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Execs profit handsomely from Bell-GTE deal

Bell Atlantic releases new details of its merger with GTE in an SEC filing.

Bell Atlantic released new details of its merger with GTE, including word that GTE's CEO stands to make close to $14 million in bonuses following the deal.

After the merger, GTE CEO Charles Lee and Bell Atlantic CEO Ivan Seidenberg will share the top spot in the new company for two years. Each will receive multimillion-dollar payments as incentive to stay with the firm.

The GTE CEO stands to make a considerable sum of money if the merger goes through. As part of the agreement, Lee will be given a $4 million bonus for staying on board after the deal is completed, and could earn an "incentive" bonus, capped at $10 million, that is tied to the performance of the stock.

These bonuses will be added to Lee's annual base salary of at least $1.25 million per year, and other pre-existing bonus packages that will total close to $10 million.

Seidenberg also will receive a "retention bonus" of more than $10 million.

If he leaves, Lee will likely be able to keep the $10 million incentive bonus. Both executives would forfeit their retention bonuses if they jump ship to another company.

Separately, Bell Atlantic plans to break up the wireless phone joint venture it operates with AirTouch called PrimeCo PCS. (See related story)

Lee will serve as chairman, Seidenberg as president, and both will share a co-CEO title until June of 2002. At that time, Lee will retire, and Seidenberg will take the full CEO duties, the company said.

Lee will continue to serve as chairman for another two years, after which Seidenberg will also step into that position.

The salary details were contained in a merger proxy statement with the federal Securities and Exchange Commission today, in advance of a shareholder vote on the merger scheduled for May 18.

In the filing, the two companies spun out their rationale for the merger, saying that they need to grow larger in order to compete in a national and international telecommunications market.

The proxy statement also spun out details of how the agreement between the two companies evolved.

The merger talks apparently began in an early June 1998 meeting between executives of the two companies.

Executives and directors slowly analyzed the benefits of a merger over the next two months, before having their hand tipped by growing rumors late in July. According to today's filing, a pending newspaper report on the deal prompted them to speed up their timetable late in that month, and the deal was finally announced two days later on July 28.

The companies said they expected to see between $1.2 billion to $1.6 billion in transition costs over the next three years. But this would be made up by close to $4 billion in annual savings and new revenues, they said.

The deal has yet to be approved by federal and state regulators, and officials at the FCC have been skeptical of a similar pending merger between SBC Communications and Ameritech.

The company hopes to have the deal approved and completed by the end of 1999, but said regulatory approval could push back the finish line to the first half of 2000, the filing said.

GTE shareholders will meet on May 18 to vote on the deal. Bell Atlantic stockholders will cast their own votes the following day.