Document:

ex10ii.htm

    

     

    Exhibit
10-ii

     

    AT&T
INC.

     

    

     

    2006
INCENTIVE PLAN

     

    Plan
Effective: May 1, 2006

     

    Amended
Through: January 28, 2010

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    AT&T
INC.

     

    2006
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 was originally effective on May 1, 2006,
      and is being hereby amended and restated effective January 28,
      2010.

            

    

     

    
      	
              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) “Applicable
Law” means the legal requirements relating to the administration of options and
share-based or performance-based awards under any applicable laws of the United
States, any other country, and any provincial, state, or local subdivision, any
applicable stock exchange or automated quotation system rules or regulations, as
such laws, rules, regulations and requirements shall be in place from time to
time.

     

    (b) “Award”
means, individually or collectively, a grant or award under this Plan of Stock
Options, Restricted Stock (including unrestricted Stock), Restricted Stock
Units, Performance Units, or Performance Shares.

     

    (c) “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.

     

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

     

    (e) “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.

     

    (f) “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 consummation of 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 fifty percent (50%) 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.

     

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

     

    (h) “Committee”
means the committee or committees of the Board of Directors given authority to
administer the Plan as provided in Article 3.

     

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

     

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

     

    (k) “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.

     

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

     

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

     

    (n) “Fair
Market Value” shall mean the closing price on the New York Stock Exchange
(“NYSE”) for a Share 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, from time to time,
select any other index or measurement to determine the Fair Market Value of
Shares under the Plan, including but not limited to an average determined over a
period of trading days.

     

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

     

    (p) “Officer
Level Employee” shall mean a Participant who is an officer level Employee for
compensation purposes as indicated on the records of AT&T.

     

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

     

    (r) “Participant”
means an Employee or former Employee who holds an outstanding Award granted
under the Plan.

     

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

     

    (t) “Plan”
means this 2006 Incentive Plan.  The Plan may also be referred to as
the “AT&T 2006 Incentive Plan” or as the “AT&T Inc.  2006
Incentive Plan.”

     

    (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 , the date the Participant is at least age 55 and has five (5)
years of net credited 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 

      

       

    

     

    For
purposes of this Plan only, Net Credited Service shall be calculated in the same
manner as “Pension Eligibility Service” under the AT&T Pension Benefit Plan
– Nonbargained Program (“Pension Plan”), as that may be amended from time to
time, except that service with an Employer shall be counted as though the
Employer were a “Participating Company” under the Pension Plan and the Employee
was a participant in the Pension Plan.

     

    (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) “Senior
Manager” shall mean a Participant who is a senior manager for compensation
purposes as indicated on the records of AT&T.

     

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

     

    (y) “Subsidiary”
shall mean any corporation, partnership, venture or other entity in which
AT&T holds, directly or indirectly, a fifty percent (50%) or greater
ownership interest.  The Committee may, at its sole discretion,
designate, on such terms and conditions as the Committee shall determine, any
other corporation, partnership, limited liability company, venture other entity
a Subsidiary for purposes of this Plan.  Unless otherwise provided by
the Committee, Cingular and its direct or indirect majority-owned subsidiaries
shall each be deemed a Subsidiary so long as AT&T holds a direct or indirect
twenty five percent (25%) or greater ownership interest in Cingular Wireless LLC
or its successor.

     

    (z) “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.  With respect to any Award that constitutes a
“nonqualified deferred compensation plan” within the meaning of Section 409A of
the Code, “Termination of Employment” shall mean a “separation from service” as
defined under Section 409A of the Code.

     

    
      	
              Article
      3.  

            	
              Administration.

            

    

     

    
      	
              3.1  

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

            

    

     

    (a) With
respect to Insiders, the Plan and 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 the committee that 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) With
respect to persons who are not Insiders, the Plan and Awards hereunder shall be
administered by each of the Disinterested Committee and such other committee, if
any, to which the Board may delegate such authority (such other Committee shall
be the “Non-Insider Committee”), and each such Committee shall have full
authority to administer the Plan and all Awards hereunder, except as otherwise
provided herein or by the Board.  The Disinterested Committee may,
from time to time, limit the authority of the Non-Insider Committee in any
way.  Any Committee may be replaced by the Board at any
time.

     

    (c) Except as
otherwise indicated from the context, references to the “Committee” in this Plan
shall be to either of the Disinterested Committee or the Non-Insider
Committee.

     

    
      	
              3.2  

            	
              Authority of the
      Committee.  The Committee shall have complete control
      over the administration of the Plan and shall have the authority in its
      sole discretion to (a) exercise all of the powers granted to it under the
      Plan, (b) construe, interpret and implement the Plan, grant terms and
      grant notices, and all Award Agreements, (c) prescribe, amend and rescind
      rules and regulations relating to the Plan, including rules governing its
      own operations, (d) make all determinations necessary or advisable in
      administering the Plan, (e) correct any defect, supply any omission and
      reconcile any inconsistency in the Plan, (f) amend the Plan to reflect
      changes in applicable law (whether or not the rights of the holder of any
      Award are adversely affected, unless otherwise provided by the Committee),
      (g) grant Awards and determine who shall receive Awards, when such Awards
      shall be granted and the terms and conditions of such Awards, including,
      but not limited to, conditioning the exercise, vesting, payout or other
      term of condition of an Award on the achievement of Performance Goals
      (defined below), (h) unless otherwise provided by the Committee, amend any
      outstanding Award in any respect, not materially adverse to the
      Participant, including, without limitation, to (1) accelerate the time or
      times at which the Award becomes vested, unrestricted or may be exercised
      (and, in connection with such acceleration, the Committee may provide that
      any Shares acquired pursuant to such Award shall be Restricted Shares,
      which are subject to vesting, transfer, forfeiture or repayment provisions
      similar to those in the Participant’s underlying Award), (2) accelerate
      the time or times at which shares of Common Stock are delivered under the
      Award (and, without limitation on the Committee’s rights, in connection
      with such acceleration, the Committee may provide that any shares of
      Common Stock delivered pursuant to such Award shall be Restricted Shares,
      which are subject to vesting, transfer, forfeiture or repayment provisions
      similar to those in the Grantee’s underlying Award), or (3) waive or amend
      any goals, restrictions or conditions applicable such Award, or impose new
      goals, restrictions and (i) determine at any time whether, to what extent
      and under what circumstances and method or methods (1) Awards may be (A)
      settled in cash, shares of Stock, other securities, other Awards or other
      property (in which event, the Committee may specify what other
      effects such settlement will have on the Participant’s Award), (B)
      exercised or (C) canceled, forfeited or suspended, (2) Shares, other
      securities, cash, other Awards or other property and other amounts payable
      with respect to an Award may be deferred either automatically or at the
      election of the Participant or of the Committee, or (3) Awards may be
      settled by the Company or any of its Subsidiaries or any of its or their
      designees.

            

    

     

    No Award
may be made under the Plan more than ten years after April 30,
2016.

     

    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, provided, however, only the Disinterested Committee
may take action with respect to Insiders with regard to granting or determining
the terms of Awards or other matters that would require the Disinterested
Committee to act in order to comply with Rule 16b-3 promulgated under the
Exchange Act.

     

    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 but not limited to the
Company, its stockholders, Employees, Participants, and their estates and
beneficiaries.

     

    
      	
              Article
      4.  

            	
              Shares Subject to the
      Plan.

            

    

     

    
      	
              4.1  

            	
              Number of
      Shares.  Subject to adjustment as provided in
      Section 4.3 herein, the number of Shares available for issuance under
      the Plan shall not exceed 90 million Shares.  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.

            

    

     

    
      	
              4.2  

            	
              Share
      Accounting.  Without limiting the discretion of the
      Committee under this section, unless otherwise provided by the
      Disinterested 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) If an
outstanding Award for any reason expires or is terminated or canceled without
having been exercised or settled in full, or if Shares acquired pursuant to an
Award subject to forfeiture or repurchase are forfeited or repurchased by the
Company for an amount not greater than the Participant’s original purchase
price, the Shares allocable to the terminated portion of such Award or such
forfeited or repurchased Shares shall again be available for issuance under the
Plan.

     

    (b) Shares
shall not be deemed to have been issued pursuant to the Plan with respect to any
portion of an Award that is settled in cash, other than an Option.

     

    (c) Shares
withheld or reacquired by the Company in satisfaction of tax withholding
obligations under a Restricted Stock Award shall not again be available for
issuance under the Plan; however Shares withheld for tax withholding from other
awards shall be available for issuance again.

     

    (d) If the
exercise price of an Option is paid by tender to the Company, or attestation to
the ownership, of Shares owned by the Participant, or an Option is settled
without the payment of the exercise price, the number of shares available for
issuance under the Plan shall be reduced by the gross number of shares for which
the Option is exercised.

     

    
      	
              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 but not limited to 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 (and Performance Units
      and other Awards whose value is based on a number of 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 eligible 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 no single Employee may receive Options
      under this Plan for more than one percent (1%) of the Shares approved for
      issuance under this Plan during any calendar year.  The
      Committee may not grant Incentive Stock Options, as described in Section
      422 of the Code, under this Plan.

            

    

     

    
      	
              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 effect 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.  Unless
      otherwise determined by the Committee, 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.

            

    

     

    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 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 Shares, 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 has 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
      Shares 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, the value of the Shares delivered
shall be equal to the then most recent Fair Market Value of the Shares
established before the exercise of the Option.

     

    Restricted
Stock may not be used to pay the Exercise 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
      eligible to Retire (and if the Participant is an Officer Level Employee ,
      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;

            

    

     

    
      	
              (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 paragraphs (a) and (c)(i),
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 the Shares subject to such forfeited Options shall once again
become available for issuance under the Plan).

     

    (e) Notwithstanding
the foregoing, the Committee may, in its sole discretion, establish different,
or waive, terms and conditions pertaining to the effect of Termination of
Employment on Options, whether or not the Options are outstanding, but no such
modification shall shorten the terms of Options issued prior to such
modification or otherwise be materially adverse to the Participant.

     

    
      	
              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 achievement of Performance
      Goals in the same manner as provided in Section 8.4, herein, with respect
      to Performance Shares.  No Employee may be awarded, in any
      calendar year, a number of Shares in the form of Restricted Stock (or
      Restricted Stock Units) exceeding one percent (1%) of the Shares approved
      for issuance under this Plan.

            

    

     

    
      	
              7.2  

            	
              Restricted Stock
      Agreement.  The Committee may require, as a condition to
      receiving a Restricted Stock Award, that the Participant 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, including the
      achievement of Performance Goals (as described in Section 8.4), as may be
      determined by the Committee.  Unless otherwise provided by the
      Committee, to the extent Restricted Stock is subject to any condition to
      vesting, if such condition or conditions are not satisfied by the time the
      period for achieving such condition has expired, such Restricted Stock
      shall be forfeited.  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 but not limited to
      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 Committee may also grant Restricted Stock
      without any terms or conditions in the form of vested Stock
      Awards.

            

    

     

    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.  Unless otherwise provided
      by the Committee, 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.

            

    

     

    
      	
              7.10  

            	
              Restricted Stock
      Units.  In lieu of or in addition to Restricted Stock,
      the Committee may grant Restricted Stock Units under such terms and
      conditions as shall be determined by the Committee.  Restricted
      Stock Units shall be subject to the same terms and conditions under this
      Plan as Restricted Stock except as otherwise provided in this Plan or as
      otherwise provided by the Committee.  Except as otherwise
      provided by the Committee, the award shall be settled and pay out promptly
      upon vesting (to the extent permitted by Section 409A of the Code), and
      the Participant holding such Restricted Stock Units shall receive, as
      determined by the Committee, Shares (or cash equal to the Fair Market
      Value of the number of Shares as of the date the award becomes payable)
      equal to the number of such Restricted Stock Units. Restricted Stock Units
      shall not be transferable, shall have no voting rights, and shall not
      receive dividends, but shall, unless otherwise provided by the Committee,
      receive dividend equivalents at the time and at the same rate as dividends
      are paid on Shares with the same record and pay dates. Upon a
      Participant’s Termination of Employment due to Death or Disability, his or
      her Restricted Stock Units will vest, and in the case of Death, will pay
      out promptly, and in the case of Disability, will only pay out in
      accordance with the terms of the grant (without regard to the Termination
      due to Disability).  If the Participant dies after Termination
      of Employment, vested Restricted Stock Units will be promptly paid
      out.

            

    

     

     

    
      	
              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 and the terms and conditions of each such
      Award.

            

    

     

    
      	
              8.2  

            	
              Value of Performance
      Shares and Units.

