Agreement or the award of compensatory or punitive damages and the parties waive the right to recover, in such arbitration, damages other than the amounts in controversy under this Agreement and any compensatory or punitive damages.
22. Confidentiality. The Executive agrees not to disclose or discuss, other than with his legal counsel, personal tax or financial advisors, or spouse, either the existence of or any details of this Agreement, or the existence of or any details of any dispute arising out of or relating to this Agreement, or the existence of or any details of any litigation or any arbitration pursuant to Article 21 of this Agreement. The Executive will use his best efforts to ensure that any such legal counsel,
personal tax or financial advisors, or spouse will not disclose or discuss with any other person the existence of or any details of this Agreement, or the existence of or any details of any dispute arising out of or relating to this Agreement, or the existence of or any details of any litigation or any arbitration pursuant to Article 21 of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered as of the __ day of ____________, 1996.
EXECUTIVE COMPANY
__________________________ ________________________
Ivan G. Seidenberg
|
EXHIBIT A
SEPARATION AGREEMENT AND RELEASE
In consideration of the fact that I, __________ (the employee), have voluntarily and of my own free will, elected to resign and accept a payment ("Severance Payment") in the amount of _______, and that NYNEX Corporation, or its subsidiaries and affiliates (hereinafter "NYNEX Corporation" or "the Company") has agreed to pay me the above amount, I acknowledge and agree to the following:
1. I understand that as of ______________________ my employment with ____________________________ (the Company) will cease.
2. I understand that the Severance Payment is being paid as consideration for my signing this Separation Agreement and Release and that these are benefits to which I would not otherwise have been entitled had I not signed this Separation Agreement and Release.
3. I also understand that, pursuant to the Older Workers Benefit Protection Act of 1990, I have the right to consult with an attorney before signing this Separation Agreement and Release, I have 21 days to consider the Release before signing it, and I may revoke the Release within 7 calendar days after signing it.
4. I realize that there are various State and Federal laws that govern my employment relationship with the Company and/or prohibit employment discrimination on the basis of age, color, race, gender, sexual preference/orientation, marital status, national origin, mental or physical disability, religious affiliation or veteran status and that these laws are enforced through the courts and agencies such as the Equal Employment Opportunity Commission, Department of Labor and State Human Rights Agencies. Such laws include, but are not limited to, Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967, as amended, the Employee Retirement Income Security Act of 1974, as amended, and the Americans with Disabilities Act of 1990. In consideration of the Severance Payment provided for in this Agreement, I intend to give up any rights I may have under these or any other laws or agreements with respect to my employment and termination of employment at the Company and acknowledge that the Company (including NYNEX Corporation, its subsidiaries and affiliates) has not (a) discriminated against me, (b) breached any express or implied contract with me, or (c) otherwise
acted unlawfully toward me.
5. Subject to paragraph 6 herein, on behalf of myself, my heirs, executors,
administrators, successors and assigns, I release and discharge NYNEX
Corporation, its successors, assigns, subsidiaries, affiliates,
directors, officers, representatives, agents and employees and the
fiduciaries of any employee benefit plan maintained by any of the
foregoing ("Releasees") from any and all claims, including claims for
attorneys' and experts' fees and costs, charges, actions and causes of
action with respect to, or arising out of, my employment or termination
of employment with the Company. This includes, but is not limited to,
claims arising under contract, federal, state, or local laws prohibiting
age, color, race, gender, sexual preference/orientation, marital status,
national origin, mental or physical disability, religious affiliation
or veteran status or any other forms of discrimination or claims
growing out of the Company's termination of its employees. With
respect to any charges that have been or may be filed concerning events
or actions relating to my employment or the termination of my
employment and which occurred on or before the date of this agreement,
I additionally waive and release any right I may have to recover in any
lawsuit or proceeding brought by me, an administrative agency, or any
other person on my behalf or which includes me in any class. If I
breach this paragraph, I understand that I will be liable for all
expenses, including costs and reasonable attorney's fees, incurred by
any Releasee in defending the lawsuit or charge of discrimination,
regardless of the outcome. I agree to pay such expenses within thirty
(30) calendar days of written demand. This paragraph is not intended
to limit me from instituting legal action for the sole purpose of
enforcing this Agreement.
6. I understand that this Separation Agreement and Release in no way affects any rights I may have for benefits under the NYNEX Corporation Management Pension Plan or any other applicable NYNEX Corporation benefit plan.
