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AT&T INC. filed this Form 10-K on 02/22/2013
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ye12_10k.htm
FORM 10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
x                                                                                                                          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

 
For the fiscal year ended December 31, 2012

OR

¨                                                                                                                      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from               to

Commission File Number:  1-8610

AT&T INC.

Incorporated under the laws of the State of Delaware
I.R.S. Employer Identification Number 43-1301883

208 S. Akard St., Dallas, Texas, 75202
Telephone Number 210-821-4105


Securities registered pursuant to Section 12(b) of the Act: (See attached Schedule A)

Securities registered pursuant to Section 12(g) of the Act:  None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X]   No [   ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [   ]   No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]   No [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X ] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [X]
Accelerated filer [   ]
Non-accelerated filer [   ]
Smaller reporting company [   ]
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [   ]   No [X]

 
 
 

 
 
Based on the closing price of $35.66 per share on June 29, 2012, the aggregate market value of our voting and non-voting common stock held by non-affiliates was $207 billion.

At February 20, 2013, common shares outstanding were 5,491,609,489.



DOCUMENTS INCORPORATED BY REFERENCE

(1)
Portions of AT&T Inc.’s Annual Report to Stockholders for the fiscal year ended December 31, 2012 (Parts I and II).

(2)
Portions of AT&T Inc.’s Notice of 2013 Annual Meeting and Proxy Statement dated on or about March 11, 2013 to be filed within the period permitted under General Instruction G(3) (Parts III and IV).
 
 
 
 

 

SCHEDULE A
 
Securities Registered Pursuant To Section 12(b) Of The Act:


   
             Name of each exchange
Title of each class
 
                on which registered
     
Common Shares (Par Value $1.00 Per Share)
 
New York Stock Exchange
     
                                             6.125% AT&T Inc.
 
New York Stock Exchange
                                              Global Notes due April 2, 2015
   
     
                                             5.875% AT&T Inc.
 
New York Stock Exchange
                                              Global Notes due April 28, 2017
   
     
                                             1.875% AT&T Inc. Global Notes due
                                              December 4, 2020
 
New York Stock Exchange
     
                                             3.55% AT&T Inc. Global Notes due
                                              December 17, 2032
 
New York Stock Exchange
     
                                             7.00% AT&T Inc.
 
New York Stock Exchange
                                              Global Notes due April 30, 2040
 
   
                                             4.875% AT&T Inc.
                                              Global Notes due June 1, 2044
 
New York Stock Exchange
     
     
 
 
 
 

 
TABLE OF CONTENTS


 
Item
  Page
 
   
PART I
 
   
 
1.
Business
1
 
 
1A.
Risk Factors
 9
 
 
2.
Properties
10
 
 
3.
Legal Proceedings
10
 
 
4.
Mine Safety Disclosures
10
 
         
   
Executive Officers of the Registrant
11
 
         
         
   
PART II
 
   
 
5.
Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
12
 
 
6.
Selected Financial Data
12
 
 
7.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
13
 
 
7A.
Quantitative and Qualitative Disclosures about Market Risk
13
 
 
8.
Financial Statements and Supplementary Data
13
 
 
9.
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
13
 
 
9A.
Controls and Procedures
13
 
 
9B.
Other Information
13
 
         
         
   
PART III
 
   
 
10.
Directors, Executive Officers and Corporate Governance
14
 
 
11.
Executive Compensation
14
 
 
12.
Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
14
 
 
13.
Certain Relationships and Related Transactions, and Director Independence
14
 
 
14.
Principal Accountant Fees and Services
14
 
         
         
   
PART IV
 
   
 
15.
Exhibits and Financial Statement Schedules
15
 
         
         

 
 
 

 
AT&T Inc.
 


PART I

ITEM 1. BUSINESS

GENERAL

AT&T Inc. (“AT&T,” “we” or the “Company”) is a holding company incorporated under the laws of the State of Delaware in 1983 and has its principal executive offices at 208 S. Akard St., Dallas, Texas, 75202 (telephone number 210-821-4105). We maintain an Internet website at www.att.com. (This website address is for information only and is not intended to be an active link or to incorporate any website information into this document.) We make available, free of charge, on our website our annual report on Form 10-K, our quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission (SEC). We also make available on that website, and in print, if any stockholder or other person so requests, our code of business conduct and ethics entitled “Code of Ethics” applicable to all employees and Directors, our “Corporate Governance Guidelines,” and the charters for all committees of our Board of Directors, including Audit, Human Resources and Corporate Governance and Nominating. Any changes to our Code of Ethics or waiver of our Code of Ethics for senior financial officers, executive officers or Directors will be posted on that website.

History
AT&T, formerly known as SBC Communications Inc. (SBC), was formed as one of several regional holding companies created to hold AT&T Corp.’s (ATTC) local telephone companies. On January 1, 1984, we were spun-off from ATTC pursuant to an anti-trust consent decree, becoming an independent publicly-traded telecommunications services provider. At formation, we primarily operated in five southwestern states. Our subsidiaries merged with Pacific Telesis Group in 1997, Southern New England Telecommunications Corporation in 1998 and Ameritech Corporation in 1999, thereby expanding our wireline operations as the incumbent local exchange carrier (ILEC) into a total of 13 states. In November 2005, one of our subsidiaries merged with ATTC, creating one of the world’s leading telecommunications providers. In connection with the merger, we changed the name of our company from “SBC Communications Inc.” to “AT&T Inc.” In December 2006, one of our subsidiaries merged with BellSouth Corporation (BellSouth) making us the ILEC in an additional nine states. With the BellSouth acquisition, we thereby acquired BellSouth’s 40 percent economic interest in AT&T Mobility LLC (AT&T Mobility), formerly Cingular Wireless LLC, resulting in 100 percent ownership of AT&T Mobility. Our services and products are marketed under the AT&T brand name.

Scope
We are a leading provider of telecommunications services in the United States and the world. We offer our services and products to consumers in the U.S. and services and products to businesses and other providers of telecommunications services worldwide.

The services and products that we offer vary by market, and include: wireless communications, local exchange services, long-distance services, data/broadband and Internet services, video services, telecommunications equipment, managed networking, and wholesale services. We group our operating subsidiaries as follows, corresponding to our operating segments for financial reporting purposes:
·  
wireless subsidiaries provide both wireless voice and data communications services across the U.S. and, through roaming agreements, in a substantial number of foreign countries.
·  
wireline subsidiaries provide primarily landline voice and data communication services, AT&T U-verse® high-speed broadband, video, and voice services (U-verse) and managed networking to business customers.
·  
other subsidiaries include results from corporate and other operations, our portion of  results from our equity investments and impacts from corporate-wide decisions for which the individual operating segments are not being evaluated.

On May 8, 2012, we sold our Advertising Solutions segment. Subsidiaries in this segment published Yellow and White Pages directories and sold directory advertising and Internet-based advertising and local search. As part of the sale, we received a 47 percent equity interest in the new entity YP Holdings LLC (YP Holdings).

Our local exchange subsidiaries operate as the ILEC in 22 states: Alabama, Arkansas, California, Connecticut, Illinois, Indiana, Florida, Georgia, Kentucky, Louisiana, Kansas, Michigan, Mississippi, Missouri, Nevada, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas and Wisconsin (22-state area). Our local exchange subsidiaries are subject to regulation by each state in which they operate and by the Federal Communications Commission (FCC). Wireless service providers are regulated by the FCC. Additional information relating to regulation is contained under the heading “Government Regulation” and in the Annual Report under the heading “Operating Environment and Trends of the Business,” and is incorporated herein by reference pursuant to General Instruction G(2).
 
 
 

 
AT&T Inc.
 


With the expansion of our company through acquisitions and the resulting ownership consolidation of AT&T Mobility, and with continuing advances in technology, our services offerings now combine our traditional wireline and wireless services. We make our customers’ lives more convenient and productive and foster competition and further innovation in the communications and entertainment industry. In 2013, we plan to focus on the areas discussed below.

Wireless
AT&T Mobility began operations in October 2000 as a joint venture between us and BellSouth and, in 2004, acquired AT&T Wireless Services, Inc. Upon our acquisition of BellSouth in 2006, AT&T Mobility became a wholly-owned subsidiary. As of December 31, 2012, we served 107 million subscribers.

We cover most major metropolitan areas of the United States with our Universal Mobile Telecommunications System/High-Speed Downlink Packet Access (HSPA) and HSPA+ network technology, with HSPA+ providing 4G speeds when combined with our upgraded backhaul. At the end of 2012, over 90 percent of our data traffic was carried over this enhanced backhaul. Our network provides superior mobile broadband speeds for data and video services, as well as operating efficiencies using the same spectrum and infrastructure for voice and data on an IP-based platform. Our wireless network also relies on digital transmission technologies known as GSM, General Packet Radio Services and Enhanced Data rates for GSM Evolution (EDGE) for data communications. We have also begun transitioning our network to next generation LTE technology and expect this network to cover approximately 300 million people in the United States and to be largely complete by the end of 2014. We continue to expand the number of locations, including airports and cafés, where customers can access broadband Internet connections using wireless fidelity (local radio frequency commonly referred to as Wi-Fi) technology.

As the wireless industry continues to mature, we believe that future wireless growth will increasingly depend on our ability to offer innovative data services and a wireless network that has sufficient spectrum and capacity to support these innovations and make them available to more subscribers. We are facing significant spectrum and capacity constraints on our wireless network in certain markets. We expect such constraints to increase and expand to additional markets in the coming years. While we are continuing to invest significant capital in expanding our network capacity, our capacity constraints could affect the quality of existing voice and data services and our ability to launch new, advanced wireless broadband services, unless we are able to obtain more spectrum. Any long-term spectrum solution will require that the FCC make new or existing spectrum available to the wireless industry to meet the expanding needs of our subscribers. We will continue to attempt to address spectrum and capacity constraints on a market-by-market basis. To that end, we signed nearly 50 deals to acquire spectrum during 2012 (some pending regulatory review). Much of the recently acquired spectrum came from an innovative solution in which we obtained FCC approval to use WCS spectrum for mobile broadband for the first time.

Also as part of our efforts to improve our network performance and help address the need for additional spectrum capacity, we intend to redeploy spectrum currently used for basic 2G services to support more advanced mobile Internet services on our 3G and 4G networks. We will manage this process consistent with previous network upgrades and will transition customers on a market-by-market basis from our Global System for Mobile Communications (GSM) and EDGE networks (referred to as 2G networks) to our more advanced 3G and 4G networks. We expect to fully discontinue service on our 2G networks by approximately January 1, 2017. As of December 31, 2012, about 8 percent of AT&T’s postpaid subscribers used 2G-capable handsets. We do not expect this transition to have a material impact on our operating results.

Business Customers
We expect to continue to strengthen the reach and sophistication of our network facilities and our ability to offer a variety of communications services, both wireless and wireline, to large businesses, governmental and wholesale customers worldwide. We expect to offer similar services to small- and medium-businesses and to increase the attractiveness of our services to governmental customers. We also expect to extend our wholesale business offerings to other service products and systems integration services.

Data/Broadband
As the communications industry continues to move toward Internet-based technologies that are capable of blending traditional wireline and wireless services, we plan to offer services that take advantage of these new and more sophisticated technologies. In particular, we intend to continue to focus on expanding our AT&T U-verse high-speed broadband and video offerings and on developing IP-based services that allow customers to unite their home or business wireline services with their wireless service.
 
 
 

 
AT&T Inc.
 


U-verse Services  During 2012, we continued to expand our offerings of U-verse High Speed Internet and TV services. As of December 31, 2012, we are marketing U-verse services to approximately 24.5 million customer locations (locations eligible to receive U-verse service). As of December 31, 2012, we had 8.0 million total U-verse subscribers (high-speed Internet and video), including 7.7 million Internet and 4.5 million video subscribers (subscribers to both services are only counted once in the total). As part of Project Velocity IP (VIP), we plan to expand our U-verse services to an additional approximately 8.5 million customer locations.

We believe that our U-verse TV service is a “video service” under the Federal Communications Act. However, some cable providers and municipalities have claimed that certain IP services should be treated as a traditional cable service and therefore subject to the applicable state and local cable regulation. Certain municipalities have delayed our requests to offer this service or have refused us permission to use our existing or new right-of-ways to deploy or activate our U-verse-related equipment, services and products, resulting in litigation. Petitions have been filed at the FCC alleging that the manner in which we provision “public, educational and governmental” (PEG) programming over our U-verse TV service conflicts with federal law, and a lawsuit has been filed in a California state superior court raising similar allegations under California law. If courts having jurisdiction where we have significant deployments of our U-verse services were to decide that federal, state and/or local cable regulation were applicable to our U-verse services, or if the FCC, state agencies or the courts were to rule that we must deliver PEG programming in a manner substantially different from the way we do today or in ways that are inconsistent with our current network architecture, it could have a material adverse effect on the cost and extent of our U-verse offerings.

Voice over Internet Protocol (VoIP)  VoIP is generally used to describe the transmission of voice using IP-based technology rather than a traditional wire and switch-based telephone network. A company using this technology can often provide voice services at a lower cost because this technology uses bandwidth more efficiently than a traditional network and because this technology has not been subject to traditional telephone industry regulation. While the development of VoIP has resulted in increased competition for our wireless and wireline voice services, it also presents growth opportunities for us to develop new products for our customers.

Project VIP  In November 2012, we announced plans to significantly expand and enhance our wireless and wireline broadband networks to support future IP data growth and new services. As part of Project VIP, we plan to expand our deployment of LTE wireless technology and deploy additional technology to further improve wireless spectrum efficiencies. To that end, we expect to cover at least 250 million people in the United States by year-end 2013 and approximately 300 million people in the United States by the end of 2014. In addition, we plan to expand our wireline IP broadband network to additional residential and small-business customer locations to cover approximately 75 percent of all such customer locations in our 22-state wireline service area by year-end 2015. This project is intended to support new revenue opportunities in four key areas: wireless, strategic network services, network managed (“cloud”) services and security as well as continued growth in existing wireless, U-verse and IP-related business services. We expect capital expenditures in the $21 billion range for 2013, and 2014 and 2015 to each be approximately $22 billion, and then decrease to pre-Project VIP levels.

BUSINESS OPERATIONS

OPERATING SEGMENTS
Our segments are strategic business units that offer different products and services over various technology platforms and are managed accordingly. We analyze our operating segments based on segment income before income taxes. We make our capital allocations decisions based on our strategic direction of the business, needs of the network (wireless or wireline) providing services and other assets needed to provide emerging services to our customers. Actuarial gains and losses from pension and other postemployment benefits, interest expense and other income (expense) – net, are managed only on a total company basis and are, accordingly, reflected only in consolidated results. Therefore, these items are not included in the calculation of each segment’s reportable results. The customers and long lived assets of our reportable segments are predominantly in the United States. Each segment’s percentage of total segment operating revenue and income calculations is derived from our segment results, and income percentage may total more than 100 percent due to losses in one or more segments. At December 31, 2012, we had three reportable segments: (1) Wireless, (2) Wireline, and (3) Other. Our Operating results prior to May 9, 2012, also included Advertising Solutions, which was a reportable segment. On May 8, 2012, we completed the sale of our Advertising Solutions segment and received a 47 percent equity interest in the new entity YP Holdings.

Additional information about our segments, including financial information, is included under the heading “Segment Results” on pages 33 through 40 and in Note 3 of the Annual Report and is incorporated herein by reference pursuant to General Instruction G(2).
 
 
 

 
AT&T Inc.
 

 
WIRELESS
Wireless consists of our subsidiary, AT&T Mobility, which operates as a wireless provider to both business and consumer subscribers. Our Wireless segment provided approximately 52% of 2012 total segment operating revenues and 70% of our 2012 total segment income. At December 31, 2012, we served 107 million wireless subscribers. We classify our subscribers as either postpaid, prepaid, connected device or reseller.

Services and Products
We offer a comprehensive range of high-quality nationwide wireless voice and data communications services in a variety of pricing plans, including postpaid and prepaid service plans. Our offerings are tailored to meet the communications needs of targeted customer segments, including youth, family, active professionals, small businesses, government and major national corporate accounts.

Service – Our voice service is generally offered on a contract basis for one- or two-year periods, referred to as postpaid. Under the terms of these contracts, service is billed and provided on a monthly basis according to the applicable rate plan chosen. Our wireless services include basic local wireless communications service, long-distance service and roaming services. Roaming services enable our subscribers to utilize other carriers’ networks when they are “roaming” outside our network footprint. We also charge fees to other carriers for providing roaming services to their customers when their customers utilize our network. We also offer prepaid voice service to certain customers who prefer to control usage or pay in advance.

Wireless data revenues continue to be a growing area of our business, representing an increasing share of our overall subscriber revenue. We are experiencing solid growth from both consumer and enterprise wireless data services, as an increasing number of our subscribers have upgraded their handsets to more advanced integrated devices. We are also seeing rapid growth in demand for new data-centric devices such as notebooks, tablets, eReaders, direction and navigation aids and monitoring devices. In late August 2012, we launched new Mobile Share data plans (which allow postpaid subscribers to share data at discounted prices among devices covered by their plan), and sales results have been strong, with approximately 25% of Mobile Share subscribers choosing plans of 10 gigabytes or higher. Such offerings are intended to encourage existing subscribers to upgrade their current services and/or add connected devices, attract subscribers from other providers, and minimize subscriber churn. Customers in our “connected device” category (e.g., users of eReaders and navigation aids) purchase those devices from third-party suppliers that buy data access supported by our network. Other data-centric device users are classified as either postpaid customers (primarily tablet, netbook and notebook users) or prepaid customers since they purchase service directly from us. We continue to upgrade our network and coordinate with equipment manufacturers and applications developers in order to further capitalize on the continued growth in the demand for wireless data services.

Equipment – We sell a wide variety of handsets, wirelessly enabled computers (i.e., notebooks and tablets) and personal computer wireless data cards manufactured by various suppliers for use with our voice and data services. We sell through our own company-owned stores, agents or third-party retail stores. We also sell accessories, such as carrying cases, hands-free devices, batteries, battery chargers and other items, to consumers, as well as to agents and third-party distributors for resale. Like other wireless service providers, we often provide postpaid contract subscribers substantial equipment subsidies to initiate, renew or upgrade service.

Equity in net income (loss) of affiliates for the Wireless segment includes expenses from our mobile payment joint venture with Verizon and T-Mobile, marketed as the Isis Mobile WalletTM (ISIS).

Additional information on our Wireless segment is contained in the Annual Report in the “Operating Environment Overview” section under the heading “Expected Growth Areas,” “Wireless” beginning on page 41 and is incorporated herein by reference pursuant to General Instruction G(2).

WIRELINE
Our Wireline subsidiaries provide both retail and wholesale communication services domestically and internationally. Our Wireline segment provided approximately 47% of 2012 segment operating revenues and 30% of our 2012 total segment income. We divide our wireline services into three product-based categories: data, voice and other. Revenues from our traditional voice services have been declining as customers have been switching to wireless, cable and other Internet-based providers. In addition, the continuing economic climate has caused wireline customers to terminate their residential or business phone service as individuals have lost jobs or otherwise combined households and businesses have closed or reduced operations. We have responded by offering packages of combined voice and data services, including broadband and video, and intend to continue this strategy during 2013.
 
 
 

 
AT&T Inc.
 


Services and Products
Data – We provide data services that rely on IP-based technology and data services that rely on older, circuit-based technology. We provide businesses voice applications over IP-based networks (i.e., Enhanced Virtual Private Networks or “EVPN”). Over the past several years, we have built out our new IP/MPLS (Internet Protocol/MultiProtocol Label Switching) network, to supplement our IP-based product set, and eventually replace our older circuit-based networks and services. These products allow us to provide highly complex global data networks. Additional IP-based services include Internet access and network integration, dedicated Internet and enterprise networking services, U-verse services and related data equipment sales.

Our circuit-based, traditional data products include switched and dedicated transport services that allow business customers to transmit data at high speeds, as well as DSL and dial-up Internet access. Our private line offering uses high-capacity digital circuits to transmit from point-to-point in multiple configurations and allows customers to create internal data networks and to access external data networks. Switched Transport services transmit data using switching equipment to transfer the data between multiple lines before reaching its destination. Dedicated Transport services use a single direct line to transmit data between destinations. DSL is a digital modem technology that converts existing twisted-pair telephone lines into access paths for multimedia and high-speed data communications to the Internet or private networks. DSL allows customers to simultaneously make a phone call and access information via the Internet or local area network (LAN). Digital Services use dedicated digital circuits to transmit digital data at various high rates of speed.

Network integration services include installation of business data systems, local area networking and other data networking offerings. Internet access services include a wide range of products for residences and businesses including basic dial-up access service, dedicated access, web hosting, managed services, e-mail and high-speed access services. Our managed web-hosting services for businesses provide network, server and security infrastructure as well as built-in data storage and include application performance management, database management, hardware and operating system management. Our hosting services also provide customers with secure access to detailed reporting information about their infrastructure and applications. These services are evolving to a cloud delivery model, providing customers with on demand data storage and computing capabilities from a centrally-managed network (referred to as the cloud) accessible from a variety of different devices and locations.

Packet services consist of data networks using packet switching and transmission technologies, including traditional circuit-based, and IP connectivity services. Packet services enable customers to transmit large volumes of data economically and securely and are used for LAN interconnection, remote site, point of sale and branch office communications. High-speed packet services are used extensively by enterprise (large business) customers.

Enterprise networking services provide comprehensive support from network design, implementation and installation to ongoing network operations and management for networks of varying scales, including LANs, wide area networks, and virtual private networks. These services include applications such as e-mail, order entry systems, employee directories, human resource transactions and other database applications. We also offer Wi-Fi service.

We provide local, interstate and international wholesale networking capacity to other service providers. We offer a combination of high-volume transmission capacity and conventional dedicated line services on a regional, national and international basis to wireless carriers, interexchange carriers, Internet service providers (ISPs) and facility-based and switchless resellers. Our wholesale customers are primarily large ISPs, wireless carriers, competitive local exchange carriers (CLECs), regional phone companies, interexchange carriers, cable companies and systems integrators.

Voice – Voice includes traditional local and long-distance service provided to retail customers and wholesale access to our network and individual network elements provided to competitors. At December 31, 2012, our wireline subsidiaries served approximately 16 million retail consumer access lines, 14 million retail business access lines and 2 million wholesale access lines. We also have a number of integrated voice and data services, such as integrated network connections, that provide customers the ability to integrate access for their voice and data services, the data component of which is included in data revenues. Additionally, voice revenues do not include any of our VoIP revenues, which are included in data revenues.

Long distance consists of traditional long distance and international long distance for customers that select us as their primary long-distance carrier. Long distance also includes services provided by calling card, 1-800 services and conference calling. These services are used in a wide variety of business applications, including sales, reservation centers or customer service centers. We also provide wholesale switched access service to other service providers.
 
 
 

 
AT&T Inc.
 


Voice also includes calling features, fees to maintain wire located inside customer premises and other miscellaneous voice products. Calling features are enhanced telephone services available to retail customers such as Caller ID, Call Waiting and voice mail. These calling features services are generally more profitable than basic local phone service.

Other – Other includes application management, security service, integration services, customer premises equipment, outsourcing, government-related services, customer information services and satellite video services. Security services include business continuity and disaster recovery services as well as premise and network based security products.

Customer premises equipment and other equipment sales range from single-line and cordless telephones to sophisticated digital Private Branch Exchange (PBX) systems. PBX is a private telephone switching system, typically used by businesses and usually located on a customer’s premises, which provides intra-premise telephone services as well as access to our network.

OTHER
Our Other segment includes corporate and other operations and impacts from corporate-wide decisions for which the individual operating segments are not being evaluated. The Other segment provided less than 1% of total segment operating revenues in 2012. In 2012, segment operating expenses exceeded revenues. We also include in this segment the equity income (loss) from our international investments in América Móvil, S.A. de C.V., and our 47 percent equity interest in YP Holdings.

MAJOR CLASSES OF SERVICE

The following table sets forth the percentage of total consolidated reported operating revenues by any class of service that accounted for 10% or more of our consolidated total operating revenues in any of the last three fiscal years:

 
Percentage of Total
 
Consolidated Operating Revenues
 
2012
2011
2010
Wireless Segment
     
  Wireless service
46%
45%
43%
  Equipment1
6%
5%
4%
Wireline Segment
     
  Data
25%
23%
22%
  Voice
18%
20%
23%
  Other2
4%
4%
5%
1 Equipment is reported as “Other” revenue on our consolidated statements of income.
2 Includes integration services and customer premises equipment, governmental-related services and outsourcing.

GOVERNMENT REGULATION

Wireless communications providers must be licensed by the FCC to provide communications services at specified spectrum frequencies within specified geographic areas and must comply with the rules and policies governing the use of the spectrum as adopted by the FCC. The FCC’s rules have a direct impact on whether the wireless industry has sufficient spectrum available to support the high quality, innovative services our customers demand. Wireless licenses are issued for a fixed time period, typically ten years, and we must seek renewal of these licenses. While the FCC has generally renewed licenses given to operating companies such as us, the FCC has authority to both revoke a license for cause and to deny a license renewal if a renewal is not in the public interest. Additionally, while wireless communications providers’ prices and service offerings are generally not subject to regulation, the federal government and various states are considering new regulations and legislation relating to various aspects of wireless services.

Our wireline subsidiaries are subject to regulation by state governments, which have the power to regulate intrastate rates and services, including local, long-distance and network access services, provided such state regulation is consistent with federal law. Some states have eliminated or reduced regulations on our retail offerings. These subsidiaries are also subject to the jurisdiction of the FCC with respect to intercarrier compensation, interconnection, and interstate and international rates and services, including interstate access charges. Access charges are a form of intercarrier compensation designed to compensate our wireline subsidiaries for the use of their networks by other carriers.
 
 
 

 
AT&T Inc.
 

 
Our subsidiaries operating outside the United States are subject to the jurisdiction of national and supranational regulatory authorities in the market where service is provided. Regulation is generally limited to operational licensing authority for the provision of enterprise services.
 
Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (ITRA) added new section 13(r) to the Securities Exchange Act of 1934, requiring a public reporting issuer to disclose in its annual and quarterly reports whether it or any of its affiliates have knowingly engaged in specific activities or transactions relating to Iran during the period covered by the report, including activities not prohibited by U.S. law and conducted outside the U.S. by non-U.S. affiliates in compliance with local law.
 
AT&T had no activities in 2012 that required reporting under ITRA. AT&T holds a 9.55% interest in América Móvil, which is more fully described on page 71 of the 2012 Annual Report to Stockholders. América Móvil has reported to AT&T that it and certain of its subsidiaries have entered into roaming interconnection agreements with MTN Irancell. To date, América Móvil and its subsidiaries have no revenues under the agreement. We understand that América Móvil intends to continue this relationship.

Additional information relating to regulation of our subsidiaries is contained in the Annual Report under the headings “Operating Environment Overview” beginning on page 41 and “Regulatory Developments” beginning on page 42 and are incorporated herein by reference pursuant to General Instruction G(2).

IMPORTANCE, DURATION AND EFFECT OF LICENSES

Certain of our subsidiaries own or have licenses to various patents, copyrights, trademarks and other intellectual property necessary to conduct business. Many of our subsidiaries also hold government-issued licenses or franchises to provide wireline or wireless services and regulation affecting those rights is contained in the Annual Report under the heading “Operating Environment Overview” beginning on page 41 and is incorporated herein by reference pursuant to General Instruction G(2). We actively pursue patents, trademarks and service marks to protect our intellectual property within the U.S. and abroad. We maintain a significant global portfolio of patents, trademarks and service mark registrations. We have also entered into agreements that permit other companies, in exchange for fees and subject to appropriate safeguards and restrictions, to utilize certain of our trademarks and service marks. We periodically receive offers from third parties to obtain licenses for patents and other intellectual rights in exchange for royalties or other payments. We also receive notices asserting that our products or services infringe on their patents and other intellectual property rights. These claims, whether against us directly or against third-party suppliers of products or services that we, in turn, sell to our customers, such as wireless handsets, could require us to pay damages, royalties, stop offering the relevant products or services and/or cease other activities. While the outcome of any litigation is uncertain, we do not believe that the resolution of any of these infringement claims or the expiration or non-renewal of any of our intellectual property rights would have a material adverse effect on our results of operations.

MAJOR CUSTOMER

No customer accounted for 10% or more of our consolidated revenues in 2012, 2011 or 2010.

COMPETITION

Information relating to competition in each of our operating segments is contained in the Annual Report under the heading “Competition” beginning on page 43, and is incorporated herein by reference pursuant to General Instruction G(2).
 
 
 

 
AT&T Inc.
 


RESEARCH AND DEVELOPMENT

AT&T Labs’ scientists and engineers conduct research in a variety of areas, including IP networking; advanced network design and architecture; network and cyber security, network operations support systems; data mining techniques and advanced speech technologies. The majority of the development activities are performed by AT&T Services, Inc. The developers within AT&T Services, Inc. work with our business units and AT&T Labs to create new services and invent tools and systems to manage secure and reliable networks for us and our customers. We have recently initiated a technology outreach effort aimed at venture capital funded startups with the objective of rapidly introducing new solutions, products and applications developed by third parties. We also have a research agreement with Ericsson. Research and development expenses were $1,278 million in 2012, $1,307 million in 2011, and $1,280 million in 2010.
 
EMPLOYEES

As of January 31, 2013, we employed approximately 242,000 persons. Approximately 55 percent of our employees are represented by the Communications Workers of America (CWA), the International Brotherhood of Electrical Workers or other unions. Contracts covering approximately 77,000 (as of December 31, 2012) employees expired during 2012 and we have reached new contracts covering approximately 57,000 of those employees. Contracts covering wireline employees in California, Connecticut and Nevada expired in April 2012. On February 20, 2013, we announced a tentative three-year agreement with the CWA covering the approximately 17,000 wireline employees in California and Nevada; this agreement is subject to ratification by these employees. The contract covering Connecticut employees remains subject to negotiation. In addition, during 2012, we entered into a new national four-year contract covering only benefits with the approximately 40,000 employees in our mobility business; contracts covering wages and other non-benefit working terms for these mobility employees are structured on a regional basis and one regional contract for 20,000 employees expired during February 2013. Contracts covering approximately 30,000 non-mobility employees will expire during 2013, including approximately 20,000 wireline employees in our five-state Southwest region. On February 6, 2013, we announced a tentative agreement with the CWA covering the wireline employees in our Southwest region; this agreement is subject to ratification by these employees. After expiration of the current agreements, work stoppages or labor disruptions may occur in the absence of new contracts or other agreements being reached.
 
At December 31, 2012, we had approximately 331,741 retirees who, along with their dependents, were eligible to receive retiree benefits.
 
 
 

 
AT&T Inc.
 


ITEM 1A. RISK FACTORS

Information required by this Item is included in the Annual Report under the heading “Risk Factors” on pages 54 through 57 which is incorporated herein by reference pursuant to General Instruction G(2).

CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS

The following factors could cause our future results to differ materially from those expressed in the forward-looking statements:
·  
Adverse economic and/or capital access changes in the markets served by us or in countries in which we have significant investments, including the impact on customer demand and our ability and our suppliers’ ability to access financial markets at favorable rates.
·  
Changes in available technology and the effects of such changes, including product substitutions and deployment costs.
·  
Increases in our benefit plans’ costs, including increases due to adverse changes in the United States and foreign securities markets, resulting in worse-than-assumed investment returns and discount rates and adverse medical cost trends and unfavorable healthcare legislation, regulations or related court decisions.
·  
The final outcome of FCC and other federal agency proceedings and reopenings of such proceedings and judicial reviews, if any, of such proceedings, including issues relating to access charges, intercarrier compensation, interconnection obligations, transitioning from legacy technologies to IP-based infrastructure, universal service, broadband deployment, E911 services, competition, net neutrality, unbundled loop and transport elements, availability of new spectrum from the FCC on fair and balanced terms, wireless license awards and renewals and wireless services, including data roaming agreements and spectrum allocation, and the sunset of the traditional copper-based network services and regulatory obligations.
·  
The final outcome of regulatory proceedings in the states in which we operate and reopenings of such proceedings and judicial reviews, if any, of such proceedings, including proceedings relating to Interconnection terms, access charges, universal service, unbundled network elements and resale and wholesale rates; broadband deployment including our U-verse services; net neutrality; performance measurement plans; service standards; and intercarrier and other traffic compensation.
·  
Enactment of additional state, federal and/or foreign regulatory and tax laws and regulations pertaining to our subsidiaries and foreign investments, including laws and regulations that reduce our incentive to invest in our networks, resulting in lower revenue growth and/or higher operating costs.
·  
Our ability to absorb revenue losses caused by increasing competition, including offerings that use alternative technologies (e.g., cable, wireless and VoIP) and our ability to maintain capital expenditures.
·  
The extent of competition and the resulting pressure on customer and access line totals and wireline and wireless operating margins.
·  
Our ability to develop attractive and profitable product/service offerings to offset increasing competition in our wireless and wireline markets.
·  
The ability of our competitors to offer product/service offerings at lower prices due to lower cost structures and regulatory and legislative actions adverse to us, including state regulatory proceedings relating to unbundled network elements and nonregulation of comparable alternative technologies (e.g., VoIP).
·  
The development of attractive and profitable U-verse service offerings; the extent to which regulatory, franchise fees and build-out requirements apply to this initiative; and the availability, cost and/or reliability of the various technologies and/or content required to provide such offerings.
·  
Our continued ability to attract and offer a diverse portfolio of wireless devices, some on an exclusive basis.
·  
The availability and cost of additional wireless spectrum and regulations and conditions relating to spectrum use, licensing, obtaining additional spectrum, technical standards and deployment and usage, including network management rules.
·  
Our ability to manage growth in wireless data services, including network quality and acquisition of adequate spectrum at reasonable costs and terms.
·  
The outcome of pending, threatened or potential litigation, including patent and product safety claims by or against third parties.
·  
The impact on our networks and business from major equipment failures; security breaches related to the network or customer information; our inability to obtain handsets, equipment/software or have handsets, equipment/software serviced in a timely and cost-effective manner from suppliers; or severe weather conditions, natural disasters, pandemics, energy shortages, wars or terrorist attacks.
·  
The issuance by the Financial Accounting Standards Board or other accounting oversight bodies of new accounting standards or changes to existing standards.
·  
The issuance by the Internal Revenue Service and/or state tax authorities of new tax regulations or changes to existing standards and actions by federal, state or local tax agencies and judicial authorities with respect to applying applicable tax laws and regulations and the resolution of disputes with any taxing jurisdictions.
·  
Our ability to adequately fund our wireless operations, including payment for additional spectrum, network upgrades and technological advancements.
·  
Changes in our corporate strategies, such as changing network requirements or acquisitions and dispositions, which may require significant amounts of cash or stock, to respond to competition and regulatory, legislative and technological developments.
·  
The uncertainty surrounding further congressional action to address spending reductions and negotiations over the debt ceiling, which may result in a significant reduction in government spending and reluctance of businesses and consumers to spend in general and on our products and services specifically, due to this fiscal uncertainty.
Readers are cautioned that other factors discussed in this report, although not enumerated here, also could materially affect our future earnings.
 
 
 
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AT&T Inc.
 

 
ITEM 2. PROPERTIES

Our properties do not lend themselves to description by character and location of principal units. At December 31, 2012, approximately 79.5% of our property, plant and equipment was owned by our wireline subsidiaries and approximately 20.5% was owned by our wireless subsidiaries. Central office equipment represented 31.8%; Outside Plant (including cable, wiring and other non-central office network equipment) represented approximately 29.7%; other equipment, comprised principally of furniture and office equipment and vehicles and other work equipment, represented 22.6%; land, building and wireless communications towers represented 11.3%; and other miscellaneous property represented 4.6%.

Substantially all of the installations of central office equipment are located in buildings and on land we own. Many garages, administrative and business offices, and telephone centers and retail stores are in leased quarters. Property, on which communication towers are located, may be either owned or leased.

ITEM 3. LEGAL PROCEEDINGS

We are a party to numerous lawsuits, regulatory proceedings and other matters arising in the ordinary course of business. Additional information regarding litigation is included in the Annual Report under the headings “Retiree Phone Concession Litigation,” “Wage and Hour Litigation,” “NSA Litigation” and “Universal Service Fees Litigation” on pages 46 through 47, which is incorporated herein by reference pursuant to General Instruction G(2). As of the date of this report, we do not believe any pending legal proceedings to which we or our subsidiaries are subject are required to be disclosed as material legal proceedings pursuant to this item.

We are subject from time to time to judicial and administrative proceedings brought by various governmental authorities under federal, state or local environmental laws. We are required to discuss three of these proceedings in our Forms 10-Q and 10-K,  because each could result in monetary sanctions (exclusive of interest and costs) of one hundred thousand dollars or more. However, we do not believe that any of them currently pending will have a material adverse effect on our results of operations.

(a)  
AT&T Mobility has entered into an administrative settlement with the U.S. Environmental Protection Agency (EPA) regarding alleged violations of federal environmental statutes in connection with management of back-up power systems at AT&T Mobility facilities. The EPA’s allegations included noncompliance with requirements to obtain air emission permits for generators and to prepare spill prevention plans for fuel storage tanks. The settlement requires us pay an initial civil penalty of 750 thousand dollars and to spend 625 thousand dollars on certain environmental projects. The settlement also requires us to audit our compliance at over 1,300 facilities and to pay stipulated penalties for any violations discovered by those audits.

(b)  
On March 29, 2012, attorneys in an investigation led by the California Attorney General’s Office informed us of claimed violations of California state hazardous waste statutes arising from the disposal of batteries, aerosol cans, and electronic waste at various California facilities. We are analyzing the claims while cooperating with investigators and implementing remedial measures where appropriate. At this time, it is possible that we could face civil penalties in excess of one hundred thousand dollars, but we do not anticipate such fines would be in an amount that would be material.

(c)  
In December 2011, Harris County, Texas brought suit on behalf of itself and the Texas Commission on Environmental Quality (TCEQ) alleging AT&T to be liable for statutory civil penalties for past leakage at eleven petroleum storage tank locations. All eleven sites have been remediated (with de minimis actual impact) in accordance with state programs and the TCEQ has issued No Further Action (NFA) letters closing the sites. Notwithstanding these facts, Harris County declined at mediation in June 2012 to dismiss its claims. While it is possible that Harris County may recover civil penalties exceeding one hundred thousand dollars, we do not expect the amount, if any, to be material.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.
 
 
 
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AT&T Inc.
 



EXECUTIVE OFFICERS OF THE REGISTRANT
(As of February 1, 2013)
 

Name
Age
Position
Held Since
       
Randall L. Stephenson
52
Chairman of the Board, Chief Executive Officer and President
6/2007
William A. Blase Jr.
57
Senior Executive Vice President – Human Resources
6/2007
James W. Cicconi
60
Senior Executive Vice President – External and Legislative Affairs, AT&T Services, Inc.
11/2008
Catherine M. Coughlin
55
Senior Executive Vice President and Global Marketing Officer
6/2007
Ralph de la Vega
61
President and Chief Executive Officer, AT&T Mobility
10/2008
John M. Donovan
52
Senior Executive Vice President – AT&T Technology and Network Operations
1/2012
Andrew M. Geisse
56
Chief Executive Officer – AT&T Business Solutions
8/2012
Lori M. Lee
47
Executive Vice President-Home Solutions
1/2013
John T. Stankey
50
Group President and Chief Strategy Officer
2/2012
John J. Stephens
53
Senior Executive Vice President and Chief Financial Officer
6/2011
Wayne Watts
59
Senior Executive Vice President and General Counsel
6/2007
       

All of the above executive officers have held high-level managerial positions with AT&T or its subsidiaries for more than the past five years, except for Mr. Donovan. Mr. Donovan was executive vice president of product, sales, marketing and operations at VeriSign Inc., a technology company that provides Internet infrastructure services, from November 2006 to April 2008. Mr. Donovan joined AT&T as Chief Technology Officer in April 2008. Executive officers are not appointed to a fixed term of office.

 
 
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AT&T Inc.
 

 
PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES


(a) Our common stock is listed on the New York Stock Exchange. The number of stockholders of record as of December 31, 2012 and 2011 was 1,224,601 and 1,301,479. The number of stockholders of record as of February 20, 2013, was 1,217,463. We declared dividends, on a quarterly basis, totaling $1.77 per share in 2012 and $1.73 per share in 2011.

Other information required by this Item is included in the Annual Report under the headings “Quarterly Financial Information” on page 91, “Selected Financial and Operating Data” on page 30, and “Stock Trading Information” on the back cover, which are incorporated herein by reference pursuant to General Instruction G(2).

(c) On December 17, 2010, our Board of Directors authorized a share repurchase plan of 300 million shares of common stock, with no expiration date. During 2010 and 2011, we did not repurchase any shares under this plan. During the first quarter of 2012, we started to repurchase a portion of the shares pursuant to plans that comply with the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934. In November 2012, we completed the purchase of the authorized shares. In July 2012, the Board authorized the repurchase of up to an additional 300 million shares of common stock, with no expiration date. For the year ended December 31, 2012, we repurchased 371 million shares of common stock under both plans. We will continue to fund any share repurchases through a combination of cash from operations, borrowings dependent on market conditions, or cash from the disposition of certain non-strategic investments.
 
ISSUER PURCHASES OF EQUITY SECURITIES
                   
A summary of our repurchases of common stock during the fourth quarter of 2012 is as follows:
                   
Period
 
(a)
 
 
 
Total Number of Shares (or Units) Purchased
 
 
(b)
 
 
 
Average Price Paid Per Share (or Unit)
 
 
(c)
 
 
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs1,2 
 
 
(d)
 
Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under The Plans or Programs1,2 
                 
 
October 1, 2012 - October 31, 2012
 
26,946,700 
 
$
37.12 
 
26,946,700 
 
328,537,255 
November 1, 2012 - November 30, 2012
 
44,536,9003
   
33.76 
 
44,460,000 
 
284,077,255 
December 1, 2012 - December 31, 2012
 
55,195,000 
   
34.01 
 
55,195,000 
 
228,882,255 
Total
 
126,678,600
 
$
34.58 
 
126,601,700 
   
In December 2010, we announced our stock repurchase plan, under which our Board of Directors authorized the
    repurchase of up to 300 million shares of our common stock, which we completed in November 2012.
In July 2012, the Board authorized the repurchase of an additional 300 million shares. The plan has no expiration date.
3  Of the shares purchased, 76,900 shares were acquired through the withholding of taxes on the vesting of restricted stock or through the payment in stock of the exercise price of options.

 
ITEM 6. SELECTED FINANCIAL DATA

Information required by this Item is included in the Annual Report under the heading “Selected Financial and Operating Data” on page 30, which is incorporated herein by reference pursuant to General Instruction G(2).
 
 
 
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AT&T Inc.
 

 
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Information required by this Item is included in the Annual Report on pages 31 through 58, which is incorporated herein by reference pursuant to General Instruction G(2).

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information required by this Item is included in the Annual Report under the heading “Market Risk” on pages 52 through 53, which is incorporated herein by reference pursuant to General Instruction G(2).

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Information required by this Item is included in the Annual Report on pages 59 through 91, which is incorporated herein by reference pursuant to General Instruction G(2).

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

During our two most recent fiscal years, there has been no change in the independent accountant engaged as the principal accountant to audit our financial statements and the independent accountant has not expressed reliance on other independent accountants in its reports during such time period.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by the registrant is recorded, processed, summarized, accumulated and communicated to its management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosure, and reported within the time periods specified in the SEC’s rules and forms. The Chief Executive Officer and Chief Financial Officer have performed an evaluation of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures as of December 31, 2012. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the registrant’s disclosure controls and procedures were effective as of December 31, 2012.

Internal Control Over Financial Reporting

(a)  Management’s Annual Report on Internal Control over Financial Reporting
The management of AT&T is responsible for establishing and maintaining adequate internal control over financial reporting. AT&T’s internal control system was designed to provide reasonable assurance as to the integrity and reliability of the published financial statements. AT&T management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2012. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework. Based on its assessment, AT&T management believes that, as of December 31, 2012, the Company’s internal control over financial reporting is effective based on those criteria.

(b)  Attestation Report of the Registered Public Accounting Firm
The registered public accounting firm that audited the financial statements included in the Annual Report containing the disclosure required by this Item, Ernst & Young LLP, has issued an attestation report on the Company’s internal control over financial reporting. The attestation report issued by Ernst & Young LLP is included in the Annual Report on page 94, which is incorporated herein by reference pursuant to General Instruction G(2).

ITEM 9B. OTHER INFORMATION

There is no information that was required to be disclosed in a report on Form 8-K during the fourth quarter of 2012 but was not reported.
 
 
 
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AT&T Inc.
 


PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information regarding executive officers required by Item 401 of Regulation S-K is furnished in a separate disclosure at the end of Part I of this report since the registrant did not furnish such information in its definitive proxy statement prepared in accordance with Schedule 14A. Information regarding directors required by Item 401 of Regulation S-K is incorporated herein by reference pursuant to General Instruction G(3) from the registrant’s definitive proxy statement, dated on or about March 11, 2013 (Proxy Statement) under the heading “Election of Directors.”

Information required by Item 405 of Regulation S-K is incorporated herein by reference pursuant to General Instruction G(3) from the registrant’s Proxy Statement under the heading “Section 16(a) Beneficial Ownership Reporting Compliance.”
 
 
The registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The members of the committee are Messrs. Kelly, Madonna, McCallister, Pardo, and Ms. Tyson. The additional information required by Item 407(d)(5) of Regulation S-K is incorporated herein by reference pursuant to General Instruction G(3) from the registrant’s Proxy Statement under the heading “Audit Committee.”

The registrant has adopted a code of ethics entitled “Code of Ethics” that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer, or controller or persons performing similar functions. The additional information required by Item 406 of Regulation S-K is provided in this report under the heading “General” under Part I, Item 1. Business.

ITEM 11. EXECUTIVE COMPENSATION

Information required by Item 402(k) of Regulation S-K is incorporated herein by reference pursuant to General Instruction G(3) from the registrant’s Proxy Statement under the heading “Compensation of Directors.” Information regarding officers is included in the registrant’s Proxy Statement on the pages beginning with the heading “Compensation Discussion and Analysis” and ending with, and including, the pages under the heading “Potential Payments upon Change in Control” which are incorporated herein by reference pursuant to General Instruction G(3). Information required by Item 407(e)(5) of Regulation S-K is included in the registrant’s Proxy Statement under the heading “Compensation Committee Report” and is incorporated herein by reference pursuant to General Instruction G(3) and shall be deemed furnished in this Annual Report on Form 10-K and will not be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information required by Item 403 of Regulation S-K is included in the registrant’s Proxy Statement under the heading “Common Stock Ownership,” which is incorporated herein by reference pursuant to General Instruction G(3).
 
Information required by Item 201(d) of Regulation S-K is incorporated herein by reference pursuant to General Instruction G(3) from the registrant’s Proxy Statement under the heading “Equity Compensation Plan Information.”

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information required by Item 404 of Regulation S-K is included in the registrant’s Proxy Statement under the heading “Related Person Transactions,” which is incorporated herein by reference pursuant to General Instruction G(3). Information required by Item 407(a) of Regulation S-K is included in the registrant’s Proxy Statement under the heading “Independence of Directors,” which is incorporated herein by reference pursuant to General Instruction G(3).

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information required by this Item is included in the registrant’s Proxy Statement under the heading “Principal Accountant Fees and Services,” which is incorporated herein by reference pursuant to General Instruction G(3).
 
 
 
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AT&T Inc.
 


PART IV

ITEM 15. EXHIBITS and FINANCIAL STATEMENT SCHEDULES

(a) Documents filed as a part of the report:
 
                                               Page
(1) Report of Independent Registered Public Accounting Firm                                                                                                                  *
      Financial Statements covered by Report of Independent Registered Public Accounting Firm:
Consolidated Statements of Income                                                                                                                                                    *
Consolidated Statements of Comprehensive Income                                                                                                                       *
Consolidated Balance Sheets                                                                                                                                                               *
Consolidated Statements of Cash Flows                                                                                                                                            *
Consolidated Statements of Changes in Stockholders’ Equity                                                                                                       *
Notes to Consolidated Financial Statements                                                                                                                                     *

 
*
Incorporated herein by reference to the appropriate portions of the registrant’s Annual Report to Stockholders for the fiscal year ended December 31, 2012. (See Part II.)
 
                                               Page
(2) Financial Statement Schedules:
II - Valuation and Qualifying Accounts                                                                                                                                             21

 
Financial statement schedules other than those listed above have been omitted because the required information is contained in the financial statements and notes thereto, or because such schedules are not required or applicable.

(3) Exhibits:

 
Exhibits identified in parentheses below, on file with the SEC, are incorporated herein by reference as exhibits hereto. Unless otherwise indicated, all exhibits so incorporated are from File No. 1-8610.

Exhibit
Number              

 
2
Stock Purchase Agreement by and Between Deutsche Telekom AG and AT&T Inc. dated March 20, 2011. (Exhibit 2.1 to Form 8-K dated March 20, 2011.)

 
3-a
Restated Certificate of Incorporation, filed with the Secretary of State of Delaware on May 1, 2009. (Exhibit 3 to Form 10-Q filed for June 30, 2009.)

 
3-b
Bylaws amended June 24, 2011. (Exhibit 3 to Form 8-K dated June 24, 2011.)
 
 
4-a
Certificate of Designations for Perpetual Cumulative Preferred Stock of SBC Communications Inc., filed with the Secretary of State of the State of Delaware on November 18, 2005. (Contained in Restated Certificate of Incorporation filed as Exhibit 3-a.)

 
4-b
No instrument which defines the rights of holders of long-term debt of the registrant and all of its consolidated subsidiaries is filed herewith pursuant to Regulation S-K, Item 601b)(4)(iii)(A), except for the instruments referred to in 4-c, 4-d, 4-e, 4-f, 4-g, 4-h and 4-i below. Pursuant to this regulation, the registrant hereby agrees to furnish a copy of any such instrument not filed herewith to the SEC upon request.

 
4-c
Guaranty of certain obligations of Pacific Bell Telephone Co. and Southwestern Bell Telephone Co. (Exhibit 4-c to Form 10-K for 2011.)

 
4-d
Guaranty of certain obligations of Ameritech Capital Funding Corp., Indiana Bell Telephone Co. Inc., Michigan Bell Telephone Co., Pacific Bell Telephone Co., and Wisconsin Bell, Inc.  (Exhibit 4-d  to Form 10-K for 2011.)

 
4-e
Guarantee of certain obligations of AT&T Corp. (Exhibit 4-e to Form 10-K for 2011.)
 
 
 
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AT&T Inc.
 


 
4-f
Guarantee of certain obligations of BellSouth. (Exhibit 4-f to Form 10-K for 2011.)

 
4-g
Cingular Third Supplemental Indenture. (Exhibit 4-g to Form 10-K for 2011.)

 
4-h
Indenture dated as of November 1, 1994 between SBC Communications Inc. and The Bank of New York, as Trustee. (Exhibit 4-h to Form 10-K for 2008.)

 
4-i
Registration Rights Agreement dated December 17, 2012 (Exhibit 4.4 to Form 8-K dated December 17, 2012.)

 
10-a
Short Term Incentive Plan, dated November 18, 2005. (Exhibit 10-a to Form 10-K for 2008.)

 
10-b
2001 Incentive Plan, dated November 18, 2005. (Exhibit 10-t to Form 10-K for 2008.)

 
10-c
2006 Incentive Plan, amended and restated effective through January 28, 2010. (Exhibit 10-c to Form 10-Q filed for June 30, 2010.)

 
10-d
2011 Incentive Plan. (Exhibit 10.4 to Form 10-Q filed for March 31, 2011.)

 
10-e
1995 Management Stock Option Plan, dated November 16, 2001. (Exhibit 10-w to Form 10-K for 2008.)

 
10-f
Supplemental Life Insurance Plan, amended and restated effective January 1, 2010. (Exhibit 10-d to Form 10-Q filed for June 30, 2009.)

 
10-g
Supplemental Retirement Income Plan, amended and restated December 31, 2008. (Exhibit 10-c to Form 10-K for 2008.)

 
10-h
2005 Supplemental Employee Retirement Plan, amended and restated May 1, 2012. (Exhibit 10-a to Form 10-Q filed for June 30, 2012.)

 
10-i
Senior Management Deferred Compensation Plan (effective for Units of Participation Having a Unit Start Date Prior to January 1, 1988). (Exhibit 10-d to Form 10-K for 2008.)

 
10-j
Senior Management Deferred Compensation Program of 1988 (effective for Units of Participation Having a Unit Start Date of January 1, 1988 or later). (Exhibit 10-e to Form 10-K for 2008.)

 
10-k
Salary and Incentive Award Deferral Plan, dated December 31, 2004.  (Exhibit 10-k to Form 10-K for 2011.)
 
 
10-l
Stock Savings Plan, dated December 31, 2004. (Exhibit 10-l to Form 10-K for 2011.)

 
10-m
Stock Purchase and Deferral Plan, amended and restated January 31, 2013.

 
10-n
Cash Deferral Plan, amended and restated January 31, 2013.

 
10-o
Master Trust Agreement for AT&T Inc. Deferred Compensation Plans and Other Executive Benefit Plans and subsequent amendments dated August 1, 1995 and November 1, 1999. (Exhibit 10-dd to Form 10-K for 2009.)

 
10-p
Officer Disability Plan, amended and restated effective January 1, 2010. (Exhibit 10-i to Form 10-Q filed for June 30, 2009.)

 
10-q
AT&T Inc. Health Plan, amended and restated June 28, 2012. (Exhibit 10-b to Form 10-Q filed for June 30, 2012.)
 
 
 
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10-r
AT&T Management Relocation Plan.  (Exhibit 10-r to Form 10-K for 2011.)

 
10-r(i)
Amendment to AT&T Management Relocation Plan, dated November 20, 2008. (Exhibit 10-ww to Form 10-Q filed for March 31, 2009.)

 
10-s
Pension Benefit Makeup Plan No.1, amended and restated December 31, 2010. (Exhibit 10-jj to Form 10-K for 2010.)

 
10-t
AT&T Inc. Change in Control Severance Plan, amended and restated effective February 1, 2013.

 
10-u
AT&T Inc. Equity Retention and Hedging Policy.  (Exhibit 10.2 to Form 8-K dated December 15, 2011.)
 
 
10-v
Form of Non-Disclosure and Non-Solicitation Agreement. (Exhibit 10-jjj to Form 10-K for 2009.)
         
 
10-w
Administrative Plan, amended and restated effective January 1, 2013.

 
10-x
Retirement Plan for Non-Employee Directors.  (Exhibit 10-x to Form 10-K for 2011.)

 
10-y
Non-Employee Director Stock and Deferral Plan, amended and restated June 26, 2008. (Exhibit 10-f to Form 10-Q filed for June 30, 2008.)

 
10-z
Non-Employee Director Stock Purchase Plan, effective June 27, 2008. (Exhibit 10-e to Form 10-Q filed for June 30, 2008.)

 
10-aa
Communications Concession Program for Directors, amended and restated February 1, 2013.

 
10-bb
Form of Indemnity Agreement, effective July 1, 1986, between SBC (now AT&T Inc.) and its directors and officers. (Exhibit 10-bb to Form 10-K for 2011.)

 
10-cc
Transition Agreement by and between BellSouth Corporation and Rafael de la Vega, dated December 29, 2003.  (Exhibit 10-cc to Form 10-K for 2011.)

 
10-dd
Transition Agreement. (Exhibit 10-dd to Form 10-K for 2011.)

 
10-ee
Transition Agreement. (Exhibit 10-ee to Form 10-K for 2011.)

 
10-ff
Agreement and Release and Waiver of Claims between Richard G. Lindner and AT&T Inc. (Exhibit 10.1 to Form 8-K/A dated March 4, 2011.)

 
10-gg
Pacific Telesis Group Supplemental Cash Balance Plan, amended as of July 1, 1996. (Exhibit 10-gg to Form 10-K for 2011.)
 
 
10-hh
Pacific Telesis Group Deferred Compensation Plan for Nonemployee Directors. (Exhibit 10-hh to Form 10-K for 2011.)

 
10-hh(i)
Resolutions amending the Plan, effective November 21, 1997. (Exhibit 10-hh(i) to Form 10-K for 2011.)

 
10-ii
Pacific Telesis Group Outside Directors’ Deferred Stock Unit Plan. (Exhibit 10-ii to Form 10-K for 2011.)

 
10-jj
Pacific Telesis Group 1996 Directors’ Deferred Compensation Plan. (Exhibit 10-jj to Form 10-K for 2011.)

 
10-jj(i)
Resolutions amending the Plan, effective November 21, 1997. (Contained in and filed as Exhibit 10-hh(i)).

 
10-kk
Pacific Telesis Group 1996 Executive Deferred Compensation Plan, amended November 20, 2008. (Exhibit 10-u to Form 10-K for 2008.)
 
 
 
17 

 
AT&T Inc.
 

 
 
10-ll
Pacific Telesis Group Executive Deferral Plan, amended November 20, 2008. (Exhibit 10-z to Form 10-K for 2008.)

 
10-mm
AT&T Corp. Executive Deferred Compensation Plan (formerly known as AT&T Corp. Senior Management Incentive Award Deferral Plan), amended and restated January 1, 2008. (Exhibit 10-hh to Form 10-K for 2008.)

 
10-nn
Master Trust Agreement for AT&T Corp. Deferred Compensation Plans and Other Executive Benefit Plans, effective January 13, 1994. (Exhibit 10-nn to Form 10-K for 2011.)

 
10-nn(i)
First Amendment to Master Trust Agreement, effective December 23, 1997. (Exhibit 10-nn(i) to Form 10-K for 2011.)

 
10-oo
AT&T Corp. Senior Management Long Term Disability and Survivor Protection Plan, amended December 31, 2008. (Exhibit 10-xx to Form 10-K for 2008.)

 
10-pp
AT&T Corp. Non-Qualified Pension Plan, as amended and restated effective December 31, 2008. (Exhibit 10-ggg to Form 10-K for 2008.)

 
10-qq
AT&T Corp. Excess Benefit and Compensation Plan, as amended and restated effective December 31, 2008. (Exhibit 10-hhh to Form 10-K for 2008.)

 
10-rr
AT&T Corp. 1997 Long Term Incentive Program, dated March 14, 2000. (Exhibit 10-rr to Form 10-K for 2011.)

 
10-ss
BellSouth Corporation Nonqualified Deferred Compensation Plan, dated January 1, 2005. (Exhibit 10-ss to Form 10-K for 2011.)

 
10-tt
BellSouth Officer Compensation Deferral Plan, amended January 1, 2005. (Exhibit 10-mm to Form 10-K for 2009.)

 
10-uu
BellSouth Corporation Deferred Compensation Plan for Non-Employee Directors, dated March 9, 1984. (Exhibit 10-uu to Form 10-K for 2011.)
 
 
10-vv
BellSouth Corporation Director’s Compensation Deferral Plan, as amended and restated effective as of January 1, 2005. (Exhibit 10-vv to Form 10-K for 2011.)

 
10-ww
BellSouth Corporation Stock Plan, dated April 24, 1995. (Exhibit 10-ww to Form 10-K for 2011.)

 
10-xx
BellSouth Corporation Stock and Incentive Compensation Plan, as amended June 28, 2004. (Exhibit 10-qq for Form 10-K for 2009.)

 
10-xx(i)
First Amendment to the BellSouth Corporation Stock and Incentive Compensation Plan, dated September 26, 2005. (Exhibit 10-xx(i) to Form 10-K for 2011.)

 
10-xx(ii)
Second Amendment to BellSouth Corporation Stock and Incentive Compensation Plan, effective June 26, 2008. (Exhibit 10-qq(ii) to Form 10-K for 2008.)

 
10-yy
BellSouth Corporation Supplemental Executive Retirement Plan, amended and restated as of May 1, 2012. (Exhibit10-c to Form 10-Q filed for June 30, 2012.)

 
10-zz
BellSouth Corporation Non-Employee Director Non-Qualified Stock Option Terms and Conditions (for options granted under the BellSouth Corporation Stock and Incentive Compensation Plan). (Exhibit 10-tt to Form 10-K for 2009.)

 
10-aaa
BellSouth Corporation Amended And Restated Trust Under Board Of Directors Benefit Plan(s), effective October 11, 2006. (Exhibit 10-aaa to Form 10-K for 2011.)
 
 
 
18 

 
AT&T Inc.
 

 
 
10-bbb
BellSouth Non-Employee Directors Charitable Contribution Program, effective February 29, 1992. (Exhibit 10-bbb to Form 10-K for 2011.)

 
10-bbb(i)
First Amendment to the Non-Employee Directors Charitable Contribution Program, effective January 27, 1997. (Exhibit 10-bbb(i) to Form 10-K for 2011.)

 
10-bbb(ii)
Second Amendment to the Non-Employee Directors Charitable Contribution Program, effective February 25, 2002. (Exhibit 10-bbb(ii) to Form 10-K for 2011.)

 
10-ccc
BellSouth Split-Dollar Life Insurance Plan, as amended December 31, 2008, and restated effective January 1, 2005. (Exhibit 10-iii to Form 10-K for 2008.)

 
10-ddd
BellSouth Supplemental Life Insurance Plan, amended and restated November 1, 2009. (Exhibit 10-aaa to Form 10-K for 2009.)

 
10-eee
BellSouth Compensation Deferral Plan, as amended and restated effective January 1, 2005.  (Exhibit 10-eee to Form 10-K for 2011.)

 
10-fff
BellSouth Nonqualified Deferred Income Plan, as amended and restated May 1, 2012.

 
10-ggg
BellSouth Corporation Executive Incentive Award Deferral Plan, as amended and restated effective January 1, 2008. (Exhibit 10-ggg to Form 10-K for 2011.)

 
10-hhh
Cingular Wireless Cash Deferral Plan, effective November 1, 2001. (Exhibit 10-hhh to Form 10-K for 2011.)

 
10-iii
Cingular Wireless Long Term Compensation Plan, amended and restated effective November 1, 2007. (Exhibit 10-iii to Form 10-K for 2011.)

 
10-jjj
Cingular Wireless BLS Executive Transition Benefit Plan. (Exhibit 10-jjj to Form 10-K for 2011.)

 
10-kkk
Cingular Wireless SBC Executive Transition Benefit Plan. (Exhibit 10-kkk to Form 10-K for 2011.)

 
10-lll
AT&T Mobility 2005 Cash Deferral Plan. (Exhibit 10-lll to Form 10-K for 2011.)
 
 
10-mmm
Five Year Credit Agreement dated December 11, 2012. (Exhibit 10.b to Form 8-K dated December 11, 2012.)
 
 
10-nnn
Amended and Restated Four Year Credit Agreement dated December 11, 2012. (Exhibit 10-nnn to Form 8-K dated December 11, 2012.)

 
10-ooo
Stockholder’s Agreement by and between Deutsche Telekom AG and AT&T Inc. dated March 20, 2011 (Exhibit 10.1 to Form 8-K dated March 20, 2011.)

 
10-ppp
Letter Agreement to Deutsche Telekom AG (exhibit 10 to Form 8-K dated December 19, 2011.)

 
12
Computation of Ratios of Earnings to Fixed Charges.

 
13
Portions of AT&T’s Annual Report to Stockholders for the fiscal year ended December 31, 2011. Only the information incorporated by reference into this Form 10-K is included in the exhibit.

 
21
Subsidiaries of AT&T Inc.

 
23
Consent of Ernst & Young LLP, independent registered public accounting firm for AT&T.
 
 
24
Powers of Attorney.
 

 
19 

 
AT&T Inc.
 

 
 
31
Rule 13a-14(a)/15d-14(a) Certifications
 
 
      31.1  Certification of Principal Executive Officer
 
 
      31.2  Certification of Principal Financial Officer

 
32
Section 1350 Certification
 
 
101
XBRL Instance Document
                                                                      
We will furnish to stockholders upon request, and without charge, a copy of the Annual Report to Stockholders and the Proxy Statement, portions of which are incorporated by reference in the Form 10-K. We will furnish any other exhibit at cost.


 
20

 

Schedule II - Sheet 1

AT&T INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Allowance for Doubtful Accounts
Dollars in Millions



COL. A
 
COL. B
COL. C
COL. D
 
COL. E
     
Additions
     
     
(1)
(2)
(3)
     
 
Balance at Beginning of Period
Charged to Costs and Expenses (a)
Charged to Other Accounts (b)
Acquisitions
Deductions (c)
Balance at End of Period
                 
Year 2012
$
878
1,117
48
-
1,496
$
547
Year 2011
$
957
1,136
38
-
1,253
$
878
Year 2010
$
1,202
1,334
(28)
-
1,551
$
957
                 
 
(a)
Excludes direct charges and credits to expense on the consolidated statements of income and reinvested earnings related to interexchange carrier receivables.
(b)
Includes amounts previously written off which were credited directly to this account when recovered and amounts related to long-distance carrier receivables which were billed by AT&T.
(c)  
Amounts written off as uncollectible, or related to divested entities.
 
 
 
21 

 


 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 22nd day of February, 2013.

                       AT&T INC.



  /s/ John J. Stephens
 
John J. Stephens
Senior Executive Vice President
and Chief Financial Officer
 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

Principal Executive Officer:
Randall Stephenson*
Chairman of the Board, Chief Executive Officer
and President

Principal Financial and Accounting Officer:
John J. Stephens
Senior Executive Vice President
and Chief Financial Officer

  /s/ John J. Stephens
 
John J. Stephens, as attorney-in-fact
and on his own behalf as Principal
Financial Officer and Principal
Accounting Officer
 


                       February 22, 2013

Directors:
 
Randall L. Stephenson*
Jon C. Madonna*
Gilbert F. Amelio*
Michael B. McCallister*
Reuben V. Anderson*
John B. McCoy*
James H. Blanchard*
Joyce M. Roché*
Jaime Chico Pardo*
Matthew K. Rose*
Scott T. Ford*
Laura D’Andrea Tyson*
James P. Kelly*
 
* by power of attorney


ex10aa.htm
Exhibit 10-aa

AT&T INC. BOARD OF DIRECTORS
COMMUNICATIONS CONCESSION PROGRAM

 

 
 
Communications Concession
 
Applies to both active and retired non-employee Directors of AT&T Inc.

