Document:

ex10t.htm

    

      Exhibit
10-t

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      2001
INCENTIVE PLAN

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

                                    Plan
Effective:  April 27, 2001

         Revisions
Effective:  November 18, 2005

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      AT&T
INC.

      2001
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.

              

      

      

      
        	
                 
      

              	
                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.

              

      

      

      
        	
                 
      

              	
                1.3

              	
                Effective Date of the
      Plan.  The Plan shall become effective on April 27,
      2001; however, grants may be made before that time subject to becoming
      effective on or after that date.

              

      

      

      

      
        	
                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 or award under this Plan of 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 an Employee 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 of the Board of Directors given authority to
administer the Plan as provided in Article 3.

      

      (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 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)           "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.

      

      (o)           "Key
Executive Officer Short Term Award" or "KEO Award" means a Performance
Unit.

      

      (p)           “Option”
means an option to purchase Shares from AT&T.

      

      (q)           "Participant"
means an Employee or former Employee who holds an outstanding Award granted
under the Plan.

      

      (r)           "Performance
Unit" and "Performance Share" shall each mean an Award granted to an Employee
pursuant to Article 8 herein.

      

      (s)           "Plan"
means this 2001 Incentive Plan.  The Plan may also be referred to as
the "AT&T 2001 Incentive Plan" or as the "AT&T Inc. 2001 Incentive
Plan."

      

      (t)           "Restricted
Stock" means an Award of Stock granted to an Employee pursuant to Article 7
herein.

      

      (u)           "Retirement"
or to "Retire" shall mean the Participant’s Termination of Employment 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,
except as otherwise indicated below:

       

      
         

        
          
            
              	
                      Net Credited
    Service

                    	
                      Age

                       

                    
	
                      10 years or
      more

                    	
                      65 or
      older 

                    
	
                      20 years or
      more 

                    	
                      55 or
      older 

                    
	
                      25 years or
      more 

                    	
                      50 or
      older 

                    
	
                      30 years or
      more 

                    	
                      Any
      age 

                    

            

          

        

        
 

      

      In
determining whether a Participant's Termination of Employment under the Enhanced
Pension and Retirement Program ("EPR") is a Retirement as defined above, 5 years
shall be added to each of Age and Net Credited Service.

      

      (v)           "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.

      

      (w)           "Shares"
or "Stock" means the shares of common stock of the Company.

      

      (x)           "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.

      

      (y)           "Termination
of Employment" or a similar reference shall mean the event where the Employee is
no longer an Employee of the Company or of any Subsidiary, including but not
limited to where the employing company ceases to be a Subsidiary.

      

      

      
        	
                Article
      3

              	
                Administration.

              

      

      

      
        	
                 
      

              	
                3.1

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

              

      

      

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

              

      

      

      No Award
other than Restoration Options may be made under the Plan after April 2,
2011.

      

      References
to determinations or other actions by AT&T or the Company, herein, shall
mean actions authorized by the Committee, the Chairman of the Board of AT&T,
the Senior Executive Vice President of AT&T 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 AT&T pursuant to the provisions of the
Plan and all related orders or 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.

      

      Subject
to the terms of this Plan, the Committee is authorized, and shall not be limited
in its discretion, to use any of the Performance Criteria specified herein in
its determination of any Award under this Plan.

      

      

      
        	
                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 issuance 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 and 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
or deferred through another plan following the end of the Performance Period, or
which are withheld for taxes, 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 Disinterested 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 receive Awards under 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 not
      grant Incentive Stock Options, as described in Section 422 of the Code,
      under this Plan.  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.

              

      

      

      
        	
                 
      

              	
                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.  In the event the Committee does not specify the
      expiration date of an Option, then such Option will expire on the tenth
      (10th)
      anniversary date of its grant, except as otherwise provided
      herein.

              

      

      

      
        	
                 
      

              	
                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 another 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 Executive 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 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 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 sale order) a sufficient
portion of the Shares to be received from the Option exercise 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 of the Participant's Termination of
Employment 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.  In the event of the Participant's Termination of
Employment 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.  In the event of the Participant's
Termination of Employment 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 Options
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
three (3) months 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, 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: (i) in the case of the Participant, only
upon the Participant’s death and in accordance with the AT&T Rules for
Employee Beneficiary Designations; and (ii) 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 shall
      be made by AT&T, 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, and subject to any additional
      terms in the grant thereof, Shares of Restricted Stock granted herein may
      not be sold, transferred, pledged, assigned, or otherwise alienated or
      hypothecated until fully vested.

              

      

      

      
        	
                 
      

              	
                7.4

              	
                Restrictions.  The
      Restricted Stock shall be subject to such vesting terms as may be
      determined by the Committee.  The Committee may 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 the shares
are fully vested and 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 or otherwise provided in the grant thereof, Shares of Restricted
      Stock covered by each Restricted Stock grant made under the Plan shall
      become freely transferable by the Participant after completion of all
      conditions to vesting, if any.  However, the Committee, in its
      sole discretion, shall have the right to immediately vest the shares and
      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.  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 of
      the Participant's Termination of Employment by reason of death or
      Disability, 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.  In the event of the
      Participant's Termination of Employment 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.

              

      

      

      

      
        	
                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.  The Committee may denominate a Performance Unit Award in
dollars instead of Performance Units.  A Performance Unit Award may be
referred to as a "Key Executive Officer Short Term Award" or "KEO
Award".

