Document:

ex10-5.htm

    
      

      

    McDermott International,
Inc.

    New Supplemental Executive
Retirement Plan

    As
Amended and Restated Effective January 1, 2009

    

    ARTICLE
I

    

    Purpose

    

    1.1           Purpose
of Plan.  The purpose of this McDermott International, Inc.,
New Supplemental Executive Retirement Plan (the “Plan”) is to advance the
interests of McDermott International, Inc., its subsidiaries and affiliates by
providing certain retirement benefits that will attract and retain highly
qualified key employees accountable for the successful conduct of its
business.

    

    1.2           ERISA
Status.  The Plan is governed by the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”).  It has been designed to
qualify for certain exemptions under Title I of ERISA that apply to plans that
are unfunded and maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated
employees.  The Plan is intended to comply with Section 409A of the
Internal Revenue Code of 1986, as amended, and regulations and rulings issued
thereunder.

    

    1.3   Effective
Date.   The original effective date of this Plan is January 1,
2005.  The effective date of this restatement is the close of business
December 31, 2008.

    

    

    ARTICLE
II

    

    Definitions and
Construction

    

    Definitions.  Where
the following words and phrases appear in the Plan, they shall have the
respective meanings set forth below, unless their context clearly indicates to
the contrary.

    

    
      
        	
              	
                2.1

              	
                Account.  Collectively,
      means the Particpant's Company Account and the Particpant's Deferral
      Account. 

              

      

    

     

    
      	
            	
              2.2

            	
              Account
      Value.  At any
      given time, the sum of all amounts credited to the Participant's Account,
      adjusted for any income, gain or loss and any payments attributable to
      such account. 

            

    

     

    
      
        	
              	
                2.3

              	
                Beneficiary.  The person
      designated by each Participant, on a form provided by the Company for this
      purpose, to receive the Participant's distribution under Article VI in the
      event of the Participant's death prior to receiving complete payment of
      his Account. In order to be effective under this Plan, any form
      designating a Beneficiary must be delivered to the Committee before the
      Participant's death. In the adsence of such an effective designation of a
      Beneficiary , "Beneficiary" means the Participant's spouse, or if there is
      no spouse on the date of the participant's death, the Participant's estate
      or heirs at law if there is no administration of the Participant's
      estate.  

              

      

    

    

    
      	
               
      

            	
              2.4

            	
              Board.  The Board
      of Directors of McDermott International, Inc. or the board of directors of
      a company that is a successor to the
Company.

            

    

    

    
      	
               
      

            	
              2.5

            	
              Bonus. Any bonus paid to
      a Participant under any plan, policy or program of the Company providing
      for the payment of annual bonuses to employees or any extraordinary
      payment paid to a Participant if such payment is designated by the
      Committee to be a Bonus for purposes of this Plan.  Bonus shall
      not include any compensation under the 2002 B&W Performance Incentive
      Plan.

            

    

    

    2.6           Cause. Cause
means:

    

    
      	
               
      

            	
              (a)

            	
              the
      overt and willful disobedience of orders or directives issued to a
      Participant that are within his scope of duties, or any other willful and
      continued failure of a Participant to perform substantially his duties
      with the Company (occasioned by reason other than physical or mental
      illness or disability) after a written demand for substantial performance
      is delivered to the Participant by the Committee or the Chief Executive
      Officer of the Company which specifically identifies the manner in which
      the Committee or the Chief Executive Officer believes that the Participant
      has not substantially performed his duties, after which the Participant
      shall have thirty days to defend or remedy such failure to substantially
      perform his duties;

            

    

    

    
      	
               
      

            	
              (b)

            	
              the
      willful engaging by the Participant in illegal conduct or gross misconduct
      which is materially and demonstrably injurious to the Company;
      or

            

    

    

    
      	
               
      

            	
              (c)

            	
              the
      conviction of the Participant with no further possibility of appeal or, or
      plea of nolo contendere by the Participant to, any felony or crime of
      falsehood.

            

    

    

    The
cessation of employment of a Participant under subparagraph (a) and (b) above
shall not be deemed to be for “Cause” unless and until there shall have been
delivered to him a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters (3/4) of the entire membership of the Committee at
a meeting of such Committee called and held for such purpose (after reasonable
notice is provided to the Participant and the Participant is given an
opportunity to be heard before the Committee), finding that, in the good faith
opinion of the Committee, the Participant is guilty of the conduct described in
subparagraph (a) or (b) above, and specifying the particulars thereof in
detail.

    

    2.7           Change in
Control.  A change in
control shall occur when:

    

    
      	
              (a)  

            	
              any
      person (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 stockholders of the Company in substantially the
      same proportions as their ownership of stock of the Company) is or becomes
      the beneficial owner, directly or indirectly, of securities of the Company
      representing thirty percent (30%) or more of the combined voting power of
      the Company’s then outstanding voting
  securities;

            

    

    

    
      	
               
      

            	
              (b)

            	
              during
      any period of two (2) consecutive years (not including any period prior to
      the execution of this Plan), individuals who at the beginning of such
      period constitute the Board of the Company, and any new director of the
      Company (other than a director designated by a person who has entered into
      an agreement with the Company to effect a transaction described in Clauses
      (a) or (c) of this Paragraph (7) whose election by the Company’s Board or
      nomination for election by the stockholders of the Company, was approved
      by a vote of at least two-thirds (2/3) of the Directors of the Company’s
      Board, then still in office who either were Directors thereof at the
      beginning of the period or who election or nomination for election was
      previously so approved, cease for any reason to constitute a majority
      thereof:

            

    

    

    
      	
               
      

            	
              (c)

            	
              the
      shareholders of the Company approve a) 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 combined voting power of the
      voting securities of the Company or such surviving entity outstanding
      immediately after such merger or consolidation, or b) the shareholders of
      the Company approve a plan of complete liquidation of the Company, or c)
      an agreement for the sale or disposition by the Company of all or
      substantially all of the Company’s assets;
or

            

    

    

    
      	
               
      

            	
              (d)

            	
              Such
      other circumstances as may be deemed by the Board in its sole discretion
      to constitute a change in control of the
  Company.

            

    

    

    

    However,
in no event shall a “Change In Control” be deemed to have occurred with respect
to a Participant if the Participant is part of the purchasing group which
consummates the Change-In-Control transaction.  A Participant shall be
deemed “part of a purchasing group” for purposes of the preceding sentence if
the Participant is an equity participant in the purchasing company or group
(except for:  (i) passive ownership of less than three percent (3%) of
the stock of the purchasing company; or (ii) ownership of equity participation
in the purchasing company or group which is otherwise not significant, as
determined prior to the Change in Control by a majority of the non-employee
continuing directors).

    

    2.8           Code.  The Internal
Revenue Code of 1986, as amended.

    

    
      	
               
      

            	
              2.9

            	
              Committee.  The
      Compensation Committee of the Board, or such other administrative
      committee that is appointed by the Board to administer the
      Plan.

            

    

    

    
      	
               
      

            	
              2.10

            	
              Company.  McDermott
      International, Inc. and except where the context clearly indicates
      otherwise, shall include the Company’s subsidiaries and affiliates, as
      well as any successor to any such
entities.

            

    

    

    
      	
               
      

            	
              2.11

            	
              Company
      Account.  The
      notional account maintained by the Committee reflecting each Participant’s
      Company Contributions, together with any income, gain or loss and any
      payments attributable to such
account.

            

    

    

    
      	
               
      

            	
              2.12

            	
              Company
      Contribution.  The total contributions credited
      to a Participant’s Company Account for any one Plan Year pursuant to the
      provisions of Section 4.1 or
4.2.

            

    

    

    
      	
               
      

            	
              2.13

            	
              Compensation. The salary, wages
      and other cash remuneration received by a Participant during any Plan Year
      or in respect of employment with the Company, including any contributions
      made to a plan described in Sections 125, 132(f) or 401(k) of the Code
      pursuant to a salary reduction agreement entered into between a
      Participant and the Company and Bonuses, and amounts, if any, deferred by
      the Participant under this Plan, but excluding cash payments under the
      Company’s 2001 Directors and Officers Long Term Incentive Plan and any
      successor plan thereto and other additional remuneration in any
      form.

            

    

    

    
      	
               
      

            	
              2.14

            	
              Deemed
      Investments.  With
      respect to any Account, the hypothetical investment options with respect
      to which such Account is deemed to be invested for purposes of determining
      the value of such Account under this Plan, as selected from time to time
      by the Committee in its discretion.

            

    

    

    
      	
               
      

            	
              2.15

            	
              Deferral
      Account.  The notional account maintained by the
      Committee reflecting each Participant’s Deferral Contributions, together
      with any income, gain or loss and any payments attributable to such
      amount.

            

    

    

    
      	
               
      

            	
              2.16

            	
              Deferral
      Contribution.  Compensation that is deferred by a
      Participant pursuant to Section 4.3 and credited to a Participant’s
      Deferral Account pursuant to the provisions of Section
  4.3.

            

    

    

    
      	
               
      

            	
              2.17

            	
              Disabled.  A
      Participant will be considered Disabled if the Committee determines in its
      sole discretion that the Participant is unable to engage in any
      substantial gainful activity by reason of any medically determinable
      physical or mental impairment that is expected to last for a continuous
      period of not less than twelve (12)
months.

            

    

    

    
      	
               
      

            	
              2.18

            	
              Eligible
      Employee.  The
      Company’s CEO and any officers of the Company and its subsidiaries and
      affiliates.

            

    

    

    
      	
               
      

            	
              2.19

            	
              ERISA.  The
      Employee Retirement Income Security Act of 1974, as
    amended.

            

    

    

    2.20           Exchange
Act.  The Securities
Exchange Act of 1934, as amended.

    

    
      	
               
      

            	
              2.21

            	
              Participant.  An Eligible
      Employee who has been selected by the Committee as a Participant in the
      Plan until such Eligible Employee ceases to be a Participant in accordance
      with Article III of the Plan.

            

    

    

    
      	
               
      

            	
              2.22

            	
              Plan
      Year.  The
      twelve-consecutive month period commencing January 1 of each
      year.

            

    

    

    
      	
               
      

            	
              2.23

            	
              Retirement.  Separation
      from Service with the Company on or after the first of the calendar month
      following the Participant’s attainment of the age of
  65.

            

    

    

    
      	
               
      

            	
              2.24

            	
              Separation
      from Service.  A
      Separation from Service occurs on the date a Participant dies, retires or
      otherwise has a termination of employment with the Company.  A
      termination of employment occurs on the date after which the Participant
      and the Company reasonably anticipate that no further services will be
      performed by the Participant or that the level of bona fide services
      reasonably anticipated to be performed after such date will permanently
      decrease to 49% or less of the average level of bona fide services
      provided in the immediately preceding thirty-six
  months.

            

    

    

    
      	
               
      

            	
              2.25

            	
              Specified
      Person.  Specified
      Person shall have the meaning set forth in Code Section 409A(a)(2)(B)(i)
      and regulations and ruling promulgated
  thereunder.

            

    

    

    
      	
               
      

            	
              2.26

            	
              Unforeseeable
      Emergency.  A severe
      financial hardship to the Participant resulting from an illness or
      accident of the Participant, the Participant’s spouse, the Participant’s
      Beneficiary, or the Participant’s dependent (as defined in Section 409A of
      the Code); 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.  Whether a
      Participant is faced with an Unforeseeable Emergency is to be determined
      by the Committee in its sole discretion, based on the relevant facts and
      circumstances of each case.  In any case, a distribution on
      account of Unforeseeable Emergency may not exceed the amount necessary to
      relieve the emergency, plus amounts necessary to pay taxes reasonably
      anticipated as a result of the distribution, after taking into account the
      extent that the emergency may be relieved through reimbursement or
      compensation from insurance or otherwise, by liquidation of the
      Participant’s assets, to the extent the liquidation of such assets would
      not itself cause severe financial hardship, or by cessation of deferrals
      under the Plan.

            

    

    

    
      	
               
      

            	
              2.27

            	
              Vested
      Account.  The sum of the Participant’s vested Company
      Account and the Participant’s Deferral
Account.

            

    

    

    
      	
               
      

            	
              2.28

            	
              Vested
      Percentage.  The
      percentage as to which a Participant is vested in his or her Company
      Account as determined under Sections 5.4 and
  5.5.

            

    

    

    
      	
               
      

            	
              2.29

            	
              Years
      of Participation.  The sum of whole Plan Years of
      participation in the Plan as an active employee in continuous employment,
      excluding fractional years.

            

    

    

                                                                                                                                                                                     
ARTICLE III

     

    Participation

     

    

    The
Committee, in its sole discretion, shall select and notify in writing those
Eligible Employees of the Company who shall participate in the
Plan.  An Eligible Employee who has been selected by the Committee as
a Participant shall begin participation in the Plan effective on the date
specified by the Committee in its notification and shall continue to participate
in the Plan until the earlier of (a) the date the Committee notifies the
Participant that he is no longer eligible to participate in the Plan or (b) the
date of his Separation from Service.  A Participant who ceases to
participate in the Plan pursuant to (a) of the preceding sentence shall be
treated as if he had terminated employment with the Company but (i) his benefit,
if any, shall not be payable until after his Separation from Service, and (ii)
his Vested Account shall be adjusted as provided in Article V.  An
Eligible Employee who is rehired by the Company following his Separation from
Service shall become a Participant only if such Eligible Employee is again
selected to participate in the Plan by the Committee.