7. In accordance with my existing and continuing obligations to the Company, I have returned or will immediately return to the Company, on or before my termination date, all Company property, including, but not limited to, files, records, computer access codes, computer programs, instruction manuals, business plans, and other property which I prepared or helped to prepare or which came into my possession in connection with my employment with the Company.
8. I affirm my obligation to keep all proprietary Company information confidential and not to disclose it to any third party in the future. I understand that the term "proprietary Company information" includes, but is not limited to, technical, marketing, business, financial or other information which constitutes trade secret information or information not available to competitors of the Company, the use or disclosure of which might reasonably be construed to be contrary to the interest of the Company or its subsidiaries or affiliates. I understand that this paragraph does not prevent me from talking with any regulatory or law enforcement agencies.
9. The construction, interpretation and performance of this Agreement shall be governed by the laws of [ ].
10. In the event that any one or more of the provisions contained in this Agreement shall for any reason be held to be unenforceable in any respect under the law of any state or of the United States of America, such unenforceability shall not affect any other provisions of this Separation Agreement and Release, but, with respect only to that jurisdiction holding the provision to be unenforceable, this Separation Agreement and Release shall then be construed as if such unenforceable provision or provisions had never been contained herein.
11. This Separation Agreement and Release contains the entire agreement between the Company and me and fully supersedes any and all prior agreements or understandings pertaining to the subject matter hereof. I represent and acknowledge that in executing this Separation Agreement and Release I have not relied upon any representation or statement not set forth herein made by any of the Releasees or by any of the Releasee's agents, representatives or attorneys with regard to the subject matter of this Separation Agreement and Release.
BY SIGNING THIS SEPARATION AGREEMENT AND RELEASE, I STATE THAT: I HAVE READ IT; I UNDERSTAND IT AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS; I AGREE WITH EVERYTHING IN IT; I AM AWARE OF MY RIGHT TO CONSULT AN ATTORNEY BEFORE SIGNING IT; AND I HAVE SIGNED IT KNOWINGLY AND VOLUNTARILY.
EXHIBIT B
Golden Parachute Cap
(1) Notwithstanding anything to the contrary contained herein, in the event that any payment received or to be received by the Executive under this Agreement (the "Contract Payment") would, in the opinion of independent tax counsel selected by the Company and reasonably acceptable to the Executive ("Tax Counsel"), be subject to the excise tax (the "Excise Tax") imposed by Section 4999 of the Code (in whole or part), the Contract Payment shall be reduced (but not below zero) until no portion of such payments would be subject to the Excise Tax. For purposes of this limitation, (i) no portion of such payments the receipt or enjoyment of which the Executive shall have effectively waived in writing shall be taken into account, (ii) only the portion of such payments which in the opinion of Tax Counsel constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the code shall be taken into account, (iii) such payments shall be reduced only to the extent necessary so that such payments would not be subject to the Excise Tax, in the opinion of Tax Counsel and (iv) the value of any noncash benefit or any deferred payment or benefit included in such payments shall be determined in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. The Executive shall be entitled, at any time by written notice to the Company, to reduce the amount of any Contract Payment otherwise payable to him, and to select from among such payments those to be so reduced.
(2)(i) If it is established pursuant to an opinion of Tax Counsel or a
final determination of a court or an Internal Revenue Service proceeding that,
notwithstanding the good faith of the Executive and the Company in applying the
terms of Section (1) hereof, any Contract Payment paid to the Executive or for
his benefit exceeded the limitation contained in Section (1) hereof, then he
shall pay to the Company, within five days of receipt of notice of such final
determination or opinion, an amount equal to the sum of (A) the excess of the
payments paid to him or for his benefit over the maximum payments that should
have been paid to or for his benefit taking into account the limitations
contained in Section (1) hereof and (B) interest on the amount set forth in
clause (A) of this sentence at the applicable federal rate (as defined in
Section 1274(d) of the Code) from the date of his receipt of such excess until
the date of such payment; provided, however, that he shall not be required to
make any payment to the Company pursuant to this Section(2)(i) if such final
determination requires the payment by him of an Excise Tax by reason of any
Contract Payment or portion thereof.