      

      
        	
                 
      

              	
                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, Value Added (after-tax cash operating profit less depreciation and
      less a capital charge), EBITDA (earnings before interest, taxes,
      depreciation and amortization), revenues, sales, expenses, costs, market
      share, volumes of a particular product or service or category thereof,
      including but not limited to the product's life cycle (for example,
      products introduced in the last 2 years), return on net assets, return on
      assets, return on capital, profit margin, operating revenues, operating
      expenses, and/or operating income.

              

      

      

      
        	
                (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.

              

      

      

      (b)           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,
the effects of such events 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
      held by a Participant on the record date for the
  dividend.

              

      

      

      
        	
                 
      

              	
                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).

      

      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 or Disability.  In the event of
      the Participant's Termination of Employment 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.

              

      

      

      
        	
                 
      

              	
                8.8

              	
                Termination of
      Employment for Other Reasons.  In the event of the
      Participant's Termination of Employment for other than a reason set forth
      in Section 8.7 (and other than for Cause), if the Participant is not
      Retirement eligible at Termination of Employment, the Participant may
      receive no more than a prorated payout of all Performance Units and
      Performance Shares, based on the number of months the Participant worked
      at least one day during the respective Performance Period divided by the
      number of months in the Performance
Period.

              

      

      

      
        	
                 
      

              	
                8.9

              	
                Termination of
      Employment for Cause.  In the event of the Participant's
      Termination of Employment of a Participant 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.  Beneficiary Designations of a Participant received by
      AT&T prior to November 16, 2001, that were applicable to awards under
      the 1996 Stock and Incentive Plan will also apply to awards under this
      Plan unless and until the Participant provides to the
      contrary.

              

      

      

      

      
        	
                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 or the
      Disinterested Committee may at any time and from time to time, alter or
      amend the Plan in whole or in part or suspend or terminate 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.

      

      If
permitted by the Committee, 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.

      

      

      
        	
                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  

              	
                Errors.  At
      any time AT&T may correct any error made under the Plan without
      prejudice to AT&T.  Such corrections may include, among
      other things, changing or revoking an issuance of an
  Award.

              

      

      

      
        	
                       
      16.5  

              	
                Elections and
      Notices.  Notwithstanding anything to the contrary
      contained in this Plan, all elections and notices of every kind shall be
      made on forms prepared by AT&T or the General Counsel, Secretary or
      Assistant Secretary, or their respective delegates or shall be made in
      such other manner as permitted or required by AT&T or the General
      Counsel, Secretary or Assistant Secretary, or their respective delegates,
      including through electronic means, over the Internet or
      otherwise.  An election shall be deemed made when received by
      AT&T (or its designated agent, but only in cases where the designated
      agent has been appointed for the purpose of receiving such election),
      which may waive any defects in form.  AT&T may limit the
      time an election may be made in advance of any
  deadline.

              

      

      

      Where any
notice or filing required or permitted to be given to AT&T under the Plan,
it shall be delivered to the principal office of AT&T, directed to the
attention of the Senior Executive Vice President-Human Resources of AT&T or
his or her successor.  Such notice shall be deemed given on the date
of delivery.

      

      Notice to
the Participant shall be deemed given when mailed (or sent by telecopy) to the
Participant's work or home address as shown on the records of AT&T or, at
the option of AT&T, to the Participant's e-mail address as shown on the
records of AT&T.  It is the Participant's responsibility to ensure
that the Participant's addresses are kept up to date on the records of
AT&T.  In the case of notices affecting multiple Participants, the
notices may be given by general distribution at the Participants' work
locations.

      

      
        	
                        16.6  

              	
                Governing
      Law.  To the extent not preempted by Federal law, the
      Plan, and all awards and agreements hereunder, and any and all disputes in
      connection therewith, shall be governed by and construed in accordance
      with the substantive laws of the State of Texas, without regard to
      conflict or choice of law principles which might otherwise refer the
      construction, interpretation or enforceability of this Plan to the
      substantive law of another
jurisdiction.

              

      

      

      
        	
                        16.7  

              	
                Venue.  Because
      awards under the Plan are granted in Texas, records relating to the Plan
      and awards thereunder are located in Texas, and the Plan and awards
      thereunder are administered in Texas, the Company and the Participant to
      whom an award under this Plan is granted, for themselves and their
      successors and assigns, irrevocably submit to the exclusive and sole
      jurisdiction and venue of the state or federal courts of Texas with
      respect to any and all disputes arising out of or relating to this Plan,
      the subject matter of this Plan or any awards under this Plan, including
      but not limited to any disputes arising out of or relating to the
      interpretation and enforceability of any awards or the terms and
      conditions of this Plan.  To achieve certainty regarding the
      appropriate forum in which to prosecute and defend actions arising out of
      or relating to this Plan, and to ensure consistency in application and
      interpretation of the Governing Law to the Plan, the parties agree that
      (a) sole and exclusive appropriate venue for any such action shall be an
      appropriate federal or state court in Bexar County, Texas, and no other,
      (b) all claims with respect to any such action shall be heard and
      determined exclusively in such Texas court, and no other, (c) such Texas
      court shall have sole and exclusive jurisdiction over the person of such
      parties and over the subject matter of any dispute relating hereto and (d)
      that the parties waive any and all objections and defenses to bringing any
      such action before such Texas court, including but not limited to those
      relating to lack of personal jurisdiction, improper venue or forum non
      conveniens.ex10u.htm

    Exhibit
10-u

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    PACIFIC
TELESIS GROUP

    

    1996 EXECUTIVE DEFERRED
COMPENSATION PLAN

    

    (Amended
Effective November 20, 2008)

    

    

    

    

    

    

    

    

    

    

    

    

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    PACIFIC
TELESIS GROUP

    

    1996 EXECUTIVE DEFERRED
COMPENSATION PLAN

    

    (Adopted
Effective December 1, 1995)

    

    

    SECTION
1.                                Purpose.