1.  
Primary Residence Equipment
Each Director will receive equipment that will allow the provision of services offered by affiliates of AT&T at the Director’s primary residence as designated by the Director.  If the relevant AT&T affiliate does not service the area of the Director’s residence and it is impractical to obtain the equipment from an affiliate, then AT&T will reimburse the Director for equipment provided by another company.  Provision of equipment at the primary residence will not count against the annual communications allowance, whether the equipment is provided by the AT&T affiliate or another carrier (where equipment from the affiliate is not available).

2.  
Concession for Equipment at Other Residences and for Services
Each Director will receive communications equipment (other than at the primary residence) and services each year in an amount not to exceed the following limits:
·  
$25,000.00 for active Directors and Directors retiring after November 20, 2009;
·  
$15,000.00 for Directors retiring before November 20, 2009.

3.  
Requirements
·  
All concession services must be provided by AT&T affiliates, including AT&T Mobility and AT&T Long Distance.  The only exception is service and equipment to the primary residence where the residence is not served by an AT&T affiliate.  Services and equipment will only be provided to locations in the continental United States.
·  
The concession benefits are for the personal use of the Director and his/her immediate family sharing the same household.
·  
In order to keep you informed, the Secretary’s Office will send you a semi-annual notice indicating the usage of your concession.  If your usage exceeds the maximum benefit, you will be asked to reimburse AT&T.
·  
A Director’s surviving spouse will continue to receive benefits for fourteen months after the date of the Director’s death.
·  
This concession benefit may be amended or terminated at any time by the AT&T Board of Directors.


Amended February 1, 2013
Effective July 2004

ex10fff.htm
Exhibit 10-fff



BELLSOUTH NONQUALIFIED DEFERRED INCOME PLAN

(As amended and restated effective as of January 1, 2005)


BellSouth Corporation (“BellSouth”) established on the first (1st) day of September, 1985, the BellSouth Nonqualified Deferred Income Plan (“Plan”) for certain employees of BellSouth and its subsidiaries, and the Plan was subsequently amended from time to time.  The Plan is now hereby amended and restated, effective as of the lst day of January, 2005, and as so amended and restated is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, with respect to all benefits under the Plan that are subject to Section 409A.  Subject to the limitations contained in Article 2 of the Plan, and except as expressly provided herein, the Plan as so amended and restated shall hereafter apply to all Deferral Agreements, including those executed before this effective date, under the Plan.


ARTICLE I

DEFINITIONS

1.1            “Base Salary” means the gross salary of the Participants, including the amount of any before-tax basic and supplemental contributions to the BellSouth Retirement Savings Plan or similar contributions to a comparable plan maintained by a Participating Company and the amount of any other deferrals from gross salary under any nonqualified deferred compensation plans which may be maintained by a Participating Company from time to time.

1.1A         “CEO” means the Chief Executive Officer of BellSouth.

1.1B         “Change in Control Severance Plan” means a severance plan (or plans) adopted under the terms of the Company Disclosure Letter to the Merger Agreement (as defined in Section 1.5D below).

1.1C         “Code” means the Internal Revenue Code of 1986, as amended.

1.2            “Compensation” means Net Monthly Salary.

1.3            “Compensation Rate” means the cash compensation of a Participant, including (i) annual Base Salary rate in effect on the date the Deferral Agreement is executed, and (ii) standard lump-sum award amount(s) in effect under incentive compensation programs on the date the Deferral Agreement is executed.  For Participants employed by Participating Companies whose compensa­tion structures do not readily fit within this definition, Compensation Rate means cash compensation as defined by the CEO.

1.4            “Deferral Agreement” means an agreement pursuant to which deferral elections under this Plan are made and includes a standard Deferral Agreement, substantially in the form of Exhibit A hereto, a Deferral Agreement for deferral of certain lump-sum payments, substantially in the form of Exhibit B hereto, and other agreements approved from time to time for use in connection with this Plan as described in Article 2.

1.4A         “Disabled” or “Disability” means, with respect to a Non-Grandfathered Participant, any of the following:

(a)            the inability of the Participant 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 12 months; or

(b)            the Participant 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 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Employer.

1.4B         “Effective Date” means January 1, 2005, the date as of which the Plan is amended and restated.

1.5            “Employer” means (i) BellSouth and (ii) any subsidiary of BellSouth authorized by BellSouth to enter into Deferral Agreements pursuant to this Plan.

1.5A         “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

1.5B         “Executive Severance Agreement” means a BellSouth executive change in control agreement entered into by and between an executive who is a Participant in this Plan and BellSouth, as amended and/or superseded from time to time, providing certain benefits in the event of a change in corporate control of BellSouth.

1.5C         “Grandfathered Participant” means any Participant other than a Non-Grandfathered Participant.
 
1.5D         “Merger” means the planned 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 will be merged with and into the Merger Sub.

1.5E          “Net Credited Service” shall have the same meaning as is given such term in the BellSouth Personal Retirement Account Pension Plan, under the terms of such plan in effect on the Effective Date.  Net Credited Service will include periods of employment as described in Section 5.5D.

1.6            “Net Monthly Salary” means the amount of a Participant’s Base Salary which actually is paid to him or her in any month, net of all withholding, allotments, and deductions other than any reduction as a result of participation in this Plan.

1.6A         “Non-Grandfathered Participant” means any Participant who (a) is described in Section 5.5A, Section 5.5B or Section 5.5C, or (b) otherwise first becomes eligible for a Retirement benefit, or dies or becomes Disabled, on or after January 1, 2005.

1.7            “Participant” means an employee who is authorized by the CEO or his delegated representative to participate in the Plan and to execute a Deferral Agreement.

1.7A         “Participating Company” means (i) BellSouth and (ii) any corporate Subsidiary at least eighty percent (80%)of the capital stock of which is owned by BellSouth or by one or more eighty percent (80%) owned Subsidiaries, which has been designated by BellSouth for participation in this Plan.

1.7B         “Plan Administrator means the CEO and any individual or committee he designates to act on his behalf with respect to any or all of his responsibilities hereunder; provided, the CEO may designate any other person or committee to serve as the Plan Administrator with respect to any or all of the administrative responsibilities hereunder.

1.8            “Plan Year” means (i) January 1, 1986 through December 31, 1986 and (ii) each and every calendar year thereafter through 1996.  For certain Participants designated by the CEO, “Plan Year” also means calendar year 1997 or calendar year 1998.

1.8A         “Rabbi Trust Agreements” means each and all of the: (i) BellSouth Corporation Trust Under Executive Benefit Plan(s); (ii) BellSouth Telecommunications, Inc. Trust Under Executive Benefit Plan(s); (iii) BellSouth Enterprises, Inc. Trust Under Executive Benefit Plan(s); (iv) BellSouth Corporation Trust Under Executive Benefit Plan(s) for Mobile Systems Executives; (v) BellSouth Corporation Trust Under Executive Benefit Plan(s) for Advertising and Publishing Executives; and (vi) Trust Under Executive Benefit Plan(s) for Certain BellSouth Companies; in each case, as amended from time to time.

1.8B         “Responsible Officer” means the officer elected by the Employer’s Board of Directors (or similar governing body) responsible for human resources matters for the Employer.

1.9            “Retirement” means any termination by a Participant who is (or would be) eligible for a pension, other than a deferred vested pension, under the terms and conditions of the BellSouth Personal Retirement Account Pension Plan, or comparable plan maintained by the Participating Company employing the Participant, under the terms of such plans in effect on the Effective Date.

With respect to any Participant who, at the time eligibility for Retirement is determined, is not eligible to participate in either the BellSouth Personal Retirement Account Pension Plan or a comparable plan maintained by the Participating Company employing the Participant, “Retirement” means the termination of employment by the Participant if at such time (A) the sum of (i) plus (ii) equals or exceeds seventy-five (75) years where (i) is the Participant’s whole years and whole months of age and (ii) is the Participant’s whole years and whole months of Net Credited Service, and (B) the Participant’s Net Credited Service is at least ten (10) years (the “Rule of 75”).  For purposes of the Rule of 75, Net Credited Service shall include the Participant’s period of service with any Subsidiary both prior to and after the time such Subsidiary became a Subsidiary.

Additionally, “Retirement” means (i) any termination by a Participant who is (or would be) eligible for a service benefit under terms and conditions of the BellSouth Corporation Supplemental Executive Retirement Plan (“SERP”), under the terms of SERP in effect on the Effective Date, (ii) any termination by a Participant who has attained age 62 or older and whose Net Credited Service is ten (10) years or more at the time of employment termination, (iii) any termination by a Participant who separates from service under the BellSouth Career Transition Assistance Plan (CTAP), the BellSouth Enterprises Employee Career Transition Plan (ECTP), the BellSouth Telecommunications, Inc. Career Transition Assistance Plan (BST CTAP), the BellSouth Telecommunications, Inc. Career Transition Assistance Plan-Professional (BST CTAP-P), the BellSouth Telecommunications, Inc. Employee Separation Assistance Plan (ESAP), the BellSouth Telecommunications, Inc. Competitive Management Restaffing Plan (CMRP), the BellSouth Telecommunications, Inc. Leadership Repositioning Plan (LRP), the BellSouth Telecommunications, Inc. Competitive Sourcing Transition Assistance Plan - Information Technology (CSTAP-IT), the BellSouth Advertising & Publishing Corporation Voluntary Management Separation Pay Plan (VMSPP), or a designated successor to any such plan, or other severance arrangement approved by the CEO as applicable to this Plan, and (iv) any termination by a Participant who separates from service under the BellSouth Voluntary Transition Incentive Plan (VTIP) and whose Net Credit Service is ten years or more at the time of such separation.

1.10          “Section 409A” means Code Section 409A and the Treasury regulations or other authoritative guidance issued thereunder.  Whenever the terms “subject to Section 409A” or “to the extent permitted by Section 409A” (or any such similar reference so as to indicate that a Plan provision is subject to Section 409A) are used, such terms shall be interpreted to mean that the applicable Plan provision shall be effective only if and to the extent such provision would not trigger penalty taxes or interest under Section 409A.

1.11          “Subsidiary” means any corporation other than BellSouth which is a member of the same controlled group of corporations, within the meaning of Code Section 414(b), as BellSouth and any trade or business (whether or not incorporated) which is under common control with BellSouth, within the meaning of Code Section 414(c).


ARTICLE 2

TERM; AMENDMENT

This Plan shall be effective until terminated by the CEO.  This Plan originally provided for 1986 through 1998 with Plan specifications and interest rates being established by the CEO for each separate Plan Year.  Notwithstanding the foregoing, no deferrals will be permitted under the Plan except with respect to the Plan Years described in Section 1.8 and then only to the extent authorized by the CEO.

This Plan may be amended, renewed, or restated by the CEO; provided that no such action shall accelerate or postpone the time or schedule of payment of any Plan benefits except as may be permitted under Code Section 409A and regulations thereunder.  Notwithstanding the foregoing, no contractual right created by and under any Deferral Agreement on the date of termination or amendment shall be abrogated by the termination or amendment of this Plan unless the Participant who executed such Deferral Agreement consents.  Participants have no other right or interest in the continuance of this Plan in any form.


ARTICLE 3

ADMINISTRATION; INTERPRETATION

3.1            Claims Procedure.

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

(b)            Appeal.  Any Participant or Beneficiary who has been denied a benefit shall be entitled, upon request to the Plan Administrator, to appeal the denial of his claim.  The claimant (or his duly authorized representative) may review pertinent documents related to the Plan and in the Plan Administrator’s possession in order to prepare the appeal.  The request for review, together with written statement of the claimant’s position, must be filed with the Plan Administrator no later than 60 days after receipt of the written notification of denial of a claim provided for in Section 3.1(a).  The Plan Administrator’s decision shall be made within 60 days following the filing of the request for review.  If unfavorable, the notice of the decision shall explain the reasons for denial and indicate the provisions of the Plan or other documents used to arrive at the decision.

3.2            Interpretation.  The Plan Administrator shall have the exclusive responsibility and complete discretionary authority to control the operation and administration of the Plan, with all powers necessary to properly carry out such responsibility, including without limitation the full and exclusive power (i) to interpret the terms of this Plan and any Deferral Agreement, including the power to construe ambiguous or uncertain terms (ii) to establish reasonable procedures with which Participants must comply to exercise any right established under the Plan or any Deferral Agreement, (iii) to determine status, coverage, eligibility for and the amount of benefits, and all questions arising in connection therewith, and (iv) to resolve all questions that arise in the operation and administration of this Plan.  The rights and duties of Participants and other persons and entities are subject to, and governed by, such acts of administration, interpretations, procedures, and delegations.  All actions or determinations of the Plan Administrator or its delegates under this Article 3 shall be final, conclusive and binding on all persons.

3.3            Post-Merger Plan Administration.  Notwithstanding anything to the contrary in this Plan, following the Merger, responsibility for administration of the Plan shall be determined under the terms of the Rabbi Trust Agreements.  As provided in the Rabbi Trust Agreements, claims for benefits, appeals of benefit denials and Plan interpretations shall be made by a “Trust Contractor” or “Independent Fiduciary” (as such terms are defined in the Rabbi Trust Agreements), as the case may be.  At any time during which a Trust Contractor or Independent Fiduciary shall, under the terms of the Rabbi Trust Agreements, have such Plan administrative responsibilities, the term “Plan Administrator” as used in this Plan shall refer to such Trust Contractor or Independent Fiduciary.


ARTICLE 4

DEFERRAL AGREEMENT

4.1            Election to Defer.  As hereinafter provided and subject to acceptance by an Employer, (a) a Participant may elect to reduce the amount of Compensation which will be paid to him or her during any Plan Year by executing and delivering to his or her Employer in a timely fashion a standard Deferral Agreement, substantially in the form of Exhibit A hereto, and (b) a Participant may elect to reduce the amount of a lump-sum payment to which he or she may become entitled prior to 1997 in connection with separation under the BellSouth Career Transition Assistance Plan (CTAP), the BellSouth Enterprises Employee Career Transition Plan (ECTP), the BellSouth Telecommunications, Inc. Career Transition Assistance Plan (BST CTAP), the BellSouth Telecommunications, Inc. Career Transition Assistance Plan Professional (BST CTAP-P), the BellSouth Telecommunications, Inc. Employee Separation Assistance Plan (ESAP), the BellSouth Telecommunications, Inc. Competitive Management Restaffing Plan (CMRP), the BellSouth Telecommunications, Inc. Leadership Repositioning Plan (LRP), the BellSouth Advertising & Publishing Corporation Voluntary Management Separation Pay Plan (VMSPP), the BellSouth Voluntary Transition Incentive Plan (VTIP) or a designated successor to any such plan, or other severance arrangement approved by the CEO as applicable to this Plan, by executing and delivering to his or her Employer in a timely fashion a Deferral Agreement, substantially in the form of Exhibit B hereto; provided that subsection (b) of this Section 4.1 shall apply to a Participant separating under the BellSouth Voluntary Transition Incentive Plan (VTIP) only if the Participant’s Net Credited Service is ten (10) years or more at the time of such separation.

4.2            Creation of Contractual Obligation.  An Employer which accepts a properly executed and timely delivered Deferral Agreement agrees to pay to the Participant or his or her Designated Beneficiary, as defined in Section 6.1, the benefits described in Article 5, which shall be calculated based upon (i) the amount deferred by each Participant, (ii) interest rate established for each Plan Year by the CEO or his delegate and applied to that amount annually, (iii) the time which elapses between the Plan Year of deferral and the date of benefit payments, and (iv) other factors established in this Plan and by the CEO or his delegate.

An Employer’s senior executive officer or Responsible Officer is authorized to accept and approve a properly executed Deferral Agreement on behalf of that Employer under Section 4.2.

4.3            Timing of Election.  A Participant may execute and deliver to his or her Employer a standard Deferral Agreement, substantially in the form of Exhibit A hereto, on or before November 30 of any calendar year to reduce the Participant’s Compensation only for the next subsequent Plan Year.  In addition, a Participant may execute and deliver to his or her Employer a Deferral Agreement, substantially in the form of Exhibit B hereto, in connection with a lump-sum payment described in Section 4.1(b) of this Plan within the time period prescribed by his or her Employer, but in no event later than the day preceding the day on which individuals are selected for separation under such program by the Employer.

Notwithstanding any other provisions of this Plan or any Deferral Agreement, no Deferral Agreement shall be effective to defer Compensation (or other amounts) which is earned by any Participant on or before the date upon which the Deferral Agreement is properly executed and timely delivered to the Participant’s Employer.

4.4            Amount of Deferral.  (a) A Participant may elect to defer during any Plan Year a dollar amount which is less than or equal to a specified percent of his or her Compensation Rate applicable to the Plan Year rounded to the next highest one thousand dollars.  The CEO shall establish the specified percent of the Compensation Rate applicable to each Plan Year.  Notwithstanding any provision of a Deferral Agreement or this Plan to the contrary, the Deferral Agreement of a Participant, with regard to a deferral described in this paragraph (a) shall be modified automatically if necessary such that all actual reductions pursuant to his or her Deferral Agreement are made from his or her Net Monthly Salary.

(b)            A Participant may elect to defer a portion of a lump-sum payment to which he or she may become entitled as described in Section 4.1(b) in an amount not to exceed (i) a dollar amount which is less than or equal to the maximum deferral, if any, which such Participant could elect under paragraph (a) of this Section 4.4 at the time of election, and (ii) the dollar amount by which any election of deferrals under paragraph (a) of this Section 4.4 for the Plan Year in which the Participant terminates employment have not been satisfied at the time of termination of employment, except as may be otherwise approved by the CEO.

4.5            No Deferrals Since 1998.   No deferrals have been permitted under the Plan since Plan Year 1998.  No current or future deferrals shall be permitted under the Plan.


ARTICLE 5

PAYMENT OF BENEFITS

5.1            Retirement Benefit.  (a)  If a Participant terminates employment with his or her Employer and is not immediately reemployed by another Employer (or, in the case of a Non-Grandfathered Participant, by a Subsidiary), and such termination constitutes a Retirement, or upon any subsequent termination from such an entity that constitutes a Retirement, then the Employer shall pay to the Participant the annual Retirement benefit stated in his or her Deferral Agreements on those dates specified in each Deferral Agreement.  The Employer shall also make any Retirement benefit payment to a Participant who has remained employed with the Employer (or with another Employer or a Subsidiary) through the date specified for such payment in his or her Deferral Agreement.  Except as hereinafter provided, the Retirement benefit payment(s) which will be stated in a Participant’s Deferral Agreement shall be a number of payments equal to the lesser of (i) fifteen (15) and (ii) the remainder of eighty (80) minus the age at which Retirement benefit payments commence pursuant to this Section.  The Retirement benefit shall be paid as soon as administratively practicable after the first (1st) day of January following the calendar year in which the Participant attains age sixty-five (65).  Any such Deferral Agreement executed by a Participant which defers amounts which would otherwise be payable to the Participant in or after the Plan Year in which he or she attains age sixty-five (65), however, shall provide that the first Retirement benefit payable shall be paid as soon as administratively practicable after the first (1st) day of January following the later of (i) the fifth (5th) anniversary of the date upon which the Deferral Agreement is accepted by the Employer or (ii) his or her Retirement, and that the number of Retirement benefit payments shall equal the remainder of (i) eighty (80) minus (ii) the age at which Retirement benefit payments commence pursuant to this Section.

(b)            Notwithstanding the provisions of paragraph (a) of this Section 5.1, to the extent authorized in terms and conditions approved for a Plan Year by the CEO pursuant to Article 2 of this Plan, the Employer shall pay to the Participant the annual Retirement benefit specified in his or her Deferral Agreements on those dates specified in each Deferral Agreement which may differ from those specified in Section 5.1(a).

(c)            If a Grandfathered Participant is, on the date of termination, or becomes thereafter a proprietor, officer, partner, or employee of, or otherwise is or becomes affiliated with (i) any business that is in competition with any Employer or (ii) any government agency having regulatory jurisdiction over the business activities of any Employer, then, upon that date, no further benefit payments shall be made to the Participant, or any other person with respect to the Participant’s participation in this Plan, under any provision or Section of this Plan, except that, the Participant shall be paid in lump-sum as soon as administratively practicable after the first (1st) day of January following that date an amount equal to (i) the amount deferred pursuant to each of his or her Deferral Agreements, (ii) plus interest on each such amount (adjusted to take into account all payments described in clause (iii) below) credited separately at a rate equal to the rate paid on ten (10) year United States Treasury obligations on each date for which interest is credited, compounded quarterly, for each Plan Year between the Plan Year to which the Deferral Agreement applies and the Plan Year in which the act occurs or status is first attained, inclusive, (iii) minus the amount of all Interim Distributions and any other payments hereunder.  If the above calculation results in a negative amount, such amount shall not be collected from, or enforced against the Participant as a claim by his or her Employer.  This Section 5.1(c) shall be inapplicable with respect to any Non-Grandfathered Participant.

5.2            Interim Distributions.  A Participant shall be paid the benefits stated in Paragraph 3 of his or her standard Deferral Agreements on those dates stated in that paragraph of each such Deferral Agreement (herein referred to as “Interim Distributions”).  However, no Interim Distribution shall be stated in a Deferral Agreement or paid to any Participant as a result of the Deferral Agreement if the Participant is age fifty-five (55) or older on any day during the Plan Year to which the Deferral Agreement applies.  Except as may be otherwise specified by the CEO, no Interim Distribution shall be paid to a Participant on or after the date upon which the Participant or his or her Designated Beneficiary receives any benefit or payment under any other Section of this Plan or any other paragraph of his or her Deferral Agreement.  No Interim Distribution shall be paid in connection with any Deferral Agreement which does not specifically provide for such benefits.

5.3            Death Benefit.  If a Participant dies on or before the date upon which he or she is eligible for Retirement, then his or her Designated Beneficiary, as defined in Section 6.1, shall be paid in a lump-sum as soon as administratively practicable after the first day of January following his or her date of death an amount equal to:  (i) the amount deferred pursuant to each of his or her Deferral Agreements, (ii) plus interest on each such amount (adjusted to take into account all payments described in clause (iii) below) credited separately at the rate approved for and applicable to his or her participation in each Plan Year for which he or she executed accepted Deferral Agreements, such rates to be compounded quarterly for each Plan Year between the Plan Year to which the Deferral Agreement applies and the Plan Year in which his or her death occurs, inclusive, (iii) minus the amount of all Interim Distributions, if any, received by the Participant or to which the Participant is entitled on or before the date of his or her death.  If the above calculation results in a negative amount, such amount shall not be collected from, or enforced against the Participant as a claim by his or her Employer.

If a Participant dies on or after the date upon which he or she is eligible for Retirement (as defined in Section 1.9), whether or not he or she has in fact terminated employment, prior to commencing receipt of benefits, or having received all benefits, as the case may be, payable in accordance with the duly authorized Deferral Agreement under this Plan, except as provided under Section 5.4, then his or her Designated Beneficiary, as defined in Section 6.1, shall receive all benefits, or continue to receive the remaining benefits, as the case may be, in accordance with that Deferral Agreement.

If the Participant’s Designated Beneficiary receives or is entitled to receive a benefit hereunder, then no person or persons shall receive or be entitled to receive any benefit or payment under any other Section or this Plan or under any Deferral Agreement, notwithstanding any other provision of this Plan or any Deferral Agreement.

5.4            Pre-Retirement Disability Benefit.  If a Participant suffers a Disability or becomes Disabled (as defined in Section 1.4A) prior to the date upon which he or she receives or is entitled to receive a benefit under Section 5.1 or Section 5.3, then he or she shall be paid by the Employer in a lump-sum as soon as administratively practicable after the first (1st) day of January following the Plan Year in which the Disability occurs an amount equal to:  (i) the amount deferred pursuant to each of his or her Deferral Agreements, (ii) plus interest on each such amount (adjusted to take into account all payments described in clause (iii) below) credited separately at the rate approved for and applicable to his or her participation in each Plan Year for which he or she executed accepted Deferral Agreements, such rates to be compounded annually for each Plan Year between the Plan Year to which the Deferral Agreement applies and the Plan Year in which his or her Disability occurs, inclusive, (iii) minus the amount of all Interim Distributions, if any, received by the Participant or to which the Participant is entitled on or before the date of onset of Disability.  If the above calculation results in a negative amount, such amount shall not be collected from, or enforced against the Participant as a claim by his or her Employer.  If the Participant receives or is entitled to receive a benefit hereunder, then no person or persons shall receive or be entitled to receive any benefit or payment under any other section of this Plan or under any Deferral Agreement, notwithstanding any other provisions of this Plan or any Deferral Agreement.

5.5            Termination of Employment Prior to Retirement or Disability.  If a Participant terminates employment with his or her Employer, and is not immediately reemployed by another Employer (or, in the case of a Non-Grandfathered Participant, by a Subsidiary), prior to death, Disability or Retirement, then a benefit amount shall be paid to the Participant in a lump-sum (or, in the case of a Grandfathered Participant, either in a lump-sum or in five (5) annual installments, at the election of the CEO), payable as soon as administratively practicable after the first (1st) day of January following his or her date of termination (and anniversaries thereof in case of installments), which amount equals (i) the amount deferred pursuant to each of his or her Deferral Agreements, (ii) plus interest on each such amount (adjusted to take into account all payments described in clause (iii) below) credited separately at a rate equal to the rate on ten (10) year United States Treasury obligations on each date for which interest is to be credited, compounded quarterly, for each Plan Year between the Plan Year to which the Deferral Agreement applies and the Plan Year in which the termination occurs, inclusive, (iii) minus the amount of all Interim Distributions, if any, received by the Participant or to which the Participant is entitled on or before the date of his or her termination.  If the above calculation results in a negative amount, such amount shall not be collected from, or enforced against the Participant as a claim by his or her Employer.  If the Participant receives or is entitled to receive a benefit hereunder, then no person or persons shall then or thereafter receive any benefit or payment under any other Section of this Plan or any Deferral Agreement, notwithstanding any other provision of this Plan or any Deferral Agreement.

5.5A         Termination of Employment Under TPPS:V Prior to Retirement or Disability.  If a Participant terminates employment with his or her Employer under the BellSouth Corporation Transition Payment Plan for Senior Management: Voluntary (“TPPS:V”) during calendar year 2006, prior to death, Disability or Retirement, the Participant shall be permitted to make a new payment election with respect to the Participant’s Plan benefits to have his or her entire Plan benefit paid as if the Participant’s termination of employment constituted a Retirement for all purposes of the Plan.  Each Participant who elects to participate in TPPS:V, and who terminates employment under the provisions of TPPS:V and satisfies all requirements of TPPS:V, will be deemed to have made this new payment election with respect to his or her NQDIP benefits.  Notwithstanding anything to the contrary in this Plan, the new payment election described above shall in no event change payment elections with respect to benefits that otherwise would have been paid in 2006, or to cause payments to be made in 2006.  No new payment election may be made pursuant to this Section 5.5A after December 31, 2006.

5.5B         Termination of Employment Under Change in Control Severance Plan.  A Participant (i) who as of his or her termination of employment has not satisfied the age and service requirements for Retirement, (ii) who will be treated under the Change in Control Severance Plan as having satisfied such requirements upon terminating employment under the circumstances specified therein, and (iii) who elects on or before December 31, 2006, to be covered under these terms, shall be deemed to have made a new payment election to have his or her entire Plan benefit paid as if the Participant’s termination of employment constituted a Retirement for all purposes of the Plan.  Notwithstanding anything to the contrary in this Plan, no such election made after December 31, 2006, shall be valid and the new payment election described above shall in no event change the terms of payment with respect to benefits that otherwise would have been paid in 2006, or to cause payments to be made in 2006.

5.5C         Termination of Employment Under Executive Severance Agreement.  A Participant who has an Executive Severance Agreement with BellSouth and (i) who as of his or her “Termination Date” (as defined in the Executive Severance Agreement) has not satisfied the age and service requirements for Retirement, (ii) who will be treated under the Executive Severance Agreement as having satisfied such requirements upon terminating employment under the circumstances specified therein, and (iii) who elects on or before December 31, 2006, to be covered under these terms, shall be deemed to have made a new payment election to have his or her entire Plan benefit paid as if the Participant’s termination of employment constituted a Retirement for all purposes of the Plan.  Notwithstanding anything to the contrary in this Plan, no such election made after December 31, 2006, shall be valid, and the new payment election described above shall in no event change the terms of payment with respect to benefits that otherwise would have been paid in 2006, or to cause payments to be made in 2006.

5.5D         Transfer of Employment to YP Holdings LLC (“YPH”)     On April 7, 2012, AT&T reached an agreement to sell its Advertising Solutions (AS) business to Cerberus Capital Management, L.P. pursuant to an agreement entitled the “Purchase Agreement by and between AT&T Inc. and Congo Buyer LLC” (the “Agreement”). Participants in the AS unit who leave AT&T employment and transfer to employment with  YPH as part of the closing of the transaction  (hereinafter referred to as  a “YP Participant”) will have their actual period of employment at YPH included as Net Credited Service for purposes of this Plan, up to a maximum of four years.  The closing of the transaction described in the preceding sentence shall be hereinafter referred to as the “Closing.”  The Net Credited Service (maximum four years) will be counted to determine if a Participant meets the eligibility for a Retirement event (described in Section 1.9) and Retirement Benefit (described in Section 5.1).  The YPH service will not be used for any other purpose in the Plan.

Furthermore, if a YP Participant’s employment with YPH is involuntarily terminated (other than for “cause”) by YPH, as determined by the Plan Administrator, within the four year period immediately following the Closing, then additional service will be credited under the Plan so that the YP Participant will be deemed to have met the eligibility for a Retirement event (described in Section 1.9) and Retirement Benefit (described in Section 5.1).  For purposes of clarity, if a YP Participant voluntarily terminates his employment with YPH or is involuntarily terminated for “cause” from YPH, as determined by the Plan Administrator, within the four year period immediately following the Closing, the additional service with YPH to be recognized under the Plan shall cease as of the date of such termination from YPH.  Finally, a YP Participant’s age upon his actual termination of employment (separation from service) from YPH will be used to determine the participant’s eligibility for Retirement (section 1.9) and a Retirement Benefits (Section 5.1) under the Plan.

For purposes of the paragraph above, “cause” shall mean (A) the refusal or willful material failure to perform the YP Participant’s lawful responsibilities to YPH; (B) the refusal or willful material failure to follow or carry out any reasonable, lawful, material direction from YPH; (C) any material breach of fiduciary obligation on the part of the YP Participant or that otherwise could reasonably be expected to have a materially adverse effect upon the business, interests or reputation of YPH; (D) the conviction of the YP Participant of, or plea by him of nolo contendere to, any felony; (E) the YP Participant has breached any applicable non-competition, non-solicitation or confidentiality agreements or provisions that results in material harm to YPH; or (F) the commission of fraud, embezzlement, or theft by the YP Participant.


In addition, in compliance with the requirements of Code Section 409A, YP Participants will not experience a termination of employment (separation of service) under the Plan, and therefore will not be eligible to commence their benefits under the Plan, until such time as they incur a termination of employment (separation from service) from YPH.

The preceding amendment only applies to benefits for certain participants that were not considered “grandfathered” under the Section 409A rules and does not apply to any benefits or participants that were “grandfathered” under Section 409A.

5.6            Distributions to Code Section 409A Specified Employees.  Notwithstanding any provision of this Plan to the contrary, with respect to any Non-Grandfathered Participant who is a “specified employee” for purposes of Code Section 409A, no payment of any portion of the Non-Grandfathered Participant’s benefit amount which is occasioned by the Non-Grandfathered Participant’s separation from service shall be made before the date that is six (6) months after the date of such Participant’s separation from service.


