ex10n.htm


     

    Exhibit 10-n


    


    


    


    


    


    


    


    


    


    


    


    


    1996
STOCK AND INCENTIVE PLAN

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    Plan
Effective:  January 1, 1996

    Revisions
Effective:  November 2, 2002

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    AT&T
INC.

    1996
STOCK AND INCENTIVE PLAN

    


    


    
      	
              Article
      1

            	
              Establishment and
      Purpose.

            


    

    


    
      	
               
      

            	
              1.1

            	
              Establishment of the
      Plan.  AT&T Inc., a Delaware corporation (the
      “Company” or “AT&T”), hereby establishes an incentive compensation
      plan (the “Plan”), as set forth in this document. No awards may be granted
      under this Plan on or after April 27,
2001.

            


    

    


    
      	
               
      

            	
              1.2

            	
              Purpose of the
      Plan.  The purpose of the Plan is to promote the success
      and enhance the value of the Company by linking the personal interests of
      Participants to those of the Company’s shareowners, and by providing
      Participants with an incentive for outstanding
  performance.

            


    

    


    The Plan
is further intended to attract and retain the services of Participants upon
whose judgment, interest, and special efforts the successful operation of
AT&T and its subsidiaries is dependent.

    


    
      	
               
      

            	
              1.3

            	
              Effective Date of the
      Plan.  The Plan shall become effective on January 1,
      1996; however, grants may be made before that time subject to becoming
      effective on or after that date.  During the first year this
      Plan is effective, Awards shall be issued only to the extent the potential
      payout of Shares shall not exceed 10% of the Shares approved for issuance
      under this Plan.

            


    

    


    
      	
              Article
      2

            	
              Definitions.

            


    

    


    Whenever
used in the Plan, the following terms shall have the meanings set forth below
and, when the meaning is intended, the initial letter of the word is
capitalized:

    


    (a)  “Award”
means, individually or collectively, a grant under this Plan of Nonqualified
Stock Options, Incentive Stock Options, Restricted Stock, Performance Units, or
Performance Shares.

    


    (b)  “Award
Agreement” means an agreement which may be entered into by each Participant and
the Company, setting forth the terms and provisions applicable to Awards granted
to Participants under this Plan.

    


    (c)  “Board”
or “Board of Directors” means the AT&T Board of Directors.

    


    (d)  “Cause” shall
mean willful and gross misconduct on the part of a Participant that is
materially and demonstrably detrimental to the Company or any Subsidiary as
determined by the Company in its sole discretion.

    


    (e)  “Change
in Control” shall be deemed to have occurred if (i) any “person” (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee
or other fiduciary holding securities under an employee benefit plan of the
Company or a corporation owned directly or indirectly by the shareowners of the
Company in substantially the same proportions as their ownership of stock of the
Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of the Company representing
twenty percent (20%) or more of the total voting power represented by the
Company's then outstanding voting securities, or (ii) during any period of two
(2) consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Company and any new Director whose
election by the Board of Directors or nomination for election by the Company's
shareowners was approved by a vote of at least two-thirds (2/3) of the Directors
then still in office who either were Directors at the beginning of the period or
whose election or nomination for election was previously so approved, cease for
any reason to constitute a majority thereof, or (iii) the shareowners of the
Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least eighty percent (80%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the shareowners of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets.

    


    (f) “Code”
means the Internal Revenue Code of 1986, as amended from time to
time.

    


    (g)  “Committee”
means the committee or committees, as specified in Article 3, appointed by the
Board to administer the Plan with respect to grants of Awards.

    


    (h) “Director”
means any individual who is a member of the AT&T Board of
Directors.

    


    (i)   “Disability”
shall mean absence of an Employee from work under the relevant Company or
Subsidiary disability plan.

    


    (j)   “Employee”
means any management employee of the Company or of one of the Company's
Subsidiaries.  “Employment” means the employment of an Employee by the
Company or one of its Subsidiaries.  Directors who are not otherwise
employed by the Company shall not be considered Employees under this
Plan.

    


    (k)  “Exchange
Act” means the Securities Exchange Act of 1934, as amended from time to time, or
any successor Act thereto.

    


    (l)   “Exercise
Price” means the price at which a Share may be purchased by a Participant
pursuant to an Option, as determined by the Committee.

    


    (m) 
“Fair Market Value” shall mean the closing price on the New York Stock
Exchange (“NYSE”) for Shares on the relevant date, or if such date was not a
trading day, the next preceding trading date, all as determined by the
Company.  A trading day is any day that the Shares are traded on the
NYSE.  In lieu of the foregoing, the Committee may select any other
index or measurement to determine the Fair Market Value of Shares under the
Plan.

    


    (n) 
“Incentive Stock Option” or “ISO” means an option to purchase Shares from
AT&T, granted under this Plan, which is designated as an Incentive Stock
Option and is intended to meet the requirements of Section 422 of the
Code.

    


    (o) 
“Insider” shall mean an Employee who is, on the relevant date, an officer,
director, or ten percent (10%) beneficial owner of the Company, as those terms
are defined under Section 16 of the Exchange Act.

    


    (p)  “Key
Executive Officer Short Term Award” means a Performance Unit expressed in
dollars.

    


    (q)  “Nonqualified
Stock Option” or “NQSO” means the option to purchase Shares from AT&T,
granted under this Plan, which is not intended to be an Incentive Stock
Option.

    


    (r)   “Option”
or “Stock Option” shall mean an Incentive Stock Option or a Nonqualified Stock
Option, and shall include a Restoration Option.

    


    (s)   “Participant”
shall mean an Employee or former Employee that participates in this
Plan.

    


    (t)    “Performance
Unit” and “Performance Share” shall each mean an Award granted to an Employee
pursuant to Article 8 herein.

    


    (u)   “Plan”
means this 1996 Stock and Incentive Plan.  The Plan may also be
referred to as the “AT&T 1996 Stock and Incentive Plan” or as the “AT&T
Inc. 1996 Stock and Incentive Plan.”

    


    (v)  
“Restricted Stock” means an Award of Stock granted to an Employee pursuant to
Article 7 herein.

    


    (w)  “Restriction
Period” means the period during which Shares of Restricted Stock are subject to
restrictions or conditions under Article 7.