    

    The
Pacific Telesis Group 1996 Executive Deferred Compensation Plan (the “Plan”)
provides certain Officers of the Company with an opportunity to defer
compensation and accrue earnings on a pre-tax basis and with an opportunity to
receive employer matching contributions that cannot be provided to them under
the Pacific Telesis Group Supplemental Retirement and Savings Plan for Salaried
Employees ("the Savings Plan") because of the limitations imposed by section
401(a)(17) of the Internal Revenue Code of 1986, as amended (“the
Code”).

    

    SECTION
2.                                Eligibility to
Participate.

    

    The
following employees are eligible to participate in the Plan:

    

    
      	
               
      

            	
              (A)

            	
              Officers
      of Pacific Telesis Group and/or Pacific
Bell;

            

    

    

    
      	
               
      

            	
              (B)

            	
              The
      Officers of any Affiliate of Pacific Telesis Group who are specifically
      designated to participate by the PTG Board and the Board of Directors or
      other governing body of such
Affiliate.

            

    

    

    SECTION
3.                                Plan
Accounts.

    

    3.1           Establishment of
Account. An account shall be established for each eligible employee who
elects to become a participant in the Plan in accordance with the procedures set
forth in Section 4 of the Plan. The account shall be credited with allocations
and earnings under Sections 4, 5 and 6 and debited with distributions under
Section 7 of the Plan.

    

    3.2           No Funding or
Assignment. For income tax purposes under the Code and for purposes of
Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), it is intended that this Plan constitute an unfunded deferred
compensation arrangement. The amounts credited to Plan accounts for employees of
each participating Company shall be held in the general funds of such
participating Company. All amounts in such accounts, including all Compensation
deferred by an employee, shall remain an asset of the participating Company. A
participating Company shall not be required to reserve or otherwise set aside
funds for the payment of amounts credited to Plan accounts. The obligation of a
participating Company to pay benefits under the Plan constitutes a mere promise
to make benefit payments in the future, and shall be unfunded as to the
employee, whose rights shall be those of a general unsecured creditor. Title to
and beneficial ownership of any assets which a participating Company may set
aside or otherwise designate to make payments under the Plan shall at all times
remain in the participating Company, and the employee shall not have any
property interest in any specific assets of a participating Company. The rights
of an employee or his or her beneficiary to benefit payments under the Plan are
not subject in any manner to assignment, alienation, pledge or garnishment by
creditors.

    

    SECTION
4. Deferred
Compensation.

    

    4.1           Annual Deferral and
Distribution Election. An eligible employee may elect to participate in
the Plan prior to the beginning of any calendar year, or within 30 days of first
becoming eligible to participate in the Plan, or within 30 days of becoming
eligible to participate in a feature of the Plan with respect to such Plan
feature. An employee's election shall direct that compensation in one or more of
the following categories (collectively “Compensation”) be deferred and credited
to an account under the Plan, subject to the limitations and effectiveness
prescribed for each category of Compensation, and shall direct that such
Compensation, together with all other amounts credited under the Plan with
respect to such Compensation under Section 5 (Company Match) and Section 6
(Earnings), shall be distributed in accordance with a distribution option set
forth in Section 7.

    

    
      	
               
      

            	
              (A)

            	
              Salary. An
      employee may elect to defer part of his or her base annual compensation
      (“Salary”) otherwise payable for services performed in a calendar year,
      but not less than $2,500 nor more than 80% of salary. Such election shall
      become effective for Salary otherwise payable for services performed in
      the payroll period beginning, (i) in the case of an employee who makes an
      election within 30 days of first becoming eligible to participate in the
      Plan, immediately subsequent to the election or (ii) in all other cases,
      on the first day of the calendar year to which the election applies. An
      election related to Salary otherwise payable for services performed in any
      calendar year shall become irrevocable, (x) in the case of an election
      made within 30 days of first becoming eligible to participate in the Plan,
      on the last day before the applicable payroll period for which the
      election becomes effective, or (y) in all other cases, on the last day
      prior to the beginning of such calendar
year.

            

    

    

    
      	
               
      

            	
              (B)

            	
              STIP. An
      employee may elect to defer all or part, but not less than $5,000, of his
      or her awards under the Pacific Telesis Group Short Term Incentive Plan,
      or a similar or successor incentive compensation plan or program of
      Pacific Telesis Group or an Affiliate (“STIP”), for services performed in
      a calendar year and otherwise payable in the calendar year following such
      calendar year. Such election may be made with respect to services to be
      performed (i) in the remainder of the year in which the employee first
      becomes eligible to participate in the Plan, provided the election is made
      prior to October 1st of such year, which election shall become effective
      for STIP earned with respect to services performed beginning with the
      payroll period immediately subsequent to the election, or (ii) in the next
      following calendar year, which election on shall become effective on the
      first day of the calendar year to which the election applies in all other
      cases. An election related to the STIP award for services performed in a
      calendar year shall become irrevocable (x) in the case of an election made
      within 30 days of first becoming eligible to participate in the Plan, on
      the last day before the applicable payroll period for which the election
      becomes effective, or (y) in all other cases, on the last day prior to the
      beginning of such calendar year.