(ii) If it is established pursuant to an opinion of Tax Counsel or a final determination of a court or an Internal Revenue Service proceeding that,
notwithstanding the good faith of the Executive and the Company in applying the
terms of Section (1) hereof, any Contract Payment paid to him or for his benefit
was in an amount less than the maximum Contract Payment which could be payable
to him without such payments being subject to the Excise Tax, then the Company
shall pay to him, within five days of receipt of notice of such final
determination or opinion, an amount equal to the sum of (A) the excess, if any,
of the payments that should have been paid to him or for his benefit over the
payments paid to or for his benefit and (B) interest on the amount set forth in
clause (A) of this sentence at the applicable federal rate (as defined in
Section 1274(d) of the Code) from the date of his non-receipt of such excess
until the date of such payment.
(3) The Company shall pay the Contract Payment at such times as set forth in the applicable paragraph hereof; provided, however, that if the Company in good faith believes that any such payments shall be reduced under the provisions of Section (1) hereof, the Company shall pay to the Executive at such time a good faith estimate of the reduced payments, the computation of which shall be given to him in writing together with a written explanation of the basis for making such adjustment. The Company shall, within thirty days of the otherwise applicable payment date, either (i) pay to the Executive the balance of the payments together with interest thereon at the applicable federal rate (as defined in Section 1274(d) of the Code) or (ii) deliver to him a copy of the opinion of Tax Counsel referred to in Section (1) hereof, as applicable, establishing the amount of the reduced payments over the estimate previously paid on account thereof, together with interest thereon at the applicable
federal rate (as defined in Section 1274(d) of the Code).
Exhibit (12)
NYNEX CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In millions)
For the
Six Months
Ended
June 30, For the Year Ended December 31,
1996 1995 1994 1993 1992 1991
(unaudited)
Earnings
Earnings before Interest Expense,
Extraordinary Item and Cumulative
Effect of Change in Accounting Principle $ 893.3 $1,803.4 $1,466.4 $ 387.1 $1,995.8 $1,326.8
Federal, State and Local Income Taxes 327.6 640.9 303.7 (172.7) 570.4 192.1
Estimated Interest Portion of Rental Expense 48.6 117.3 109.0 117.3 126.2 127.9
Priority Distributions 28.6 47.1 29.9 15.2 - -
--------- -------- -------- ------- -------- --------
Total Earnings $ 1,298.1 $2,608.7 $1,909.0 $ 346.9 $2,692.4 $1,646.8
========= ======== ======== ======= ======== ========
Fixed Charges
Total Interest Expense $ 321.5 $ 733.9 $ 673.8 $ 659.5 $ 684.6 $ 726.0
Estimated Interest Portion of Rental Expense 48.6 117.3 109.0 117.3 126.2 127.9
Priority Distributions 28.6 47.1 29.9 15.2 - -
-------- -------- ------- ------- ------- -------
Total Fixed Charges $ 398.7 $ 898.3 $ 812.7 $ 792.0 $ 810.8 $ 853.9
======== ======== ======= ======= ======= =======
Ratio of Earnings to Fixed Charges* 3.26 2.90 2.35 .44 3.32 1.93
======== ======== ======= ======= ======= =======
|
* Earnings were inadequate to cover Fixed Charges by $445.1 million for the year ended December 31, 1993 as a result of $2.1 billion of fourth quarter 1993 business restructuring charges ($1.4 billion after-tax).
| ARTICLE 5 |
| PERIOD TYPE | 6 MOS |
| FISCAL YEAR END | DEC 31 1995 |
| PERIOD END | JUN 30 1996 |
| CASH | 75 |
| SECURITIES | 0 |
| RECEIVABLES | 3,210 |
| ALLOWANCES | 250 |
| INVENTORY | 154 |
| CURRENT ASSETS | 3,905 |
| PP&E | 36,642 |
| DEPRECIATION | 19,666 |
| TOTAL ASSETS | 26,448 |
| CURRENT LIABILITIES | 3,457 |
| BONDS | 9,367 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 453 |
| OTHER SE | 6,097 |
| TOTAL LIABILITY AND EQUITY | 26,448 |
| SALES | 0 |
| TOTAL REVENUES | 6,700 |
| CGS | 0 |
| TOTAL COSTS | 5,558 |
| OTHER EXPENSES | (7) |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 322 |
| INCOME PRETAX | 899 |
| INCOME TAX | 328 |
| INCOME CONTINUING | 572 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 131 |
| NET INCOME | 703 |
| EPS PRIMARY | 1.61 |
| EPS DILUTED | 1.61 |