    


    (x)   “Retirement”
or to “Retire” shall mean the termination of a Participant’s employment with the
Company or one of its Subsidiaries, for any reason other than death, Disability
or for Cause, on or after the earlier of the following dates, or as otherwise
provided by the Committee: (1) for Officer Level Employees (Participants deemed
officer level Employees for compensation purposes as indicated on the records of
AT&T), the date the Participant attains age 55 (individuals who become
Officer Level Employees on or after January 1, 2002, must also have five (5)
years of service); or (2) the date the Participant has attained one of the
following combinations of age and service at termination of employment on or
after April 1, 1997, except as otherwise indicated below:

    


    
      	
               
      

            	
              Net Credited
      Service

            	
              Age

            


    

    
      	
               
      

            	
              10
      Years of more

            	
              65
      or older

            


    

    
      	
               
      

            	
              20
      years or more

            	
              55
      or older

            


    

    
      	
               
      

            	
              25
      years or more

            	
              50
      or older

            


    

    
      	
               
      

            	
              30
      years or more

            	
              Any
      age

            


    

    


    With
respect to a Participant who is granted an EMP Service Pension under and
pursuant to the provisions of the AT&T Pension Benefit Plan – Nonbargained
Program upon termination of employment, the terms “Retirement” or to “Retire”
shall include such Participant’s termination of employment.

    


    
      Termination Under
EPR.  In determining whether an Eligible Employee’s termination
of employment under the Enhanced Pension and Retirement Program (“EPR”) is a
Retirement for purposes of this Plan, five years shall be added to each of age
and net credited service (“NCS”).  If with such additional age and
years of service, (1) an Eligible Employee upon such termination of employment
under EPR is Retirement Eligible according to the AT&T Supplemental
Retirement Income Plan (“SRIP”) or (2) the Eligible Employee upon such
termination of employment under EPR has attained one of the following
combinations of age and service,

    

    
       

      
        


        
          	
                   
      

                	
                  Actual NCS + 5
      Years

                	
                  Actual Age + 5 Years

                


        

        
          	
                   
      

                	
                  10
      Years of more

                	
                  65
      or older

                


        

        
          	
                   
      

                	
                  20
      years or more

                	
                  55
      or older

                


        

        
          	
                   
      

                	
                  25
      years or more

                	
                  50
      or older

                


        

        
          	
                   
      

                	
                  30
      years or more

                	
                  Any
      age

                


        

        
 

      

    

    then such
termination of employment shall be a Retirement for all purposes under this Plan
and the Eligible Employee shall be entitled to the treatment under this Plan
afforded in the case of a termination of employment which is a
Retirement.

    


    (y) “Rotational
Work Assignment Company (“RWAC”) shall mean any entity with which AT&T Inc.
or any of its Subsidiaries may enter into an agreement to provide an employee
for a rotational work assignment.

    


    (z)  “Shares”
or “Stock” means the shares of common stock of the Company.

    


    (aa)  “Subsidiary”
shall mean any corporation in which the Company owns directly, or indirectly
through subsidiaries, more than fifty percent (50%) of the total combined voting
power of all classes of Stock, or any other entity (including, but not limited
to, partnerships and joint ventures) in which the Company owns more than fifty
percent (50%) of the combined equity thereof.

    


    (bb) “Window
Period” means the period beginning on the third business day following the date
of public release of the Company's quarterly sales and earnings information, and
ending on the twelfth business day following such date.

    


    
      	
              Article
      3

            	
              Administration.

            


    

    


    
      	
               
      

            	
              3.1

            	
              The
      Committee.  Administration of the Plan shall be
      bifurcated as follows:

            


    

    


    (a)  With
respect to Insiders, the Plan and all Awards hereunder shall be administered
only by the Human Resources Committee of the Board or such other Committee as
may be appointed by the Board for this purpose (the “Disinterested Committee”),
where each Director on such Disinterested Committee is a “Disinterested Person”
(or any successor designation for determining who may administer plans,
transactions or awards exempt under Section 16(b) of the Exchange Act), as that
term is used in Rule 16b-3 under the Exchange Act, as that rule may be modified
from time to time.

    


    (b) 
The Disinterested Committee and such other Committee as the Board may create, if
any, specifically to administer the Plan with respect to non-Insiders (the
“Non-Insider Committee”) shall each have full authority to administer the Plan
and all Awards hereunder with respect to all persons who are not Insiders,
except as otherwise provided herein or by the Board.  Either Committee
may be replaced by the Board at any time.

    


    
      	
                    
      3.2  

            	
              Authority of the
      Committee. The Committee shall have full power, except as
      limited by law and subject to the provisions herein, in its sole and
      exclusive discretion: to grant Awards; to select the recipients of Awards;
      to determine the eligibility of a person to participate in the Plan or to
      receive a particular Award; to determine the sizes and types of Awards; to
      determine the terms and conditions of such Awards in a manner consistent
      with the Plan; to construe and interpret the Plan and any agreement or
      instrument entered into under the Plan; to establish, amend, or waive
      rules and regulations for the Plan's administration; and (subject to the
      provisions of Article 13 herein) to amend the terms and conditions of any
      outstanding Award to the extent such terms and conditions are within the
      discretion of the Committee as provided in the Plan.  Further,
      the Committee shall make all other determinations in its discretion which
      may be necessary or advisable for the administration of the
      Plan.

            


    

    


    References
to determinations or other actions by the Company, herein, shall mean actions
authorized by the Committee, the Chairman of the Board of the Company, the
Senior Executive Vice President of the Company in charge of Human Resources or
their respective successors or duly authorized delegates, in each case in the
discretion of such person.

    


    All
determinations and decisions made by the Company pursuant to the provisions of
the Plan, and all related orders and resolutions of the Board shall be final,
conclusive, and binding on all persons, including the Company, its stockholders,
Employees, Participants, and their estates and beneficiaries.

    


    
      	
              Article
      4

            	
              Shares Subject to the
      Plan.

            


    

    


    
      	
               
      

            	
              4.1

            	
              Number of
      Shares.  Subject to adjustment as provided in Section 4.3
      herein, the number of Shares available for grant under the Plan shall not
      exceed 60 million Shares of Stock.  No more than 10% of the
      Shares approved for issuance under this Plan may be Shares of Restricted
      Stock.  No more than 40% of the Shares approved for issuance
      under this Plan may be issued to Participants as a result of Performance
      Share or Restricted Stock Awards.  The Shares granted under this
      Plan may be either authorized but unissued or reacquired
      Shares.  The Disinterested Committee shall have full discretion
      to determine the manner in which Shares available for grant are counted in
      this Plan.