            

    

    

    
      	
               
      

            	
              (C)

            	
              LTIP. An
      employee may elect to defer all or part, but not less than $5,000, of his
      or her awards under the Pacific Telesis Group Senior Management Long Term
      Incentive Plan or a similar or successor long term incentive compensation
      plan of Pacific Telesis Group or an Affiliate (“LTIP”), for services
      performed in a multiple-year performance period and otherwise payable in a
      calendar year following such performance period. An election related to
      the LTIP award otherwise payable for services performed in a performance
      period shall become irrevocable on the last day prior to the beginning of
      the performance period applicable to that LTIP
  award.

            

    

    

    
      	
               
      

            	
              (D)

            	
              Other Awards.
      An employee may elect to defer all or part of his or her awards under any
      other bonus, special award, or any other similar form of compensation
      (“Other Awards”) otherwise payable to him or her by a participating
      Company with respect to services performed in a calendar year. An election
      related to Other Awards otherwise payable in a calendar year shall become
      irrevocable on the last day prior to the beginning of such calendar
      year.

            

    

    

    Notwithstanding
the foregoing, in no event shall deferrals under the Plan include that portion
of Compensation required for all applicable tax, Social Security and employee
benefit plan withholding, whether or not such withholding requirement is related
to this Plan.

    

    4.2            Form of Election,
Modification or Termination. An employee's election or written notice of
modification or termination of any prior election shall be made in accordance
with procedures established by the Plan Administrator, in the form of a document
approved by the Plan Administrator, executed by the employee and filed with the
Plan Administrator or his or her designee. An election which has not become
irrevocable may be modified, terminated or reinstated by the employee prior to
the time such election would have become irrevocable as provided in Section 4.1.
An election with respect to Salary, STIP or Other Awards for services performed
in a calendar year and/or with respect to LTIP for services performed in a
multiple-year performance period shall be deemed irrevocably terminated when the
employee, whether by transfer or termination of employment, ceases to be
eligible to participate in the Plan during such calendar year and/or such
multiple-year performance period (as applicable).

    

    4.3            Modification of Irrevocable
Election by the Committee. Upon receipt of a written request made by or
on behalf of an employee, the Committee in its sole discretion may modify or
terminate the employee's election with respect to Compensation otherwise payable
in a calendar year as it deems necessary to prevent extreme financial hardship
to the employee, notwithstanding that the election has become effective and
irrevocable as provided in Section 4.1.

    

    4.4            Allocation to
Accounts. Deferred amounts related to Compensation which would otherwise
have been paid by a participating Company shall be credited to the employee's
account as of the date the Compensation would otherwise have been paid. Deferred
amounts related to Compensation which would otherwise have been distributed in
Pacific Telesis Group common shares shall be credited to the employee's account
as deferred Pacific Telesis Group shares as of the date such Pacific Telesis
Group shares would otherwise have been transferred to the employee.

    

    SECTION
5.                                Company
Match.

    

    5.1            Eligibility for Company
Match. An employee who (A) elects to defer Compensation under the Plan
for a calendar year, and (B) has made the maximum elective deferral under the
Savings Plan permitted by section 402(g) of the Code for such calendar year
(except to the extent that a further limitation is required by section 401
(k)(3) and/or section 415 of the Code), shall be eligible to have additional
amounts based on Compensation deferred pursuant to this Plan ("Company Match")
credited to his or her account hereunder.

    

    5.2            Amount of Company
Match. The Company Match credited to an employee's account under this
Plan with respect to Compensation deferred during a calendar year shall be equal
to

    

    
      	
               
      

            	
              (A)

            	
              the
      amount of Compensation deferred into the employee's Plan account,
      multiplied by

            

    

    

    
      	
               
      

            	
              (B)

            	
              the
      percentage in effect for that calendar year at which the employee's Basic
      Contributions to the Savings Plan are matched by employing Company
      contributions;

            

    

    

    provided,
however, that the maximum Company Match credited to the employee's account under
this Plan shall not exceed

    

    
      	
               
      

            	
              (C)

            	
              6%
      of the employee's Savings Plan Salary, multiplied
  by

            

    

    

    
      	
               
      

            	
              (D)

            	
              the
      percentage in effect for that calendar year at which the employee's Basic
      Contributions to the Savings Plan are matched by employing Company
      contributions, reduced by

            

    

    

    
      	
               
      

            	
              (E)

            	
              the
      total amount of matching Company contributions credited to the employee's
      account under the Savings Plan.

            

    

    

    For
purposes of determining the amount of Compensation deferred into the employee's
Plan account, deferred Pacific Telesis Group common shares shall be valued by
multiplying the number of shares deferred by the Price of Pacific Telesis Group
common shares on the deferral date.

    

    5.3            Allocation to
Account. Until fully credited for the calendar year, and subject to the
delay provided in Section 5.4, Company Match shall be credited to an employee's
account under this Plan as of each date that deferred Compensation is credited
to the employee's account under this Plan.

    

    5.4            Maximum Pre-Tax Savings Plan
Deferrals Required. No Company Match shall be credited to an employee's
account for a calendar year until the employee has made before-tax contributions
under the Savings Plan equal to the maximum elective deferrals permitted under
section 402(g) of the Code, as further limited by section 401 (k)(3) of the
Code. Thereafter, the employee's account shall immediately be credited with
an amount equal to the Company Match that would otherwise have been previously
credited under Section 5.3.