ARTICLE 6

MISCELLANEOUS

6.1            Beneficiary Designation.  If a Participant dies and, on the date of his or her death, any benefit or benefits remain to be paid to the Participant under the terms and conditions of this Plan, the remaining benefit or benefits shall be paid to that person or persons designated by the Participant (“Designated Beneficiary”) on the form provided from time to time to the Participant by his or her Employer in accordance with the Deferral Agreement.  If the Designated Beneficiary dies prior to completion of all payments under the Deferral Agreement, the estate of the Designated Beneficiary shall be paid by the Employer in a lump-sum as soon as administratively practicable after the first (1st) day of January following the year in which the Designated Beneficiary died.  The amount of the lump-sum will be equal to (i) the amount deferred pursuant to each of the Participant’s Deferral Agreements, (ii) plus interest on each such amount (adjusted to take into account all payments described in clauses (iii) and (iv) below) credited separately at the rate approved for and applicable to the Participant’s participation in each Plan Year from which he or she executed accepted Deferral Agreements, such rates to be compounded quarterly for each Plan Year between the Plan Year to which the Deferral Agreement applies and the Plan Year in which the Designated Beneficiary’s death occurs, inclusive, (iii) minus the amount of all Interim Distributions, if any received by the Participant or Designated Beneficiary, (iv) minus the Retirement benefits paid to the Participant or Designated Beneficiary pursuant to the Deferral Agreement(s).  If the above calculation results in a negative amount, such amount shall not be collected from, or enforced against the estate of the Designated Beneficiary.  If no Designated Beneficiary has been chosen by the Participant or if the Designated Beneficiary is not living on the date of the Participant’s death, the estate of the Participant shall be paid by the Employer in a lump-sum as soon as administratively practicable after the first (1st) day of January following the year in which the Participant died.  The amount of the lump-sum shall be determined in the manner described previously in this Section 6.1.

6.2            Obligations of Employers Not the Obligations of BellSouth.  The duties and obligations of each Employer hereunder are several but not joint, each Employer is only liable to its own employees who are Participants hereunder, and BellSouth is not liable for the actions, omissions, duties or obligations of any other Employer hereunder.

6.3            Recalculation Events; Treatment of this Plan under Applicable Federal Income Tax Laws.  With respect to Grandfathered Participants, the adoption and maintenance of the Plan is strictly conditioned upon (i) the applicability of Code Section 451(a) to the Participant’s recognition of gross income as a result of his or her participation, (ii) the fact that Participants will not recognize gross income as a result of participation in this Plan until and to the extent that benefits are received, (iii) the applicability of Code Section 404(a)(5) to the deductibility of the amounts paid to Participants hereunder, (iv) the fact that an Employer will not receive a deduction for amounts credited to any accounting reserve created as a result of this Plan until and only to the extent that benefits are paid, and (v) the inapplicability of Parts 2, 3, and 4 of Title I of ERISA to this Plan by reason of the exemptions set forth in ERISA Sections 201(a), 301(a) and 401(a) and Part 1 of ERISA by reason of the exemption set forth in Section 2520.104-23 of applicable United States Department of Labor regulations.  If the Internal Revenue Service, the Department of Labor or any court determines or finds as a fact or legal conclusion that any of the above conditions is untrue and issues or intends to issue an assessment, determination, opinion or report stating such, or if the opinion of the legal counsel of BellSouth based upon legal authorities then existing is that any of the above assumptions is incorrect, then, if the CEO so elects within one year of such finding, determination, or opinion, a Recalculation Event shall be deemed to have occurred.

If a Recalculation Event occurs under this Section 6.3, Section 6.4, or any other Section of this Plan, then each Grandfathered Participant who has not attained the age of fifty-five (55) years on the date on which the CEO takes official action to elect the occurrence of a Recalculation Event shall thereafter be paid benefits in accordance with the election made irrevocably in connection therewith in the Deferral Agreement.  For each such Grandfathered Participant the amount of Retirement benefit stated in the Deferral Agreement shall be recalculated and restated using a rate of interest equal to the rate of interest on ten (10) year United States Treasury obligations on each date upon which interest should have been or will be calculated, compounded quarterly, instead of the interest rate assumed in originally calculating the benefit, as referenced in Section 4.2.

Notwithstanding anything to the contrary contained in this Plan or a Deferral Agreement, the benefits payable with respect to any Participant who shall have either (i) attained the age of fifty-five (55) years or (ii) died, on or prior to the date on which the CEO takes official action to elect the occurrence of a Recalculation Event under either Sections 6.3 or 6.4 of this Plan, shall not be recalculated and restated in the manner described in such Sections or in any other way affected by such action.  If such Participant or Designated Beneficiary receives or is entitled to receive a benefit as result of the occurrence of a Recalculation Event, then no person or persons shall receive or be entitled to receive any benefit or payment under any other Section of this Plan or under any Deferral Agreement, notwithstanding any other provision of this Plan or the Deferral Agreement.

This Section 6.3 shall be inapplicable with respect to any Non-Grandfathered Participant.

6.4            Changes in the Internal Revenue Code of 1954.  With respect to Grandfathered Participants, the adoption and maintenance of this Plan also is strictly conditioned upon the existence and continuation of the percentage tax rates for corporations stated in Section 11(b) of the Internal Revenue Code of 1954, as amended through August 13, 1981 but not thereafter (the “1954 Code”).  In particular, the adoption and maintenance of this Plan is strictly conditioned upon the rate of tax stated in Section 11(b)(5) of the 1954 Code, that is, “46 percent of so much of the taxable income as exceeds $100,000.”  If (1) 1954 Code Section 11(b) is deleted or amended or a surtax or other addition to tax is imposed and, as a result thereof, the rate of federal income tax imposed on taxable income of corporations in excess of One Hundred Thousand Dollars ($100,000) is reduced below such rate in effect immediately before reduction and is less than forty percent (40%), (2) a tax is imposed by the federal government on income, sales, consumption, or the value of goods and services which is not currently contained in the Code, or (3) the Code is amended or restated so extensively that in the opinion of the legal counsel of BellSouth the tax treatment of this Plan to the Employer has materially changed to the detriment of the Employer, then, if the CEO so elects within one year after the enactment of the legislation causing such event, a Recalculation Event shall be deemed to have occurred and a benefit will be payable only as described in Section 6.3.

This Section 6.4 shall be inapplicable with respect to any Non-Grandfathered Participant.

6.5            Governing Law.  This Plan and the Deferral Agreements shall be construed in accordance with the laws of the State of Georgia to the extent such laws are not preempted by ERISA.

6.6            Successors, Mergers, Consolidations.  The terms and conditions of this Plan and each Deferral Agreement shall inure to the benefit of and bind BellSouth, the other Employers, the Participants, their successors, assigns, and personal representatives.  If substantially all of the assets of any Employer are acquired by another corporation or entity or if an Employer is merged into, or consolidated with, another corporation or entity, then the obligations created hereunder and as a result of the Employer’s acceptance of Deferral Agreements shall be obligations of the successor corporations or entity.

6.7            Discharge of Employer’s Obligation.  The payment by the Employer of the benefits due under each and every Deferral Agreement to the Participant or to the person or persons specified in Section 6.1 discharges the Employer’s obligations hereunder, and the Participant has no further rights under this Plan or the Deferral Agreements upon receipt by the appropriate person of all benefits.  In addition, (i) if any payment is made to a Participant or his or her Designated Beneficiary with respect to benefits described in this Plan from any source arranged by the Employer including, without limitation, any fund, trust, insurance arrangement, bond, security device, or any similar arrangement, such payment shall be deemed to be in full and complete satisfaction of the obligation of the Employer under this Plan and the Deferral Agreements to the extent of such payment as if such payment had been made directly by the Employer; and (ii) if any payment from a source described in clause (i) above shall be made, in whole or in part, prior to the time payment would be made under the terms of this Plan and the Deferral Agreement, such payment shall be deemed to satisfy the Employer’s obligation to pay Plan benefits beginning with the benefit which would next become payable under the Plan and the Deferral Agreement and continuing in the order in which benefits are so payable, until the payment from such other source is fully recovered.  In determining the benefits satisfied by a payment described in clause (ii), Plan benefits, as they become payable, shall be discounted to their value as of the date such actual payment was made using an interest rate equal to the valuation interest rate for deferred annuities as last published by the Pension Benefit Guaranty Corporation prior to the date of such actual payment.  If the benefits which actually become payable under this Plan, after applying the discount described in the preceding sentence, are less than the amount of the payment(s) described in clause (ii), any such shortfall shall not be collected from or enforced against the Participant as a claim by the Employer.

6.8            Social Security and Income Tax Withholding.  Each Participant agrees as a condition of participation hereunder that his or her Employer may withhold federal, state, and local income taxes and Social Security taxes from any distribution or benefit paid hereunder.

6.9            Notice; Delivery of Deferral Agreement.  Any notice required to be delivered hereunder and any Deferral Agreement is properly delivered to the Employer when personally delivered to, or actually received from the United States mail, postage prepaid, by Executive Compensation and Benefits Group, Room 13J08, BellSouth Corporation, 1155 Peachtree Street, N.E., Atlanta, Georgia  30309-3610, or at such other address as the Plan Administrator shall prescribe from time to time.

6.10          Nature of Obligations Created Hereunder.  The Participants agree as a condition of participation hereunder that:

(a)            Participants have the status of general, unsecured creditors of the Employer and the Plan and the Deferral Agreements constitute the mere promise by the Employer to make benefit payments in the future;

(b)            nothing contained in this Plan or any Deferral Agreement shall create or be construed to create a trust of any kind between BellSouth, any Employer, and any Participant;

(c)            benefits payable, and rights to benefits under, this Plan and Deferral Agreements may not be anticipated, sold, assigned (either at law or in equity), transferred, pledged, encumbered or subject to attachment, garnishment, levy, execution or other legal or equitable process.

The Plan is intended to be unfunded for purposes of ERISA and the Code.

6.11          No Modification of Employment Agreement.  Neither this Plan nor any Deferral Agreement constitutes a modification of any employment agreement which may exist between the Participant and the Participating Company employing the Participant, and no right to continued employment is created by this Plan or the Deferral Agreement.

6.12          Liability of Employers for Individual Participants Employed by More than One Employer; Applicability of Deferral Agreement Filed with One Employer to Subsequent Employers.  Any Deferral Agreement which is timely executed and delivered to an Employer shall be effective to defer Compensation earned by the Participant from that Employer or any other Employer during the period in which the Deferral Agreement is effective.  The execution and delivery of a Deferral Agreement by a Participant constitutes an election by the Participant to defer Compensation earned from any Employer under the terms of this Plan.  A Participant who timely executes and delivers a Deferral Agreement to one Employer and who subsequently transfers to another Employer or otherwise terminates employment and becomes employed by another Employer shall have the Compensation which is paid to him or her by both Employers reduced under the terms of the Deferral Agreement and this Plan as if the transfer or termination and reemployment had not occurred.  The Employer which accepts an executed, timely delivered Deferral Agreement is liable to the Participant for all benefits which may be payable under, and as a result of, that Deferral Agreement notwithstanding the transfer of a Participant to or from another Employer, or the termination and reemployment of a Participant by another Employer.  If a Participant timely executes and delivers Deferral Agreements to more than one Employer, each Employer is singly and not jointly liable for the Deferral Agreement or Deferral Agreements which it accepted.  Any provision of this Plan which refers to a benefit or payment which is payable as a result of more than one (1) Deferral Agreement shall be construed to apply only to the Deferral Agreements delivered by that Participant and accepted by each separate Employer of that Participant, and not to all Deferral Agreements executed and timely delivered by one Participant or all Participants to all Employers, each Deferral Agreement which incorporates the terms of this constituting a separate contractual obligation of a single Employer.

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

6.14          Plan to Comply with Code Section 409A.  Notwithstanding any provision to the contrary in this Plan, each provision of this Plan shall be interpreted to permit the deferral of compensation and the payment of deferred amounts in accordance with Code Section 409A and any provision that would conflict with such requirements shall not be valid or enforceable.



 
 

 

Exhibit A

DEFERRAL AGREEMENT
FOR THE BELLSOUTH NONQUALIFIED DEFERRED INCOME PLAN


1.           Amount of Deferral.  I, _______________, hereby agree to participate in the BellSouth Nonqualified Deferred Income Plan (“Plan”).  I have read the Plan in its entirety and agree to its terms and conditions, which are incorporated herein by reference. Pursuant to the terms of the Plan, I elect to defer from my compensation to be paid to me in Plan Year ____ the sum of _________________ Dollars.  I understand that my Compensation which ordinarily would be paid to me in that Plan Year will be reduced by the amount of my deferral, and that such reduction will be made only from my gross monthly salary, not from any bonus or incentive award which may be payable to me.

2.           Retirement Benefits.  In consideration for my deferral, my Employer shall pay to me the following benefits on the dates specified, if I am entitled to these benefits under the terms and conditions of the Plan:

3.           Interim Distributions.  In consideration for my deferral, my Employer shall pay to me the following benefits on the dates specified, if I am entitled to these benefits under the terms and conditions of the Plan:

4.           Recalculation Event.  If a Recalculation Event applicable to me occurs, my Employer shall pay to me benefits in an amount determined in accordance with the terms and conditions of paragraph 6.3 of the Plan paid in accordance with the terms elected below.  The undistributed balance of the recalculated amount will continue to accumulate at the reduced rate specified in paragraph 6.3 of the Plan.

 
-
Recalculated amount paid in a LUMP-SUM in the year following the Recalculation Event.

 
-
Recalculated amount paid in FOUR ANNUAL PAYMENTS beginning in the year following the Recalculation Event.

 
-
Recalculated amount paid in SAME NUMBER of payments beginning on the same date as specified in paragraph 2 of this Agreement.

(All amounts are to be paid as soon as administratively practicable after the first of the specified year.)

5.           Election Irrevocable.  This election is irrevocable after November 30 immediately preceding the Plan Year to which this Agreement pertains.


6.           Primacy of Plan.  I recognize that I am entitled to benefits hereunder and that this Agreement is subject to the terms and conditions of the Plan.


Participant:                                                                       Accepted by Employer:

_______________________________       _________________________________
Name (Print)                                                                     Name of Employer

_______________________________       By:______________________________
Signature                                                                          Its: ______________________________
Title
_______________________________       _________________________________
Date                                                                                   Date


 
 
 

 

 
 
 

 

Exhibit B

DEFERRAL AGREEMENT
FOR THE BELLSOUTH NONQUALIFIED DEFERRED INCOME PLAN
(For Deferral of Lump-Sum Payments)


THIS AGREEMENT is made this ___ day of ____________, 19__, by and between ___________________ (the “Company”) and _____________________ (the “Employee”);


W I T N E S S E T H:

WHEREAS, the Employee may separate from service with the Company under the terms of an eligible separation plan or arrangement sponsored by the Company (hereinafter, the “Separation Plan”); and

WHEREAS, the BellSouth Nonqualified Deferred Income Plan (the “Plan”) permits the Employee to elect irrevocably to defer a portion of the lump-sum separation allowance to which he may become entitled thereunder, and the Employee desires to make such deferral;

NOW, THEREFORE, it is mutually agreed as follows:

1.

PLAN PROVISIONS CONTROL

The Plan, including all terms, conditions, restrictions and limitations contained therein, is hereby incorporated by reference and made a part of this Agreement for all purposes.   The terms and conditions applicable to the plan year of the Plan in which the Employee separates from service shall apply to deferrals hereunder.  In interpreting the Plan for purposes of this Agreement, the lump-sum separation allowance payable under the Separation Plan shall not be included in the Employee’s “Compensation Rate” as that term is used in the Plan.

2.

CONDITIONAL DEFERRAL

The deferral election contained herein shall be irrevocable by the Employee upon its submission to the Company but shall be expressly conditioned upon the Employee’s separation from service under the Separation Plan.  If the Employee does not separate from service under the Separation Plan, this Agreement shall be null and void.  Neither the Company’s offering of this deferral opportunity to the Employee, the Company’s acceptance of the Employee’s deferral election contained in this Agreement, nor any other provision hereof shall in any way be construed as conferring upon the Employee any right or entitlement to any payment under the Separation Plan.

3.

DEFERRAL ELECTION(S)

(a)           Subject to the Plan’s limitations, the Employee hereby irrevocably elects to defer from the lump-sum separation allowance payable under the Separation Plan __________________________ Dollars ($__________).*

*NOTE:                      Amount may not exceed __% of the sum of your current annual base
salary and lump-sum awards received in the previous twelve (12) months.

YES _______                                           NO _______

(b)           The Employee hereby irrevocably elects to defer from the lump-sum separation allowance payable under the Separation Plan the dollar amount by which any election of deferrals from base salary under the Plan for the plan year of the Plan in which the Employee separates from service has not been satisfied by the time the Employee separates.


YES _______                                           NO _______

Such amounts shall be subject to the terms of the original Deferral
Agreement to which they relate.

I understand that the lump-sum separation allowance payable under the Separation Plan which would otherwise have been paid to me will be reduced by the amount of my deferral(s).

4.

RETIREMENT BENEFITS

In consideration of my deferral described in section 3(a) above, if any, the Company shall pay to me the following benefits on the dates specified, if I am entitled to these benefits under the terms and conditions of the Plan:

Any distributions attributable to deferral(s) under Schedule B of the Plan shall be made beginning on _____________ in _____ annual payments.

5.

INTERIM DISTRIBUTIONS

In consideration for my deferral described in section 3(a) above, if any, the Company shall pay to me the following benefits on the dates specified, if I am entitled to these benefits under the terms and conditions of the Plan:

6.

RECALCULATION EVENT

If a Recalculation Event occurs, the Company shall pay to me benefits in an amount determined in accordance with the terms and conditions of paragraph 6.3 of the Plan paid in accordance with the terms elected below.  The undistributed balance of the recalculated amount will continue to accumulate at the reduced rate specified in paragraph 6.3 of the Plan.

 
Recalculated amount paid in a lump-sum as soon as administratively practicable after the first day of the year following the date of the Recalculation Event.

 
Recalculated amount paid in four annual payments beginning as soon as administratively practicable after the first day of the year following the date of the Recalculation Event.

 
Recalculated amount paid in same number of payments beginning on the same date as specified in paragraph 4 of this Agreement.


IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in its corporate name by a duly authorized officer, and the Employee has hereunto set his hand, as of the date set forth above.

EMPLOYEE:                                                                THE COMPANY:

___________________________   ___________________________________
Name (Print)                                                      Name of Company

___________________________   By: ________________________________
Signature                                                                  Signature

                                                                            ___________________________________
                       Title

ex10m.htm
Exhibit 10-m

AT&T INC.

STOCK PURCHASE AND DEFERRAL PLAN

Adopted November 19, 2004
As amended through January 31, 2013

Article 1 - Statement of Purpose

The purpose of the Stock Purchase and Deferral Plan (“Plan”) is to increase stock ownership by, and to provide savings opportunities to, a select group of management employees of AT&T Inc. (“AT&T”) and its Subsidiaries.

Article 2 - Definitions

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

Annual Bonus.  The award designated the “Annual Bonus” by AT&T (including but not limited to an award that may be paid in more frequent installments than annually), together with any individual discretionary award made in connection therewith, or comparable awards, if any, determined by AT&T to be used in lieu of these awards.
 
Base Compensation.  The following types of cash-based compensation paid by an Employer (but not including payments made by a non-Employer, such as state disability payments), before reduction due to any contribution pursuant to this Plan or reduction pursuant to any deferral plan of an Employer, including but not limited to a plan that includes a qualified cash or deferral arrangement under Section 401(k) of the Code:           
(a)  
base salary;

(b)  lump sum payments in lieu of a base salary increase; and

(c)  Annual Bonus.

Payments by an Employer under a disability plan made in lieu of any compensation described above shall be deemed to be a part of the respective form of compensation it replaces for purposes of this definition.  Base Compensation does not include zone allowances or any other geographical differential and shall not include payments made in lieu of unused vacation or other paid days off, and such payments shall not be contributed to this Plan.

Determinations by AT&T (the Committee with respect to Officer Level Employees) of the items that make up Base Compensation shall be final.  The Committee may, from time to time, add or subtract types of compensation to or from the definition of “Base Compensation” provided, however, any such addition or subtraction shall be effective only with respect to the next period in which a Participant may make an election to establish a Share Deferral Account.  Base Compensation that was payable in a prior Plan Year but paid in a later Plan Year shall not be used to determine Employee Contributions or Matching Contributions in such later Plan Year.

Business Day.  Any day during regular business hours that AT&T is open for business.

Change in Control.  With respect to AT&T’s direct and indirect ownership of an Employer, a “Change in the effective control of a Corporation,” as defined in Treasury Regulation Section 1.409A-3(i)(5)(vi)(A)(1), regardless of whether the Employer is a corporation or non corporate entity as permitted by the regulation, and using “50 percent” in lieu of “30 percent” in such regulation.  A Change in Control will not apply to AT&T itself.

Chief Executive Officer.  The Chief Executive Officer of AT&T Inc.

Code.  References to the Code shall be to provisions of the Internal Revenue Code of 1986, as amended, including regulations promulgated thereunder and successor provisions.  Similarly, references to regulations shall include amendments and successor provisions.

Committee.  The Human Resources Committee of the Board of Directors of AT&T Inc.

Disability. Absence of an Employee from work with an Employer under the relevant Employer's disability plan.

Eligible Employee.  An Employee who:
(a) is a full or part time, salaried Employee of AT&T or an Employer in which AT&T has a direct or indirect 100% ownership interest and who is on active duty or Leave of Absence (but only while such Employee is deemed by the Employer to be an Employee of such Employer);

(b) is, as determined by AT&T, a member of Employer's “select group of management or highly compensated employees” within the meaning of the Employee Retirement Income Security Act of 1974, as amended, and regulations thereunder (“ERISA”), which is deemed to include each Officer Level Employee; and

(c) has an employment status which has been approved by AT&T to be eligible to participate in this Plan or is an Officer Level Employee.
 
Notwithstanding the foregoing, AT&T (the Committee with respect to Officer Level Employees) may, from time to time, exclude any Employee or group of Employees from being deemed an “Eligible Employee” under this Plan.

In the event a court or other governmental authority determines that an individual was improperly excluded from the class of persons who would be permitted to make Employee Contributions during a particular time for any reason, that individual shall not be permitted to make such contributions for purposes of the Plan for the period of time prior to such determination.

                Employee.  Any person employed by an Employer and paid on an Employer’s payroll system, excluding persons hired for a fixed maximum term and excluding persons who are neither citizens nor permanent residents of the United States, all as determined by AT&T. For purposes of this Plan, a person on Leave of Absence who otherwise would be an Employee shall be deemed to be an Employee.

Employee Contributions.  Amounts credited to a Share Deferral Account pursuant to Section 4.1 (Election to Make Contributions) of the Plan.

Employer.  AT&T Inc. or any of its Subsidiaries.

Exercise Price.  The price per share of Stock purchasable under an Option.

                Fair Market Value or FMV.  In valuing Stock or any other item subject to valuation under this Plan, the Committee may use such index or measurement as the Committee may reasonably determine from time to time, and such index or measurement shall be the FMV of such Stock or other item, provided that for purposes of determining the Exercise Price of Stock Options, the Committee shall use a value consistent with the requirements of Section 409A.  In the absence of such action by the Committee, FMV means, with respect to Stock, the closing price on the New York Stock Exchange (“NYSE”) of the Stock on the relevant date, or if on such date the Stock is not traded on the NYSE, then the closing price on the immediately preceding date such Stock is so traded.

Leave of Absence.  Where a person is absent from employment with an Employer on a leave of absence, military leave, sick leave, or Disability where the leave is given in order to prevent a break in the continuity of term of employment, and permission for such leave is granted (and not revoked) in conformity with the rules of the Employer that employs the individual, as adopted from time to time, and the Employee is reasonably expected to return to service.  Except as set forth below, the leave shall not exceed six (6) months for purposes of this Plan, and the Employee shall Terminate Employment upon termination of such leave if the Employee does not return to work prior to or upon expiration of such six (6) month period, unless the individual retains a right to reemployment under law or by contract.  A twenty-nine (29) month limitation shall apply in lieu of such six (6) month limitation if the leave is due to the Employee being "disabled" (within the meaning of Treasury Regulation §1.409A-3(i)(4)).  A Leave of Absence shall not commence or shall be deemed to cease under the Plan where the Employee has incurred a Termination of Employment.

Officer Level Employee.  Any executive officer of AT&T, as that term is used under the Securities Exchange Act of 1934, as amended, and any Employee that is an “officer level” Employee for compensation purposes as shown on the records of AT&T.

Options or Stock Options.  Options to purchase Stock issued pursuant to this Plan.

Participant.  An Employee or former Employee who participates in this Plan.

Plan Year.  Each of the following shall be a Plan Year:  the period January 1, 2005, through January 15, 2006; the period January 16, 2006, through December 31, 2006; and, for all later Plan Years, it is defined as the period from January 1 through December 31.

Retirement or Retire.  Termination of Employment on or after the earlier of the following dates, unless otherwise provided by the Committee:  (a) for Officer Level Employees, the date the Participant is at least age 55 and has five (5) years of Net Credited Service; or (b) the date the Participant has attained one of the following combinations of age and Net Credited Service:
 
                      Net Credited Service                                                       Age
                      10 years or more                                           65 or older
                      20 years or more                                           55 or older
                      25 years or more                                           50 or older
                      30 years or more                                           Any age

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

Senior Manager.  Any Employee who is a “senior manager” for compensation purposes as shown on the records of AT&T.

Shares or Share Units.  An accounting entry representing the right to receive an equivalent number of shares of Stock.

Share Deferral Account or Account.   The Account or Accounts established annually by an election by a Participant to make Employee Contributions to the Plan, with each Account relating to a Plan Year.  For each Plan Year after 2008, there shall be (1) a separate Share Deferral Account for Share Units purchased with Employee Contributions of Base Compensation (excluding Annual Bonus) and related Matching Share Units and (2) a separate Share Deferral Account for Share Units purchased with Employee Contributions of Short Term Incentive Award and/or Annual Bonus and any related Matching Share Units.  Earnings on Share Units and Matching Share Units shall accrue to the respective Share Deferral Accounts where they are earned.

Short Term Incentive Award.  A cash award paid by an Employer (and not by a non-Employer, such as state disability payments) under the Short Term Incentive Plan or any successor plan, together with any individual discretionary award made in connection therewith; an award under a similar plan intended by the Committee to be in lieu of an award under such Short Term Incentive Plan, including, but not limited to, Performance Units granted under the 2006 Incentive Plan or any successor plan.  It shall also include any other award that the Committee designates as a Short Term Incentive Award specifically for purposes of this Plan (regardless of the purpose of the award) provided the deferral election is made in accordance with Section 409A.

Specified Employee.  Any Participant who is a “Key Employee” (as defined in Code Section 416(i) without regard to paragraph (5) thereof), as determined by AT&T in accordance with its uniform policy with respect to all arrangements subject to Code Section 409A, based upon the 12-month period ending on each December 31st (such 12-month period is referred to below as the “identification period”).  All Participants who are determined to be Key Employees under Code Section 416(i) (without regard to paragraph (5) thereof) during the identification period shall be treated as Key Employees for purposes of the Plan during the 12-month period that begins on the first day of the 4th month following the close of such identification period.

Stock.  The common stock of AT&T Inc.

Subsidiary.  Any corporation, partnership, venture or other entity or business with which AT&T would be considered a single employer under Sections 414(a) and (c) of the Code, using 50% as the ownership threshold as provided under Section 409A of the Code.

Termination of Employment. References herein to “Termination of Employment," “Terminate Employment” or a similar reference, shall mean the event where the Employee has a “separation from service,” as defined under Section 409A, with all Employers. For purposes of this Plan, a Termination of Employment with respect to an Employer shall be deemed to also occur when such Employer incurs a Change in Control.


Article 3 - Administration of the Plan

3.1           The Committee.
Except as delegated by this Plan or by the Committee, the Committee shall be the administrator of the Plan and will administer the Plan, interpret, construe and apply its provisions and determine all questions of administration, interpretation and application of the Plan, including, without limitation, questions and determinations of eligibility, entitlement to benefits and payment of benefits, all in its sole and absolute discretion.  The Committee may further establish, adopt or revise such rules and regulations and such additional terms and conditions regarding participation in the Plan as it may deem necessary or advisable for the administration of the Plan.  References in this Plan to determinations or other actions by AT&T, herein, shall mean actions authorized by the Committee, the Chief Executive Officer, the Senior Executive Vice President of AT&T in charge of Human Resources, or their respective successors or duly authorized delegates, in each case in the discretion of such person.  All decisions by the Committee, its delegate or AT&T, as applicable, shall be final and binding.

3.2           Authorized Shares of Stock.
(a) Except as provided below, the number of shares of Stock which may be distributed pursuant to the Plan, exclusive of Article 8 - Options, is 21,000,000.  The number of shares of Stock which may be issued pursuant to the exercise of Stock Options is 34,000,000 (together with an equal number of Stock Options).  In determining the number of authorized shares remaining available for issuance, shares withheld for taxes in a distribution shall not be considered issued and shall not reduce the number of authorized shares.  When an Option is exercised, the authorized shares of Stock that may be issued pursuant to an Option exercise shall be reduced by the number of Options so exercised.  To the extent an Option issued under this Plan is canceled, terminates, expires, or lapses for any reason, such Option shall again be available for issuance under the Plan.  Conversions of Stock awards into Share Units and their eventual distribution (excluding the effects of any dividends on such Share Units) shall count only against the limits of the plans from which they originated and shall not be applied against the limits in this Plan.  To the extent Share Units are credited through deferrals of Stock or Employee Contributions where the distribution of which would be deductible by AT&T under Section 162(m) of the Code without regard to the size of the distribution, and such deductible Share Units are available for distribution, such Share Units shall be distributed first.

(b)  In the event the Committee determines that continuing the issuance of Share Units under the Plan or Stock Options under the Plan may cause the number of shares of Stock that are to be distributed under this Plan or the number of Stock Options (as determined pursuant to subsection (a), above) to exceed the number of authorized shares of Stock, then in lieu of distributing Stock, the Committee may provide after such determination and only with respect to Share Units that have not theretofore been credited to a Share Deferral Account, that such Share Units may be settled in cash equal to the value of the Stock that would otherwise be distributed based on the FMV of the Stock on the date of the distribution of such Share Unit.  The Committee may also provide after such determination and only with respect to Stock Options that have not theretofore been issued that such Stock Options may only be settled on a Net-Settled basis in cash equal to the value of the Stock that would otherwise be distributed based on the FMV of the Stock on the day of exercise.

(c) In the event of a merger, reorganization, consolidation, recapitalization, separation, liquidation, stock dividend, stock split, share combination, or other change in the corporate structure of AT&T affecting the shares of Stock (including a conversion of Stock into cash or other property), such adjustment shall be made to the number and class of the shares of Stock which may be delivered under the Plan (including but not limited to individual limits), and in the number and class of and/or price of shares of Stock subject to outstanding Options granted under the Plan, and/or in the number of outstanding Options and Share Units, or such other adjustment determined by the Committee, in each case as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or enlargement of rights.

3.3           Claims and Appeals.
 
                                (a)           Claims.  A person who believes that he or she is being denied a benefit to which he or she is entitled under this Plan (hereinafter referred to as a “Claimant”) may file a written request for such benefit with the Executive Compensation Administration Department, setting forth his or her claim. The request must be addressed to the AT&T Executive Compensation Administration Department at its then principal place of business.
 
(b)           Claim Decision.  Upon receipt of a claim, the AT&T Executive Compensation Administration Department shall review the claim and provide the Claimant with a written notice of its decision within a reasonable period of time, not to exceed ninety (90) days, after the claim is received. If the AT&T Executive Compensation Administration Department determines that special circumstances require an extension of time beyond the initial ninety (90)- day claim review period, the AT&T Executive Compensation Administration Department shall notify the Claimant in writing within the initial ninety (90)-day period and explain the special circumstances that require the extension and state the date by which the AT&T Executive Compensation Administration Department expects to render its decision on the claim. If this notice is provided, the AT&T Executive Compensation Administration Department may take up to an additional ninety (90) days (for a total of one hundred eighty (180) days after receipt of the claim) to render its decision on the claim.
 
If the claim is denied by the AT&T Executive Compensation Administration Department, in whole or in part, the AT&T Executive Compensation Administration Department shall provide a written decision using language calculated to be understood by the Claimant and setting forth:  (i) the specific reason or reasons for such denial; (ii) specific references to pertinent provisions of this Plan on which such denial is based; (iii) a description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation of why such material or such information is necessary; (iv) a description of the Plan’s procedures for review of denied claims and the steps to be taken if the Claimant wishes to submit the claim for review; (v) the time limits for requesting a review of a denied claim under this section and for conducting the review under this section; and (vi)  a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA if the claim is denied following review under this section .
 
(c)           Request for Review. Within sixty (60) days after the receipt by the Claimant of the written decision on the claim provided for in this section, the Claimant may request in writing that the Committee review the determination of the AT&T Executive Compensation Administration Department.  Such request must be addressed to the Committee at the address for giving notice in this Plan.  To assist the Claimant in deciding whether to request a review of a denied claim or in preparing a request for review of a denied claim, a Claimant shall be provided, upon written request to the Committee and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim.  The Claimant or his or her duly authorized representative may, but need not, submit a statement of the issues and comments in writing, as well as other documents, records or other information relating to the claim for consideration by the Committee.  If the Claimant does not request a review by the Committee of the AT&T Executive Compensation Administration Department’s decision within such sixty (60)-day period, the Claimant shall be barred and stopped from challenging the determination of the AT&T Executive Compensation Administration Department.
 
