SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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 1-8607
BELLSOUTH CORPORATION
(Exact name of registrant as specified in its charter)
Georgia 58-153343
(State of Incorporation) (I.R.S. Employer
Identification Number)
1155 Peachtree Street, N. E., Atlanta, Georgia 30309-3610
(Address of principal executive offices) (Zip Code)
Registrant's telephone number 404 249-2000
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 ___
At July 31, 1996, a total of 993,967,026 common shares were
outstanding.
Table of Contents
Item Page
Part I
1. Financial Statements 3
Consolidated Statements of Income 3
Consolidated Balance Sheets 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Selected Operating Data 10
2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 12
Results of Operations 13
Volumes of Business 13
Operating Revenues 15
Operating Expenses 16
Other Income Statement Items 18
Financial Condition 18
Regulatory Developments and Competition 20
Federal Developments 20
State Developments 20
Business Developments 21
Part II
4. Submission of Matters to a Vote of Security Holders 22
6. Exhibits and Reports on Form 8-K 23
PART I - FINANCIAL INFORMATION
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Millions, Except Per Share Amounts)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
Operating Revenues:
Network and related services:
Local service $ 2,021 $ 1,793 $ 3,951 $ 3,562
Interstate access 871 806 1,780 1,601
Intrastate access 202 227 420 453
Toll 198 266 405 547
Wireless communications 691 623 1,316 1,223
Directory advertising and
publishing 367 389 685 742
Other services 270 286 604 561
Total Operating Revenues 4,620 4,390 9,161 8,689
Operating Expenses:
Cost of services and
products 1,499 1,485 2,967 2,988
Depreciation and
amortization 917 859 1,820 1,694
Selling, general and
administrative 1,016 950 2,003 1,816
Total Operating Expenses 3,432 3,294 6,790 6,498
Operating Income 1,188 1,096 2,371 2,191
Interest Expense 174 186 354 360
Gain on Sale of Paging
Business -- -- 442 --
Other Income (Expense), net 16 9 52 (2)
Income Before Income Taxes
and Extraordinary Losses 1,030 919 2,511 1,829
Provision for Income Taxes 401 362 912 725
Income Before Extraordinary
Losses 629 557 1,599 1,104
Extraordinary Loss for
Discontinuance of SFAS No.
71, net of tax -- (2,718) -- (2,718)
Extraordinary Loss on Early
Extinguishment of Debt, net
of tax -- (16) -- (16)
Net Income (Loss) $ 629 $(2,177) $ 1,599 $(1,630)
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Continued)
(Unaudited)
(In Millions, Except Per Share Amounts)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
Weighted Average Common
Shares Outstanding 994 993 994 993
Dividends Declared Per Common
Share $ .36 $ .345 $ .72 $ .69
Earnings (Loss) Per Share:
Income Before Extraordinary
Losses $ .63 $ .56 $ 1.61 $ 1.11
Extraordinary Loss for
Discontinuance of SFAS No.
71, net of tax -- (2.73) -- (2.73)
Extraordinary Loss on Early
Extinguishment of Debt, net
of tax -- (.02) -- (.02)
Earnings (Loss) Per Share $ .63 $(2.19) $ 1.61 $(1.64)
The accompanying notes are an integral part of these financial statements.
BELLSOUTH CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Millions, Except Per Share Amounts)
June 30, December 31,
1996 1995
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 1,169 $ 1,711
Temporary cash investments 35 71
Accounts receivable, net of allowance for
uncollectibles of $154 and $171 3,852 3,772
Material and supplies 434 430
Other current assets 366 521
5,856 6,505
Investments and Advances 2,601 2,418
Property, Plant and Equipment:
Property, Plant and Equipment 48,372 46,869
Accumulated Depreciation 26,999 25,777
21,373 21,092
Intangible Assets, net 1,313 1,527
Deferred Charges and Other Assets 501 338
Total Assets $ 31,644 $ 31,880
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Debt maturing within one year $ 2,047 $ 2,951
Accounts payable 1,410 1,724
Other current liabilities 2,661 2,715
6,118 7,390
Long-Term Debt 7,897 7,924
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 1,740 1,650
Unamortized investment tax credits 317 355
Other liabilities and deferred credits 2,789 2,736
4,846 4,741
Shareholders' Equity:
Common stock, $1 par value 1,009 1,007
Paid-in capital 7,691 7,619
Retained earnings 4,987 4,099
Shares held in trust (409) (374)
Guarantee of ESOP debt (495) (526)
12,783 11,825
Total Liabilities and Shareholders' Equity $ 31,644 $ 31,880
The accompanying notes are an integral part of these financial statements.
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Millions, Except Per Share Amounts)
For the Six Months
Ended June 30,
1996 1995
Cash Flows from Operating Activities:
Net income (loss) $ 1,599 $ (1,630)
Adjustments to net income (loss):
Extraordinary loss for discontinuance of SFAS
No. 71 -- 4,449
Extraordinary loss on early extinguishment of
debt -- 26
Depreciation and amortization 1,820 1,694
Gain on sale of paging business (442) --
Net losses and dividends from unconsolidated
affiliates 136 102
Provision for losses on bad debts 113 110
Deferred income taxes and unamortized
investment tax credits 68 (1,727)
Net change in accounts receivable and
other current assets (146) (218)
Net change in accounts payable and other
current liabilities (438) (524)
Net change in deferred charges and other
assets (164) 6
Net change in deferred credits and other
liabilities 99 202
Other reconciling items, net (89) 13
Net cash provided by operating activities 2,556 2,503
Cash Flows from Investing Activities:
Capital expenditures (2,185) (1,828)
Proceeds from sale of paging business 930 --
Proceeds from disposition of short-term
investments 67 112
Purchases of short-term investments (31) (146)
Investment dispositions and repayments of
advances 5 2
Investments in and advances to unconsolidated
affiliates (247) (302)
Other investing activities, net 10 (35)
Net cash used for investing activities (1,451) (2,197)
Cash Flows from Financing Activities:
Proceeds from short-term borrowings 12,649 9,261
Repayments of short-term borrowings (13,112) (9,457)
Proceeds from long-term debt 56 844
Repayments of long-term debt (527) (353)
Dividends paid (715) (694)
Other financing activities, net 2 (2)
Net cash used for financing activities (1,647) (401)
Net Decrease in Cash and Cash Equivalents (542) (95)
Cash and Cash Equivalents at Beginning of Period 1,711 606
Cash and Cash Equivalents at End of Period $ 1,169 $ 511
The accompanying notes are an integral part of these financial statements.
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In Millions, Except Per Share Amounts)
Note A -- Preparation of Interim Financial Statements
The consolidated financial statements of BellSouth Corporation
(BellSouth) have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission (SEC).
Certain amounts have been reclassified from previous presentations.
These consolidated financial statements include estimates and
assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities and
the amounts of revenues and expenses. Actual results could differ
from those estimates. In the opinion of BellSouth, these statements
include all adjustments necessary for a fair presentation of the
results of all interim periods reported herein. All adjustments
are of a normal recurring nature unless otherwise disclosed.
Certain information and footnote disclosures prepared in accordance
with generally accepted accounting principles have been either
condensed or omitted pursuant to SEC rules and regulations.
However, BellSouth believes that the disclosures made are adequate
for a fair presentation of results of operations, financial
position and cash flows. These consolidated financial statements
should be read in conjunction with the consolidated financial
statements and accompanying notes included in BellSouth's latest
annual report on Form 10-K and previous quarterly report on Form 10-
Q.
For the three and six months ended June 30, 1995, weighted
average common shares and related per share amounts have been
restated to reflect a two-for-one stock split effective in November
1995.
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(In Millions, Except Per Share Amounts)
Note B -- BellSouth Corporation Consolidated Shareholders' Equity
Number of
Shares Amount
Shares Shares Guaran-
Held Held tee of
Common in Common Paid-in Retained in ESOP
Stock Trust Stock Capital Earnings Trust Debt
(1) (1)
Balance at
December 31, 1995 1,007 (13) $1,007 $7,619 $4,099 $(374) $(526)
Net Income 1,599
Dividends declared (716)
Shares issued for:
Employee benefit
plans 1 1 16
Grantor Trusts 1 (1) 1 34 (35)
Treasury shares
purchased for
employee benefit
plans (12)
ESOP activities
and related tax
benefit 5 31
Foreign currency
translation
adjustment ______ ______ ______ 34 ________ ______ _______
Balance at June
30, 1996 1,009 (14) $1,009 $7,691 $4,987 $(409) $(495)
(1) Such shares are not considered to be outstanding for financial
reporting purposes.
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(In Millions, Except Per Share Amounts)
Note C -- Supplemental Cash Flow Information
The following supplemental information is presented in accordance
with the provisions of SFAS No. 95, "Statement of Cash Flows."
For the Six Months
Ended June 30,
1996 1995
Cash Paid For:
Income taxes $ 689 $ 696
Interest $ 373 $ 375
Noncash Investing and Financing Activities:
Shares issued to grantor trusts $ 35 $ 38
Note D -- Sale of Paging Subsidiary
In January 1996, BellSouth sold to MobileMedia Corporation its
paging subsidiary, Mobile Communications Corporation of America
(MCCA), and its two-way nationwide narrowband personal
communications services license for a total of $930. The pretax
gain on such sale was $442.
For the three- and six-month periods ended June 30, 1995,
MCCA's total operating revenues were $84 and $165, respectively.
Total operating expenses for the same periods were $74 and $147,
respectively. Total assets at December 31, 1995 were $355.
Note E -- Extraordinary Losses
Discontinuance of SFAS No. 71. In the second quarter 1995,
BellSouth Telecommunications, Inc. (BellSouth Telecommunications)
discontinued application of SFAS No. 71 and recorded a non-cash
extraordinary charge of $2,718 (net of a deferred tax benefit of
$1,731). The components of the charge included a $3,002 (after tax)
reduction of telephone plant partially offset by a $194 (after tax)
benefit for a change in the method by which BellSouth
Telecommunications reported its directory publishing revenues, a
$71 (after tax) benefit reflecting the removal of regulatory assets
and liabilities that were recorded as a result of previous actions
by regulators and a $19 (after tax) benefit for the partial
acceleration of unamortized investment tax credits associated with
the reductions in asset carrying values and in asset lives.
Early Extinguishment of Debt. In the second quarter 1995,
BellSouth Telecommunications issued $300 of Ten Year Notes, the
proceeds from which were used to redeem and refinance an
outstanding $300 Debenture issue, due August 1, 2029. As a result
of the early extinguishment of this issue, an extraordinary loss of
$16 (net of taxes of $10) was recognized in the second quarter
1995.
BELLSOUTH CORPORATION
SELECTED OPERATING DATA
(Unaudited)
Percent Change
1996 vs. 1995 vs.
1996 1995 1994
Network Access Lines in Service at June 30 (Thousands)(a):
By Type:
Residence 14,937 3.5% 3.7%
Business 6,522 8.7 7.7
Other 262 2.3 1.3
Total Access Lines 21,721 5.0 4.8
By State:
Florida 5,750 5.4 4.8
Georgia 3,701 7.1 6.2
Tennessee 2,500 4.6 4.6
North Carolina 2,155 5.2 5.7
Louisiana 2,151 3.5 3.9
Alabama 1,832 4.1 3.9
South Carolina 1,325 4.0 4.2
Mississippi 1,184 3.5 4.1
Kentucky 1,123 3.6 3.6
Total Access Lines 21,721 5.0 4.8
Percent Change for
the Periods Ended
1996 vs. 1995 vs.
1996 1995 1994
Access Minutes of Use (Millions)(a)(b):
Interstate:
Three months ended March 31 16,660 10.1% 7.7%
Three months ended June 30 16,847 8.0 8.2
Six months ended June 30 33,507 9.0 7.9
Intrastate:
Three months ended March 31 5,118 13.0 13.1
Three months ended June 30 5,235 9.3 14.7
Six months ended June 30 10,353 11.1 13.9
Total Minutes of Use:
Three months ended March 31 21,778 10.8 8.9
Three months ended June 30 22,082 8.3 9.6
Six months ended June 30 43,860 9.5 9.3
Toll Messages (Millions)(a):
Three months ended March 31 281 (24.1) (4.3)
Three months ended June 30 257 (27.0) (11.4)
Six months ended June 30 538 (25.5) (7.9)
(a) Prior period operating data are often revised at later dates
to reflect updated information. The above information reflects the
latest data available for the periods indicated.
(b) Minutes of Use are classified as either interstate or
intrastate based on the percentage interstate usage factor. This
factor is updated periodically.
BELLSOUTH CORPORATION
SELECTED OPERATING DATA (Continued)
(Unaudited)
Percent Change
1996 vs. 1995 vs.
1996 1995 1994
Cellular Customers Served at June 30 (Equity basis)(Thousands)(c):
Domestic Cellular 3,231 31.1% 36.6%
International Cellular 976 102.9 81.8
(c) Includes customers served based on BellSouth's ownership
percentage in all markets served.
For the Six
Months Ended
June 30,
1996
Ratio of Earnings to Fixed Charges (d) 7.3
(d) For the purpose of this ratio: (i) earnings have been
calculated by adding income before income taxes, gross interest
expense, such portion of rental expense representative of the
interest factor on such rentals and equity in losses from less-than-
50%-owned investments (accounted for under the equity method of
accounting) less the excess of earnings over distributions from
less-than-50%-owned investments (accounted for under the equity
method of accounting); (ii) fixed charges are comprised of gross
interest expense and such portion of rental expense representative
of the interest factor on such rentals.
BELLSOUTH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
(Dollars in Millions, Except Per Share Amounts)
Management's Discussion and Analysis of Results of Operations and
Financial Condition (MD&A) should be read in conjunction
with MD&A in BellSouth Corporation's (BellSouth)
latest annual report on Form 10-K and previous
quarterly report on Form 10-Q.
BellSouth is a holding company headquartered in Atlanta, Georgia
whose operating telephone company subsidiary, BellSouth
Telecommunications, Inc. (BellSouth Telecommunications), serves, in
the aggregate, approximately two-thirds of the population and one-
half of the territory within Alabama, Florida, Georgia, Kentucky,
Louisiana, Mississippi, North Carolina, South Carolina and
Tennessee. BellSouth Telecommunications primarily provides local
exchange and toll communications services within geographic areas,
called Local Access and Transport Areas (LATAs), and provides
network access services to enable interLATA communications using
the long-distance facilities of interexchange carriers. Through
subsidiaries, other telecommunications services and products are
provided primarily within the nine-state BellSouth
Telecommunications region. BellSouth Enterprises, Inc. (BellSouth
Enterprises), another wholly-owned subsidiary, owns businesses
providing primarily wireless and international communications
services and advertising and publishing products.
Approximately 72% and 71% of BellSouth's Total Operating Revenues
for the six-month periods ended June 30, 1996 and 1995,
respectively, were from wireline services provided by BellSouth
Telecommunications. Charges for local, access and toll services
for the six-month period ended June 30, 1996 accounted for
approximately 60%, 34% and 6%, respectively, of the wireline
revenues discussed above. Revenues from wireless communications
services and directory advertising and publishing services
accounted for approximately 14% and 7%, respectively, of Total
Operating Revenues for the six months ended June 30, 1996. The
remainder of such revenues was derived principally from other
nonregulated services provided by BellSouth Telecommunications.
RESULTS OF OPERATIONS
Per share amounts for 1995 have been restated to reflect a two-for-
one stock split effective in November 1995.
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
1996 1995 1996 1995
Income Before Extraordinary
Losses $ 629 $ 557 $ 1,599 $ 1,104
Extraordinary Loss for
Discontinuance of SFAS No.
71, net of tax -- (2,718) -- (2,718)
Extraordinary Loss on Early
Extinguishment of Debt, net
of tax -- (16) -- (16)
Net Income (Loss) $ 629 $(2,177) $ 1,599 $(1,630)
Earnings (Loss) Per Share:
Income Before Extraordinary
Losses $ .63 $ .56 $ 1.61 $ 1.11
Extraordinary Loss for
Discontinuance of SFAS No.
71, net of tax -- (2.73) -- (2.73)
Extraordinary Loss on Early
Extinguishment of Debt, net
of tax -- (.02) -- (.02)
Earnings (Loss) Per Share $ .63 $(2.19) $ 1.61 $(1.64)
For the three and six-month periods ended June 30, 1996, Income
Before Extraordinary Losses increased by $72 (12.9%) and $495
(44.8%), respectively, and Income Before Extraordinary Losses Per
Share increased $.07 (12.5%) and $.50 (45.0%), respectively. The
increase for the three-month period resulted primarily from
continued strong growth in key business volumes and expense savings
attributable to employee reductions under BellSouth
Telecommunications' restructuring and work force reduction plans.
The increase for the six-month period resulted primarily from the
$344 gain ($.35 per share) on sale of BellSouth's paging business
(see Note D to the Consolidated Financial Statements) as well as
the growth in key business volumes and expense savings previously
noted.
For a description of the second quarter 1995 extraordinary losses,
see Note E to the Consolidated Financial Statements.
Volumes of Business
The total number of access lines in service since June 30, 1995
increased by approximately 1,030,000 (5.0%) to 21,721,000, compared
to a 4.8% rate of increase for the same prior year period.
Business and residence access lines increased by 8.7% and 3.5%,
respectively, compared to growth rates of 7.7% and 3.7% in 1995.
The number of second residence lines, included in total residence
lines, increased by 237,000 (20.6%) to 1,387,000 and accounted for
approximately 47.2% and 23.0% of the overall increases in residence
access lines and total access lines, respectively, since June 30,
1995. Such second residence lines are generally used for home
office purposes, access to on-line computer services and children's
phones. The growth in all categories of access lines was primarily
attributable to continued economic improvement in the Southeast,
including increased business activity in Georgia in preparation for
the Olympics, and successful marketing programs.
Access minutes of use represent the volume of traffic carried by
interexchange carriers between LATAs, both interstate and
intrastate, using BellSouth Telecommunications' local facilities.
Total access minutes of use increased by 1,695 million (8.3%) and
3,813 million (9.5%) for the three- and six-month periods ended
June 30, 1996, respectively, compared to increases of 9.6% and 9.3%
for the same periods last year. The increase in access minutes of
use was primarily attributable to access line growth; promotions by
the interexchange carriers; and intraLATA toll competition, which
has the effect of increasing access minutes of use while reducing
toll messages carried over BellSouth Telecommunications'
facilities. The growth rate in total minutes of use continues to
be negatively impacted by competition and the migration of
interexchange carriers to categories of service (e.g., special
access) that have a fixed charge as opposed to a volume-driven
charge and to high capacity services.
Toll messages are comprised of Message Telecommunications Service
and Wide Area Telecommunications Service. For the three- and six-
month periods ended June 30, 1996, toll messages decreased by 95
million (27.0%) and 184 million (25.5%), respectively, compared to
decreases of 11.4% and 7.9% for the corresponding periods in 1995.
The decrease in 1996 was primarily attributable to the expansion of
local area calling plans (LACPs) in Florida, Georgia and North
Carolina and also to increased competition from interexchange
carriers in the intraLATA toll market. While the respective
impacts of such factors cannot be precisely quantified, BellSouth
estimates that about 70% of the decline in toll messages was
attributable to expanded LACPs and about 30% was due to increased
competition.
The expanded LACPs discussed above and future implementation of
other such plans in BellSouth Telecommunications' service region,
coupled with competition in the intraLATA toll market, will
adversely impact future toll message volumes. Expanded LACPs and
the effects of competition result in the transfer of calls from
toll to local service and access categories, respectively, but the
corresponding revenues are not generally shifted at commensurate
rates.
Domestic cellular customers (equity-weighted) increased by 767,000
(31.1%) since June 30, 1995 to 3,231,000 due to continuing high
demand for wireless services. The overall penetration rate (number
of customers as a percentage of the total population in the service
territory) increased from 6.1% at June 30, 1995 to 8.1% at June 30,
1996. Total minutes of use have also continued to increase and
average minutes of use per cellular customer have remained
essentially unchanged from second quarter 1995, with stimulation
due to promotions being substantially offset by the continuing
trend of increased penetration into lower-usage market segments.
Since June 30, 1995, the number of international cellular customers
increased by 495,000 (102.9%) to 976,000. Growth in total minutes
of use for international cellular properties remained strong due to
demand stimulated by competitive programs, enhanced services and
underdeveloped land-line service.
Operating Revenues
Total Operating Revenues increased $230 (5.2%) and $472 (5.4%) for
the three- and six-month periods ended June 30, 1996, respectively,
when compared to the corresponding 1995 periods. The components of
Total Operating Revenues were as follows:
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
1996 1995 1996 1995
Local Service $2,021 $1,793 $3,951 $3,562
Interstate Access 871 806 1,780 1,601
Intrastate Access 202 227 420 453
Toll 198 266 405 547
Wireless Communications 691 623 1,316 1,223
Directory Advertising and
Publishing 367 389 685 742
Other Services 270 286 604 561
Total Operating Revenues $4,620 $4,390 $9,161 $8,689
Local Service revenues increased $228 (12.7%) and $389 (10.9%) for
the three- and six-month periods ended June 30, 1996, respectively,
as compared to the same 1995 periods. The increases for both
periods were due primarily to 5.0% growth in access lines in
service since June 30, 1995. Also contributing were increases of
$40 and $71, for the three- and six-month periods, respectively,
due to higher customer demand for Touchstar and Custom Calling
services, and the effect of expanded LACPs.
Interstate Access revenues increased $65 (8.1%) and $179 (11.2%)
for the three- and six-month periods ended June 30, 1996,
respectively, as compared to the same prior year periods. The
increases for both periods were attributable primarily to growth in
minutes of use of 8.0% and 9.0%, respectively, and, for the six-
month period ended June 30, 1996, net rate activity, which
increased revenues by $34.
Intrastate Access revenues decreased $25 (11.0%) and $33 (7.3%) for
the three- and six-month periods ended June 30, 1996, respectively,
when compared to the corresponding 1995 periods. The decreases
were due primarily to rate reductions of $40 and $71, respectively,
compared with the same 1995 periods, partially offset by increases
attributable to growth in minutes of use of 9.3% and 11.1%,
respectively.
Toll revenues decreased $68 (25.6%) and $142 (26.0%) for the three-
and six-month periods ended June 30, 1996 when compared to the same
prior year periods. The decreases were primarily attributable to
the expansion of LACPs and increased competition, the effect of
which reduced toll messages by 27.0% and 25.5%, respectively.