    

    5.5            Savings Plan Provisions
Prevail. The provisions of this Section 5 shall not limit or affect the
application of the provisions regarding matching Company contributions in the
Savings Plan, which shall take precedence over the provisions of this Section
5.

    

    SECTION
6.            Earnings on
Accounts.

    

    6.1            Interest Allocations to
Accounts. Deferred amounts related to Compensation which would otherwise
have been paid in cash shall bear interest from the date the Compensation would
otherwise have been paid. Interest shall be applied to Company Match credited to
an employee's account as if such Company Match had been credited to the
employee's account at the same time that the related amounts of Compensation
deferred hereunder were credited to the employee's account. The interest
credited to an account shall be compounded annually at the end of each calendar
year.

    

    6.2            Rate of Interest. The
rate of interest to be applied to an employee's aggregate account balance under
the Plan for a calendar year shall be determined by the Committee from time to
time, and promptly communicated to eligible employees in advance of its
application, but in no event shall (A) the interest rate be decreased below the
average 10-Year Treasury note rate, (B) any reduction apply to interest already
credited to Plan accounts for periods prior to the Committee's action, or (C)
any interest rate previously guaranteed for a given period and communicated to
eligible employees be reduced during such period except as may be equitable in
light of any change in applicable law which substantially increases the burden
to the participating Companies of paying such guaranteed interest.

    

    6.3            Retroactive Limitation of
Interest Accrual in Case of Early Separation. Notwithstanding Section
6.2, an employee whose Separation occurs before he or she attains age 55 will
receive interest on all deferred cash Compensation and Company Match for all
years of participation in the Plan based on the average 10-Year Treasury note
rate, rather than the rate of interest established by the Committee for any
particular calendar year.

    

    6.4            Dividends and Adjustments
for Pacific Telesis Group Shares. An employee's account credited with
deferred Pacific Telesis Group shares shall be credited on each subsequent
dividend payment date for Pacific Telesis Group shares with an amount equivalent
to the dividend payable on the number of Pacific Telesis Group common shares
equal to the number of deferred Pacific Telesis Group shares in the employee's
account on the record date for such dividend. Such amount shall then be
converted to a number of additional deferred Pacific Telesis Group shares,
determined by dividing such amount by the Price of Pacific Telesis Group common
shares on the dividend payment date. In the event of any change in outstanding
Pacific Telesis Group common shares by reason of any stock dividend or split,
recapitalization, merger, consolidation, combination or exchange of shares or
other similar corporate change, the Committee shall make such adjustments, if
any, that it deems appropriate in the number of deferred Pacific Telesis Group
shares then credited to an employee's account. Any and all such adjustments
shall be conclusive and binding upon all parties concerned.

    

    

    SECTION
7.            Distribution.

    

    7.1            Distribution
Elections. At the time an eligible employee makes an election to defer
Compensation otherwise payable for services performed in a calendar year, the
employee also shall make an election with respect to the distribution, during
the employee's lifetime, of such deferred Compensation, together with Company
Match and earnings credited to the employee's Plan account with respect to such
deferred Compensation. Subject to the provisions on Hardship distributions in
Section 7.6.3 and the provisions on Options for Distribution in the Event of
Death in Section 7.3, distribution elections shall become effective and
irrevocable at the same time the election to defer such Compensation becomes
effective and irrevocable under Section 4.1.

    

    7.2            Options for Distribution
During Life. An employee may elect to receive the amounts credited to the
employee's Plan account with respect to a deferral election made pursuant to
Section 4.1 (a) in one payment, or (b) in a number of annual installments over a
period of 5, 10, or 15 years, calculated in accordance with procedures
established by the Plan Administrator. As specified by the employee,
distributions shall commence as soon as practicable after

    

    
      	
               
      

            	
              (A)

            	
              the
      first day of the calendar year next following the employee's
      Separation;

            

    

    

    
      	
               
      

            	
              (B)

            	
              the
      first day of the fifth calendar year next following the employee's
      Separation; or

            

    

    

    
      	
               
      

            	
              (C)

            	
              the
      first day of the calendar year next following the employee's attainment of
      a specified age between 59 1/2 and
70.

            

    

    

    All
amounts credited to an employee's Plan account with respect to which he or she
has elected distribution in the same form and commencing at the same time shall
be aggregated as a single Distribution Account. Notwithstanding the employee's
election under this Section 7.2 with respect to the time and form of
distribution for each such Distribution Account, if the aggregate of all amounts
credited to an employee's Distribution Account is less than $50,000 at the time
of such employee's Separation, such Distribution Account shall be distributed in
a single payment as soon as practicable after the first day of the calendar year
next following the employee's Separation.

    

    7.3            Options for Distribution In
the Event of Death. An employee may elect that, in the event the employee
should die before full payment of all amounts credited to the employee's Plan
account, the balance of the employee's Plan account shall be distributed to the
beneficiary or beneficiaries designated by the employee

    

    
      	
               
      

            	
              (A)

            	
              in
      one payment, paid as soon as practicable after the first day of the
      calendar year next following the year of the employee's
    death;

            

    

    

    
      	
               
      

            	
              (B)

            	
              in
      10 annual installments, calculated in accordance with procedures
      established by the Plan Administrator, commencing as soon as practicable
      after the first day of the calendar year next following the year of the
      employee's death, provided that if the aggregate of all amounts credited
      to an employee's Plan Account is less than $50,000 at the time of such
      employee's death, such Distribution Account shall be distributed in a
      single payment as soon as practicable after the first day of the calendar
      year next following the employee's death;
or

            

    

    

    
      	
               
      

            	
              (C)

            	
              by
      a continuation of the distribution times and forms elected under Section
      7.2 (in the case of an employee who dies before commencement of
      distributions, using as any specified age the date the employee would have
      attained that age if he or she had continued to live), subject to the
      single payment distribution of a Distribution Account credited with less
      than $50,000 at the time of the employee's death, as set forth in Section
      7.2.