            

    

     

    (a) A
Performance Share is equivalent in value to a Share.  In any calendar
year, no individual may be awarded Performance Shares having a potential payout
of Shares exceeding one percent (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, as of the date of granting the Award, of one percent (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.”

     

    
      	
              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 (and may establish for
      other Awards) performance objectives (“Performance Goals”) for the
      Company, its Subsidiaries, and/or divisions of any of foregoing, using the
      Performance Criteria and other factors set forth in (a) and (b),
      below.  It may also use other criteria or factors in
      establishing Performance Goals in addition to or in lieu of the
      foregoing.  A Performance Goal may be stated as an absolute
      value or as a value determined relative to an index, budget, prior period,
      similar measures of a peer group of other companies or other standard
      selected by the Committee.  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.  Unless previously
      canceled or reduced, Performance Shares and Performance Units which may
      not be converted because of failure in whole or in part to satisfy the
      relevant Performance Goals or for any other reason shall be canceled at
      the time they would otherwise be distributable.  When the
      Committee desires an Award of Performance Shares, Performance Units,
      Restricted Stock or Restricted Stock Units to qualify under Section 162(m)
      of the Code, as amended, the Committee shall establish the Performance
      Goals for the respective Award prior to or within 90 days of the beginning
      of the Performance Period relating to such Performance Goal, and not later
      than after 25% of such period 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,
including but not limited to the offset against each other of any combination of
the following criteria:

     

    
      	
              (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, gross
      margin, operating margin, profit margin, pre-tax profit, 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), number of customers or subscribers,
      number of items in service, including but not limited to every category of
      access or other telecommunication or television lines, return on net
      assets, return on assets, return on capital, return on invested capital,
      cash flow, free cash flow, operating cash flow, 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.  Employee satisfaction,
      employee retention, product development, completion of a joint venture or
      other corporate transaction, completion of an identified special project,
      and effectiveness of management.

            

    

     

    
      	
              (3)  

            	
              The
      Company’s Stock price, return on stockholders’ equity, total stockholder
      return (Stock price appreciation plus dividends, assuming the reinvestment
      of dividends), and/or earnings per
Share.

            

    

     

    
      	
              (4)  

            	
              Impacts
      of acquisitions, dispositions, or restructurings, on any of the
      foregoing.

            

    

     

    (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 but not limited to
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 Award to fail to satisfy the performance based
exemption of Section 162(m) of the Code.

     

    
      	
              8.5  

            	
              Dividend Equivalents
      on Performance Shares.  For each Award of Performance
      Shares, the Committee may establish a cash payment (“Dividend Equivalent”)
      in an amount equal to the dividend payable on one Share to each
      Participant for each Performance Share held by a Participant on the record
      date for the dividend.  Such Dividend Equivalent, if any, will
      be payable at the time the relevant AT&T common stock dividend is
      payable or at such other time as determined by the Committee, and may be
      modified or terminated by the Committee at any
  time.

            

    

     

    
      	
              8.6  

            	
              Form and Timing of
      Payment of Performance Units and Performance Shares.  As
      soon as practicable (but in no event more than ninety (90) days) 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 Goal), 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 or prohibited by this Plan (such as in
      the case of a Change in Control), 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 cancel any part or all of a
      grant or award of Performance Units or Performance Shares, 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 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 during a Performance Period, the Participant shall receive a
      lump sum payout of the related outstanding Performance Units and
      Performance Shares calculated as if all unfinished Performance Periods had
      ended with 100% of the Performance Goals achieved,  valued as of
      the first business day of the calendar year following the date of
      Termination of Employment and payable as soon thereafter as reasonably
      possible.  Where the amount or part of Dividend Equivalents is
      determined by the number of Performance Shares that are paid out or is
      otherwise determined by a performance measure, and the related Performance
      Period for the Dividend Equivalents was not completed at Termination of
      Employment, or in the event of the Termination of Employment by reason of
      death or Disability, then the Dividend Equivalents will be calculated as
      though 100% of the goals were achieved and paid as soon reasonably
      possible following the first business day of the calendar
      year.

            

    

     

    
      	
              8.8  

            	
              Termination of
      Employment for Other Reasons.  Unless the Committee
      determines otherwise, 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, then upon Termination, the number of the
      Participant’s Performance Units and/or Performance Shares shall be reduced
      at the time of the Termination of Employment so that the Participant may
      receive no more than a prorated payout of all Performance Units and
      Performance Shares granted, 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, to be paid, if at all,
      at the same time and under the same terms that such outstanding
      Performance Units and Performance Shares would otherwise be
      paid.

            

    

     

    
      	
              8.9  

            	
              Termination of
      Employment for Cause.  In the event of the 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 in
      accordance with the procedures set forth in such
  Rules.

            

    

     

    
      	
              Article
      10.  

            	
              Deferrals.  Unless
      otherwise provided by the Committee, a Participant may, as permitted by
      the Company, defer all or part of Awards made under this Plan in
      accordance with and subject to the terms of such plans so long as such
      deferral is determined by the Company to be consistent in all respects
      with Section 409A of the Code.

            

    

     

    
      	
              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.

            

    

     

    
      	
              11.3  

            	
              Loyalty
      Conditions and Enforcement.  This section relates solely to
      Awards granted on or after January 1, 2010 to a Participant who is an
      Officer Level Employee or a Senior Manager as of the date the Award is
      made.

            

    

     

    (a) Each
Award under the Plan is intended to closely align the Participant’s long-term
interests with those of the Company and its shareholders, and the conditions set
forth in subsections (b) or (d) hereof (collectively, the “Loyalty Conditions”)
are intended to protect the Company’s critical need for each Participant’s
loyalty to the Company and its shareholders.  If any Participant does
not comply with a Loyalty Condition, either during employment or within the
periods described below following Termination of Employment for any reason, then
the Participant is acting contrary to the long-term interests of the Company,
and there will be a failure of the consideration on which the Participant
received any Award or Awards pursuant to the Plan.  Accordingly,
unless otherwise provided in the Award, as a condition of such Award granted on
or after January 1, 2010, the Participant is deemed to agree that he shall not,
without obtaining the written consent of AT&T in advance, violate the
Loyalty Provisions of this Section 11.3.  Unless otherwise expressly
provided in an Award Agreement, if the Participant violates a Loyalty Condition,
then the Company may terminate any outstanding, unexercised, unexpired, unpaid,
or deferred Awards granted on or after January 1, 2010 (“Award Termination”),
rescind any exercise, payment or delivery pursuant to any Award or Awards
(“Rescission”), or recapture any cash or Shares (whether restricted or
unrestricted) issued pursuant to any Award or Awards, or proceeds from the
Participant’s sale of such Shares (“Recapture”).

     

    (b) During
the Participant’s employment with the Company and any of its Subsidiaries and
for a period of two years after a Termination of Employment for any reason, a
Participant shall not, without the Company’s prior written authorization, (i)
disclose to anyone outside the Company or use, other than in the Company’s
business, any Confidential Information, or (ii) disclose any trade secrets of
the Company, as that term is defined under Applicable Law, for as long as such
information is not generally known to the Company’s competitors through no fault
or negligence of the Participant.

     

    “Confidential
Information” means all information belonging to, or otherwise relating to
the business of the Company, which is not generally known, regardless of the
manner in which it is stored or conveyed to Participant, and which the Company
has taken reasonable measures under the circumstances to protect from
unauthorized use or disclosure.  Confidential Information includes
trade secrets as well as other proprietary knowledge, information, know-how, and
non-public intellectual property rights, including unpublished or pending patent
applications and all related patent rights, formulae, processes, discoveries,
improvements, ideas, conceptions, compilations of data, and data, whether or not
patentable or copyrightable and whether or not it has been conceived,
originated, discovered, or developed in whole or in part by
Participant.  For example, Confidential Information includes, but is
not limited to, information concerning the Company’s business plans, budgets,
operations, products, strategies, marketing, sales, inventions, designs, costs,
legal strategies, finances, employees, customers, prospective customers,
licensees, or licensors; information received from third parties under
confidential conditions; or other valuable financial, commercial, business,
technical or marketing information concerning the Company, or any of the
products or services made, developed or sold by the
Company.  Confidential Information does not include information that
(i) was generally known to the public at the time of disclosure; (ii) was
lawfully received by Participant from a third party; (iii) was known to
Participant prior to receipt from the Company; or (iv) was independently
developed by Participant or independent third parties; in each of the foregoing
circumstances, this exception applies only if such public knowledge or
possession by an independent third party was without breach by Participant or
any third party of any obligation of confidentiality or non-use, including but
not limited to the obligations and restrictions set forth in this
Agreement.

     

    (c) Coincidentally
with the exercise, receipt of payment, or delivery of cash or Shares pursuant to
an Award granted after January 1, 2010, the Company may require that the
Participant shall give a certification to the Company in writing if the
Participant is not for any reason in full compliance with the terms and
conditions of the Plan, including its Loyalty Conditions.  If a
Termination of Employment has occurred for any reason, the Participant’s
certification shall state the name and address of the Participant’s then-current
employer or any entity for which the Participant performs business services and
the Participant’s title, and shall identify any organization or business in
which the Participant owns an equity interest of greater than five
percent.

     

    (d) If the
Company determines, in its sole and absolute discretion, that (i) a Participant
has violated any of the Loyalty Conditions, or (ii) during his or her employment
by the Company or any of its Subsidiaries, or within two years after the
Termination of Employment for any reason, a Participant has engaged in any of
the following conduct:

     

    
      	
              (i)  

            	
                owned,
      operated or controlled, or participated in the ownership, operation or
      control of, any business enterprise (including, without limitation, any
      corporation, partnership, proprietorship or other venture) that competes
      with the Company in the Restricted Business (defined below) anywhere in
      the Restricted Territory (defined
below);

            

    

     

    
      	
              (ii)  

            	
                become
      employed as an officer or executive by any business enterprise (including,
      without limitation, any corporation, partnership, proprietorship or other
      venture) that competes with the Company in the Restricted Business
      anywhere in the Restricted Territory, if such employment or engagement
      requires Participant to compete against the Company in the Restricted
      Business;

            

    

     

    
      	
              (iii)  

            	
                solicited
      any nonclerical employee of the Company with whom the Participant had
      Contact during his or her employment to terminate employment with the
      Company; or

            

    

     

    
      	
              (iv)  

            	
                committed
      any breach of Participant’s fiduciary duty or the duty of loyalty, as
      determined by Applicable Law, then the Committee may, in its sole and
      absolute discretion, impose an Award Termination, Rescission, and/or
      Recapture with respect to any or all of the Participant’s Awards granted
      after January 1, 2010, including any Shares or cash associated therewith,
      or any proceeds thereof.  For purposes of this Agreement, the
      term “Restricted Business” means the business of providing communications
      or connectivity services, including both wireless and wire-lined
      telephone, messaging, Internet, data, and related services; the term
      “Restricted Territory” shall mean the state in which the Participant
      maintained his or her principal office with the Company on the date the
      Award was granted; and the term “Contact” means interaction between the
      Participant and the nonclerical employee during performance of
      Participant’s job responsibilities on behalf of the
    Company.

            

    

     

    (e) Within
ten days after receiving notice from the Company of any such activity described
in subsection (d) above, the Participant shall deliver to the Company the cash
or Shares acquired pursuant to any and all Awards granted on or after January 1.
2009, or, if Participant has sold the Shares, the gain realized, or payment
received as a result of the rescinded exercise, payment, or delivery; provided,
that if the Participant returns Shares that the Participant purchased pursuant
to the exercise of an Option (or the gains realized from the sale of such
Shares), the Company shall promptly refund the exercise price, without earnings
or interest, that the Participant paid for the Shares.  Any payment by
the Participant to the Company pursuant to this Section shall be made either in
cash or by returning to the Company the number of Shares that the Participant
received in connection with the rescinded exercise, payment, or
delivery.  It shall not be a basis for Award Termination, Rescission
or Recapture if, after a Termination of Employment, the Participant purchases,
as an investment or otherwise, stock or other securities of an organization
engaged in the Restricted Business, so long as (i) such stock or other
securities are listed upon a recognized securities exchange or traded over the
counter, and (ii) such investment does not represent more than a ten percent
(10%) equity interest in the organization or business.