Wireless Communications revenues include revenues from the
consolidated wireless communications businesses (cellular and, for
1995, paging within BellSouth Enterprises) as well as revenues from
interconnections by unaffiliated cellular carriers with BellSouth
Telecommunications' network. (BellSouth's interests in the net
income or loss of the unconsolidated wireless businesses within
BellSouth Enterprises, which are accounted for under the equity
method of accounting, are recorded in Other Income (Expense), net.)
Wireless Communications revenues increased $68 (10.9%) and $93
(7.6%) for the three- and six-month periods ended June 30, 1996,
respectively, when compared to the same periods last year. The
increases were primarily attributable to continued growth of the
customer base in domestic and international cellular markets,
partially offset by the effect of the January 1996 sale of
BellSouth's paging business. For the three- and six-month periods
ended June 30, 1995, revenues from paging services were $84 and
$165, respectively. Excluding the effects of the sale of the
paging business, Wireless Communications revenues increased 28.2%
and 24.4% for the three- and six-month periods, respectively.
Directory Advertising and Publishing revenues decreased $22 (5.7%)
and $57 (7.7%) for the three- and six-month periods ended June 30,
1996, respectively, when compared to the same prior year periods.
The decreases for both periods were due primarily to changes in the
issue dates of certain directories which decreased revenues in the
quarter and six months ended June 30, 1996 by $50 and $53,
respectively. The decrease for the six-month period was also due
to a $41 reduction resulting from the adoption of issue basis
accounting, effective in the third quarter of 1995, for all
directory revenues in connection with the discontinuance of
Statement of Financial Accounting Standards (SFAS) No. 71,
"Accounting for the Effects of Certain Types of Regulation." Both
decreases were partially offset by increased revenues attributable
to volume growth.
Other Services revenues are principally comprised of revenues from
customer premises equipment (CPE) sales and maintenance services,
billing and collection services and other nonregulated services
(primarily inside wire services) offered by BellSouth
Telecommunications. Other Services revenues decreased $16 (5.6%)
and increased $43 (7.7%) for the three- and six-month periods ended
June 30, 1996, respectively, when compared to the corresponding
1995 periods. The decrease for the quarter was primarily
attributable to the disposition of a subsidiary which performed
computer maintenance. The increase for the six-month period was
primarily attributable to incremental rate impacts related to
potential sharing under certain state regulatory plans, partially
offset by the disposition of a sudsidiary previously noted.
Operating Expenses
Total Operating Expenses increased $138 (4.2%) and $292 (4.5%) for
the three- and six-month periods ended June 30, 1996 compared to
the same periods in 1995. The components of Total Operating
Expenses were as follows:
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
1996 1995 1996 1995
Depreciation and Amortization $ 917 $ 859 $ 1,820 $ 1,694
Other Operating Expenses:
Cost of Services and
Products 1,499 1,485 2,967 2,988
Selling, General and
Administrative 1,016 950 2,003 1,816
2,515 2,435 4,970 4,804
Total Operating Expenses $ 3,432 $ 3,294 $ 6,790 $ 6,498
Depreciation and Amortization increased $58 (6.8%) and $126 (7.4%)
for the three- and six-month periods ended June 30, 1996,
respectively, compared to the same periods in 1995. The increases
were due primarily to higher levels of property, plant and
equipment since June 30, 1995, and shorter depreciable lives
subsequent to the discontinuance of SFAS No. 71. The higher levels
of property, plant and equipment resulted from continued growth in
the customer base for wireless and wireline services and continued
modernization of the networks.
Other Operating Expenses are comprised of Cost of Services and
Products and Selling, General and Administrative. Cost of Services
and Products includes employee and employee-related expenses
associated with network repair and maintenance, material and
supplies expense, cost of tangible goods sold and other expenses
associated with providing services. Selling, General and
Administrative includes expenses related to sales activities such
as salaries, commissions, benefits, travel, marketing and
advertising expenses and administrative expenses.
Other Operating Expenses increased $80 (3.3%) and $166 (3.5%) for
the three- and six-month periods ended June 30, 1996, respectively,
when compared to the corresponding 1995 periods. The increases
were primarily attributable to increased expenses of $88 and $155,
respectively, related to sustained growth in the cellular customer
base, reflecting additional marketing and operational costs
associated with higher levels of sales and expanded operations. At
BellSouth Telecommunications, Other Operating Expenses increased
$52 and $92, for the three- and six-month periods ended June 30,
1996, respectively, due principally to higher business volumes and
initiatives to effectively position the business for increased
competition, partially offset by decreases of approximately $28 and
$92, for the three- and six-month periods ended June 30, 1996,
respectively, for labor costs in the core wireline business,
including expenses for employee benefits. The decreases in such
labor costs reflect net employee reductions in BellSouth
Telecommunications' telephone operations of approximately 6,000
since June 30, 1995 primarily attributable to previously-disclosed
restructuring and work force reduction plans, partially offset by
annual compensation increases for management and represented
employees. The increases for the periods were partially offset by
the effect of the January 1996 sale of BellSouth's paging business.
For the three- and six-month periods ended June 30, 1995, Other
Operating Expenses for the paging business were $63 and $124,
respectively. Excluding the effects of the sale of the paging
business, Other Operating Expenses increased 6.0% and 6.2%,
respectively.
Other Income Statement Items
The other income statement components were as follows:
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
1996 1995 1996 1995
Interest Expense $174 $186 $354 $360
Gain on Sale of Paging
Business -- -- 442 --
Other Income (Expense), net 16 9 52 (2)
Provision for Income Taxes 401 362 912 725
Interest Expense decreased $12 (6.5%) and $6 (1.7%) for the three-
and six-month periods ended June 30, 1996, respectively, compared
to the same periods last year. The decrease for the three-month
period was primarily attributable to lower average interest rates
on borrowings due in part to refinancings during 1995, partially
offset by higher average balances of long-term debt.
Gain on Sale of Paging Business represents the pre-tax gain on the
sale of BellSouth's paging business in January 1996.
Other Income (Expense), net increased $7 and $54 for the three- and
six-month periods ended June 30, 1996, respectively, compared to
the corresponding periods in 1995. The increases were primarily
attributable to higher interest income due to the investment of
cash proceeds from the sale of the paging business. The amounts of
equity in losses of unconsolidated affiliates were ($30) and ($58),
respectively, for the three- and six-month periods ending June 30,
1996 compared to ($13) and ($45) for the same periods in 1995. The
higher overall losses in 1996 reflect increased losses from certain
international businesses, principally operations in Germany and
Denmark, partially offset in the six-month period by improved
results from unconsolidated domestic cellular operations.
Provision for Income Taxes increased $39 (10.8%) and $187 (25.8%)
for the three- and six-month periods ended June 30, 1996,
respectively, over the comparable 1995 periods. For the three- and
six-month periods ended June 30, 1996, BellSouth's effective tax
rates were 38.9% and 36.3%, respectively, compared to 39.4% and
39.7%, respectively, for the same periods last year. The lower
effective tax rate for the six-month period in 1996 was due
primarily to a higher tax than book basis for the paging business,
which resulted in a lower gain on sale for computing tax expense.
FINANCIAL CONDITION
BellSouth uses the net cash generated from its operations and
external financing to fund capital expenditures, pay dividends and
invest in and operate its existing operations and new businesses.
While current liabilities exceeded current assets at both June 30,
1996 and December 31, 1995, BellSouth's sources of funds --
primarily from operations and, to the extent necessary, from
readily available external financing arrangements -- are sufficient
to meet all current obligations on a timely basis. In addition,
BellSouth believes such sources of funds will be sufficient to meet
the needs of its business for the foreseeable future.
For the Six Months
Ended June 30,
1996 1995
Net Cash Provided by Operating Activities $2,556 $2,503
Operating Activities. Net cash provided by operating activities
increased $53 (2.1%) in the first six months of 1996 compared with
the same period in 1995, primarily due to an increase in operating
income.
For the Six Months
Ended June 30,
1996 1995
Net Cash Used for Investing Activities $(1,451) $(2,197)
Investing Activities. BellSouth's primary use of capital resources
continues to be for capital expenditures to support development of
the wireline and wireless networks. Net cash used for investing
activities decreased $746 (34.0%) in the first six months of 1996
compared to the corresponding 1995 period. The decrease was
primarily due to $930 in cash received from the sale of the paging
business, partially offset by higher capital expenditures of $357
related to network development.
Internal sources provided substantially all cash required for
capital expenditures in the first six months of 1996. For the
remainder of 1996, BellSouth expects to continue to finance capital
expenditures primarily through internally generated funds, and, to
the extent necessary, from external sources.
For the Six Months
Ended June 30,
1996 1995
Net Cash Used for Financing Activities $(1,647) $(401)
Financing Activities. Net cash used for financing activities
increased $1,246 (310.7%) in the first six months of 1996 compared
to the same period last year. The increase reflects repayments of
$459 in commercial paper and $485 in debentures as well as the
absence of new long-term borrowings in 1996.
As of August 1, 1996, shelf registration statements were on file
with the Securities and Exchange Commission under which $2,227 of
debt securities could be publicly offered.
BellSouth's debt to total capitalization ratio decreased to 43.6%
at June 30, 1996 from 46.7% at December 31, 1995. The decrease was
primarily caused by the repayment of commercial paper described
above and the increase in Shareholders' equity due to earnings
during 1996.
BellSouth's Board of Directors has authorized the repurchase of an
unspecified number of shares of BellSouth Common Stock on the open
market or through privately negotiated purchases. As of June 30,
1996, approximately 254,000 shares have been repurchased for an
aggregate of $12. The company intends to reissue the shares as
stock options are exercised under existing plans.
REGULATORY DEVELOPMENTS AND COMPETITION
Federal Developments
In February 1996, Congress passed the Telecommunications Act of
1996 (the 1996 Act). Among its provisions, the 1996 Act preempts
state legislative and regulatory barriers to competition for local
telephone service, subject only to competitively neutral
requirements to assure quality service consistent with public
safety, convenience and consumer welfare. The 1996 Act also
includes requirements that incumbent local exchange carriers
(ILECs) unbundle network elements, capabilities and functions for
purchase by authorized competing companies. The price of these
unbundled items is calculated based on the cost of the item and may
include a reasonable profit. ILECs are also required to sell their
retail services to authorized competing local carriers for resale.
The 1996 Act provides that services to be resold are to be provided
to the competing companies at the ILECs' retail rates, discounted
for avoided costs.
In connection with the requirements of the 1996 Act, on August 8,
1996, the FCC released an order adopting rules governing
interconnection and open competition in the local telephone service
industry. Among the issues specifically addressed by the FCC order
are the network elements that ILECs must make available; pricing
guidelines to be followed by states in setting rates for
interconnection, unbundled network elements and resold services;
and access charges paid by interexchange carriers providing
competing local service. The FCC will address access charges and
universal service matters in subsequent proceedings, although an
interim access charge plan will lower access charges paid by
carriers that purchase unbundled network elements from ILECs. The
decision also reduces rates paid by wireless carriers for
connection to the wireline networks of the ILECs. BellSouth is
evaluating the impact that the order released on August 8 will have
on its operations. It will not be possible to assess fully
its implications until all likely challenges thereto have been
resolved and the state regulatory commissions have addressed the
related matters within their jurisdictions.
State Developments
In order to comply with the requirements of the 1996 Act, all
states in BellSouth Telecommunications' local service area have
proceedings and other activities in progress to consider rules and
regulations necessary to implement open competition for local
service. Among the issues being addressed in these proceedings is
the level of discounts required to be offered by the ILECs to
competing local carriers.
A number of competing local carriers have been approved or have
filed applications to provide local service in many of the areas in
which BellSouth Telecommunications provides service. BellSouth has
executed 15 interconnection or resale agreements with competing
local carriers. BellSouth believes that a number of these
agreements address all of the 14 items required for interLATA
authority contained in the 1996 Act. BellSouth continues to
negotiate with a number of other telecommunications companies and
is also involved in arbitration proceedings with certain local
exchange competitors with whom BellSouth was unable to reach
agreements on all points negotiated.
Price regulation plans have been approved or authorized by the
requisite legislative or regulatory bodies in all states in the
BellSouth Telecommunications local service area.
Recent significant developments with respect to discounts to be
offered to competing local carriers, price regulation and other
related issues are discussed below.
Georgia. In second quarter 1996, the Georgia Public Service
Commission ordered a wholesale discount level of 20.3% for
residential services and 17.3% for business services, both of which
were greater than BellSouth's proposals and the Commission Staff's
recommendations (but less than proposed by other carriers). The
discount levels are to remain in effect for a 12-month period from
implementation after which the Commission will conduct a review to
determine if modification is necessary. After reconsideration, the
Commission also set out a time line starting in the third quarter
1996 for electronic interface implementation with competing local
carriers.
On July 11, BellSouth Telecommunications appealed the Commission's
order to the Superior Court of Fulton County, Georgia.
North Carolina. In May 1996, the North Carolina Utilities
Commission modified a price regulation plan previously submitted by
BellSouth Telecommunications. The modified plan became effective
June 24, 1996. Under the terms of such plan, prices for residence
basic local exchange services are capped for three years, after
which any price increases are limited subject to an inflation-based
formula. For business basic local exchange, interconnection and
certain non-basic services, any increases in current prices are
also subject to inflation-based formulas. Prices for toll switched
access services are capped at current prices, after giving effect
to specified rate reductions ordered in conjunction with approval
of the price regulation plan. Such rate reductions, including the
toll switched access component and elimination of charges for touch-
tone service by the first anniversary of the plan, will total
approximately $60 over the next three years.
BUSINESS DEVELOPMENTS
In April 1996, BellSouth Telecommunications received approval from
the Florida Public Service Commission to provide competing local
service in other carriers' service areas. BellSouth
Telecommunications intends to offer local service in the near
future to business customers in parts of the Orlando market not
previously served by BellSouth Telecommunications.
BellSouth plans to begin offering interLATA wireline service within
its nine-state local service territory as soon as possible after
completion of FCC and state regulatory proceedings and satisfaction
of requirements arising out of these proceedings, expected to be
concluded in late 1996 or early 1997; however, it is uncertain when
BellSouth will be authorized to initiate such service.
As permitted by the 1996 Act, BellSouth began offering interLATA
wireless service to its cellular customers in February. Also, in
March, BellSouth began joint marketing of cellular and wireline
services in select markets. BellSouth expects to extend joint
marketing of such services throughout its service region by the end
of 1996.
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
BellSouth's 1995 Annual Meeting of Shareholders was held on April
22, 1996. At the meeting, the following items were submitted to a
vote of the shareholders:
Election of Directors:
The following directors were elected with not less than 97.3% of
the votes cast to serve terms expiring in 1999:
For Withheld
F. Duane Ackerman 768,767,257 15,987,849
Reuben V. Anderson 763,671,315 21,083,791
John G. Medlin, Jr. 768,658,654 16,096,452
C. Dixon Spangler, Jr. 768,673,956 16,081,150
Ronald A. Terry 768,488,342 16,266,764
Ratification of Coopers & Lybrand L.L.P. as Independent
Auditors:
For Against Abstain
772,126,596 6,857,213 5,771,297
Director Proposal Regarding Officer Short Term Incentive Award
Plan:
Broker Non-
For Against Abstain Votes
679,934,830 85,795,319 19,024,957 0
Shareholder Proposal Regarding Officer Incentives:
Broker Non-
For Against Abstain Votes
98,300,295 590,128,359 25,217,029 71,109,423
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number
4a No instrument which defines the rights of holders of long
and intermediate term debt of BellSouth Corporation is
filed herewith pursuant to Regulation S-K, Item
601(b)(4)(iii)(A). Pursuant to this regulation,
BellSouth Corporation hereby agrees to furnish a copy of
any such instrument to the SEC upon request.
10r-8 Amendment dated July 22, 1996 to the BellSouth Personal
Retirement Account Pension Plan.
10s-1 Amendment dated May 23, 1996 to the BellSouth Corporation
Trust Under Executive Benefit Plan(s).
10t-1 Amendment dated May 23, 1996 to the BellSouth
Telecommunications, Inc. Trust Under Executive Benefit
Plan(s).
10u-1 Amendment dated May 23, 1996 to the BellSouth Corporation
Trust Under Board of Directors Benefit Plan(s).
10v-1 Amendment dated May 23, 1996 to the BellSouth
Telecommunications, Inc. Trust Under Board of Directors
Benefit Plan(s).
11 Computation of Earnings Per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
Date of Event Subject
July 17, 1996 Second Quarter 1996 Earnings Release
SIGNATURE
Pursuant to the requirements 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.
BELLSOUTH CORPORATION
By /s/ Ronald M. Dykes
RONALD M. DYKES
Executive Vice President, Chief
Financial Officer and Comptroller
(Principal Financial and Accounting Officer)
August 12, 1996
EXHIBIT INDEX
Exhibit
Number
10r-8 Amendment dated July 22, 1996 to the BellSouth Personal
Retirement Account Pension Plan.
10s-1 Amendment dated May 23, 1996 to the BellSouth Corporation
Trust Under Executive Benefit Plan(s).
10t-1 Amendment dated May 23, 1996 to the BellSouth
Telecommunications, Inc. Trust Under Executive Benefit
Plan(s).
10u-1 Amendment dated May 23, 1996 to the BellSouth Corporation
Trust Under Board of Directors Benefit Plan(s).
10v-1 Amendment dated May 23, 1996 to the BellSouth
Telecommunications, Inc. Trust Under Board of Directors
Benefit Plan(s).
11 Computation of Earnings Per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule.
AMENDMENT TO THE
BELLSOUTH PERSONAL RETIREMENT ACCOUNT PENSION PLAN
This Amendment is made to the BellSouth Personal
Retirement Account Pension Plan (the "Plan"), which
was adopted effective July 1, 1993, as a
restatement and amendment of the BellSouth Management
Pension Plan. The BellSouth Employees' Benefit Claim
Review Committee, acting under authority delegated by
the Nominating and Compensation Committee of the
Board of Directors of BellSouth Corporation, hereby
amends the Plan as follows:
1.
Amend Section 1 of the Plan by adding new Sections
1.02A and 1.02B thereto that read as follows:
1.02A "Applicable Interest Rate" means
(a) for Plan Years beginning before January
1, 1998 (January 1, 2000, in the case of
Subparagraph 7.06(a)), the interest rate used by
the
Pension Benefit Guaranty Corporation to value (1)
immediate annuities, as to annuities that are in
payment status, or (2) deferred annuities, as
to annuities that are not otherwise currently
payable, in a trusteed single employer plan
that terminates as of January 1st of the
applicable calendar year, and
(b) for Plan Years beginning on or after
January 1, 1998 (January 1, 2000, in the case of
Subparagraph 7.06(a)), the average yield, expressed
as an annual rate of interest, of 30-year
Treasury securities for November of the
immediately preceding Plan Year. 1.02B "Applicable
Mortality Table" means
(a) for Plan Years beginning before January
1, 1998 (January 1, 2000, in the case of
Subparagraph 7.06(a)), the BellSouth Management
50/50 mortality rates, and
(b) for Plan Years beginning on or after
January 1, 1998 (January 1, 2000, in the case of
Subparagraph 7.06(a)), the GAM 83 mortality
tables, adjusted to eliminate gender
distinctions, or such other table or tables as
may be prescribed by the Secretary of the
Treasury from time to time.
2.
Amend Section 7 of the Plan by replacing the
first sentence of Subparagraph 7.06(a) with the
following:
If the greater of the Participant's
account balance or the present value of the
Participant's accrued benefit (determined using
the Applicable Mortality Table and the Applicable
Interest Rate) is less than or equal to $3,500
as of the date of his retirement or termination,
a lump-sum settlement equal to such greater
amount shall be payable to him on such date in
lieu of any other benefits under the Plan,
provided the greater of such amounts remains $3,500
or less through the date of payment.
3.
Amend Section 7 of the Plan by replacing Paragraph
7.08 with the following:
7.08 Lump Sum Settlement Option. A Participant
may Elect to receive a lump sum settlement as
determined below in lieu of the forms of benefit
described in Paragraph 7.01.
(a) An election to receive a lump sum
settlement described in this Paragraph 7.08 by a
Participant shall include amounts payable by
Participating Companies pursuant to Paragraph
6.05 of the Plan which are in excess of the
"maximum permissible amount" described in such
Paragraph only if the present value of such
amounts, determined on the Pension Commencement
Date using the Applicable Mortality Table and the
Applicable Interest Rate, does not exceed $20,000.
(b) The lump sum settlement of any
Participant described in subparagraph 7.08(a) who
Elects the lump sum settlement option shall equal
the greater of (i) the Participant's account
balance, and (ii) the present value of the
Participant's pension on his Pension Commencement
Date, which shall be determined using the Applicable
Mortality Table and the Applicable Interest Rate.
(c) A Participant who wants to Elect to
receive a lump sum settlement as described
above must do so in accordance with
the procedures in Paragraph 7.02.
(d) As a special transition rule
for Participants whose Pension
Commencement Dates occur on or after July
1, 1996, and in a Plan Year which begins
before January 1, 2000, such a
Participant's present value amount in
clause (ii) of Subparagraph 7.08(b) shall
be determined using the interest rate
specified in Paragraph 1.02A(b) and the
mortality table specified in Paragraph 1.02B(b)
if the combined use of that rate and table
results in a higher present value amount
than the combined use of the rate and
table specified in Paragraphs 1.02A(a)
and 1.02B(a), respectively.
4.
Amend Section 8 of the Plan by adding the following
sentence to the end of Paragraph 8.02:
Effective for such Participants who die on or after
July 22, 1996, (a) if the Participant has a surviving
spouse, in lieu of the monthly pension described above,
the surviving spouse may elect to receive a lump sum
settlement that is equal to the greater of (I) 45% of
the Participant's hypothetical account balance
determined in steps (i) and (ii), above, and (II) the
present value of such monthly pension determined using
the Applicable Mortality Table and the Applicable
Interest Rate, and (b) if such a Participant dies and
does not have a surviving spouse, the amount determined
in the prior sentence shall be paid to his estate in a
lump sum. APPROVED this 22nd day of July, 1996.
EMPLOYEES' BENEFIT CLAIM REVIEW
COMMITTEE:
/s/ H.C. Henry, Jr.