(d)           Review of Decision.  Within sixty (60) days after the Committee’s receipt of a request for review, the Administrator will review the decision of the AT&T Executive Compensation Administration Department.  If the Committee determines that special circumstances require an extension of time beyond the initial sixty (60)-day review period, the Committee shall notify the Claimant in writing within the initial sixty (60)-day period and explain the special circumstances that require the extension and state the date by which the Committee expects to render its decision on the review of the claim.  If this notice is provided, the Committee may take up to an additional sixty (60) days (for a total of one hundred twenty (120) days after receipt of the request for review) to render its decision on the review of the claim.
 
During its review of the claim, the Committee shall:
 
(1)           Take into account all comments, documents, records, and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial review of the claim conducted pursuant to this section;
 
(2)           Follow reasonable procedures to verify that its benefit determination is made in accordance with the applicable Plan documents; and
 
(3)           Follow reasonable procedures to ensure that the applicable Plan provisions are applied to the Participant to whom the claim relates in a manner consistent with how such provisions have been applied to other similarly-situated Participants.
 
After considering all materials presented by the Claimant, the Committee will render a decision, written in a manner designed to be understood by the Claimant.  If the Committee denies the claim on review, the written decision will include (i) the specific reasons for the decision; (ii) specific references to the pertinent provisions of this Plan on which the decision is based; (iii) a statement that the Claimant is entitled to receive, upon request to the Committee and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim; and (iv) a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA.
 
The Committee shall serve as the final review committee under the Plan and shall have sole and complete discretionary authority to administer, interpret, construe and apply the Plan provisions, and determine all questions of administration, interpretation, construction, and application of the Plan, including questions and determinations of eligibility, entitlement to benefits and the type, form and amount of any payment of benefits, all in its sole and absolute discretion.  The Committee shall further have the authority to determine all relevant facts and related issues, and all documents, records and other information relevant to a claim conclusively for all parties, and in accordance with the terms of the documents or instruments governing the Plan.  Decisions by the Committee shall be conclusive and binding on all parties and not subject to further review.
 
In any case, a Participant or Beneficiary may have further rights under ERISA. The Plan provisions require that Participants or Beneficiary pursue all claim and appeal rights described in this section before they seek any other legal recourse regarding claims for benefits.
 

Article 4 - Contributions

4.1           Election to Make Contributions.
(a) The Committee shall establish dates and other conditions for participation in the Plan and making contributions as it deems appropriate.  Except as otherwise provided by the Committee, each year an Employee who is an Eligible Employee as of September 30 may thereafter make an election on or prior to the last Business Day of the immediately following November (such election shall be cancelled if the Employee is not an Eligible Employee on the last day such an election may be made) to contribute on a pre-tax basis, through payroll deductions, any combination of the following:

(1)  From 6% to 30% (in whole percentage increments) of the Participant’s monthly Base Compensation, other than Annual Bonus, during the calendar year (the Plan Year for such contributions) following the calendar year of such election.  The Employee Contributions shall be used to acquire Share Units to be credited to the Share Deferral Account for that Plan Year.

(2)  Up to 95% (in whole percentage increments or limited to the target amount) of a Short Term Incentive Award, or from 6% to 30% (in whole percentage increments) of Annual Bonus, in each case such contributions shall be made during the second calendar year (which is the Plan Year for such contributions) following the year of such election, except that in 2008 a separate election may be made with respect to contributions to be made in 2009. An Employee may make such an election with respect to the type of Award (Short Term Incentive Award or Annual Bonus) that the Employee is under as of the time the Employee’s eligibility to make such election is determined.  If because of a promotion or otherwise, the Employee receives a different type of Award instead of, or in partial or full replacement for, the type of Award subject to the Employee’s election for the relevant Plan Year, the election will apply to the other Award as well, including but not limited to any individual discretionary award related thereto.

(b)  The Committee may permit an Eligible Employee to make an election to purchase Share Units under this Plan with compensation other than Base Compensation or Short Term Incentive Awards on such terms and conditions as such Committee may permit from time to time, provided that any such election is made in accordance with Section 409A of the Code.  In no event shall an acquisition of Share Units pursuant to this paragraph (b) or pursuant to the conversion of a right to receive Stock into Share Units (such as through a distribution of Stock under the 2001 Incentive Plan) result in the crediting of an AT&T Matching Contribution or Options.

(c) Notwithstanding anything to the contrary in this Plan, no election shall be effective to the extent it would permit an Employee Contribution or distribution to be made that is not in compliance with Section 409A of the Code.  To the extent such election related to Employee Contributions that complied with such statute and regulations thereunder, that portion of the election shall remain valid, except as otherwise provided under this Plan.

(d)  To the extent permitted by Section 409A of the Code, AT&T may refuse or terminate, in whole or in part, any election to purchase Share Units in the Plan at any time; provided, however, that only the Committee may take such action with respect to persons who are Officer Level Employees.

(e)  In the event the Participant takes a hardship withdrawal pursuant to Treasury Regulation §1.401(k)-1 from a benefit plan qualified under the Code and sponsored by an Employer, any election to make Employee Contributions by such Participant shall be cancelled on a prospective basis, and the Participant shall not be permitted to make a new election with respect to Employee Contributions that would be contributed during the then current and immediately following calendar year.

4.2           Purchase of Share Units.
(a) Employee Contributions (as well as any corresponding AT&T Matching Contributions) shall be made pursuant to a proper election, only during the Participant’s lifetime; provided, however, with respect to Employee Contribution elections made prior to 2007, the Employee must remain an Eligible Employee while making any such contributions.  In the event of a Change in Control of an Employer, subsequent compensation from the Employer may not be contributed to the Plan.  The Employer may continue the then current elections of the participants under a subsequent plan in order to comply with applicable tax laws.

(b)  The number of Share Units purchased by a Participant during a calendar month shall be found by dividing the Participant's Employee Contributions during the month by the FMV of a share of Stock on the last day of such month.

(c)  A contribution to the Plan shall be made when the compensation – from which the contribution is to be deducted – is to be paid (“paid,” as used in this Plan, includes amounts contributed to the Plan that would have been paid were it not for an election under this Plan), as determined by the relevant Employer.   The Committee may modify or change this paragraph (c) from time to time.

4.3           Reinvestment of Dividends.
In the month containing a record date for a cash dividend on Stock, each Share Deferral Account shall be credited with that number of Share Units equal to the declared dividend per share of Stock, multiplied by the number of Share Units held in such Share Deferral Account as of such record date, and dividing the product by the FMV of a share of Stock on the last day of such month.


Article 5 - AT&T Matching Contributions

5.1           AT&T Match.
(a) Each month AT&T shall credit the Participant's relevant Share Deferral Account with  the number of “Matching Share Units” found by taking eighty percent (80%) of the Participant's Employee Contributions from Base Compensation made to this Plan and to the Cash Deferral Plan during the month with respect to the first six percent (6%) of the Participant’s monthly Match Eligible Compensation (as defined below) and dividing the resulting figure by the FMV of the Stock on the last day of such month (such resulting amount shall be the “Matching Contribution”).  The monthly “Match Eligible Compensation” shall be the sum of:

(1) the monthly Employee Contributions from Base Compensation to this Plan and the Cash Deferral Plan (in the aggregate, “Deferred BC”), plus

(2) the amount of the Participant’s monthly Base Compensation in excess of the Deferred BC (“Non-Deferred BC”) but only to the extent such monthly Non-Deferred BC, when aggregated with the Participant’s total Non-Deferred BC for prior months in such Plan Year, as determined by the relevant Employer, exceeds the limit in effect under Section 401(a)(17) of the Code applicable with respect to such Plan Year.

The foregoing formula shall apply regardless of whether or not the Participant makes contributions to a 401(k) plan.

A Participant may receive Matching Share Units in a Share Deferral Account for a particular form of compensation only if the Participant is then making contributions to the same Share Deferral Account; provided, however, this condition shall not apply for purposes of determining under Section 5.1(a)(2) whether the limit described therein has been reached.

                As provided in the definition of Share Deferral Account, Matching Share Units shall be credited to the respective Share Deferral Account that is related to the same form of Employee Contributions (either (1) Base Compensation excluding Annual Bonus or (2) Annual Bonus).

(b) In the sole discretion of the Committee, in the event the Committee reduces the number of Options that AT&T issues for each Share Unit purchased, the Committee may provide for the contribution of a Bonus Matching Contribution on such terms as the Committee determines.  Such Bonus Matching Contribution may not exceed 20% of the Participant’s Employee Contributions for the month.  The Bonus Matching Contribution shall be subject to such terms and conditions as required by the Committee and, unless otherwise provided by the Committee, to the same distribution requirements as Matching Contributions.  Pursuant to the foregoing authority and until otherwise provided by the Committee, effective for Share Accounts created pursuant to Employee Contribution elections where such elections are made after January 1, 2010,  AT&T shall make Bonus Matching Contributions equal to 20% of the Participant’s monthly Employee Contributions from each of Base Compensation and Short Term Incentive Award (not to exceed the target amount of such award, which limit shall be pro rated for any partial year award).  Such Bonus Matching Contribution shall be used to purchase that number of Matching Share Units found by dividing the relevant Bonus Matching Contribution for the month by the FMV of the Stock on the last day of such month.

5.2           Distribution of Share Units Acquired with Matching Contributions.
A Participant's Matching Share Units shall be distributed in a lump sum, in accordance with the Plan's distribution provisions, in the earlier of: (a) the calendar year following the calendar year of the Termination of Employment of the Participant, or (b) the calendar year in which the Participant reaches age 55, in each case only with respect to Matching Share Units relating to Share Deferral Accounts for Plan Years before such distribution calendar year.

Matching Share Units acquired as part of a Share Deferral Account that commences in or after the calendar year the Employee reaches age 55 or after the calendar year in which the Employee Terminates Employment will be distributed in the same manner and time as other Share Units in such Share Deferral Account.

Notwithstanding anything to the contrary in this section, Matching Share Units acquired in 2008 and later shall be distributed at the same time as other Share Units (including those acquired with Employee Contributions) in the same Share Deferral Account.


Article 6 - Distributions

6.1
Distributions of Share Units.
(a)  Initial Election with Respect to a Share Deferral Account.  At the time the Participant makes an election to make Employee Contributions with respect to a Share Deferral Account, the Participant shall also elect the calendar year the Share Deferral Account shall be distributed, which may be from the first through fifth calendar years after the Plan Year the Account commenced (except as otherwise provided in this Plan with respect to Matching Share Units).  For example, if an Account commenced in 2005, the Participant may elect to commence the distribution in any calendar year from and including 2006 to and including 2010.  If no timely distribution election is made by the Participant, then the Participant will be deemed to have made an election to have the Share Deferral Account distributed in a single installment in the first calendar year after the calendar year the Account commenced.

(b)  Election to Delay a Scheduled Distribution.  A Participant may elect to defer a scheduled distribution of a Share Deferral Account for five (5) additional calendar years beyond that previously elected (except as otherwise provided in this Plan with respect to Matching Share Units).  Unless otherwise provided by the Committee, the election to defer the distribution must be made on or after October 1, and on or before the last Business Day of the next following December, of the calendar year that is the second calendar year preceding the calendar year of the relevant scheduled distribution.  To make this election, the Participant must be an Eligible Employee both on the September 30 immediately preceding such election and on the last day such an election may be made.  For example, an election to defer a scheduled distribution in 2010 must be made during the period from October 1, 2008, through the last business day of December 2008, and the Participant must be an Eligible Employee both on September 30, 2008, and the last business day of December 2008.  An election to defer the distribution of a Share Deferral Account may not be made in the same calendar year that the election to establish the Share Deferral Account is made.  Notwithstanding anything to the contrary in this Plan, (1) an election to defer the distribution of a Share Deferral Account must be made at least 12 months prior to the date of the first scheduled payment under the prior distribution election and (2) the election shall not take effect until at least 12 months after the date on which the election is made.
 
(c)  A Participant’s Share Deferral Account shall be distributed to the Participant on March 10 (or as soon thereafter as administratively practicable as determined by AT&T) of the calendar year elected by the Participant for that Account.  In the event the distribution is to be made to a “Specified Employee” as a result of the Participant’s Termination of Employment (other than as a result of a Change in Control), the distribution shall not occur until the later of such March 10 or six (6) months after the Termination of Employment, except it shall be distributed upon the Participant’s earlier death in accordance with this Plan.

6.2           Death of the Participant.
In the event of the death of a Participant, notwithstanding anything to the contrary in this Plan, all undistributed Share Deferral Accounts shall be distributed to the Participant's beneficiary in accordance with the AT&T Rules for Employee Beneficiary Designations, as the same may be amended from time to time, within the later of 90 days following such determination or the end of the calendar year in which determination was made.

6.3           Unforeseeable Emergency Distribution.
If a Participant experiences an “Unforeseeable Emergency,” the Participant may submit a written petition to AT&T (the Committee in the case of Officer Level Employees), to receive a partial or full distribution of his Share Deferral Account(s).  In the event that AT&T (the Committee in the case of Officer Level Employees), upon review of the written petition of the Participant, determines in its sole discretion that the Participant has suffered an “Unforeseeable Emergency,” AT&T shall make a distribution to the Participant from the Participant’s Share Deferral Accounts (other than Matching Share Units), on a pro-rata basis, within the later of 90 days following such determination or the end of the calendar year in which determination was made, subject to the following:

(a)       “Unforeseeable Emergency” shall mean a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s legal spouse, the Participant’s beneficiary, or the Participant’s dependent (as defined in Code Section 152, without regard to Code Section 152(b)(1), (b)(2), and (d)(1)(B)); 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, all as determined in the sole discretion of the Committee.  Whether a Participant is faced with an Unforeseeable Emergency permitting a distribution is to be determined based on the relevant facts and circumstances of each case, but, in any case, a distribution on account of Unforeseeable Emergency shall not be made to the extent that such emergency is or 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 cause severe financial hardship, or by cessation of deferrals under the Plan.

(b)       The amount of a distribution to be made because of an Unforeseeable Emergency shall not exceed the lesser of (i) the FMV of the Participant's vested Share Deferral Account, calculated as the date on which the amount becomes payable, as determined by AT&T (the Committee in the case of Officer Level Employees) in its sole discretion, and (ii) the amount reasonably necessary, as determined by the AT&T (the Committee in the case of Officer Level Employees) in its sole discretion, to satisfy the emergency need (which may include amounts necessary to pay any Federal, state, local, or foreign income taxes or penalties reasonably anticipated to result from the distribution).  Determinations of the amount reasonably necessary to satisfy the emergency need shall take into account any additional compensation that is available if the plan provides for cancellation of a deferral election upon a payment due to an Unforeseeable Emergency.  The determination of amounts reasonably necessary to satisfy the Unforeseeable Emergency need is not required to, but may, take into account any additional compensation that, due to the Unforeseeable Emergency, is available under another nonqualified deferred compensation plan but has not actually been paid, or that is available due to the Unforeseeable Emergency under another plan that would provide for deferred compensation except due to the application of the effective date provisions under Treasury Regulation §1.409A-6.

(c)       Upon such distribution on account of an Unforeseeable Emergency under this Plan, any election to make Employee Contributions by such Participant shall be immediately cancelled, and the Participant shall not be permitted to make a new election with respect to Employee Contributions that would be contributed during the then current and immediately following calendar year.

6.4           Ineligible Participant.
Notwithstanding any other provisions of this Plan to the contrary, if AT&T receives an opinion from counsel selected by AT&T, or a final determination is made by a Federal, state or local government or agency, acting within its scope of authority, to the effect that an individual’s continued participation in the Plan would violate applicable law, then such person shall not make further contributions to the Plan to the extent permitted by Section 409A of the Code.

6.5
Distribution Process.
A Share Deferral Account shall be distributed under this Plan by taking the number of Share Units comprising the Account to be distributed and converting them into an equal number of shares of Stock.  (Once distributed, a Share Unit shall be canceled.)


Article 7 - Transition Provisions

7.1
Stockholder Approval
The Plan was approved by Stockholders at the 2005 Annual Meeting of Stockholders.

7.2           2005 Share Deferral Accounts.
Notwithstanding Article 4 to the contrary, if an Employee is an Eligible Employee on September 30, 2004, the Employee may make an election under Article 4 on or prior to December 15, 2004, with respect to the establishment of a Share Deferral Account for the (i) contribution of Base Compensation and/or Short Term Incentive Awards paid during the period from January 1, 2005, through January 15, 2006, which shall be the Plan Year for such Share Deferral Account; and/or (ii) the conversion of a distribution of Stock that would be made during the same Plan Year pursuant to the 2001 Incentive Plan into an equal number of Share Units, so long as such conversion would not cause the recognition of income for Federal income tax purposes in respect of such distribution of Stock prior to distribution of Share Units under this Plan.

7.3           2007 Amendments.
(a) Amendments made to the Plan on November 15, 2007, shall be effective January 1, 2008. except for amendments to this Article 7, which shall be effective upon adoption.  Any Participants electing prior to November 15, 2007, to make Employee Contributions in 2008 shall have their elections canceled if they do not consent by December 14, 2007, to all prior amendments to this Plan and to the Cash Deferral Plan.  Subject to the foregoing consent requirements, all Employee Contribution elections made prior to 2008, including but not limited to elections to contribute Stock that would be distributed under the 2001 Incentive Plan or a successor plan, shall remain in force, subject to all other terms of the amended Plan. In addition, all unvested but not forfeited Matching Share Units shall vest on November 15, 2007.  Matching Shares that have been forfeited shall not be reinstated, and no amendment to this Plan shall be interpreted as reinstating such forfeitures.

 (b)  Not withstanding anything to the contrary in this Plan, a Participant who as of December 29, 2006, was eligible for an additional payment pursuant to Section 4A of the BellSouth Corporation Executive Incentive Award Deferral Plan shall not, with respect to the 2008 Plan Year, receive Matching Share Units on Base Compensation that exceeds $230,000.

7.4           2008 Amendments.
For Plan Years prior to 2009, Participants who, at the time of the determination of their eligibility to participate in an Account, are paid through a “sales plan” involving the use of commissions may elect to contribute up to 40% of Base Compensation.  For the 2008 Plan Year, only Salary and Short Term Incentive Awards paid after Termination of Employment may be contributed to the Plan.


Article 8 - Options

8.1           Grants.
Options may be issued in definitive form or recorded on the books and records of AT&T for the account of the Participant, at the discretion of AT&T.  If AT&T elects not to issue the Options in definitive form, they shall be deemed issued, and the Participants shall have all rights incident thereto as if they were issued on the dates provided herein, without further action on the part of AT&T or the Participant.  In addition to the terms herein, all Options shall be subject to such additional provisions and limitations as provided in any Administrative Procedures adopted by the Committee prior to the issuance of such Options.  The number of Options issued to a Participant shall be reflected on the Participant's annual statement of account.

8.2           Term of Options.
The Options may only be exercised:  (a) after the earlier of (i) the expiration of one (1) year from date of issue or (ii) the Participant's Termination of Employment, and (b) no later than the tenth (10th) anniversary of their issue; and Options shall be subject to earlier termination as provided herein.

8.3           Exercise Price.
The Exercise Price of an Option shall be the FMV of the Stock on the date of issuance of the Option, and an Option may not be repriced.

8.4           Issuance of Options.

(a)  For each Share Deferral Account established by a Participant pursuant to an Employee Contribution election where such election was made prior to January 1, 2010:

(1)  on June 15 of the Plan Year for the Share Deferral Account, the Participant shall receive two (2) Options for each Share Unit acquired by the Participant as part of such Share Deferral Account during the immediately preceding January through May period with Employee Contributions of Base Compensation and/or Short Term Incentive Award.  A fractional number of Options shall be rounded up to the next whole number.

(2)  on the February 15 immediately following the Plan Year for the Share Deferral Account, a Participant shall receive:
 
(i)     two (2) Options for each Share Unit acquired by the Participant as part of such Share Deferral Account during the immediately preceding June through the remainder of the relevant Plan Year with Employee Contributions of Base Compensation and/or Short Term Incentive Award; and

(ii)    two (2) Options for each Share Unit acquired prior to such date by the Participant with dividend equivalents that were derived, directly or indirectly (such as dividend equivalents paid on Share Units acquired with dividend equivalents), from Share Units acquired with Employee Contributions as part of such Share Deferral Account.

(b) A fractional number of Options shall be rounded up to the next whole number.

(c) If Stock is not traded on the NYSE on any of the foregoing Option issuance dates, then the Options shall not be issued until the next such day on which Stock is so traded.

(d) If a Participant Terminates Employment other than (i) while Retirement eligible or (ii) because of death or Disability, no further Options shall be issued to or with respect to such Participant.  In the event of re-Employment following a Termination of Employment, the preceding sentence shall not apply to those Options resulting from participation in the Plan after such re-Employment until a subsequent Termination of Employment.

(e) No more than 400,000 Options shall be issued to any individual under this Plan during a calendar year.  No Share Unit may be counted more than once for the issuance of Options.

(f) The Committee may, in its sole discretion, at any time, increase or lower the number of Options that are to be issued for each Share Unit acquired, not to exceed two (2) Options per Share Unit purchased.  However, if the Committee lowers the number of Options, then such change shall only be effective with respect to the next Share Deferral Account a Participant may elect to establish.

(g) The Committee may also, at any time and in any manner, limit the number of Options which may be acquired as a result of the Short Term Incentive Award being contributed to the Plan.  Further, except as otherwise provided by the Committee, in determining the number of Options to be issued to a Participant with respect to a Participant's contribution of a Short Term Incentive Award to the Plan and subsequent crediting of Share Units, Options may be issued only with respect to an amount which does not exceed the target amount of such award (or such other portion of the award as may be determined by the Committee).  Where a Participant’s election to contribute a Short Term Incentive Award to the Plan becomes applicable to Annual Bonus, the above limitation on options shall apply to the contribution of Annual Bonus as though it were a Short Term Incentive Award.


(h) No options shall be issued to or in respect of a Participant for a particular issuance, unless at least ten (10) Options will be issued to that Participant.

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

Exercises of Options may be effected only on days and during the hours that the New York Stock Exchange is open for regular trading or as otherwise provided or limited by AT&T.  If an Option expires on a day or at a time when exercises are not permitted, then the Options may be exercised no later than the immediately preceding date and time that the Options were exercisable.

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

Payment may be made:

(a) in cash, or

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

(i) electing a Stock-Settled Exercise on or after February 1, 2013.  Upon exercise of Options through a Stock-Settled Exercise, the Participant shall receive that number of shares of Stock found by (1) subtracting the Exercise Price of an Option being exercised (on a per share basis) from the FMV of the Stock as of the immediately preceding day that the Stock was traded on the NYSE, (2) multiplying the difference by the number of Options being exercised, and (3) dividing the result by the same FMV.  For example, a Participant exercises 1,000 Options with an Exercise Price of $30 (exercises may only occur on a day when the NYSE is open for regular trading) and the FMV for the immediately preceding trading day was $40.  In that case, the Participant would receive his $10,000 profit in the form of 250 shares of Stock, subject to tax withholding and any other costs provided under this Plan.

or;

(ii) if AT&T has designated a stockbroker to act as AT&T's agent to process Option exercises, issuance of an exercise notice to such stockbroker together with instructions irrevocably instructing the stockbroker:  (A) to immediately sell (which shall include an exercise notice that becomes effective upon execution of a sell order) a sufficient portion of the Stock to pay the Exercise Price of the Options being exercised and the required tax withholding, and (B) to deliver on the settlement date the portion of the proceeds of the sale equal to the Exercise Price and tax withholding to AT&T.  In the event the stockbroker sells any Stock on behalf of a Participant, the stockbroker shall be acting solely as the agent of the Participant, and AT&T disclaims any responsibility for the actions of the stockbroker in making any such sales.  No Stock shall be issued until the settlement date and until the oceeds (equal to the Exercise Price and tax withholding) are paid to AT&T.

8.6           Restrictions on Exercise and Transfer.
 No Option shall be transferable except: (a) upon the death of a Participant in accordance with AT&T's Rules for Employee Beneficiary Designations, as the same may be amended from time to time; and (b) in the case of any holder after the Participant's death, only by will or by the laws of descent and distribution.  During the Participant's lifetime, the Participant's Options shall be exercisable only by the Participant or by the Participant's guardian or legal representative.  After the death of the Participant, an Option shall only be exercised by the holder thereof (including but not limited to an executor or administrator of a decedent's estate) or his or her guardian or legal representative.  In each such case the Option holder shall be considered a Participant for the limited purpose of exercising such Options.

8.7           Termination of Employment.
 (a)  Not Retirement Eligible.  Unless otherwise provided by the Committee, if a Participant Terminates Employment while not Retirement eligible, a Participant's Options may be exercised, to the extent then exercisable:

(i) if such Termination of Employment is by reason of death or Disability, then for a period of three (3) years from the date of such Termination of Employment or until the expiration of the stated term of such Option, whichever period is shorter; or

(ii) if such Termination of Employment is for any other reason, then for a period of one (1) year from the date of such Termination of Employment or until the expiration of the stated term of such Option, whichever period is shorter.

 (b)  Retirement Eligible.  Unless otherwise provided by the Committee, if a Participant Terminates Employment while Retirement eligible, the Participant's Option may be exercised, to the extent then exercisable:  (i) for a period of five (5) years from the date of Retirement or (ii) until the expiration of the stated term of such Option, whichever period is shorter.

 (c) Re-Employment of a Participant after a Termination of Employment shall have no effect on the periods during which Options resulting from the prior Employment may be exercised.  For example, if the Option exercise period has been shortened because of the prior Termination of Employment, it shall not be extended because of the re-Employment.

 (d)  Notwithstanding any other definition of Termination of Employment under this Plan, for purposes of this Article 8 – Options only, a Termination of Employment shall mean the cessation of the Employee being employed by any corporation, partnership, venture or other entity in which AT&T holds, directly or indirectly, a 50% or greater ownership interest, including but not limited to where AT&T ceases to hold such interest in the employing company.  In addition, the definition of Retirement for purposes of this Article 8 shall use the immediately foregoing definition of Termination of Employment in  lieu of any other definition.


Article 9 - Discontinuation, Termination, Amendment.

9.1           AT&T's Right to Discontinue Offering Share Units.
The Committee may at any time discontinue offerings of Share Units under the Plan.  Any such discontinuance shall have no effect upon existing Share Units or the terms or provisions of this Plan as applicable to such Share Units.

9.2           AT&T's Right to Terminate Plan.
The Committee may terminate the Plan at any time.  Upon termination of the Plan, contributions shall no longer be made under the Plan.

After termination of the Plan, Participants shall continue to earn dividend equivalents in the form of Share Units on undistributed Share Units and shall continue to receive all distributions under this Plan at such time as provided in and pursuant to the terms and conditions of Participant's elections and this Plan.  Notwithstanding the foregoing, the termination of the Plan shall be made solely in accordance with Section 409A of the Code and in no event shall cause the accelerated distribution of any Account unless such termination is effected in accordance with Section 409A of the Code.

9.3
Amendment.
The Committee may at any time amend the Plan in whole or in part including but not limited to changing the formulas for determining the amount of AT&T Matching Contributions under Article 5 or decreasing the number of Options to be issued under Article 8; provided, however, that no amendment, including but not limited to an amendment to this section, shall be effective, without the consent of a Participant, to alter, to the material detriment of such Participant, a Share Deferral Account of the Participant, other than as provided elsewhere in this section.   For purposes of this section, an alteration to the material detriment of a Participant shall include, but not be limited to, a material reduction in the period of time over which Stock may be distributed to a Participant, any reduction in the Participant's number of vested Share Units or Options, or an increase in the Exercise Price or decrease in the term of an Option.   Any such consent may be in a writing, telecopy, or e-mail or in another electronic format. An election to acquire Share Units with Employee Contributions shall be conclusively deemed to be the consent of the Participant to any and all amendments to the Plan prior to such election, and such consent shall be a condition to making any election with respect to Employee Contributions.

Notwithstanding anything to the contrary contained in this section of the Plan, the Committee may modify this Plan with respect to any person subject to the provisions of Section 16 of the Securities Exchange Act of 1934, as amended (“Exchange Act”) to place additional restrictions on the exercise of any Option or the transfer of any Stock not yet issued under the Plan.

The Plan is established in order to provide deferred compensation to a select group of management and highly compensated employees with in the meaning of Sections 201(2) and 301(a)(3) of ERISA. To the extent legally required, the Code and ERISA shall govern the Plan, and if any provision hereof is in violation of an applicable requirement thereof, the Company reserves the right to retroactively amend the Plan to comply therewith to the extent permitted under the Code and ERISA.  The Company also reserves the right to make such other changes as may facilitate implementation of Section 409A of the Code.  Provided, however, that in no event shall any such amendments be made in violation of the requirements of Section 409A of the Code.

Article 10 – Miscellaneous.

10.1        Tax Withholding.
Upon distribution of Stock, including but not limited to, shares of Stock issued upon the exercise of an Option, AT&T shall withhold shares of Stock sufficient in value, using the FMV on the date determined by AT&T to be used to value the Stock for tax purposes, to satisfy the minimum amount of Federal, state, and local taxes required by law to be withheld as a result of such distribution. Employment taxes incurred by a Participant on Employee Contributions and on Matching Contributions shall be withheld from the Participant’s regular wages or paid in cash by the Participant as they become due.

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

Unless otherwise determined by the Committee, when the method of payment for the Exercise Price is from the sale by a stockbroker pursuant to Section 8.5, hereof, of the Stock acquired through the Option exercise, then the tax withholding shall be satisfied out of the proceeds.  For administrative purposes in determining the amount of taxes due, the sale price of such Stock shall be deemed to be the FMV of the Stock.

10.2        Elections and Notices.
Notwithstanding anything to the contrary contained in this Plan, all elections and notices of every kind under this Plan shall be made on forms prepared by AT&T or the General Counsel, Secretary or Assistant Secretary, or their respective delegates or shall be made in such other manner as permitted or required by AT&T or the General Counsel, Secretary or Assistant Secretary, or their respective delegates, including through electronic means, over the Internet or otherwise.  An election shall be deemed made when received by AT&T (or its designated agent, but only in cases where the designated agent has been appointed for the purpose of receiving such election), which may waive any defects in form.  Unless made irrevocable by the electing person, each election with regard to making Employee Contributions or distributions of Share Deferral Accounts shall become irrevocable at the close of business on the last day to make such election. AT&T may limit the time an election may be made in advance of any deadline.

If not otherwise specified by this Plan or AT&T, any notice or filing required or permitted to be given to AT&T under the Plan shall be delivered to the principal office of AT&T, directed to the attention of the Senior Executive Vice President in charge of Human Resources for AT&T or his or her successor.  Such notice shall be deemed given on the date of delivery.

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

By participating in the Plan, each Participant agrees that AT&T may provide any documents required or permitted under the Federal or state securities laws, including but not limited to the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, by e-mail, by e-mail attachment, or by notice by e-mail of electronic delivery through AT&T's Internet Web site or by other electronic means.

10.3        Unsecured General Creditor.
Participants and their beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, interest, or claims in any property or assets of any Employer.  No assets of any Employer shall be held under any trust for the benefit of Participants, their beneficiaries, heirs, successors, or assigns, or held in any way as collateral security for the fulfilling of the obligations of any Employer under this Plan.  Any and all of each Employer's assets shall be, and remain, the general, unpledged, unrestricted assets of such Employer.  The only obligation of an Employer under the Plan shall be merely that of an unfunded and unsecured promise of AT&T to distribute shares of Stock corresponding to Share Units and Options, under the Plan.
 
 
10.4        Non-Assignability.
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, shares of Stock corresponding to Share Units under the Plan, if any, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable.  No part of the Stock distributable shall, prior to actual distribution, 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.

10.5        Employment Not Guaranteed.
Nothing contained in this Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any employee any right to be retained in the employ of an Employer or to serve as a director.

10.6        Errors.
At any time AT&T or an Employer may correct any error made under the Plan without prejudice to AT&T or any Employer.  Neither AT&T nor any Employer shall be liable for any damages resulting from failure to timely allow any contribution to be made to the Plan or for any damages resulting from the correction of, or a delay in correcting, any error made under the Plan.  In no event shall AT&T or any Employer be liable for consequential or incidental damages arising out of a failure to comply with the terms of the Plan.

10.7
Captions.
The captions of the articles, sections, and paragraphs of this Plan are for convenience only and shall not control nor affect the meaning or construction of any of its provisions.

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

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

10.9        Plan to Comply with Section 409A.
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.  Notwithstanding any provision to the contrary in this Plan, each provision in this Plan shall be interpreted to permit the deferral of compensation in accordance with Section 409A of the Code and any provision that would conflict with such requirements shall not be valid or enforceable.

10.10     Successors and Assigns.
This Plan shall be binding upon AT&T and its successors and assigns.

10.11  Loyalty Conditions for Officer Level Employees and Senior Managers

Each Officer Level Employee or a Senior Manager who elects to make Employee Contributions under Section 4.1 of this Plan shall be subject to the agreements and conditions of this section.