     

    (f) Notwithstanding
the foregoing provisions of this Section, the Company has sole and absolute
discretion not to require Award Termination, Rescission and/or Recapture, and
its determination not to require Award Termination, Rescission and/or Recapture
with respect to any particular act by a particular Participant or Award shall
not in any way reduce or eliminate the Company’s authority to require Award
Termination, Rescission and/or Recapture with respect to any other act or
Participant or Award.  Nothing in this Section shall be construed to
impose obligations on the Participant to refrain from engaging in lawful
competition with the Company after the Participant’s Termination of Employment
that does not violate subsections (b) or (d) of this Section, other than any
obligations that are part of any separate agreement between the Company and the
Participant or that arise under Applicable Law.

     

    (g) All
administrative and discretionary authority given to the Company under this
Section shall be exercised by the most senior human resources executive of the
Company or such other person or committee (including without limitation the
Committee) as the Committee may designate from time to time.

     

    (h) If any
provision within this Section is determined to be unenforceable or invalid under
any applicable law, such provision will be applied to the maximum extent
permitted by Applicable Law, and shall automatically be deemed amended in a
manner consistent with its objectives and any limitations required under
Applicable Law.

     

    
      	
              11.4  

            	
              Reimbursement
      of Company for Unearned or Ill-gotten Gains.  Unless otherwise
      specifically provided in an Award Agreement, and to the extent permitted
      by Applicable Law, the Committee may in its sole and absolute discretion,
      without obtaining the approval or consent of the Company’s shareholders or
      of any Participant, with respect to Awards granted after January 1, 2010,
      require that any Participant reimburse the Company for all or any portion
      of any Awards granted or settled under this Plan (with each such case
      being a “Reimbursement”), or the Committee may require the Termination or
      Rescission of, or the Recapture associated with, any Award, if and to the
      extent the Committee determines in its discretion that either
      —

            

    

     

    (a) the
Participant personally engaged in one or more material acts of fraud or
misconduct that have caused or partially caused the need for a financial
restatement by the Company and/or any Affiliate; or

     

    (b) (i) the
granting, vesting, or payment of such Award (or portion thereof) was predicated
upon the achievement of financial results involving statements of earnings,
revenues, gains, or other financial criteria relating to the Company, an
Affiliate or Affiliates of the Company, or any divisions or units of any of
them; (ii) the Participant benefited from a calculation that later proves to be
materially inaccurate; and (iii) a lower granting, vesting, payment, or other
settlement of such Award would have occurred but for the conduct described in
clause (b)(ii) of this Section.

     

    In each
instance described in clause (a) or (b) above, the Committee may, to the extent
practicable and allowable under Applicable Laws, require Reimbursement, Award
Termination or Rescission of, or Recapture relating to, any such Award granted
to a Participant; provided that the Company will not seek Reimbursement, Award
Termination or Rescission of, or Recapture relating to, any such Awards that
were paid or vested more than three years prior to the first date of a financial
period that is subject to a restatement described in clause (a)
above.

     

    
      	
              Article
      12.  

            	
              Change in
      Control.

            

    

     

    Unless
the Committee provides otherwise prior to the grant of an Award, upon the
occurrence of a Change in Control, the following shall apply to such
Award:

     

    (a) Any and
all Options granted hereunder to a Participant immediately shall become vested
and exercisable upon the Termination of Employment of the Participant by the
Company or by the Participant for “Good Reason”;

     

    (b) Unless
otherwise determined by the Committee, the payout of Performance Units and
Performance Shares shall be determined exclusively by the attainment of the
Performance Goals established by the Committee, which may not be modified after
the Change in Control, and AT&T shall not have the right to reduce the
Awards for any other reason;

     

    (c) For
purposes of this Plan, “Good Reason” means in connection with a termination of
employment by a Participant within two (2) years following a Change in Control,
(a) a material adverse alteration in the Participant’s position or in the nature
or status of the Participant’s responsibilities from those in effect immediately
prior to the Change in Control, or (b) any material reduction in the
Participant’s base salary rate or target annual bonus, in each case as in effect
immediately prior to the Change in Control, or (c) the relocation of the
Participant’s principal place of employment to a location that is more than
fifty (50) miles from the location where the Participant was principally
employed at the time of the Change in Control or materially increases the time
of the Participant’s commute as compared to the Participant’s commute at the
time of the Change in Control (except for required travel on the Company’s
business to an extent substantially consistent with the Participant’s customary
business travel obligations in the ordinary course of business prior to the
Change in Control).

     

    In order
to invoke a Termination of Employment for Good Reason, a Participant must
provide written notice to AT&T or the Employer with respect to which the
Participant is employed or providing services of the existence of one or more of
the conditions constituting Good Reason within ninety (90) days following the
Participant’s knowledge of the initial existence of such condition or
conditions, specifying in reasonable detail the conditions constituting Good
Reason, and AT&T shall have thirty (30) days following receipt of such
written notice (the “Cure Period”) during which it may remedy the
condition.  In the event that AT&T or the Employer fails to remedy
the condition constituting Good Reason during the applicable Cure Period, the
Participant’s “separation from service” (within the meaning of Section 409A of
the Code) must occur, if at all, within two (2) years following such Cure Period
in order for such termination as a result of such condition to constitute a
Termination of Employment for Good Reason.

     

    
      	
              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 or any Award 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 or any Award shall adversely affect in any material way any Award
      previously granted under the Plan, without the written consent of the
      Participant holding such Award; provided, however, that any such
      modification made for the purpose of complying with Section 409A of the
      Code may be made by the Company without the consent of any
      Participant.

            

    

     

    
      	
              13.3  

            	
              Delay in
      Payment. To the
      extent required in order to avoid the imposition of any interest and/or
      additional tax under Section 409A(a)(1)(B) of the Code, any amount that is
      considered deferred compensation under the Plan or Agreement and that is
      required to be postponed pursuant to Section 409A of the Code, following
      the a Participant’s Termination of Employment shall be delayed for six
      months if a Participant is deemed to be a “specified employee” as defined
      in Section 409A(a)(2)(i)(B) of the Code; provided that, if the Participant
      dies during the postponement period prior to the payment of the postponed
      amount, the amounts withheld on account of Section 409A shall be paid to
      the executor or administrator of the decedent’s estate within 60 days
      following the date of his death.  A “Specified Employee”
      means any Participant who is a “key employee” (as defined in Code Section
      416(i) without regard to paragraph (5) thereof), as determined by AT&T
      in accordance with its uniform policy with respect to all arrangements
      subject to Code Section 409A, based upon the twelve (12) month period
      ending on each December 31st (such twelve (12) month period is referred to
      below as the “identification period”).  All Participants who are
      determined to be key employees under Code Section 416(i) (without regard
      to paragraph (5) thereof) during the identification period shall be
      treated as Specified Employees for purposes of the Plan during the twelve
      (12) month period that begins on the first day of the 4th month following
      the close of such identification
period.

            

    

     

    
      	
              Article
      14.  

            	
              Withholding.

            

    

     

    
      	
              14.1  

            	
              Tax
      Withholding.  Unless otherwise provided by the Committee,
      the Company shall deduct or withhold an amount sufficient to satisfy
      Federal, state, and local taxes (including but not limited to 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.  Unless otherwise provided by the Committee,
      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 but not limited to elections or notices 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 Dallas 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.ex10mm.htm

    EXHIBIT
10-mm

    

    BELLSOUTH

    OFFICER
COMPENSATION DEFERRAL PLAN

    

    (AS
AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2005)

    

    BELLSOUTH
OFFICER COMPENSATION DEFERRAL PLAN

    

    Effective as of the 1st day of
January, 2002, BellSouth Corporation ("BellSouth") established the BellSouth
Officer Compensation Deferral Plan (the "Plan"). The Plan is hereby amended and
restated in its entirety effective as of the 1st day of January,
2005.

    

    BACKGROUND
AND PURPOSE

    

    A.    GOAL.
BellSouth desires to provide its executives, and those of its Affiliates that
participate in the Plan, with an opportunity (i) to defer the receipt and income
taxation of a portion of such executives' compensation; and (ii) to receive an
investment return on those deferred amounts based on either (A) the return of
BellSouth stock, an indexed rate of interest, or a combination of the two, or
(B) for executives who satisfy BellSouth's stock ownership guidelines, the
return of a selected group of mutual and other investment funds.

    

    B.    PURPOSE.
The purpose of the Plan is to set forth the terms and conditions under which
these deferrals may be made and deemed invested and to describe the nature and
extent of the executives' rights to their deferred amounts.

    

    C.    TYPE OF
PLAN. The Plan constitutes an unfunded, nonqualified deferred compensation plan
that benefits certain designated employees who are within a select group of key
management or highly compensated employees. Each Participating Company alone has
the obligation to pay amounts payable under the Plan to Plan Participants, and
such payments are not, and will not be, an obligation of any other Participating
Company.

    

    

    ARTICLE
I

    DEFINITIONS

    

    For purposes of the Plan, each of the
following terms, when used with an initial capital letter, shall have the
meaning set forth below unless a different meaning plainly is required by the
context.

    

    1.1   "ACCOUNT" shall
mean, with respect to a Participant or Beneficiary, the total dollar amount or
value evidenced by the last balance posted in accordance with the terms of the
Plan to the account record established for such Participant or Beneficiary with
respect to the Deferral Contributions of such Participant for any Plan
Year.

    

    1.2   "AFFILIATE"
shall mean at any time any corporation, joint venture or partnership in which
BellSouth owns directly or indirectly, (i) with respect to a corporation, stock
possessing at least ten percent (10%) of the total combined voting power of all
classes of stock in the corporation, or (ii) in the case of a joint venture or
partnership, a ten percent (10%) or greater interest in the capital or profits
of such joint venture or partnership.

    

    1.3   "ANNUAL BONUS"
shall mean, with respect to each Eligible Executive for a specified Plan Year,
such Eligible Executive's actual award amount to be paid under the Short Term
Bonus Plan for such Plan Year (payable in the succeeding year).

    

    1.4   "BASE SALARY"
shall mean, with respect to each Eligible Executive for a specified Plan Year,
the gross regular, periodic base salary paid or payable to the Eligible
Executive for each payroll period during such Plan Year, including any of the
Eligible Executive's own before-tax and after-tax contributions to, or deferrals
under, any Code Section 401(k), Code Section 125, nonqualified deferred
compensation or other employee benefit plan or program, maintained by a
Participating Company from time to time, but excluding any contributions or
benefits paid under any such plan or program by a Participating
Company.

    

    1.5   "BELLSOUTH"
shall mean BellSouth Corporation, a Georgia corporation.

    

    1.6   "BENEFICIARY"
shall mean, with respect to a Participant, the person(s) determined in
accordance with Section 5.4 to receive any death benefits that may be payable
under the Plan upon the death of the Participant.

    

    1.7   "BOARD" shall
mean the Board of Directors of BellSouth.

    

    1.8   "BONUS DEFERRAL
ELECTION" shall mean an election in such form as is provided by the Plan
Administrator on which an Eligible Executive may elect to defer a portion of
such executive's Annual Bonus.

    

    1.9   "BUSINESS DAY"
shall mean each day on which the New York Stock Exchange operates and is open to
the public for trading.

    

    1.10  "CODE" shall mean the
Internal Revenue Code of 1986, as amended.

    

    1.11  "COMPANY STOCK" shall
mean the $1.00 par value per share voting common stock of
BellSouth.

    

    1.12  "COMPENSATION" shall
mean, for any Plan Year, the Participant's annualized Base Salary rate as in
effect on November 15 preceding the beginning of the Plan Year. Provided,
however, that with respect to an Eligible Executive whose eligibility to
actively participate in the Plan commences after November 15 preceding the
beginning of the Plan Year, such amount shall be the Participant's annualized
Base Salary rate as in effect on the first day of the first payroll period after
which the Eligible Executive is eligible to actively participate in the Plan.
Notwithstanding the foregoing, the Plan Administrator, in its sole discretion,
may specify dates other than those described above on which a Participant's
annualized Base Salary rate for a Plan Year is to be determined. For any
Participant employed by a Participating Company whose compensation structure
does not readily fit this definition, "Compensation" shall mean cash
compensation as defined by the Plan Administrator.

    

    1.13  "CREDITED INTEREST
RATE" shall mean, for each Plan Year, the rate of return equal to Moody's
Monthly Average of Yields of Aa Corporate Bonds, as published by Moody's
Investors Service, Inc., for the month of July immediately preceding such Plan
Year. If such rate (or any alternative rate described in this sentence) is at
any time no longer available, the Plan Administrator shall designate an
alternative rate which, in the Plan Administrator's reasonable judgment, is
generally comparable to the rate described in the preceding sentence, and such
alternative rate shall thereafter be the Credited Interest Rate.