    

     

    ARTICLE
IV

     

    Contributions

    
 

    4.1   Annual
Company Contribution.  As of the first day of each Plan Year,
the Company shall declare a contribution percentage for each Participant’s
Company Account.  The contribution percentage declared for a
Participant may, but need not be, the same as the contribution percentage
declared for other Participants.  Company Contributions shall be
credited as a bookkeeping entry as of the first day of the Plan Year or at other
such times as determined by the Committee to each Participant’s Company Account,
in an amount equal to the contribution percentage declared for the Participant
multiplied by the Participant’s Compensation received during the prior Plan
Year.

    

    4.2   Discretionary
Company Contribution.  The Committee may in its sole discretion
at any time make an extraordinary contribution to the Company Account of any
Participant.

    

    4.3   Participant
Deferrals.  For
any Plan Year, the Committee may, in its sole discretion, allow a Participant to
elect to defer the payment by the Company of any whole percentage (or dollar
amount) of his annual base salary that would otherwise be paid during such Plan
Year and/or of any whole percentage (or dollar amount) of any Bonus earned
during such Plan Year, and instead have such amounts credited as a bookkeeping
entry to his Deferral Account.  The Compensation otherwise payable to
the Participant shall be reduced by the amount the Participant elected to have
contributed to the Participant’s Deferral Account, which shall be a Deferral
Contribution.

    

    4.4   Participant
Elections.  Prior to the first day of each Plan
Year, a Participant shall file a written election with the Committee specifying
(i) the type(s) and amount(s) of Compensation that he wishes to defer pursuant
to Section 4.3, if Deferral Contributions are permitted by the Committee for the
relevant Plan Year, (ii) the payment date or payment commencement date
pertaining to the portion of his Vested Account that is attributable to
contributions made in the relevant Plan Year, and (iii) the form of payment of
the portion of his Vested Account that is attributable to contributions made in
the relevant Plan Year.  Such election with respect to any Plan Year
must be filed with the Committee no later than the last day of the immediately
preceding Plan Year; provided however, that an election made by a new
Participant who is first eligible to participate in the Plan may be made no
later than the 30th day following the date on which he is
initially eligible to participate in the Plan but only with respect to
Compensation earned after the effective date of such election.  If
Deferral Contributions are permitted, a Participant may elect to defer up to 50%
of his annual Salary and/or up to 100% of any Bonus earned in any Plan
Year.

    

    Except as
set forth in Section 6.3, a Participant shall not be permitted to change his
election with respect to the timing or form of payment and any election made
hereunder shall not apply with respect to prior Plan Years.  Failure
to make a timely Deferral Contribution election will result in no Deferral
Contributions for the relevant Plan Year.  If a Participant fails to
make a timely election specifying time and form of payment, payment of the
portion of the Participant’s Vested Account that is attributable to
contributions made in the relevant Plan Year shall be paid in accordance with
Section 6.4.

    

    4.5   Suspension
of Deferral Contributions.  Except as
provided below, an election to make Deferral Contributions in a Plan Year shall
be irrevocable on the last day of the immediately preceding Plan Year. To the
extent expressly permitted under Code Section 409A and regulations and rulings
issued thereunder, a Participant’s deferral election shall be suspended during
any unpaid leave of absence granted in accordance with Company policies;
provided, however that such deferral election shall become fully operative as of
the first day of the payroll period commencing coincident with or next following
the Participant’s return to active employment following termination of the
approved unpaid leave in the Plan Year to which the Participant’s deferral
pertains.  In the event of an Unforeseeable Emergency, a Participant
shall suspend deferrals in order  to relieve the emergency, provided
that the deferrals must be suspended for the entire remainder of the Plan
Year.  In the event of a Disability, the Participant may suspend
deferrals by the later of the end of the taxable year of the Company in which
the Disability arises, or the 15th of the
third month following the date that the Disability arises.

    
 

                                                                                                                                                                                      
ARTICLE V

     

    Accounts

    
 

    5.1   Company
Accounts.  The Committee shall establish and maintain an
individual bookkeeping account for each Participant, which shall be the
Participant’s Company Account.  A separate “Company Sub Account” may
be maintained for each Participant for each Plan Year in respect of which
Company Contributions are credited under the Plan for the benefit of the
Participant.  The Committee shall credit the amount of each Company
Contribution made on behalf of a Participant to such Participant’s Company
Account pursuant to Section 4.1 and 4.2.  The Committee shall further
debit and/or credit the Participant’s Company Account with any income, gain or
loss based upon the performance of the Deemed Investments selected by the
participant and any payments attributable to such account on a daily basis, or
at such other times as it shall determine appropriate.  The sole
purpose of the Participant’s Company Account is to record and reflect the
Company’s Plan obligations related to Company Contributions to each Participant
under the Plan.  The Company shall not be required to segregate any of
its assets with respect to Plan obligations nor shall any provision of the Plan
be construed as constituting such segregation.

    

    5.2   Deferral
Accounts.  The Committee shall establish and maintain an
individual bookkeeping account for each Participant, which shall be the
Participant’s Deferral Account.  A separate “Deferral Sub Account” may
be maintained for each Participant for each Plan Year in respect of which
Deferral Contributions are credited under the Plan for the benefit of the
Participant. The Committee shall credit the amount of each Deferral Contribution
made on behalf of a Participant to such Participant’s Deferral Account as soon
as administratively feasible following the applicable deferral.  The
Committee shall further debit and/or credit the Participant’s Deferral Account
with any income, gain or loss based upon the performance of the Deemed
Investments selected by the Participant and any payments attributable to such
Account on a daily basis, or at such other times as it shall determine
appropriate.  The sole purpose of the Participant’s Deferral Account
is to record and reflect the Company’s Plan obligations related to Deferral
Contributions of each Participant under the Plan.  The Company shall
not be required to segregate any of its assets with respect to Plan obligations,
nor shall any provision of the Plan be construed as constituting such
segregation.

    

    5.3   Hypothetical
Accruals to the Account.  In accordance
with procedures established by the Committee and subject to this Section 5.3,
the Participant may designate the Deemed Investments with respect to which his
or her Account shall be deemed to be invested. If a Participant fails to make a
proper designation, then his Account shall be deemed to be invested in the
Deemed Investments designated by the Committee in its sole
discretion.   A Participant may change such designation with
respect to future Company and Deferral Contributions, as well as amounts,
already credited to his Account in accordance with procedures established by the
Committee.  A copy of any available prospectus or other disclosure
materials for each of the Deemed Investments shall be made available to each
Participant upon request.  The Committee shall determine from time to
time each of the Deemed Investments made available under the Plan and may change
any such determinations at any time.  Nothing herein shall obligate
the Company to invest any part of its assets in any of the investment vehicles
serving as the Deemed Investments.

    

    5.4   Vesting
of Company Account.  A Participant’s vested percentage with
respect to the Participant’s Company Account, adjusted by any income, gain or
loss and any payments attributable thereto, shall be the lesser of i) twenty
percent times the Participant’s Years of Participation, and ii)
100%.  Except as provided in Section 5.5, upon Separation from Service
or cessation of Plan participation, whichever is earlier, a Participant shall
forfeit all amounts credited to his Account other than his Vested Account value
determined as of the close of business coincident with or next following the
date on which the Participant separated from service or ceased to participate in
the Plan, as applicable, provided, however, that amounts not so forfeited shall
continue to be debited and credited in accordance with Section 5.3 from and
after Separation from Service.

    

    5.5   Accelerated
Vesting.  The vesting provisions above notwithstanding, the
Participant shall have a Vested Percentage of 100% for his entire Account upon
the soonest of the following to occur during the Participant’s employment with
the Company: (i) the date of Separation from Service as a result of the
Participant’s death or disability or
termination by the Company for reasons other than Cause, (ii) the Participant’s
Disability, (iii) the Participant’s Retirement, or (iv) the date a Change in
Control occurs.

    

    5.6   Vesting
of Deferral Account. A Participant’s Vested Percentage with regard to his
Deferral Account shall at all times be 100%.

    

    5.7   Nature
and Source of Payments.  The obligation to make distributions
under this Plan with respect to each Participant and any Beneficiary in
accordance with the terms of this Plan shall constitute a liability of the
Company which employed the Participant when the obligation was accrued, and no
other Company shall have such obligation and any failure by a particular Company
to live up to its obligation under this Plan shall have no effect on any other
Company.  All distributions payable hereunder shall be made from the
general assets of the Company, and nothing herein shall be deemed to create a
trust of any kind between the Company and any Participant or other
person.  No special or separate fund shall be established nor shall
any other segregation of assets be made to assure that distributions will be
made under this Plan.  No Participant or Beneficiary shall have any
interest in any particular asset of the Company by virtue of the existence of
this Plan.  Each Participant and Beneficiary shall be an unsecured
general creditor of the Company.

    

    5.8   Statements
to Participants.  Periodically as
determined by the Committee, but not less frequently than annually, the
Committee shall transmit to each Participant a written statement regarding the
Participant's Account for the period beginning on the date following the
effective date of the preceding statement and ending on the effective date of
the current statement.

    

    

    ARTICLE
VI

    

    Payment of
Benefits

    

    

    6.1   Occasions
for Distributions.  The Company shall distribute a
Participant's Vested Account following the events and in the manner set forth in
this Article VI.  A Participant’s Vested Account shall be debited in
the amount of any distribution made from the Account as of the date of the
distribution.  The occasions for distributions shall be (i) the
Participant’s Separation From Service, including upon Retirement or death,
(ii)
Disability, (iii) the
occurrence of an Unforeseeable Emergency, or (iv) the completion of fixed period
of deferral.

    

    6.2   Distribution
Elections.  A Participant
shall elect the time and form of payment of his Vested Account in the manner set
forth in Section 4.4.  A Participant who fails to timely file a
distribution election for a Plan Year shall be deemed to have elected to receive
the portion of his Vested Account attributable to the relevant Plan Year in a
single lump sum payment within 30 days after his Separation from Service, or on
the first day of the seventh month following his Separation from Service if he
is a Specified Person as of the date of the Separation from
Service.  If a Participant’s Vested Account is less than $50,000, it
will be distributed in a single lump sum distribution irrespective of any
election to the contrary.

    

    6.3   Change of
Former Timing of Payments.  A Participant may
make a subsequent election no later than twelve months prior to the date that he
would be eligible to receive a distribution under the Plan, to change the timing
and form of payment of the distribution; provided, however, that the payment, or
first payment in the case of a series of payments, under the subsequent election
shall be deferred to a date that is at least five (5) years after the date the
Participant would have been eligible to receive, or begin receiving, the
distribution under the prior election.  To be effective, any such
election must be in writing timely and received by the Committee, and cannot be
effective for at least twelve months after the date on which the election is
made.  The requirement in this Section 6.3 that the first payment with
respect to which any election thereunder applies must be deferred for at least
five (5) years shall not apply to a payment on account of the Participant’s
death, Disability or in the event of an Unforeseeable
Emergency.  Notwithstanding the provisions of this Section 6.3, for
subsequent distribution elections made in 2008 only, the five year delay shall
not be applicable, so long as the distribution is not payable in 2008 under the
prior election, and the subsequent election does not schedule the distribution
until after December 31, 2008.

    

    6.4   Distribution
on Account of Separation from Service or Disability. Subject to Section 6.8,
upon a Participant’s Disability or Separation from Service, the Company shall
distribute, or begin distributing, to the Participant (or the Participant’s
Beneficiary) within a reasonable period of time (not to exceed 30 days after
such separation), the Participant’s Vested Account.  Such
distribution(s) shall be in the form specified on the distribution election
form(s) filed with the Committee that covers the relevant Vested
Account.  If no effective election form exists, the distribution shall
be distributed in the form of a lump sum payment equal to the relevant portion
of the Participant’s Vested Account.

     

    

    6.5   Continuation
of Hypothetical Accruals to the Vested Account After Commencement of
Distributions.   If any Vested Account of a Participant is
to be distributed in a form other than a lump sum, then such Vested Account
shall continue to be adjusted for hypothetical income, gain or loss and any
payment or distributions attributable to the Vested Account as described in
Section 5.1, and 5.2, until the entire Vested Account has been
distributed.