H. C. Henry, Jr.
Executive Vice President - Corporate
Relations, Chairman
BELLSOUTH CORPORATION
TRUST UNDER EXECUTIVE BENEFIT
PLAN(S) TABLE OF CONTENTS
Section 1. Establishment of Trust 2
Section 2. Payments to Plan Participants and
Their Beneficiaries 5
Section 3. Trustee Responsibility Regarding
Payments to Trust Beneficiary When
Company is Insolvent 9
Section 4. Payments to Company 10
Section 5. Investment Authority 11
Section 5A. Sale of Company Stock by Trustee 15
Section 6. Disposition of Income 19
Section 7. Accounting by Trustee 19
Section 8. Responsibility of Trustee 19
Section 9. Compensation and Expenses of Trustee 21
Section 10. Resignation and Removal of Trustee 21
Section 11. Appointment of Successor 22
Section 12. Amendment or Termination 23
Section 13. Miscellaneous 24
Section 14. Effective Date 30
BELLSOUTH CORPORATION
TRUST UNDER EXECUTIVE BENEFIT PLAN(S)
This Agreement made this 23rd day of April, 1995May, 1996,
by and between BellSouth Corporation, a Georgia corporation
(Company) and Bankers Trust Company, a New York corporation
(Trustee);
(a) WHEREAS, Company has adopted the nonqualified deferred
compensation Plan(s) as listed in Appendix A;
(b) WHEREAS, Company has incurred or expects to incur
liability under the terms of such Plan(s) with respect to the
individuals participating in such Plan(s);
(c) WHEREAS, to make certain provisions for the payment of
such liability, Company and Trustee on April 25, 1990 executed
a trust agreement for the benefit of certain officers and
certain key managers of Company and Company's affiliates who
participate in the Plan(s) (the "Predecessor Trust");
(d) WHEREAS, Company and Trustee on April 29, 1993 amended
and restated the Predecessor Trust insofar as it related to
Company's obligations (but not obligations of subsidiary or
other affiliated entities) to pay benefits under the Plan(s)
(hereinafter, called "Successor Trust") and contributed assets
to the Successor Trust, subject to the claims of Company's
creditors in the event of Company's Insolvency, as herein
defined, until full payment has been made in respect of such
obligations of Company to Plan participants and their
beneficiaries in such manner and at such times as specified in
the Plan(s);
(e) WHEREAS, Company and Trustee on April 28, 1995 amended
and restated the Trust;
(f) WHEREAS, Company and Trustee now desire once again to
amend and restate the Successor Trust in the form of this Trust
Agreement (hereinafter, called "Trust");
(g) WHEREAS, it is the intention of the parties that this
Trust shall constitute an unfunded arrangement and shall not
affect the status of the Plan(s) as an unfunded plan maintained
for the purpose of providing deferred compensation for a select
group of management or highly compensated employees or as an
excess benefit plan for purposes of Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA");
and
(h) WHEREAS, it is the intention of Company to make
contributions to the Trust to provide itself with a source of
funds to assist it in the meeting of its liabilities under the
Plan(s);
NOW, THEREFORE, the parties do hereby establish the Trust
and agree that the Trust shall be comprised, held and disposed
of as follows:
Section 1. Establishment of Trust.
(a) Company and Trustee hereby amend and restate in
all respects the Successor Trust in the form of this Trust
Agreement. The principal of the Trust shall be held,
administered and disposed of by Trustee as provided in this
Trust Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which
Company is the grantor, within the meaning of subpart E, part
I, subchapter J, chapter 1, subtitle A of the Internal Revenue
Code of 1986, as amended, and shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon
shall be held separate and apart from other funds of Company
and shall be used exclusively for the uses and purposes of Plan
participants and general creditors as herein set forth. Plan
participants and their beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets
of the Trust. Any rights created under the Plan(s) and this
Trust Agreement shall be mere unsecured contractual rights of
Plan participants and their beneficiaries against Company. Any
assets held by the Trust will be subject to the claims of
Company's general creditors under federal and state law in the
event of Insolvency, as defined in Section 3(a) herein.
(e)(1) Company, in its sole discretion, may at any
time, or from time to time, make additional deposits of
cash or other property acceptable to Trustee in trust with
Trustee to augment the principal to be held, administered
and disposed of by Trustee as provided in this Trust
Agreement. Neither Trustee nor any Plan participant or
beneficiary shall have any right to compel any such
additional deposits under this subsection (1).
(2) If, as of the last day of a fiscal year of
the Trust, the funding level of the Trust shall be less
than eighty percent (80%) of the Trust's funding level as
of the last day of any of the five (5) most recently
preceding fiscal years of the Trust (taking into account
contributions made under this Section 1(e)(2) for each
such year), Company shall notify Trustee of such situation
and Company shall make an irrevocable contribution to the
Trust within one hundred eighty (180) days following the
last day of such fiscal year. Such contribution shall be
in the amount which, had such contribution been made as of
the last day of such fiscal year of the Trust, would have
been sufficient to bring the Trust's funding level equal
to the Trust's funding level as of the last day of the
fiscal year among the five (5) most recently preceding
fiscal years on which the Trust's funding level was
highest. In no event shall such contribution be required
if, as of the last day of such fiscal year, the fair
market value of the Trust's assets is one hundred percent
(100%), or greater, of the aggregate Current Liability (as
defined in subsection (35) of this Section 1(e)) of
Company under the Plan(s). For these purposespurposes of
this Section 1(e)(2), "funding level" shall mean the ratio
(stated as a percentage) that the fair market value of the
assets in the Trust bears to the aggregate Current
Liability of Company under the Plan(s).
Such(3) If, as of the last day of a fiscal year of
the Trust, the funding level of the Trust (taking into
account any contribution required under subsection (2) of
this Section 1(e)) shall be less than one hundred percent
(100%), Company shall notify Trustee of such situation and
shall make an irrevocable contribution to the Trust within
one hundred eighty (180) days following the last day of such
fiscal year. Such contribution shall be in the amount which,
had the contribution been made as of the last day of such
fiscal year of the Trust, would have been sufficient to bring
the Trust's funding level to 100%. For purposes of this
Section 1(e)(3), "funding level" shall mean the ratio (stated
as a percentage) that the fair market value of the assets in
the Trust bears to the aggregate Current Liability of Company
under the Plan(s); provided, that such Current Liability
shall be determined using, instead of the interest rate
described in Section 1(e)(5) hereof, the valuation interest
rate assumption reported by the enrolled actuary for
Company's principal defined benefit pension plan (measured by
the number of active management employees of Company and
affiliated entities participating in all such plans at the
end of the respective plan year which coincides with or ends
within the fiscal year of the Trust), in its actuarial
valuation report for such plan for such plan year, for
purposes of funding such respective plan for such plan year.
Notwithstanding the foregoing, (1) if the enrolled actuary
for Company's principal defined benefit pension plan changes
the applicable valuation interest rate reported for a plan
year, as described in the sentence above, in the enrolled
actuary's actuarial statement and opinion subsequently
prepared as part of the annual report required by ERISA for
such plan year, (i) Company shall so notify the Trustee, (ii)
the changed valuation interest rate shall be substituted for
the originally reported valuation interest rate in
determining Company's contribution required under Section
1(e)(3) above, and (iii) Company shall make any additional
required contribution resulting from such change within sixty
(60) days after the change, and (2) if as of the end of a
fiscal year of the Trust, Company and affiliated entities do
not maintain a defined benefit pension plan covering
management employees with assets having an aggregate market
value of at least Fifty Million Dollars ($50,000,000.00),
Current Liability for purposes of this Section 1(e)(3) shall
be determined using an interest rate assumption equal to the
average of the monthly averages of the 30-year constant
maturity U.S. Treasury rate, expressed in percent per annum,
during such fiscal year of the Trust, as published in the
Federal Reserve Report, a successor report or, if there is no
successor report, comparable data.
(4) For purposes of subsections (2) and (3) of this
Section 1(e), the funding level of the Trust and all related
determinations shall be made by Company; provided, however,
that following the engagement of a Trustee's Contractor, such
determination shall be made by Trustee's Contractor. The
Trustee may rely on the accuracy of all such determinations.
(3)(A) 5)(A) For purposes of this Trust, "Current
Liability" shall mean the amount required to pay each Plan
participant or beneficiary the benefits to which Plan
participants or their beneficiaries would be entitled
pursuant to the terms of the Plan(s), to the extent such
benefits are obligations of Company (and not obligations of
subsidiary or other affiliated entities). The Current
Liability on any date with respect to a Plan shall be
determined as if the Plan terminated as of such date using an
interest rate (subject to Section 1(e)(3)) equal to the
Pension Benefit Guaranty Corporation valuation interest rate
for immediate annuities as in effect on such date, the 1983
Group Annuity Mortality Table published by the Society of
Actuaries, and reasonable actuarial calculation principles
consistently applied. Current Liability shall be determined,
as of the last day of each fiscal year of the Trust and at
such additional times as are necessary to implement the
provisions of this Trust Agreement, by Company; provided,
however, that following the engagement of a Trustee's
Contractor, such determinations shall be made by Trustee's
Contractor. The Trustee may rely on the accuracy of all such
determinations.
(3)(B) 5)(B) In the event that the interest rate
assumption described in subsection (35)(A) above is at any
time no longer available or the mortality assumption described
above is at any time no longer considered a reasonable and
reliable mortality assumption, other interest rate (subject to
Section 1(e)(3)) or mortality assumptions,
as the case may be, deemed generally comparable to the above
specified assumptions, may be used instead. All determinations
regarding substitute assumptions, including whether such
substitution is reasonably necessary and the selection of the
substitute assumption(s), shall be made by Company; provided,
however, that following the engagement of a Trustee's Contractor,
such determinations shall be made by Trustee's Contractor.
(f) Upon a Change of Control, Company shall promptly notify
Trustee thereof and, as soon as possible, but in no event longer
than one hundred twenty (120) days following the Change of Control,
as defined herein, Company shall make an irrevocable contribution
to the Trust in an amount that is sufficient to pay each Plan
participant or beneficiary the benefits to which Plan participants
or their beneficiaries would be entitled pursuant to the terms of
the Plan(s), to the extent such benefits are obligations of Company
(and not obligations of subsidiary or other affiliated entities),
as of the date on which the Change of Control occurred. Such
contribution shall be in an amount equal to the excess, if any, of
the aggregate Current Liability as of the date on which the Change
of Control occurred over the fair market value of the Trust's
assets as of the valuation date most recently preceding the date on
which such contribution is made. Thereafter, Company shall make an
additional contribution each fiscal year to the Trust, as soon as
possible, but in no event longer than one hundred twenty (120) days
following the last day of each such fiscal year, in an amount equal
to the excess, if any, of the aggregate Current Liability under the
Plan(s) as of the last day of the fiscal year over the fair market
value of the Trust's assets as determined on the valuation date
most recently preceding the date on which such contribution is
made. The amount of all such contributions shall be determined by
Trustee's Contractor. The Trustee may rely on the accuracy of all
such determinations.
(g) If, as of a Distribution Date with respect to
outstanding rights to purchase Series A First Preferred Stock,
under the terms of and as defined in a Rights Agreement between
Company and Chemical Bank, as Rights Agent, under an agreement
originally dated November 27, 1989 (a "Distribution Date"), the
aggregate Current Liability exceeds the fair market value of the
Trust's assets (such fair market value determined as of the
valuation date most recently preceding such Distribution Date),
Company shall be required to make an additional contribution to the
Trust in an amount equal to such excess or, at Company's option, to
obtain a letter of credit, or a series of letters of
credit, adequate to fund such amount as of such Distribution Date
under the Plan(s) and maintain such letter(s) of credit until such
time as the aggregate Current Liability no longer exceeds the fair
market value of the Trust's assets. The determination of whether
the aggregate Current Liability exceeds the fair market value of
the Trust's assets upon a Distribution Date and, if so, the amount
of such excess, shall be made by Company; provided, however, that
following the engagement of a Trustee's Contractor, such
determinations shall be made by Trustee's Contractor. The Trustee
may rely on the accuracy of all such determinations. Any such
letter of credit, or series of letters of credit, shall be part of
the general assets of Company and shall not be an asset of this
Trust and, unless otherwise agreed to in writing by Trustee,
Trustee shall have no responsibility whatsoever with respect to
the adequacy of, or selection of the issuer or issuers of, any
such letter or letters of credit.
(h) If, in any five (5) consecutive calendar year
period, (i) there are five (5) or more final determinations by
courts of competent jurisdiction that (A) Company or a subsidiary
of Company which both is a member of Company's "controlled group
of corporations" as such term is defined in Section 13(g)(4) and
has adopted a Plan (a "Participating Company") has failed to pay
(after reasonable notice and demand for payment) any benefit due
under the terms and conditions of a Plan and that (B) there was no
material issue of fact or law respecting such company's obligation
to make such benefit payment, or (ii) there are two (2) or more
final determinations by courts of competent jurisdiction, in
lawsuits instituted after reasonable notice and demand with
respect thereto, in which the court determines that Company or a
Participating Company had acted in bad faith and with a clear and
deliberate disregard for such company's obligations under the
Plan(s), there shall be deemed to have occurred a Change of
Control as defined in this Trust Agreement and Company shall give
Trustee prompt written notice of such event. For purposes of this
Trust Agreement, the term "final determination" means a
determination with respect to which all rights of appeal or to
request a review, a rehearing or redetermination have been
exhausted or have lapsed.
Section 2. Payments to Plan Participants and Their
Beneficiaries.
(a) Company, or the Trustee's Contractor if one shall
have been engaged, shall deliver to Trustee a schedule (the
"Payment Schedule") that indicates the amounts payable by Company
in accordance with the terms and conditions of the Plan(s) in
respect of each Plan participant (and his or her beneficiaries),
that provides a formula or other instructions acceptable to
Trustee for determining the amounts so payable, the form in which
such amount is to be paid (as provided for or available under the
Plan(s)), and the time of commencement for payment of such
amounts. Except as otherwise provided herein, Trustee shall make
payments to the Plan participants and their beneficiaries in
accordance with such Payment Schedule. The Trustee shall make
provision for the reporting and withholding of any federal, state
or local taxes that may be required to be withheld with respect to
the payment of benefits pursuant to the terms of the Plan(s) and
shall pay amounts withheld to the appropriate taxing authorities
or determine that such amounts have been reported, withheld and
paid by Company. Payments may be made in cash or, where called
for under the terms of the Plan(s), in Company Stock (as such term
is defined in Section 5(g) hereof). Notwithstanding the foregoing,
if a benefit which is distributable in the form of Company Stock
under the terms of a Plan becomes payable at a time when there is
no (or insufficient) Company Stock in the Trust with which to satisfy
such benefit obligation and if the Company fails or refuses to pay such
benefit within a reasonable time after notice from Trustee that it has
become so payable, Trustee shall use other assets of the Trust to
acquire Company Stock, on the open market or otherwise in its
discretion, sufficient to satisfy such benefit obligation.
(b) The entitlement of a Plan participant or his or
her beneficiaries to benefits payable by Company under the Plan(s)
shall be determined in accordance with the terms of the Plan(s) by
Company or such party as it shall designate under the Plan(s), or
the Trustee's Contractor if one shall have been engaged, and any
claim for such benefits shall be considered and reviewed and paid
or not paid under the procedures set out in the Plan(s).
Notwithstanding any Plan provision to the contrary, if a Trustee's
Contractor shall have been engaged, all such determinations shall
be made by the Trustee's Contractor whose determinations shall be
final, conclusive and binding on all persons. Neither Trustee nor
Trustee's Contractor shall have any obligation for determining
whether any Plan participant or beneficiary has died and shall be
entitled to rely upon any information in this regard furnished by
Company.
(c) Company may make payment of benefits directly to
Plan participants or their beneficiaries as they become due under
the terms of the Plan(s). In such event, Company shall make
provision for the reporting and withholding of any federal, state
or local taxes that may be required to be withheld with respect to
the payment of benefits pursuant to the terms of the Plan(s) and
shall pay amounts withheld to the appropriate taxing authorities.
Company shall notify Trustee of its decision to make payment of
benefits directly prior to the time amounts are payable to
participants or their beneficiaries. In addition, if the
principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits payable by Company in
accordance with the terms of the Plan(s), Company shall make the
balance of each such payment as it falls due. Trustee shall
notify Company where principal and earnings are not sufficient.
(d) Company may engage a third party administrator as a
contractor of the Trustee ("Trustee's Contractor"), who shall not
be a Plan participant or beneficiary (but who may be the Trustee),
to perform functions described in this Section 2(d) and elsewhere
in this Trust Agreement which would otherwise be performed by
Company.
(1) Upon engagement of a Trustee's Contractor, as
soon as practicable but in no event longer than thirty (30)
days thereafter, Company shall furnish to the Trustee's
Contractor copies of the Plan documents, employment records
of participants, and other information necessary to determine
the benefits which are or may become payable by Company to or
with respect to each participant in each Plan, including any
benefits payable after the participant's death, and the
recipient of same and the procedures which Company has
adopted to calculate such benefit payments. Company shall
regularly, at least annually, and upon each benefit change
under the Plan(s) furnish revised, updated information to the
Trustee's Contractor. In the event Company refuses or
neglects to provide updated participant information as
contemplated herein, the Trustee's Contractor shall be
entitled to rely on the most recent information furnished to
it by Company.
(2) In the event of a Change of Control, Company
shall have the duty to engage, as soon as practicable
thereafter, a Trustee's Contractor reasonably acceptable to
the Trustee if there shall at that time be no Trustee's
Contractor then serving. In addition, if as of a Distribution
Date (as such term is defined in Section 1(g) hereof), there
shall be no Trustee's Contractor then
serving, Company shall have the duty to designate on a standby
basis a Trustee's Contractor who shall commence to serve as
Trustee's Contractor in the event such Distribution Date is
followed by a Change of Control. After a Change of Control,
Company shall not have any control or authority with respect
to the Trustee's Contractor so engaged or then serving, or any
successor Trustee's Contractor, including without limitation
any rights with respect to the removal or replacement of any
such Trustee's Contractor or its duties pursuant to this Trust
Agreement.
(3) Unless Trustee agrees to perform the functions
of the Trustee's Contractor described herein, Trustee shall
have no responsibility hereunder for any obligation assigned
to a Trustee's Contractor or (subject to subsection (4) below)
for the performance of a Trustee's Contractor's duties and
responsibilities under this Trust Agreement.
(4) Company may replace or remove any Trustee's
Contractor from time to time serving hereunder, in its sole
discretion, prior to the occurrence of a Change of Control.
Following a Change of Control, Trustee, in its sole
discretion, may remove a Trustee's Contractor engaged by
Company or any successor Trustee's Contractor and shall remove
any such person and engage a successor to such person if
Trustee deems such person's performance as a Trustee's
Contractor unsatisfactory. At all times following a Change of
Control, upon any such removal, or the voluntary resignation
of any such Trustee's Contractor or the occurrence of any
other event which shall result in the cessation of performance
of the Trustee's Contractor's duties hereunder, Trustee shall
use its best efforts to engage a new Trustee's Contractor
(which may be Trustee); provided, however, Trustee shall
perform the duties of the Trustee's Contractor during any
period for which Trustee is unable to find a new Trustee's
Contractor (so that there will be no default in payments under
the Plan(s) as a result of the absence of a Trustee's
Contractor), and any person engaged as a Trustee's Contractor
shall in the judgment of Trustee be independent of Company.
The person who removes or replaces a Trustee's Contractor
shall be responsible for assuring that there is a timely and
complete transfer of records from such Trustee's Contractor to
such person's successor.
(5) Except for the records dealing solely with
the assets of the Trust and investment of those assets, which
shall be maintained by the Trustee, if a Trustee's Contractor
shall be engaged, the Trustee's Contractor shall maintain all
Plan participant records contemplated by this Agreement,
including the Payment Schedule. All such records and copies
of the Plan(s) documents and employment records of the
participants in the possession of the Trustee's Contractor
shall be made available promptly upon request of Trustee or
Company. The Trustee's Contractor shall also prepare and
distribute participant statements to participants and
beneficiaries and shall perform such other duties and
responsibilities contemplated under the terms of this Trust
Agreement as Company or Trustee, as the case may be,
determines is necessary or advisable to achieve the
objectives of this Trust Agreement.
(6) Company shall indemnify and hold harmless the
Trustee's Contractor for any liability or expenses, including
without limitation advances for or prompt reimbursement of
reasonable fees and expenses of counsel and other agents
retained by it, incurred by the Trustee's Contractor with
respect to keeping the records for participants' benefits,
reporting thereon to participants and beneficiaries,
certifying benefit information to Trustee, determining the
status of benefits hereunder and otherwise carrying out its
obligations under this Trust Agreement, other than those
resulting from Trustee's Contractor's negligence or willful
misconduct or its failure to reasonably calculate and certify
the amount of benefits based on the applicable terms of the
Plan documents and other information and procedures furnished
by Company to the Trustee's Contractor in accordance with
this Trust Agreement. The Trustee's Contractor shall be
entitled to reasonable compensation for services hereunder,
the amount of which shall be agreed upon from time to time by
Company or, following a Change of Control, the Trustee, and
the Trustee's Contractor in writing, and reimbursement for
reasonable expenses incurred in connection with its
performance of such services. Following a Change of Control,
Trustee's good faith determination of compensation to be paid
to a Trustee's Contractor (including Trustee when it acts in
such capacity) shall be binding on the Company and each other
person having an interest in the Trust. All such
compensation and expenses shall be paid by Trustee from the
assets of the Trust. If not so paid, such compensation and
expenses shall be paid by Company.
(7) Except as may be otherwise agreed by the
Trustee's Contractor and Company, or Trustee following a
Change of Control, the Trustee's Contractor's obligations are
limited solely to those explicitly set forth herein and the
Trustee's Contractor shall have no responsibility, authority
or control, direct or indirect, over the maintenance or
investment of the Trust and shall have no obligation in
respect of Trustee or the Trustee's compliance with the
Trustee's Contractor's certifications to Trustee.
Section 3. Trustee Responsibility Regarding Payments to
Trust Beneficiary When Company Is Insolvent.
(a) Trustee shall cease payment of benefits to Plan
participants and their beneficiaries if the Company is Insolvent.
Company shall be considered "Insolvent" for purposes of this Trust
Agreement if (i) Company is unable to pay its debts as they become
due, or (ii) Company is subject to a pending proceeding as a
debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as
provided in Section 1(d) hereof, the principal and income of the
Trust shall be subject to claims of general creditors of Company
under federal and state law as set forth below.