    

    1.14  "DEFERRAL
CONTRIBUTIONS" shall mean, as applicable, for each Plan Year that portion of a
Participant's Base Salary and/or Annual Bonus deferred, and for each Performance
Period that portion of a Participant's Performance Share Payment deferred, under
the Plan pursuant to Section 3.2.

    

    1.15  "DEFERRAL ELECTION"
shall mean an election in such form as is provided by the Plan Administrator on
which an Eligible Executive may elect to defer under the Plan a portion of such
Eligible Executive's Base Salary.

    

    1.16  "EFFECTIVE DATE"
shall mean January 1, 2005, the date this restatement of the Plan is effective.
The Plan initially was effective as of January 1, 2002.

    

    1.17  "ELECTION DEADLINE"
shall mean:

    

    (a)   With respect to
a Deferral Election and a Bonus Deferral Election, for an individual who is
eligible to participate in the Plan for an entire Plan Year and is employed by a
Participating Company on such date, the November 30 (or if November 30 is not a
Business Day, the last Business Day immediately preceding November 30)
immediately preceding the first day of such Plan Year. Notwithstanding the
foregoing, with the approval of the Plan Administrator, "Election Deadline" may
mean, with respect to such an Eligible Executive for a Plan Year, the December
31 (or if December 31 is not a Business Day, the last Business Day immediately
preceding December 31) immediately preceding the first day of such Plan
Year.

    

    (b)   With respect to
a Deferral Election and a Bonus Deferral Election, for an individual who becomes
employed by a Participating Company as an Eligible Executive after the November
30 (or such other date) described in the preceding paragraph and on or before
October 1 of a Plan Year and who is eligible to participate in the Plan during
the remainder of such Plan Year pursuant to Section 2.2, the date which is
thirty (30) days after the date the individual first becomes eligible to
participate in the Plan.

    

    (c)   With respect to
a Performance Share Deferral Election, the November 30 (or if November 30 is not
a Business Day, the last Business Day immediately preceding November 30)
immediately preceding the final year of the Performance Period.

    

    1.18  "ELECTION PACKAGE"
shall mean a package consisting of a Deferral Election, a Bonus Deferral
Election, a Performance Share Deferral Election, an Investment Election and such
other forms and documents distributed to an Eligible Executive by the Plan
Administrator for the purpose of allowing such Eligible Executive to elect to
actively participate in the Plan for a Plan Year.

    

    1.19  "ELIGIBLE EXECUTIVE"
shall mean, for each Plan Year, each management employee of a Participating
Company who (i) is a member of a select group of highly compensated or key
management employees, and (ii) is designated by the Plan Administrator as a
member of BellSouth's "executive compensation group," or is otherwise designated
by the Plan Administrator as eligible to participate in the Plan.

    

    1.20  "ERISA" shall mean
the Employee Retirement Income Security Act of 1974, as amended.

    

    1.21  "FINANCIAL HARDSHIP"
shall mean a severe financial hardship to the Participant resulting from a
sudden and unexpected illness or accident of the Participant or of the
Participant's dependent [as defined in Code Section 152(a)], loss of the
Participant's property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant. Financial Hardship shall be determined by the Plan
Administrator on the basis of the facts of each case, including information
supplied by the Participant in accordance with uniform guidelines prescribed
from time to time by the Plan Administrator; provided, the Participant will be
deemed not to have a Financial Hardship to the extent that such hardship is or
may be relieved:

    

    (a)   through
reimbursement or compensation by insurance or otherwise;

    

    (b)   by liquidation
of the Participant's assets, to the extent the liquidation of assets would not
itself cause severe financial hardship; or

    

    (c)   by cessation of
deferrals under the Plan.

    

    Examples
of what are not considered to be unforeseeable emergencies include
the

    need to
send a Participant's child to college or the desire to purchase a
home.

    

    1.22  "INTEREST INCOME
OPTION" shall mean the Investment Option described in Section 4.4, pursuant to
which a Participant's deemed investment earnings are determined on the basis of
the Credited Interest Rate.

    

    1.23  "INTEREST INCOME
SUBACCOUNT" shall mean a bookkeeping subaccount reflecting that portion of a
Participant's Account for each Plan Year which is deemed to be invested in the
Interest Income Option.

    

    1.24  "INVESTMENT ELECTION"
shall mean an election in such form as is provided by the Plan Administrator on
which an Eligible Executive may elect to have Deferral Contributions for a Plan
Year (and all investment earnings attributable thereto) deemed invested in the
Stock Unit Option, the Interest Income Option and/or the Mutual Fund Option
(including the underlying Mutual Funds).

    

    1.25  "INVESTMENT OPTIONS"
shall mean the Stock Unit Option, the Interest Income Option and the Mutual Fund
Option (including the underlying Mutual Funds).

    

    1.26  "MUTUAL FUND" shall
mean the investment funds selected from time to time by the Plan Administrator
for purposes of determining the rate of return on amounts deemed invested in the
Mutual Fund Option pursuant to the terms of the Plan.

    

    1.27  "MUTUAL FUND OPTION"
shall mean the Mutual Fund Option described in Section 4.5, pursuant to which a
Participant's deemed investment earnings are determined by the rate of return
applicable to Mutual Funds.

    

    1.28  "MUTUAL FUND
SUBACCOUNT" shall mean a bookkeeping subaccount reflecting that portion of a
Participant's Account for each Plan Year which is deemed to be invested in the
Mutual Fund Option.

    

    1.29  "PARTICIPANT" shall
mean any person participating in the Plan pursuant to the provisions of Article
II.

    

    1.30  "PARTICIPATING
COMPANY" shall mean BellSouth and each Affiliate which, by action of its board
of directors (or equivalent governing body), adopts the Plan as a Participating
Company with the approval of the Plan Administrator. Such entities shall be
listed on Exhibit A hereto, which shall be updated from time to time to reflect
the addition of new Participating Companies and the effective dates of their
participation, and the deletion of any entities which are no longer
Participating Companies.

    

    1.31  "PERFORMANCE PERIOD"
shall mean the three consecutive calendar year period (or other period of time)
specified in a performance share award agreement (or similar document) made
pursuant to the Stock Plan with respect to which a Performance Share Deferral
Election is made.

    

    1.32  "PERFORMANCE SHARE
AWARD" shall mean, with respect to each Eligible Executive for a specified
Performance Period, an award of "Performance Shares" (as such term is defined in
the Stock Plan) made pursuant to the Stock Plan with respect to such Performance
Period.

    

    1.33  "PERFORMANCE SHARE
DEFERRAL ELECTION" shall mean an election in such form as is provided by the
Plan Administrator on which an Eligible Executive may elect to defer a portion
of such executive's Performance Share Payment.

    

    1.34  "PERFORMANCE SHARE
PAYMENT" shall mean the aggregate of any and all amounts to be paid with respect
to a Performance Share Award.

    

    1.35  "PLAN" shall mean the
BellSouth Officer Compensation Deferral Plan, as contained herein and all
amendments hereto.

    

    1.36  "PLAN ADMINISTRATOR"
shall mean the Chief Executive Officer of BellSouth and any individual or
committee the Chief Executive Officer designates to act on his or her behalf
with respect to any or all of the Chief Executive Officer's responsibilities
hereunder; provided, the Board may designate any other person or committee to
serve in lieu of the Chief Executive Officer as the Plan Administrator with
respect to any or all of the administrative responsibilities
hereunder.

    

    1.37  "PLAN YEAR" shall
mean the calendar year.

    

    1.38  "SHORT TERM BONUS
PLAN" shall mean, effective April 26, 2004, the BellSouth Corporation Stock and
Incentive Compensation Plan, or any successor plan. Prior to April 26, 2004,
"Short Term Bonus Plan" referred to the BellSouth Corporation Officer Short Term
Incentive Award Plan.

    

    1.39  "STOCK/INTEREST
OPTION" shall mean the investment option comprised of the Stock Unit Option
and/or the Interest Income Option, as described in Section
4.2(b)(i).

    

    1.40  "STOCK PLAN" shall
mean the BellSouth Corporation Stock and Incentive Compensation Plan, or any
successor plan.

    

    1.41  "STOCK UNIT" shall
mean an accounting entry that represents an unsecured obligation of a
Participating Company to pay to a Participant an amount which is based on the
fair market value of one share of Company Stock as set forth herein. A Stock
Unit shall not carry any voting, dividend or other similar rights and shall not
constitute an option or any other right to acquire any equity securities of
BellSouth.

    

    1.42  "STOCK UNIT OPTION"
shall mean the Investment Option described in Section 4.3, pursuant to which a
Participant's deemed investment earnings are determined by the rate of return
applicable to Stock Units.

    

    1.43  "STOCK UNIT
SUBACCOUNT" shall mean a bookkeeping subaccount reflecting that portion of a
Participant's Account for each Plan Year which is deemed to be invested in the
Stock Unit Option.

    

    1.44  "VALUATION DATE"
shall mean each Business Day. Notwithstanding the foregoing, for any specific
purpose determined in the sole discretion of the Plan Administrator, "Valuation
Date" shall mean any day or days declared by the Plan Administrator, in its sole
discretion, to be a Valuation Date. If the Plan provides for a valuation to be
made on a day that is not a Valuation Date, such valuation shall be made as of
the Valuation Date immediately preceding such day.

    

    

    

    ARTICLE
II

    ELIGIBILITY
AND PARTICIPATION

    

    2.1 ANNUAL PARTICIPATION. Each
individual who is an Eligible Executive as of the first day of a Plan Year and
is employed by a Participating Company before the beginning of such Plan Year
shall be eligible to defer a portion of such Eligible Executive's Base Salary,
Annual Bonus and Performance Share Payment, if any, and thereby to actively
participate in the Plan for such Plan Year. Such individual's participation
shall become effective as of the first day of such Plan Year, provided that the
Eligible Executive properly and timely completes the election procedures
described in Section 2.3. For purposes of the Plan, references to "Plan Year"
with respect to a Performance Share Deferral Election shall mean the Plan Year
that is the final calendar year of the Performance Period.

    

    2.2 INTERIM PLAN YEAR PARTICIPATION.
Each individual who becomes employed by a Participating Company as an Eligible
Executive on or before October 1 of a Plan Year, and who is not otherwise
eligible to participate in the Plan during such Plan Year in accordance with
Section 2.1, shall be immediately eligible upon commencement of such employment
to make a Deferral Election and/or Bonus Deferral Election, and thereby to
actively participate in the Plan, for the remainder of such Plan Year. Such
individual's participation shall become effective as of the first day of the
calendar month following the calendar month in which such Deferral Election
and/or Bonus Deferral Election is made, provided that the Eligible Executive
properly and timely completes the election procedures described in Section
2.3.

    

    2.3 ELECTION PROCEDURES. Each
Eligible Executive may elect to defer a portion of such Eligible Executive's
Base Salary, Annual Bonus and/or Performance Share Payment, and thereby become
an active Participant for a Plan Year (or, if Section 2.2 is applicable, for the
remainder of such Plan Year), by delivering a completed Deferral Election, Bonus
Deferral Election and/or Performance Share Deferral Election and an Investment
Election to the Plan Administrator by the applicable Election Deadline for such
Plan Year. Such an election shall be effective only if the individual is
actively employed as an Eligible Executive at the time the individual delivers
the completed Deferral Election, Bonus Deferral Election and/or Performance
Share Deferral Election and Investment Election to the Plan Administrator. The
Plan Administrator may also require the Eligible Executive to complete other
forms and provide other data, as a condition of participation in the
Plan.

    

    2.4 CESSATION OF ELIGIBILITY. An
Eligible Executive's active participation in the Plan shall terminate, and the
Eligible Executive shall not be eligible to make any additional Deferral
Contributions, for any portion of a Plan Year following the date the Eligible
Executive's employment with BellSouth and all Participating Companies terminates
(unless such individual is reemployed as an Eligible Executive later in such
Plan Year). In addition, an individual who actively participated in the Plan
during prior Plan Years but who is not an Eligible Executive or does not
complete the election procedures, for a subsequent Plan Year, shall cease active
participation in the Plan for such subsequent Plan Year. If an individual's
active participation in the Plan ends, such individual shall remain an inactive
Participant in the Plan until the earlier of (i) the date the full amount of
such individual's Accounts is distributed from the Plan, or (ii) the date the
individual again becomes an Eligible Executive and recommences active
participation in the Plan. During the period of time that an individual is an
inactive Participant in the Plan, such individual's Accounts shall continue to
be credited with earnings as provided in the Plan.