     

    

    6.6   Unforeseeable
Emergency Distribution.   In the
event that the Committee, upon the written request of a Participant, determines
in its sole discretion that such Participant has incurred an Unforeseeable
Emergency, as defined in Section 2.26, such Participant may be entitled to
receive a distribution of part or all of the Participant’s Vested Account,
in an amount not to exceed the lesser of (a) the amount determined by the
Committee under Section 2.26, or (b) the value of such Participant’s Vested
Account at the time of the emergency.  Such amount shall be paid in a
single lump sum payment as soon as administratively practicable after the
Committee has made its determination with respect to the availability and amount
of such distribution; provided, however, that the payment shall not be made
after the later of the end of the taxable year of the Company in which the
Unforeseeable Emergency arises or the 15th day of
the third month following the date of the occurrence of the Unforeseeable
Emergency.  If a Participant’s Account is deemed to be invested in
more than one Deemed Investment, such distribution shall be made pro rata from
each of such Deemed Investments.  For purposes of the foregoing, such
distribution shall be made from the Participant’s Account beginning with the
oldest Account in the following order:  First, such amount shall be
debited from the Participant’s Deferral Account, and second, from the
Participant’s Company Account (subject to forfeitures with respect to the
non-vested portion of the Company Account utilized for such
distribution).

    

    6.7     Distribution
on Account of Completion of a Fixed Deferral Period.   At
the time of a Participant’s election to participate in the Plan, the Participant
may elect to receive the Distribution of a Participant’s Vested Account
(established only in respect of the relevant Plan Year), or any applicable
Vested Plan Year Company Sub-Account or Plan Year Deferral Sub-Account on the
completion of a fixed deferral period elected by the Participant on forms
provided by the Committee.

    

     6.8           Limitation
on Distributions to Certain Key Employees. Notwithstanding any
other provision of the Plan to the contrary, to the extent that a Participant is
a Specified Person and the Participant’s distribution is on account of any
reason other than death or Disability distributions may not be made before the
date which is six months after the date of the Separation from
Service.  Payments to which the Participant would otherwise be
entitled during the six-month period described above shall be delayed and paid
in a lump sum on the first day of the seventh month after the date of his
Separation from Service.

    
 

    ARTICLE
VII

    

    Committee

    

    7.1           Authority.  The Committee has
full and absolute discretion in the exercise of each and every aspect of the
rights, power, authority and duties retained or granted it under the Plan,
including without limitation, the authority to determine all facts, to interpret
this Plan, to apply the terms of this Plan to the facts determined, to make
decisions based upon those facts and to make any and all other decisions
required of it by this Plan, such as the right to benefits, the correct amount
and form of benefits, the determination of any appeal, the review and correction
of the actions of any prior administrative committee, and the other rights,
powers, authority and duties specified in this Article and elsewhere in this
Plan.  The Committee may correct any defect or supply any omission or
reconcile any inconsistency in this Plan or any agreement or document related to
this Plan in the manner and to the extent the Committee deems necessary or
appropriate to carry this Plan into effect.  Notwithstanding any
provision of law, or any explicit ruling or implicit provision of this document,
any action taken, or finding, interpretation, ruling or decision made by the
Committee in the exercise of any of its rights, powers, authority or duties
under this Plan shall be final and conclusive as to all parties, including
without limitation all Participants, former Participants and beneficiaries,
regardless of whether the Committee or one or more if its members may have an
actual or potential conflict of interest with respect to the subject matter of
the action, finding, interpretation, ruling or decision.  No final
action, finding, interpretation, ruling or decision of the Committee shall be
subject to de novo review in any judicial proceeding.  No final
action, finding, interpretation, ruling or decision of the Committee may be set
aside unless it is held to have been arbitrary and capricious by a final
judgment of a court having jurisdiction with respect to the issue.  To
the extent Plan distributions are payable in a form other than a single lump sum
(e.g., installments), the Committee shall determine the methodology for
computing such payments.

    

    7.2           Delegation
of Authority.  The Committee may
delegate any of its powers or responsibilities to one or more members of the
Committee or any other person or entity.

    

    7.3           Procedures.  The Committee may
establish procedures to conduct its operations and to carry out its rights and
duties under the Plan.  Committee decisions may be made by majority
action.  The Committee may act by written consent.

    

    7.4   Compensation
and Expenses.  The members of
the Committee shall serve without compensation for their services, but all
expenses of the Committee and all other expense incurred in administering the
Plan shall be paid by the Company

    

    7.5   Indemnification.  The Company shall
indemnify the members of the Committee and/or any of their delegates against the
reasonable expenses, including attorney’s fees, actually and appropriately
incurred by them in connection with the defense of any action, suit or
proceeding, of in connection with any appeal thereto, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Company) and against all amounts paid by them in satisfaction of
a judgment in any such action, suit or proceeding, except in relation to matters
as to which it shall be adjudged in a suit of final adjudication that such
Committee member is liable for fraud, deliberate dishonesty of willful
misconduct in the performance of his duties; provided that within 60 days after
the institution of any such action, suit or proceeding a Committee member has
offered in writing to allow the Company, at its own expense, to handle and
defend any such action, suit or proceeding.

    

    

    ARTICLE
VIII

    

    Amendment and
Termination

    

    The
Company retains the power to amend the Plan or to terminate the Plan at any time
by action of the Board.  No such amendment or termination shall
adversely affect any Participant or Beneficiary with respect to his right to
receive a benefit in accordance with Article VI, determined as of the later of
the date that the Plan amendment or termination is adopted or the date such Plan
amendment or termination is effective, unless the affected Participant or
Beneficiary consents to such amendment or termination.

    
 

    ARTICLE
IX

    

    Miscellaneous

    

    9.1           Plan Does
Not Affect the Rights of Employee.  Nothing contained
in this Plan shall be deemed to give any Participant the right to be retained in
the employment of the Company, to interfere with the rights of the Company to
discharge any Participant at any time or to interfere with a Participant’s right
to terminate his employment at any time.

    

    9.2           Nonalienation
and Nonassignment.  Except for debts
owed the Company by a Participant or Beneficiary, no amounts payable or to
become payable under the Plan to a Participant or Beneficiary shall be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, whether voluntary, involuntary, by operation of law or
otherwise, and any attempt to so anticipate, alienate, sell, transfer, assign,
pledge, encumber or charge the same by a Participant or Beneficiary prior to
distribution as herein provided shall be null and void.

    

    9.3           Tax
Withholding.  The Company shall
have the right to deduct from any payments to a Participant or Beneficiary under
the Plan any taxes required by law to be withheld with respect to such
payments.  In addition, the Company shall have the right to deduct
from any Participant’s base salary or other compensation any applicable
employment taxes or other required withholdings with respect to a
Participant.

    

    9.4           FICA
Withholding/Employee Deferrals/Company Contributions. For each payroll period,
the Company shall withhold from that portion of the Participant’s Compensation
that is not being deferred under this Plan, the Participant’s share of FICA and
other applicable taxes that are required to be withheld with respect to
(i) Employee Deferrals, and (ii) Company Contributions as they vest
and become subject to such FICA withholding.  To the extent that there
are insufficient funds to satisfy all applicable tax withholding requirements in
a timely manner, the Company reserves the right to reduce the Participant’s
Employee Deferrals, as required to  provide available funds for
applicable tax withholding requirements.  To the extent there are
still insufficient funds to satisfy all such applicable tax withholding
requirements, the Participant agrees to timely remit cash funds to the Company
sufficient to cover such withholding requirements.

     

    9.5           Setoffs. As a condition to the
receipt of any benefits hereunder, the Committee, in its sole discretion, may
require a Participant or Beneficiary to first execute a written authorization,
in the form established by the Committee, authorizing the Company to offset from
the benefits otherwise due hereunder any and all amounts, debts or other
obligations, incurred in the ordinary course of the service relationship, owed
to the Company by the Participant.  Where such written authorization
has been so executed by a Participant, benefits hereunder shall be reduced
accordingly.  The Committee shall have full discretion to determine
the application of such offset and the manner in which such offset will reduce
benefits under the Plan; provided, however, that the amount offset in any one
taxable year does not exceed $5,000 and the offset is taken at the same time and
in the same amount as the debt otherwise would have been due from the
Participant.

     

    9.6   Number
and Gender.  Wherever
appropriate herein, words used in the singular shall be considered to include
the plural and words used in the plural shall be considered to include the
singular.  The masculine gender, where appearing in the Plan, shall be
deemed to include the feminine gender.

    

    9.7   Headings.  The headings of
Articles and Sections herein are included solely for convenience, and if there
is any conflict between such headings and the text of the Plan, the text shall
control.

    

    9.8   Applicable
Law.  Except to the
extent preempted by federal law, the terms and provisions of the Plan shall be
construed in accordance with the laws of the State of Texas.

    

    9.9   Successors.  All obligations
under the Plan shall be binding upon the Company and any successors and assigns,
in accordance with its terms, whether the existence of such successor is the
result of a direct or indirect purchase, merger, consolidation or other
transaction, involving all or substantially all of the business and/or assets of
the Company.

    

    9.10   Claims
Procedure.  The Committee
shall have sole discretionary authority with regard to the adjudication of any
claims made under the Plan.  All claims for benefits under the Plan
shall be submitted in writing, shall be signed by the claimant and shall be
considered filed on the date the claim is received by the
Committee.  In the event a claim is denied, in whole or in part, the
claims procedures set forth below shall be applicable.

    

    Upon the
filing of a claim as above provided and in the event the claim is denied, in
whole or in part, the Committee shall within ninety (90 days, forty five (45)
days for disability related claims,) provide the claimant with a written
statement which shall be delivered or mailed to the claimant to his last known
address, which statement shall contain the following:

    

    (a)           the
specific reason or reasons for the denial of benefits;

    

    
      	
              (b)

            	
              a
      specific reference to the pertinent provisions of the Plan upon which the
      denial is based;

            

    

    

    
      	
              (c)

            	
              a
      description of any additional material or information necessary for the
      claimant to perfect his claim for benefits and an explanation of why such
      material and information is necessary;
and

            

    

    

    (d)           an
explanation of the review procedure provided below.

    

    If
special circumstances require additional time for processing the claim, the
Committee shall advise the claimant prior to the end of the initial ninety (90)
day or forty-five (45) day period, setting forth the reasons for the delay and
the approximate date the Committee expects to render its
decision.  Any such extension shall not exceed ninety (90) days, or
thirty (30) days for disability related claims.

    

    Within
ninety (90) days after receipt of the written notice of denial of a claim as
provided above, a claimant or his authorized representative may request a review
of the denial upon written application to the Committee, may review pertinent
documents and may submit issues and comments in writing to the
Committee.  Within sixty (60) days (or forty-five days in the case of
a disability related claim) after receipt of a written request for review, or
within one hundred and twenty (120) days (or ninety days for disability related
claims) in the event of special circumstances which require an extension of time
for processing such application for review, the Committee shall notify the
claimant of its decision by delivery or by Certified or Registered Mail to his
last known address.  The decision of the Committee shall be in writing
and shall include the specific reasons for the decision and specific references
to the pertinent provisions of the Plan on which such decision is
based.  The Committee shall advise the claimant prior to the end of
the initial sixty (60) day or forty-five day period, as applicable, if
additional time is needed to process such application for review.  The
decision of the Committee shall be final and conclusive.

    

    9.11           Claims/Disputes.  Any dispute or
claim arising out of this Plan or the breach thereof, which is not settled under
the Plan’s administrative claims procedure and which is pursued beyond such
claims procedure, shall be brought in Federal District Court, in Harris County,
Texas.

    

    9.12           Conduct
Injurious to the Company.  Notwithstanding
anything in the Plan to the contrary, any and all benefits otherwise payable to
any Participant hereunder, except to the extent of any prior distributions under
the Plan, shall be forever forfeited if it is determined by the Committee, in
its sole discretion, that such Participant has engaged in conduct injurious to
the Company, including but not limited to the following:

    

    (a)           dishonesty
while in the employ of the Company;

    

    
      	
              (b)

            	
              imparting,
      disclosing or appropriating proprietary information for himself or to or
      for any other person, firm, corporation, association or entity for any
      reason or purpose whatsoever, except if required by law or at the
      Company’s direction;

            

    

    

    
      	
              (c)

            	
              performing
      any act or engaging in any course of conduct which has or may reasonably
      have the effect of demeaning the name or business reputation of the
      Company; or

            

    

    

    
      	
              (d)

            	
              providing
      goods or services to or becoming an employee, owner, officer, agent,
      consultant, advisor or director of any firm or person in any geographic
      area which competes with the Company in any phase of any of the business
      lines or services offered by the Company as of the Participant’s
      Retirement Date.

            

    

    

    9.13           Compliance
with Code Section 409A. The Plan is intended to
meet the requirements of Section 409A of the Code in order to avoid any
adverse tax consequences resulting from any failure to comply with
Section 409A of the Code and, as a result, the Plan shall be operated
in a manner consistent with such compliance.  Except to the extent
expressly set forth in the Plan, the Participant (and/or the Participant’s
Beneficiary, as applicable) shall have no right to dictate the taxable year in
which any payment hereunder that is subject to Section 409A of the Code should
be paid.

    

    9.14           No
Guarantee of Tax Consequences. None of the Board of
Directors, officers or employees of the Company, the Company or any Affiliate
makes any commitment or guarantee that any federal, state or local tax treatment
will apply or be available to any individual or person participating hereunder
or eligible to participate hereunder.

    

    9.15           Entire
Agreement.  This Plan
document constitutes the entire Plan governing the Company and the Participant
with respect to the subject matters hereof and supercedes all prior written and
oral and all contemporaneous written and oral agreements and understandings,
with respect to the subject matters herein.  This Plan may not be
changed orally, but only by an amendment in writing signed by the Company,
subject to the provisions in this Plan regarding amendments
thereto.