            


    

    


    Without
limiting the discretion of the Committee under this section, unless otherwise
provided by the Committee, the following rules will apply for purposes of the
determination of the number of Shares available for grant under the Plan or
compliance with the foregoing limits:

    


    (a)  The
grant of a Stock Option or a Restricted Stock Award shall reduce the Shares
available for grant under the Plan by the number of Shares subject to such
Award.  However, to the extent the Participant uses previously owned
Shares to pay the Exercise Price or any taxes, or Shares are withheld to pay
taxes, these Shares shall be available for regrant under the Plan.

    


    (b)  With
respect to Performance Shares, the number of Performance Shares granted under
the Plan shall be deducted from the number of Shares available for grant under
the Plan. The number of Performance Shares which cannot be, or are not,
converted into Shares and distributed (including deferrals) to the Participant
(after any applicable tax withholding) following the end of the Performance
Period shall increase the number of Shares available for regrant under the Plan
by an equal amount.

    


    (c) With
respect to Performance Units representing a fixed dollar amount that may only be
settled in cash, the Performance Units Award shall not affect the number of
Shares available under the Plan.

    


    
      	
               
      

            	
              4.2

            	
              Lapsed
      Awards.  If any Award granted under this Plan is
      canceled, terminates, expires, or lapses for any reason, Shares subject to
      such Award shall be again available for the grant of an Award under the
      Plan.

            


    

    


    
      	
               
      

            	
              4.3

            	
              Adjustments in
      Authorized Plan Shares.  In the event of any merger,
      reorganization, consolidation, recapitalization, separation, liquidation,
      Stock dividend, split-up, Share combination, or other change in the
      corporate structure of the Company affecting the Shares, an adjustment
      shall be made in the number and class of Shares which may be delivered
      under the Plan (including individual limits), and in the number and class
      of and/or price of Shares subject to outstanding Awards granted under the
      Plan, and/or the number of outstanding Options, Shares of Restricted
      Stock, and Performance Shares constituting outstanding Awards, as may be
      determined to be appropriate and equitable by the Committee, in its sole
      discretion, to prevent dilution or enlargement of
  rights.

            


    

    


    
      	
              Article
      5

            	
              Eligibility and
      Participation.

            


    

    


    
      	
               
      

            	
              5.1

            	
              Eligibility.  All
      management Employees are eligible to participate in this
    Plan.

            


    

    


    
      	
               
      

            	
              5.2

            	
              Actual
      Participation.  Subject to the provisions of the Plan,
      the Committee may, from time to time, select from all eligible Employees,
      those to whom Awards shall be granted and shall determine the nature and
      amount of each Award.  No Employee is entitled to receive an
      Award unless selected by the
Committee.

            


    

    


    
      	
              Article
      6

            	
              Stock
      Options.

            


    

    


    
      	
               
      

            	
              6.1

            	
              Grant of
      Options.  Subject to the terms and provisions of the
      Plan, Options may be granted to Employees at any time and from time to
      time, and under such terms and conditions, as shall be determined by the
      Committee.  In addition, the Committee may, from time to time,
      provide for the payment of dividend equivalents on Options, prospectively
      and/or retroactively, on such terms and conditions as the Committee may
      require.  The Committee shall have discretion in determining the
      number of Shares subject to Options granted to each Employee; provided,
      however, that the maximum number of Shares subject to Options which may be
      granted to any single Employee during any calendar year shall not exceed
      2% of the Shares approved for issuance under this Plan.  The
      Committee may grant ISOs, NQSOs, or a combination thereof; provided,
      however, that no ISO may be issued after January 1,
      2006.   The Committee may authorize the automatic grant of
      additional Options (“Restoration Options”) when a Participant exercises
      already outstanding Options, or options granted under a prior option plan
      of the Company, on such terms and conditions as it shall
      determine.  Unless otherwise provided by the Committee, the
      number of Restoration Options granted to a Participant with respect to the
      exercise of an option (including an Option under this Plan) shall not
      exceed the number of Shares delivered by the Participant in payment of the
      Exercise Price of such option, and/or in payment of any tax withholding
      resulting from such exercise, and any Shares which are withheld to satisfy
      withholding tax liability arising out of such exercise.  A
      Restoration Option shall have an Exercise Price of not less than 100% of
      the per Share Fair Market Value on the date of grant of such Restoration
      Option, and shall be subject to all the terms and conditions of the
      original grant, including the expiration date, and such other terms and
      conditions as the Committee in its sole discretion shall
      determine.

            


    

    


    
      	
               
      

            	
              6.2

            	
              Form of
      Issuance.  Each Option grant may be issued in the form of
      an Award Agreement and/or may be recorded on the books and records of the
      Company for the account of the Participant. If an Option is not issued in
      the form of an Award Agreement, then the Option shall be deemed granted as
      determined by the Committee.  The terms and conditions of an
      Option shall be set forth in the Award Agreement, in the notice of the
      issuance of the grant, or in such other documents as the Committee shall
      determine.  Such terms and conditions shall include the Exercise
      Price, the duration of the Option, the number of Shares to which an Option
      pertains (unless otherwise provided by the Committee, each Option may be
      exercised to purchase one Share), and such other provisions as the
      Committee shall determine, including, but not limited to whether the
      Option is intended to be an ISO or a
NQSO.

            


    

    


    
      	
               
      

            	
              6.3

            	
              Exercise
      Price.  Unless a greater Exercise Price is determined by
      the Committee, the Exercise Price for each Option Awarded under this Plan
      shall be equal to one hundred percent (100%) of the Fair Market Value of a
      Share on the date the Option is
granted.

            


    

    


    
      	
               
      

            	
              6.4

            	
              Duration of
      Options.  Each Option shall expire at such time as the
      Committee shall determine at the time of grant (which duration may be
      extended by the Committee); provided, however, that no Option shall be
      exercisable later than the tenth (10th) anniversary date of its
      grant.