(1) The Board of Directors and the Chief Executive
Officer of Company shall have the duty to inform Trustee in
writing of Company's Insolvency. If a person claiming to be
a creditor of Company alleges in writing to Trustee that
Company has become Insolvent, Trustee shall determine whether
Company is Insolvent and, pending such determination, Trustee
shall discontinue payment of benefits to Plan participants or
their beneficiaries.
(2) Unless Trustee has actual knowledge of Company's
Insolvency, or has received notice from Company or a person
claiming to be a creditor alleging that Company is Insolvent,
Trustee shall have no duty to inquire whether Company is
Insolvent. Trustee may in all events rely on such evidence
concerning Company's solvency as may be furnished to Trustee
and that provides Trustee with a reasonable basis for making
a determination concerning Company's solvency.
(3) If at any time Trustee has determined that Company
is Insolvent, Trustee shall discontinue payments to Plan
participants or their beneficiaries and shall hold the assets
of the Trust for the benefit of Company's general creditors.
Nothing in this Trust Agreement shall in any way diminish any
rights of Plan participants or their beneficiaries to pursue
their rights as general creditors of Company with respect to
benefits due under the Plan(s) or otherwise.
(4) Trustee shall resume the payment of benefits to
Plan participants or their beneficiaries in accordance with
Section 2 of this Trust Agreement only after Trustee has
determined that Company is not Insolvent (or is no longer
Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant to
Section 3(b) hereof and subsequently resumes such payments, the
first payment following such discontinuance shall include the
aggregate amount of all payments due from Company to Plan
participants or their beneficiaries under the terms of the Plan(s)
for the period of such discontinuance, less the aggregate amount
of any payments made to Plan participants or their beneficiaries
by Company in lieu of the payments provided for hereunder during
any such period of discontinuance.
Section 4. Payments to Company.
(a) Except as provided in Sections 3, 4(b), 4(c),
4(d), 5(b) and 12(c) hereof, after the Trust has become
irrevocable, Company shall have no right or power to direct
Trustee to return to Company or to divert to others any of the
Trust assets before all payment of benefits have been made to Plan
participants and their beneficiaries pursuant to the terms of the
Plan(s) to the extent such benefits are obligations of Company.
(b) If, prior to a Change of Control, within sixty
(60) days following the end of a fiscal year of the Trust, Company
provides a written certification to Trustee, reasonably acceptable
to the Trustee that, as of the last day of the fiscal year, the
fair market value of the assets of the Trust exceeds one hundred
twenty percent (120%) of the aggregate Current Liability, Trustee
shall, at Company's request, distribute to Company all or part of
such excess. No distribution pursuant to this Section 4(b) may be
made following a Change of Control.
(c) Prior to a Change of Control, Trustee shall, if so
instructed by Company in writing within thirty (30) days after the
actual filing of Company's federal income tax return for a year,
reimburse Company from the assets of the Trust for federal, state
or local income taxes, or any part thereof, which Company
certifies that it has paid, attributable to income of the Trust
for such year, as determined by Company, within thirty (30) days
after receipt of such request. No reimbursement for taxes
pursuant to this Section 4(c) may be made following a Change of
Control.
(d) Notwithstanding any other provision of this Trust
Agreement, including without limitation Section 1(b) hereof, prior
to a Change of Control Company shall have the right with respect
to each contribution to the Trust (other than contribution(s)
required pursuant to Section 1(e)(2subsections (2) and (3) of
Section 1(e) hereof) to cause Trustee to return all or any portion
of a contribution and any and all income on such contribution to
Company. Such right shall be exercised by giving written notice
to Trustee and shall be exercisable in a nonfiduciary capacity
without the approval or consent of Trustee or any other person.
Such right shall expire with respect to each contribution to the
Trust upon the earlier of (i) thirty days following the date on
which the contribution is made, (ii) the last day of the taxable
year of Company in which the contribution is made or (iii) a
Change of Control. Company's right under this Section 4(d) shall
expire upon a Change of Control.
Section 5. Investment Authority.
(a) Except as otherwise provided in subsections (c), (d),
(e) and (g) of this Section 5, the assets of the Trust shall be
invested and reinvested by Trustee, without distinction between
principal and income, at such time or times in such investments
and pursuant to such investment strategies or courses of action
and in such shares and proportions, as Trustee, in its sole
discretion, shall deem advisable. Except as otherwise provided
herein, Trustee may invest in securities (including stock or
rights to acquire stock) or obligations issued by Company. All
rights associated with assets of the Trust shall be exercised by
Trustee or the person designated by Trustee, and shall in no event
be exercisable by or rest with Plan participants.
(b) Company shall have the right, at any time, and from
time to time in its sole discretion, to substitute assets of equal
fair market value for any asset held by the Trust. This right is
exercisable by Company in a nonfiduciary capacity without the
approval or consent of any person in a fiduciary capacity. In
connection with any substitution of assets described in this
Section 5(b), Company Stock may not revert to Company in kind at
any time following a voting record date for any meeting of Company
stockholders and before such meeting, unless Trustee shall have
voted such shares by proxy. Such reversion may occur immediately
following the stockholders' meeting to which such record date
relates. Further, any such substitution may be made only out of
property available to the Company for the purchase of shares of
stock under applicable state law, as determined by Company.
(c) Subject to the provisions of Section 5A, investment
authority over the Trust's assets, or any portion thereof, other
than dividends on Company Stock held by the Trust, may be reserved
by Company to itself from time to time in its absolute discretion,
prior to a Change of Control. Any such reservation of
discretionary authority by Company shall be communicated to
Trustee in writing. In this regard, unless Company notifies
Trustee to the contrary, Company shall act through its Treasurer,
or any person who such Treasurer authorizes in writing to act on
his behalf or any other person who is authorized to act on
Company's behalf by a resolution of Company's Board of Directors.
Company shall furnish Trustee from time to time with a list of the
names and signatures of all
persons authorized to so act. Notwithstanding anything to the
contrary contained herein, following a Change of Control, Company
may not reserve discretionary authority for the management and
control of any assets of the Trust and any prior reservation then
in effect shall immediately be nullified.
(d) Trustee shall be under no duty or obligation to
review or to question any direction of Company pursuant to
authority reserved under subsection (c) of this Section 5, or to
review securities or any other property so held with respect to
prudence or proper diversification, or to make any suggestions or
recommendation to Company with respect to the retention or
investment of any such assets and shall have no authority to take
any action or to refrain from taking any action with respect to
any such assets unless and until it is directed to do so by
Company. Notwithstanding anything to the contrary in this Trust
Agreement, Company does hereby discharge, indemnify and hold
harmless Trustee, its directors, officers, employees, and agents,
from and against any and all losses, costs, damages, claims,
penalties, expenses (including reasonable attorneys' fees and
expenses) or liabilities arising in connection with Trustee's
administration of the Trust consistent with Section 5(c).
(e) Trustee shall be responsible for assuring the daily
investment of cash balances, unless directed otherwise by the
Company pursuant to authority reserved in subsection (c) of this
Section 5, so as to maintain uninvested cash balances at a
minimum.
(f) Without in any way limiting the powers and
discretions conferred upon Trustee by the other provisions of this
Trust Agreement, Trustee (and Company acting pursuant to authority
reserved under subsection (c) of this Section 5) shall be vested
with the following powers and discretions (to be exercised in
light of the nature and purpose of this Trust) with respect to the
assets of the Trust subject to its management and control:
(1) To invest and reinvest in any property, real,
personal or mixed, wherever situated and whether or not
productive of income or consisting of wasting assets,
including without limitation, common and preferred stocks,
bonds, notes, debentures (including convertible stocks and
securities), leaseholds, mortgages, certificates of deposit
or demand or time deposits (including any such deposits with
Trustee), shares of investment companies and mutual funds,
interests in partnerships and trusts, insurance policies and
annuity contracts, and oil, mineral or gas properties,
royalties, interests or rights, without being limited to the
classes of property in which trustees are authorized to
invest by any law or any rule of court of any state and
without regard to the proportion any such property may bear
to the entire amount of the Trust;
(2) To invest and reinvest all or any portion of
the Trust collectively through the medium of any common,
collective or commingled trust fund that may be established
and maintained by Trustee, to be held and invested subject to
all of the terms and conditions thereof, and such trust shall
be deemed adopted as a part of the Trust to the extent that
assets of the Trust are invested therein;
(3) To retain any property at any time received by
the Trustee;
(4) (4) To sell or exchange any property held by
it at public or private sale, for cash or on credit, to grant
and exercise options for the purchase or exchange thereof, to
exercise all conversion or subscription rights
pertaining to any such property and to enter into any
covenant or agreement to purchase any property in the future;
(5) To participate in any plan of reorganization,
consolidation, merger, combination, liquidation or other
similar plan relating to property held by it and to consent
to or oppose any such plan or any action thereunder or any
contract, lease, mortgage, purchase, sale or other action by
any person;
(6) To deposit any property held by it with any
protective, reorganization or similar committee, to delegate
discretionary power thereto, and to pay part of the expenses
and compensation thereof and any assessments levied with
respect to any such property so deposited;
(7) To extend the time of payment of any
obligation held by it;
(8) To hold uninvested any monies received
by it, without liability for interest thereon until
such monies shall be invested, reinvested or disbursed;
(9) To exercise all voting or other rights with
respect to any property held by it and to grant proxies,
discretionary or otherwise;
(10) For the purposes of the Trust, to borrow
money from others, to issue its promissory note or notes
therefor, and to secure the repayment thereof by pledging any
property held by it;
(11) To manage, administer, operate, insure,
repair, improve, develop, preserve, mortgage, lease or
otherwise deal with, for any period, any real property or any
oil, mineral or gas properties, royalties, interests, or
rights held by joining with others, using other Trust assets
for any such purposes, to modify, extend, renew, waive or
otherwise adjust any provision for amortization of the
investment in or depreciation of the value of such property;
(12) To employ suitable agents (including but not
limited to actuarial and employee benefit consulting firms)
and counsel, who may be counsel to Company or Trustee, and to
pay their reasonable expenses and compensation from the Trust
to the extent not paid by Company;
(13) To register any securities held in the Trust
in the name of a nominee and to hold any investment in bearer
form, and to combine certificates representing such
investments with certificates of the same issue held by the
Trustee in other fiduciary capacities or to deposit or
arrange for the deposit of such securities in a qualified
central depository even though, when so deposited, such
securities may be merged and held in bulk in the name of the
nominee of such depository with other securities deposited
therein by any other person, or to deposit or arrange for the
deposit of any securities issued by the United States
Government, or an agency or instrumentality thereof, with a
federal reserve bank, but the books and records of Trustee
shall at all times show that all such investments are part of
the Trust;
(14) To settle, compromise, or submit to
arbitration any claims, debts, or damages due or owing to or
from the Trust, respectively, to commence or defend suits or
legal proceedings to protect any interest of the Trust, and
to represent the Trust in all suits or legal proceedings in
any court or before any other body or tribunal; provided,
however, Trustee shall not be required to take any such
action unless it shall have been indemnified by Company or
the Trust to its reasonable satisfaction against liability
and expense it might incur therefrom;
(15) To organize under laws of any state a
corporation or trust for the purpose of acquiring and holding
title to any property which it is authorized to acquire
hereunder and to exercise with respect thereto any or all of
the powers set forth herein; and
(16) Generally, to do all acts consistent with its
duties hereunder, whether or not expressly authorized, that
Trustee may deem necessary or desirable for the protection of
the Trust.
(g) Notwithstanding anything to the contrary contained
herein (other than the provisions of Section 5A hereof), unless
and until directed otherwise by Company, or the occurrence of a
Change of Control, the assets of the Trust (other than dividends
on Company Stock held by the Trust) shall be invested and
reinvested exclusively in the common stock, par value $1.00 per
share, of Company ("Company Stock") except to the extent that
Company directs otherwise with respect to a portion of the assets
in anticipation of reasonable liquidity needs of the Trust.
Trustee shall purchase from Company any such Company Stock
acquired for the Trust, unless Trustee is instructed otherwise by
Company in writing. With respect to assets of the Trust invested
in Company Stock, Trustee shall have no obligation to diversify
investments in the Trust, and shall not be subject to any rule of
applicable law which might otherwise make necessary, require, or
in any way deem appropriate diversification of investments in the
Trust, all such rules being hereby expressly waived.
Notwithstanding anything to the contrary in this Trust Agreement,
Company does hereby discharge, indemnify and hold harmless
Trustee, its directors, officers, employees and agents, from and
against any and all losses, costs, damages, claims, penalties,
expenses (including reasonable attorneys' fees and expenses) or
liabilities arising in connection with such Trustee's
administration of the Trust consistent with this Section 5(g).
(h) Following a Change of Control, Trustee may no
longer invest in Company Stock or any other securities or
obligations issued by Company, and Section 5(g) shall no longer
apply. After a Change of Control, Trustee shall have and exercise
all discretionary authority for the management and control of
Trust assets and shall commence the orderly disposition of Company
Stock, subject to the provisions of Section 5A hereof to the
extent applicable. Trustee may, in its sole discretion, retain
Company Stock acquired prior to a Change of Control for such
period of time as Trustee deems appropriate and in the best
interest of participants and beneficiaries in the Plan(s). In no
event may Trustee make additional investments in Company Stock on
behalf of the Trust after a Change of Control, other than (i)
amounts held in diversified common investment vehicles in which
Trustee invests, and (ii) through the exercise of rights to
acquire Company Stock attributable to shares held at the time of
the Change of Control, in the Trustee's sole discretion, if the
Trustee deems such exercise appropriate and in
best interest of the participants and beneficiaries in the
Plan(s).
Section 5A. Sale of Company Stock by Trustee.
(a) Except as otherwise specifically permitted herein,
Trustee may not sell Company Stock except: (1) as necessary from
time to time to satisfy benefit obligations under the Plan(s)
which are required to be paid by Trustee under this Trust;
(2) pursuant to a tender or exchange offer, by other than Company,
for all or substantially all of the issued and outstanding Company
Stock; or (3) following a Change of Control; and then only as
specifically permitted herein.
(b) Trustee shall provide Company with not less than
30 days prior notice that it proposes to sell any Company Stock,
unless Trustee determines in good faith that such delay would
cause irreparable harm to Trustee or to the Trust, in which event
Trustee shall provide reasonable notice of such proposed sale.
Notice shall be given by telephone, confirmed promptly by
facsimile or first class mail, postage prepaid. Trustee shall
specify in any event the number of shares proposed to be sold.
(c) Trustee shall make sales of Company Stock pursuant
to an effective registration statement under, or an exemption
(including but not limited to Rule 144) from, the registration
requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and in compliance with applicable state
securities laws.
(d) Should either Company or Trustee determine in good
faith, with the written advice of counsel delivered to and in form
reasonably acceptable to the other party hereto, that such
proposed sale could not reasonably be made pursuant to an
exemption from the Securities Act, then Trustee may demand in
writing that Company, at Company's option, either purchase under
Section 5A(f) or register under the Securities Act under Section
5A(e), such number of shares of Company Stock held and proposed to
be sold by Trustee. Company shall promptly notify Trustee by
telephone, confirmed promptly by facsimile or first class mail,
postage prepaid, whether it elects to proceed under Section 5A(f)
or 5A(e).
(e) If Company elects registration pursuant to a
demand under Section 5A(d) above, then:
(1) As soon as practicable, but in any event
within 90 days after receipt of the demand from Trustee,
Company shall:
(i) file with the Securities and Exchange
Commission (the "Commission") a registration statement
covering the shares to be sold and use its reasonable
best efforts to have such registration statement filed
pursuant to this Agreement declared effective as
promptly as practicable. Company shall advise Trustee
of the progress of such filing and of any review thereof
undertaken by the Commission, and promptly notify
Trustee, and confirm such advice in writing, (x) when
such registration statement becomes effective, (y) when
any post-effective amendment to such registration
statement becomes effective and (z) of any request by
the Commission for any amendment or supplement to such
registration statement or any prospectus relating
thereto or for additional information;
(ii) use its reasonable best efforts to
register, qualify, or effect compliance not later than
the effective date of any registration statement filed
pursuant to this Trust Agreement, the shares of Company
Stock registered thereunder under the blue sky laws of
such states or the District of Columbia as the Trustee
may reasonably request; provided, however, that Company
shall not be obligated to qualify as a foreign
corporation or as a dealer in securities or to execute
or file any general consent to service of process under
the laws of any such jurisdiction where it is not so
subject; and, provided, further, that Company reserves
the right not to register or qualify shares of Company
Stock in any jurisdiction where registration or
qualification of such shares would be unreasonably
burdensome;
(iii) from time to time (x) after the Company
has elected to satisfy a demand for sale by means of
registration, immediately advise Trustee of any event or
development, including a material adverse change in the
financial condition, business or affairs of Company,
known to Company (other than events or developments
affecting market or economic conditions generally),
which may have a material adverse impact on the proposed
offering; and (y) within the period of effectiveness of
such registration statement, advise Trustee of any event
or development requiring amendment or supplement (which
amendment or supplement shall be prepared with
reasonable promptness by Company) of the registration
statement or prospectus used in connection therewith or
rendering it inadvisable to use the prospectus until it
is supplemented or amended; and
(iv) furnish to Trustee such number of copies
of any preliminary and final prospectuses and any
amendments and supplements thereto as Trustee may
reasonably request.
(2) Trustee and Company shall negotiate with an
underwriter selected or approved by Company with regard to
the underwriting of such requested registration. Company
shall enter into an underwriting agreement in customary form
with the underwriter(s) and Trustee in which Company and
Trustee (to the extent applicable based only on such
information as is provided in writing by Trustee) shall
provide customary indemnification to such underwriter(s) and
each other.
(3) Company shall have the right to terminate or
withdraw any registration contemplated by it under this
Section 5A(e) prior to or following the effectiveness of such
registration for any reason whatsoever, provided that it
shall thereupon be required to purchase shares pursuant to
Section 5A(f).
(4) Trustee shall provide all such information
and materials and take all such actions, furnish all such
information, execute all such documents and cooperate with
Company in good faith, all as may be reasonably required in
order to permit Company to comply with all applicable
requirements of the Commission and all other applicable laws
or regulations and to obtain acceleration of the effective
date of the registration statement.
(5) All expenses incurred in connection with any
registration, qualification or compliance pursuant to this
Trust Agreement, including without limitation, all
registration, filing and qualification fees, printing and
engraving expenses, fees and disbursements of counsel for
Company, and expenses of any special audits or comfort letters
incidental to or required by such registration, shall be borne
by Company, provided, that Trustee may pay such expenses and
recover same from the Trust if Company fails to pay such
expenses in a timely manner.
(f) Notwithstanding any contrary provision of this
Agreement, if Company advises Trustee of any delays in filing or
effectiveness of more than 60 days, if Company and Trustee are
unable despite good faith efforts to agree as to registration or an
exempt sale, or if a registered sale would not permit Trustee to
sell Company Stock expeditiously enough to meet Trustee's good
faith needs, Trustee may demand that Company purchase, or if
Company elects to purchase stock pursuant to Section 5A(d), (e)(3)
or (g), Company shall purchase the Company Stock desired to be sold
at fair market value, which shall be the volume weighted average
trading price (including only trades which would meet the time of
purchases conditions under Rule 10b-18 under the Securities
Exchange Act of 1934, as amended ("Rule 10b-18"), of a share of
such security on the New York Stock Exchange on the day that
Company receives such demand or gives notice of such election.
Company and Trustee shall use their reasonable best efforts to
agree as to the prompt execution, closing and delivery of shares
and proceeds therefor.
(g) Until a Change of Control, Company may, on notice of
a proposed sale by Trustee, whether or not exempt, elect to
purchase such Company Stock from Trustee at fair market value, as
defined in Section 5A(f), and with the manner, conditions, and
closing of such sale to be agreed upon by Company and Trustee.
(h) Company shall be entitled to postpone the filing of
any registration statement and any amendment or supplement thereto
otherwise required to be prepared and filed by it, or to direct
that Trustee postpone any sale or put if, at the time it receives a
request for registration or sale, (i) Company determines, in its
reasonable business judgment, that such filing, registration and
offering, or sale or put, would materially interfere with the
likely success of a proposed purchase or sale of securities by
Company; or (ii) counsel for Company opines in writing that the
filing of such registration statement, amendment or supplement, or
sale or put would have a material adverse impact on any material
ongoing or pending transaction or program of Company or any of its
subsidiaries or any other circumstances; provided, that should such
delays adversely affect the Trustee's ability to pay benefits as
contemplated by this Trust Agreement, then Company shall advance
such funds as may be reasonably needed by Trustee for such proposed
pending sale.
(i) Notwithstanding any provisions above permitting
sale by Trustee of Company Stock, Trustee shall, until a Change of
Control or a tender or exchange offer for all or substantially all
of the issued and outstanding Common Stock, limit sales, whether
registered or exempt (other than sales described in Section 5A(f)),
by reference to the volume limitations for issuer repurchases
within Rule 10b-18; provided, that block sales may not exceed 25%
of the trading volume on the New York Stock Exchange, Inc. for the
14 day period prior to such sale. Company shall provide all
information reasonably required by Trustee to make determinations
as to the number of shares which may be sold,
and Trustee shall promptly notify Company as to all sales made
other than through a registered public offering.
(j) Company and Trustee shall each cooperate in good
faith and employ their reasonable best efforts in permitting and
effecting any purchase or sale of Company Stock as contemplated in
this Section 5A and each shall comply with all applicable laws and
regulations relating to the foregoing including, without
limitation, federal and state securities laws, rules and
regulations issued thereunder, and any other governmental or stock
exchange requirements or regulations relating thereto.
Section 6. Disposition of Income.
During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and
reinvested.
Section 7. Accounting by Trustee.
Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions
required to be made, including such specific records as shall be
agreed upon in writing between Company and Trustee. Within forty
five (45) days following the close of each calendar year and within
forty-five (45) days after the removal or resignation of the
Trustee, Trustee shall deliver to Company a written account of its
administration of the Trust during such year or during the period
from the close of the last preceding year to the date of such
removal or resignation, setting forth all investments, receipts,
disbursements and other transactions effected by it, including a
description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales (accrued
interest paid or receivable being shown separately), and showing
all cash, securities and other property held in the Trust at the
end of such year or as of the date of such removal or resignation,
as the case may be. In addition, as of the end of each calendar
month (referred to in this Trust as a "valuation date"), within ten
(10) days after each such month-end, Trustee shall deliver to
Company a written account setting forth the value of the Trust's
assets, together with such other information as shall be agreed
upon between Company and Trustee.