     

    IN WITNESS WHEREOF, McDermott
International, Inc. has caused this Plan to be executed by its duly authorized
officer, effective as provided herein.

     

    

    

              McDermott International,
Inc.

    

    

    By:          _____________________________

    Title:       _____________________________

    Date:       _____________________________ex10a.htm

    
      

    

    
      

    

    
       

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      2005

    

    
      SUPPLEMENTAL
EMPLOYEE

    

    
      RETIREMENT
PLAN

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      

    

    
      Adopted:  November
19, 2004

    

    
                   Effective:  November
18, 2005

    

    
      Amended:  June
26, 2008

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    
      
 

    

    
      2005
SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN

    

    

     

    
      	
              1  

            	
              Purpose.

            

    

     

    
      The
purpose of the 2005 Supplemental Employee Retirement Plan (the “SERP” or the
"Plan") is to provide Participants with retirement benefits to supplement
benefits payable pursuant to qualified group pension plans sponsored by AT&T
or an affiliate of AT&T.  The Plan is a successor to the AT&T
Supplemental Retirement Income Plan (“SRIP”) that was effective January 1, 1984
and which was amended, effective December 31, 2004, to cease accruals so that
the benefits payable under the SRIP shall be grandfathered and administered in
accordance with the provisions of the SRIP in a manner that does not invoke
Section 409A of the Code.

       

      

    

    
      	
              2  

            	
              Definitions.

            

    

     

    
      For
purposes of this Plan, the following words and phrases shall have the meanings
indicated, unless the context clearly indicates otherwise:

       

      

    

    
      Administrative
Committee. "Administrative Committee" means a Committee, consisting of
the SEVP-HR and two or more other members designated by the SEVP-HR, which shall
administer the Plan.

       

      

    

    
      Agreement.  "Agreement"
means the written agreement entered into between AT&T by its SEVP-HR and a
Participant prior to January 1, 2009 to carry out the Plan with respect to such
Participant.  No Agreements are necessary for Participants who become
eligible to participate in the Plan on or after January 1, 2009.

       

      

    

    
      AT&T.  "AT&T"
means AT&T Inc.

       

      

    

    
      Beneficiary.  "Beneficiary"
shall mean any beneficiary or beneficiaries designated by the Participant
pursuant to the AT&T Rules for Employee Beneficiary Designations as may
hereafter be amended from time-to-time ("Rules").  If a Participant
fails to execute a Beneficiary designation form with respect to Plan benefits,
his or her Beneficiary designation form with respect to his SRIP benefits shall
apply with respect to his Plan benefits.  If a Participant fails to
execute a Beneficiary designation form with respect to Plan benefits and with
respect to SRIP benefits, the default provisions in the Rules shall
apply.

       

      

    

    
      CEO or
Chief Executive Officer.  “CEO” or
“Chief Executive Officer” shall mean the Chief Executive Officer of
AT&T.

       

      

    

    
      Disabled
or Disability.  “Disabled” or "Disability" means the
Participant’s (i) inability to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than twelve (12) months, or (ii) is, by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than twelve
(12) months, receiving income replacement benefits for a period of not less than
three (3) months under an accident or health plan covering employees of the
Participant’s employer.  The Administrative Committee, in its complete
and sole discretion, determines whether a Participant is
Disabled.  The Administrative Committee may require that the
Participant submit to an examination by a competent physician or medical clinic
selected by the Administrative Committee.  On the basis of such
medical evidence, the determination of the Administrative Committee as to
whether or not a Participant is Disabled shall be conclusive.

       

      

    

    
      Earnings.  "Earnings"
means for a given calendar year the Participant's: (1) bonus earned as a short
term award during the calendar year but not exceeding 200% of the target amount
of such bonus (or such other portion of the bonus or target bonus as may be
determined by the Human Resources Committee of the Board of AT&T), plus (2)
base salary before reduction due to any contribution pursuant to any deferred
compensation plan or agreement sponsored by AT&T or an AT&T affiliate,
including but not limited to compensation deferred in accordance with Sections
401(k), 125, or 132(f) of the Internal Revenue Code.

       

      

    

    
      Final
Average Earnings.  "Final Average Earnings" means the average
of the Participant's Monthly Earnings for the thirty-six (36) consecutive months
out of the one hundred twenty (120) months next preceding the Participant's
Termination of Employment which yields the highest average
earnings.  If the Participant has fewer than thirty-six (36) months of
employment, the average shall be taken over his or her period of
employment.

       

      

    

    
      GAAP
Rate.  For a referenced calendar year, "GAAP Rate" means the
interest rate used for valuing Plan liabilities on December 31 of the
immediately preceding calendar year and for calculating periodic pension expense
for the referenced calendar year, both for purposes of AT&T's financial
statement reporting requirements.

       

      

    

    
      Immediate
Annuity Value of any AT&T or affiliate Qualified
Pensions.  “Immediate Annuity Value of any AT&T or
affiliate Qualified Pensions” shall have the meaning as provided in Attachment
B.

       

      

    

    
      Immediate
Annuity Value of SRIP. "Immediate Annuity Value of SRIP" shall have the
meaning as provided in Attachment C.

       

      

    

    
      Immediate
Annuity Value of any other AT&T or affiliate Non-Qualified Pensions other
than SERP. "Immediate Annuity Value of any AT&T or affiliate
Non-Qualified Pensions other than SERP" shall have the meaning as provided in
Attachment D.

       

      

    

    
      Mid-Career
Hire.  “Mid-Career Hire”
means an individual whose Service Commencement Date is on or after the
individual’s thirty-fifth (35th)
birthday.

       

      

    

    
      Monthly
Earnings.  "Monthly Earnings" means one-twelfth (1/12) of
Earnings.

       

      

    

    
      Mortality
Tables.  "Mortality Tables" means the mortality tables as
defined by Code Section 417(e) for valuing minimum lump sum benefits payable
from qualified pension plans for the referenced period.

       

      

    

    
      Officer.
"Officer" shall mean an individual who is designated as an officer level
employee for compensation purposes on the records of
AT&T.

    

    
      

    

    
      Participant.
"Participant" means:

       

      

    

    
      
        	
                      
      (a)  

              	
                Any
      person who, as of close of business on December 31, 2004, was employed by
      an AT&T affiliate and was a participant in the SRIP;
  or

              

      

       

      

    

    
      
        	
                     
      (b)  

              	
                Any
      person who was a participant in the SRIP, terminated employment in 2004
      and receives Earnings in 2005; or

              

      

       

      

    

    
      
        	
                     
      (c)  

              	
                An
      Officer of AT&T or an AT&T affiliate who is designated by the CEO
      as eligible to participate in the
Plan.

              

      

       

      

    

    
      Notwithstanding
the foregoing definition of Participant, the CEO, may, at any time and from time
to time, exclude any person or group of persons from being deemed a
“Participant” under this plan.

       

      

    

    
      An
individual’s participation in SERP shall commence as of his or her SERP
Effective Date.

       

      

    

    
      Retire or
Retirement.  "Retire" or "Retirement" shall mean the
Termination of Employment of a Participant for reasons other than death, on or
after the earlier of the following dates:  (1) the date the
Participant is Retirement Eligible or (2) the date the Participant has attained
one of the following combinations of age and service at Termination of
Employment:

       

      

    

    
      
         

        
          	Years
      of
      Service                      	Age 
	 	 
	25 years or
      more 	50 or
  older
	30 years or
      more 	Any
    age 

        

         

      

       

    

    

    
      Retirement
Eligible.  "Retirement Eligible" or "Retirement Eligibility"
means that a Participant has attained age 55 and has at least five (5) Years of
Service.

       

      

    

    
      Retirement
Percent.  "Retirement Percent" means the percent specified in
the Agreement with the Participant (if any) which establishes a Target
Retirement Benefit (see Section 3.1) as a percentage of Final Average Earnings.
For an individual who becomes a Participant on or after January 1, 2006,
"Retirement Percent" means 50 percent unless otherwise provided by the Human
Resources Committee of the Board of Directors of AT&T.

       

      

    

    
      SERP
Effective Date.  “SERP Effective Date” means the date of the
written designation of the Participant’s eligibility to participate in SERP,
signed by the CEO.

       

      

    

    
      SEVP-HR.  “SEVP-HR”
means AT&T’s Senior Executive Vice President responsible for Human Resources
matters.

       

      

    

    
      Supplemental
Retirement Income Plan or SRIP.  "Supplemental Retirement
Income Plan” or “SRIP" means the AT&T Inc. Supplemental Retirement Income
Plan effective January 1, 1984.

       

      

    

    
      Service
Commencement Date.  “Service Commencement Date” means the
Participant’s employment commencement date with AT&T or any AT&T
affiliate, as such date may be adjusted from time-to-time in accordance with
rules, policies and procedures generally applied by AT&T to adjust for
breaks in service or other periods of time, as reflected in AT&T’s or an
AT&T affiliate’s records, all as determined in the discretion of the
SEVP-HR.

       

      

    

    
      Service
Factor.  "Service Factor" means, unless otherwise agreed in
writing by the Participant and AT&T, either (a) a deduction of 1.43 percent,
or .715 percent for Mid-Career Hires, multiplied by the number by which (i)
thirty-five (or thirty in the case of a Participant who is an Officer) exceeds
(ii) the number of Years of Service of the Participant, or (b) a credit of 0.715
percent multiplied by the number by which (i) the number of Years of Service of
the Participant exceeds (ii) thirty-five (or thirty in the case of a Participant
who is an Officer).  For purposes of the above computation, a
deduction shall result in the Service Factor being subtracted from the
Retirement Percent whereas a credit shall result in the Service Factor being
added to the Retirement Percent.

       

      

    

    
      Termination
of Employment.  "Termination of Employment" means the ceasing
of the Participant's employment from the AT&T controlled group of companies
for any reason whatsoever, whether voluntarily or involuntarily.  A
Participant will be deemed to have realized a Termination of Employment at any
time that a Participant and the Administrative Committee reasonably anticipate
that the bona fide level of services the Participant will perform (whether as an
employee or an independent contractor) will be permanently reduced to a level
that is less than fifty percent (50%) of the average level of bona fide services
the Participant performed during the immediately preceding thirty-six (36)
months (or the entire period the Participant has provided services if the
Participant has been providing services to the AT&T controlled group of
companies less than thirty-six (36) months).

       

      

    

    
      Year.  A "Year" is a
period of twelve (12) consecutive calendar months.

       

      

    

    
      Years of
Participation.  "Years of Participation" means the number of
each complete Years beginning with the Participant’s SERP Effective Date through
each annual anniversary of such date.

       

      

    

    
      Years of
Service.  "Years of Service" means the number of each complete
Years of full-time service as an employee of AT&T or an AT&T affiliate
beginning with the Participant’s Service Commencement Date through each annual
anniversary of such date, including service prior to the adoption of this Plan.
“Years of Service” shall also include a Participant’s Years of service that are
recognized for purposes of the BellSouth Corporation Supplemental Employee
Retirement Plan, but that are not otherwise included pursuant to the immediately
preceding sentence.

       

      

    

    
      	
              3  

            	
              Plan ("SERP")
      Benefits.

            

    

     

    
      
        	
                       
      3.1  

              	
                SERP Benefit
      Formula.

              

      

       

      

    

    
      With
respect to (1) a Participant who was a participant in the SRIP prior to January
1, 1998, or (2) a Participant who, prior to January 1, 1998, was an officer of a
Pacific Telesis Group ("PTG") company and became a participant in the SRIP after
January 1, 1998, the amount of such Participant’s SERP Benefit is calculated as
follows:

       

       

       

       

      
 

       

      
      

       

      
        	 	Final Average
      Earnings
	 x	Revised
      Retirement Percentage 	
              
	 =	Target Retirement
      Benefit 
	- 	Immediate Annuity
      Value of any AT&T or affiliate Qualified Pensions 
	- 	Immediate Annuity
      Value of any other AT&T or affiliate Non-Qualified Pensions other than the
      SERP 
	=	Target
    Benefit
	- 	Age
      Discount
	= 	Annual Value of Life
      with 10 Year Certain SERP Benefit payable as a result of Termination of
      Employment Before SIRP Reduction 
	- 	Immediate Annuity
      Value of SRIP 
	= 	Annual Value of Life
      with 10 Year Certain SERP Benefit payable as a result of
      Termination of Employment 

      

       

    

     

    
       

    

    
      With
respect to all other Participants, subject to the provisions of Attachment E,
the amount of such Participant’s SERP Benefit is calculated as
follows:

    

     

    

    
      
         

        
          	 	Final Average
      Earnings
	 x	Revised
      Retirement Percentage 	
                
	 =	Target Retirement
      Benefit 
	- 	Age
      Discount 
	=	Discounted Target
      Benefit
	-	Immediate Annuity
      Value of any AT&T or affiliate Qualified Pensions
	-	Immediate
      Annuity Value of SRIP 
	-	Immediate Annuity
      Value of any other AT&T or affiliate Non-Qualified Pensions other than
      SERP
	=	Annual Value of Life
      with 10 Year Certain SERP Benefit payable as a result of Termination of
      Employment

        

         

      

    

    
       

    

    
 

    
      Where in
both of the above cases the following apply:

       

      

    

    
      
        	
                (a)

              	
                Revised
      Retirement Percentage = Retirement Percent + Service
  Factor

              

      

       

      

    

    
      
        	
                (b)

              	
                For
      purposes of determining the Service Factor, the Participant's actual Years
      of Service as of the date of Termination of Employment, to the day, shall
      be used.

