Technology & Health

Exit Package Gives AT&T CEO A Reason Not to Tarry at SBC --- Dorman Stands to Receive $32 Million if He Leaves Within 6 Months of Merger

AT&T Corp. Chief Executive David Dorman stands to receive a total exit package valued at roughly $32.3 million if he leaves SBC Communications Inc. within six months after the two companies complete their merger.

AT&T and SBC announced their $16 billion deal in January, combining two telephone giants.

At the time, the companies said Mr. Dorman would stay on as president of the combined entity and a member of its board. According to Securities and Exchange Commission filings both companies made Friday, Mr. Dorman's agreement with SBC provides a strong financial incentive for Mr. Dorman to leave sooner rather than later if he isn't picked to succeed Edward Whitacre Jr., SBC's current chief executive and chairman. Mr. Whitacre is expected to retire when his employment agreement expires in November 2006.

If Mr. Dorman's employment is terminated "without cause" within six months after the deal closes, his total package will include a $10.3 million severance payout; accelerated vesting of options valued at about $1.3 million; accelerated vesting of restricted shares valued at about $9.1 million; an annuity likely valued at about $2 million; and lifetime medical and dental benefits.

If he leaves within the first six months, he also would start a three-year consulting agreement with SBC and, in return, receive 400,000 shares of SBC restricted stock. Based on SBC shares' price of $24 as of 4 p.m. in New York Stock Exchange composite trading Friday, that deal would be valued at $9.6 million. Those shares would vest over a period of three years and he may not compete with SBC.

If his employment with SBC is terminated sometime after six months, he wouldn't receive the $9.6 million of SBC shares or the roughly $2 million annuity. That means that if he leaves the combined company, say, a year after the deal's close, he stands to receive roughly $20 million.

A spokesman for AT&T said he couldn't speculate on what would happen to Mr. Dorman at SBC and directed questions to the other company. "But what Dave has said is he's enthused about going to a new company and serving as president," said AT&T spokesman Paul Kranhold.

In response to the question of whether Mr. Dorman will stay on, Selim Bingol, a spokesman for SBC, said, "That will be decided between Mr. Dorman and the board."

Mr. Dorman doesn't have to leave SBC, of San Antonio, to benefit from the accelerated vesting of options and restricted shares that he already owns -- valued at a total of about $10.4 million -- if the deal with SBC closes by the end of 2005.

As part of the deal with SBC, assuming it closes by year end, Mr. Dorman would forfeit roughly $7 million in unvested performance-related shares that he already has received under AT&T's long-term incentive plan.

In 2004, Mr. Dorman received total compensation of nearly $10 million from AT&T, including a salary of $1.3 million, a bonus of nearly $2 million, restricted shares valued at about $2.8 million, long-term incentive payouts of nearly $2.6 million and other compensation of about $1.3 million, which included personal use of the corporate aircraft, financial counseling and other benefits. By comparison, he earned $11.7 million in 2003. AT&T is based in Bedminster, N.J.

Meanwhile, SBC's Mr. Whitacre received compensation of $14.2 million in 2004, according to the company's proxy filed Friday. Mr. Whitacre's salary was $2.1 million, virtually unchanged from a year earlier; his bonus was $6.2 million. Mr. Whitacre also received other annual compensation totaling $1.6 million, which included personal transportation on company flights valued at $32,312.

He also received long-term incentive payouts of $3.5 million and "other compensation" totaling $730,594, which included premiums on SBC owned life insurance.

Mr. Whitacre didn't receive restricted-stock awards, compared with $7.2 million in restricted stock in 2003. In addition to his 2004 compensation, Mr. Whitacre was granted options with a present value of roughly $1.5 million, according to the filing. Mr. Whitacre also realized $748,894 from exercising options in 2004.