(a)   By making an Employee Contribution election under Section 4.1 of this Plan after September 1, 2009, a Participant acknowledges that AT&T would be unwilling to provide for such an election but for the loyalty conditions and covenants set forth in this section, and that the conditions and covenants herein are a material inducement to AT&T’s willingness to sponsor the Plan and to offer Plan benefits for the Participants.  Accordingly, as a condition to making an Employee Contribution election under Section 4.1 of this Plan after September 1, 2009, each such electing Participant is deemed to agree that he shall not, without obtaining the written consent of the Committee in advance, participate in activities that constitute engaging in competition with AT&T or engaging in conduct disloyal to AT&T, as those terms are defined in this section.
 
(b)   Definitions.  For purposes of this section and of the Plan generally:
 
(i) an “Employer Business” shall mean AT&T Inc. and any of its Subsidiaries, or any business in which they or any affiliate of theirs has a substantial ownership or joint venture interest;
 
(ii) “engaging in competition with AT&T” shall mean, while employed by AT&T or any of its Subsidiaries, or within two (2) years after Participant’s Termination of Employment, engaging by the Participant in any business or activity in all or any portion of the same geographical market where the same or substantially similar business or activity is being carried on by an Employer Business.  “Engaging in competition with AT&T” shall not include owning a non-substantial publicly traded interest as a shareholder in a business that competes with an Employer Business.  “Engaging in competition with AT&T” 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.
 
(iii) “engaging in conduct disloyal to AT&T” means, while employed by AT&T or any of its Subsidiaries, or within two (2) years after Participant’s Termination of Employment, (i) soliciting for employment or hire, whether as an employee or as an independent contractor, for any business in competition with an Employer Business, any person employed by AT&T or any of its Subsidiaries during the one (1) year prior to the Participant’s Termination of Employment, whether or not acceptance of such position would constitute a breach of such person’s contractual obligations to AT&T or any of its Subsidiaries; (ii) soliciting, encouraging, or inducing any vendor or supplier with which Participant had business contact on behalf of any Employer Business during the two (2) years prior to the Participant’s Termination of Employment (regardless of the reason for that termination) to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with AT&T or any of its Subsidiaries; or (iii) soliciting, encouraging, or inducing any customer or active prospective customer with whom Participant had business contact, whether in person or by other media (“Customer”), on behalf of any Employer Business during the two (2) years prior to the Participant’s Termination of Employment (regardless of the reason for that termination), to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with any Employer Business, or to purchase competing goods or services from a business competing with any Employer Business, or accepting or servicing business from such Customer on behalf of himself or any other business.  “Engaging in conduct disloyal to AT&T” shall also mean, disclosing Confidential Information to any third party or using Confidential Information, other than for an Employer Business, or failing to return any Confidential Information to the Employer Business following termination of employment.
 
(iv) “Confidential Information” shall mean all information belonging to, or otherwise relating to, an Employer Business, which is not generally known, regardless of the manner in which it is stored or conveyed to Participant, and which the Employer Business has taken reasonable measures under the circumstances to protect from unauthorized use or disclosure.  Confidential Information includes trade secrets as well as other proprietary knowledge, information, know-how, and non-public intellectual property rights, including unpublished or pending patent applications and all related patent rights, formulae, processes, discoveries, improvements, ideas, conceptions, compilations of data, and data, whether or not patentable or copyrightable and whether or not it has been conceived, originated, discovered, or developed in whole or in part by Participant.  For example, Confidential Information includes, but is not limited to, information concerning the Employer Business’ business plans, budgets, operations, products, strategies, marketing, sales, inventions, designs, costs, legal strategies, finances, employees, customers, prospective customers, licensees, or licensors; information received from third parties under confidential conditions; or other valuable financial, commercial, business, technical or marketing information concerning the Employer Business, or any of the products or services made, developed or sold by the Employer Business.  Confidential Information does not include information that (i) was generally known to the public at the time of disclosure; (ii) was lawfully received by Participant from a third party; (iii) was known to Participant prior to receipt from the Employer Business; or (iv) was independently developed by Participant or independent third parties; in each of the foregoing circumstances, this exception applies only if such public knowledge or possession by an independent third party was without breach by Participant or any third party of any obligation of confidentiality or non-use, including but not limited to the obligations and restrictions set forth in this Plan.
 
(c)   Equitable Relief.  The parties recognize that any Participant’s breach of any of the covenants in this section will cause irreparable injury to the AT&T, will represent a failure of the consideration under which AT&T (in its capacity as creator and sponsor of the Plan) agreed to provide the Participant with the opportunity to receive Plan benefits, and that monetary damages would not provide AT&T with an adequate or complete remedy that would warrant AT&T’s continued sponsorship of the Plan (including the accrual or granting of Share Units, Matching Share Units and Options) for all Participants.  Accordingly, in the event of a Participant’s actual or threatened breach of the covenants in this section, the Committee, in addition to all other rights and acting as a fiduciary under ERISA on behalf of all Participants, shall have a fiduciary duty (in order to assure that AT&T receives fair and promised consideration for its continued Plan sponsorship and funding) to seek an injunction restraining the Participant from breaching the covenants in this Section.  AT&T shall pay for any Plan expenses that the Committee incurs hereunder, and shall be entitled to recover from the Participant its reasonable attorneys’ fees and costs incurred in obtaining such injunctive remedies.
 
(d)   Uniform Enforcement.  In recognition of AT&T’s need for nationally uniform standards for the Plan administration, it is an absolute condition in consideration of any Participant’s ability to make Employee Contribution elections under Section 4.1 of this Plan after September 1, 2009, that each and all of the following conditions apply to all such electing Participants:
 
(i) ERISA shall control all issues and controversies hereunder, and the Committee shall serve for purposes hereof as a “fiduciary” of the Plan and its “named fiduciary” within the meaning of ERISA.
 
(ii) All litigation between the parties relating to this section shall occur in federal court, which shall have exclusive jurisdiction; any such litigation shall be held in the United States District Court for the Northern District of Texas, and the only remedies available with respect to the Plan shall be those provided under ERISA.
 

ex10n.htm
Exhibit 10-n
 

 
AT&T INC.
 
CASH DEFERRAL PLAN
 
Adopted November 19, 2004
As amended through January 31, 2013

Article 1 − Statement of Purpose
 
The purpose of the Cash Deferral Plan (“Plan”) is to provide savings opportunities to a select group of management employees of AT&T Inc. (“AT&T”) and its Subsidiaries.
 
Article 2 − Definitions
 
For the purpose of this Plan, the following words and phrases shall have the meanings indicated, unless the context indicates otherwise:
 
Annual Bonus.  The award designated the “Annual Bonus” by AT&T (including but not limited to an award that may be paid in more frequent installments than annually), together with any individual discretionary award made in connection therewith, or comparable awards, if any, determined by AT&T to be used in lieu of these awards.
 
Base Compensation.  The following types of cash-based compensation paid by an Employer (but not including payments made by a non-Employer, such as state disability payments), before reduction due to any contribution pursuant to this Plan or reduction pursuant to any deferral plan of an Employer, including but not limited to a plan that includes a qualified cash or deferral arrangement under Section 401(k) of the Code:
 
(a)  base salary;
 
(b)  lump sum payments in lieu of a base salary increase; and
 
(c)  Annual Bonus.
 
Payments by an Employer under a disability plan made in lieu of any compensation described above, shall be deemed to be a part of the respective form of compensation it replaces for purposes of this definition.  Base Compensation does not include zone allowances or any other geographical differential and shall not include payments made in lieu of unused vacation or other paid days off, and such payments shall not be contributed to this Plan.
 
Determinations by AT&T (the Committee with respect to Officer Level Employees) of the items that make up Base Compensation shall be final.  The Committee may, from time to time, add or subtract types of compensation to or from the definition of “Base Compensation” provided, however, any such addition or subtraction shall be effective only with respect to the next period in which a Participant may make an election to establish a Cash Deferral Account.  Base Compensation that was payable in a prior Plan Year but paid in a later Plan Year shall not be used to determine Employee Contributions in the later Plan Year.
 
Business Day.  Any day during regular business hours that AT&T is open for business.
 
Cash Deferral Account or Account.  The Account or Accounts established annually by an election by a Participant to make Employee Contributions to the Plan with each account relating to a Plan Year.  For each Plan Year after 2008, there shall be a separate Cash Deferral Account for Base Compensation (excluding Annual Bonus) and a separate Cash Deferral Account for the Short Term Incentive Award and/or Annual Bonus.  Earnings on each of Employee Contributions shall accrue to the respective Cash Deferral Accounts where they are earned.
 
Change in Control.  With respect to AT&T’s direct and indirect ownership of an Employer, a “Change in the effective control of a Corporation,” as defined in Treasury Regulation Section 1.409A−3(i)(5)(vi)(A)(1), regardless of whether the Employer is a corporation or non-corporate entity as permitted by the regulation, and using “50 percent” in lieu of “30 percent” in such regulation.  A Change in Control will not apply to AT&T itself.
 
Chief Executive Officer.  The Chief Executive Officer of AT&T Inc.
 
Code.  References to the Code shall be to provisions of the Internal Revenue Code of 1986, as amended, including regulations promulgated thereunder and successor provisions.  Similarly, references to regulations shall include amendments and successor provisions.
 
Committee.  The Human Resources Committee of the Board of Directors of AT&T Inc.
 
Disability.  Absence of an Employee from work with an Employer under the relevant Employer’s disability plan.
 
Eligible Employee.  An Employee who:
 
(a) is a full or part time, salaried Employee of AT&T or an Employer in which AT&T has a direct or indirect 100% ownership interest and who is on active duty or Leave of Absence (but only while such Employee is deemed by the Employer to be an Employee of such Employer);
 
(b) is, as determined by AT&T, a member of Employer’s “select group of management or highly compensated employees” within the meaning of the Employee Retirement Income Security Act of 1974, as amended, and regulations thereunder (“ERISA”), which is deemed to include each Officer Level  Employee; and
 
(c) has an employment status which has been approved by AT&T to be eligible to participate in this Plan or is an Officer Level Employee.
 
Notwithstanding the foregoing, AT&T (the Committee with respect to Officer Level Employees) may, from time to time, exclude any Employee or group of Employees from being deemed an “Eligible Employee” under this Plan.
 
In the event a court or other governmental authority determines that an individual was improperly excluded from the class of persons who would be permitted to make Employee Contributions during a particular time for any reason, that individual shall not be permitted to make such contributions for purposes of the Plan for the period of time prior to such determination.
 
Employee.  Any person employed by an Employer and paid on an Employer’s payroll system, excluding persons hired for a fixed maximum term and excluding persons who are neither citizens nor permanent residents of the United States, all as determined by AT&T.  For purposes of this Plan, a person on Leave of Absence who otherwise would be an Employee shall be deemed to be an Employee.
 
Employee Contributions.  Amounts credited to a Cash Deferral Account pursuant to Section 4.1 (Election to Make Contributions) of the Plan.
 
Employer.  AT&T Inc. or any of its Subsidiaries.
 
Incentive Award.  A cash award paid by an Employer (and not by a non-Employer, such as state disability payments) under the Short Term Incentive Plan or any successor plan, the 2006 Incentive Plan or any successor plan, or any other award that the Committee specifically permits to be contributed to a Cash Deferral Account under this Plan (regardless of the purpose of the award).
 
Leave of Absence.  Where a person is absent from employment with an Employer on a leave of absence, military leave, sick leave, or Disability, where the leave is given in order to prevent a break in the continuity of term of employment, and permission for such leave is granted (and not revoked) in conformity with the rules of the Employer that employs the individual, as adopted from time to time, and the Employee is reasonably expected to return to service.  Except as set forth below, the leave shall not exceed six (6) months for purposes of this Plan, and the Employee shall Terminate Employment upon termination of such leave if the Employee does not return to work prior to or upon expiration of such six (6) month period, unless the individual retains a right to reemployment under law or by contract.  A twenty-nine (29) month limitation shall apply in lieu of such six (6) month limitation if the leave is due to the Employee being “disabled” (within the meaning of Treasury Regulation §1.409A−3(i)(4)).  A Leave of Absence shall not commence or shall be deemed to cease under the Plan where the Employee has incurred a Termination of Employment.
 
Officer Level Employee.  Any executive officer of AT&T, as that term is used under the Securities Exchange Act of 1934, as amended, and any Employee that is an “officer level” Employee for compensation purposes as shown on the records of AT&T.
 
Participant.  An Employee or former Employee who participates in this Plan.
 
Plan Interest Rate.  An annual rate of interest equal to Moody’s Long-Term Corporate Bond Yield Average for the September preceding the calendar year during which the interest rate will apply.  The Committee may choose another method of calculating the Plan Interest Rate, but such other method may only apply to Cash Deferral Units that Participants have not yet elected to establish.
 
Plan Year.  Each of the following shall be a Plan year:  the period from January 1, 2005 through January 15, 2006; the period January 16, 2006 through December 31, 2006; and, for all later Plan Years, it is defined as the period from January 1 through December 31.
 
Retirement or Retire.  Termination of Employment on or after the date the Participant has attained one of the following combinations of age and Net Credited Service:
 
Net Credited Service                                                  Age
 
10 years or more                                           65 or older
 
20 years or more                                           55 or older
 
25 years or more                                           50 or older
 
30 years or more                                           Any age
 
For purposes of this Plan only, Net Credited Service shall be calculated in the same manner as “Pension Eligibility Service” under the AT&T Pension Benefit Plan – Nonbargained Program (“Pension Plan”), as the same existed on October 1, 2008, except that service with an Employer shall be counted as though the Employer were a “Participating Company” under the Pension Plan and the Employee was a participant in the Pension Plan.
 
Senior Manager.  Any Employee who is a “senior manager” for compensation purposes as shown on the records of AT&T.
 
Short Term Incentive Award.  A cash award paid by an Employer (and not by a non-Employer, such as state disability payments) under the Short Term Incentive Plan or any successor plan, together with any individual discretionary award made in connection therewith; an award under a similar plan intended by the Committee to be in lieu of an award under such Short Term Incentive Plan, including, but not limited to, Performance Units granted under the 2006 Incentive Plan or any successor plan.  It shall also include any other award that the Committee designates as a Short Term Incentive Award specifically for purposes of this Plan (regardless of the purpose of the award) provided the deferral election is made in accordance with Section 409A.
 
Specified Employee.  Any Participant who is a “Key Employee” (as defined in Code Section 416(i) without regard to paragraph (5) thereof), as determined by AT&T in accordance with its uniform policy with respect to all arrangements subject to Code Section 409A, based upon the 12-month period ending on each December 31st (such 12-month period is referred to below as the “identification period”).  All Participants who are determined to be Key Employees under Code Section 416(i) (without regard to paragraph (5) thereof) during the identification period shall be treated as Key Employees for purposes of the Plan during the 12-month period that begins on the first day of the 4th month following the close of such identification period.
 
Subsidiary.  Any corporation, partnership, venture or other entity or business with which AT&T would be considered a single employer under Sections 414(a) and (c) of the Code, using 50% as the ownership threshold as provided under Section 409A of the Code.
 
Termination of Employment.  References herein to “Termination of Employment,” “Terminate Employment” or a similar reference, shall mean the event where the Employee has a “separation from service,” as defined under Section 409A, with all Employers.  For purposes of this Plan, a Termination of Employment with respect to an Employer also shall be deemed to occur when such Employer incurs a Change in Control.
 
Article 3 − Administration of the Plan
 
3.1           The Committee.
 
Except as delegated by this Plan or by the Committee, the Committee shall be the administrator of the Plan and will administer the Plan, interpret, construe and apply its provisions and all questions of administration, interpretation and application of the Plan, including, without limitation, questions and determinations of eligibility entitlement to benefits and payment of benefits, all in its sole and absolute discretion.  The Committee may further establish, adopt or revise such rules and regulations and such additional terms and conditions regarding participation in the Plan as it may deem necessary or advisable for the administration of the Plan.  References in this Plan to determinations or other actions by AT&T, herein, shall mean actions authorized by the Committee, the Chief Executive Officer, the Senior Executive Vice President of AT&T in charge of Human Resources, or their respective successors or duly authorized delegates, in each case in the discretion of such person.  All decisions by the Committee, its delegate or AT&T, as applicable, shall be final and binding.
 
3.2           Claims and Appeals.
 
(a)           Claims.  A person who believes that he or she is being denied a benefit to which he or she is entitled under this Plan (hereinafter referred to as a “Claimant”) may file a written request for such benefit with the Executive Compensation Administration Department, setting forth his or her claim. The request must be addressed to the AT&T Executive Compensation Administration Department at its then principal place of business.
 
(b)           Claim Decision.  Upon receipt of a claim, the AT&T Executive Compensation Administration Department shall review the claim and provide the Claimant with a written notice of its decision within a reasonable period of time, not to exceed ninety (90) days, after the claim is received. If the AT&T Executive Compensation Administration Department determines that special circumstances require an extension of time beyond the initial ninety (90)-day claim review period, the AT&T Executive Compensation Administration Department shall notify the Claimant in writing within the initial ninety (90)-day period and explain the special circumstances that require the extension and state the date by which the AT&T Executive Compensation Administration Department expects to render its decision on the claim. If this notice is provided, the AT&T Executive Compensation Administration Department may take up to an additional ninety (90) days (for a total of one hundred eighty (180) days after receipt of the claim) to render its decision on the claim.
 
If the claim is denied by the AT&T Executive Compensation Administration Department, in whole or in part, the AT&T Executive Compensation Administration Department shall provide a written decision using language calculated to be understood by the Claimant and setting forth:  (i) the specific reason or reasons for such denial; (ii) specific references to pertinent provisions of this Plan on which such denial is based; (iii) a description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation of why such material or such information is necessary; (iv) a description of the Plan’s procedures for review of denied claims and the steps to be taken if the Claimant wishes to submit the claim for review; (v) the time limits for requesting a review of a denied claim under this section and for conducting the review under this section; and (vi) a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA if the claim is denied following review under this section.
 
(c)           Request for Review. Within sixty (60) days after the receipt by the Claimant of the written decision on the claim provided for in this section, the Claimant may request in writing that the Committee review the determination of the AT&T Executive Compensation Administration Department.  Such request must be addressed to the Committee at the address for giving notice under this Plan.  To assist the Claimant in deciding whether to request a review of a denied claim or in preparing a request for review of a denied claim, a Claimant shall be provided, upon written request to the Committee and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim.  The Claimant or his or her duly authorized representative may, but need not, submit a statement of the issues and comments in writing, as well as other documents, records or other information relating to the claim for consideration by the Committee.  If the Claimant does not request a review of the AT&T Executive Compensation Administration Department’s decision by the Committee within such sixty (60)-day period, the Claimant shall be barred and estopped from challenging the determination of the AT&T Executive Compensation Administration Department.
 
(d)           Review of Decision. Within sixty (60) days after the Committee’s receipt of a request for review, the Administrator will review the decision of the AT&T Executive Compensation Administration Department.  If the Committee determines that special circumstances require an extension of time beyond the initial sixty (60)-day review period, the Committee shall notify the Claimant in writing within the initial sixty (60)-day period and explain the special circumstances that require the extension and state the date by which the Committee expects to render its decision on the review of the claim.  If this notice is provided, the Committee may take up to an additional sixty (60) days (for a total of one hundred twenty (120) days after receipt of the request for review) to render its decision on the review of the claim.
 
During its review of the claim, the Committee shall:
 
(1)           Take into account all comments, documents, records, and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial review of the claim conducted pursuant to this section;
 
(2)           Follow reasonable procedures to verify that its benefit determination is made in accordance with the applicable Plan documents; and
 
(3)           Follow reasonable procedures to ensure that the applicable Plan provisions are applied to the Participant to whom the claim relates in a manner consistent with how such provisions have been applied to other similarly-situated Participants.
 
After considering all materials presented by the Claimant, the Committee will render a decision, written in a manner designed to be understood by the Claimant.  If the Committee denies the claim on review, the written decision will include (i) the specific reasons for the decision; (ii) specific references to the pertinent provisions of this Plan on which the decision is based; (iii) a statement that the Claimant is entitled to receive, upon request to the Committee and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim; and (iv) a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA.
 
The Committee shall serve as the final review committee under the Plan and shall have sole and complete discretionary authority to administer, interpret, construe and apply the Plan provisions, and determine all questions of administration, interpretation, construction, and application of the Plan, including questions and determinations of eligibility, entitlement to benefits and the type, form and amount of any payment of benefits, all in its sole and absolute discretion.  The Committee shall further have the authority to determine all relevant facts and related issues, and all documents, records and other information relevant to a claim conclusively for all parties, and in accordance with the terms of the documents or instruments governing the Plan. Decisions by the Committee shall be conclusive and binding on all parties and not subject to further review.
 
In any case, a Participant or Beneficiary may have further rights under ERISA.  The Plan provisions require that Participants or Beneficiary pursue all claim and appeal rights described in this section before they seek any other legal recourse regarding claims for benefits.
 
Article 4 − Contributions
 
4.1           Election to Make Contributions.
 
(a)  The Committee shall establish dates and other conditions for participation in the Plan and making contributions as it deems appropriate.  Except as otherwise provided by the Committee, each year an Employee who is an Eligible Employee as of September 30 may thereafter make an election on or prior to the last Business Day of the immediately following November (such election shall be cancelled if the Employee is not an Eligible Employee on the last day such an election may be made) to contribute on a pre-tax basis, through payroll deductions, any combination of the following:
 
(1)  From 1% to 50% (in whole percentage increments) of the Participant’s monthly Base Compensation, other than Annual Bonus, during the calendar year (the Plan Year for such contributions) following the calendar year of such election.  Employees who are below the level of Senior Manager, as shown on the records of AT&T at the time of the election, may contribute no more than 25% or such other amount as determined by AT&T.
 
(2)  Up to 95% (in whole percentage increments) of a Short Term Incentive Award, or up to 50% (in whole percentage increments) of Annual Bonus (25% for Employees who are below the level of Senior Manager), in each case such contributions shall be made during the second calendar year (which is the Plan Year for such contributions) following the year of such election, except that in 2008 a separate election may be made with respect to contributions to be made in 2009.  An Employee may make such an election with respect to the type of Award (Short Term Incentive Award or Annual Bonus) that the Employee is under as of the time the Employee’s eligibility to make such election is determined.  If because of a promotion or otherwise, the Employee receives a different type of Award instead of or in partial or full replacement for the type of Award subject to the Employee’s election for the relevant Plan Year, the election will apply to the other Award as well, including but not limited to any individual discretionary award related thereto.
 
(b)  The Committee may permit an Eligible Employee to make an election to make other contributions under this Plan with compensation other than Base Compensation or Short Term Incentive Awards on such terms and conditions as such Committee may permit from time to time provided that any such election is made in accordance with Section 409A of the Code.
 
(c)  Notwithstanding anything to the contrary in this Plan, no election shall be effective to the extent it would permit an Employee Contribution or distribution to be made that is not in compliance with Section 409A of the Code.  To the extent such election related to Employee Contributions that complied with such statute and regulations, thereunder, that portion of the election shall remain valid, except as otherwise provided under this Plan.
 
(d)  To the extent permitted by Section 409A of the Code, AT&T may refuse or terminate, in whole or in part, any election to make contributions to the Plan at any time; provided, however, only the Committee may take such action with respect to persons who are Officer Level Employees.
 
(e)  In the event the Participant takes a hardship withdrawal pursuant to Treasury Regulation §1.401(k)−1 from a benefit plan qualified under the Code and sponsored by an Employer, any election to make Employee Contributions by such Participant shall be cancelled on a prospective basis, and the Participant shall not be permitted to make a new election with respect to Employee Contributions that would be contributed during the then current and immediately following calendar year.
 
(f)  To the extent a Participant makes contributions to the Plan where the payment of which would be deductible by AT&T under Section 162(m) of the Code without regard to the size of the distribution, such contributions and earnings thereon shall be distributed first.
 
(g)  With respect to a Plan Year, an Employee may elect to (1) make Employee Contributions of Base Compensation other than Annual Bonus to this Plan but only if the Employee elects to contribute at least 6% of Base Compensation other than Annual Bonus for the same Plan Year to the Stock Purchase and Deferral Plan and/or (2) make Employee Contributions of Annual Bonus to this Plan but only if the Employee elects to contribute at least 6% of Annual Bonus for the same Plan Year to the Stock Purchase and Deferral Plan.
 
4.2           Contributions to a Cash Deferral Account.
 
(a)  Employee Contributions shall be made pursuant to a proper election, only during the Participant’s lifetime; provided, however, with respect to Employee Contribution elections made prior to 2007, the Employee must remain an Eligible Employee while making any such contributions.  In the event of a Change in Control of an Employer, subsequent compensation from the Employer may not be contributed to the Plan.  The Employer may continue the then current elections of the participants under a subsequent plan in order to comply with applicable tax laws.
 
(b)  A Participant’s contributions shall be credited to the Participant’s Cash Deferral Account on the day the compensation – from which the contribution is to be deducted – is to be paid (“paid,” as used in this Plan, includes amounts contributed to the Plan that would have been paid were it not for an election under this Plan), as determined by the relevant Employer.  Earnings on each Cash Deferral Account shall be recorded on Participant’s statements quarterly.  The Committee may modify or change this paragraph (b) from time to time.
 
4.3           Earnings on Cash Deferral Accounts.
 
During a calendar year, the Participant’s Cash Deferral Account shall accrue interest on amounts held by such Account at the Plan Interest Rate for such year, compounded quarterly on the last day of each quarter.  Interest will accrue on unpaid amounts in the Cash Deferral Account from the date credited to such Account.
 
Article 5 − Distributions
 
5.1           Distributions of Cash Deferral Accounts.
 
(a)  Initial Election with Respect to a Cash Deferral Account.  At the time the Participant makes an election to make Employee Contributions with respect to a Cash Deferral Account, the Participant shall also elect the calendar year of the distribution of the Cash Deferral Account and the number of installments.  The Participant may elect either of the following:
 
(1)  Specified Date Distribution.  That the distribution of the Cash Deferral Account commence in the calendar year specified by the Participant, but no later than the 10th calendar year after the Plan Year the Cash Deferral Account commenced, in up to Ten (10) installments.
 
(2)  Retirement Distribution.  That the distribution of the Cash Deferral Account commence the calendar year following the calendar year of Retirement in up to (10) installments.  If the Participant Terminates Employment while not Retirement eligible, the distribution shall commence the calendar year following the calendar year of Termination of Employment, but shall be limited to five (5) installments.  This distribution alternative will not be available for Initial Elections made after 2007.
 
If no timely distribution election is made by the Participant, then the Participant will be deemed to have made an election to have the Cash Deferral Account distributed in a single installment in the first calendar year after the calendar year Employee Contributions were first made.
 
(b)  If an Employee elected a Specified Date Distribution for a Cash Deferral Account, the Employee may elect to delay the Specified Date Distribution commencement date and, as part of such delay election elect a new number of installments; provided, however, Termination of Employment will not accelerate the distribution, unlike the initial deferral election.  Unless otherwise provided by the Committee, the election of a new distribution commencement date for a Cash Deferral Account must be made on or after October 1, and on or before the last Business Day of the next following December, of the calendar year that is the second calendar year preceding the calendar year in which the distribution would otherwise commence.  To make this election, the Participant must be an Eligible Employee both on the September 30 immediately preceding such election and on the last day such an election may be made.  For example, an election to defer a scheduled distribution that would otherwise commence in 2010 must be made during the period from October 1, 2008, through the last business day of December 2008, and the Participant must be an Eligible Employee both on September 30, 2008, and the last business day of December 2008.  The new distribution election must delay commencement of the distribution by five (5) years.  An election to delay the Specified Date Distribution commencement date of a Cash Deferral Account may not be made in the same calendar year the election to establish the Cash Deferral Account is made.  Notwithstanding anything to the contrary in this Plan, (1) such election to delay the Specified Date Distribution commencement date must be made at least 12 months prior to the date of the first scheduled payment under the prior distribution election and (2) the election shall not take effect until at least 12 months after the date on which the election is made.
 
(c)  A Participant’s Cash Deferral Account shall be distributed to the Participant on March 10 (or as soon thereafter as administratively practicable, as determined by AT&T) of the calendar year elected by the Participant for the Account.  In the event the distribution is to be made to a “Specified Employee” as a result of the Participant’s Termination of Employment (other than as a result of a Change in Control), the distribution shall not occur until the later of such March 10 or six (6) months after the Termination of Employment, except it shall be distributed upon the Participant’s earlier death in accordance with this Plan.  The distributions shall continue annually on each successive March 10 (or such other date as determined by AT&T) until the number of installments elected by the Participant is reached.  In each installment, AT&T shall distribute to the Participant that portion of the Participant’s Cash Deferral Account that is equal to the total dollar amount of the Participant’s Account divided by the number of remaining installments.
 
(d)  The Committee may establish other distribution alternatives from time to time, but such alternatives may be offered no earlier than the next period in which a Participant may make an election to establish a Cash Deferral Account.
 
5.2           Death of the Participant.
 
In the event of the death of a Participant, notwithstanding anything to the contrary in this Plan, all undistributed Cash Deferral Accounts shall be distributed to the Participant’s beneficiary in accordance with the AT&T Rules for Employee Beneficiary Designations, as the same may be amended from time to time, within the later of 90 days following such determination or the end of the calendar year in which determination was made.
 
5.3           Unforeseeable Emergency Distribution.
 
If a Participant experiences an “Unforeseeable Emergency,” the Participant may submit a written petition to AT&T (the Committee in the case of Officer Level Employees), to receive a partial or full distribution of his Cash Deferral Account(s).  In the event that AT&T (the Committee in the case of Officer Level Employees), upon review of the written petition of the Participant, determines in its sole discretion that the Participant has suffered an “Unforeseeable Emergency,” AT&T shall make a distribution to the Participant from the Participant’s Cash Deferral Accounts, on a pro-rata basis, within the later of 90 days following such determination or the end of the calendar year in which determination was made, subject to the following:
 
(a)           “Unforeseeable Emergency” shall mean a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s legal spouse, the Participant’s beneficiary, or the Participant’s dependent (as defined in Code Section 152, without regard to Code Section 152(b)(1), (b)(2), and (d)(1)(B)); 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, all as determined in the sole discretion of the Committee.  Whether a Participant is faced with an Unforeseeable Emergency permitting a distribution is to be determined based on the relevant facts and circumstances of each case, but, in any case, a distribution on account of Unforeseeable Emergency shall not be made to the extent that such emergency is or 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 cause severe financial hardship, or by cessation of deferrals under the Plan.
 
(b)           The amount of a distribution to be made because of an Unforeseeable Emergency shall not exceed the amount reasonably necessary, as determined by AT&T (the Committee in the case of Officer Level Employees) in its sole discretion, to satisfy the emergency need (which may include amounts necessary to pay any Federal, state, local, or foreign income taxes or penalties reasonably anticipated to result from the distribution).  Determinations of the amount reasonably necessary to satisfy the emergency need shall take into account any additional compensation that is available if the plan provides for cancellation of a deferral election upon a payment due to an Unforeseeable Emergency.  The determination of amounts reasonably necessary to satisfy the Unforeseeable Emergency need is not required to, but may, take into account any additional compensation that, due to the Unforeseeable Emergency, is available under another nonqualified deferred compensation plan but has not actually been paid, or that is available due to the Unforeseeable Emergency under another plan that would provide for deferred compensation except due to the application of the effective date provisions under Treasury Regulation § 1.409A−6.
 
(c)           Upon such distribution on account of an Unforeseeable Emergency under this Plan, any election to make Employee Contributions by such Participant shall be immediately cancelled, and the Participant shall not be permitted to make a new election with respect to Employee Contributions that would be contributed during the then current and immediately following calendar year.
 

 
5.4           Ineligible Participant.
 
Notwithstanding any other provisions of this Plan to the contrary, if AT&T receives an opinion from counsel selected by AT&T, or a final determination is made by a Federal, state or local government or agency, acting within its scope of authority, to the effect that an individual’s continued participation in the Plan would violate applicable law, then such person shall not make further contributions to the Plan to the extent permitted by Section 409A of the Code.
 
Article 6 − Transition Provisions
 
6.1           2005 Cash Deferral Accounts.
 
Notwithstanding Article 4 to the contrary, if an Employee is an Eligible Employee on September 30, 2004, the Employee may make an election under Article 4 on or prior to December 15, 2004, with respect to the establishment of a Cash Deferral Account for the contribution of Base Compensation and/or Incentive Awards that would otherwise be paid during the period from January 1, 2005, through January 15, 2006, which shall be the Plan Year for such Cash Deferral Account.
 
6.2           2007 Amendments.
 
Amendments made to the Plan on November 15, 2007, shall be effective January 1, 2008, except for amendments to this Article 7, which shall be effective upon adoption.  Any Participants electing prior to November 15, 2007, to make Employee Contributions in 2008 shall have their elections canceled if they do not consent by December 14, 2007, to all prior amendments to this Plan and to the Stock Purchase and Deferral Plan.  Subject to the foregoing consent requirements, all Employee Contribution elections made prior to 2008, including but not limited to elections to contribute cash with respect to Performance Shares granted that would be distributed under the 2001 Incentive Plan or a successor plan, shall remain in force, subject to all other terms of the amended Plan.
 