              

      

       

      

    

    
      
        	
                (c)

              	
                For
      purposes of determining the Final Average Earnings, the Participant's
      Earnings history as of the date of Termination of Employment shall be
      used.

              

      

       

      

    

    
      
        	
                (d)

              	
                Age
      Discount means the Participant's SERP Benefit shall be decreased by
      five-tenths of one percent (.5%) for each month that the date of the
      Participant’s Termination of Employment precedes the date on which the
      Participant will attain age 60.

              

      

       

      

    

    
      Notwithstanding
the foregoing, if at the time of Termination of Employment the Participant is,
or has been within the one year period immediately preceding the Participant's
Termination of Employment, an Officer with 30 or more Years of Service such
Participant's Age Discount shall be zero.

       

      

    

    
      Except to
true up for an actual short term award paid following Termination of Employment,
there shall be no recalculation of the value of a Participant's SERP Benefit
hereunder following a Participant's Termination of Employment.

       

       

                    
3.2.  Vesting.

    

     

    

    
      Notwithstanding
any other provision of this Plan, upon any Termination of Employment of the
Participant for a reason other than death or Disability, AT&T shall have no
obligation to the Participant under this Plan if the Participant has less than
five (5) Years of Service or, for Participants who are informed, in writing, of
their SERP eligibility on or after September 28, 2006, less than four (4) Years
of Participation, at the time of Termination of Employment.

       

      

    

    
      	
              4  

            	
              Election and Form of
      Distribution of SERP
Benefits.

            

    

     

    
      
        	
                         
      4.1  

              	
                Normal
      Form.

              

      

       

      

    

    
      The
normal form of a Participant's benefits hereunder shall be a Life with 10-Year
Certain Benefit as described in Section 4.2(a).

       

      

    

    
      
        	
                          4.2  

              	
                Election
      Alternatives.

              

      

       

      

    

    
      Notwithstanding
the normal form for distribution of a Participant’s SERP Benefits, a Participant
may elect one of the following Benefit Payout Alternatives:

       

      

    

    
      
        	
                        
      (a)

              	
                Life with a 10-Year
      Certain Benefit.  An annuity payable during the longer of
      (i) the life of the Participant or (ii) the 10-year period commencing on
      the Participant’s Termination of Employment and ending on the day next
      preceding the tenth anniversary of such date (the "Life With 10-Year
      Certain Benefit").  If a Participant who is receiving a Life
      with 10-Year Certain Benefit dies prior to the expiration of the 10-year
      period described in this Section 4.2(a), the Participant's Beneficiary
      shall be entitled to receive the remaining Life With 10-Year Certain
      Benefit installments which would have been paid to the Participant had the
      Participant survived for the entire such 10-year
  period.

              

      

       

      

    

    
      
        	
                        
      (b)

              	
                Joint and 100%
      Survivor Benefit.  A joint and one hundred percent (100%)
      survivor annuity payable for life to the Participant and at his or her
      death to his or her Beneficiary, in an amount equal to one hundred percent
      (100%) of the amount payable during the Participant's life, for life (the
      "Joint and 100% Survivor Benefit").

              

      

       

      

    

    
      
        	
                        
      (c)

              	
                Joint and 50% Survivor
      Benefit.  A joint and fifty percent (50%) survivor
      annuity payable for life to the Participant and at his or her death to his
      or her Beneficiary, in an amount equal to fifty percent (50%) of the
      amount payable during the Participant's life, for life (the "Joint and 50%
      Survivor Benefit").

              

      

       

      

    

    
      
        	
                        
      (d)

              	
                Lump Sum
      Benefit.  A lump sum benefit, which shall apply only if
      the Participant has attained the age of fifty-five (55) years as of his or
      her Termination of Employment.  If a Participant elects a lump
      sum benefit but realizes a Termination of Employment prior to attaining
      age fifty-five (55), the Participant’s SERP Benefit shall be paid as
      provided in Section 4.2(a), 4.2(b) or 4.2(c), as elected or deemed elected
      by the Participant.

              

      

       

      

    

    
      The
Benefit Payout Alternatives described in Section 4.2(b), 4.2(c) and 4.2(d) shall
be the actuarially determined equivalent (using the same reasonable actuarial
assumptions and methods for valuing each Benefit Payout Alternative as
determined by the SEVP-HR in his or her complete and sole discretion) of the
Life With 10-Year Certain Benefit that is converted by such
election.  The amount of a Participant's lump sum benefit shall be
calculated as of the Participant's Termination of Employment by applying the
Mortality Tables and the GAAP Rate, both as in effect for the calendar year
immediately preceding the calendar year of the Participant’s Termination of
Employment, but using the Participant’s age, Years of Service and other factors
as of the Participant’s Termination of Employment.

       

      

    

    
      
        	
                          
      4.3  

              	
                Distribution
      Election.

              

      

       

      

    

    
      
        	
                        
      (a)

              	
                Individual Who Is A
      Participant On or Before December 31, 2008.  An
      individual who was a Participant on or before December 31, 2008 may make
      an irrevocable election of a Benefit Payout Alternative before the earlier
      of December 31 of the year immediately preceding his or her Termination of
      Employment or December 31, 2008 by delivery of such election, in writing,
      telecopy, email or in another electronic format, pursuant to or as
      instructed by the SEVP-HR (as determined by the SEVP-HR in his or her sole
      and absolute discretion).

              

      

       

      

    

    
      
        	
                        
      (b)

              	
                Individual Who Becomes
      A Participant After December 31, 2008.  An individual who
      becomes a Participant after December 31, 2008 may make an irrevocable
      election of a Benefit Payout Alternative no later than the thirtieth
      (30th)
      day immediately following the Participant’s SERP Effective Date by
      delivery of such election in writing, telecopy, email or in another
      electronic format, pursuant to or as instructed by the SEVP-HR (as
      determined by the SEVP-HR in his or her sole and absolute
      discretion).

              

      

       

      

    

    
      
        	
                       
      (c)

              	
                Failure to Timely Make
      a Distribution Election.  If a Participant fails to make
      a timely election of a Benefit Payout Alternative as provided in Section
      4.3(a) or 4.3(b), such Participant shall be deemed to have elected and
      such Participant's form of benefit shall be the Life With 10-Year Certain
      Benefit described in Section
4.2(a).

              

      

       

      

    

    
      
        	
                        
      (d)

              	
                Death of or Divorce
      from Annuitant During Participant’s
      Lifetime.  Notwithstanding any other provision of this
      Plan to the contrary, in the event of the death of a designated annuitant
      during the life of the Participant, the Participant's election to have a
      Benefit Payout Alternative described in Section 4.2(b) or 4.2(c) shall,
      without any action by the Participant, be revoked, and the Participant’s
      benefit, or remaining benefit, under the Plan, as the case may be, shall
      be paid as provided in Section 4.2(a).  Any conversion of
      benefit from one form to another pursuant to the provisions of this
      paragraph shall use the same reasonable actuarial assumptions and methods
      for valuing each annuity form of benefit before and after the death of the
      designated annuitant and shall be subject to actuarial adjustment (as
      determined by the SEVP-HR in his or her complete and sole discretion) such
      that the Participant's new benefit is the actuarial equivalent of the
      Participant's remaining prior form of benefit.  Payments
      pursuant to Participant's new form of benefit shall be effective
      commencing with the first monthly payment for the month following the
      death of the annuitant.

              

      

       

      
 

    

    
      Notwithstanding
any other provision of this Plan to the contrary, in the event of the divorce or
legal separation of the Participant, the Participant’s election to have a
Benefit Payout Alternative described in Section 4.2(b) or 4.2(c), with a
survivor annuity for the benefit of the Participant's former spouse as
Beneficiary, shall, without any action by the Participant, be revoked, and the
Participant's benefit, or remaining benefit, under the Plan, as the case may be,
shall be paid as provided in Section 4.2(a) (using the same reasonable actuarial
assumptions and methods for valuing each annuity form of benefit before and
after the divorce or legal separation  and shall be subject to
actuarial adjustment (as determined by the SEVP-HR in his or her complete and
sole discretion).  In such event, the 10-Year period as described in
Section 4.2(a) shall be the same 10-year period as if such form of benefit was
the form of benefit originally selected and the expiration date of such period
shall not be extended beyond its original expiration date.  Payments
pursuant to Participant’s new form of benefit shall be effective commencing with
the first monthly payment following notice from the Participant to the SEVP-HR
after the divorce (or legal separation) becomes final.

       

      

    

    
      
        	
                        
      (e)

              	
                Special Provisions for
      Lump Sum Benefit Election.  A Participant who elects a
      lump sum benefit under Section 4.2(d) must, contemporaneous with such Lump
      Sum Benefit election, elect a specific number of year(s), not to exceed
      twenty (20) years, following his or her Termination of Employment upon
      which the lump sum benefit (including any interest accrued thereon) shall
      be distributed; provided, however,

              

      

       

      

    

    
      
        	
                               
      (i)

              	
                the Participant may
      not receive more than thirty percent (30%) of his or her lump sum benefit
      (excluding any interest thereon) until the third (3rd) anniversary of his
      or her Termination of Employment; provided, however, if the
      Participant is age sixty (60) or older as of his or her Termination of
      Employment, the Participant, if elected in his or her timely filed
      election of a Benefit Payout Alternative, may receive one hundred percent
      (100%) of his or her lump sum benefit upon the day that is six (6) months
      following his or her Termination of Employment if he or she agrees, in
      writing, substantially in the form provided in Attachment A, not to
      compete with an Employer Business within the meaning of Section 8.2 for a
      period of three (3) years from such Participant’s Termination of
      Employment and further agrees that if he or she fails to abide by such
      agreement, the non-compete agreement is challenged, or the non-compete
      agreement is unenforceable, he or she shall forfeit all benefits hereunder
      and repay the lump sum benefit to AT&T;
      and

              

      

       

      

    

    
      
        	
                                
      (ii)

              	
                prior
      to distribution of the Participant’s lump sum benefit, interest on such
      lump sum benefit shall accrue and shall be added to the Participant’s lump
      sum benefit or distributed monthly, as elected by the Participant in his
      or her election of a
      Benefit Payout Alternative.

              

      

       

      

    

    
      A
Participant’s lump sum benefit payment schedule must comply with the rules for
payment schedules as adopted by the SEVP-HR (as determined by the SEVP-HR in his
or her sole and absolute discretion), which, for example, may require payment of
principal to be made no more frequently than once per calendar
year.

       

      

    

    
      If the
payment schedule elected by a Participant does not comply with the rules for
payment schedules, (i) thirty percent (30%) of such Participant’s lump sum
benefit shall be paid to the Participant upon the date that is six (6) months
following the Participant’s Termination of Employment, and (ii) the
remaining seventy percent (70%) shall be paid to the Participant on the third
(3rd)
anniversary of such Participant’s Termination of Employment.

       

      

    

    
      
        	
                       
      (f)

              	
                Lump Sum Benefit
      Account Balance.  From and after a Participant’s
      Termination of Employment, the SEVP-HR shall maintain records of a lump
      sum benefit account balance for each Participant who elected a lump sum
      benefit.  During such period of time that all or any portion of
      a Participant’s lump sum benefit is not paid, interest shall be credited
      using the same methodology used by AT&T for financial accounting
      purposes using the GAAP Rate that was used to calculate such Participant’s
      lump sum benefit.  Payments of principal and interest shall be
      deducted from the lump sum benefit account
  balance.

              

      

       

      

    

    
      A
Participant whose employment has not terminated may change a prior distribution
election at any time on or before December 31, 2008, provided, however, if the
Participant’s employment terminates for any reason in the calendar year in which
the new distribution election is filed, such new election shall be null and
void.  In the event the Participant’s new election is null and void,
the Participant’s prior election, if any, shall apply.  If there is no
prior election, the Plan’s default distribution provisions shall
apply.

       

      

    

    
      	
              5  

            	
              Death or Disability
      Benefits.                                                                                                

            

    

     

    
      
        	
                          
      5.1  

              	
                Death Following
      Termination of Employment.

              

      

       

      

    

    
      If a
Participant who has commenced payment of his or her SERP benefit hereunder dies,
his or her Beneficiary shall be entitled to receive the remaining SERP benefit
in accordance with the Benefit Payout Alternative elected or deemed elected by
the Participant.

       

      

    

    
      
        	
                          
      5.2  

              	
                Death Prior to
      Termination of Employment.