Section 8. Responsibility of Trustee.
(a) Trustee shall act with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent
person acting in like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with
like aims, provided, however, that Trustee shall incur no liability
to any person for (i) any action taken pursuant to a direction,
request or approval given by Company or a Trustee's Contractor
which is contemplated by, and in conformity with, the terms of the
Plan(s) or this Trust and is given in writing by Company or a
Trustee's Contractor (other than Trustee when it acts as Trustee's
Contractor), or (ii) the investment in, or retention of, Company
Stock pursuant to the terms of this Agreement, and no such action
shall be considered a breach of the fiduciary standard herein set
forth. In the event of a dispute between Company or a Trustee's
Contractor and a party, Trustee may apply to a court of competent
jurisdiction to resolve the dispute.
(b) If Trustee undertakes or defends any litigation arising
in connection with this Trust or a Plan (including without
limitation any action to compel funding of the Trust pursuant to
Section 1 hereof, to compel Company to take any action under the
Trust or the Plan(s), or to determine Trustee's obligations
hereunder), Trustee shall be indemnified by the Trust against
Trustee's costs, expenses and liabilities (including, without
limitation, reasonable attorneys' fees and expenses) relating
thereto and the Trust shall be primarily liable for such payments,
other than those arising from Trustee's negligence or willful
misconduct. Trustee shall also be entitled to reasonable payment
from the Trust for the allocation of Trustee's personnel to the
investigation and defense or prosecution thereof, at Trustee's
normal hourly billing rates. If such costs, expenses and
liabilities are not paid from the Trust for any reason (including
without limitation insufficiency of the Trust's assets to satisfy
such obligations) in a reasonably timely manner, Company agrees to
indemnify Trustee against such costs, expenses and liabilities.
Anything in this subsection (b) to the contrary notwithstanding,
Company shall indemnify and hold Trustee harmless from and against
all costs, expenses and liabilities arising out of or relating to
the acquisition, retention or disposition of Company Stock, except
with respect to matters covered by the Trustee's indemnity to be
provided under Section 5A(e)(2).
(c) Trustee may consult with legal counsel (who may also be
counsel for Company generally) with respect to any of its duties
or obligations hereunder.
(d) Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other professionals
to assist it in performing any of its duties or obligations
hereunder.
(e) Trustee shall have, without exclusion, all powers
consistent with the terms hereof conferred on trustees by
applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset
of the Trust, Trustee shall have no power to name a beneficiary of
the policy other than the Trust, to assign the policy (as distinct
from conversion of the policy to a different form) other than to a
successor Trustee, or to loan to any person the proceeds of any
borrowing against such policy.
(f) Notwithstanding any powers granted to Trustee pursuant
to this Trust Agreement or to applicable law, Trustee shall not
have any power that could give this Trust the objective of
carrying on a business and dividing the gains therefrom, within
the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal
Revenue Code.
Section 9. Compensation and Expenses of Trustee.
All administrative and Trustee's fees as agreed upon between
Trustee and Company and reasonable expenses actually incurred by
the Trustee in performing its duties hereunder including the fees
and expenses of any third party which provides services
contemplated herein or in the Plan(s) shall be paid by Trustee
from the assets of the Trust and, until so paid, shall constitute
a lien on the assets of the Trust. If not so paid, the fees and
expenses shall be paid by Company.
Section 10. Resignation and Removal of Trustee.
(a) Trustee may resign at any time by written notice to
Company, which shall be effective sixty (60) days after receipt
of such notice unless Company and Trustee agree otherwise;
provided that in no event shall any such resignation take effect
prior to the appointment of a successor Trustee.
(b) Trustee may be removed by Company on sixty (60) days
notice or upon shorter notice accepted by Trustee.
(c) Upon a Change of Control, as defined herein, Trustee
may not be removed by Company for one (1) year. Additionally,
after the expiration of the one (1) year period following a Change
of Control, Trustee may be removed by Company only if Company
first obtains the express written consent to such removal of more
than twenty-five percent (25%) of the participants in the Plan(s).
(d) If Trustee resigns or is removed within one (1) year of
a Change of Control, as defined herein, Trustee shall select a
successor Trustee in accordance with the provisions of Section
11(b) hereof prior to the effective date of Trustee's resignation
or removal. Additionally, if Trustee resigns or is removed after
expiration of the one (1) year period following a Change of
Control, Company may select a successor Trustee in accordance with
the provisions of Section 11(b) hereof if it shall first obtain
the express written consent to the appointment of the proposed
successor of more than twenty-five percent (25%) of the
participants in the Plan(s). If Company fails to so appoint a
successor Trustee, Trustee shall select a successor Trustee. Upon
the appointment and acceptance by, and transfer of assets to, a
successor Trustee, Trustee shall have no further responsibilities
under this Trust Agreement.
(e) Upon resignation or removal of Trustee and appointment
of a successor Trustee, all assets shall subsequently be
transferred to the successor Trustee. The transfer shall be
completed within sixty (60) days after receipt of notice of
resignation, removal or transfer, unless Company extends the time
limit.
(f) If Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the effective
date of resignation or removal under paragraph (a) of this
section. If no such appointment has been made, Trustee may apply
to a court of competent jurisdiction for appointment of a
successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed and charged to the
Trust as administrative expenses of the Trust.
Section 11. Appointment of Successor.
(a) If Trustee resigns or is removed in accordance with
Section 10(a) or (b) or (c) hereof, Company may, subject to
Section 10(d), appoint any third party, such as a bank trust
department or other party that may be granted corporate trustee
powers under state or federal law, as a successor to replace
Trustee upon resignation or removal. The appointment shall be
effective when accepted in writing by the new Trustee, who shall
have all the rights and powers of the former Trustee, including
ownership rights in the Trust assets. The former Trustee shall
execute any instrument necessary or reasonably requested by
Company or the successor Trustee to evidence the transfer.
(b) If Trustee resigns or is removed pursuant to the
provisions of Section 10(a), (b), (c) or (d) hereof and selects a
successor Trustee pursuant to Section 10(d) hereof, Trustee may
appoint any third party such as a bank trust department or other
party that may be granted corporate trustee powers under state or
federal law. The appointment of a successor Trustee shall be
effective when accepted in writing by the new Trustee. The new
Trustee shall have all the rights and powers of the former
Trustee, including ownership rights in Trust assets. The former
Trustee shall execute any instrument necessary or reasonably
requested by the successor Trustee to evidence the transfer.
(c) A former Trustee shall prepare and deliver to Company
and to the successor Trustee a final accounting unless Company
waives Company's right to such accounting, and such accounting
shall be effective through the date of the former Trustee's
transfer of all assets to its successor. The successor Trustee
need not examine the records and acts of any prior Trustee unless
requested to do so by Company (and, after a Change of Control,
unless the successor Trustee in addition concludes that there is a
reasonable basis for such request by Company) and may retain or
dispose of existing Trust assets, subject to Sections 7 and 8
hereof. Subject to the foregoing, the successor Trustee shall not
be responsible for and Company shall indemnify and defend the
successor Trustee from any claim or liability resulting from any
action or inaction of any prior Trustee or from any other past
event, or any condition existing at the time it becomes successor
Trustee. The compensation arrangement for the successor Trustee
shall be reasonable in relation to the services to be performed by
the successor Trustee.
Section 12. Amendment or Termination.
(a) This Trust Agreement (including Appendix A hereto) may
be amended by a written instrument executed by Trustee and
Company. Notwithstanding the foregoing, (i) no such amendment
shall conflict with the terms of the Plan(s) as then in effect or
shall make the Trust revocable after it has become irrevocable in
accordance with Section 1(b) hereof and (ii) the duties and
responsibilities of Trustee shall not be increased without
Trustee's written consent.
(1) Furthermore, notwithstanding anything to the
contrary in this Trust Agreement (except as otherwise
provided in this Section 12), (i) prior to a Change of
Control, no amendment shall be made to Section 1(d) through
(h), Section 2, Section 4, Section 5(h), Section 10(c),
Section 10(d), this Section 12(a), Section 13(d), Section
13(g), Section 13(j), and Section 13(k), and no deletion
shall be made in Appendix A, without the prior written
consent of more than twenty-five percent (25%) of the
adversely affected participants in the Plan(s) unless such
amendment would not, in the opinion of counsel, have a
material and adverse effect on the rights or interests of
such participants; and (ii) following a Change of Control, no
amendment shall be made to any provision of this Trust
Agreement (including Appendix A hereto) without the prior
written consent of more than twenty-five percent (25%) of the
adversely affected participants in the Plan(s) unless such
amendment would not, in the opinion of counsel, have a
material and adverse effect on the rights or interests of
such participants.
(2) The limitations contained in Section 12(a)(1)
shall not apply with respect to any amendment which is
reasonably necessary, in the opinion of counsel, to preserve
the status of the Trust as a grantor trust and the status of
the Plan(s) as unfunded for federal income tax purposes and
for purposes of the Employee Retirement Income Security Act
of 1974, as amended, or to guard against an adverse impact on
Plan participants or beneficiaries and which, in the
opinion of counsel, is drafted primarily to preserve such
status or to reduce or eliminate such adverse impact on such
person or persons.
(3) In each instance in which an opinion of
counsel is contemplated in this Section 12(a) prior to a
Change of Control, such opinion shall be in writing and
delivered to Trustee, rendered by a nationally recognized law
firm selected by Company, and in each instance in which an
opinion of counsel is contemplated in this Section 12(a)
after a Change of Control, such opinion shall be in writing
and delivered to Trustee, rendered by a nationally recognized
law firm selected by the Trustee's Contractor. Trustee may
rely on all such opinions and determinations.
(b) The Trust shall not terminate until the date on which
Plan participants and their beneficiaries are no longer entitled
to benefits from Company pursuant to the terms of the Plan(s).
Upon termination of the Trust any assets remaining in the Trust
shall be returned to Company.
(c) Upon written approval of participants or beneficiaries
entitled to payment of benefits pursuant to the terms of the
Plan(s), Company may terminate this Trust prior to the time all
benefit payments under the Plan(s) have been made. All assets in
the Trust at termination shall be returned to Company.
(d) Trustee may rely for purposes of this Section 12 on a
certificate furnished by Company prior to a Change of Control, and
by the Trustee's Contractor after a Change of Control,
(i) with respect to any amendment requiring the prior written
consent of more than twenty-five percent (25%) of the adversely
affected participants in the Plan(s) pursuant to subsection (a) of
this Section 12, that such consent has been obtained, (ii) with
respect to subsection (b) of this Section 12, that Plan
participants and their beneficiaries are no longer entitled to
benefits pursuant to the terms of the Plan(s), and (iii) with
respect to subsection (c) of this Section 12, that the written
approval of participants or beneficiaries entitled to payment of
benefits pursuant to the terms of the Plan(s) has been obtained.
Section 13. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
(b) Benefits payable to Plan participants and their
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed
in accordance with the laws of New York.
(d) For purposes of this Trust, Change of Control shall
mean: (i) any "person" (as such term is defined in the Securities
Exchange Act of 1934, as amended), other than a trustee or other
fiduciary holding securities under an employee benefit plan of
Company or a corporation owned directly or indirectly by the
shareholders of Company in substantially the same proportions as
their ownership of stock of Company, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of Company representing 20% or more of
the total voting power represented by
Company's then outstanding voting securities; or (ii) during any
period of two consecutive years, individuals who at the beginning
of such period constitute the Board of Directors of Company and
any new director whose election by the Board of Directors or
nomination for election by Company's shareholders was approved by
a vote of at least two-thirds of the directors who either were
directors at the beginning of the two-year period or whose
election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof.
Notwithstanding anything to the contrary in this Trust Agreement,
for purposes of Section 5 and Section 5A hereof, "50%" shall be
substituted for "20%" where such reference appears in clause (i)
of this Section 13(d). For all purposes of this Trust Agreement,
Trustee shall have no responsibility whatsoever to determine
whether or not a Change of Control of Company has occurred.
(e)(1) After the execution of this Trust Agreement,
Company shall promptly file with Trustee, and following the
appointment of a Trustee's Contractor, Company shall promptly
file with the Trustee's Contractor, a certified list of the
names and specimen signatures of the officers of Company and
any delegate authorized to act for it. Unless Company
notifies Trustee to the contrary, Company shall act through
its Treasurer or any person who such Treasurer authorizes in
writing to act on his behalf or any other person who is
authorized to act on Company's behalf by a resolution of
Company's Board of Directors. Company shall promptly notify
Trustee and the Trustee's Contractor, if applicable, of the
addition or deletion of any person's name to or from such
list, respectively. Until receipt by Trustee and/or the
Trustee's Contractor of notice that any person is no longer
authorized so to act, Trustee or the Trustee's Contractor may
continue to rely on the authority of the person. All
certifications, notices and directions by any such person or
persons to Trustee or the Trustee's Contractor shall be in
writing signed by such person or persons. Trustee and the
Trustee's Contractor may rely on any certification, notice or
direction of Company that the Trustee or the Trustee's
Contractor reasonably believes to have been signed by a duly
authorized officer or agent of Company. Trustee and the
Trustee's Contractor shall have no responsibility for acting
or not acting in reliance upon any notification reasonably
believed by Trustee or the Trustee's Contractor to have been
signed by a duly authorized officer or agent of Company.
(e)(2) After the engagement of a Trustee's Contractor
(other than Trustee), the Trustee's Contractor shall promptly
file with Trustee a certified list of the names and specimen
signatures of the officers of the Trustee's Contractor and
any delegate authorized to act for it. Trustee's Contractor
shall promptly notify Trustee of the addition or deletion of
any person's name to or from such list. Until receipt by
Trustee of notice that any person is no longer authorized so
to act, Trustee may continue to rely on the authority of the
person. All certifications, notices and directions by any
such person or persons to Trustee shall be in writing signed
by such person or persons. Trustee may rely on any such
certification, notice or direction of the Trustee's
Contractor that Trustee reasonably believes to have been
signed by or on behalf of a duly authorized officer or agent
of the Trustee's Contractor. Trustee shall have no
responsibility for acting or not acting in reliance upon any
notification reasonably believed by the Trustee to have been
signed by a duly authorized officer or agent of the Trustee's
Contractor.
(f) Neither the gender nor the number (singular or plural)
of any word shall be construed to exclude another gender or number
when a different gender or number would be appropriate.
(g)(1) This Trust Agreement shall be binding upon and
inure to the benefit of any successor(s) to Company and
Trustee.
(g)(2)(A) If there is a transfer of any liability for
the payment of any Transferred Benefit (as defined below) to
any individual or entity (the "New Company") as a result of
any transaction, including without limitation any sale of
Company, its business or a portion thereof, merger,
consolidation, reorganization, spin-off, division or transfer
of assets (hereinafter a "corporate transaction") and there
is a "Default" (as defined below) by New Company with respect
to the payment of such benefit, Company shall (subject to
this Section 13(g)(2)) pay such unpaid Transferred Benefit
which is otherwise due and payable (and such payment may be
made on Company's behalf from this Trust pursuant to Section
2) if (i) this Trust remains in effect at the time such
benefit is payable, (ii) there are sufficient assets in this
Trust to pay such benefit and (iii) Section 13(g)(3) does not
apply to such corporate transaction.
(g)(2)(B) For purposes of this Section 13(g)(2):
(i) the term "Transferred Benefit" shall mean any
Plan benefit (I) which is attributable to compensation
deferrals made for pay periods ending before the
effective date of such corporate transaction under any
Plan(s) which are plans of deferred compensation and any
interest on such deferrals (at an interest rate no
higher than the rate payable under the terms of the Plan
as of the date of such transaction) or which was accrued
under any Plan(s) which are supplemental retirement or
pension plans before the effective date of any such
transaction, (II) for which the liability for payment
was transferred to New Company in connection with such
corporate transaction and
(III) which are properly payable under the terms and
conditions of the Plan(s) as in effect as of the date of
such corporate transaction; and
(ii) the term "Default" shall mean a default on the
payment of a Transferred Benefit by the New Company if
(I) the affected participant or beneficiary has timely
and properly made a claim for such benefit and has
exhausted all claims and claims review procedures
properly imposed under the terms of the Plan(s) with
respect to such benefit, (II) such participant or
beneficiary has agreed to provide and timely provides
whatever information Company or a Trustee's Contractor
might request from such person with respect to such
Transferred Benefit and New Company and (III) such
participant or beneficiary promptly takes whatever
action is reasonably requested by Company or the
Trustee's Contractor to enable Company or the Trustee to
be fully subrogated to the extent of any such payments
to all the rights, claims and remedies such participant
or beneficiary might have against New Company for the
payment of the related Transferred Benefits. Trustee
shall not be required to take any action with respect to
a subrogation claim unless there
are sufficient assets in the Trust to cover the expense
thereof.
(g)(2)(C) The liability of Company under this Section
13(g)(2) shall not exceed the value of the assets of the
Trust as of the date payment is to be made by Company under
this Section 13(g)(2).
(g)(3) The provisions of Section 13(g)(2) shall not
apply to, and Company for purposes of Section 12(b) and each
other provision of this Trust Agreement shall be deemed to
have paid in full and shall have no further obligation to
pay, any Transferred Benefit which is payable following any
corporate transaction (i) which involves a Disposition, if
there is established, or there is imposed on Company's
successor an obligation to establish (or there is otherwise
provided with respect to affected Plan participants and
beneficiaries), with respect to the Transferred Benefit an
irrevocable trust which, in the opinion of counsel, meets the
requirements for a "rabbi trust" as set forth in the model
grantor trust agreement contained in Rev. Proc. 92-64, 1992-2
C. B. 422, or any successor to such Revenue Procedure, with a
bank as trustee, and which when established (or, if already
in existence, at the effective date of such corporate
transaction) is funded to at least the funding level of this
Trust, or (ii) which does not involve a Disposition, if (A)
there is established, or there is imposed on Company's
successor an obligation to establish, with respect to the
Transferred Benefit a trust which, in the opinion of counsel,
has terms substantially similar to any one of the Trusts
under Executive Benefit Plan(s) established by Company or a
subsidiary on or before the date hereof, as such trusts are
then in effect, with a bank as trustee, and which when
established is funded to at least the funding level of this
Trust; or (B) the Transferred Benefit becomes covered, as of
the effective date of such corporate transaction, by any
trust described in, or previously established pursuant to,
(A) above and which trust, if such transfer takes place on or
after a Change of Control has occurred, is funded (after
taking into account the Transferred Benefit) to at least the
funding level of this Trust. The determination of whether
the requirements of the preceding sentence have been
satisfied shall be made by Company; provided, however, that
following the engagement of a Trustee's Contractor, such
determinations shall be made by Trustee's Contractor. The
opinions of counsel contemplated in this Section 13(g)(3)
shall be in writing and delivered to Trustee, rendered by
counsel for Company or, following the engagement of a
Trustee's Contractor, counsel selected by Trustee's
Contractor. Trustee may rely on the accuracy of all such
determinations and opinions. For purposes of this Section
13(g)(3), "funding level" shall have the meaning ascribed to
such term in Section 1(e)(2) hereof, except that (i) in
determining Current Liability of a trust other than this
Trust, reference shall be made to liabilities under the
plan(s) covered by each such trust and (ii) in determining
funding level as of any date other than the last day of any
trust's (including this Trust's) fiscal year, there may be
employed reasonable estimation techniques, consistently
applied.
(g)(4) For purposes of this Trust Agreement, there
shall be a "Disposition" of Company or its business, or a
portion thereof, whenever as a result of any transaction the
Company, successor(s) to Company or its business, or a
portion thereof as the case may be, is not a member of
Company's "controlled group of corporations", as such term is
defined in Section 1563(a) of the Internal Revenue Code of
1986, as amended, substituting "more than 50 percent" for the
phrase "at least 80 percent" each place it appears in Section
1563(a)(1).
(h) This Trust Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original,
but all of which shall together constitute only one Agreement.
(i) Communications to Trustee shall be sent to Bankers
Trust Company, 280 Park Avenue, New York, New York 10017
ATTENTION: Senior Vice President, Retirement Services Group, or
to such other address as Trustee may specify in writing. No
communication shall be binding upon Trustee until it is received
by Trustee. Communications to Company and the Trustee's
Contractor shall be sent to the principal offices of Company or
the Trustee's Contractor, as the case may be, or to such other
address as Company or the Trustee's Contractor, as applicable, may
specify in writing.
(j) In the event the participants and beneficiaries in one
or more of the Plan(s) are determined generally to be subject to
federal income tax on any amount in the Trust prior to the time of
payment hereunder, the entire amount determined to be so taxable
shall be distributed by Trustee to each affected participant or
beneficiary. Company may, at its option, make such payments
directly to affected participants and beneficiaries. An amount
shall be determined to be subject to federal income tax upon the
earliest of: (a) a final determination by the United States
Internal Revenue Service addressed to a participant or beneficiary
which is not appealed to the courts; (b) a final determination by
the United States Tax Court or any other federal court affirming
any such determination by the Internal Revenue Service; or (c) an
opinion by counsel for Company reasonably acceptable to Trustee
addressed to Company and Trustee, that, by reason of the Treasury
Regulations, amendments to the Internal Revenue Code, published
Internal Revenue Service rulings, court decisions or other
substantial precedent, amounts hereunder are generally subject to
federal income tax prior to payment; provided, that following a
Change of Control, only an opinion by counsel selected by the
Trustee's Contractor may be accepted by Trustee for purposes of
(c). Company shall undertake at its sole expense to defend any
tax claims described herein which are asserted by the Internal
Revenue Service against any participant or beneficiary and which
it determines would affect participants or beneficiaries
generally, including attorneys' fees and costs of appeal, and
shall have the sole authority to determine whether or not to
appeal any determination made by the Internal Revenue Service or
by a lower court. Company also agrees to reimburse any
participant or beneficiary for any interest or penalties in
respect of tax claims hereunder which it determines would affect
participants or beneficiaries generally, upon receipt of
documentation of same. Any distributions from the Trust to a
participant or beneficiary under this Section 13(j) (other than
reimbursements of interest or penalties referred to in the
preceding sentence) shall reduce the benefits payable to such
participant and/or beneficiary under the Plan(s).