            


    

    


    
      	
               
      

            	
              6.5

            	
              Vesting of
      Options.  Options shall vest at such times and under such
      terms and conditions as determined by the Committee; provided, however,
      unless a later vesting period is provided by the Committee at or before
      the grant of an Option, one-third of the Options will vest on each of the
      first three anniversaries of the grant; if one Option remains after
      equally dividing the grant by three, it will vest on the first anniversary
      of the grant, if two Options remain, then one will vest on each of the
      first two anniversaries.  The Committee shall have the right to
      accelerate the vesting of any Option; however, the Chairman of the Board
      or the Senior Vice President-Human Resources, or their respective
      successors, or such other persons designated by the Committee, shall have
      the authority to accelerate the vesting of Options for any Participant who
      is not an Insider.

            


    

    


    
      	
               
      

            	
              6.6

            	
              Exercise of
      Options. Options granted under the Plan shall be exercisable at
      such times and be subject to such restrictions and conditions as the
      Committee or the Board shall in each instance approve, which need not be
      the same for each grant or for each Participant. Exercises of Options may
      be effected only on days and during the hours that the New York Stock
      Exchange is open for regular trading.  The Company may further
      change or limit the times or days Options may be exercised.  If
      an Option expires on a day or at a time when exercises are not permitted,
      then the Options may be exercised no later than the immediately preceding
      date and time that the Options were
exercisable.

            


    

    


    Options
shall be exercised by providing notice to the designated agent selected by the
Company (if no such agent has been designated, then to the Company), in the
manner and form determined by the Company, which notice shall be irrevocable,
setting forth the exact number of Shares with respect to which the Option is
being exercised and including with such notice payment of the Exercise
Price.  When Options have been transferred, the Company or its
designated agent may require appropriate documentation that the person or
persons exercising the Option, if other than the Participant, has the right to
exercise the Option.   No Option may be exercised with respect to
a fraction of a Share.

    


    
      	
               
      

            	
              6.7

            	
              Payment.  The
      Exercise Price shall be paid in full at the time of
      exercise.  No Shares shall be issued or transferred until full
      payment has been received therefor.

            


    

    


    Payment
may be made:

    


    (a) in
cash, or

    


    (b) unless
otherwise provided by the Committee at any time, and subject to such additional
terms and conditions and/or modifications as the Committee or the Company may
impose from time to time, and further subject to suspension or termination of
this provision by the Committee or Company at any time, by:

    


    (i)                 delivery
of Shares of Stock owned by the Participant in partial (if in partial payment,
then together with cash) or full payment; provided, however, as a condition to
paying any part of the Exercise Price in Stock, at the time of exercise of the
Option, the Participant must establish to the satisfaction of the Company that
the Stock tendered to the Company must have been held by the Participant for a
minimum of six (6) months preceding the tender; or

    


    (ii)                 if
the Company has designated a stockbroker to act as the Company’s agent to
process Option exercises, issuance of an exercise notice together with
instructions to such stockbroker irrevocably instructing the
stockbroker:  (A) to immediately sell (which shall include an exercise
notice that becomes effective upon execution of a sell order) a sufficient
portion of the Shares to pay the Exercise Price of the Options being exercised
and the required tax withholding, and (B) to deliver on the settlement date the
portion of the proceeds of the sale equal to the Exercise Price and tax
withholding to the Company.  In the event the stockbroker sells any
Shares on behalf of a Participant, the stockbroker shall be acting solely as the
agent of the Participant, and the Company disclaims any responsibility for the
actions of the stockbroker in making any such sales.  No Stock shall
be issued until the settlement date and until the proceeds (equal to the Option
Price and tax withholding) are paid to the Company.

    


    If
payment is made by the delivery of Shares of Stock, the value of the Shares
delivered shall be equal to the Fair Market Value of the Shares on the day
preceding the date of exercise of the Option.

    


    Restricted
Stock may not be used to pay the Option Price.

    


    
      	
               
      

            	
              6.8

            	
              Termination of
      Employment.

            


    

    


    Unless
otherwise provided by the Committee, the following limitations on exercise of
Options shall apply upon termination of Employment:

    


    (a)  Termination by Death or
Disability.  In the event the Employment of a Participant shall
terminate by reason of death or Disability, all outstanding Options granted to
that Participant shall immediately vest as of the date of termination of
Employment and may be exercised, if at all, no more than three (3) years from
the date of the termination of Employment, unless the Options, by their terms,
expire earlier.  However, in the event the Participant was eligible to
Retire at the time of termination of Employment, notwithstanding the foregoing,
the Options may be exercised, if at all, no more than five (5) years from the
date of the termination of Employment, unless the Options, by their terms,
expire earlier.

    


    (b)  Termination for
Cause.  If the Employment of a Participant shall be terminated
by the Company for Cause, all outstanding Options held by the Participant shall
immediately be forfeited to the Company and no additional exercise period shall
be allowed, regardless of the vested status of the Options.

    


    (c)  Retirement or Other
Termination of Employment.  If the Employment of a Participant
shall terminate for any reason other than the reasons set forth in (a) or (b),
above:

    


    (i)         
If upon the Participant's termination of Employment, the Participant is not an
EPR Terminee (as that term is defined in the AT&T Pension Benefit Plan or
the Ameritech Management Pension Plan), but is eligible to Retire (and if the
Participant is an officer level employee for compensation purposes as determined
by AT&T, the employee must also be age 55 or older at termination of
Employment), then all outstanding unvested Options granted to that Participant
shall immediately vest as of the date of the Participant's termination of
Employment; provided, however, this vesting provision shall not apply to an
Option granted prior to September 28, 2001, unless and except for those Options
outstanding as of September 27, 2001, that have an Exercise Price equal to or
more than the Fair Market Value of Stock on such date;

    


    (ii)         
All outstanding Options which are vested as of the effective date of termination
of Employment may be exercised, if at all, no more than five (5) years from the
date of termination of Employment if the Participant is eligible to Retire, or
one (1) year from the date of the termination of Employment if the Participant
is not eligible to Retire, as the case may be, unless in either case the
Options, by their terms, expire earlier; and

    


    (iii)                   
In the event of the death of the Participant after termination of Employment,
this paragraph (c) shall still apply and not paragraph (a), above.

    


    (d)   Options not Vested at
Termination.  Except as provided in paragraph (a), above, all
Options held by the Participant which are not vested on or before the effective
date of termination of Employment shall immediately be forfeited to the Company
(and shall once again become available for grant under the Plan).

    


    (e)   Notwithstanding
the foregoing, the Committee may, in its sole discretion, establish different
terms and conditions pertaining to the effect of termination of Employment, but
no such modification shall shorten the terms of Options issued prior to such
modification.