              

      

       

      

    

    
      If a
Participant dies prior to his or her Termination of Employment, a pre-retirement
death benefit will be calculated and paid as though the Participant had
Retired  (determined without regard to the 5 Years of Service or the 4
Years of Participation requirements) on the day prior to the date of
death.  The pre-retirement death benefit shall be paid at such time
and in such form as timely elected or deemed elected by the Participant;
provided, if the Participant elected or is deemed to have elected any form of an
annuity, such pre-retirement death benefit shall be paid as a Beneficiary Life
Annuity (as such term is hereinafter described) based on the life expectancy of
the Beneficiary, and, if the Participant elected or is deemed to have elected a
Life with a 10-Year Certain Benefit, such Beneficiary Life Annuity shall
continue for the longer of (i) the Beneficiary’s life, or (ii) the 10 year
period commencing on the Participant’s death.  If paid as a
Beneficiary Life Annuity, such benefit shall be the actuarially determined
equivalent using the same reasonable actuarial assumptions and methods (as
determined by the SEVP-HR in his or her complete and sole discretion) of the
Life With 10-Year Certain Benefit that would have been paid to the Participant
had he or she Retired on the day immediately prior to his or her
death.  If the Participant had timely elected and qualified to receive
a Lump Sum Benefit, it shall be calculated in the same manner as provided in
Section 4.2 as if the Participant were alive; e.g., calculated as of the
Participant's death applying the Mortality Tables and the GAAP Rate, both as in
effect for the calendar year immediately preceding the calendar year of the
Participant’s death, but using the Participant’s age, Years of Service and other
factors as of the Participant’s date of death.

       

      

    

    
      
        	
                          
      5.3  

              	
                Disability.

              

      

       

      

    

    
      Upon a
Participant's Termination of Employment and contemporaneous qualification for
receipt of long term disability benefits under an AT&T or AT&T affiliate
sponsored long term disability benefit plan in which the Participant
participates prior to being Retirement Eligible (without regard to the 5 Years
of Service or 4 Years of Participation requirements), the Participant will
continue to accrue Years of Service during such disability until the earliest of
his or her:

       

      

    

    
      
        	
                        
      (a)

              	
                Recovery
      from Disability,

              

      

       

      

    

    
      
        	
                        
      (b)

              	
                Retirement
      (determined without regard to the 5 Years of Service or 4 Years of
      Participation requirements), or

              

      

       

      

    

    
      
        	
                        
      (c)

              	
                Death.

              

      

       

      

    

    
      Upon the
occurrence of either (a) Participant's recovery from Disability prior to his or
her Retirement Eligibility if Participant does not return to employment, or (b)
Participant's Retirement (determined without regard to the 5 Years of Service or
4 Years of Participation requirements), the Participant shall be entitled to
receive a SERP Benefit as if he or she realized a Termination of Employment as
of the date of such occurrence.

       

      

    

    
      For
purposes of calculating the foregoing benefit, the Participant's Final Average
Earnings shall be determined using his or her Earnings history as of the date of
his or her Disability.

       

      

    

    
      If a
Participant who continues to have a Disability dies prior to his or her
Retirement Eligibility (without regard to the 5 Years of Service or 4 Years of
Participation requirements), the Participant will be treated in the same manner
as if he or she had died while in employment (See Section 5.2).

       

      

    

    6.            
Payment of
Benefits.

     

    
      
        	
                           
      6.1  

              	
                Commencement of
      Payments.

              

      

       

      

    

    
      
        	
                                 
      (a)

              	
                Except
      as provided in Section 5.3, benefit payments shall commence pursuant to
      the Benefit Payout Alternative elected by the Participant in his or her
      Agreement on the date that is six (6) months following his or her
      Termination of Employment; provided, however, if the Participant dies
      after Termination of Employment and prior to the lapse of such six (6)
      month period, benefit payments shall commence upon the Participant’s
      death.  If a Participant elected (or is deemed to have elected)
      an annuity form of benefit under Section 4.2(a), 4.2(b) or 4.2(c), the
      aggregate monthly amount that would be paid between the Participant’s
      Termination of Employment through the date that benefit payments actually
      commence, shall be paid in a lump sum on the date that benefit payments
      actually commence hereunder.  In addition, during the period of
      time between a Participant’s Termination of Employment and the date that
      annuity payments hereunder actually commence, interest shall be credited
      on the withheld annuity amounts for such period of time that each annuity
      payment is withheld.  The credited interest shall be paid in a
      lump sum on the date that payments hereunder actually
      commence.  Interest shall be credited using the GAAP Rate in
      effect for the calendar year immediately preceding the calendar year of
      the Participant’s Termination of
Employment.

              

      

       

      

    

    
      
        	
                               
         (b)

              	
                Notwithstanding
      the designation of a specific date for commencement of payment of a
      distribution hereunder, commencement of payments under this Plan may be
      delayed for administrative reasons in the discretion of the SEVP-HR, but
      shall begin not later than sixty (60) days following the date upon which
      payment(s) would otherwise commence under this Plan. A Participant shall
      not have the right to designate or participate in the decision as to the
      taxable year of benefit
commencement.

              

      

       

      

    

    
      
        	
                           
      6.2  

              	
                Withholding;
      Unemployment Taxes.

              

      

       

      

    

    
      
        	
                               
        (a)

              	
                A
      payment may be made from the Plan to reflect the payment of state, local,
      or foreign tax obligations arising from participation in the Plan that
      apply to an amount deferred under the Plan before the amount is paid or
      made available to a Participant (the “State, Local, or Foreign Tax
      Amount”).  Such payment may not exceed the amount of such taxes
      due as a result of participation in the Plan.  Such payment may
      be made by distributions to the Participant in the form of withholding
      pursuant to provisions of applicable state, local, or foreign law or by
      distribution directly to the Participant.  Additionally, a
      payment may be made from the Plan to pay the income tax at source on wages
      imposed under Code Section 3401 as a result of the payment of the State,
      Local, or Foreign Tax Amount and to pay the additional income tax at
      source on wages attributable to such additional Code Section 3401 wages
      and taxes.  However, the total payment under this Section 6.2(a)
      shall not exceed the aggregate of the State, Local, or Foreign Tax Amount
      and the income tax withholding related to such State, Local, or Foreign
      Tax Amount.

              

      

       

      

    

    
      
        	
                                  
      (b)

              	
                A
      payment may be made from the Plan to pay the Federal Insurance
      Contributions Act tax imposed by Code Sections 3101, 3121(a), and
      3121(v)(2) on compensation deferred under the Plan (the “FICA
      Amount”).  Additionally, a payment may be made from the Plan to
      pay the income tax at source on wages imposed under Code Section 3401 or
      the corresponding withholding provisions of applicable state, local or
      foreign tax laws as a result of the payment of the FICA Amount and to pay
      the additional income tax at source on wages attributable to the
      pyramiding section 3401 wages and taxes.  However, the total
      payment under this Section 6.2(b) shall not exceed the aggregate of the
      FICA Amount and the income tax withholding related to such FICA
      Amount.

              

      

       

      

    

    
      
        	
                           
      6.3  

              	
                Recipients of
      Payments; Designation of
Beneficiary.

              

      

       

      

    

    
      All
payments to be made under the Plan shall be made to the Participant during his
or her lifetime, provided that if the Participant dies prior to the completion
of such payments, then all subsequent payments under the Plan shall be made to
the Participant's Beneficiary or Beneficiaries.

       

      

    

    
      In the
event of the death of a Participant, distributions/benefits under this Plan
shall pass to the Beneficiary (ies) designated by the Participant in accordance
with this Plan and the Rules.

       

      

    

    
      
        	
                           
      6.4  

              	
                No Other
      Benefits.

              

      

       

      

    

    
      No
benefits shall be paid hereunder to the Participant or his or her Beneficiary
except as specifically provided herein.

       

      

    

    
      
        	
                           
      6.5  

              	
                Small
      Benefit.

              

      

       

      

    

    
      Notwithstanding
any election made by the Participant, the SEVP-HR in his or her sole discretion
may pay any benefit in the form of a lump sum payment if (A) the lump sum
equivalent amount is or would be less than the applicable dollar amount under
Code Section 402(g)(1)(B) when payment of such benefit would otherwise commence,
and (B) the payment of the lump sum equivalent amount results in the termination
and liquidation of the entirety of the Participant’s interest under the Plan and
under any other plan that is considered a single nonqualified deferred
compensation plan under Treasury Regulations Section
1.409A-1(c)(2).

       

      

    

    7.            
Conditions Related to
Benefits.

     

    
      
        	
                           
      7.1  

              	
                Administration of
      Plan.

              

      

       

      

    

    
      The
Administrative Committee and the SEVP-HR with respect to specific functions
identified in the Plan, shall be the sole administrators of the Plan and will,
in their discretion, administer, interpret, construe and apply the Plan in
accordance with its terms.  The Administrative Committee or the
SEVP-HR shall further establish, adopt or revise such rules and regulations as
each may deem necessary or advisable for the administration of the
Plan.  All decisions of the Administrative Committee or the SEVP-HR
shall be final and binding unless the Board of Directors should determine
otherwise.

       

      

    

    
      
        	
                           
      7.2  

              	
                No Right to AT&T
      Assets.

              

      

       

      

    

    
      Neither a
Participant nor any other person shall acquire by reason of the Plan any right
in or title to any assets, funds or property of any AT&T company whatsoever
including, without limiting the generality of the foregoing, any specific funds
or assets which AT&T, in its sole discretion, may set aside in anticipation
of a liability hereunder, nor in or to any policy or policies of insurance on
the life of a Participant owned by AT&T.  No trust shall be
created in connection with or by the execution or adoption of this Plan or any
Agreement, and any benefits which become payable hereunder shall be paid from
the general assets of AT&T.  A Participant shall have only a
contractual right to the amounts, if any, payable hereunder unsecured by any
asset of AT&T.

       

      

    

    
      
        	
                           
      7.3  

              	
                Trust
      Fund.

              

      

       

      

    

    
      AT&T
shall be responsible for the payment of all benefits provided under the
Plan.  At its discretion, AT&T may establish one or more trusts,
for the purpose of providing for the payment of such benefits.  Such
trust or trusts may be irrevocable, but the assets thereof shall be subject to
the claims of AT&T's creditors.  To the extent any benefits
provided under the Plan are actually paid from any such trust, AT&T shall
have no further obligation with respect thereto, but to the extent not so paid,
such benefits shall remain the obligation of, and shall be paid by
AT&T.

       

      

    

    
      
        	
                           
      7.4  

              	
                No Employment
      Rights.

              

      

       

      

    

    
      Nothing
herein shall constitute a contract of continuing employment or in any manner
obligate any AT&T company to continue the service of a Participant, or
obligate a Participant to continue in the service of any AT&T company and
nothing herein shall be construed as fixing or regulating the compensation paid
to a Participant.

       

      

    

    
      
        	
                           
      7.5  

              	
                Modification or
      Termination of Plan.

              

      

       

      

    

    
      This Plan
may be modified or terminated at any time in accordance with the provisions of
AT&T's Schedule of Authorizations.  A modification may affect
present and future Participants.   AT&T also reserves the
sole right to terminate at any time any or all Agreements.  In the
event of termination of the Plan or of a Participant's Agreement, a Participant
shall be entitled to benefits hereunder, if prior to the date of termination of
the Plan or of his or her Agreement, such Participant has attained 5 Years of
Service and, if applicable, 4 Years of Participation, in which case, regardless
of the termination of the Plan/Participant's Agreement, such Participant shall
be entitled to benefits at such time as provided in and as otherwise in
accordance with the Plan and his or her Agreement, provided, however, a
Participant's benefit shall be computed as if the Participant had realized a
Termination of Employment as of the date of termination of the Plan or of his or
her Agreement; provided further, however, a Participant's service subsequent to
Plan/Agreement termination shall be recognized for purposes of reducing or
eliminating the Age discount provided for by Section 3.1(d).  No
amendment, including an amendment to this Section 7.5, shall be effective,
without the written consent of a Participant, to alter, to the detriment of such
Participant, the benefits described in this Plan as applicable to such
Participant as of the effective date of such amendment.  For purposes
of this Section 7.5, an alteration to the detriment of a Participant shall mean
a reduction in the amount payable hereunder to a Participant to which such
Participant would be entitled if such Participant realized a Termination of
Employment at such time, or any change in the form of benefit payable hereunder
to a Participant to which such Participant would be entitled if such Participant
realized a Termination of Employment at such time.  Any amendment
which reduces a Participant's benefit hereunder to adjust for a change in his or
her pension benefit resulting from an amendment to any company-sponsored defined
benefit pension plan which changes the pension benefits payable to all
employees, shall not require the Participant's consent.  Written
notice of any amendment shall be given to each Participant.

       

      

    

    
      
        	
                            
      7.6  

              	
                Offset.

              

      

       

      

    

    
      If at the
time payments or installments of payments are to be made hereunder, a
Participant or his or her Beneficiary or both are indebted to AT&T or any
AT&T affiliate as a result of debt incurred in the ordinary course of the
employment relationship between the Participant and the AT&T company, then,
annually, up to $5,000 of the payments remaining to be made to the Participant
or his or her Beneficiary or both, may, at the discretion of the SEVP-HR, be
reduced by the amount of such indebtedness; provided, however, that the
reduction must be made at the same time and in the same amount as the debt
otherwise would have been due and collected from the Participant or his or her
Beneficiary; provided, further, however, that an election by the Board of
Directors not to reduce any such payment or payments shall not constitute a
waiver of such AT&T company's claim for such indebtedness.