    

    

    

    ARTICLE
III

    PARTICIPANTS'
ACCOUNTS; DEFERRAL CONTRIBUTIONS

    

    3.1 PARTICIPANTS'
ACCOUNTS.

    

    (a) ESTABLISHMENT OF ACCOUNTS. The
Plan Administrator shall establish and maintain one or more Accounts on behalf
of each Participant for each Plan Year for which the Participant makes Deferral
Contributions. The Plan Administrator shall credit each Participant's Account
with the Participant's Deferral Contributions for such Plan Year and earnings
attributable thereto, and shall maintain such Account until the value thereof
has been distributed to or on behalf of such Participant or his or her
Beneficiary.

    

    (b) NATURE OF CONTRIBUTIONS AND
ACCOUNTS. The amounts credited to a Participant's Accounts shall be represented
solely by bookkeeping entries.  Except as provided in Article VII, no
monies or other assets shall actually be set aside for such Participant, and all
payments to a Participant under the Plan shall be made from the general assets
of the Participating Companies.

    

    (c) SEVERAL LIABILITIES. Each
Participating Company shall be severally (and not jointly) liable for the
payment of benefits under the Plan under Deferral Elections, Bonus Deferral
Elections and Performance Share Deferral Elections executed by Eligible
Executives with, and while employed by, such Participating Company.

    

    (d) GENERAL CREDITORS. Any assets
which may be acquired by a Participating Company in anticipation of its
obligations under the Plan shall be part of the general assets of such
Participating Company. A Participating Company's obligation to pay benefits
under the Plan constitutes a mere promise of such Participating Company to pay
such benefits, and a Participant or Beneficiary shall be and remain no more than
an unsecured, general creditor of such Participating Company.

    

    3.2 DEFERRAL CONTRIBUTIONS. Each
Eligible Executive may irrevocably elect to have Deferral Contributions made on
his or her behalf for a Plan Year (or, if Section 2.2 is applicable, for the
remainder of such Plan Year), by completing in a timely manner a Deferral
Election, Bonus Deferral Election and/or Performance Share Deferral Election and
an Investment Election, and following other election procedures as provided in
Section 2.3. Subject to any modifications, additions or exceptions that the Plan
Administrator, in its sole discretion, deems necessary, appropriate or helpful,
the following terms shall apply to such Deferral Elections, Bonus Deferral
Elections and Performance Share Deferral Elections:

    

    (a) EFFECTIVE DATE.

    

    (i) BASE SALARY DEFERRAL ELECTION.
Subject to Section 3.2(a)(iv), a Deferral Election made by a Participant shall
be effective beginning with the first regular, periodic paycheck earned and paid
(A) with respect to a Participant participating for the entire Plan Year, in
such Plan Year, and (B) with respect to a Participant participating for a
portion of a Plan Year, in accordance with Section 2.2, in the calendar month
following the calendar month in which the Participant makes his or her Deferral
Election.

    

    (ii) BONUS DEFERRAL ELECTION. Subject
to Section 3.2(a)(iv), a Bonus Deferral Election made by a Participant shall be
effective (A) with respect to a Participant participating for the entire Plan
Year, for the Annual Bonus earned during the Plan Year, and (B) with respect to
a Participant participating for a portion of Plan Year in accordance with
Section 2.2, for the Annual Bonus earned during such portion of the Plan
Year.

    

    (iii) PERFORMANCE SHARE DEFERRAL
ELECTION. Subject to Section 3.2(a)(iv), a Performance Share Deferral Election
shall be effective for the Performance Share Payment earned during the
Performance Period with respect to which such election is made.

    

    (iv) OTHER REQUIREMENTS. To be
effective, a Participant's Deferral Election, Bonus Deferral Election and/or
Performance Share Deferral Election, as applicable, must be made by the Election
Deadline. If an Eligible Executive fails to deliver a Deferral Election, a Bonus
Deferral Election or a Performance Share Deferral Election, or to complete any
of the other requisite election procedures for a Plan Year, in a timely manner,
the Eligible Executive shall be deemed to have elected not to participate in the
Plan for that Plan Year.

    

    (b) TERM. Each Deferral Election for
a Plan Year that is made by a Participant shall remain in effect with respect to
the specified portion of all Base Salary earned and paid or payable during such
Plan Year (or, in the case of a Participant participating for a portion of the
Plan Year in accordance with Section 2.2, with respect to the specified portion
of all Base Salary paid or payable during the remainder of such Plan Year) but
shall not apply to any subsequent Plan Year. Each Bonus Deferral Election for a
Plan Year that is made by a Participant shall be effective with respect to the
specified portion of Annual Bonus, if any, earned during such Plan Year (or, in
the case of a Participant participating for a portion of the Plan Year in
accordance with Section 2.2, for the specified portion of the Annual Bonus
earned during the remainder of such Plan Year), but shall not apply to any
subsequent Plan Year.  Each Performance Share Deferral Election that
is made by a Participant shall be effective with respect to the specified
portion of Performance Share Payment, if any, under the Performance Share Award
to which it relates, but shall not apply to any subsequent Performance Share
Award.

    

    (c) BASE SALARY DEFERRAL ELECTION
AMOUNT. Each Eligible Executive's Deferral Election for a Plan Year shall
specify a whole percentage of his or her Compensation to be deferred from his or
her Base Salary for such year.  Notwithstanding the foregoing, the
Plan Administrator, in its sole discretion, may allow an Eligible Executive to
complete a Deferral Election specifying either (i) a whole dollar amount of his
or her Base Salary to be deferred, with such amount being expressed in
increments of $1,000 (or such other increments as the Plan Administrator may
determine), or (ii) a percentage of his or her Base Salary paid or payable for
each payroll period, with the amount of such deferral to vary as the Eligible
Executive's Base Salary changes. The maximum amount of Base Salary that an
Eligible Executive may defer for any Plan Year shall be fifty-five percent (55%)
of the Eligible Executive's Compensation for such Plan Year rounded up to the
next highest thousand dollars. The total amount elected to be deferred shall be
withheld from such Eligible Executive's regular, periodic paychecks of Base
Salary in substantially equal installments (except as contemplated in clause
(ii) above) throughout the Plan Year. If any election would result in a
fractional dollar amount to be withheld, the Plan Administrator, in its sole
discretion, may determine that such amount will be rounded up to the next
highest whole dollar. Notwithstanding any provision of the Plan or a Deferral
Election to the contrary, however, the amount withheld from any payment of Base
Salary shall be reduced automatically, if necessary, so that it does not exceed
the amount of such payment net of all withholding, allotments and deductions,
other than any reduction pursuant to such Deferral Election. No amounts shall be
withheld during any period an individual ceases to receive Base Salary as an
actively employed Eligible Executive for any reason during the Plan Year except
that, in the case of an individual on an approved paid leave of absence as an
Eligible Executive (including a paid leave of absence under a short term
disability plan of a Participating Company), amounts shall be withheld from such
leave of absence payments and otherwise treated in the same manner as if such
payments constituted Base Salary under the Plan. No adjustment shall be made in
the amount to be withheld from any subsequent payment of Base Salary for a Plan
Year to compensate for any missed or reduced withholding amounts
above.

    

    (d) BONUS DEFERRAL ELECTION AMOUNT.
The Bonus Deferral Election of each Eligible Executive shall specify a whole
percentage of such Eligible Executive's Annual Bonus to be deferred, not to
exceed fifty percent (50%) and not less than five percent (5%). Notwithstanding
any provision of the Plan or a Bonus Deferral Election to the contrary, the
amount withheld from any bonus payment shall be reduced automatically, if
necessary, so that it does not exceed the amount of such payment net of all
withholding, allotments and deductions other than any reduction pursuant to such
Bonus Deferral Election.

    

    (e) PERFORMANCE SHARE DEFERRAL
ELECTION AMOUNT. The Performance Share Deferral Election of each Eligible
Executive shall specify a whole percentage of such Eligible Executive's
Performance Share Payment to be deferred, not less than five percent (5%) and
not to exceed one hundred percent (100%) of the amount actually payable to the
Eligible Executive with respect to the Performance Share Award. Notwithstanding
any provision of the Plan or a Performance Share Deferral Election to the
contrary, the amount withheld from any Performance Share Payment shall be
reduced automatically, if necessary, so that it does not exceed the amount of
such payment net of all withholding, allotments and deductions, other than any
reduction pursuant to such Performance Share Deferral Election.

    

    (f) REVOCATION. Once made, a
Participant may not revoke a Deferral Election or Bonus Deferral Election for a
Plan Year, or a Performance Share Deferral Election with respect to a
Performance Share Award.

    

    (g) CREDITING OF DEFERRED
COMPENSATION.

    

    (i) STOCK UNIT OPTION AND/OR INTEREST
INCOME OPTION. If a Participant elects to have all or any portion of his or her
deferred Base Salary for a Plan Year deemed invested in the Stock/Interest
Option pursuant to Section 4.2(b), the Plan Administrator shall credit to the
Participant's Account for such Plan Year, as of the first day of such Plan Year
(or, as of the effective date of participation of a Participant described in
Section 2.2), the entire amount of the Participant's deferred Base Salary for
such Plan Year. If a Participant elects to have all or any portion of his or her
deferred Annual Bonus for a Plan Year deemed invested in the Stock/Interest
Option pursuant to Section 4.2(b), the Plan Administrator shall credit to the
Participant's Account, as of the first day of the Plan Year in which the
Participant's Annual Bonus for such Plan Year is actually paid under the Short
Term Bonus Plan, the entire amount deferred. If a Participant elects to have all
or any portion of his or her deferred Performance Share Payment for a
Performance Period deemed invested in the Stock/Interest Option pursuant to
Section 4.2(b), the Plan Administrator shall credit to the Participant's
Account, as of the first day of the Plan Year next following the end of the
Performance Period, the entire amount deferred. If for any reason the entire
amount of the Participant's Deferral Contributions so elected are not made, the
Participant's Account shall be automatically adjusted, retroactively to the
first day of such Plan Year (or, if applicable, the effective date of
participation of a Participant described in Section 2.2), to reflect the amount
of Deferral Contributions actually made from Base Salary (or pursuant to Section
3.4, if applicable), Annual Bonus and/or Performance Share Payment during the
Plan Year. Notwithstanding the foregoing, if a Participant described in this
Section 3.2(g)(i) is an "Executive Officer" (as such term is defined in the
Stock Plan), the Plan Administrator shall instead credit to such Participant's
Account for a Plan Year, as of the last day of the applicable Plan Year, the
entire amount of the Participant's Base Salary, Annual Bonus and/or Performance
Share Payment actually deferred, retroactively to the first day of such Plan
Year (or, if applicable, the effective date of participation of a Participant
described in Section 2.2).

    

    (ii) MUTUAL FUND OPTION. If a
Participant elects to have all or any portion of his or her deferred Base Salary
for a Plan Year deemed invested in the Mutual Fund Option pursuant to Section
4.2(b), the Plan Administrator shall credit to the Participant's Account, as of
each Valuation Date that is on (or as soon as administratively practicable
after) a payroll period payment date, the Deferral Contribution made from Base
Salary for such payroll period. If a Participant elects to have all or any
portion of his or her deferred Annual Bonus for a Plan Year deemed invested in
the Mutual Fund Option pursuant to Section 4.2(b), the Plan Administrator shall
credit to the Participant's Account, as of the Valuation Date that is on (or as
soon as administratively practicable after) the date the Participant's Annual
Bonus for the prior Plan Year is actually paid under the Short Term Bonus Plan,
the amount of such Annual Bonus that is deferred. If a Participant elects to
have all or any portion of his or her deferred Performance Share Payment for a
Performance Period deemed invested in the Mutual Fund Option pursuant to Section
4.2(b), the Plan Administrator shall credit to the Participant's Account, as of
each Valuation Date that is on (or as soon as administratively practicable
after) the date that each separate payment to be made to the Participant with
respect to the Performance Share Award is actually payable, the amount of such
Performance Share Award that is deferred.