            

    

    

    If no
election has been made under this Section 7.3, the balance of the employee's
deferred account shall be distributed in one payment as soon as practicable
after the first day of the calendar year next following the year of the
employee's death. if no beneficiary designation has been made, distribution
shall be made to the estate of the employee.

    

    7.4            Form of Elections.
Distribution elections and beneficiary designations shall be made in writing in
the form of a document or documents approved by the Plan Administrator, executed
by the employee and filed with the Plan Administrator or his or her designee. An
employee may designate one or more individuals or a trust as his or her
beneficiary, and may change the beneficiary designation at any time, effective
upon receipt by the Plan Administrator or his or her designee.

    

    7.5            Form and Timing of
Distribution. Amounts credited to an employee's Plan account as cash plus
accumulated interest, less applicable withholding taxes, shall be distributed in
cash. Amounts credited as deferred Pacific Telesis Group shares, less applicable
withholding taxes, shall be distributed in the form of whole Pacific Telesis
Group common shares, plus cash for any fractional share. Installment
distributions subsequent to the first installment shall be paid on or about the
anniversary date of the first annual installment until the entire balance of the
employee's Plan account is paid. Account balances held pending distribution
shall continue to be credited with interest or additional deferred Pacific
Telesis Group shares, as applicable, determined in accordance with Section
6.

    

    7.6            Distributions Not in
Accordance with Elections.

    

    7.6.1         Postponement of
Payment. The Committee may postpone payment of Plan benefits to an
employee (A) who, in the year Plan benefits would otherwise be payable, is a
"covered employee" for purposes of the $1 million limitation on deductible
compensation under Section 162(m) of the Code, and (B) whose compensation for
the year in which Plan benefits would otherwise be payable would, but for such
postponement, exceed the $1 million limit on deductibility. In addition,
notwithstanding an election pursuant to Section 7.2, at the sole discretion of
the Committee, in the event that an employee's Separation is on account of total
and permanent disability, as determined by the Committee, the Committee may
postpone payment of Plan benefits to such employee to commence in a year later
than the year in which his or her Plan benefits would otherwise be payable upon
such Separation, provided that no such postponement shall extend beyond the
earlier of (a) ten years from the date of Separation, or (b) the year in which
such employee attains age 65.

    

    Notwithstanding
the foregoing, the following shall apply solely with respect to Plan
participants who, as of December 31, 2004, were employed by an affiliate of
AT&T Inc. and who had not attained age fifty-five (55):

    

    7.6.1   Postponement of
Payment.   If the Committee reasonably anticipates that the
payment of any or all of an employee’s Plan benefits, if made as scheduled,
would not be deductible due to the application of Code Section 162(m), the
distribution of such employee’s Plan benefits may be delayed to (A) the end of
the employee’s first taxable year in which the Committee reasonably anticipates
(or should reasonably anticipate) that the deduction of such payment would not
be barred by application of Code Section 162(m), or (B) the 15th day of
the third month of the year following the year of the employee’s separation from
service; provided, however, this delayed payment provision shall apply only to
the extent all payments of non-qualified deferred compensation from plans
sponsored by AT&T Inc. (or any affiliate) are similarly
delayed.

    

    7.6.2          Immediate Single
Payment. Notwithstanding an election Pursuant to Section 7.2, at the sole
discretion of the Committee the entire amount then credited to the employee's
account shall be paid as soon as practicable in a single payment if an employee
is involuntarily terminated by his or her Company or becomes employed by a
governmental agency having jurisdiction over the activities of Pacific Telesis
Group or any of its Affiliates.

    

    Notwithstanding
the foregoing, the following shall apply solely with respect to Plan
participants who, as of December 31, 2004, were employed by an affiliate of
AT&T Inc. and who had not attained age fifty-five (55):

    

    7.6.2   Immediate Single
Payment.  Notwithstanding an election pursuant to Section 7.2,
at the sole discretion of the Committee the entire amount then credited to the
employee's account shall be paid as soon as practicable in a single payment if
an employee becomes employed by a governmental agency having jurisdiction over
the activities of Pacific Telesis Group or any of its Affiliates to the extent
(A) necessary for any employee in the executive branch of the United States
government to comply with an ethics agreement with the Federal government, or
(B) reasonably necessary to avoid the violation of an applicable Federal, state
or local ethics law or conflicts of interest law (including where such payment
is reasonably necessary to permit the employee to participate in activities in
the normal course of the employee’s position in which the employee would
otherwise not be able to participate under an applicable rule).  For
purposes of this section, a payment is reasonably necessary to avoid the
violation of a Federal, state or local ethics law or conflicts of interest law
if the payment is a necessary part of a course of action that results in
compliance with a Federal, state or local ethics law or conflicts of interest
law that would be violated absent such course of action, regardless of whether
other actions would also result in compliance with Federal, state or local
ethics law or conflicts of interest law.