       

      

    

    
      
        	
                            
      7.7  

              	
                Change in
      Status.

              

      

       

      

    

    
      In the
event of a change in the employment status of a Participant to a status in which
he is no longer an Participant, the Participant shall immediately cease to be
eligible for any benefits under this Plan except such benefits as had previously
vested.  Only Participant's Years of Service and Earnings history
prior to the change in his employment status shall be taken into account for
purposes of determining Participant's vested benefits hereunder.

       

      

    

    8.            
Miscellaneous.

     

    
      
        	
                            
      8.1  

              	
                Nonassignability.

              

      

       

      

    

    
      Neither a
Participant nor any other person shall have any right to commute, sell, assign,
transfer, pledge, anticipate, mortgage or otherwise encumber, transfer,
hypothecate or convey in advance of actual receipt of the amounts, if any,
payable hereunder, or any part thereof, which are, and all rights to which are,
expressly declared to be unassignable and non-transferable.  No part
of the amounts payable shall, prior to actual payment, be subject to seizure or
sequestration for the payment of any debts, judgments, alimony or separate
maintenance owed by a Participant or any other person, nor be transferable by
operation of law in the event of a Participant's or any other person's
bankruptcy or insolvency.

       

      

    

    
      
        	
                           
      8.2  

              	
                Non-Competition.

              

      

       

      

    

    
      Notwithstanding
any other provision of this Plan, all benefits provided under the Plan with
respect to a Participant shall be forfeited and canceled in their entirety if
the Participant, without the consent of AT&T and while employed by AT&T
or any subsidiary thereof or within three (3) years after termination of such
employment, engages in competition with AT&T or any subsidiary thereof or
with any business with which AT&T or a subsidiary or affiliated company has
a substantial interest (collectively referred to herein as "Employer business")
and fails to cease and desist from engaging in said competitive activity within
120 days following receipt of written notice from AT&T to Participant
demanding that Participant cease and desist from engaging in said competitive
activity.  For purposes of this Plan, engaging in competition with any
Employer business shall mean engaging by the Participant in any business or
activity in the same geographical market where the same or substantially similar
business or activity is being carried on as an Employer
business.  Such term shall not include owning a nonsubstantial
publicly traded interest as a shareholder in a business that competes with an
Employer business. However, engaging in competition with an Employer business
shall include representing or providing consulting services to, or being an
employee of, any person or entity that is engaged in competition with any
Employer business or that takes a position adverse to any Employer
business.  Accordingly, benefits shall not be provided under this Plan
if, within the time period and without the written consent specified,
Participant either engages directly in competitive activity or in any capacity
in any location becomes employed by, associated with, or renders service to any
company, or parent or affiliate thereof, or any subsidiary of any of them, if
any of them is engaged in competition with an Employer business, regardless of
the position or duties the Participant takes and regardless of whether or not
the employing company, or the company that Participant becomes associated with
or renders service to, is itself engaged in direct competition with an Employer
business.

       

      

    

    
      
        	
                           
      8.3  

              	
                Notice.

              

      

       

      

    

    
      Any
notice required or permitted to be given to the Administrative Committee or the
SEVP-HR under the Plan shall be sufficient if in writing and hand delivered, or
sent by certified mail, to the principal office of AT&T, directed to the
attention of the SEVP-HR.  Any notice required or permitted to be
given to a Participant shall be sufficient if in writing and hand delivered, or
sent by certified mail, to Participant at Participant's last known mailing
address as reflected on the records of his or her employing company or the
company from which the Participant incurred a Termination of Employment, as
applicable.  Notice shall be deemed given as of the date of delivery
or, if delivery is made by mail, as of the date shown on the postmark or on the
receipt for certification.

       

      

    

    
      
        	
                           
      8.4  

              	
                Validity.

              

      

       

      

    

    
      In the
event any provision of this Plan is held invalid, void or unenforceable, the
same shall not affect, in any respect whatsoever, the validity of any other
provision of this plan.

       

      

    

    
      
        	
                           
      8.5  

              	
                Applicable
      Law.

              

      

       

      

    

    
      This Plan
shall be governed and construed in accordance with the laws of the State of
Texas to the extent not preempted by the Employee Retirement Income Security Act
of 1974, as amended, and regulations thereunder ("ERISA").

       

      

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          Attachment A

        

      

    

    LUMP SUM DISTRIBUTION
AGREEMENT

    

    This Lump
Sum Distribution Agreement is made as of the ____ day of ______________, ____ by
and between AT&T Inc.
(“AT&T” or the
“Company”) and _______________(“Participant”).  Unless otherwise
indicated herein, capitalized words used herein shall have the same meaning
ascribed to such words in the 2005 Supplemental Employee Retirement Plan (the
“Plan” or “SERP”).

    

    WHEREAS,
Participant is a Participant in the Plan, which is sponsored by the
Company;

     

    WHEREAS,
pursuant to the Plan, Participant executed an Agreement, governing Participant’s
benefits in the Plan;

     

    WHEREAS,
Participant’s Agreement provides for the distribution of his benefits in the
form of a lump sum, payable one hundred percent (100%) upon the six (6) month
anniversary of his Termination of Employment provided that Participant is age
sixty (60) or older as of the date of his Termination of Employment and
Participant agrees not to compete with an Employer Business;

     

    NOW,
THEREFORE, the parties hereto, for good and valuable consideration, the
sufficiency of which is hereby acknowledged, hereby agree as
follows:

     

    
      	
              1.  

            	
              If
      Participant is age sixty (60) or over as of the date of his Termination of
      Employment, Company shall pay to

            

    

    Participant his benefits under the Plan
in the form of a lump sum distribution, one hundred percent (100%) of which
shall be paid upon the six (6) month anniversary of Participant’s Termination of
Employment.

     

    
      	
              2.  

            	
              In
      exchange for the right to receive the payment described in Paragraph 1,
      above, Participant acknowledges and agrees that he shall not, without the
      written consent of Company, within three (3) years after Termination of
      Employment, engage in competition with AT&T or with any business with
      which AT&T or a subsidiary of AT&T or an affiliated company has a
      substantial interest (collectively referred to herein as "Employer
      business").  For purposes of this Lump Sum Distribution
      Agreement, engaging in competition with any Employer business shall mean
      Participant’s engaging in any business or activity in the same
      geographical market where the same or substantially similar business or
      activity is being carried on as an Employer business. Such term shall not
      include owning a nonsubstantial publicly traded interest as a shareholder
      in a business that competes with an Employer business.  However,
      it is hereby specifically agreed that engaging in competition with an
      Employer business shall include representing or providing consulting
      services to, or being an employee of, any person or entity that is engaged
      in competition with any Employer business or that takes a position adverse
      to any Employer business.  Participant hereby specifically
      agrees not to engage in any such conduct.  Participant also
      specifically agrees that a breach of this provision would result if,
      within the time period and without the written consent specified,
      Participant either engages directly in competitive activity or in any
      capacity in any location becomes employed by, associated with, or renders
      service to any company, or parent or affiliate thereof, or any subsidiary
      of any of them, if any of them is engaged in competition with an Employer
      business, regardless of the position or duties Participant takes and
      regardless of whether or not the employing company, or the company
      that

            

    

    Participant
becomes associated with or renders service to, is itself engaged in direct
competition with an Employer business.

     

    
      	
              3.  

            	
              Participant
      acknowledges and agrees that he shall promptly return to the Company and
      forfeit all consideration previously received pursuant to this Lump Sum
      Distribution Agreement, specifically the payment referred to in Paragraph
      1, if he engages in competition with an Employer business in
      violation of the provisions of Paragraph
2.

            

    

     

    
      	
              4.  

            	
              Participant
      may submit a description of any proposed activity in writing to AT&T and AT&T shall
      advise

            

    

    Participant in writing within
fifteen (15) business days whether such proposed activity would constitute
engaging in competition with an Employer business, within the meaning of this
Lump Sum Distribution Agreement.

     

    
      	
              5.  

            	
              It
      is hereby specifically agreed that the terms of this Lump Sum Distribution
      Agreement shall be kept strictly confidential and that neither party
      shall, except as necessary for performance of the terms hereof or as
      specifically required by law, disclose the existence of this Lump Sum
      Distribution Agreement or any of its terms to third persons without the
      express consent of the other party.

            

    

     

    
      	
              6.  

            	
              Participant agrees that for any
      breach or threatened breach of any of the provisions of this Lump Sum
      Distribution Agreement by Participant, the Company shall have no adequate
      legal remedy, and in addition to any other remedies available, including
      the repayment and forfeiture remedies described in Paragraph 3, a
      restraining order and/or an injunction may be issued against
      Participant to prevent or
      restrain any such breach.

            

    

     

    
      	
              7.  

            	
              Any
      notice required hereunder to be given by either party will be in writing
      and will be deemed effectively given upon personal delivery to the party
      to be notified, or five (5) days after deposit with the United States Post
      Office by certified mail, postage prepaid, to the other party at the
      address set forth below, or to such other address as either party may from
      time to time designate by ten (10) days advance written notice pursuant to
      this Paragraph.

            

    

     

    
      	
              8.  

            	
              In
      the event any provision of this Lump Sum Distribution Agreement is held
      invalid, void, or unenforceable, the same shall not affect in any respect
      whatsoever the validity of any other provision of this Lump Sum
      Distribution Agreement, except that should any part of the non-compete
      provisions of Paragraph 2 of this Agreement be held invalid, void, or
      unenforceable as applicable to and as asserted by Participant, this Lump
      Sum Distribution Agreement, at the Company's option, may be declared by
      the Company null and void.  If this Lump Sum Distribution
      Agreement is declared null and void by Company pursuant to the provisions
      of this Paragraph, Participant shall return to Company all consideration
      previously received pursuant to this Lump Sum Distribution
      Agreement.

            

    

     

    

     

     

    AT&T
Inc.

     

    

     

    
      	 By: 	Senior Executive
      Vice	 	 
	 	President-Human
      Resources	 	 
	 	175 E. Houston
      Street	 	 
	 	San Antonio, Texas
      78205	 	 
	 	 	 	 
	Date	 	Date

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

        
          Attachment B

        

      

    

    “Immediate
Annuity Value of any AT&T or affiliate Qualified Pensions” shall
mean:

    

    
      The
annual amount of annuity payments that would be paid out of the qualified
defined benefit pension plan sponsored by AT&T or an AT&T affiliate in
which the Participant participates on a single life, level payment annuity basis
assuming payment of such qualified defined benefit pension plan benefit
commenced immediately upon the Participant’s Termination of Employment,
notwithstanding the form of payment of such qualified defined benefit pension
plan’s benefit actually made to the Participant (i.e., joint and survivor
annuity, lump sum, etc.) and notwithstanding the actual commencement date of the
payment of such qualified defined benefit pension plan benefit.

       

      

    

    
      

       

      

    

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          Attachment C

        

      

    

    
      Immediate
Annuity Value of SRIP. "Immediate Annuity Value of SRIP" shall
mean

       

      

    

    
      An
objectively determined amount as of December 31, 2008 equal to the annual amount
of a level payment, single life with 10 year certain annuity benefit that would
be paid to the Participant pursuant to the SRIP as it exists on December 31,
2008 assuming the Participant became eligible to receive a distribution of
benefit payments under the SRIP on December 31, 2008, applying the Participant’s
Final Average Earnings and Years of Service (both as defined in the SRIP) as of
December 31, 2004 and the Participant’s age as of December 31, 2008,
notwithstanding the form of payment of the SRIP benefit that would actually be
made to the Participant (i.e., joint and survivor annuity, lump sum, etc.) and
notwithstanding the actual commencement date of the payment of such SRIP
benefit.

       

      

    

    
      

       

      

    

    
      

       

      

    

    
      

       

      

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          Attachment D

        

      

    

    
      

       

      

    

    
      Immediate
Annuity Value of any AT&T or AT&T affiliate Non-Qualified Pensions other
than SERP.  "Immediate Annuity Value of any AT&T or
AT&T affiliate Non-Qualified Pensions other than SERP" shall mean with
respect to a Participant, any one or more of the following, as
applicable:

       

      

    

    
      1.           For
a Participant who is a participant in (or otherwise has a benefit in) the
AT&T Pension Benefit Make Up Plan No. 1 (“PBMU No. 1”), the AT&T Pension
Benefit Make Up Plan No. 2 (“PBMU No. 2”), the Cingular Wireless SBC Executive
Transition Pension Make Up Plan (the “Cingular Plan”) and/or the Pacific Telesis
Group Executive Supplemental Cash Balance Pension Plan (“PTG Plan”) and is a
Participant in the Plan on December 31, 2008:

       

      

    

    An
objectively determined amount as of December 31, 2008 equal to the annual amount
of a level payment, single life annuity benefit that would be paid to the
Participant pursuant to the PBMU No. 1, the PBMU No. 2, the Cingular Plan,
and/or the PTG Plan, as applicable, as they exist on December 31, 2008 assuming
the Participant became eligible to receive a distribution of benefit payments
under the PBMU No. 1, the PBMU No. 2, the Cingular Plan, and/or the PTG Plan, as
applicable, on December 31, 2008, notwithstanding the form of payment of the
benefit that would actually be made to the Participant pursuant to the PBMU No.
1, the PBMU No. 2, the Cingular Plan, and/or the PTG Plan, (i.e., 10-year
certain annuity, lump sum, etc.) and notwithstanding the actual commencement
date of the payment of such PBMU No. 1, PBMU No. 2, the Cingular Plan, and/or
PTG Plan benefit.