    

    3.3 DEFERRAL ELECTIONS AND MULTIPLE
PARTICIPATING COMPANIES. Any Deferral Election, Bonus Deferral Election and/or
Performance Share Deferral Election which is timely executed and delivered to
the Plan Administrator shall be effective to defer Base Salary, Annual Bonus
and/or a Performance Share Payment earned by the Participant from the
Participating Company employing such Participant at the time of the
Participant's election or any other Participating Company employing such
Participant during the Plan Year for which the Deferral Election, Bonus Deferral
Election is effective, or during the Performance Period with respect to which a
Performance Share Deferral Election is effective. In particular, a Participant
(i) who timely executes and delivers a Deferral Election, Bonus Deferral
Election and/or Performance Share Deferral Election while employed by one
Participating Company and subsequently transfers to another Participating
Company, or (ii) who terminates employment and subsequently becomes employed by
another Participating Company, shall have the Base Salary, Annual Bonus and/or
Performance Share Payment that is paid or payable to such Participant by both
Participating Companies reduced under the terms of the Deferral Election, Bonus
Deferral Election and/or Performance Share Deferral Election and the Plan as if
the transfer or termination and reemployment had not occurred; provided that, as
provided in Section 3.2(c), no amounts of Base Salary shall be withheld to the
extent they are attributable to any portion of the Plan Year during which such
Participant is not receiving Base Salary as an Eligible Executive of a
Participating Company.

    

    3.4 TERMINATION UNDER SEVERANCE
ARRANGEMENT. Notwithstanding the foregoing, a Participant eligible to
participate in a severance plan or arrangement sponsored by a Participating
Company which provides for a lump-sum severance payment upon termination of
employment may elect, on such form and at such time and in such manner as shall
be prescribed by the Plan Administrator, to reduce the amount of a lump-sum
severance payment to which the Participant may become entitled under such plan
or arrangement. The amount of such reduction shall not exceed the dollar amount
by which the Participant's deferred Base Salary for the Plan Year in which such
termination occurs would not have been made at the time of termination of
employment, and the amount so elected shall for all purposes be treated as
Deferral Contributions made under the Plan.

    

    3.5 VESTING. A Participant shall at
all times be fully vested in the Participant's Deferral Contributions and all
investment earnings attributable thereto.

    

    3.6 DEBITING OF DISTRIBUTIONS. As of
each Valuation Date, the Plan Administrator shall debit each Participant's
Account for any amount distributed from such Account since the immediately
preceding Valuation Date.

    

    ARTICLE
IV

    DETERMINATION
AND CREDITING OF INVESTMENT RETURN

    

    4.1 GENERAL INVESTMENT PARAMETERS.
The rate of return credited to each Participant's Account shall be determined on
the basis of the Investment Option(s) selected by the Participant. The terms of
this selection process and the manner in which investment return is credited are
set forth in this Article IV.

    

     4.2 PARTICIPANT DIRECTION OF
DEEMED INVESTMENTS. Each Participant generally may direct that his or her
Deferral Contributions for each Plan Year shall be deemed invested in the
Stock/Interest Option, the Mutual Fund Option or both, and then may select among
the options offered within that selection. The Participant may make a separate
election for his or her deferred Base Salary and deferred Annual Bonus for each
Plan Year and deferred Performance Share Payment for each Performance Period.
Notwithstanding the foregoing, the Mutual Fund Option may be elected only by
Participants who, as of June 30 of the year in which the Investment Election is
made, satisfy the BellSouth stock ownership target then applicable to each such
Participant under BellSouth's executive stock ownership guidelines. Once made, a
Participant may not revoke an election between the Stock/Interest Option and the
Mutual Fund Option.

    

    (a) NATURE OF PARTICIPANT DIRECTION.
A Participant's election of the deemed investments shall be for the sole purpose
of determining the rate of return to be credited to such Participant's Account
for such Plan Year, and shall not be treated or interpreted in any manner
whatsoever as a requirement or direction to actually invest assets in Company
Stock, an interest income fund, a mutual fund or any other investment media. The
Plan, as an unfunded, nonqualified deferred compensation plan, at no time shall
have any actual investment of assets relative to the benefits or Accounts
hereunder.

    

    (b) INVESTMENT OF CONTRIBUTIONS. In
conjunction with completing each of a Deferral Election, Bonus Deferral Election
and/or Performance Share Deferral Election for a Plan Year, an Eligible
Executive shall complete a separate Investment Election in which he or she
elects the whole percentages of the amount deferred under such Deferral
Election, such Bonus Deferral Election or such Performance Share Deferral
Election (as applicable) to be deemed invested in (i) the Stock/Interest Option,
and/or (ii) if available with respect to the executive, the Mutual Fund Option;
provided, the combined percentages allocated to the Stock/Interest Option and
the Mutual Fund Option shall equal one hundred percent (100%). Once a
Participant makes an election between the Stock/Interest Option and the Mutual
Fund Option for a Plan Year, he or she may not change such election. If the
Eligible Executive elects the Stock/Interest Option, he or she must then select
his or her investment mix as described in subsection (i) hereinbelow; and if the
Eligible Executive elects the Mutual Fund Option, he or she must then select his
or her investment mix as described in subsection (ii) hereinbelow.

    

    (i) STOCK UNIT OPTION AND/OR INTEREST
INCOME OPTION. An Eligible Executive who selects the Stock/Interest Option with
respect to eitherhis or her deferred Base Salary, deferred Annual Bonus or
deferred Performance Share Payment shall specify any whole percentage to be
invested in the Stock Unit Option and any whole percentage to be invested in the
Interest Income Option, such that the total of the two percentages equals the
total percentage of his deferred amount allocated to the Stock/Interest
Option.

    

    ii) MUTUAL FUND OPTION. An Eligible
Executive, who as of June 30 of the year during which the Investment Election is
made satisfies BellSouth's stock ownership target applicable to such Executive
under BellSouth's executive stock ownership guidelines, and who selects the
Mutual Fund Option with respect to either his or her deferred Base Salary,
deferred Annual Bonus or deferred Performance Share Payment, shall specify the
whole percentage of such Deferral Contributions that will be deemed invested in
each Mutual Fund. Within the Mutual Fund Option, a Participant may make
subsequent Investment Elections to change the percentage of such Deferral
Contributions that will be deemed invested in each Mutual Fund, and any such
election shall apply to all such Deferral Contributions credited to his or her
Account after the election becomes effective. Any such election shall be
effective on or as soon as administratively practicable after the Plan
Administrator's receipt of the election. All such Investment Elections shall be
(A) made in whole percentages, (B) effected at the 4:00 p.m. Eastern Time
closing price of the applicable Mutual Fund on each applicable Valuation Date,
and (C) subject to such additional rules as the Plan Administrator may
prescribe.

    

    (c) INVESTMENT OF EXISTING ACCOUNT
BALANCES.

    

    (i) STOCK/INTEREST OPTION. A
Participant with all or part of his or her Account deemed invested in the
Stock/Interest Option may not make an Investment Election (i) changing all or
any portion of such deemed investment among investment alternatives within the
Stock/Interest Option, or (ii) transferring all or any portion of such deemed
investments to the Mutual Fund Option. Thus, once an amount is deemed invested
in the Stock/Interest Option, it shall continue to be so invested until such
amount is distributed.

    

    (ii) MUTUAL FUND OPTION. A
Participant with all or part of his or her Account deemed invested in the Mutual
Fund Option may make subsequent Investment Elections changing the percentage of
that portion of his or her existing Account balance that will be deemed invested
in each Mutual Fund. Any such election shall be effected at the 4:00 p.m.
Eastern Time closing price of the applicable Mutual Fund on the Valuation Date
that is coincident with or as soon as administratively practicable after the
Plan Administrator's receipt of such election. All such Investment Elections
shall be made in whole percentages, and subject to such additional rules as the
Plan Administrator may prescribe. No Investment Election may be made changing a
deemed investment from the Mutual Fund Option to the Stock/Interest
Option.

    

    (d) INVESTMENT SUBACCOUNTS. For the
sole purpose of tracking a Participant's Investment Elections and calculating
deemed investment earnings attributable to a Participant's Account for a Plan
Year pursuant to the terms of this Article IV, the Plan Administrator shall
establish and maintain for such Participant for such Plan Year a Stock Unit
Subaccount, an Interest Income Subaccount and a Mutual Fund Subaccount, as
necessary, the total of which shall equal such Participant's Account for such
Plan Year.

    

    4.3 STOCK UNIT OPTION.

    

    a) STOCK UNIT SUBACCOUNT. To the
extent an Eligible Executive makes an Investment Election in accordance with
Section 4.2 to have his or her Deferral Contributions for a Plan Year deemed to
be invested in the Stock Unit Option, the Participant's Stock Unit Subaccount
shall be credited (subject to the adjustment described in subsection 3.2(g), if
applicable) with the applicable portion of each such Deferral Contribution at
the time such Deferral Contribution is credited to the Participant's Account
under Section 3.2(g), with a number of Stock Units equal to the number of full
and fractional shares of Company Stock that could have been purchased with such
portion of the Eligible Executive's Deferral Contribution at the average of the
high and low sales prices of one share of Company Stock on the New York Stock
Exchange for the last Business Day of each of the three (3) calendar months
immediately preceding the first day of such Plan Year.

    

    (b) CASH DIVIDENDS. As of each date
on which BellSouth has paid a cash dividend on Company Stock, the number of
Stock Units credited to a Participant's Stock Unit Subaccount shall be increased
by a number of additional Stock Units equal to the quotient of (i) the amount of
dividends that would have been paid on the number of shares of Company Stock
equivalent to the number of Stock Units credited to such subaccount on such
dividend payment date, divided by (ii) the 4:00 p.m. Eastern Time closing price
of Company Stock on the New York Stock Exchange on such dividend payment
date.

    

    (c) ADJUSTMENTS. In the event of any
change in outstanding shares of Company Stock, by reclassification,
recapitalization, merger, consolidation, spinoff, combination, exchange of
shares, stock split, reverse stock split or otherwise, or in the event of the
payment of a stock dividend on Company Stock, or in the event of any other
increase or decrease in the number of outstanding shares of Company Stock, other
than the issuance of shares for value received by BellSouth or the redemption of
shares for value, the Plan Administrator shall adjust the number and/or form of
Stock Units in the manner it deems appropriate in its reasonable judgment to
reflect such event, including substituting or adding publicly traded shares of
companies other than the Company as a basis for determining Stock Units. The
Plan Administrator similarly shall make such adjustments as it deems are
appropriate in its reasonable judgment in the form, including the basis of
measurement, of Stock Units in the event all shares of Company Stock cease for
any reason to be outstanding or to be actively traded on the New York Stock
Exchange. In the event the Plan Administrator determines in its reasonable
judgment that it would not be possible to appropriately reflect an event under
this paragraph (c) by adjusting the number and/or form of Stock Units, the Plan
Administrator shall establish a special Valuation Date appropriate to such event
for all Stock Unit Subaccounts and shall cause such subaccounts, as so valued,
automatically to be converted into Interest Income Subaccounts, which thereafter
shall be subject to Section 4.4.

    

    4 INTEREST INCOME
OPTION.

    

    (a) INTEREST INCOME SUBACCOUNT. To
the extent that an Eligible Executive makes an Investment Election in accordance
with Section 4.2 to have his or her Deferral Contributions for a Plan Year
deemed to be invested in the Interest Income Option, the Participant's Interest
Income Subaccount shall be credited (subject to the adjustment described in
subsection 3.2(g), if applicable) with the applicable portion of each such
Deferral Contribution at the time such Deferral Contribution is credited to the
Participant's Account under Section 3.2(g).

    

    (b) CREDITING OF DEEMED INTEREST. As
of each Valuation Date, the Plan Administrator shall credit a Participant's
Interest Income Subaccounts with the amount of earnings applicable thereto for
the period since the immediately preceding Valuation Date. Such crediting of
earnings for each Interest Income Subaccount shall be effected, as
follows:

    

    (i)
AMOUNT INVESTED. The Plan Administrator shall determine the amount of (A) in the
case of an Interest Income Subaccount established in connection with a Deferral
Election or Bonus Deferral Election for the Plan Year, or established in
connection with a Performance Share Deferral Election for the Performance
Period, such Participant's Deferral Contributions credited to such Participant's
Interest Income Subaccount as of the immediately preceding Valuation Date, plus
any investment earnings credited to such Participant's Interest Income
Subaccount since the immediately preceding Valuation Date; and (B) in the case
of an Interest Income Subaccount for a prior Plan Year, the balance of such
Participant's Interest Income Subaccount as of the immediately preceding
Valuation Date, plus any investment earnings credited to such Participant's
Interest Income Subaccount since the immediately preceding Valuation Date, minus
the amount distributed from such Participant's Interest Income Subaccount since
the immediately preceding Valuation Date; and

    

    (ii)
DETERMINATION OF AMOUNT. The Plan Administrator then shall apply the Credited
Interest Rate for such Plan Year to such Participant's adjusted Interest Income
Subaccount (as determined in subparagraph (i) hereof), and the total amount of
investment earnings resulting therefrom shall be credited to such Participant's
Interest Income Subaccount as of such Valuation Date.