    


    
      	
               
      

            	
              6.9

            	
              Employee
      Transfers.  For purposes of the Plan, transfer of
      employment of a Participant between the Company and any one of its
      Subsidiaries (or between Subsidiaries) or between the Company or a
      Subsidiary and a RWAC, to the extent the period of employment at a RWAC is
      equal to or less than five (5) years, shall not be deemed a termination of
      Employment.  Provided, however, for purposes of this Article 6,
      termination of employment with a RWAC without a concurrent transfer to the
      Company or any of its Subsidiaries shall be deemed a termination of
      Employment as that term is used herein.  Similarly, termination
      of an entity’s status as a Subsidiary or as a RWAC shall be deemed a
      termination of Employment of any Participants employed by such Subsidiary
      or RWAC.

            


    

    


    
      	
               
      

            	
              6.10

            	
              Restrictions on
      Exercise and Transfer of Options.  Unless otherwise
      provided by the Committee:

            


    

    


    (a)  During
the Participant’s lifetime, the Participant’s Options shall be exercisable only
by the Participant or by the Participant’s guardian or legal
representative.  After the death of the Participant, except as
otherwise provided by AT&T’s Rules for Employee Beneficiary Designations, as
the same may be amended from time to time, an Option shall only be exercised by
the holder thereof (including, but not limited to, an executor or administrator
of a decedent’s estate) or his or her guardian or legal
representative.

    


    (b)  No
Option shall be transferable except: (a) in the case of the Participant, only
upon the Participant’s death and in accordance with the Company's Rules for
Employee Beneficiary Designations, as the same may be amended from time to time;
and (b) in the case of any holder after the Participant’s death, only by will or
by the laws of descent and distribution.

    


    
      	
                     
      6.11  

            	
              Competition and
      Solicitation.  In the event a Participant directly or
      indirectly, engages in competitive activity, or has become associated
      with, employed by, controls, or renders service to any business that is
      engaged in competitive activity, with (i) the Company, (ii) any
      Subsidiary, or (iii) any business in which any of the foregoing have a
      substantial interest, or if the Participant attempts, directly or
      indirectly, to induce any employee of the Company or a Subsidiary to be
      employed or perform services elsewhere without the permission of the
      Company, then the Company may (i) cancel any Option granted to such
      Participant, whether or not vested, in whole or in part; and/or (ii)
      rescind any exercise of the Participant’s Options that occurred on or
      after that date six months prior to engaging in such activity, in which
      case the Participant shall pay the Company the gain realized or received
      upon such exercise of Options.  “Has become associated with”
      shall include, among other things, beneficial ownership of 1/10 of 1% or
      more of a business engaged in competitive activity.  The
      determination of whether a Participant has engaged in any such activity
      and whether to cancel Options and/or rescind the exercise of Options may
      be made by the Committee, the Senior Executive Vice President of the
      Company in charge of Human Resources or such person’s successor, or the
      delegate of or a committee appointed by any of the foregoing, and in each
      case such determination shall be final, conclusive and binding on all
      persons.

            


    

    


    
      	
              Article
      7

            	
              Restricted
      Stock.

            


    

    


    
      	
               
      

            	
              7.1

            	
              Grant of Restricted
      Stock.  Subject to the terms and provisions of the Plan,
      the Committee, at any time and from time to time, may grant Shares of
      Restricted Stock to eligible Employees in such amounts and upon such terms
      and conditions as the Committee shall determine.  In addition to
      any other terms and conditions imposed by the Committee, vesting of
      Restricted Stock may be conditioned upon the attainment of Performance
      Goals based on Performance Criteria in the same manner as provided in
      Section 8.4, herein, with respect to Performance Shares.  No
      Employee may receive, in any calendar year, in the form of Restricted
      Stock more than one-third of 1% of the Shares approved for issuance under
      this Plan.

            


    

    


    
      	
               
      

            	
              7.2

            	
              Restricted Stock
      Agreement.  The Committee may require, as a condition to
      an Award, that a recipient of a Restricted Stock Award enter into a
      Restricted Stock Award Agreement, setting forth the terms and conditions
      of the Award.  In lieu of a Restricted Stock Award Agreement,
      the Committee may provide the terms and conditions of an Award in a notice
      to the Participant of the Award, on the Stock certificate representing the
      Restricted Stock, in the resolution approving the Award, or in such other
      manner as it deems appropriate.

            


    

    


    
      	
               
      

            	
              7.3

            	
              Transferability.  Except
      as otherwise provided in this Article 7, the Shares of Restricted Stock
      granted herein may not be sold, transferred, pledged, assigned, or
      otherwise alienated or hypothecated until the end of the applicable
      Restriction Period established by the Committee, which shall not be less
      than a period of three years.

            


    

    


    
      	
               
      

            	
              7.4

            	
              Other
      Restrictions.  The Committee shall impose such other
      conditions and/or restrictions on any Shares of Restricted Stock granted
      pursuant to the Plan as it may deem advisable including, without
      limitation, a requirement that Participants pay a stipulated purchase
      price for each Share of Restricted Stock and/or restrictions under
      applicable Federal or state securities laws; and may legend the
      certificates representing Restricted Stock to give appropriate notice of
      such restrictions.

            


    

    


    The
Company shall also have the right to retain the certificates representing Shares
of Restricted Stock in the Company's possession until such time as all
conditions and/or restrictions applicable to such Shares have been
satisfied.

    


    
      	
               
      

            	
              7.5

            	
              Removal of
      Restrictions.  Except as otherwise provided in this
      Article 7, Shares of Restricted Stock covered by each Restricted Stock
      grant made under the Plan shall become freely transferable by the
      Participant after the last day of the Restriction Period and completion of
      all conditions to vesting, if any.  However, unless otherwise
      provided by the Committee, the Committee, in its sole discretion, shall
      have the right to immediately waive all or part of the restrictions and
      conditions with regard to all or part of the Shares held by any
      Participant at any time.

            


    

    


    
      	
               
      

            	
              7.6

            	
              Voting Rights,
      Dividends and Other Distributions.  During the
      Restriction Period, Participants holding Shares of Restricted Stock
      granted hereunder may exercise full voting rights and shall receive all
      regular cash dividends paid with respect to such Shares.  Except
      as provided in the following sentence, in the sole discretion of the
      Committee, other cash dividends and other distributions paid to
      Participants with respect to Shares of Restricted Stock may be subject to
      the same restrictions and conditions as the Shares of Restricted Stock
      with respect to which they were paid.  If any such dividends or
      distributions are paid in Shares, the Shares shall be subject to the same
      restrictions and conditions as the Shares of Restricted Stock with respect
      to which they were paid.