(k) (k) In the event that Company shall fail to
satisfy any obligation of Company to a Plan participant or
beneficiary under this Trust Agreement, or in one or more of the
Plan(s), after reasonable notice and demand with respect thereto,
and one or more participants or beneficiaries obtains a final
determination by a court of competent jurisdiction that Company
has so failed, such participant(s) or beneficiary(ies) shall be
indemnified by the Trust against reasonable and appropriate costs
and
expenses (including without limitation reasonable attorneys' fees
and expenses) relating thereto and the Trust shall be primarily
liable for such payments. Interest on any Plan benefit payments
which such court determines have been delayed to the extent
interest or similar payments in an equal or greater amount are not
provided in the Plan or by the court or otherwise shall also be
paid from the assets of the Trust. Such interest shall be
calculated using a rate of interest equal to the rate of interest
on ten (10) year United States Treasury obligations, as determined
on the first day of each calendar quarter, compounded quarterly.
If such costs, expenses and interest are not paid from the Trust
for any reason (including without limitation insufficiency of the
Trust's assets to satisfy such obligations) in a reasonably timely
manner, such participant(s) or beneficiary(ies) may obtain payment
from Company.
(l) Nothing herein shall be construed as restricting or
limiting in any way amendment of the Plan(s) in accordance with
the terms of the Plan(s).
(m) Any other provisions of this Trust Agreement to the
contrary notwithstanding, this Trust shall terminate no later than
the twenty-first anniversary of the date of death of the survivor
from among a class consisting of all of the descendants of the
late Joseph P. Kennedy, the former Ambassador to the Court of
Saint James, who are living on the date of the establishment of
the Trust and, if the Trust is still in existence on such
anniversary date, Trustee shall dispose of the Trust as Company
shall direct.
(n) In case of any conflict or inconsistency between
the terms of this Trust Agreement and any Plan, the terms of this
Trust Agreement shall control.
Section 14. Effective Date.
The effective date of this Trust Agreement shall be the date
of its execution set forth on page 1 of the Trust Agreement.
IN WITNESS WHEREOF, the parties hereto have caused the Trust
Agreement to be duly executed and their respective corporate seals
to be hereto affixed on the date set forth on page 1 of the Trust
Agreement.
BELLSOUTH CORPORATION
By:/s/Kincaid Paterson for
Title: Vice President, Secretary
and Treasurer
(CORPORATE SEAL)
ATTEST: /s/Marcy A. Bass
Title: General Attorney & Assistant Secretary
BANKERS TRUST COMPANY,
as Trustee
By:/S/ Robert M. Bysshe
Title:Managing Director
(CORPORATE SEAL)
ATTEST: /s/David Abramson
Title: Vice President and Counsel
APPENDIX A
! BellSouth Nonqualified Deferred Compensation Plan
! BellSouth Nonqualified Deferred Income Plan
! BellSouth Corporation Supplemental Executive Retirement Plan
! BellSouth Corporation Executive Incentive Award Deferral
Plan
! BellSouth Corporation Section 415 Excess Pension Plan
BELLSOUTH TELECOMMUNICATIONS,
INC. TRUST UNDER EXECUTIVE BENEFIT
PLAN(S)
TABLE OF CONTENTS
Section 1. Establishment of Trust 2
Section 2. Payments to Plan Participants and
Their Beneficiaries 6
Section 3. Trustee Responsibility Regarding Payments
to Trust Beneficiary When Company is Insolvent 9
Section 4. Payments to Company 10
Section 5. Investment Authority 11
Section 5A. Sale of Company Stock by Trustee 15
Section 6. Disposition of Income 19
Section 7. Accounting by Trustee 19
Section 8. Responsibility of Trustee 19
Section 9. Compensation and Expenses of Trustee 20
Section 10. Resignation and Removal of Trustee 21
Section 11. Appointment of Successor 22
Section 12. Amendment or Termination 22
Section 13. Miscellaneous 24
Section 14. Effective Date 29
BELLSOUTH TELECOMMUNICATIONS, INC.
TRUST UNDER EXECUTIVE BENEFIT PLAN(S)
This Agreement made this 23rd day of May, 1996, by and
between BellSouth Corporation, a Georgia corporation
(BellSouth), BellSouth Telecommunications, Inc., a Georgia
corporation whollyowned by BellSouth (Company), and Bankers
Trust Company, a New York corporation (Trustee);
(a) WHEREAS, Company has adopted the nonqualified
deferred compensation Plan(s) as listed in Appendix A;
(b) WHEREAS, Company has incurred or expects to incur
liability under the terms of such Plan(s) with respect to the
individuals participating in such Plan(s);
(c) WHEREAS, to make certain provisions for the payment
of such liability BellSouth and Trustee on April 25, 1990
executed a trust agreement for the benefit of certain officers
and certain key managers of BellSouth and its affiliates
(including Company) who participate in the Plan(s) (the
"Predecessor Trust");
(d) WHEREAS, Company and Trustee on April 29, 1993
amended and restated the Predecessor Trust insofar as it
related to Company's obligations (but not obligations of
subsidiary or other affiliated entities) to pay benefits under
the Plan(s) (hereinafter, called "Trust") and contributed
assets to the Trust, subject to the claims of Company's
creditors in the event of Company's Insolvency, as herein
defined, until full payment has been made in respect of such
obligations of Company to Plan participants and their
beneficiaries in such manner and at such times as specified in
the Plan(s);
(e) WHEREAS, BellSouth, Company and Trustee on April 28,
1995 amended and restated the Trust;
(f) WHEREAS, BellSouth, Company and Trustee now desire
once again to amend and restate the Trust in the form of this
Trust Agreement;
(g) WHEREAS, it is the intention of the parties that this
Trust shall constitute an unfunded arrangement and shall not
affect the status of the Plan(s) as an unfunded plan maintained
for the purpose of providing deferred compensation for a select
group of management or highly compensated employees or as an
excess benefit plan for purposes of Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA");
(h) WHEREAS, it is the intention of Company to make
contributions to the Trust to provide itself with a source of
funds to assist it in the meeting of its liabilities under the
Plan(s);
NOW, THEREFORE, the parties do hereby establish the Trust
and agree that the Trust shall be comprised, held and disposed
of as follows:
Section 1. Establishment of Trust.
(a) BellSouth, Company and Trustee hereby amend and
restate in all respects the Trust in the form of this Trust
Agreement. The principal of the Trust shall be held,
administered and disposed of by Trustee as provided in this
Trust Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which
Company is the grantor, within the meaning of subpart E, part
I, subchapter J, chapter 1, subtitle A of the Internal Revenue
Code of 1986, as amended, and shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon
shall be held separate and apart from other funds of Company
and shall be used exclusively for the uses and purposes of Plan
participants and general creditors as herein set forth. Plan
participants and their beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets
of the Trust. Any rights created under the Plan(s) and this
Trust Agreement shall be mere unsecured contractual rights of
Plan participants and their beneficiaries against Company. Any
assets held by the Trust will be subject to the claims of
Company's general creditors under federal and state law in the
event of Insolvency, as defined in Section 3(a) herein.
(e)(1) Company, in its sole discretion, may at any
time, or from time to time, make additional deposits of
cash or other property acceptable to Trustee in trust with
Trustee to augment the principal to be held, administered
and disposed of by Trustee as provided in this Trust
Agreement. Neither Trustee nor any Plan participant or
beneficiary shall have any right to compel any such
additional deposits under this subsection (1).
(2) If, as of the last day of a fiscal year of the
Trust, the funding level of the Trust shall be less than
eighty percent (80%) of the Trust's funding level as of
the last day of any of the five (5) most recently
preceding fiscal years of the Trust (taking into account
contributions made under this Section 1(e)(2) for each
such year), BellSouth shall notify Trustee of such
situation and Company shall make an irrevocable
contribution to the Trust within one hundred eighty (180)
days following the last day of such fiscal year. Such
contribution shall be in the amount which, had such
contribution been made as of the last day of such fiscal
year of the Trust, would have been sufficient to bring the
Trust's funding level equal to the Trust's funding level
as of the last day of the fiscal year among the five (5)
most recently preceding fiscal years on which the Trust's
funding level was highest. In no event shall such
contribution be required if, as of the last day of such
fiscal year, the fair market value of the Trust's assets
is one hundred percent (100%), or greater, of the
aggregate Current Liability (as defined in subsection (5)
of this Section 1(e)) of Company under the Plan(s). For
purposes of this Section 1(e)(2), "funding level" shall
mean the ratio (stated as a percentage) that the fair
market value of the assets in the Trust bears to the
aggregate Current Liability of Company under the Plan(s).
(3) If, as of the last day of a fiscal year of the
Trust, the funding level of the Trust (taking into account
any contribution required under subsection (2) of this
Section 1(e)) shall be less than one hundred percent (100%),
BellSouth shall notify Trustee of such situation and Company
shall make an irrevocable contribution to the Trust within
one hundred eighty (180) days following the last day of such
fiscal year. Such contribution shall be in the amount which,
had the contribution been made as of the last day of such
fiscal year of the Trust, would have been sufficient to bring
the Trust's funding level to 100% as of the last day of such
fiscal year. For purposes of this Section 1(e)(3), "funding
level" shall mean the ratio (stated as a percentage) that the
fair market value of the assets in the Trust bears to the
aggregate Current Liability of Company under the Plan(s);
provided, that such Current Liability shall be determined
using, instead of the interest rate described in Section
1(e)(5) hereof, the valuation interest rate assumption
reported by the enrolled actuary for Company's principal
defined benefit pension plan (measured by the number of
active management employees of Company and affiliated
entities participating in all such plans at the end of the
respective plan year which coincides with or ends within the
fiscal year of the Trust), in its actuarial valuation report
for such plan for such plan year, for purposes of funding
such respective plan for such plan year. Notwithstanding the
foregoing, (1) if the enrolled actuary for Company's
principal defined benefit pension plan changes the applicable
valuation interest rate reported for a plan year, as
described in the sentence above, in the enrolled actuary's
actuarial statement and opinion subsequently prepared as part
of the annual report required by ERISA for such plan year,
(i) BellSouth shall so notify the Trustee, (ii) the changed
valuation interest rate shall be substituted for the
originally reported valuation interest rate in determining
Company's contribution required under this Section 1(e)(3)
above, and (iii) Company shall make any additional required
contribution resulting from such change within sixty (60)
days after the change, and (2) if as of the end of a fiscal
year of the Trust, Company and affiliated entities do not
maintain a defined benefit pension plan covering management
employees with assets having an aggregate market value of at
least Fifty Million Dollars ($50,000,000.00), Current
Liability for purposes of this Section 1(e)(3) shall be
determined using an interest rate assumption equal to the
average of the monthly averages of the 30-year constant
maturity U.S. Treasury rate, expressed in percent per annum,
during such fiscal year of the Trust, as published in the
Federal Reserve Report, a successor report or, if there is no
successor report, comparable data, plus one percent (1%) per
annum.
(4) For purposes of subsections (2) and (3) of this
Section 1(e), the funding level of the Trust and all related
determinations shall be made by BellSouth; provided, however,
that following the engagement of a Trustee's Contractor, such
determination shall be made by Trustee's Contractor. The
Trustee may rely on the accuracy of all such determinations.
(5)(A) For purposes of this Trust, "Current
Liability" shall mean the amount required to pay each Plan
participant or beneficiary the benefits to which Plan
participants or their beneficiaries would be entitled
pursuant to the terms of the Plan(s), to the extent such
benefits are obligations of Company (and not obligations of
subsidiary or other affiliated entities). The Current
Liability on any date with respect to a Plan shall be
determined as if the Plan terminated as of such date using an
interest rate (subject to Section 1(e)(3)) equal to the
Pension Benefit Guaranty Corporation valuation interest rate
for immediate annuities as in effect on such date, the 1983
Group Annuity Mortality Table published by the Society of
Actuaries, and reasonable actuarial calculation principles
consistently applied. Current Liability shall be determined,
as of the last day of each fiscal year of the Trust and at
such additional times as are necessary to implement the
provisions of this Trust Agreement, by BellSouth; provided,
however, that following the engagement of a Trustee's
Contractor, such determinations shall be made by Trustee's
Contractor. The Trustee may rely on the accuracy of all such
determinations.
(5)(B) In the event that the interest rate assumption
described in subsection (5)(A) above is at any time no longer
available or the mortality assumption described above is at
any time no longer considered a reasonable and reliable
mortality assumption, other interest rate (subject to Section
1(e)(3)) or mortality assumptions,
as the case may be, deemed generally comparable to the above
specified assumptions, may be used instead. All determinations
regarding substitute assumptions, including whether such
substitution is reasonably necessary and the selection of the
substitute assumption(s), shall be made by BellSouth; provided,
however, that following the engagement of a Trustee's Contractor,
such determinations shall be made by Trustee's Contractor.
(f) Upon a Change of Control, BellSouth shall promptly notify
Trustee thereof and, as soon as possible, but in no event longer
than one hundred twenty (120) days following the Change of Control,
as defined herein, Company shall make an irrevocable contribution
to the Trust in an amount that is sufficient to pay each Plan
participant or beneficiary the benefits to which Plan participants
or their beneficiaries would be entitled pursuant to the terms of
the Plan(s), to the extent such benefits are obligations of Company
(and not obligations of subsidiary or other affiliated entities),
as of the date on which the Change of Control occurred. Such
contribution shall be in an amount equal to the excess, if any, of
the aggregate Current Liability as of the date on which the Change
of Control occurred over the fair market value of the Trust's
assets as of the valuation date most recently preceding the date on
which such contribution is made. Thereafter, Company shall make an
additional contribution each fiscal year to the Trust, as soon as
possible, but in no event longer than one hundred twenty (120) days
following the last day of each such fiscal year, in an amount equal
to the excess, if any, of the aggregate Current Liability under the
Plan(s) as of the last day of the fiscal year over the fair market
value of the Trust's assets as determined on the valuation date
most recently preceding the date on which such contribution is
made. The amount of all such contributions shall be determined by
Trustee's Contractor. The Trustee may rely on the accuracy of all
such determinations.
(g) If, as of a Distribution Date with respect to outstanding
rights to purchase Series A First Preferred Stock, under the terms
of and as defined in a Rights Agreement between BellSouth and
Chemical Bank, as Rights Agent, under an agreement originally dated
November 27, 1989 (a "Distribution Date"), the aggregate Current
Liability exceeds the fair market value of the Trust's assets (such
fair market value determined as of the valuation date most recently
preceding such Distribution Date), Company shall be required to
make an additional contribution to
the Trust in an amount equal to such excess or, at Company's
option, to obtain a letter of credit, or a series of letters of
credit, adequate to fund such amount as of such Distribution Date
under the Plan(s) and maintain such letter(s) of credit until such
time as the aggregate Current Liability no longer exceeds the fair
market value of the Trust's assets. The determination of whether
the aggregate Current Liability exceeds the fair market value of
the Trust's assets upon a Distribution Date and, if so, the amount
of such excess, shall be made by BellSouth; provided, however,
that following the engagement of a Trustee's Contractor, such
determinations shall be made by Trustee's Contractor. The Trustee
may rely on the accuracy of all such determinations. Any such
letter of credit, or series of letters of credit, shall be part of
the general assets of Company and shall not be an asset of this
Trust and, unless otherwise agreed to in writing by Trustee,
Trustee shall have no responsibility whatsoever with respect to
the adequacy of, or selection of the issuer or issuers of, any
such letter or letters of credit.
(h) If, in any five (5) consecutive calendar year period,
(i) there are five (5) or more final determinations by courts of
competent jurisdiction that (A) BellSouth or a subsidiary of
BellSouth, including Company, which both is a member of
BellSouth's "controlled group of corporations" as such term is
defined in Section 13(g)(4) and has adopted a Plan (a
"Participating Company") has failed to pay (after reasonable
notice and demand for payment) any benefit due under the terms and
conditions of a Plan and that (B) there was no material issue of
fact or law respecting such company's obligation to make such
benefit payment, or (ii) there are two (2) or more final
determinations by courts of competent jurisdiction, in lawsuits
instituted after reasonable notice and demand with respect
thereto, in which the court determines that BellSouth or a
Participating Company had acted in bad faith and with a clear and
deliberate disregard for such company's obligations under the
Plan(s), there shall be deemed to have occurred a Change of
Control as defined in this Trust Agreement and BellSouth shall
give Trustee prompt written
notice of such event. For purposes of this Trust Agreement, the
term "final determination" means a determination with respect to
which all rights of appeal or to request a review, a rehearing or
redetermination have been exhausted or have lapsed.
Section 2. Payments to Plan Participants and Their
Beneficiaries.
(a) BellSouth or the Trustee's Contractor if one shall have
been engaged, shall deliver to Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable by Company in
accordance with the terms and conditions of the Plan(s) in respect
of each Plan participant (and his or her beneficiaries), that
provides a formula or other instructions acceptable to Trustee for
determining the amounts so payable, the form in which such amount
is to be paid (as provided for or available under the Plan(s)),
and the time of commencement for payment of such amounts. Except
as otherwise provided herein, Trustee shall make payments to the
Plan participants and their beneficiaries in accordance with such
Payment Schedule. The Trustee shall make provision for the
reporting and withholding of any federal, state or local taxes
that may be required to be withheld with respect to the payment of
benefits pursuant to the terms of the Plan(s) and shall pay
amounts withheld to the appropriate taxing authorities or
determine that such amounts have been reported, withheld and paid
by Company. Payments may be made in cash or, where called for
under the terms of the Plan(s), in Company Stock (as such term is
defined in Section 5(g) hereof).
Notwithstanding the foregoing, if a benefit which is distributable
in the form of Company Stock under the terms of a Plan becomes
payable at a time when there is no (or insufficient) Company Stock
in the Trust with which to satisfy such benefit obligation, and if
Company fails or refuses to pay such benefit within a reasonable
time after notice from Trustee that it has become so payable,
Trustee shall use other assets of the Trust to acquire Company
Stock, on the open market or otherwise in its discretion,
sufficient to satisfy such benefit obligation.
(b) The entitlement of a Plan participant or his or her
beneficiaries to benefits payable by Company under the Plan(s)
shall be determined in accordance with the terms of the Plan(s) by
BellSouth (or Company) or such party as it shall designate under
the Plan(s), or the Trustee's Contractor if one shall have been
engaged, and any claim for such benefits shall be considered and
reviewed and paid or not paid under the procedures set out in the
Plan(s). Notwithstanding any Plan provision to the contrary, if a
Trustee's Contractor shall have been engaged, all such
determinations shall be made by the Trustee's Contractor whose
determinations shall be final, conclusive and binding on all
persons. Neither Trustee nor Trustee's Contractor shall have any
obligation for determining whether any Plan participant or
beneficiary has died and shall be entitled to rely upon any
information in this regard furnished by BellSouth or Company.
(c) Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the
terms of the Plan(s). In such event, Company shall make provision
for the reporting and withholding of any federal, state or local
taxes that may be required to be withheld with respect to the
payment of benefits pursuant to the terms of the Plan(s) and shall
pay amounts withheld to the appropriate taxing authorities.
BellSouth shall notify Trustee of Company's decision to make
payment of benefits directly prior to the time amounts are payable
to participants or their beneficiaries. In addition, if the
principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits payable by Company in
accordance with the terms of the Plan(s), Company shall make the
balance of each such payment as it falls due. Trustee shall notify
BellSouth where principal and earnings are not sufficient.
(d) BellSouth may engage a third party administrator as a
contractor of the Trustee ("Trustee's Contractor"), who shall not
be a Plan participant or beneficiary (but who may be the Trustee),
to perform functions described in this Section 2(d) and elsewhere
in this Trust Agreement which would otherwise be performed by
BellSouth or Company.
(1) Upon engagement of a Trustee's Contractor, as soon
as practicable but in no event longer than thirty (30) days
thereafter, BellSouth shall furnish to the Trustee's
Contractor copies of the Plan documents, employment records
of participants, and other information necessary to determine
the benefits which are or may become payable by Company to or
with respect to each participant in each Plan, including any
benefits payable after the participant's death, and the
recipient of same and the procedures which BellSouth has
adopted to calculate such benefit payments. BellSouth shall
regularly, at least annually, and upon each benefit change
under the Plan(s) furnish revised, updated information to the
Trustee's Contractor. In the event BellSouth refuses or
neglects to provide updated participant information as
contemplated herein, the Trustee's Contractor shall be
entitled to rely on the most recent information
furnished to it by BellSouth.
(2) In the event of a Change of Control, BellSouth
shall have the duty to engage, as soon as practicable
thereafter, a Trustee's Contractor reasonably acceptable to
the Trustee if there shall at that time be no Trustee's
Contractor then serving. In addition, if as of a
Distribution Date (as such term is defined in Section 1(g)
hereof), there shall be no Trustee's Contractor then serving,
BellSouth shall have the duty to designate on a stand-by
basis a Trustee's Contractor who shall commence to serve as
Trustee's Contractor in the event such Distribution Date is
followed by a Change of Control. After a Change of Control,
BellSouth shall not have any control or authority with
respect to the Trustee's Contractor so engaged or then
serving, or any successor Trustee's Contractor, including
without limitation any rights with respect to the removal or
replacement of any such Trustee's Contractor or its duties
pursuant to this Trust Agreement.
(3) Unless Trustee agrees to perform the functions of
the Trustee's Contractor described herein, Trustee shall have
no responsibility hereunder for any obligation assigned to a
Trustee's Contractor or (subject to subsection (4) below) for
the performance of a Trustee's Contractor's duties and
responsibilities under this Trust Agreement.
(4) BellSouth may replace or remove any Trustee's
Contractor from time to time serving hereunder, in its sole
discretion, prior to the occurrence of a Change of Control.
Following a Change of Control, Trustee, in its sole
discretion, may remove a Trustee's Contractor engaged by
BellSouth or any successor Trustee's Contractor and shall
remove any such person and engage a successor to such person
if Trustee deems such person's performance as a Trustee's
Contractor unsatisfactory. At all times following a Change
of Control, upon any such removal, or the voluntary
resignation of any such Trustee's Contractor or the
occurrence of any other event which shall result in the
cessation of performance of the Trustee's Contractor's duties
hereunder, Trustee shall use its best efforts to engage a new
Trustee's Contractor (which may be Trustee); provided,
however, Trustee shall perform the duties of the Trustee's
Contractor during any period for which Trustee is unable to
find a new Trustee's Contractor (so that there will be no
default in payments under the Plan(s) as a result of the
absence of a Trustee's Contractor), and any person engaged as
a Trustee's Contractor shall in the judgment of Trustee be
independent of Company and BellSouth. The person who removes
or replaces a Trustee's Contractor shall be responsible for
assuring that there is a timely and complete transfer of
records from such Trustee's Contractor to such person's
successor.