    

    4.5 MUTUAL FUND OPTION.

    

    (a) MUTUAL FUNDS. From time to time,
the Plan Administrator shall select two (2) or more Mutual Funds for purposes of
determining the rate of return on amounts deemed invested in the Mutual Fund
Option in accordance with the terms of the Plan. The Plan Administrator may
change, add or remove Mutual Funds on a prospective basis at any time and in any
manner it deems appropriate.

    

    (b) MUTUAL FUND SUBACCOUNT. To the
extent that an Eligible Executive makes an Investment Election in accordance
with Section 4.2 to have his or her Deferral Contributions for a Plan Year
deemed to be invested in the Mutual Fund Option, the Participant's Mutual Fund
Subaccount shall be credited with the applicable portion of each such Deferral
Contribution at the time such Deferral Contribution is credited to the
Participant's Account under Section 3.2(g), with the investment in each Mutual
Fund based on the 4:00 p.m. Eastern Time closing price of the Mutual Fund on
such crediting date.

    

    (c) CREDITING OF EARNINGS. As of each
Valuation Date, the Plan Administrator shall determine the value of a
Participant's Mutual Fund Subaccount (as well as the earnings and/or losses
thereof) by valuing the deemed investments in the Mutual Funds as if such
subaccount actually were invested therein.

    

    4.6 GOOD FAITH VALUATION BINDING. In
determining the value of Accounts, the Plan Administrator shall exercise its
best judgment, and all such determinations of value (in the absence of bad
faith) shall be binding upon all Participants and their
Beneficiaries.

    

    4.7 ERRORS AND OMISSIONS IN ACCOUNTS.
If an error or omission is discovered in the Account of a Participant or in the
amount of a Participant's Deferral Contributions, the Plan Administrator, in its
sole discretion, shall cause appropriate, equitable adjustments to be made as
soon as administratively practicable following the discovery of such error or
omission.

    

    ARTICLE
V

    PAYMENT
OF ACCOUNT BALANCES

    

    5.1 BENEFIT AMOUNTS.

    

    (a) BENEFIT ENTITLEMENT. As the
benefit under the Plan, each Participant (or Beneficiary) shall be entitled to
receive the total amount of the Participant's Accounts, determined as of the
most recent Valuation Date, and payable at such times and in such forms as
described in this Article V.

    

    (b) VALUATION OF BENEFIT. For
purposes hereof, each Account of a Participant as of any Valuation Date shall be
equal to the total value such Participant's Stock Unit Subaccount, Interest
Income Subaccount and Mutual Fund Subaccount.

    

    (c) CONVERSION OF STOCK UNITS INTO
DOLLARS. For purposes of converting some or all of a Participant's Stock Units
into a dollar amount in valuing the Participant's Accounts as of any Valuation
Date, the value of each Stock Unit shall be equal to the average of the high and
low sales prices of one share of Company Stock on the New York Stock Exchange
for the last Business Day of each of the three (3) months of the calendar
quarter most recently completed on or prior to such Valuation Date.

    

    5.2 ELECTIONS OF TIMING AND FORM. In
conjunction with, and at the time of, completing a Deferral Election and/or
Bonus Deferral Election for each Plan Year, or a Performance Share Deferral
Election for each Performance Share Award, an Eligible Executive shall select
the timing and form of the distribution that will apply to the Account for such
Eligible Executive's Deferral Contributions (and deemed investment earnings
attributable thereto) for such Plan Year. The terms applicable to this selection
process are as follows:

    

    (a) TIMING. For a Participant's
Account for each Plan Year, such Participant may elect that distribution will be
made or commence as of any January 1 following the Plan Year of deferral;
provided, a Participant may not select a benefit payment or commencement date
for such Account that is (i) earlier than (A) in the case of a Deferral
Election, the second January 1 following the end of the Plan Year for which the
deferral is made, or (B) in the case of a Bonus Deferral Election or a
Performance Share Deferral Election, the third January 1 following the end of
the Plan Year for which the deferral is made; or (ii) later than the twentieth
(20th) January 1 following the end of the Plan Year of deferral.

    

    (b) FORM OF DISTRIBUTION. For a
Participant's Account for each Plan Year, such Participant may elect that
distribution will be paid in one of the following forms:

    

    (i) a single lump-sum cash payment;
or

    

    (ii) substantially equal annual
installments (adjusted for investment earnings between payments in the manner
described in Article IV) over a period of two (2) to ten (10)
years.

    

    (c) MULTIPLE SELECTIONS. An Eligible
Executive may select a different benefit payment or commencement date and/or a
different form of distribution with respect to his or her Account for each Plan
Year. For ease of administration, the Plan Administrator may combine Accounts
and subaccounts of a Participant to which the same benefit payment/commencement
date and the same form of distribution apply.

    

    5.3 BENEFIT PAYMENTS TO A
PARTICIPANT.

    

    (a) TIMING. A Participant shall
receive or begin receiving a distribution of each of his or her Accounts as of
the earlier of (i) the January 1 selected by such Participant with respect to
each such Account pursuant to the terms of Section 5.2(a); or (ii) the January 1
immediately following the date that such Participant's employment with BellSouth
and all Affiliates ends for any reason, unless the Participant returns to
employment with BellSouth or one of the Affiliates before such January 1;
provided, however, that with respect to a Bonus Deferral Election or Performance
Share Deferral Election of a Participant whose employment has so terminated,
distribution shall be made or begin no sooner than the January 1 immediately
following the date on which the Annual Bonus or Performance Share Payment is
payable. An amount payable "as of" any January 1 shall be made as soon as
practicable after such January 1 and, unless extenuating circumstances arise, no
later than January 31.

    

    (b) FORM OF DISTRIBUTION. A
Participant shall receive or begin receiving a distribution of each of his or
her Accounts in cash in the form selected by such Participant with respect to
such Account pursuant to the terms of Section 5.2(b).

    

    (c) VALUATION OF SINGLE LUMP-SUM
PAYMENTS. The amount of a Participant's single lump-sum distribution of any of
his or her Accounts as of any applicable January 1 shall be equal to the value
of such Account as of the Valuation Date immediately preceding the date on which
such distribution is paid.

    

    (d) VALUATION OF INSTALLMENT
PAYMENTS. For purposes of determining the amount of any installment payment to
be paid as of a January 1 from an Account, the following shall
apply:

    

    (i) for any amount of such Account
attributable to an Interest Income Subaccount as of the immediately preceding
Valuation Date, such amount shall be divided by the number of remaining
installments to be paid from such Account (including the current
installment);

    

    (ii) for any portion of such Account
attributable to a Stock Unit Subaccount as of the immediately preceding
Valuation Date, the total number of Stock Units constituting such portion shall
be divided by the number of remaining installments to be paid from such Account
(including the current installment), and the resulting number of Stock Units
shall be converted into a dollar amount (pursuant to the terms of Section
5.1(c)) as of such Valuation Date; and

    

    (iii) for any amount of such Account
attributable to a Mutual Fund Subaccount as of the immediately preceding
Valuation Date, such amount shall be divided by the number of remaining
installments to be paid from such Account (including the current
installment).

    

    5.4 DEATH BENEFITS.

    

    (a) GENERAL. If a Participant dies
before receiving the entire amount of his or her benefit under the Plan, such
Participant's Beneficiary shall receive distribution of amounts remaining in the
Participant's Accounts in the form, as elected by the Participant on a
Beneficiary designation form described in Section 5.6, of either:

    

    (i) a single lump-sum cash payment of
the entire balance in the Participant's Accounts as of the January 1 immediately
following the date of the Participant's death; or

    

    (ii) (A) for Accounts with respect to
which distribution has not commenced under Section 5.2 at the time of the
Participant's death, substantially equal annual installments (adjusted for
investment earnings between payments in the manner described in Article IV) over
a period of two (2) to ten (10) years, commencing as of the January 1
immediately following the Participant's death; and (B) for Accounts with respect
to which distribution has commenced in the form of installments described in
Section 5.2(b)(ii) at the time of the Participant's death, continuation of such
installment payment schedule.

    

    An amount
payable "as of" any January 1 shall be made as soon as practicable after such
January 1 and, unless extenuating circumstances arise, no later than January
31.

    

    (b) VALUATION. The valuation rules
described in subsections 5.3(c) and 5.3(d) shall apply to payments described in
this Section 5.4.

    

    5.5 WITHDRAWALS.

    

    (a) HARDSHIP WITHDRAWALS. Upon
receipt of an application for a hardship withdrawal and the Plan Administrator's
decision, made in its sole discretion, that a Participant has suffered a
Financial Hardship, the Plan Administrator shall cause the payment of a
distribution to such Participant. Such distribution shall be paid in a
single-sum payment in cash as soon as administratively feasible after the Plan
Administrator determines that the Participant has incurred a Financial Hardship.
The amount of such single-sum payment shall be limited to the amount reasonably
necessary to meet the Participant's requirements resulting from the Financial
Hardship. The amount of such distribution shall reduce the Participant's Account
balance as provided in Section 3.6.

    

    (b) WITHDRAWALS WITH FORFEITURE.
Notwithstanding any other provisions of this Article V to the contrary, a
Participant may elect, at any time prior to the distribution of his or her
entire benefit hereunder, to withdraw all or a portion of (i) the remaining
amount credited to one or more of  his or her Accounts, determined as
of the Valuation Date on which such distribution is processed, in twenty-five
percent (25%) increments; plus (ii) the amount of Deferral Contributions made
since such Valuation Date. Such distribution shall be made in the form of a
single-sum payment in cash, as prescribed in Section 5.2(b)(i), as soon as
administratively feasible after the date of the Participant's election under
this subsection (b). At the time such distribution is made, an amount equal to
ten percent (10%) of the amount distributed shall be permanently and irrevocably
forfeited (and, if the distribution request is more than ninety percent (90%) of
such Participant's Account, the forfeiture amount shall be deducted from his or
her distribution amount to the extent there otherwise will be an insufficient
remaining Account balance from which to deduct this forfeiture). In addition,
the Participant receiving such distribution shall immediately cease to make
Deferral Contributions with respect to a Deferral Election for the Plan Year in
which such withdrawal occurs, and any Bonus Deferral Election and/or Performance
Share Deferral Election with respect to such Plan Year shall be disregarded, and
such Participant shall not be eligible to resume Deferral Contributions until
the first day of the Plan Year coinciding with or immediately following the one
year anniversary of such distribution.

    

    5.6 BENEFICIARY
DESIGNATION.

    

    (a) GENERAL. A Participant shall
designate a Beneficiary or Beneficiaries for all of his or her Accounts by
completing the form prescribed for this purpose for the Plan by the Plan
Administrator and submitting such form as instructed by the Plan Administrator.
Once a Beneficiary designation is made, it shall continue to apply until and
unless such Participant makes and submits a new Beneficiary designation form for
this Plan.

    

    (b) NO DESIGNATION OR DESIGNEE DEAD
OR MISSING. In the event that:

    

    (i) a Participant dies without
designating a Beneficiary;

    

    (ii) the Beneficiary designated by a
Participant is not surviving or in existence when payments are to be made or
commence to such designee under the Plan, and no contingent Beneficiary,
surviving or in existence, has been designated; or

    

    (iii) the Beneficiary designated by a
Participant cannot be located by the Plan Administrator within 1 year from the
date benefit payments are to be made or commence to such designee; then, in any
of such events, the Beneficiary of such Participant shall be the Participant's
surviving spouse, if any can then be located, and if not, the estate of the
Participant, and the entire balance in the Participant's Accounts shall be paid
to such Beneficiary in the form of a single lump-sum cash payment described in
Section 5.4(a)(i).

    

    (c) DEATH OF BENEFICIARY. If a
Beneficiary who survives the Participant, and to whom payment of Plan benefits
commences, dies before complete distribution of the Participant's Accounts, the
entire balance in such Accounts shall be paid to the estate of such Beneficiary
in the form of a single lump-sum cash payment as of the January 1 immediately
following such Beneficiary's death. An amount payable "as of" any January 1
shall be made as soon as practicable after such January 1 and, unless
extenuating circumstances arise, no later than January 31. The valuation rules
described in subsection 5.3(c) shall apply to any payments described in this
subsection 5.6(c).

    

    5.7 TAXES. If the whole or any part
of any Participant's or Beneficiary's benefit hereunder shall become subject to
any estate, inheritance, income, employment or other tax which a Participating
Company shall be required to pay or withhold, the Participating Company shall
have the full power and authority to withhold and pay such tax out of any monies
or other property in its hand for the account of the Participant or Beneficiary
whose interests hereunder are so affected. Prior to making any payment, the
Participating Company may require such releases or other documents from any
lawful taxing authority as it shall deem necessary.