            


    

    


    
      	
               
      

            	
              7.7

            	
              Termination of
      Employment Due to Death or Disability.  In the event the
      Employment of a Participant shall terminate by reason of death or
      Disability, all Restriction Periods and all restrictions imposed on
      outstanding Shares of Restricted Stock held by the Participant shall
      immediately lapse and the Restricted Stock shall immediately become fully
      vested as of the date of termination of
  Employment.

            


    

    


    
      	
               
      

            	
              7.8

            	
              Termination of
      Employment for Other Reasons.  If the Employment of a
      Participant shall terminate for any reason other than those specifically
      set forth in Section 7.7 herein, all Shares of Restricted Stock held by
      the Participant which are not vested as of the effective date of
      termination of Employment immediately shall be forfeited and returned to
      the Company.

            


    

    
      	
               
      

            	 


    

    
      	
               
      

            	
              7.9

            	
              Employee
      Transfers.  For purposes of the Plan, transfer of
      employment of a Participant between the Company and any one of its
      Subsidiaries (or between Subsidiaries) or between the Company or a
      Subsidiary and a RWAC, to the extent the period of employment at a RWAC is
      equal to or less than five (5) years, shall not be deemed a termination of
      Employment.  Provided, however, for purposes of this Article,
      termination of employment with a RWAC without a concurrent transfer to the
      Company or any of its Subsidiaries shall be deemed a termination of
      Employment as that term is used herein.  Similarly, termination
      of an entity’s status as a Subsidiary or as a RWAC shall be deemed a
      termination of Employment of any Participants employed by such Subsidiary
      or RWAC.

            


    

    


    
      	
               
      

            	
              7.10

            	
              Other
      Grants.  Subject to the terms and provisions of the Plan,
      the Committee, at any time and from time to time, may make grants of cash
      or other property to eligible Employees in such amounts and upon such
      terms and conditions as the Committee shall determine.  If the
      grant is in the form of stock or shares in a company other than AT&T,
      the award shall be subject to tax withholding in accordance with Article
      14, hereof, in the same manner as
Stock.

            


    

    


    
      	
              Article
      8

            	
              Performance Units and
      Performance Shares.

            


    

    


    
      	
               
      

            	
              8.1

            	
              Grants of Performance
      Units and Performance Shares.  Subject to the terms of
      the Plan, Performance Shares and Performance Units may be granted to
      eligible Employees at any time and from time to time, as determined by the
      Committee.  The Committee shall have complete discretion in
      determining the number of Performance Units and/or Performance Shares
      Awarded to each Participant.

            


    

    


    


    
      	
               
      

            	
              8.2

            	
              Value of Performance
      Shares and Units.

            


    

    


    (a) A
Performance Share is equivalent in value to a Share of Stock.  In any
calendar year, no individual may be Awarded Performance Shares having a
potential payout of Shares of Stock exceeding two-thirds of 1% of the Shares
approved for issuance under this Plan.

    


    (b) A
Performance Unit shall be equal in value to a fixed dollar amount determined by
the Committee.  In any calendar year, no individual may be Awarded
Performance Units having a potential payout equivalent exceeding the Fair Market
Value of two-thirds of 1% of the Shares approved for issuance under this
Plan.  The number of Shares equivalent to the potential payout of a
Performance Unit shall be determined by dividing the maximum cash payout of the
Award by the Fair Market Value per Share on the effective date of the
grant.  In the event the Committee denominates a Performance Unit
Award in dollars instead of Performance Units, the Award may be referred to as a
Key Executive Officer Short Term Award.  In all other respects, the
Key Executive Officer Short Term Award will be treated in the same manner as
Performance Units under this Plan.

    


    
      	
               
      

            	
              8.3

            	
              Performance
      Period.  The Performance Period for Performance Shares
      and Performance Units is the period over which the Performance Goals are
      measured.  The Performance Period is set by the Committee for
      each Award; however, in no event shall an Award have a Performance Period
      of less than one year.

            


    

    


    
      	
               
      

            	
              8.4

            	
              Performance
      Goals.  For each Award of Performance Shares or
      Performance Units, the Committee shall establish performance objectives
      (“Performance Goals”) for the Company, its Subsidiaries, and/or divisions
      of any of foregoing, based on the Performance Criteria and other factors
      set forth in (a) through (d), below.  Performance Goals shall
      include payout tables, formulas or other standards to be used in
      determining the extent to which the Performance Goals are met, and, if
      met, the number of Performance Shares and/or Performance Units which would
      be converted into Stock and/or cash (or the rate of such conversion) and
      distributed to Participants in accordance with
      Section 8.6.  All Performance Shares and Performance Units
      which may not be converted under the Performance Goals or which are
      reduced by the Committee under Section 8.6 or which may not be converted
      for any other reason after the end of the Performance Period shall be
      canceled at the time they would otherwise be
      distributable.  When the Committee desires an Award to qualify
      under Section 162(m) of the Code, as amended, the Committee shall
      establish the Performance Goals for the respective Performance Shares and
      Performance Units prior to or within 90 days of the beginning of the
      service relating to such Performance Goal, and not later than after 25% of
      such period of service has elapsed.  For all other Awards, the
      Performance Goals must be established before the end of the respective
      Performance Period.

            


    

    


    (a)  The
Performance Criteria which the Committee is authorized to use, in its sole
discretion, are any of the following criteria or any combination
thereof:

    


    (1)                  Financial
performance of the Company (on a consolidated basis), of one or more of its
Subsidiaries, and/or a division of any of the foregoing.  Such
financial performance may be based on net income and/or Value Added (after-tax
cash operating profit less depreciation and less a capital charge).

    


    (2)                  Service
performance of the Company (on a consolidated basis), of one or more of its
Subsidiaries, and/or of a division of any of the foregoing.  Such
service performance may be based upon measured customer perceptions of service
quality.

    


    (3)                  The
Company’s Stock price; return on shareholders’ equity; total shareholder return
(Stock price appreciation plus dividends, assuming the reinvestment of
dividends); and/or earnings per share.