(5) Except for the records dealing solely with the
assets of the Trust and investment of those assets, which
shall be maintained by the Trustee, if a Trustee's Contractor
shall be engaged, the Trustee's Contractor shall maintain all
Plan participant records contemplated by this Agreement,
including the Payment Schedule. All such records and copies
of the Plan(s) documents and employment records of the
participants in the possession of the Trustee's Contractor
shall be made available promptly upon request of Trustee,
BellSouth or Company. The Trustee's Contractor shall also
prepare and distribute participant statements to participants
and beneficiaries and shall perform such other
duties and responsibilities contemplated under the terms of
this Trust Agreement as BellSouth or Trustee, as the case may
be, determines is necessary or advisable to achieve the
objectives of this Trust Agreement.
(6) BellSouth and Company shall indemnify and hold
harmless the Trustee's Contractor for any liability or
expenses, including without limitation advances for or prompt
reimbursement of reasonable fees and expenses of counsel and
other agents retained by it, incurred by the Trustee's
Contractor with respect to keeping the records for
participants' benefits, reporting thereon to participants and
beneficiaries, certifying benefit information to Trustee,
determining the status of benefits hereunder and otherwise
carrying out its obligations under this Trust Agreement,
other than those resulting from Trustee's Contractor's
negligence or willful misconduct or its failure to reasonably
calculate and certify the amount of benefits based on the
applicable terms of the Plan documents and other information
and procedures furnished by BellSouth to the Trustee's
Contractor in accordance with this Trust Agreement. The
Trustee's Contractor shall be entitled to reasonable
compensation for services hereunder, the amount of which
shall be agreed upon from time to time by BellSouth or,
following a Change of Control, the Trustee, and the Trustee's
Contractor in writing, and reimbursement for reasonable
expenses incurred in connection with its performance of such
services. Following a Change of Control, Trustee's good
faith determination of compensation to be paid to a Trustee's
Contractor (including Trustee when it acts in such capacity)
shall be binding on BellSouth and each other person having an
interest in the Trust. All such compensation and expenses
shall be paid by Trustee from the assets of the Trust. If
not so paid, such compensation and expenses shall be paid by
BellSouth or Company.
(7) Except as may be otherwise agreed by the Trustee's
Contractor and BellSouth, or Trustee following a Change of
Control, the Trustee's Contractor's obligations are limited
solely to those explicitly set forth herein and the Trustee's
Contractor shall have no responsibility, authority or
control, direct or indirect, over the maintenance or
investment of the Trust and shall have no obligation in
respect of Trustee or the Trustee's compliance with the
Trustee's Contractor's certifications to Trustee.
Section 3. Trustee Responsibility Regarding Payments to
Trust Beneficiary When Company Is Insolvent.
(a) Trustee shall cease payment of benefits to Plan
participants and their beneficiaries if the Company is Insolvent.
Company shall be considered "Insolvent" for purposes of this Trust
Agreement if (i) Company is unable to pay its debts as they become
due, or (ii) Company is subject to a pending proceeding as a
debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as
provided in Section 1(d) hereof, the principal and income of the
Trust shall be subject to claims of general creditors of Company
under federal and state law as set forth below.
(1) The Board of Directors and the Chief Executive
Officer of Company shall have the duty to inform Trustee in
writing of Company's Insolvency. If a person claiming to be
a creditor of Company alleges in writing to Trustee that
Company has become Insolvent, Trustee shall determine
whether Company is Insolvent and, pending such determination,
Trustee shall discontinue payment of benefits to Plan
participants or their beneficiaries.
(2) Unless Trustee has actual knowledge of Company's
Insolvency, or has received notice from Company or a person
claiming to be a creditor alleging that Company is Insolvent,
Trustee shall have no duty to inquire whether Company is
Insolvent. Trustee may in all events rely on such evidence
concerning Company's solvency as may be furnished to Trustee
and that provides Trustee with a reasonable basis for making
a determination concerning Company's solvency.
(3) If at any time Trustee has determined that Company
is Insolvent, Trustee shall discontinue payments to Plan
participants or their beneficiaries and shall hold the assets
of the Trust for the benefit of Company's general creditors.
Nothing in this Trust Agreement shall in any way diminish any
rights of Plan participants or their beneficiaries to pursue
their rights as general creditors of Company with respect to
benefits due under the Plan(s) or otherwise.
(4) Trustee shall resume the payment of benefits to
Plan participants or their beneficiaries in accordance with
Section 2 of this Trust Agreement only after Trustee has
determined that Company is not Insolvent (or is no longer
Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant to
Section 3(b) hereof and subsequently resumes such payments, the
first payment following such discontinuance shall include the
aggregate amount of all payments due from Company to Plan
participants or their beneficiaries under the terms of the Plan(s)
for the period of such discontinuance, less the aggregate amount
of any payments made to Plan participants or their beneficiaries
by Company in lieu of the payments provided for hereunder during
any such period of discontinuance.
Section 4. Payments to Company.
(a) Except as provided in Sections 3, 4(b), 4(c), 5(b) and
12(c) hereof, after the Trust has become irrevocable, neither
BellSouth nor Company shall have the right or power to direct
Trustee to return to Company or to divert to others any of the
Trust assets before all payment of benefits have been made to Plan
participants and their beneficiaries pursuant to the terms of the
Plan(s) to the extent such benefits are obligations of Company.
(b) If, prior to a Change of Control, within sixty (60) days
following the end of a fiscal year of the Trust, BellSouth
provides a written certification to Trustee, reasonably acceptable
to the Trustee that, as of the last day of the fiscal year, the
fair market value of the assets of the Trust exceeds one hundred
twenty percent (120%) of the aggregate Current Liability, Trustee
shall, at BellSouth's request, distribute to Company all or part
of such excess. No distribution pursuant to this Section 4(b) may
be made following a Change of Control.
(c) Prior to a Change of Control, Trustee shall, if so
instructed by BellSouth in writing within thirty (30) days after
the actual filing of BellSouth's federal income tax return for a
year, reimburse Company from the assets of the Trust for federal,
state or local income taxes, or any part thereof, which BellSouth
certifies that Company has paid, attributable to income of the
Trust for such year, as determined by BellSouth, within thirty
(30) days after receipt of such request. No reimbursement for
taxes pursuant to this Section 4(c) may be made following a Change
of Control.
(d) Notwithstanding any other provision of this Trust
Agreement, including without limitation Section 1(b) hereof, prior
to a Change of Control Company shall have the right with respect
to each contribution to the Trust (other than contribution(s)
required pursuant to subsections 2 and 3 of Section 1(e) hereof)
to cause Trustee to return all or any portion of a contribution
and any and all income on such contribution to Company. Such
right shall be exercised by giving written notice to Trustee and
shall be exercisable in a nonfiduciary capacity without the
approval or consent of Trustee or any other person. Such right
shall expire with respect to each contribution to the Trust upon
the earlier of (i) thirty days following the date on which the
contribution is made, (ii) the last day of the taxable year of
Company in which the contribution is made or (iii) a Change of
Control. Company's right under this Section 4(d) shall expire
upon a Change of Control.
Section 5. Investment Authority.
(a) Except as otherwise provided in subsections (c), (d),
(e) and (g) of this Section 5, the assets of the Trust shall be
invested and reinvested by Trustee, without distinction between
principal and income, at such time or times in such investments
and pursuant to such investment strategies or courses of action
and in such shares and proportions, as Trustee, in its sole
discretion, shall deem advisable. Except as otherwise provided
herein, Trustee may invest in securities (including stock or
rights to acquire stock) or obligations issued by BellSouth. All
rights associated with assets of the Trust shall be exercised by
Trustee or the person designated by Trustee, and shall in no event
be exercisable by or rest with Plan participants.
(b) Company shall have the right, at any time, and from
time to time in its sole discretion, to substitute assets of equal
fair market value for any asset held by the Trust. This right is
exercisable by Company in a nonfiduciary capacity without the
approval or consent of any person in a fiduciary capacity. In
connection with any substitution of assets described in this
Section 5(b), Company Stock may not revert to Company in kind at
any time following a voting record date for any meeting of
BellSouth stockholders and before such meeting, unless Trustee
shall have voted such shares by proxy. Such reversion may occur
immediately following the stockholders' meeting to which such
record date relates. Further, any such substitution may be made
only out of property available to the Company for the purchase of
shares of stock under applicable state law, as determined by
Company.
(c) Subject to the provisions of Section 5A, investment
authority over the Trust's assets, or any portion thereof, other
than dividends on Company Stock held by the Trust, may be reserved
by BellSouth to itself from time to time in its absolute
discretion, prior to a Change of Control. Any such reservation of
discretionary authority by BellSouth shall be communicated to
Trustee in writing. In this regard, unless BellSouth notifies
Trustee to the contrary, BellSouth shall act through its
Treasurer or any person who such Treasurer authorizes in writing
to act on his behalf or any other person who is authorized to act
on BellSouth's behalf by a resolution of BellSouth's Board of
Directors. BellSouth shall furnish Trustee from time to time with
a list of the names and signatures of all persons authorized to so
act. Notwithstanding anything to the contrary contained herein,
following a Change of Control, BellSouth may not reserve
discretionary authority for the management and control of any
assets of the Trust and any prior reservation then in effect shall
immediately be nullified.
(d) Trustee shall be under no duty or obligation to review
or to question any direction of BellSouth pursuant to authority
reserved under subsection (c) of this Section 5, or to review
securities or any other property so held with respect to prudence
or proper diversification, or to make any suggestions or
recommendation to BellSouth with respect to the retention or
investment of any such assets and shall have no authority to take
any action or to refrain from taking any action with respect to
any such assets unless and until it is directed to do so by
BellSouth. Notwithstanding anything to the contrary in this Trust
Agreement, BellSouth does hereby discharge indemnify and hold
harmless Trustee, its directors, officers, employees, and agents,
from and against any and all losses, costs, damages, claims,
penalties, expenses (including reasonable attorneys' fees and
expenses) or liabilities arising in connection with Trustee's
administration of the Trust consistent with Section 5(c).
(e) Trustee shall be responsible for assuring the daily
investment of cash balances, unless directed otherwise by
BellSouth pursuant to authority reserved in subsection (c) of this
Section 5, so as to maintain uninvested cash balances at a
minimum.
(f) Without in any way limiting the powers and discretions
conferred upon Trustee by the other provisions of this Trust
Agreement, Trustee (and BellSouth acting pursuant to authority
reserved under subsection (c) of this Section 5) shall be vested
with the following powers and discretions (to be exercised in
light of the nature and purpose of this Trust) with respect to the
assets of the Trust subject to its management and control:
(1) To invest and reinvest in any property, real,
personal or mixed, wherever situated and whether or not
productive of income or consisting of wasting assets,
including without limitation, common and preferred stocks,
bonds, notes, debentures (including convertible stocks and
securities), leaseholds, mortgages, certificates of deposit
or demand or time deposits (including any such deposits with
Trustee), shares of investment companies and mutual funds,
interests in partnerships and trusts, insurance policies and
annuity contracts, and oil, mineral or gas properties,
royalties, interests or rights, without being limited to the
classes of property in which trustees are authorized to
invest by any law or any rule of court of any state and
without regard to the proportion any such property may bear
to the entire amount of the Trust;
(2) To invest and reinvest all or any portion of the
Trust collectively through the medium of any common,
collective or commingled trust fund that may be established
and maintained by Trustee, to be held and invested subject to
all of the terms and
conditions thereof, and such trust shall be deemed adopted as
a part of the Trust to the extent that assets of the
Trust are invested therein;
(3) To retain any property at any time received by the
Trustee;
(4) To sell or exchange any property held by it at
public or private sale, for cash or on credit, to grant and
exercise options for the purchase or exchange thereof, to
exercise all conversion or subscription rights pertaining to
any such property and to enter into any covenant or agreement
to purchase any property in the future;
(5) To participate in any plan of reorganization,
consolidation, merger, combination, liquidation or other
similar plan relating to property held by it and to consent
to or oppose any such plan or any action thereunder or any
contract, lease, mortgage, purchase, sale or other action by
any person;
(6) To deposit any property held by it with any
protective, reorganization or similar committee, to delegate
discretionary power thereto, and to pay part of the expenses
and compensation thereof and any assessments levied with
respect to any such property so deposited;
(7) To extend the time of payment of any obligation
held by it;
(8) To hold uninvested any monies received by it,
without liability for interest thereon until such
monies shall be invested, reinvested or disbursed;
(9) To exercise all voting or other rights with respect
to any property held by it and to grant proxies,
discretionary or otherwise;
(10) For the purposes of the Trust, to borrow money from
others, to issue its promissory note or notes therefor, and
to secure the repayment thereof by pledging any property held
by it;
(11) To manage, administer, operate, insure, repair,
improve, develop, preserve, mortgage, lease or otherwise deal
with, for any period, any real property or any oil, mineral
or gas properties, royalties, interests, or rights held by
joining with others, using other Trust assets for any such
purposes, to modify, extend, renew, waive or otherwise adjust
any provision for amortization of the investment in or
depreciation of the value of such property;
(12) To employ suitable agents (including but not
limited to actuarial and employee benefit consulting firms)
and counsel, who may be counsel to BellSouth or Trustee, and
to pay their reasonable expenses and compensation from the
Trust to the extent not paid by Company or BellSouth;
(13) To register any securities held in the Trust in the
name of a nominee and to hold any investment in bearer form,
and to combine certificates representing such investments
with certificates of the same issue held by the Trustee in
other fiduciary capacities or to deposit or arrange for the
deposit of such securities in a qualified central depository
even though, when so deposited, such
securities may be merged and held in bulk in the name of the
nominee of such depository with other securities deposited
therein by any other person, or to deposit or arrange for the
deposit of any securities issued by the United States
Government, or an agency or instrumentality thereof, with a
federal reserve bank, but the books and records of Trustee
shall at all times show that all such investments are part of
the Trust;
(14) To settle, compromise, or submit to arbitration any
claims, debts, or damages due or owing to or from the Trust,
respectively, to commence or defend suits or legal
proceedings to protect any interest of the Trust, and to
represent the Trust in all suits or legal proceedings in any
court or before any other body or tribunal; provided,
however, Trustee shall not be required to take any such
action unless it shall have been indemnified by BellSouth or
the Trust to its reasonable satisfaction against liability
and expense it might incur therefrom;
(15) To organize under laws of any state a corporation
or trust for the purpose of acquiring and holding title to
any property which it is authorized to acquire hereunder and
to exercise with respect thereto any or all of the powers set
forth herein; and
(16) Generally, to do all acts consistent with its
duties hereunder, whether or not expressly authorized, that
Trustee may deem necessary or desirable for the protection of
the Trust.
(g) Notwithstanding anything to the contrary contained
herein (other than the provisions of Section 5A hereof), unless
and until directed otherwise by BellSouth, or the occurrence of a
Change of Control, the assets of the Trust (other than dividends
on Company Stock held by the Trust) shall be invested and
reinvested exclusively in the common stock, par value $1.00 per
share, of BellSouth Corporation ("Company Stock") except to the
extent that BellSouth directs otherwise with respect to a portion
of the assets in anticipation of reasonable liquidity needs of the
Trust. Trustee shall purchase from BellSouth any such Company
Stock acquired for the Trust, unless Trustee is instructed
otherwise by BellSouth in writing. With respect to assets of the
Trust invested in Company Stock, Trustee shall have no obligation
to diversify investments in the Trust, and shall not be subject to
any rule of applicable law which might otherwise make necessary,
require, or in any way deem appropriate diversification of
investments in the Trust, all such rules being hereby expressly
waived. Notwithstanding anything to the contrary in this Trust
Agreement, BellSouth and Company do hereby discharge, indemnify
and hold harmless Trustee, its directors, officers, employees and
agents, from and against any and all losses, costs, damages,
claims, penalties, expenses (including reasonable attorneys' fees
and expenses) or liabilities arising in connection with such
Trustee's administration of the Trust consistent with this Section
5(g).
(h) Following a Change of Control, Trustee may no longer
invest in Company Stock or any other securities or obligations
issued by BellSouth or Company, and Section 5(g) shall no longer
apply. After a Change of Control, Trustee shall have and exercise
all discretionary authority for the management and control of
Trust assets and shall commence the orderly disposition of Company
Stock, subject to the provisions of Section 5A hereof to the
extent applicable. Trustee may, in its sole discretion, retain
Company Stock acquired prior to a Change
of Control for such period of time as Trustee deems appropriate
and in the best interest of participants and beneficiaries in the
Plan(s). In no event may Trustee make additional investments in
Company Stock on behalf of the Trust after a Change of Control,
other than (i) amounts held in diversified common investment
vehicles in which Trustee invests, and (ii) through the exercise
of rights to acquire Company Stock attributable to shares held at
the time of the Change of Control, in the Trustee's sole
discretion, if the Trustee deems such exercise appropriate and in
best interest of the participants and beneficiaries in the
Plan(s).
Section 5A. Sale of Company Stock by Trustee.
(a) Except as otherwise specifically permitted herein,
Trustee may not sell Company Stock except: (1) as necessary from
time to time to satisfy benefit obligations under the Plan(s)
which are required to be paid by Trustee under this Trust; (2)
pursuant to a tender or exchange offer, by other than BellSouth,
for all or substantially all of the issued and outstanding Company
Stock; or (3) following a Change of Control; and then only as
specifically permitted herein.
(b) Trustee shall provide BellSouth with not less than 30
days prior notice that it proposes to sell any Company Stock,
unless Trustee determines in good faith that such delay would
cause irreparable harm to Trustee or to the Trust, in which event
Trustee shall provide reasonable notice of such proposed sale.
Notice shall be given by telephone, confirmed promptly by
facsimile or first class mail, postage prepaid. Trustee shall
specify in any event the number of shares proposed to be sold.
(c) Trustee shall make sales of Company Stock pursuant to an
effective registration statement under, or an exemption (including
but not limited to Rule 144) from the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and
in compliance with applicable state securities laws.
(d) Should either BellSouth or Trustee determine in good
faith, with the written advice of counsel delivered to and in form
reasonably acceptable to the other party hereto, that such
proposed sale could not reasonably be made pursuant to an
exemption from the Securities Act, then Trustee may demand in
writing that BellSouth, at BellSouth's option, either purchase
under Section 5A(f) or register under the Securities Act under
Section 5A(e), such number of shares of Company Stock held and
proposed to be sold by Trustee. BellSouth shall promptly notify
Trustee by telephone, confirmed promptly by facsimile or first
class mail, postage prepaid, whether it elects to proceed under
Section 5A(f) or 5A(e).
(e) If BellSouth elects registration pursuant to a demand
under Section 5A(d) above, then:
(1) As soon as practicable, but in any event within 90
days after receipt of the demand from Trustee, BellSouth
shall:
(i) file with the Securities and Exchange
Commission (the "Commission") a registration statement
covering the shares to be sold and use its reasonable
best efforts to have such registration statement filed
pursuant to this Agreement declared effective as
promptly as practicable. BellSouth shall advise Trustee
of the progress of such filing and of any review thereof
undertaken by the Commission, and
promptly notify Trustee, and confirm such advice in
writing, (x) when such registration statement becomes
effective, (y) when any post-effective amendment to such
registration statement becomes effective and (z) of any
request by the Commission for any amendment or
supplement to such registration statement or any
prospectus relating thereto or for additional
information;
(ii) use its reasonable best efforts to register,
qualify, or effect compliance not later than the
effective date of any registration statement filed
pursuant to this Trust Agreement, the shares of Company
Stock registered thereunder under the blue sky laws of
such states or the District of Columbia as the Trustee
may reasonably request; provided, however, that neither
BellSouth nor Company shall be obligated to qualify as a
foreign corporation or as a dealer in securities or to
execute or file any general consent to service of
process under the laws of any such jurisdiction where it
is not so subject; and, provided, further, that
BellSouth reserves the right not to register or qualify
shares of Company Stock in any jurisdiction where
registration or qualification of such shares would be
unreasonably burdensome;
(iii) from time to time (x) after BellSouth has
elected to satisfy a demand for sale by means of
registration, immediately advise Trustee of any event or
development, including a material adverse change in the
financial condition, business or affairs of BellSouth,
known to BellSouth (other than events or developments
affecting market or economic conditions generally),
which may have a material adverse impact on the proposed
offering; and (y) within the period of effectiveness of
such registration statement, advise Trustee of any event
or development requiring amendment or supplement (which
amendment or supplement shall be prepared with
reasonable promptness by BellSouth) of the registration
statement or prospectus used in connection therewith or
rendering it inadvisable to use the prospectus until it
is supplemented or amended; and
(iv) furnish to Trustee such number of copies of
any preliminary and final prospectuses and any
amendments and supplements thereto as Trustee may
reasonably request.
(2) Trustee and BellSouth shall negotiate with an
underwriter selected or approved by BellSouth with regard to
the underwriting of such requested registration. BellSouth
shall enter into an underwriting agreement in customary form
with the underwriter(s) and Trustee in which BellSouth and
Trustee (to the extent applicable based only on such
information as is provided in writing by Trustee) shall
provide customary indemnification to such underwriter(s) and
each other.
(3) BellSouth shall have the right to terminate or
withdraw any registration contemplated by it under this
Section 5A(e) prior to or following the effectiveness of such
registration for any reason whatsoever, provided that it
shall thereupon be required to purchase shares pursuant to
Section 5A(f).
(4) Trustee shall provide all such information and
materials and take all such actions, furnish all such
information, execute all such documents and cooperate with
BellSouth in good faith, all as may be reasonably required in
order to permit BellSouth to comply with all applicable
requirements of the Commission and all other applicable laws
or regulations and to obtain acceleration of the effective
date of the registration statement.
(5) All expenses incurred in connection with any
registration, qualification or compliance pursuant to this
Trust Agreement, including without limitation, all
registration, filing and qualification fees, printing and
engraving expenses, fees and disbursements of counsel for
BellSouth, and expenses of any special audits or comfort
letters incidental to or required by such registration, shall
be borne by BellSouth, provided that Trustee may pay such
expenses and recover same from the Trust if BellSouth fails
to satisfy such expenses in a timely manner.