     

    
      2.           For
a Participant who is a participant in (or otherwise has a benefit in) the PBMU
No. 1, the PBMU No. 2, the Cingular Plan, and/or the PTG Plan and has a SERP
Effective Date after December 31, 2008:

       

      

    

    An
objectively determined amount as of the Participant’s SERP Effective Date equal
to the annual amount of a level payment, single life annuity benefit that would
be paid to the Participant pursuant to the PBMU No. 1, the PBMU No. 2, the
Cingular Plan, and/or the PTG Plan, as applicable, as they exist on the
Participant’s SERP Effective Date assuming the Participant became eligible to
receive a distribution of benefit payments under the PBMU No. 1, the PBMU No. 2,
the Cingular Plan, and/or the PTG Plan, on his or her SERP Effective Date,
notwithstanding the form of payment of the benefit that would actually be made
to the Participant pursuant to the PBMU No. 1, the PBMU No. 2, the Cingular
Plan, and/or the PTG Plan (i.e., 10-year certain annuity, lump sum, etc.) and
notwithstanding the actual commencement date of the payment of such PBMU No. 1,
PBMU No. 2, the Cingular Plan, and/or PTG Plan benefit.

     

    
      3.           For
a Participant who is a participant in (or otherwise has a benefit in) the
BellSouth Corporation Supplemental Executive Retirement Plan (the “BellSouth
Plan”) and is a Participant in the Plan on December 31, 2008:

       

      

    

    
      An
objectively determined amount as of December 31, 2008 equal to the annual amount
of a level payment, single life annuity benefit that would be paid to the
Participant pursuant to the BellSouth Plan as it exists on December 31, 2008
assuming the Participant became eligible to receive a distribution of benefit
payments under the BellSouth Plan on December 31, 2008, but applying the
Participant’s age and years of service as if the Participant remained employed
through the fourth anniversary of his or her SERP Effective Date and the
Participant’s Included Earnings (as defined in the BellSouth Plan) as of
December 31, 2008, notwithstanding the form of payment of the BellSouth Plan’s
benefit that would actually be made to the Participant (i.e., joint and survivor
annuity, lump sum, etc.) and notwithstanding the actual commencement date of the
payment of such BellSouth Plan benefit.

       

      

    

    
      4.           For
a Participant who is a participant in (or otherwise has a benefit in) the
BellSouth Plan and has a SERP Effective Date after December 31,
2008:

       

      

    

    An
objectively determined amount as of the Participant’s SERP Effective Date equal
to the annual amount of a level payment, single life annuity benefit that would
be paid to the Participant pursuant to the BellSouth Plan as it exists on the
Participant’s SERP Effective Date assuming the Participant became eligible to
receive a distribution of benefit payments under the BellSouth Plan on his or
her SERP Effective Date (applying the Participant’s age, years of service and
Included Earnings (as defined in the BellSouth Plan) as of the Participant’s
SERP Effective Date), notwithstanding the form of payment of the BellSouth
Plan’s benefit that would actually be made to the Participant (i.e., joint and
survivor annuity, lump sum, etc.) and notwithstanding the actual commencement
date of the payment of such BellSouth Plan benefit.

     

    
      5.           For
a Participant who is a participant in (or otherwise has a benefit in) the
AT&T Corp. Long Term Disability and Survivor Protection Plan (“LTDSPP”) and
is entitled to a nonqualified defined benefit from the LTDSPP, the AT&T
Corp. Excess Benefit and Compensation Plan, (“Excess Plan”), and/or the AT&T
Corp. Non-Qualified Pension Plan (“NQPP”) and is a Participant in the Plan on
December 31, 2008 (the Participant’s election as to the time and form of
benefits under these plans is identical to such election under this
Plan):

       

      

    

    
      The
benefit payments paid pursuant to the LTDSPP (nonqualified defined benefit
only), Excess Plan, and/or the NQPP, as applicable, commencing at the actual
time and pursuant to the actual form such benefit payments are made from the
LTDSPP, Excess Plan, and/or the NQPP, as applicable.

       

      

    

    
      6.           For
a Participant who is a participant in (or otherwise has a benefit in) the LTDSPP
and is entitled to a nonqualified defined benefit from the LTDSPP, the Excess
Plan, and/or the NQPP and has a SERP Effective Date after December 31,
2008:

       

      

    

    An
objectively determined amount as of the Participant’s SERP Effective Date equal
to the annual amount of a level payment, single life annuity benefit that would
be paid to the Participant pursuant to the LTDSPP (nonqualified defined benefit
only), the Excess Plan, and/or the NQPP, as applicable, as they exist on the
Participant’s SERP Effective Date assuming the Participant became eligible to
receive a distribution of benefit payments under the AT&T Corp. LTDSPP
(nonqualified defined benefit only), the Excess Plan, and/or the NQPP, on his or
her SERP Effective Date, notwithstanding the form of payment of the benefit that
would actually be made to the Participant pursuant to the LTDSPP (nonqualified
defined benefit only), the Excess Plan, and/or the NQPP (i.e., 10-year certain
annuity, lump sum, etc.) and notwithstanding the actual commencement date of the
payment of such the AT&T Corp. LTDSPP (nonqualified defined benefit only),
the Excess Plan, and/or the NQPP benefit.

     

    

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          Attachment E

          

          

          

          

        

      

    

    Attachment
E applies with respect to any Participant who:

    

    
      	
              ·  

            	
              Became
      a Participant in the 2005 AT&T Supplemental Executive Retirement Plan
      on or before December 31, 2008;

            

    

    
      	
              ·  

            	
              Is
      a participant in the BellSouth Corporation Supplemental Executive
      Retirement Plan; and

            

    

    
      	
              ·  

            	
              Attained
      the age of fifty-four (54) on or before March 1, 2007;
  and

            

    

    
      	
              ·  

            	
              Realizes
      a Termination of Employment on or after January 1,
  2009.

            

    

    

    Upon
Termination of Employment, such Participant’s Plan benefit shall equal the
greater of his or her benefit determined in accordance with Section 3 of the
Plan or this Attachment E.

    

    A.           Definitions.  Solely
for purposes of this Attachment E, the following words shall have the meanings
as provided in this Attachment E.  Any other capitalized word, not
otherwise defined in this Attachment E, shall have the meaning as provided in
Section 2 of the Plan.

    

    
      	
              1.

            	
              The
      term "Annual
      Bonus Award" shall mean the bonus amount paid annually to an
      Attachment E Participant that is included in the calculation of pension
      benefits under the Pension Plan.

            

    

    

    
      	
              2.

            	
              The
      term “Attachment
      E Participant” shall mean any Participant to whom Attachment E
      applies as described in the first paragraph of this Attachment
      E.

            

    

    

    
      	
              3.

            	
              The
      terms "BellSouth
      Corporation" and "Company" shall
      mean BellSouth Corporation, a Georgia corporation, or its
      successors.

            

    

    

    
      	
              4.

            	
              The
      term "Included
      Earnings" shall mean the 12 month average of the sum of (1) the
      last sixty (60) months of base pay, plus (2) the Annual Bonus Awards
      payable during or after that sixty (60) month period; provided, however,
      Included Earnings shall not include base pay or Annual Bonus Awards earned
      after March 1, 2011.  The amounts of base pay and other payments
      used to determine Included Earnings as described above include all amounts
      during the specified period including those amounts previously deferred
      pursuant to other plans.  If an Attachment E Participant
      terminates employment while eligible for a benefit under this Attachment E
      and thereafter receives Included Earnings, these additional Included
      Earnings shall be deemed to have been paid as of the date of the
      Attachment E Participant’s Termination of Employment, and the amount of
      benefit payable under this Attachment E shall be corrected
      accordingly.

            

    

    

    
      	
              5.

            	
              The
      term “Merger” shall
      mean the merger, pursuant to the Agreement and Plan of Merger dated as of
      March 4, 2006 (the “Merger Agreement”), by and among BellSouth, AT&T
      Inc. (“AT&T”), and ABC Consolidation Corp., a Georgia corporation and
      wholly-owned subsidiary of AT&T (“Merger Sub”), pursuant to which, at
      the “Effective Time” (as defined in the Merger Agreement), BellSouth was
      merged with and into the Merger
Sub.

            

    

     

    
      	
              6.

            	
              The
      term "Pension
      Plan" shall mean the BellSouth Personal Retirement Account Pension
      Plan as in effect on the date of the
Merger.

            

    

    

    
      	
              7.

            	
              The
      term "Standard
      Annual Bonus" shall mean the Attachment E Participant’s Target
      Award under the AT&T 2006 Incentive Plan or the AT&T Short Term
      Incentive Plan and for periods of time prior to the Attachment E
      Participant’s participation in the AT&T 2006 Incentive Plan or the
      AT&T Short Term Incentive Plan, Standard Annual Bonus shall mean an
      amount determined by applying a target percentage of an Attachment E
      Participant’s base pay rate as determined by the annual compensation plan
      and the Attachment E Participant’s job or pay
  grade.

            

    

    

    
      	
              8.

            	
              The
      term "Vesting
      Service Credit", except as expressly limited or otherwise provided
      in this Attachment E or under an individual Attachment E Participant’s
      employment-related agreement with the Company, shall have the same meaning
      as is attributed to such term under the Pension Plan and shall be
      interpreted in the same manner as that term is interpreted for purposes of
      the Pension Plan; provided, however, Vesting Service Credit shall not
      include any period of time on or after March 1,
  2011.

            

    

    

    B.           Benefit
Amount.  An Attachment E Participant’s benefit under this
Attachment E shall be determined as follows:

    

    The
aggregate annualized benefit of each Attachment E Participant shall be
determined by adding the sum of two percent (2%) of Included Earnings for each
year of the Attachment E Participant's Vesting Service Credit for the first
twenty years, plus one and one-half percent (1.5%) of Included Earnings for each
year of the Attachment E Participant's Vesting Service Credit for the next ten
years, plus one percent (1%) of Included Earnings for each year of the
Attachment E Participant's Vesting Service Credit for each additional year up to
the month in which the Attachment E Participant retires less (1) 100% of the
Primary Social Security benefit payable at age 65, (2) 100% of the retirement
benefit (unreduced for survivor annuity) payable from the Pension Plan (as
defined below), and (3) 100% of the benefit payable from the BellSouth
Corporation Supplemental Executive Retirement Plan (as defined
below).

    

    a.           The
benefit reduction to be applied for the benefit payable from the Pension Plan
shall be the amount of such benefit that would be payable on the date that
benefits are eligible to be paid (or become payable) under the Plan, or, if
earlier, March 1, 2011 (regardless of the Attachment E Participant’s actual
pension commencement date under the Pension Plan) and determined assuming that
the Attachment E Participant elected a single life annuity (regardless of the
actual form of benefit elected under the Pension Plan).

    

    The
benefit reduction to be applied for the benefit payable from the BellSouth
Corporation Supplemental Executive Retirement Plan shall be an objectively
determined amount as of December 31, 2008 equal to the annual amount of a level
payment, single life annuity benefit that would be paid to the Attachment E
Participant pursuant to the BellSouth Supplemental Executive Retirement Plan as
it exists on December 31, 2008 assuming the Attachment E Participant became
eligible to receive a distribution of benefit payments under the BellSouth
Supplemental Executive Retirement Plan on December 31, 2008, but applying the
Attachment E Participant’s age and years of service as of March 1, 2011 and the
Attachment E Participant’s Included Earnings as of December 31, 2008,
notwithstanding the form of payment of the BellSouth Supplemental Executive
Retirement Plan’s benefit that would actually be made to the Attachment E
Participant (i.e., joint and survivor annuity, lump sum, etc.) and
notwithstanding the actual commencement date of the payment of such BellSouth
Supplemental Executive Retirement Plan benefit.

    

    

    b.           The
benefit amount determined in accordance with this Attachment E (expressed as an
annuity) at the time of the Attachment E Participant’s Termination of Employment
shall not be less than the benefit that would have been payable to the
Attachment E Participant if the Attachment E Participant had a Termination of
Employment on any prior December 31 (using pay, service, offsets and all factors
applicable on the previous dates and assuming an immediate benefit
commencement).

    

    c.           The
benefit amount determined in accordance with this Attachment E shall be reduced
(before the offset for benefits under the Pension Plan) by one-quarter percent
(0.25%) for each calendar month or part thereof by which the Attachment E
Participant’s Termination of Employment precedes his or her 62nd
birthday.

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