    


    (4)                  With
respect to the Company (on a consolidated basis), to one or more of its
Subsidiaries, and/or to a division of any of the foregoing: sales; costs; market
share of a product or service; return on net assets; return on assets; return on
capital; profit margin; and/or operating revenues, expenses or
earnings.

    


    (b)   If
the performance of more than one Subsidiary is being measured to determine the
attainment of performance goals, then a weighted average of the Subsidiaries’
results shall be used, as determined by the Committee, including, but not
limited to, basing such weighting upon the revenues, assets or net income for
each Subsidiary for any year prior to the Performance Period or by using budgets
to weight such Subsidiaries.

    


    (c)   Except
to the extent otherwise provided by the Committee in full or in part, if any of
the following events occur during a Performance Period and would directly affect
the determination of whether or the extent to which Performance Goals are met,
they shall be disregarded in any such computation: changes in accounting
principles; extraordinary items; changes in tax laws affecting net income and/or
Value Added; natural disasters, including floods, hurricanes, and earthquakes;
and intentionally inflicted damage to property which directly or indirectly
damages the property of the Company or its Subsidiaries.  No such
adjustment shall be made to the extent such adjustment would cause the
Performance Shares or Performance Units to fail to satisfy the performance based
exemption of Section 162(m) of the Code.

    


    
      	
               
      

            	
              8.5

            	
              Dividend Equivalents
      on Performance Shares.  Unless reduced or eliminated by
      the Committee, a cash payment in an amount equal to the dividend payable
      on one Share will be made to each Participant for each Performance Share
      which on the record date for the dividend had been awarded to the
      Participant and not converted, distributed (or deferred) or
      canceled.

            


    

    


    
      	
               
      

            	
              8.6

            	
              Form and Timing of
      Payment of Performance Units and Performance Shares.  As
      soon as practicable after the applicable Performance Period has ended and
      all other conditions (other than Committee actions) to conversion and
      distribution of a Performance Share and/or Performance Unit Award have
      been satisfied (or, if applicable, at such other time determined by the
      Committee at or before the establishment of the Performance Goals for such
      Performance Period), the Committee shall determine whether and the extent
      to which the Performance Goals were met for the applicable Performance
      Units and Performance Shares.  If Performance Goals have been
      met, then the number of Performance Units and Performance Shares to be
      converted into Stock and/or cash and distributed to the Participants shall
      be determined in accordance with the Performance Goals for such Awards,
      subject to any limits imposed by the Committee.  Unless the
      Participant has elected to defer all or part of his Performance Units or
      Performance Shares as provided in Article 10, herein, payment of
      Performance Units and Performance Shares shall be made in a single lump
      sum, as soon as reasonably administratively possible following the
      determination of the number of Shares or amount of cash to which the
      Participant is entitled.  Performance Units will be distributed
      to Participants in the form of cash.  Performance Shares will be
      distributed to Participants in the form of 50% Stock and 50% Cash, or at
      the Participant’s election, 100% Stock or 100% Cash.  In the
      event the Participant is no longer an Employee at the time of the
      distribution, then the distribution shall be 100% in cash, provided the
      Participant may elect to take 50% or 100% in Stock.  At any time
      prior to the distribution of the Performance Shares and/or Performance
      Units (or if distribution has been deferred, then prior to the time the
      Awards would have been distributed), unless otherwise provided by the
      Committee, the Committee shall have the authority to reduce or eliminate
      the number of Performance Units or Performance Shares to be converted and
      distributed or to mandate the form in which the Award shall be paid (i.e.,
      in cash, in Stock or both, in any proportions determined by the
      Committee).

            


    

    


    Unless
otherwise provided by the Committee, any election to take a greater amount of
cash or Stock with respect to Performance Shares must be made in the calendar
year prior to the calendar year in which the Performance Shares are distributed
(or if distribution has been deferred, then in the year prior to the year the
Performance Shares would have been distributed absent such
deferral).  In addition, if required in order to exempt the
transaction from the provisions of Section 16(b) of the Exchange Act, any
election by an Insider to take a greater amount in cash must be made during a
Window Period and shall be subject to Committee approval.

    


    For the
purpose of converting Performance Shares into cash and distributing the same to
the holders thereof (or for determining the amount of cash to be deferred), the
value of a Performance Share shall be the Fair Market Value of a Share on the
date the Committee authorizes the payout of Awards.  Performance
Shares to be distributed in the form of Stock will be converted at the rate of
one (1) Share of Stock per Performance Share.

    


    
      	
               
      

            	
              8.7

            	
              Termination of
      Employment Due to Death, Disability, or Retirement.  If
      the Employment of a Participant shall terminate by reason of death or
      Disability, the Participant shall receive a lump sum payout of all
      outstanding Performance Units and Performance Shares calculated as if all
      unfinished Performance Periods had ended with 100% of the Performance
      Goals achieved, payable in the year following the date of termination of
      Employment.  In the event of Retirement, the full Performance
      Units and Performance Shares shall be converted and distributed based on
      and subject to the achievement of the Performance Goals and in accordance
      with all other terms of the Award and this
Plan.

            


    

    


    
      	
               
      

            	
              8.8

            	
              Termination of
      Employment for Other Reasons.  If the Employment of a
      Participant shall terminate for other than a reason set forth in Section
      8.7 (and other than for Cause), the number of Performance Units and
      Performance Shares to be converted and distributed shall be converted and
      distributed based upon the achievement of the Performance Goals and in
      accordance with all other terms of the Award and the Plan; however, the
      Participant may receive no more than a prorated payout of all Performance
      Units and Performance Shares, based on the portions of the respective
      Performance Periods that have been
completed.

            


    

    


    
      	
               
      

            	
              8.9

            	
              Termination of
      Employment for Cause.  In the event that a Participant's
      Employment shall be terminated by the Company for Cause, all Performance
      Units and Performance Shares shall be forfeited by the Participant to the
      Company.

            


    

    


    
      	
               
      

            	
              8.10

            	
              Nontransferability.  Performance
      Units and Performance Shares may not be sold, transferred, pledged,
      assigned, or otherwise alienated or hypothecated, other than in accordance
      with the AT&T Rules for Employee Beneficiary
    Designations.

            


    

    
      	
               
      

            	 


    

    
      	
              Article
      9

            	
              Beneficiary
      Designation.  In the event of the death of a Participant,
      distributions or Awards under this Plan, other than Restricted Stock,
      shall pass in accordance with the AT&T Rules for Employee Beneficiary
      Designations, as the same may be amended from time to
  time.