    

    

    7.6.3            Hardship
Distribution. Upon receipt of a written request made by or on behalf of
an employee, the Committee in its sole discretion may authorize a Hardship
distribution from the employee's Plan account. For purposes of the Plan,
"Hardship" means an unanticipated emergency that is caused by an event beyond
the control of the employee and that would result in severe financial hardship
if early distribution were not permitted. As determined by the Committee in its
sole discretion, Hardship may include one or more of the following.

    

    
      	
               
      

            	
              (A)

            	
              A
      sudden and unexpected illness or accident of the
  employee;

            

    

    

    
      	
               
      

            	
              (B)

            	
              Extraordinary
      and unreimbursed medical or hospital expenses incurred by the employee or
      a member of his or her family or a
relative;

            

    

    

    
      	
               
      

            	
              (C)

            	
              The
      loss of the employee's property due to casualty;
  or

            

    

    

    
      	
               
      

            	
              (D)

            	
              Any
      other similar unforeseeable emergency that is caused by an event beyond
      the control of the employee and would impose a severe financial hardship
      if early distribution were not
permitted.

            

    

    

    A
distribution based on Hardship cannot exceed the amount required to meet the
immediate financial need created by the Hardship and not reasonably available
from other resources of the employee, including reimbursement or compensation by
insurance or otherwise; provided that an employee shall not be required to
request a hardship distribution from the Savings Plan in order to receive a
Hardship distribution under this Plan.

    

    Notwithstanding
the foregoing, the following shall apply solely with respect to Plan
participants who, as of December 31, 2004, were employed by an affiliate of
AT&T Inc. and who had not attained age fifty-five (55):

    

    7.6.3   Unforeseeable Emergency
Distribution.  Upon receipt of a written request made by or on
behalf of an employee, the Committee in its sole discretion may authorize a
distribution from the employee's Plan account in the event of an unforeseeable
emergency. For purposes of the Plan, "unforeseeable emergency" means (A) a
severe financial hardship to the employee resulting from an illness or accident
of the employee, the employee’s spouse, the employee’s beneficiary, or the
employee’s dependent (as defined in Code Section 152 without regard to Code
Section 152(b)(1), (b)(2) and (d)(1)(B)), (B) loss of he employee’s property due
to casualty, or (C) other similar extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the employee.  As
determined by the Committee in its sole discretion, Hardship may include one or
more of the following:

    

    
      	
               
      

            	
              (A)

            	
              the
      imminent foreclosure of or eviction from the employee’s primary residence;
      ;

            

    

    
      	
               
      

            	
              (B)

            	
              the
      need to pay for medical expenses, including non-refundable deductibles, as
      well as for the costs of prescription drug medication;
  or

            

    

    
      	
               
      

            	
              (C)

            	
              the
      need to pay for the funeral expense of a spouse, a beneficiary, or a
      dependent (as defined in Code Section 152 without regard to Code Section
      152(b)(1), (b)(2) and (d)(1)(B))

            

    

    

    A
distribution on account of an unforeseeable emergency may not be made to the
extent that such emergency is or may be relieved through reimbursement or
compensation from insurance or otherwise, or by liquidation of the employee’s
assets, to the extent the liquidation of such assets would not cause severe
financial hardship. Distributions based on an unforeseeable emergency cannot
exceed the amount reasonably necessary to meet the emergency need (which may
include amounts necessary to pay any Federal, state or local income taxes or
penalties reasonably anticipated to result from the
distribution).  However, an employee shall not be required to request
a  hardship distribution or unforeseeable emergency distribution that
might be available from the 401(k) plan or other nonqualified deferred
compensation plan in which the employee participates.

    

    The
following two provisions shall apply with respect to Plan participants who, as
of December 31, 2004, were employed by an affiliate of AT&T Inc. and who had
not attained age fifty-five (55):

    

    7.6.4   Distributions to Specified
Employees.  Notwithstanding any other provision of the Plan to
the contrary (other than Plan Section 7.6.2), if an employee is a “specified
employee” within the meaning of Treasury Regulation Section 1.409A-1(i),
distribution shall be made in accordance with the employee’s distribution
election, provided, however, that no distribution shall be made to such employee
on account of separation from service before the date that is six (6) months
after the date of separation from service (or, if earlier, the date of death of
such employee).

    

    7.6.5   Distributions Upon Income
Inclusion Under Code Section 409A.  Distributions to an
employee may commence at any time the Plan fails to meet the requirements of
Code Section 409A and the regulation issued thereunder, as applicable to and
with respect to such employee; provided, however, the amount of such
distribution shall exceed the amount required to be included in income as a
result of the failure to comply with such requirements.

    

    

    7.7           Payment Obligation.
The obligation to distribute benefits under the Plan shall be borne primarily by
the last Company to employ an employee in a position eligible to participate in
the Plan immediately prior to the distribution. A Company’s withdrawal from
participation in the Plan shall not affect that Company's liability hereunder.
If for any reason the primarily liable Company fails to make timely payment of a
amount due under the Plan, Pacific Telesis Group shall be secondarily liable for
the obligation.

    

    SECTION
8.           Administration: Claims and
Review Procedures.

    

    8.1            Plan Administrator.
The Plan Administrator shall be the Executive Vice President- Human Resources
Pacific Telesis Group, or his or her deligee. The Plan Administrator shall have
the authority to administer and interpret the Plan, including sole discretion to
determine the rights of an employee or beneficiary under the Plan, and to
authorize disbursements under the Plan, except for decisions expressly reserved
by the Plan for the Committee or for the PTG Board or the Board of Directors of
an Affiliate.