6.3           2008 Amendments.  For the 2008 Plan Year, only Salary and Short Term Incentive Awards paid after Termination of Employment may be contributed to the Plan.
 
Article 7 − Discontinuation, Termination, Amendment.
 
7.1           AT&T’s Right to Discontinue Offering Cash Deferral Accounts.
 
The Committee may at any time discontinue offerings of Cash Deferral Accounts or contributions under the Plan.  Any such discontinuance shall have no effect upon existing Cash Deferral Accounts or the terms or provisions of this Plan as applicable to such Accounts.
 
7.2           AT&T’s Right to Terminate Plan.
 
The Committee may terminate the Plan at any time.  Upon termination of the Plan, contributions shall no longer be made under the Plan.
 
After termination of the Plan, Participants shall continue to earn interest on undistributed amounts and shall continue to receive all distributions under this Plan at such time as provided in and pursuant to the terms and conditions of Participant’s elections and this Plan.  Notwithstanding the foregoing, the termination of the Plan shall be made solely in accordance with Section 409A of the Code and in no event shall cause the accelerated distribution of any Account unless such termination is effected in accordance with Section 409A of the Code.
 
7.3           Amendment.
 
The Committee may at any time amend the Plan in whole or in part; provided, however, that no amendment, including but not limited to an amendment to this section, shall be effective, without the consent of a Participant, to alter, to the material detriment of such Participant, any of the Cash Deferral Accounts of the Participant, other than as provided elsewhere in this section.  For purposes of this section, an alteration to the material detriment of a Participant shall include, but not be limited to, a material reduction in the period of time over which the Participant’s Cash Deferral Account may be distributed to a Participant, any reduction in the amounts credited to the Participant’s Cash Deferral Accounts, or any reduction in the Plan Interest Rate (other than as it may fluctuate in accordance with its terms) for Cash Deferral Accounts previously elected by the Participant.  Any such consent may be in a writing, telecopy, or e-mail or in another electronic format.  An election to make Employee Contributions shall be conclusively deemed to be the consent of the Participant to any and all amendments to the Plan prior to such election, and such consent shall be a condition to making any election with respect to Employee Contributions.
 
The Plan is established in order to provide deferred compensation to a select group of management and highly compensated employees with in the meaning of Sections 201(2) and 301(a)(3) of ERISA.  To the extent legally required, the Code and ERISA shall govern the Plan, and if any provision hereof is in violation of an applicable requirement thereof, the Company reserves the right to retroactively amend the Plan to comply therewith to the extent permitted under the Code and ERISA.  The Company also reserves the right to make such other changes as may facilitate implementation of Section 409A of the Code.  Provided, however, that in no event shall any such amendments be made in violation of the requirements of Section 409A of the Code.
 
Article 8 − Miscellaneous
 
8.1           Tax Withholding.
 
Upon a distribution from a Participant’s Cash Deferral Account, AT&T shall withhold sufficient amounts to satisfy the minimum amount of Federal, state, and local taxes required by law to be withheld as a result of such distribution.
 
8.2           Loyalty Conditions for Officer Level Employees and Senior Managers.
 
Each Officer Level Employee or a Senior Manager who elects to make Employee Contributions under Section 4.1 of this Plan shall be subject to the agreements and conditions of this section.
 
(a) By making an Employee Contribution election under Section 4.1 of this Plan after September 1, 2009, a Participant acknowledges that AT&T would be unwilling to provide for such an election but for the loyalty conditions and covenants set forth in this section, and that the conditions and covenants herein are a material inducement to AT&T’s willingness to sponsor the Plan and to offer Plan benefits for the Participants.  Accordingly, as a condition to making an Employee Contribution election under Section 4.1 of this Plan after September 1, 2009, each such electing Participant is deemed to agree that he shall not, without obtaining the written consent of the Committee in advance, participate in activities that constitute engaging in competition with AT&T or engaging in conduct disloyal to AT&T, as those terms are defined in this section.
 
(b) Definitions.  For purposes of this section and of the Plan generally:
 
                                (i) an “Employer Business” shall mean AT&T Inc. and any of its Subsidiaries, or any business in which they or any affiliate of theirs has a substantial ownership or joint venture interest;
 
 (ii) “engaging in competition with AT&T” shall mean, while employed by AT&T or any of its Subsidiaries, or within two (2) years after Participant’s Termination of Employment, engaging by the Participant in any business or activity in all or any portion of the same geographical market where the same or substantially similar business or activity is being carried on by an Employer Business.  “Engaging in competition with AT&T” shall not include owning a non-substantial publicly traded interest as a shareholder in a business that competes with an Employer Business.  “Engaging in competition with AT&T” 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.
 
(iii) “engaging in conduct disloyal to AT&T” means, while employed by AT&T or any of its Subsidiaries, or within two (2) years after Participant’s Termination of Employment, (i) soliciting for employment or hire, whether as an employee or as an independent contractor, for any business in competition with an Employer Business, any person employed by AT&T or any of its Subsidiaries during the one (1) year prior to the Participant’s Termination of Employment, whether or not acceptance of such position would constitute a breach of such person’s contractual obligations to AT&T or any of its Subsidiaries; (ii) soliciting, encouraging, or inducing any vendor or supplier with which Participant had business contact on behalf of any Employer Business during the two (2) years prior to the Participant’s Termination of Employment (regardless of the reason for that termination) to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with AT&T or any of its Subsidiaries; or (iii) soliciting, encouraging, or inducing any customer or active prospective customer with whom Participant had business contact, whether in person or by other media (“Customer”), on behalf of any Employer Business during the two (2) years prior to the Participant’s Termination of Employment (regardless of the reason for that termination), to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with any Employer Business, or to purchase competing goods or services from a business competing with any Employer Business, or accepting or servicing business from such Customer on behalf of himself or any other business.  “Engaging in conduct disloyal to AT&T” shall also mean, disclosing Confidential Information to any third party or using Confidential Information, other than for an Employer Business, or failing to return any Confidential Information to the Employer Business following termination of employment.
 
 (iv) “Confidential Information” shall mean all information belonging to, or otherwise relating to, an Employer Business, which is not generally known, regardless of the manner in which it is stored or conveyed to Participant, and which the Employer Business has taken reasonable measures under the circumstances to protect from unauthorized use or disclosure.  Confidential Information includes trade secrets as well as other proprietary knowledge, information, know-how, and non-public intellectual property rights, including unpublished or pending patent applications and all related patent rights, formulae, processes, discoveries, improvements, ideas, conceptions, compilations of data, and data, whether or not patentable or copyrightable and whether or not it has been conceived, originated, discovered, or developed in whole or in part by Participant.  For example, Confidential Information includes, but is not limited to, information concerning the Employer Business’ business plans, budgets, operations, products, strategies, marketing, sales, inventions, designs, costs, legal strategies, finances, employees, customers, prospective customers, licensees, or licensors; information received from third parties under confidential conditions; or other valuable financial, commercial, business, technical or marketing information concerning the Employer Business, or any of the products or services made, developed or sold by the Employer Business.  Confidential Information does not include information that (i) was generally known to the public at the time of disclosure; (ii) was lawfully received by Participant from a third party; (iii) was known to Participant prior to receipt from the Employer Business; or (iv) was independently developed by Participant or independent third parties; in each of the foregoing circumstances, this exception applies only if such public knowledge or possession by an independent third party was without breach by Participant or any third party of any obligation of confidentiality or non-use, including but not limited to the obligations and restrictions set forth in this Plan.
 
(c) Equitable Relief.  The parties recognize that any Participant’s breach of any of the covenants in this section will cause irreparable injury to the AT&T, will represent a failure of the consideration under which AT&T (in its capacity as creator and sponsor of the Plan) agreed to provide the Participant with the opportunity to receive Plan benefits, and that monetary damages would not provide AT&T with an adequate or complete remedy that would warrant AT&T’s continued sponsorship of the Plan (including the accrual or granting of Share Units, Matching Share Units and Options) for all Participants.  Accordingly, in the event of a Participant’s actual or threatened breach of the covenants in this section, the Committee, in addition to all other rights and acting as a fiduciary under ERISA on behalf of all Participants, shall have a fiduciary duty (in order to assure that AT&T receives fair and promised consideration for its continued Plan sponsorship and funding) to seek an injunction restraining the Participant from breaching the covenants in this Section.  AT&T shall pay for any Plan expenses that the Committee incurs hereunder, and shall be entitled to recover from the Participant its reasonable attorneys’ fees and costs incurred in obtaining such injunctive remedies.
 
(d) Uniform Enforcement.  In recognition of AT&T’s need for nationally uniform standards for the Plan administration, it is an absolute condition in consideration of any Participant’s ability to make Employee Contribution elections under Section 4.1 of this Plan after September 1, 2009, that each and all of the following conditions apply to all such electing Participants:
 
(i) ERISA shall control all issues and controversies hereunder, and the Committee shall serve for purposes hereof as a “fiduciary” of the Plan and its “named fiduciary” within the meaning of ERISA.
 
(ii) All litigation between the parties relating to this section shall occur in federal court, which shall have exclusive jurisdiction; any such litigation shall be held in the United States District Court for the Northern District of Texas, and the only remedies available with respect to the Plan shall be those provided under ERISA.
 
8.3           Elections and Notices.
 
Notwithstanding anything to the contrary contained in this Plan, all elections and notices of every kind under this Plan shall be made on forms prepared by AT&T or the General Counsel, Secretary or Assistant Secretary, or their respective delegates or shall be made in such other manner as permitted or required by AT&T or the General Counsel, Secretary or Assistant Secretary, or their respective delegates, including through electronic means, over the Internet or otherwise.  An election shall be deemed made when received by AT&T (or its designated agent, but only in cases where the designated agent has been appointed for the purpose of receiving such election), which may waive any defects in form.  Unless made irrevocable by the electing person, each election with regard to making Employee Contributions or distributions of Cash Deferral Accounts shall become irrevocable at the close of business on the last day to make such election.  AT&T may limit the time an election may be made in advance of any deadline.
 
If not otherwise specified by this Plan or AT&T, any notice or filing required or permitted to be given to AT&T under the Plan shall be delivered to the principal office of AT&T, directed to the attention of the Senior Executive Vice President in charge of Human Resources for AT&T or his or her successor.  Such notice shall be deemed given on the date of delivery.
 
Notice to the Participant shall be deemed given when mailed (or sent by telecopy) to the Participant’s work or home address as shown on the records of AT&T or, at the option of AT&T, to the Participant’s e-mail address as shown on the records of AT&T.  It is the Participant’s responsibility to ensure that the Participant’s addresses are kept up to date on the records of AT&T.  In the case of notices affecting multiple Participants, the notices may be given by general distribution at the Participants’ work locations.
 
By participating in the Plan, each Participant agrees that AT&T may provide any documents required or permitted under the Federal or state securities laws, including but not limited to the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, by e-mail, by e-mail attachment, or by notice by e-mail of electronic delivery through AT&T’s Internet Web site or by other electronic means.
 
8.4           Unsecured General Creditor.
 
Participants and their beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, interest, or claims in any property or assets of any Employer.  No assets of any Employer shall be held under any trust for the benefit of Participants, their beneficiaries, heirs, successors, or assigns, or held in any way as collateral security for the fulfilling of the obligations of any Employer under this Plan.  Any and all of each Employer’s assets shall be, and remain, the general, unpledged, unrestricted assets of such Employer.  The only obligation of an Employer under the Plan shall be merely that of an unfunded and unsecured promise of AT&T to make distributions under and in accordance with the terms of the Plan.
 
8.5           Non-Assignability.
 
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, any Cash Deferral Account under the Plan, if any, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable.  No part of  a distributable Cash Deferral Account shall, prior to actual distribution, 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.
 
8.6           Employment Not Guaranteed.
 
Nothing contained in this Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any employee any right to be retained in the employ of an Employer or to serve as a director.
 
8.7           Errors.
 
At any time AT&T or an Employer may correct any error made under the Plan without prejudice to AT&T or any Employer.  Neither AT&T nor any Employer shall be liable for any damages resulting from failure to timely allow any contribution to be made to the Plan or for any damages resulting from the correction of, or a delay in correcting, any error made under the Plan.  In no event shall AT&T or any Employer be liable for consequential or incidental damages arising out of a failure to comply with the terms of the Plan.
 
8.8           Captions.
 
The captions of the articles, sections, and paragraphs of this Plan are for convenience only and shall not control nor affect the meaning or construction of any of its provisions.
 
8.9           Governing Law.
 
To the extent not preempted by Federal law, the Plan, and all benefits and agreements hereunder, and any and all disputes in connection therewith, shall be governed by and construed in accordance with the substantive laws of the State of Texas, without regard to conflict or choice of law principles which might otherwise refer the construction, interpretation or enforceability of this Plan to the substantive law of another jurisdiction.
 
Because benefits under the Plan are granted in Texas, records relating to the Plan and benefits thereunder are located in Texas, and the Plan and benefits thereunder are administered in Texas, AT&T and the Participant under this Plan, for themselves and their successors and assigns, irrevocably submit to the exclusive and sole jurisdiction and venue of the state or Federal courts of Texas with respect to any and all disputes arising out of or relating to this Plan, the subject matter of this Plan or any benefits under this Plan, including but not limited to any disputes arising out of or relating to the interpretation and enforceability of any benefits or the terms and conditions of this Plan.  To achieve certainty regarding the appropriate forum in which to prosecute and defend actions arising out of or relating to this Plan, and to ensure consistency in application and interpretation of the Governing Law to the Plan, the parties agree that (a) sole and exclusive appropriate venue for any such action shall be an appropriate Federal or state court in Dallas County, Texas, and no other, (b) all claims with respect to any such action shall be heard and determined exclusively in such Texas court, and no other, (c) such Texas court shall have sole and exclusive jurisdiction over the person of such parties and over the subject matter of any dispute relating hereto and (d) that the parties waive any and all objections and defenses to bringing any such action before such Texas court, including but not limited to those relating to lack of personal jurisdiction, improper venue or forum non conveniens.
 
8.10           Plan to Comply with Section 409A.
 
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.  Notwithstanding any provision to the contrary in this Plan, each provision in this Plan shall be interpreted to permit the deferral of compensation in accordance with Section 409A of the Code and any provision that would conflict with such requirements shall not be valid or enforceable.
 
8.11           Successors and Assigns.
 
This Plan shall be binding upon AT&T and its successors and assigns.
 

 

 
ex10t.htm
Exhibit 10-t


AT&T INC.
CHANGE IN CONTROL SEVERANCE PLAN

Effective February 1, 2013


Article 1- Purpose

The purpose of the AT&T Inc. Change in Control Severance Plan (the “Plan”) is to foster the continuous employment of key management personnel of the Company and its Subsidiaries and to reinforce and encourage their continued attention and dedication to their duties in the face of potentially disturbing circumstances arising from the possibility of a Change in Control (as defined in Article 2) of the Company, although no such change is now apparent or contemplated.

Article 2- Definitions
 
As used in this Plan, the following terms shall have the respective meanings set forth below, and, when the meaning is intended, the initial letter of the word is capitalized:
 
Base Salary” means the Participant’s annual rate of base salary in effect immediately prior to the occurrence of the circumstance giving rise to the Participant’s Termination of Employment, or, if greater, the Participant’s annual rate of base salary in effect immediately prior to the Change in Control.
 
Board” means the Board of Directors of the Company and, after a Change in Control, the “board of directors” of the Ultimate Parent (as defined below under Change in Control).
 
Bonus Amount” means a Participant’s target annual bonus for the fiscal year in which the Change in Control occurs or in which Participant’s Date of Termination occurs, whichever is greater; provided that, if a target annual bonus has not been established for the applicable fiscal year, then the target annual bonus established for the preceding fiscal year shall be substituted in lieu thereof.
 
Cause” means (i) the willful and continued failure by a Participant to substantially perform his or her duties with the Company and its Subsidiaries (other than any such failure resulting from his or her incapacity due to physical or mental impairment, or any such actual or anticipated failure after the issuance of a notice of termination by him or her for Good Reason) after a written demand for substantial performance is delivered to the Participant by the Company which demand specifically identifies the manner in which the Company believes that he or she has not substantially performed his or her duties, or (ii) the willful engaging by a Participant in conduct which is demonstrably and materially injurious to the Company or any Subsidiary, monetarily or otherwise.  For purposes of this definition, no act, or failure to act, on a Participant’s part shall be deemed “willful” unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Company and its Subsidiaries.  Notwithstanding the foregoing, a Participant shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him or her 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 Board at a meeting of the Board called and held for such purpose (after reasonable notice to the Participant and an opportunity for him or her, together with counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Participant was guilty of the conduct set forth above in clauses (i) or (ii) of the first sentence of this definition and specifying the particulars thereof in detail.
 
Change in Control” shall be deemed to have occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the shareowners of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the total voting power represented by the Company’s then outstanding voting securities, or (ii) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors and any new Director whose election by the Board of Directors or nomination for election by the Company’s shareowners was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation (such post-merger surviving entity the “Ultimate Parent”), or the shareowners of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company’s assets.
 
Committee” means the Human Resources Committee of the Board.
 
Company” means AT&T Inc.
 
Date of Termination” means the date of the Participant's Termination of Employment with the Company and its Subsidiaries as determined under Section 4.1 of the Plan.
 
Disability” has the meaning ascribed under the relevant Employer’s long-term disability plan.
 
Employee” means any person employed as an employee by an Employer and paid on an Employer’s employee payroll system, excluding persons hired for a fixed maximum term and excluding persons who are neither citizens nor permanent residents of the United States, all as determined by the Employer.  For purposes of this Plan, a person on a Leave of Absence who otherwise would be an Employee shall be deemed to be an Employee.
 
Employer” means the Company or any of its Subsidiaries provided that, if an entity ceases to be a Subsidiary during the Termination Period, such entity shall continue to be an Employer and the Employee shall continue to be a Participant until the second anniversary of the Change in Control and, notwithstanding any other provision to the contrary, any benefits under the Plan shall be paid or provided by the Company.
 
Exchange Act” means the Securities Exchange Act of 1934.
 
Executive Officer” means a person who has been identified by the Company as an executive officer under Rule 3b-7 of the Securities Exchange Act of 1934 prior to a Change in Control.
 
Good Reason” means, without the Participant’s express written consent, the occurrence of any of the following events after a Change in Control:  (i) the assignment to the Participant of any duties inconsistent with his or her title(s) or status immediately prior to the Change in Control, or a substantial adverse alteration in the nature or status of his or her responsibilities from those in effect immediately prior to the Change in Control; (ii) a reduction in the Participant’s annual base salary, target short-term or long term incentive award opportunity (including any current payments that may be made thereunder, such as the payment of dividend equivalents) as in effect immediately prior to the Change in Control, except for across-the-board salary reductions similarly affecting all officers of the Company and its Subsidiaries and all managers in equivalent positions of any person in control of the Company; (iii) the failure to pay to the Participant any portion of his or her current compensation or deferred compensation under any compensation or benefit program within seven (7) days of the date such payment is due; (iv)  the failure to continue to provide the Participant with benefits substantially similar to those enjoyed by him or her under the pension, life insurance, medical, health, accident and disability plans, or any fringe benefit material to the Participant that he or she was eligible for at the time of the Change in Control; the direct or indirect material reduction in any of such benefits; or the failure to provide the Participant with the number of paid vacation days to which he or she is entitled on the basis of his or her duration of service with the Company and its Subsidiaries, in accordance with the Employer's normal vacation policy in effect immediately prior to the Change in Control; (v) the failure to obtain a satisfactory agreement from any successor to assume and agree to perform this Plan, as contemplated in Article 7; or (vi) any purported termination of the Participant’s employment after a Change in Control which is not effected pursuant to a notice of termination satisfying the requirements of Sections 4.1 and 8.1 (for purposes of this Plan, no such purported termination shall be effective).
 
An isolated, insubstantial and inadvertent action taken in good faith implicating clauses (i), (iv), (v) or (vi) of this definition which is fully corrected by the Company prior to the Date of Termination specified in the notice of termination shall not constitute Good Reason.  A Participant’s right to terminate his or her employment for Good Reason shall not be affected by his or her incapacity due to physical or mental impairment.  A Participant’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder.
 
Leave of Absence shall mean when a Participant is absent from employment with an Employer on a leave of absence, military leave, or sick leave, where the leave is given in order to prevent a break in the continuity of term of employment, and permission for such leave is granted (and not revoked) in conformity with the rules of the Employer that employs the individual, as adopted from time to time and the Employee is reasonably expected to return to service.  Except as set forth below, the leave shall not exceed six (6) months for purposes of this Plan, and the Employee shall incur a Termination of Employment upon cessation of such leave if the Employee does not return to work prior to that time, unless the individual retains a right to reemployment under law or by contract.  A twenty-nine (29) month limitation shall apply in lieu of such six (6) month limitation if the leave is due to the Employee being "disabled" (within the meaning of Treasury Regulation §1.409A-3(i)(4)), and the Employee shall incur a Termination of Employment upon cessation of such leave.  A Leave of Absence shall not commence or shall be deemed to cease under the Plan where the Employee has incurred a Termination of Employment.
 
Officer Level Employee” means any Executive Officer and any Employee who is an “officer level” Employee for compensation purposes as shown on the records of the Company and its Subsidiaries.
 
Participant” means the CEO, each Officer Level Employee who had in effect on September 28, 2006 a Severance Benefits – Change in Control Agreement with the Company, and each other Officer Level Employee (i) who is designated from time to time in writing by the CEO and (ii) whose designation is evidenced in writing by a notification of participation to the Employee signed by the CEO.  A person shall cease to be a Participant upon (a) the Participant’s Termination of Employment prior to a Potential Change in Control or (b) the Board, the Committee or the CEO determining, in their sole discretion, that the person shall cease to qualify for benefits under this Plan (but any such determination made in respect of a Participant shall be considered an amendment of the Plan adverse to the interests of the affected Participant and is subject to the provisions of Section 8.5).  Notwithstanding the foregoing, only the Committee shall have the authority to exclude from participation or take any other action with respect to Executive Officers.
 
Potential Change in Control” shall be deemed to have occurred if (i) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control or (ii)  the Board adopts a resolution to the effect that, for purposes of this Plan, a Potential Change in Control of the Company has occurred.
 
Qualifying Termination” means a Participant’s Termination of Employment during the Termination Period (i) by the Employer other than for Cause or (ii) by the Participant for Good Reason.  Termination of Employment on account of death, Disability or Retirement shall not be treated as a Qualifying Termination.
 
Retirement” means the Participant’s mandatory retirement in accordance with the Employer’s mandatory retirement age policy, if any, for officers as in effect immediately prior to a Change in Control or in accordance with any retirement arrangement established with the Participant’s consent with respect to him or her; provided, however, that a Participant's termination for Good Reason shall not constitute Retirement.
 
Specified Employeemeans any Participant who is a “Key Employee” (as defined in Code Section 416(i) without regard to paragraph (5) thereof), as determined by the Company in accordance with its uniform policy with respect to all arrangements subject to Code Section 409A, based upon the twelve (12) month period ending on each December 31st (such twelve (12) month period is referred to below as the “identification period”).  All Participants who are determined to be key employees under Code Section 416(i) (without regard to paragraph (5) thereof) during the identification period shall be treated as Specified Employees for purposes of the Plan during the twelve (12) month period that begins on the first day of the 4th month following the close of such identification period.
 
Subsidiary” means any corporation, partnership, venture or other entity in which the Company holds, directly or indirectly, a fifty percent (50%) or greater ownership interest.  The Committee may, at its sole discretion, designate, on such terms and conditions as the Committee shall determine, any other corporation, partnership, limited liability company, venture or other entity a Subsidiary for purposes of this Plan.
 
Termination of Employment” means the event where the Participant has a “separation from service,” as defined under Section 409A, with the Employer.
 
Termination Period” means the period of time beginning with a Change in Control and ending on the second anniversary of such Change in Control.
 
Article 3- Effectiveness of the Plan
 
This Plan shall be effective as of January 1, 2007.  Nothing in this Plan shall be deemed to entitle any Participant to continued employment with any Employer, and if a Participant's employment with any Employer terminates prior to a Change in Control, the Participant shall have no rights under this Plan.
 
Article 4- Payments Upon a Qualifying Termination
 
4.1  Termination of Employment.
 
    (a)   Notice of Termination.  Any purported termination of a Participant’s employment during the Termination Period by an Employer or by a Participant shall be communicated by written notice of termination to the other party in accordance with this Section 4.1 and Section 8.1 (regarding notices).  For purposes of this Plan, a “notice of termination” shall mean a notice which shall indicate the specific termination provision in this Plan relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for the Participant’s Termination of Employment under the provision so indicated.  The failure by the Participant or the Employer to set forth in such notice any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Participant or the Employer hereunder or preclude the Participant or the Employer from asserting such fact or circumstance in enforcing the Participant’s or the Employer’s rights hereunder.
 
    (b)   Date of Termination.  If a Participant has a Qualifying Termination, the Date of Termination shall be the date specified in the notice of termination (which, in the case of a termination other than for Cause or a termination for Good Reason shall not be less than fifteen (15) nor more than sixty (60) days from the date such notice is given).  If a Participant's Termination of Employment is for Cause, the Date of Termination shall not be less than thirty (30) days from the date notice is given.  In the event of a dispute arising out of the Participant’s Termination of Employment, the Date of Termination will be determined in accordance with Section 4.1(c).
 
    (c)   Disputes Involving Termination.  If within fifteen (15) days after any notice of termination is given, or, if later, prior to the Date of Termination (as determined without regard to this provision), the party receiving such notice of termination notifies the other party that a dispute exists concerning whether the termination is a Qualifying Termination or for Cause, the Date of Termination for purposes of Section 4.2 hereof shall be the date on which the dispute is finally resolved either by mutual written agreement of the parties, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided, however, that if the dispute is not resolved prior to the end of the Termination Period, the Termination Period shall be extended so as not to deprive the Participant of the benefits under Section 4.2 in respect of such termination; provided further, that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence.  During the pendency of any such dispute (the “Dispute Period”), subject to Section 6.1, the Employer will (i) continue to pay the Participant his or her full Base Salary in accordance with the Company’s payroll practice in effect from time to time (provided that the amount paid in any calendar year shall be equal to the Participant’s annual rate of Base Salary or a proportionate fraction thereof with respect to portions of calendar years during the Dispute Period (other than amounts that are required to be paid in a subsequent calendar year pursuant to Section 6.1)), and (ii) continue the Participant as a participant in all Health Benefits as described in Section 4.2(c) of the Plan (subject to Section 6.2 of the Plan) on the same basis as provided under Section 4.2(c). Amounts paid under this provision are in addition to all other amounts due under this Plan and shall not be offset against or reduce any other amounts due under this Plan.
 
4.2       Severance Payments.
 
                             If the Participant has a Qualifying Termination, then subject to Schedule B to the Plan, the Company shall or shall cause the Employer to provide to the Participant:
 
    (a)   his or her full base salary through the Date of Termination at the rate in effect at the time notice of termination is given, plus all other amounts to which he or she is entitled under any compensation plan in effect immediately prior to the Change in Control, at the time such payments are due; provided that, subject to the Participant’s execution of a Release in the form attached to this Plan as Schedule A (the “Release”) within forty-five (45) days of the Participant’s Date of Termination (and thereafter not revoking such Release), for purposes of determining the amount to which a Participant is entitled under the Financial Counseling Program, he or she shall be regarded as having retired under the terms of the program; and
 
    (b)   subject to the Participant’s execution of a Release within forty-five (45) days of the Participant’s Date of Termination (and thereafter not revoking such Release), a lump sum cash payment equal to the result of multiplying (i) the sum of (A) the Participant’s Base Salary, plus (B) the Participant’s Bonus Amount by (ii) 2.99; provided, however, that if the amount of such payment cannot be finally determined on or before such day, the Participant shall be paid an estimate, as determined in good faith by the Company of the minimum amount of such payment and the remainder of such payment (together with interest at the rate provided in section 1274(b)(2)(B) of the Internal Revenue Code of 1986, as amended (the “Code”)) as soon as the amount thereof can be determined; provided further that, in the event that the amount of the estimated payment exceeds the amount subsequently determined to have been due, such excess shall be reimbursed by the Participant, payable on the fifth (5th) day after demand by the Company (together with interest at the rate provided in section 1274(b)(2)(B) of the Code); and
 
    (c)   subject to the Participant’s execution of a Release within forty-five (45) days of the Participant’s Date of Termination (and thereafter not revoking such Release), if the Participant is not otherwise entitled to such benefits at no cost to him or her pursuant to the terms of such plans, subject to Section 6.2 of the Plan, for a thirty six (36) month period from the Date of Termination or until December 31 of the year in which the Participant reaches age sixty-five (65), whichever is the shorter period (the “Benefit Period”), life, health and dental benefits (including spouse and dependent coverage) (“Health Benefits”) substantially similar to those that he or she was receiving immediately prior to the Date of Termination and such benefits shall be provided at no cost to the Participant (or spouse and dependents), provided that, notwithstanding the foregoing, the Participant shall not be provided any Health Benefit pursuant to this Section 4.2(c) if an equivalent benefit is actually received by the Participant during the Benefit Period from another Employer following his or her Date of Termination and any such Health Benefit actually received by the Participant shall be reported by the Participant to the Company.
 
4.3  
No Duplication of Benefits.  Except as otherwise expressly provided pursuant to this Plan, this Plan shall be construed and administered in a manner which avoids duplication of compensation and benefits which may be provided under any other plan, program, policy, or other arrangement or individual contract.  In the event a Participant is covered by any other plan, program, policy, individually negotiated agreement or other arrangement, in effect as of his or her Date of Termination, that may duplicate the payments and benefits provided for in this Article 4, the Company may reduce or eliminate the duplicative benefits provided for under the Plan but solely to the extent such reduction or elimination  does not cause the Participant to be subject to penalty taxes under Section 409A.
 
4.4  
No Affect on Other Benefits.  This Plan does not abrogate any of the usual entitlements which a Participant has or will have, first, while a regular employee, and subsequently, after termination, and thus, subject to Section 4.3 of this Plan, a Participant shall be entitled to receive all benefits payable to him or her under each and every qualified plan, welfare plan and any other plan or program relating to benefits and deriving from his or her employment with the Company and it Subsidiaries, but solely in accordance with the terms and provisions thereof.
 
Article 5 – Withholding Taxes
 
The Company and its Subsidiaries may withhold from all payments due to the Participant (or his beneficiary or estate) hereunder all taxes which, by applicable federal, state, local or other law, are required to be withheld.
 
Article 6 - Certain Additional Agreements under Section 409A
 
6.1        Delay of Payment.  In the event that a payment to be made pursuant to Sections 4.1(c) or 4.2(b) or any other amounts under this Plan that constitutes non-qualified deferred compensation under Section 409A of the Code ("Section 409A") is to be made to a “Specified Employee,” such payment will be delayed for six (6) months after the Date of Termination if required in order to avoid additional tax under Section 409A and paid in a single lump sum on the first business day of the month following the end of such six (6) month period.  If a Participant who is a Specified Employee dies within six (6) months following such Termination of Employment, any such delayed payments shall not be further delayed, and shall be immediately payable within forty-five (45) days to his or her estate in accordance with the applicable provisions of this Plan.
 
6.2           Health Benefits. Health Benefits shall be provided in such a manner that such benefits (and the costs and premiums thereof) are excluded from the Participant’s income for federal income tax purposes and, if the Company reasonably determines that providing continued coverage under one or more of its health care benefit plans contemplated herein could be taxable to the Participant, the Company shall provide such benefits at the level required hereby through the purchase of individual insurance coverage; provided, if the Company reasonably determines that any portion of the Health Benefits cannot be provided through the purchase of individual insurance coverage without penalty, such portion shall be made available on a taxable basis, but the Benefit Period shall be limited to the Participant’s maximum period of continuation coverage under section 4980B of the Code.
 
6.3           Cash Payments Subject to the Participant’s execution of a Release within forty-five (45) days of the Participant’s Date of Termination (and thereafter not revoking such Release), the Company shall use its best efforts to pay, or shall use its best efforts to cause the Employer to pay, to the Participant the cash lump sum described in  Section 4.2(b) to be made, subject to Section 6.1 on the sixtieth (60th) day following the Participant’s Date of Termination.
 
6.4           No Adverse Action.  No Employer will take any action that would expose any payment or benefit to a Participant under this Plan to the additional tax imposed under Section 409A unless (i) the Employer is obligated to take the action under an agreement, plan or arrangement, (ii) a Participant requests the action, (iii) the Employer advises such Participant in writing that the action may result in the imposition of the additional tax and (iv) such Participant subsequently requests the action in a writing that acknowledges that he or she will be responsible for any effect of the action under Section 409A.
 