            


    

    


    
      	
              Article
      10

            	
              Deferrals. Unless
      otherwise provided by the Committee, a Participant may, as permitted by
      the Stock Savings Plan or the Salary and Incentive Award Deferral Plan,
      defer all or part of awards made under this Plan in accordance with and
      subject to the terms of such plans.

            


    

    


    
      	
              Article
      11.

            	
              Employee
      Matters.

            


    

    


    
      	
               
      

            	
              11.1

            	
              Employment Not
      Guaranteed.  Nothing in the Plan shall interfere with or
      limit in any way the right of the Company or any Subsidiary to terminate
      any Participant's Employment at any time, nor confer upon any Participant
      any right to continue in the employ of the Company or one of its
      Subsidiaries.

            


    

    


    
      	
               
      

            	
              11.2

            	
              Participation.  No
      Employee shall have the right to be selected to receive an Award under
      this Plan, or, having been so selected, to be selected to receive a future
      Award.

            


    

    


    
      	
              Article
      12

            	
              Change in
      Control.

            


    

    


    Upon the
occurrence of a Change in Control:

    


    (a) Any
and all Options granted hereunder immediately shall become vested and
exercisable;

    


    (b) Any
Restriction Periods and all restrictions imposed on Restricted Shares shall
lapse and they shall immediately become fully vested;

    


    (c) The
100% Performance Goal for all Performance Units and Performance Shares relating
to incomplete Performance Periods shall be deemed to have been fully achieved
and shall be converted and distributed in accordance with all other terms of the
Award and this Plan; provided, however, notwithstanding anything to the contrary
in this Plan, no outstanding Performance Unit or Performance Share may be
reduced.

    


    
      	
              Article
      13.

            	
              Amendment,
      Modification, and
Termination.

            


    

    


    
      	
               
      

            	
              13.1

            	
              Amendment,
      Modification, and Termination.  The Board may at any time
      suspend or terminate the Plan in whole or in part; the Disinterested
      Committee may at any time and from time to time, alter or amend the Plan
      in whole or in part.

            


    

    


    
      	
               
      

            	
              13.2

            	
              Awards Previously
      Granted.  No termination, amendment, or modification of
      the Plan shall adversely affect in any material way any Award previously
      granted under the Plan, without the written consent of the Participant
      holding such Award.

            


    

    


    
      	
              Article
      14

            	
              Withholding.

            


    

    


    
      	
               
      

            	
              14.1

            	
              Tax
      Withholding.  The Company shall deduct or withhold an
      amount sufficient to satisfy Federal, state, and local taxes (including
      the Participant's employment tax obligations) required by law to be
      withheld with respect to any taxable event arising or as a result of this
      Plan (“Withholding Taxes”).

            


    

    


    
      	
                     
      14.2  

            	
              Share
      Withholding.  Upon the exercise of Options, the lapse of
      restrictions on Restricted Stock, the distribution of Performance Shares
      in the form of Stock, or any other taxable event hereunder involving the
      transfer of Stock to a Participant, the Company shall withhold Stock equal
      in value, using the Fair Market Value on the date determined by the
      Company to be used to value the Stock for tax purposes, to the Withholding
      Taxes applicable to such
transaction.

            


    

    


    Any
fractional Share of Stock payable to a Participant shall be withheld as
additional Federal withholding, or, at the option of the Company, paid in cash
to the Participant.

    


    Unless
otherwise determined by the Committee, when the method of payment for the
Exercise Price is from the sale by a stockbroker pursuant to Section 6.7(b)(ii),
herein, of the Stock acquired through the Option exercise, then the tax
withholding shall be satisfied out of the proceeds.  For
administrative purposes in determining the amount of taxes due, the sale price
of such Stock shall be deemed to be the Fair Market Value of the
Stock.

    


    Prior to
the end of any Performance Period a Participant may elect to have a greater
amount of Stock withheld from the distribution of Performance Shares to pay
withholding taxes; provided, however, the Committee may prohibit or limit any
individual election or all such elections at any time.   In
addition, if required in order to exempt the transaction from the provisions of
Section 16(b) of the Exchange Act, any such election by an Insider must be made
during a Window Period and shall be subject to Committee approval.

    


    
      	
              Article
      15

            	
              Successors.

            


    

    


    All
obligations of the Company under the Plan, with respect to Awards granted
hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.

    


    
      	
              Article
      16

            	
              Legal
      Construction.

            


    

    


    
      	
               
      

            	
              16.1

            	
              Gender and
      Number.  Except where otherwise indicated by the context,
      any masculine term used herein also shall include the feminine; the plural
      shall include the singular and the singular shall include the
      plural.

            


    

    


    
      	
               
      

            	
              16.2

            	
              Severability.  In
      the event any provision of the Plan shall be held illegal or invalid for
      any reason, the illegality or invalidity shall not affect the remaining
      parts of the Plan, and the Plan shall be construed and enforced as if the
      illegal or invalid provision had not been
  included.

            


    

    


    
      	
               
      

            	
              16.3

            	
              Requirements of
      Law.  The granting of Awards and the issuance of Shares
      under the Plan shall be subject to all applicable laws, rules, and
      regulations, and to such approvals by any governmental agencies or
      national securities exchanges as may be
  required.

            


    

    


    
      	
               
      

            	
              16.4

            	
              Securities Law
      Compliance.  With respect to Insiders, transactions under
      this Plan are intended to comply with all applicable conditions or Rule
      16b-3 or its successors under the Exchange Act.  To the extent
      any provision of the plan or action by the Committee fails to comply with
      a condition of Rule 16b-3 or its successors, it shall not apply to the
      Insiders or transactions thereby.

            


    

    


    
      	
               
      

            	
              16.5

            	
              Governing
      Law.  This Plan shall be governed by and construed in
      accordance with the substantive laws of the State of Texas, excluding any
      conflicts or choice of law rule or principle that might otherwise refer
      constructive or interpretation of this Plan to provisions of the
      substantive law of any jurisdiction other than the State of Texas. Any
      action seeking to enforce the rights of an employee, former employee or
      person who holds such rights through, from or on behalf of such employee
      or former employee under this Plan may be brought only in a Federal or
      state court located in Bexar County,
Texas.