    

    8.2            Initial Claim
Unnecessary. No claim for benefits shall be required for commencement of
distributions in accordance with an employee's election under Sections 7.2 and
7.3 of the Plan. The obligation of a Company to make distributions under the
Plan shall not be affected by any action or inaction (on the part of an
employee, his beneficiaries or any Company) with respect to amounts owed,
including but not limited to the failure to make timely demand, the granting of
extensions of time or other indulgences, the failure to make timely payment or
the failure to give notices other than those prescribed in Section
8.3.

    

    8.3            Review of Adverse Decisions. An
employee or beneficiary who disagrees with a decision by the Plan Administrator
relating to the payment of benefits under the Plan may submit a claim requesting
Plan benefits in writing to the Committee, which shall respond in writing. A
claim shall be deemed denied unless the response is sent within 90 days (or
within 180 days, if the Committee extends the time to respond by notifying the
claimant in writing of the special circumstances requiring an extension and the
date by which the response is expected). If the claim is denied in whole or
part, the response shall state (A) the specific reasons, making specific
reference to pertinent provisions of the Plan; (B) what additional information,
if any, would help perfect the claim for benefits; and (C) what steps the
claimant must take to submit the claim for review. Within 60 days after the date
of a denial, a claimant may file a written request for the PTG Board of
Directors to review the denial. Notwithstanding Section 8.2 of the Plan, such
request for review must be made in a timely manner for the purpose of seeking
any further review of a decision or determining any entitlement to a benefit
under the Plan. The PTG Board shall notify the claimant in writing of the review
decision, specifying the reasons for the decision and the Plan provisions on
which it is based. A claim shall be deemed denied unless the decision on appeal
is sent within 60 days (or within 120 days, if the PTG Board extends the time to
respond by notifying the claimant in writing). The Plan Administrator, Committee
and PTG Board shall retain such right, authority and discretion as are provided
or not expressly limited in section 503 of ERISA and the regulations thereunder
and, if the Committee denies a claim upon review, the claimant shall have such
further rights of review as are provided therein.

    

    SECTION
9.            Amendment and
Termination.

    

    9.1            Amendment.  The
PTG Board of Directors may at any time make changes in the Plan, but such
amendment shall have prospective effect only and shall not adversely affect the
rights of any employee, without his or her consent, to any benefit under the
Plan to which such employee was entitled prior to the effective date of
amendment. Changes in the interest rate applied to Plan account balances as
determined by the Committee from time to time in accordance with Section 6.2 of
the Plan shall not be deemed to be Plan amendments, notwithstanding that they
apply to Compensation previously earned and deferred. The Executive Vice
President - Human Resources of Pacific Telesis Group, with the approval of the
Executive Vice President and General Counsel of Pacific Telesis Group, shall be
authorized to make minor or administrative changes to the Plan.

    

    9.2            Termination.  The
PTG Board of Directors may at any time terminate the Plan. Any termination of
the Plan shall not terminate the deferral of Compensation previously deferred
into a Plan account, but may prevent the deferral of Compensation not yet earned
notwithstanding the employee's prior election to defer such
Compensation.

    

    

    

    SECTION
10.          Definitions.

    

    For
purposes of this Plan, the following words shall have the meaning so defined
unless the context clearly indicates otherwise:

    

    10.1            “Affiliate” as the
term relates to Pacific Telesis Group, means a subsidiary of or other entity
that controls, is controlled by, or is under common control with Pacific Telesis
Group, as the case may be. As used herein, "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such entity, whether through ownership of voting
securities or other interests, by contract or otherwise.

    

    10.2            "PTG Board of
Directors" or “PTG Board” means the
Board of Directors of Pacific Telesis Group.

    

    10.3            “Code” means the
Internal Revenue Code of 1986, as amended from time to time, and the regulations
promulgated thereunder.

    

    10.4            “Committee” means the
Compensation and Personnel Committee of the Board of Directors of Pacific
Telesis Group.

    

    10.5            “Company” shall mean
Pacific Telesis Group, Pacific Bell or any other corporation which is an
Affiliate of Pacific Telesis Group.

    

    10.6            "Officer"
means an officer of a Company, as determined by the Plan Administrator, but the
term shall not include Assistant Secretary, Assistant Treasurer, Assistant
Comptroller or any other assistant officer.

    

    10.7            “Price” with respect
to Pacific Telesis Group common shares as of a particular date means the average
of the daily high and low sale prices of Pacific Telesis Group common shares on
the New York Stock Exchange ("NYSE") for the period of five trading days ending
on such date, or the period of five trading days immediately preceding such date
if the NYSE is closed on the date.

    

    10.8            "Savings Plan" means
the Pacific Telesis Group Supplemental Retirement and Savings Plan for Salaried
Employees.

    

    10.9            "Savings Plan Salary"
means "Salary" as defined in the Pacific Telesis Group Supplemental Retirement
and Savings Plan for Salaried Employees, without reduction for deferrals of
salary under this Plan and without regard to the limit on compensation under
section 401(a)(17) of the Code. If an eligible employee is employed by a
participating Company for only a portion of a calendar year or is on a leave of
absence for a portion of a calendar year, the employee's Savings Plan Salary is
prorated to reflect only the period during which the employee was actively
employed by a participating Company.

    

    10.10           “Separation” means
retirement or termination from all employment with Pacific Telesis Group or its
Affiliates.

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