Article 7 - Successors; Binding Agreement
 
7.1           The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to unconditionally assume all of the obligations of the Employer hereunder.  Failure of the Company to obtain such assumption prior to the effectiveness of any such succession shall constitute Good Reason hereunder and shall entitle the Participants to compensation and other benefits in the same amount and on the same terms as the Participants would be entitled hereunder if they had a Qualifying Termination, except that for purposes of implementing the foregoing, the date on which any succession becomes effective shall be deemed the Date of Termination.
 
7.2           The benefits provided under this Plan shall inure to the benefit of and be enforceable by the Participant’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  If the Participant shall die while any amounts would be payable to the Participant hereunder had the Participant continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Plan to such person or persons appointed in writing by the Participant to receive such amounts or, if no person is so appointed, to the Participant’s estate.
 
Article 8 – Miscellaneous
 
8.1           Election and Notices.  Notwithstanding anything to the contrary contained in this Plan, all elections and notices of every kind under this Plan shall be made on forms prepared by the Company or its General Counsel, Secretary or Assistant Secretary, or their respective delegates or shall be made in such other manner as permitted or required by the Company or its General Counsel, Secretary or Assistant Secretary, or their respective delegates, including through electronic means, over the Internet or otherwise.  An election shall be deemed made when received by the Company (or its designated agent, but only in cases where the designated agent has been appointed for the purpose of receiving such election), which may waive any defects in form.
 
If not otherwise specified by this Plan or the Company, any notice or filing required or permitted to be given to the Company under the Plan shall be delivered to the principal office of the Company, directed to the attention of the Senior Executive Vice President in charge of Human Resources for the Company or his or her successor.  Such notice shall be deemed given on the date of delivery.
 
Notice to the Participant shall be deemed given when mailed (or sent by telecopy) to the Participant’s work or home address as shown on the records of the Employer or, at the option of the Company, to the Participant’s e-mail address as shown on the records of the Employer.  It is the Participant’s responsibility to ensure that the Participant’s addresses are kept up to date on the records of the Employer.  In the case of notices affecting multiple Participants, the notices may be given by general distribution at the Participants’ work locations.
 
8.2  
        No Mitigation; Resolution of Disputes and Costs.
 
(a)         
In no event shall the Participant be obligated to seek other employment or take other action by way of mitigation of the amounts payable to the Participant under any of the provisions of this Plan and, except as provided in Section 4.2(c), such amounts shall not be reduced whether or not the Participant obtains other employment.
 
(b)        
Participants may submit claims for benefits by giving notice to the Company pursuant to Section 8.1.  If a Participant believes that he or she has not received coverage or benefits to which he or she is entitled under the Plan, the Participant may notify the Company in writing of a claim for coverage or benefits.  If the claim for coverage or benefits is denied in whole or in part, the Company shall notify the applicant in writing of such denial within thirty (30) days (which may be extended to sixty (60) days under special circumstances), with such notice setting forth: (i) the specific reasons for the denial; (ii) the Plan provisions upon which the denial is based; (iii) any additional material or information necessary for the applicant to perfect his or her claim; and (iv) the procedures for requesting a review of the denial.  Upon a denial of a claim by the Company, the Participant may:  (i) request a review of the denial by the Board or, where review authority has been so delegated, by such other person or entity as may be designated by the Board for this purpose; (ii) review any Plan documents relevant to his or her claim; and (iii) submit issues and comments to the Board or its delegate that are relevant to the review.  Any request for review must be made in writing and received by the Board or its delegate within sixty (60) days of the date the applicant received notice of the initial denial, unless special circumstances require an extension of time for processing.  The Board or its delegate will make a written ruling on the applicant’s request for review setting forth the reasons for the decision and the Plan provisions upon which the denial, if appropriate, is based.  This written ruling shall be made within thirty (30) days of the date the Board or its delegate receives the applicant’s request for review unless special circumstances require an extension of time for processing, in which case a decision will be rendered as soon as possible, but not later than sixty (60) days after receipt of the request for review.  All extensions of time permitted by this Section 8.2 will be permitted at the sole discretion of the Board or its delegate.  If the Board does not provide the Participant with written notice of the denial of his or her appeal, the Participant’s claim shall be deemed denied.
 
(c)         
Notwithstanding anything in this Plan to the contrary, any court, tribunal or arbitration panel that adjudicates any dispute, controversy or claim arising between a Participant and any Employer, or any of their delegates or successors, in respect of a Participant’s Qualifying Termination, will apply a de novo standard of review to any determinations made by such person. Such de novo standard shall apply notwithstanding the grant of full discretion hereunder to any such person or characterization of any such decision by such person as final, binding or conclusive on any party.
 
(d)        
If any contest or dispute shall arise under this Plan involving a Participant’s Termination of Employment or involving the failure or refusal of any Employer to perform fully in accordance with the terms hereof, the Company shall or shall cause the Employer to reimburse the Participant on a current basis for all reasonable legal fees and related expenses, if any, incurred by the Participant at any time from the Effective Date of this Plan through the Participant’s remaining lifetime (or, if longer, through the 20th anniversary of the Change in Control) in connection with such contest or dispute (regardless of the result thereof), together with interest at the rate provided in section 1274(b)(2)(B) of the Code, such interest to accrue thirty (30) days from the date the Company receives the Participant’s statement for such fees and expenses through the date of payment thereof, regardless of whether or not the Participant’s claim is upheld by a court of competent jurisdiction or an arbitration panel; provided, however, that the Participant shall be required to repay immediately any such amounts to the Employer to the extent that a court or an arbitration panel issues a final and non-appealable order setting forth the determination that the position taken by the Participant was frivolous or advanced by the Participant in bad faith. To comply with Section 409A, in no event shall the payments by the Employer under this Section 8.2(d) be made later than the end of the calendar year next following the calendar year in which such fees and expenses were incurred, provided, that the Participant shall have submitted an invoice for such fees and expenses at least ten (10) days before the end of the calendar year next following the calendar year in which such fees and expenses were incurred.  The amount of such legal fees and expenses that the Employer is obligated to pay in any given calendar year shall not affect the legal fees and expenses that the Employer is obligated to pay in any other calendar year, and the Participant’s right to have the Employer pay such legal fees and expenses may not be liquidated or exchanged for any other benefit.
 
8.3   Survival.  The respective obligations and benefits afforded to the Company and the Participant as provided in Articles 4 (to the extent that payments or benefits are owed as a result of a Qualifying Termination that occurs during the term of this Plan), 5, 6, 7 and 8 shall survive the termination of this Plan.
 
8.4   Governing Law; Validity. To the extent not preempted by Federal law, the Plan, and all benefits and agreements hereunder, and any and all disputes in connection therewith, shall be governed by and construed in accordance with the substantive laws of the State of Delaware, without regard to conflict or choice of law principles which might otherwise refer the construction, interpretation or enforceability of this Plan to the substantive law of another jurisdiction.
 
8.5   Amendment and Termination.  The Board or the Committee may amend (and, by amendment, terminate) this Plan at any time; provided, however, that (i) no amendment that reduces or eliminates any benefit or other entitlement of any Participant or that is otherwise adverse to the interests of a Participant (an “Adverse Amendment”) may take effect prior to the beginning of any calendar year, and any such amendment shall be void and of no effect, unless the Participant was notified of such amendment by September 30 of the prior year, (ii) no Adverse Amendment may be adopted during the period of time beginning on a Potential Change in Control and ending on the earlier of (a) the termination of the agreement that constituted the Potential Change in Control and (b) the second anniversary of the resulting Change in Control, without the Participant’s written consent, and (iii) no Adverse Amendment may be adopted during the period commencing on a Change in Control and ending on the second anniversary of the Change in Control without the Participant’s written consent. The restrictions on amendments set forth in the prior sentence shall not apply to any amendment adopted within the period specified in clauses (ii) or (iii), above, if the following three conditions are satisfied: (1) the amendments do not take effect until the expiration of the periods, as applicable, set forth in such clauses, (2) each adversely affected Participant receives written notice of the adoption of such amendments within ten (10) days of such adoption and (3) such written notice is provided at least ninety (90) days prior to such amendments taking effect.
 
8.6   Interpretation and Administration.  The Plan shall be administered by the Board.  The Board may delegate any of its powers under the Plan to a committee thereof or prior to a Change in Control, to the CEO.  Unless otherwise provided in this Plan, actions of the Board or such committee shall be taken by a majority vote of its members.  All references to the “Board” herein shall be deemed to be references to such delegate, as appropriate.  The Board shall have the authority (i) to exercise all of the powers granted to it under the Plan, (ii) to construe, interpret and implement the Plan, (iii) to prescribe, amend and rescind rules and regulations relating to the Plan, (iv) to make all determinations necessary or advisable in administration of the Plan and (v) to correct any defect, supply any omission and reconcile any inconsistency in the Plan.
 
8.7   Type of Plan.  This Plan is intended to be, and shall be interpreted (a) as an unfunded employee welfare plan under Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and Section 2520.104-24 of the Department of Labor Regulations, maintained primarily for the purpose of providing employee welfare benefits, to the extent that it provides welfare benefits, and under Sections 201, 301 and 401 of ERISA, as a plan that is unfunded and maintained primarily for the purpose of providing deferred compensation, to the extent that it provides such compensation, in each case for a select group of management or highly compensated employees and (b) to comply with the requirements of Section 409A of the Code.
 
8.8          Nonassignability.  Benefits under the Plan may not be sold, assigned, transferred, pledged, anticipated, mortgaged, or otherwise encumbered, transferred, hypothecated, or conveyed in advance of actual receipt of the amounts, if any, payable hereunder, or any part thereof by the Participant.
 

 
 

 

Schedule A
 
RELEASE AND WAIVER
 
I, ________________, hereby fully waive and forever release and discharge Company, AT&T, any and all other subsidiaries of Company and of AT&T, their officers, directors, agents, servants, employees, successors and assigns and any and all employee benefit plans maintained by AT&T or any subsidiary thereof and/or any and all fiduciaries of any such plan from any and all common law and/or statutory claims, causes of action or suits of any kind whatsoever arising from or in connection with my past employment by Company (and any AT&T subsidiary to the extent applicable) and/or my separation therefrom, including but not limited to claims, actions, causes of action or suits of any kind allegedly arising under the Employee Retirement Income Security Act (ERISA), as amended, 29 USC §§ 1001 et seq.; the Rehabilitation Act of 1973, as amended, 29 USC §§ 701 et seq.; the Civil Rights Acts of 1866 and 1870, as amended, 42 USC §§ 1981, 1982 and 1988; the Civil Rights Act of 1871, as amended, 42 USC §§ 1983 and 1985; the Civil Rights Act of 1964, as amended, 42 USC § 2000d et seq.; the Americans With Disabilities Act, as amended, 42 USC §§ 12101 et seq., and the Age Discrimination in Employment Act of 1967 (ADEA), as amended, 29 USC §§ 621 et seq., known and unknown. In addition, I, ___________, agree not to file any lawsuit or other claim seeking monetary damage or other relief in any state or federal court or with any administrative agency against any of the aforementioned parties in connection with or relating to any of the aforementioned matters. Provided, however, by executing this Release and Waiver, I, ________________, do not waive rights or claims that may arise after the date of execution; provided further, however, this Release and Waiver shall not affect my right to receive or enforce through litigation, any indemnification rights to which I am entitled as a result of my past employment by the Company or contract rights pursuant to the Agreement and Release and Waiver of Claims entered into contemporaneously herewith and, if applicable, any subsidiary of AT&T; and, provided further, this Release and Waiver shall not affect the ordinary distribution of benefits/entitlements, if any, to which I am entitled upon termination from Company; it being understood by me that said benefits/entitlements, if any, will be subject to and provided in accordance with the terms and conditions of their respective governing plan and this Agreement.
 
 
 
 

 
 
 
 

 

Schedule B
 
Limitation on Payments Under Certain Circumstances
(a)           The following terms shall have the meanings set forth below for purposes of this Schedule B to the Plan:

Accounting Firm” shall mean a nationally recognized certified public accounting firm that is selected by the Company for purposes of making the applicable determinations hereunder and is reasonably acceptable to the Participant, which firm shall not, without the Participant’s consent, be a firm serving as accountant or auditor for the individual entity or group effecting the Change in Control.

Excise Tax” means the excise tax imposed by Section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax.

Net After-Tax Receipt” shall mean the present value (as determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) of a Payment net of all taxes imposed on the Participant with respect thereto under Sections 1 and 4999 of the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws which applied to the Participant’s taxable income for the immediately preceding taxable year, or such other rate(s) as the Accounting Firm determined to be likely to apply to the Participant in the relevant tax year(s).

Parachute Value” of a Payment means the present value as of the date of the change in control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2) of the Code, as determined by the Accounting Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.

Payment” means any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Participant, whether paid or payable pursuant to this Plan or otherwise.

Plan Payment” has the meaning set forth in Paragraph (b) of this Schedule B.

Safe Harbor Amount” means (x) 3.0 times the Participant’s “base amount,” within the meaning of Section 280G(b)(3) of the Code, minus (y) $1.00.

Underpayment” has the meaning set forth in Paragraph (d) of this Schedule B,

(b)           Notwithstanding any provision of the Plan to the contrary, in the event an Accounting Firm shall determine that receipt of all Payments would subject the Participant to the excise tax under Section 4999 of the Code, the Accounting Firm shall determine whether to reduce any of the Payments paid or payable pursuant to this Plan (the “Plan Payments”) so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount. The Plan Payments shall be so reduced only if the Accounting Firm determines that the Participant would have a greater “Net After-Tax Receipt” of aggregate Payments if the Plan Payments were so reduced.  If the Accounting Firm determines that the Participant would not have a greater “Net After-Tax Receipt” of aggregate Payments if the Plan Payments were so reduced, the Participant shall receive all Plan Payments to which the Participant is entitled hereunder.

(c)           If the Accounting Firm determines in accordance with Paragraph (b) of this Schedule B that the aggregate Plan Payments should be reduced so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount, the Company shall promptly give the Participant notice to that effect and a copy of the detailed calculation thereof. All determinations made by the Accounting Firm under this Schedule B shall be binding upon the Company and the Participant and shall be made as soon as reasonably practicable and in no event later than fifteen (15) days following the Date of Termination. For purposes of reducing the Plan Payments so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount, only amounts payable under this Plan (and no other Payments) shall be reduced.  The reduction of the Plan Payments, if applicable, shall be made by reducing the payments and benefits under the following sections in the following order: (1) any Plan Payments under Section 4.1(c), (2) any Plan Payments under Section 4.2(b), and (3) any Plan Payments under Section 6.2.  All fees and expenses of the Accounting Firm shall be borne solely by the Company.

(d)           As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to or for the benefit of the Participant pursuant to this Plan which should have not been so paid or distributed (“Overpayment”) or that additional amounts which will have not been paid or distributed by the Company to or for the benefit of the Participant pursuant to this Plan could have been so paid or distributed (“Underpayment”), in each case, consistent with the calculation of the Safe Harbor Amount hereunder.  In the event that the Accounting Firm, based upon the assertion of the deficiency by the Internal Revenue Service against either the Company or the Participant which the Accounting Firm believes has a high probability of success, determines that an Overpayment has been made, the Participant shall pay promptly (and in no event later than sixty (60) days following the date on which the Overpayment is determined) pay any such Overpayment to the Company together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no amount shall be payable by the Participant to the Company if and to the extent such payment would not either reduce the amount on which the Participant is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or substantial authority, determines that the Underpayment has occurred, any such Underpayment shall be paid promptly (and in no event later than sixty (60) days following the date on which the Underpayment is determined) by the Company to or for the benefit of the Participant together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.

(e)           To the extent requested by the Participant, the Company shall cooperate with the Participant in good faith in valuing, and the Accounting Firm shall take into account the value of, services provided or to be provided by the Participant (including without limitation, the Participant’s agreeing to refrain from performing services pursuant to a covenant not to compete or similar covenant) before, on or after the date of a change in ownership or control of the Company (within the meaning of Q&A-2(b) of the final regulations under Section 280G of the Code), such Payments in respect of such services may be considered reasonable compensation within the meaning of Q&A-9 and Q&A-40 to Q&A-44 of the final regulations under Section 280G of the Code and/or exempt from the definition of the term “parachute payment” within the meaning of Q&A-2(a) of the final regulations under Section 280G of the Code in accordance with Q&A-5(a) of the final regulations under Section 280G of the Code.




ex10w.htm
Exhibit 10-w
 


 

Administrative Plan
 

Effective January 31, 2013


The benefits under this Plan are offered by AT&T Inc. (“AT&T”) to persons who have been identified by AT&T as executive officers of AT&T under Rule 3b-7 of the Securities Exchange Act of 1934 (“Executive Officers”).

 
Administration of Plan.  The Plan or the benefits hereunder may be modified or terminated by the Human Resources Committee in its sole discretion at any time.
 
Except to the extent otherwise provided herein, the Vice President responsible for Human Resources (or the successor to such position) shall be the Administrator of the Plan and will administer the Plan, interpret, construe and apply its provisions in accordance with its terms.  The Administrator, in his or her sole discretion, may establish, adopt or revise rules, as he or she may deem necessary or advisable for the administration of the Plan, including the allocation or limitation of benefits.
 
The Administrator may adopt another plan or plans, not to exceed the benefits included herein, for the benefit of non Executive Officer employees or former employees of AT&T and/or its subsidiaries, as the Administrator may determine in his or her sole discretion and on such terms and conditions as the Administrator shall determine.  In addition, the Administrator may provide current or former non Executive Officer employees with:
 
(a) an amount equal to that necessary to offset the Federal, state and local income taxes, as well as associated employment taxes, of the recipient (including taxes on tax reimbursements) resulting from the benefits in such plan or plans, other than (1) the monthly automobile allowance, and (2) personal use of aircraft; and/or
 
(b) social club and country club memberships as approved by the CEO or the Administrator (without the limits otherwise provided in this Plan).
 
The benefit under (a), above, shall also apply to Executive Officers who retired prior to 2010.  The Administrator may, from time to time, revise the plan solely to increase the financial limits on benefits, not to exceed the corresponding proportional increase in the consumer price index from January 1, 2003, through the date of change.
 
All decisions of the Administrator shall be final and binding unless the Board of Directors or its delegate should determine otherwise.
 
No Employment Rights.  Nothing herein shall constitute a contract of continuing employment or in any manner obligate AT&T or any Executive Officer to continue the employment relationship of, or obligate an Executive Officer to continue in the service of AT&T or any Affiliate.
 
Non-Transferability.  No recipient of benefits under this Plan nor any other person shall have any right to sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey any of the benefits hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable.
 
Notice.  Any notice required or permitted to be given to the Administrator 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 Senior Executive Vice President-Human Resources.  Any notice required or permitted to be given to any other person shall be sufficient if in writing and hand delivered, or sent by certified mail, to the person at the person's last known mailing address as reflected on the records of his or her employing company.  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.
 
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.
 
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").
 
Automobile.  Each Executive Officer may receive the use of a four-door automobile or an automobile allowance and expenses associated with the operation of the automobile.  The Administrator shall determine the amount of the allowance for each Executive Officer provided that the allowance shall not exceed $2,000 per month.
 
Communications.  Each Executive Officer may receive reasonable communications services including local, long distance, Internet, wireless, U-verse services (where available)  and related equipment.
 
Financial Counseling.  Executive Officers may receive income tax preparation services and financial planning services from a list of designated providers not to exceed $14,000 per year.
 
Estate Planning.  Executive Officers may receive estate planning documentation services not to exceed $10,000 per year.  The Estate Planning limit restarts in the event of a company-initiated relocation to another state.
 
Annual Limits.  Expenses will be charged against the annual limits for the calendar year based on the date of the invoice.    Clubs.  Executive Officers may receive social club and country club memberships (along with transfer fees) as approved by the CEO or the Administrator.  Executive officers, but not persons other than Executive Officers, shall be limited to transferable country club memberships and shall not receive other country club fees, including dues and assessments.
 
AT&T does not reimburse for any expenses incurred in connection with a membership in a club that discriminates in its membership policies based on race, creed, gender or ethnic origin.  The Administrator shall report annually to the Human Resources Committee any changes in memberships for the Chief Executive Officer.
 
Executive Protection.  Based upon the concern for the security of Executive Officers, the need to secure their optimum availability for business purposes and to permit uninterrupted communications between them, the Executive Officers are authorized to receive home security services, and, whenever feasible, to use AT&T provided aircraft in connection with business travel.  The Chief Executive Officer may use such aircraft for personal travel.  Other Executive Officers may also use such aircraft for personal travel where the Chief Executive Officer, in his or her sole discretion, deems such personal use appropriate.
 
Except where prohibited by law, Executive Officers shall be required to reimburse the Company for the incremental cost of personal use of AT&T provided aircraft.  For Executive Officers other than the Chief Executive Officer, the Chief Executive Officer may determine, in his or her sole discretion, that such reimbursement is not required.

Retirement.  Upon the Retirement of an Executive Officer, he or she may receive up to an additional amount for financial consulting reasonably in connection with his/her Retirement, as follows:  In any given year, 1. for retirements occurring from January 1 through June 30 (inclusive), the amount will be $20,000 in the calendar year of retirement; 2. for retirements occurring from July 1 through November 30 (inclusive), the amount will be $10,000 in the calendar year of retirement and $10,000 in the immediately following calendar year; and 3. for retirements occurring from December 1 through December 31 (inclusive), the amount will be $20,000 in the year following retirement.  A Retired Executive Officer shall continue to receive the communications benefits until death and his or her survivor shall receive the communications benefit for six (6) billing cycles.  After the Retirement of an Executive Officer on or before December 31, 2009, he or she shall continue to receive the financial counseling and estate planning benefits until his or her death.  Executive Officers that retire on or after January 1, 2010 shall continue to receive the financial counseling and estate planning benefits for up to 36 months following retirement or until the end of the year following the year of death, whichever occurs earlier.  After the death of an Executive Officer or Retired Executive Officer, his or her survivor shall receive the communications benefit for 6 billing cycles and shall receive the financial counseling and estate planning benefits for the remainder of the year of death and the immediately following calendar year.  In a Retired Executive Officer’s final calendar year of eligibility, the Annual Limits shall be pro-rated on a monthly basis, based on the number of full or partial months the Retired Executive Officer worked in the calendar year of Retirement divided by twelve (12).
 
Loyalty Conditions.
 
This Section applies to Executive Officers who are actively employed on or after January 1, 2010.
 
Executive Officers acknowledge that no coverage and benefits would be provided under this Plan on and after January 1, 2010 but for the loyalty conditions and covenants set forth below, and that the conditions and covenants herein are a material inducement to AT&T’s willingness to sponsor the Plan and to offer Plan coverage and benefits for the Executive Officers on or after January 1, 2010.  Accordingly, as a condition of receiving coverage and any Plan benefits on or after January 1, 2010, each Executive Officer is deemed to agree that he shall not, without obtaining the written consent of AT&T in advance, participate in activities that constitute engaging in competition with AT&T or engaging in conduct disloyal to AT&T, as those terms are defined in this Section.  Further, notwithstanding any other provision of this Plan, all coverage and benefits under this Plan on and after January 1, 2010 with respect to an Executive Officer and his or her Dependents shall be subject in their entirety to the enforcement provisions below if the Executive Officer, without the Administrator’s consent participates in an activity that constitutes engaging in competition with AT&T or engaging in conduct disloyal to AT&T, as defined below.
 
Definitions.  For purposes of this Section and of the Plan generally:
 
an “Employer Business” shall mean AT&T, any subsidiary, or any business in which AT&T or a subsidiary or an affiliated company of AT&T has a substantial ownership or joint venture interest;
 
“engaging in competition with AT&T” shall mean, while employed by an Employer Business or within two (2) years after the Executive Officer’s termination of employment, engaging by the Executive Officer in any business or activity in all or any portion of the same geographical market where the same or substantially similar business or activity is being carried on by an Employer Business.  “Engaging in competition with AT&T” shall not include owning a nonsubstantial publicly traded interest as a shareholder in a business that competes with an Employer Business.  “Engaging in competition with AT&T” shall include representing or providing consulting services to, or being an employee or director of, any person or entity that is engaged in competition with any Employer Business or that takes a position adverse to any Employer Business.
 
“engaging in conduct disloyal to AT&T” means, while employed by an Employer Business or within two (2) years after the Executive Officer’s termination of employment, (i) soliciting for employment or hire, whether as an employee or as an independent contractor, for any business in competition with an Employer Business, any person employed by AT&T or its affiliates during the one (1) year prior to the termination of the Executive Officer’s employment, whether or not acceptance of such position would constitute a breach of such person’s contractual obligations to AT&T and its affiliates; (ii) soliciting, encouraging, or inducing any vendor or supplier with which the Executive Officer had business contact on behalf of any Employer Business during the two (2) years prior to the termination of the Executive Officer’s employment, for any reason to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with AT&T or its affiliate; or (iii) soliciting, encouraging, or inducing any customer or active prospective customer with whom Executive Officer had business contact, whether in person or by other media, on behalf of any Employer Business during the two (2) years prior to the termination of Executive Officer’s employment for any reason (“Customer”), to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with any Employer Business, or to purchase competing goods or services from a business competing with any Employer Business, or accepting or servicing business from such Customer on behalf of himself or any other business.  “Engaging in conduct disloyal to AT&T” also means, disclosing Confidential Information to any third party or using Confidential Information, other than for an Employer Business, or failing to return any Confidential Information to the Employer Business following termination of employment.
 
“Confidential Information” shall mean all information belonging to, or otherwise relating to, an Employer Business, which is not generally known, regardless of the manner in which it is stored or conveyed to the Executive Officer, and which the Employer Business has taken reasonable measures under the circumstances to protect from unauthorized use or disclosure.  Confidential Information includes trade secrets as well as other proprietary knowledge, information, know-how, and non-public intellectual property rights, including unpublished or pending patent applications and all related patent rights, formulae, processes, discoveries, improvements, ideas, conceptions, compilations of data, and data, whether or not patentable or copyrightable and whether or not it has been conceived, originated, discovered, or developed in whole or in part by the Executive Officer.  For example, Confidential Information includes, but is not limited to, information concerning the Employer Business’ business plans, budgets, operations, products, strategies, marketing, sales, inventions, designs, costs, legal strategies, finances, employees, customers, prospective customers, licensees, or licensors; information received from third parties under confidential conditions; or other valuable financial, commercial, business, technical or marketing information concerning the Employer Business, or any of the products or services made, developed or sold by the Employer Business.  Confidential Information does not include information that (i) was generally known to the public at the time of disclosure; (ii) was lawfully received by the Executive Officer from a third party; (iii) was known to the Executive Officer prior to receipt from the Employer Business; or (iv) was independently developed by the Executive Officer or independent third parties; in each of the foregoing circumstances, this exception applies only if such public knowledge or possession by an independent third party was without breach by the Executive Officer or any third party of any obligation of confidentiality or non-use, including but not limited to the obligations and restrictions set forth in this Plan.
 
Forfeiture of Benefits.  Coverage and benefits under this Plan shall be forfeited and shall not be provided under this Plan for any period as to which the Administrator determines that, within the time period and without the written consent specified, the Executive Officer has been either engaging in competition with AT&T or engaging in conduct disloyal to AT&T.
 
Equitable Relief.  The parties recognize that any Executive Officer’s breach of any of the covenants in this Section will cause irreparable injury to AT&T, will represent a failure of the consideration under which AT&T (in its capacity as creator and sponsor of the Plan) agreed to provide the Executive Officer with the opportunity to receive Plan coverage and benefits, and that monetary damages would not provide AT&T with an adequate or complete remedy that would warrant AT&T’s continued sponsorship of the Plan and payment of Plan benefits for all Executive Officers.  Accordingly, in the event of an Executive Officer’s actual or threatened breach of the covenants herein, the Administrator, in addition to all other rights and acting as a fiduciary under ERISA on behalf of all Executive Officers, shall have a fiduciary duty (in order to assure that AT&T receives fair and promised consideration for its continued Plan sponsorship and funding) to seek an injunction restraining the Executive Officer from breaching the covenants in this Section.  In addition, AT&T shall pay for any Plan expenses that the Administrator incurs hereunder, and shall be entitled to recover from the Executive Officer its reasonable attorneys’ fees and costs incurred in obtaining such injunctive remedies.  To enforce its repayment rights with respect to an Executive Officer, the Plan shall have a first priority, equitable lien on all Plan benefits provided to or for the Executive Officer and his or her Dependents.  In the event the Administrator succeeds in enforcing the terms of this Article through a written settlement with the Executive Officer or a court order granting an injunction hereunder, the Executive Officer shall be entitled to collect Plan benefits prospectively, if the Executive Officer is otherwise entitled to such benefits, net of any fees and costs assessed pursuant hereto (which fees and costs shall be paid to AT&T as a repayment on behalf of the Executive Officer), provided that the Executive Officer complies with said settlement or injunction.
 
Uniform Enforcement.  In recognition of AT&T’s need for nationally uniform standards for the Plan administration, it is an absolute condition in consideration of any Executive Officer’s accrual or receipt of benefits under the Plan after January 1, 2010 that each and all of the following conditions apply to all Executive Officers and to any benefits that are paid or are payable under the Plan:
 

(1)  
To the maximum extent applicable ERISA shall control all issues and controversies hereunder, and the Administrator shall serve for purposes hereof as a “fiduciary” of the Plan, and as its “named fiduciary” within the meaning of ERISA.
 
(2)  
All litigation between the parties relating to this Article shall occur in federal court, which shall have exclusive jurisdiction, any such litigation shall be held in the United States District Court for the Northern District of Texas, and the only remedies available with respect to the Plan shall be those provided under ERISA to the extent it is applicable.
 
(3)  
If the Administrator determines in its sole discretion either (I) that AT&T or its affiliate that employed the Executive Officer terminated the Executive Officer’s employment for cause, or (II) that equitable relief enforcing the Executive Officer’s covenants under this Section is either not reasonably available, not ordered by a court of competent jurisdiction, or circumvented because the Executive Officer has sued in state court, or has otherwise sought remedies not available under ERISA (to the extent applicable), then in any and all of such instances the Executive Officer shall not be entitled to collect any Plan benefits, and if any Plan benefits have been paid to the Executive Officer, the Executive Officer shall immediately repay all Plan benefits to the Plan (which shall be used to pay Plan administrative expenses or Plan benefits) upon written demand from the Administrator.
 
Furthermore, the Executive Officer shall hold AT&T and its affiliates harmless from any loss, expense, or damage that may arise from any of the conduct described in clauses (I) and (II) hereof.
 

 
ex12.htm
                             
EXHIBIT 12
AT&T INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
Dollars in Millions
 
         
       
Year Ended December 31,
 
       
2012 
 
2011 
 
2010 
 
2009 
   
2008 
Earnings:
                               
 
Income (loss) from continuing operations before income taxes
 
$
10,439 
 
$
6,716 
 
$
18,238 
 
$
18,518 
 
$
(4,572)
 
Equity in net income of affiliates included above
   
(752)
   
(784)
   
(762)
   
(734)
   
(819)
 
Fixed charges
   
4,943 
   
4,900 
   
4,786 
   
5,071 
   
4,943 
 
Distributed income of equity affiliates
   
137 
   
161 
   
161 
   
317 
   
164 
 
Interest capitalized
   
(263)
   
(162)
   
(772)
   
(740)
   
(659)
                                   
   
Earnings, as adjusted
 
$
14,504 
 
$
10,831 
 
$
21,651 
 
$
 22,432 
 
$
                                   
Fixed Charges:
                               
 
Interest expense
 
$
3,444 
 
$
3,535 
 
$
2,994 
 
$
3,368 
 
$
3,369 
 
Interest capitalized
   
263 
   
162 
   
772 
   
740 
   
659 
 
Dividends on preferred securities
   
 - 
   
 - 
   
 - 
   
 - 
   
 4 
 
Portion of rental expense representative of interest factor
   
1,236 
   
1,203 
   
1,020 
   
963 
   
911 
                                 
   
Fixed Charges
 
$
4,943 
 
$
4,900 
 
$
4,786 
 
$
5,071 
 
$
4,943 
                                   
 
Ratio of Earnings to Fixed Charges
   
2.93 
   
2.21 
   
4.52 
   
4.42 
   
-
                                   
Earnings were not sufficient to cover fixed charges in 2008. The deficit was $943.
                   

ex13.htm
Selected Financial and Operating Data
                             
Dollars in millions except per share amounts
                             
                               
At December 31 and for the year ended:
 
2012
   
2011
   
2010
   
2009
   
2008
 
Financial Data
                             
Operating revenues
  $ 127,434     $ 126,723     $ 124,280     $ 122,513     $ 123,443  
Operating expenses
  $ 114,437     $ 117,505     $ 104,707     $ 101,513     $ 125,133  
Operating income (loss)
  $ 12,997     $ 9,218     $ 19,573     $ 21,000     $ (1,690 )
Interest expense
  $ 3,444     $ 3,535     $ 2,994     $ 3,368     $ 3,369  
Equity in net income of affiliates
  $ 752     $ 784     $ 762     $ 734     $ 819  
Other income (expense) - net
  $ 134     $ 249     $ 897     $ 152