    

    

    ARTICLE
VI

    CLAIMS

    

    6.1 INITIAL CLAIM. Claims for
benefits under the Plan may be filed with the Plan Administrator on forms or in
such other written documents, as the Plan Administrator may prescribe. The Plan
Administrator shall furnish to the claimant written notice of the disposition of
a claim within 90 days after the application therefor is filed. In the event the
claim is denied, the notice of the disposition of the claim shall provide the
specific reasons for the denial, citations of the pertinent provisions of the
Plan, and, where appropriate, an explanation as to how the claimant can perfect
the claim and/or submit the claim for review.

    

    6.2 APPEAL. Any Participant or
Beneficiary who has been denied a benefit shall be entitled, upon request to the
Plan Administrator, to appeal the denial of his or her claim. The claimant (or
his or her duly authorized representative) may review pertinent documents
related to the Plan and in the Plan Administrator's possession in order to
prepare the appeal. The request for review, together with written statement of
the claimant's position, must be filed with the Plan Administrator no later than
60 days after receipt of the written notification of denial of a claim provided
for in Section 6.1. The Plan Administrator's decision shall be made within 60
days following the filing of the request for review. If unfavorable, the notice
of the decision shall explain the reasons for denial and indicate the provisions
of the Plan or other documents used to arrive at the decision.

    

    6.3 SATISFACTION OF CLAIMS. The
payment of the benefits due under the Plan to a Participant or Beneficiary shall
discharge the Participating Company's obligations under the Plan, and neither
the Participant nor the Beneficiary shall have any further rights under the Plan
upon receipt by the appropriate person of all benefits. In addition, (i) if any
payment is made to a Participant or Beneficiary with respect to benefits
described in the Plan from any source arranged by BellSouth or a Participating
Company including, without limitation, any fund, trust, insurance arrangement,
bond, security device, or any similar arrangement, such payment shall be deemed
to be in full and complete satisfaction of the obligation of the Participating
Company under the Plan to the extent of such payment as if such payment had been
made directly by such Participating Company; and (ii) if any payment from a
source described in clause (i) shall be made, in whole or in part, prior to the
time payment would be made under the terms of the Plan, such payment shall be
deemed to satisfy such Participating Company's obligation to pay Plan benefits
beginning with the benefit which would next become payable under the Plan and
continuing in the order in which benefits are so payable, until the payment from
such other source is fully recovered. The Plan Administrator or such
Participating Company, as a condition to making any payment, may require such
Participant or Beneficiary to execute a receipt and release therefor in such
form as shall be determined by the Plan Administrator or the Participating
Company. If receipt and release is required but the Participant or Beneficiary
(as applicable) does not provide such receipt and release in a timely enough
manner to permit a timely distribution in accordance with the general timing of
distribution provisions in the Plan, the payment of any affected distribution
may be delayed until the Plan Administrator or the Participating Company
receives a proper receipt and release.

    

    

    ARTICLE
VII

    SOURCE OF
FUNDS

    

    Each Participating Company shall
provide the benefits described in the Plan from its general assets. However, to
the extent that funds in one or more trusts, or other funding arrangement(s),
allocable to the benefits payable under the Plan are available, such assets may
be used to pay benefits under the Plan. If such assets are not sufficient or are
not used to pay all benefits due under the Plan, then the appropriate
Participating Company shall have the obligation, and the Participant or
Beneficiary, who is due such benefits, shall look to such Participating Company
to provide such benefits. No Participant or Beneficiary shall have any interest
in the assets of any trust, or other funding arrangement, or in the general
assets of the Participating Companies other than as a general, unsecured
creditor. Accordingly, a Participating Company shall not grant a security
interest in the assets held by the trust in favor of the Participants,
Beneficiaries or any creditor.

    

    

    ARTICLE
VIII

    PLAN
ADMINISTRATION

    

    8.1 ACTION BY THE PLAN
ADMINISTRATOR.

    

    (a) INDIVIDUAL ADMINISTRATOR. If the
Plan Administrator is an individual, such individual shall act and record his or
her actions in writing. Any matter concerning specifically such individual's own
benefit or rights hereunder shall be determined by the Board or its
designee.

    

    (b) ADMINISTRATIVE COMMITTEE. If the
Plan Administrator is a committee, action of the Plan Administrator may be taken
with or without a meeting of committee members; provided, action shall be taken
only upon the vote or other affirmative expression of a majority of the
committee members qualified to vote with respect to such action. If a member of
the committee is a Participant or Beneficiary, such member shall not participate
in any decision which solely affects his or her own benefit under the Plan. For
purposes of administering the Plan, the Plan Administrator shall choose a
secretary who shall keep minutes of the committee's proceedings and all records
and documents pertaining to the administration of the Plan. The secretary may
execute any certificate or any other written direction on behalf of the Plan
Administrator.

    

    8.2 RIGHTS AND DUTIES OF THE PLAN
ADMINISTRATOR. The Plan Administrator shall administer the Plan and shall have
all powers necessary to accomplish that purpose, including (but not limited to)
the following:

    

    (a) to construe, interpret and
administer the Plan;

    

    (b) to make determinations required
by the Plan, and to maintain records regarding Participants' and Beneficiaries'
benefits hereunder;

    

    (c) to compute and certify to
Participating Companies the amount and kinds of benefits payable to Participants
and Beneficiaries, and to determine the time and manner in which such benefits
are to be paid;

    

    (d) to authorize all disbursements by
a Participating Company pursuant to the Plan;

    

    (e) to maintain all the necessary
records of the administration of the Plan;

    

    (f) to make and publish such rules
and procedures for the regulation of the Plan as are not inconsistent with the
terms hereof;

    

    (g) to delegate to other individuals
or entities from time to time the performance of any of its duties or
responsibilities hereunder; and

    

    (h) to hire agents, accountants,
actuaries, consultants and legal counsel to assist in operating and
administering the Plan.

    

    The Plan
Administrator shall have the exclusive right to construe and interpret the Plan,
to decide all questions of eligibility for benefits and to determine the amount
of such benefits, and its decisions on such matters shall be final and
conclusive on all parties.

    

    8.3 BOND; COMPENSATION. The Plan
Administrator and (if applicable) its members shall serve as such without bond
and without compensation for services hereunder. All expenses of the Plan
Administrator shall be paid by the Participating Companies.

    

    

    ARTICLE
IX

    AMENDMENT
AND TERMINATION

    

    9.1 AMENDMENTS. Subject to Section
9.3, the Board shall have the right, in its sole discretion, to amend the Plan
in whole or in part at any time and from time to time. In addition, the Plan
Administrator shall have the right, in its sole discretion, to amend the Plan at
any time and from time to time so long as such amendment is not of a material
nature.

    

    9.2 TERMINATION OF PLAN. Subject to
Section 9.3, BellSouth reserves the right to discontinue and terminate the Plan
at any time, for any reason. Any action to terminate the Plan shall be taken by
the Board and such termination shall be binding on all Participating Companies,
Participants and Beneficiaries.

    

    9.3 LIMITATION ON AUTHORITY. Except
as otherwise provided in this Section 9.3, no contractual right created by and
under any Deferral Election, Bonus Deferral Election or Performance Share
Deferral Election made prior to the effective date of any amendment or
termination shall be abrogated by any amendment or termination of the Plan,
absent the express, written consent of the Participant who made the Deferral
Election, Bonus Deferral Election or Performance Share Deferral
Election.

    

    (a) PLAN AMENDMENTS. The limitation
on authority described in this Section 9.3 shall not apply to any amendment of
the Plan which is reasonably necessary, in the opinion of counsel, (i) to
preserve the intended income tax consequences of the Plan described in Section
10.1, (ii) to preserve the status of the Plan as an unfunded, nonqualified
deferred compensation plan for the benefit of a select group of management or
highly compensated employees and not subject to the requirements of Part 2, Part
3 and Part 4 of Title I of ERISA, or (iii) to guard against other material
adverse impacts on Participants and Beneficiaries, and which, in the opinion of
counsel, is drafted primarily to preserve such intended consequences, or status,
or to guard against such adverse impacts.

    

    (b) PLAN TERMINATION. The limitation
on authority described in this Section 9.3 shall not apply to any termination of
the Plan as the result of a determination that, in the opinion of counsel, (i)
Participants and Beneficiaries generally are subject to federal income taxation
on Deferral Contributions or other amounts in Participant Accounts prior to the
time of distribution of amounts under the Plan, or (ii) the Plan is generally
subject to Part 2, Part 3 or Part 4 of Title I of ERISA, but in either case only
if such termination is reasonably necessary, in the opinion of counsel, to guard
against material adverse impacts on Participants and Beneficiaries, or BellSouth
or Participating Companies. Upon such termination, the entire amount in each
Participant's Accounts shall be distributed in a single lump-sum distribution as
soon as practicable after the date on which the Plan is terminated. In such
event, the Plan Administrator shall declare that the date of termination (or, if
such day is not a Business Day, the last Business Day immediately preceding such
day) shall be a Valuation Date and all distributions shall be made based on the
value of the Accounts as of such Valuation Date.

    

    (c) OPINIONS OF COUNSEL. In each case
in which an opinion of counsel is contemplated in this Section 9.3, such opinion
shall be in writing and delivered to the Board, rendered by a nationally
recognized law firm selected or approved by the Board.

    

    

    ARTICLE
X

    MISCELLANEOUS

    

    10.1 TAXATION. It is the intention of
BellSouth that the benefits payable hereunder shall not be deductible by the
Participating Companies nor taxable for federal income tax purposes to
Participants or Beneficiaries until such benefits are paid by the Participating
Company to such Participants or Beneficiaries. When such benefits are so paid,
it is the intention of the Participating Companies that they shall be deductible
by the Participating Companies under Code Section 162.

    

    10.2 WITHHOLDING. All payments made
to a Participant or Beneficiary hereunder shall be reduced by any applicable
federal, state or local withholding or other taxes or charges as may be required
under applicable law.

    

    10.3 NO EMPLOYMENT CONTRACT. Nothing
herein contained is intended to be nor shall be construed as constituting a
contract or other arrangement between a Participating Company and any
Participant to the effect that the Participant will be employed by the
Participating Company or continue to be an employee for any specific period of
time.

    

    10.4 HEADINGS. The headings of the
various articles and sections in the Plan are solely for convenience and shall
not be relied upon in construing any provisions hereof. Any reference to a
section shall refer to a section of the Plan unless specified
otherwise.

    

    10.5 GENDER AND NUMBER. Use of any
gender in the Plan will be deemed to include all genders when appropriate, and
use of the singular number will be deemed to include the plural when
appropriate, and vice versa in each instance.

    

    10.6 ASSIGNMENT OF BENEFITS. The
right of a Participant or Beneficiary to receive payments under the Plan may not
be anticipated, alienated, sold, assigned, transferred, pledged, encumbered,
attached or garnished by creditors of such Participant or Beneficiary, except by
will or by the laws of descent and distribution and then only to the extent
permitted under the terms of the Plan.

    

    10.7 LEGALLY INCOMPETENT. The Plan
Administrator, in its sole discretion, may direct that payment be made to an
incompetent or disabled person, for whatever reason, to the guardian of such
person or to the person having custody of such person, without further liability
on the part of a Participating Company for the amount of such payment to the
person on whose account such payment is made.

    

    10.8 ENTIRE DOCUMENT. This Plan
document sets forth the entire Plan and all rights and limits. Except for a
formal amendment hereto, no document shall modify the Plan or create any
additional rights or benefits.

    

    10.9 GOVERNING LAW. The Plan shall be
construed, administered and governed in all respects in accordance with
applicable federal law (including ERISA) and, to the extent not preempted by
federal law, in accordance with the laws of the State of Georgia.  If
any provisions of this instrument shall be held by a court of competent
jurisdiction to be invalid or unenforceable, the remaining provisions hereof
shall continue to be fully effective.

    

    

    EXHIBIT
A

    

    Participating
Companies

    (as of
January 1, 2005)

    

    Participating Company Names
_________________________Effective Date______________

    

    1.
BellSouth Advertising & Publishing
Corporation                                   January
1, 2002

    

    2.
BellSouth
Corporation                                                                                  January
1, 2002

    

    3.
BellSouth D.C.,
Inc.                                                                                      
January 1, 2002

    

    4.
BellSouth International,
Inc.                                                                        January
1, 2002

    

    5.
BellSouth Telecommunications,
Inc.                                                          January
1, 2002

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