(f) Notwithstanding any contrary provision of this
Agreement, if BellSouth advises Trustee of any delays in filing or
effectiveness of more than 60 days, if BellSouth and Trustee are
unable despite good faith efforts to agree as to registration or
an exempt sale, or if a registered sale would not permit Trustee
to sell Company Stock expeditiously enough to meet Trustee's good
faith needs, Trustee may demand that BellSouth purchase, or if
BellSouth elects to purchase stock pursuant to Section 5A(d),
(e)(3) or (g), BellSouth shall purchase the Company Stock desired
to be sold at fair market value, which shall be the volume
weighted average trading price (including only trades which would
meet the time of purchases conditions under Rule 10b-18 under the
Securities Exchange Act of 1934, as amended ("Rule 10b-18"), of a
share of such security on the New York Stock Exchange on the day
that BellSouth receives such demand or gives notice of such
election. BellSouth and Trustee shall use their reasonable best
efforts to agree as to the prompt execution, closing and delivery
of shares and proceeds therefor.
(g) Until a Change of Control, BellSouth may, on notice of a
proposed sale by Trustee, whether or not exempt, elect to purchase
such Company Stock from Trustee at fair market value, as defined
in Section 5A(f), and with the manner, conditions, and closing of
such sale to be agreed upon by BellSouth and Trustee.
(h) BellSouth shall be entitled to postpone the filing of
any registration statement and any amendment or supplement thereto
otherwise required to be prepared and filed by it, or to direct
that Trustee postpone any sale or put if, at the time it receives
a request for registration or sale, (i) BellSouth determines, in
its reasonable business judgment, that such filing, registration
and offering, or sale or put, would materially interfere with the
likely success of a proposed purchase or sale of securities by
BellSouth; or (ii) counsel for BellSouth opines in writing that
the filing of such registration statement, amendment or
supplement, or sale or put would have a material adverse impact on
any material ongoing or pending transaction or program of
BellSouth or any of its subsidiaries or any other circumstances;
provided, that should such delays adversely affect Trustee's
ability to pay benefits as contemplated by this Trust Agreement,
then BellSouth shall advance such funds as may be reasonably
needed by Trustee for such proposed pending sale.
(i) Notwithstanding any provisions above permitting sale by
Trustee of Company Stock, Trustee shall, until a Change of
Control or a tender or exchange offer for all or substantially all
of the issued and outstanding Common Stock, limit sales, whether
registered or exempt (other than sales described in Section
5A(f)), by reference to the volume limitations for issuer
repurchases within Rule 10b-18; provided, that block sales may not
exceed 25% of the trading volume on the New York Stock Exchange,
Inc. for the 14 day period prior to such sale. BellSouth shall
provide all information reasonably required by Trustee to make
determinations as to the number of shares which may be sold, and
Trustee shall promptly notify BellSouth as to all sales made other
than through a registered public offering.
(j) BellSouth and Trustee shall each cooperate in good faith
and employ their reasonable best efforts in permitting and
effecting any purchase or sale of Company Stock as contemplated in
this Section 5A and each shall comply with all applicable laws and
regulations
relating to the foregoing including, without limitation, federal
and state securities laws, rules and regulations issued
thereunder, and any other governmental or stock exchange
requirements or regulations relating thereto.
Section 6. Disposition of Income.
During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and
reinvested.
Section 7. Accounting by Trustee.
Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions
required to be made, including such specific records as shall be
agreed upon in writing between BellSouth and Trustee. Within
forty-five (45) days following the close of each calendar year and
within forty-five (45) days after the removal or resignation of
the Trustee, Trustee shall deliver to BellSouth a written account
of its administration of the Trust during such year or during the
period from the close of the last preceding year to the date of
such removal or resignation, setting forth all investments,
receipts, disbursements and other transactions effected by it,
including a description of all securities and investments
purchased and sold with the cost or net proceeds of such purchases
or sales (accrued interest paid or receivable being shown
separately), and showing all cash, securities and other property
held in the Trust at the end of such year or as of the date of
such removal or resignation, as the case may be. In addition, as
of the end of each calendar month (referred to in this Trust as a
"valuation date"), within ten (10) days after each such month-end,
Trustee shall deliver to BellSouth a written account setting forth
the value of the Trust's assets, together with such other
information as shall be agreed upon between BellSouth and Trustee.
Section 8. Responsibility of Trustee.
(a) Trustee shall act with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent
person acting in like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and
with like aims, provided, however, that Trustee shall incur no
liability to any person for (i) any action taken pursuant to a
direction, request or approval given by BellSouth, Company or a
Trustee's Contractor which is contemplated by, and in conformity
with, the terms of the Plan(s) or this Trust and is given in
writing by BellSouth, Company or a Trustee's Contractor (other
than Trustee when it acts as Trustee's Contractor), or (ii) the
investment in, or retention of, Company Stock pursuant to the
terms of this Agreement, and no such action shall be considered a
breach of the fiduciary standard herein set forth. In the event
of a dispute between BellSouth, Company or a Trustee's Contractor
and a party, Trustee may apply to a court of competent
jurisdiction to resolve the dispute.
(b) If Trustee undertakes or defends any litigation arising
in connection with this Trust or a Plan (including without
limitation any action to compel funding of the Trust pursuant to
Section 1 hereof, to compel BellSouth or Company to take any
action under the Trust or the Plan(s), or to determine Trustee's
obligations hereunder), Trustee shall be indemnified by the Trust
against Trustee's costs, expenses and liabilities (including,
without limitation, reasonable attorneys' fees and expenses)
relating thereto and the Trust shall be primarily liable for such
payments, other than those arising from Trustee's negligence or
willful misconduct. Trustee shall also be entitled to reasonable
payment from the Trust for the allocation of Trustee's personnel
to the investigation and defense or prosecution thereof, at
Trustee's normal hourly billing rates. If such costs, expenses
and liabilities are not paid from the Trust for any reason
(including without limitation insufficiency of the Trust's assets
to satisfy such obligations) in a reasonably timely manner,
BellSouth and Company agree to indemnify Trustee against such
costs, expense and liabilities. Anything in this subsection (b)
to the contrary notwithstanding, BellSouth and Company shall
indemnify and hold Trustee harmless from and against all costs,
expenses and liabilities arising out of or relating to the
acquisition, retention or disposition of Company Stock, except
with respect to matters covered by the Trustee's indemnity to be
provided under Section 5A(e)(2).
(c) Trustee may consult with legal counsel (who may also be
counsel for BellSouth generally) with respect to any of its duties
or obligations hereunder.
(d) Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other professionals
to assist it in performing any of its duties or obligations
hereunder.
(e) Trustee shall have, without exclusion, all powers
consistent with the terms hereof conferred on trustees by
applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset
of the Trust, Trustee shall have no power to name a beneficiary of
the policy other than the Trust, to assign the policy (as distinct
from conversion of the policy to a different form) other than to a
successor Trustee, or to loan to any person the proceeds of any
borrowing against such policy.
(f) Notwithstanding any powers granted to Trustee pursuant
to this Trust Agreement or to applicable law, Trustee shall not
have any power that could give this Trust the objective of
carrying on a business and dividing the gains therefrom, within
the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal
Revenue Code.
Section 9. Compensation and Expenses of Trustee.
All administrative and Trustee's fees as agreed upon between
Trustee and BellSouth and reasonable expenses actually incurred by
the Trustee in performing its duties hereunder including the fees
and expenses of any third party which provides services
contemplated herein or in the Plan(s) shall be paid by Trustee
from the assets of the Trust and, until so paid, shall constitute
a lien on the assets of the Trust. If not so paid, the fees and
expenses shall be paid by Company or BellSouth.
Section 10. Resignation and Removal of Trustee.
(a) Trustee may resign at any time by written notice to
BellSouth, which shall be effective sixty (60) days after receipt
of such notice unless BellSouth and Trustee agree otherwise;
provided that in no event shall any such resignation take effect
prior to the appointment of a successor Trustee.
(b) Trustee may be removed by BellSouth on sixty (60) days
notice or upon shorter notice accepted by Trustee.
(c) Upon a Change of Control, as defined herein, Trustee may
not be removed by BellSouth for one (1) year. Additionally, after
the expiration of the one (1) year period following a Change of
Control, Trustee may be removed by BellSouth only if BellSouth
first obtains the express written consent to such removal of more
than twenty-five percent (25%) of the participants in the Plan(s).
(d) If Trustee resigns or is removed within one (1) year of
a Change of Control, as defined herein, Trustee shall select a
successor Trustee in accordance with the provisions of Section
11(b) hereof prior to the effective date of Trustee's resignation
or removal. Additionally, if Trustee resigns or is removed after
expiration of the one (1) year period following a Change of
Control, BellSouth may select a successor Trustee in accordance
with the provisions of Section 11(b) hereof if it shall first
obtain the express written consent to the appointment of the
proposed successor of more than twenty-five percent (25%) of the
participants in the Plan(s). If BellSouth fails to so appoint a
successor Trustee, Trustee shall select a successor Trustee. Upon
the appointment and acceptance by, and transfer of assets to, a
successor Trustee, Trustee shall have no further responsibilities
under this Trust Agreement.
(e) Upon resignation or removal of Trustee and appointment
of a successor Trustee, all assets shall subsequently be
transferred to the successor Trustee. The transfer shall be
completed within sixty (60) days after receipt of notice of
resignation, removal or transfer, unless BellSouth extends the
time limit.
(f) If Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the effective
date of resignation or removal under paragraph (a) of this
section. If no such appointment has been made, Trustee may apply
to a court of competent jurisdiction for appointment of a
successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed and charged to the
Trust as administrative expenses of the Trust.
Section 11. Appointment of Successor.
(a) If Trustee resigns or is removed in accordance with
Section 10(a) or (b) or (c) hereof, BellSouth may, subject to
Section 10(d), appoint any third party, such as a bank trust
department or other party that may be granted corporate trustee
powers under state or federal law, as a successor to replace
Trustee upon resignation or removal. The appointment shall be
effective when accepted in writing by the new Trustee, who shall
have all the rights and powers of the former Trustee, including
ownership rights in the Trust assets. The former Trustee shall
execute any instrument necessary or reasonably requested by
BellSouth or the successor Trustee to evidence the transfer.
(b) If Trustee resigns or is removed pursuant to the
provisions of Section 10(a), (b), (c) or (d) hereof and selects a
successor Trustee pursuant to Section 10(d) hereof, Trustee may
appoint any third party such as a bank trust department or other
party that may be granted corporate trustee powers under state or
federal law. The appointment of a successor Trustee shall be
effective when accepted in writing by the new Trustee. The new
Trustee shall have all the rights and powers of the former
Trustee, including ownership rights in Trust assets. The former
Trustee shall execute any instrument necessary or reasonably
requested by the successor Trustee to evidence the transfer.
(c) A former Trustee shall prepare and deliver to BellSouth
and to the successor Trustee a final accounting unless BellSouth
waives BellSouth's right to such accounting, and such accounting
shall be effective through the date of the former Trustee's
transfer of all assets to its successor. The successor Trustee
need not examine the records and acts of any prior Trustee unless
requested to do so by BellSouth (and, after a Change of Control,
unless the successor Trustee in addition concludes that there is a
reasonable basis for such request by BellSouth) and may retain or
dispose of existing Trust assets, subject to Sections 7 and 8
hereof. Subject to the foregoing, the successor Trustee shall not
be responsible for and BellSouth shall indemnify and defend the
successor Trustee from any claim or liability resulting from any
action or inaction of any prior Trustee or from any other past
event, or any condition existing at the time it becomes successor
Trustee. The compensation arrangement for the successor Trustee
shall be reasonable in relation to the services to be performed by
the successor Trustee.
Section 12. Amendment or Termination.
(a) This Trust Agreement (including Appendix A hereto) may
be amended by a written instrument executed by Trustee, BellSouth
and Company. Notwithstanding the foregoing, (i) no such amendment
shall conflict with the terms of the Plan(s) as then in effect or
shall make the Trust revocable after it has become irrevocable in
accordance with Section 1(b) hereof and (ii) the duties and
responsibilities of Trustee shall not be increased without
Trustee's written consent.
(1) Furthermore, notwithstanding anything to the
contrary in this Trust Agreement (except as otherwise
provided in this Section 12), (i) prior to a Change of
Control, no amendment shall be made to Section 1(d) through
(h), Section 2, Section 4, Section 5(h), Section 10(c),
Section 10(d), this Section 12(a), Section 13(d), Section
13(g), Section 13(j), and Section 13(k), and no deletion
shall be made in Appendix A, without the prior written
consent of more than twenty-five percent (25%) of the
affected participants in the Plan(s) unless such amendment
would not, in the opinion of counsel, have a material and
adverse effect on the rights or interests of such
participants; and (ii) following a Change of Control, no
amendment shall be made to any provision of this Trust
Agreement (including Appendix A hereto) without the prior
written consent of more than twenty-five percent (25%) of
the affected participants in the Plan(s) unless such
amendment would not, in the opinion of counsel, have a
material and adverse effect on the rights or interests of
such participants.
(2) The limitations contained in Section 12(a)(1) shall
not apply with respect to any amendment which is reasonably
necessary, in the opinion of counsel, to preserve the status
of the Trust as a grantor trust and the status of the Plan(s)
as unfunded for federal income tax purposes and for purposes
of ERISA or to guard against an adverse impact on Plan
participants or beneficiaries and which, in the opinion of
counsel, is drafted primarily to preserve such status or to
reduce or eliminate such adverse impact on such person or
persons.
(3) In each instance in which an opinion of counsel is
contemplated in this Section 12(a) prior to a Change of
Control, such opinion shall be in writing and delivered to
Trustee, rendered by a nationally recognized law firm
selected by BellSouth, and in each instance in which an
opinion of counsel is contemplated in this Section 12(a)
after a Change of Control, such opinion shall be in writing
and delivered to Trustee, rendered by a nationally recognized
law firm selected by the Trustee's Contractor. Trustee may
rely on all such opinions and determinations.
(b) The Trust shall not terminate until the date on which
Plan participants and their beneficiaries are no longer entitled
to benefits from Company pursuant to the terms of the Plan(s).
Upon termination of the Trust any assets remaining in the Trust
shall be returned to Company.
(c) Upon written approval of participants or beneficiaries
entitled to payment of benefits pursuant to the terms of the
Plan(s), BellSouth and Company may terminate this Trust prior to
the time all benefit payments under the Plan(s) have been made.
All assets in the Trust at termination shall be returned to
Company.
(d) Trustee may rely for purposes of this Section 12 on a
certificate furnished by BellSouth prior to a Change of Control,
and by the Trustee's Contractor after a Change of Control,
(i) with respect to any amendment requiring the prior written
consent of more than twenty-five percent (25%) of the affected
participants in the Plan(s) pursuant to subsection (a) of this
Section 12, that such consent has been obtained, (ii) with respect
to subsection (b) of this Section 12, that Plan participants and
their beneficiaries are no longer entitled to benefits pursuant to
the terms of the Plan(s), and (iii) with respect to subsection (c)
of this Section 12, that the written approval of participants or
beneficiaries entitled to payment of benefits pursuant to the
terms of the Plan(s) has been obtained.
Section 13. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
(b) Benefits payable to Plan participants and their
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed
in accordance with the laws of New York.
(d) For purposes of this Trust, Change of Control shall
mean: (i) any "person" (as such term is defined in the Securities
Exchange Act of 1934, as amended), other than a trustee or other
fiduciary holding securities under an employee benefit plan of
BellSouth or Company or other corporation owned directly or
indirectly by the shareholders of BellSouth in substantially the
same proportions as their ownership of stock of BellSouth, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of BellSouth
representing 20% or more of the total voting power represented by
BellSouth's then outstanding voting securities; or (ii) during any
period of two consecutive years, individuals who at the beginning
of such period constitute the Board of Directors of BellSouth and
any new director whose election by the Board of Directors or
nomination for election by BellSouth's shareholders was approved
by a vote of at least two-thirds of the directors who either were
directors at the beginning of the two year period or whose
election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof.
Notwithstanding anything to the contrary in this Trust Agreement,
for purposes of Section 5 and Section 5A hereof, "50%" shall be
substituted for "20%" where such reference appears in clause (i)
of this Section 13(d). For all purposes of this Trust Agreement,
Trustee shall have no responsibility whatsoever to determine
whether or not a Change of Control has occurred.
(e)(1) After the execution of this Trust Agreement,
BellSouth shall promptly file with Trustee, and following the
appointment of a Trustee's Contractor, BellSouth shall
promptly file with the Trustee's Contractor, a certified list
of the names and specimen signatures of the officers of
BellSouth and any delegate authorized to act for it. Unless
BellSouth notifies Trustee to the contrary, BellSouth shall
act through its Treasurer or any person who such Treasurer
authorizes in writing to act on his behalf or any other
person who is authorized to act on BellSouth's behalf by a
resolution of BellSouth's Board of Directors. BellSouth
shall promptly notify Trustee and the Trustee's Contractor,
if applicable, of the addition or deletion of any person's
name to or from such list, respectively. Until receipt by
Trustee and/or the Trustee's Contractor of notice that any
person is no longer authorized so to act, Trustee or the
Trustee's Contractor may continue to rely on the authority of
the person. All certifications, notices and directions by
any such person or persons to Trustee or the Trustee's
Contractor shall be in writing signed by such person or
persons. Trustee and the Trustee's Contractor may rely on
any certification, notice or direction of BellSouth that the
Trustee or the Trustee's Contractor reasonably believes to
have been signed by a duly authorized officer or agent of
BellSouth. Trustee and the Trustee's Contractor shall have
no responsibility for acting or not acting in reliance upon
any notification reasonably believed by Trustee or the
Trustee's Contractor to have been signed by a duly authorized
officer or agent of BellSouth.
(e)(2) After the engagement of a Trustee's Contractor
(other than Trustee), the Trustee's Contractor shall promptly
file with Trustee a certified list of the names and specimen
signatures of the officers of the Trustee's Contractor and
any delegate authorized to act for it. Trustee's Contractor
shall promptly notify Trustee of the addition or deletion of
any person's name to or from
such list. Until receipt by Trustee of notice that any
person is no longer authorized so to act, Trustee may
continue to rely on the authority of the person. All
certifications, notices and directions by any such person or
persons to Trustee shall be in writing signed by such person
or persons. Trustee may rely on any such certification,
notice or direction of the Trustee's Contractor that Trustee
reasonably believes to have been signed by or on behalf of a
duly authorized officer or agent of the Trustee's Contractor.
Trustee shall have no responsibility for acting or not acting
in reliance upon any notification reasonably believed by the
Trustee to have been signed by a duly authorized officer or
agent of the Trustee's Contractor.
(f) Neither the gender nor the number (singular or plural)
of any word shall be construed to exclude another gender or number
when a different gender or number would be appropriate.
(g)(1) This Trust Agreement shall be binding upon and
inure to the benefit of any successor(s) to BellSouth,
Company and Trustee; provided, that in the event of a
Disposition (as defined in Section 13(g)(4) hereof) of
Company, BellSouth shall cease to be a party to this
Agreement and all rights, duties and obligations of BellSouth
hereunder shall thereafter be rights, duties and obligations
of Company or its successor(s).
(g)(2)(A) If there is a transfer of any liability for
the payment of any Transferred Benefit (as defined below) to
any individual or entity (the "New Company") as a result of
any transaction, including without limitation any sale of
Company, its business or a portion thereof, merger,
consolidation, reorganization, spin-off, division or transfer
of assets (hereinafter a "corporate transaction") and there
is a "Default" (as defined below) by New Company with respect
to the payment of such benefit, Company shall (subject to
this Section 13(g)(2)) pay such unpaid Transferred Benefit
which is otherwise due and payable (and such payment may be
made on Company's behalf from this Trust pursuant to Section
2) if (i) this Trust remains in effect at the time such
benefit is payable, (ii) there are sufficient assets in this
Trust to pay such benefit and (iii) Section 13(g)(3) does not
apply to such corporate transaction.
(g)(2)(B) For purposes of this Section 13(g)(2):
(i) the term "Transferred Benefit" shall mean any
Plan benefit (I) which is attributable to compensation
deferrals made for pay periods ending before the
effective date of such corporate transaction under any
Plan(s) which are plans of deferred compensation and any
interest on such deferrals (at an interest rate no
higher than the rate payable under the terms of the Plan
as of the date of such transaction) or which was accrued
under any Plan(s) which are supplemental retirement or
pension plans before the effective date of any such
transaction, (II) for which the liability for payment
was transferred to New Company in connection with such
corporate transaction and (III) which are properly
payable under the terms and conditions of the Plan(s) as
in effect as of the date of such corporate transaction;
and
(ii) the term "Default" shall mean a default on the
payment of a Transferred Benefit by the New Company
if (I) the affected participant or beneficiary has
timely and properly made a claim for such benefit and
has exhausted all claims and claims review procedures
properly imposed under the terms of the Plan(s) with
respect to such benefit, (II) such participant or
beneficiary has agreed to provide and timely provides
whatever information Company or a Trustee's Contractor
might request from such person with respect to such
Transferred Benefit and New Company and (III) such
participant or beneficiary promptly takes whatever
action is reasonably requested by Company or the
Trustee's Contractor to enable Company or the Trustee to
be fully subrogated to the extent of any such payments
to all the rights, claims and remedies such participant
or beneficiary might have against New Company for the
payment of the related Transferred Benefits. Trustee
shall not be required to take any action with respect to
a subrogation claim unless there are sufficient assets
in the Trust to cover the expense thereof.
(g)(2)(C) The liability of Company under this Section
13(g)(2) shall not exceed the value of the assets of the
Trust as of the date payment is to be made by Company under
this Section 13(g)(2).
(g)(3) The provisions of Section 13(g)(2) shall not
apply to, and Company for purposes of Section 12(b) and each
other provision of this Trust Agreement shall be deemed to
have paid in full and shall have no further obligation to
pay, any Transferred Benefit which is payable following any
corporate transaction (i) which involves a Disposition, if
there is established, or there is imposed on Company's
successor an obligation to establish (or there is otherwise
provided with respect to affected Plan participants and
beneficiaries), with respect to the Transferred Benefit an
irrevocable trust which, in the opinion of counsel, meets the
requirements for a "rabbi trust" as set forth in the model
grantor trust agreement contained in Rev. Proc. 92-64, 1992-2
C. B. 422, or any successor to such Revenue Procedure, with a
bank as trustee, and which when established (or, if already
in existence, at the effective date of such corporate
transaction) is funded to at least the funding level of this
Trust, or (ii) which does not involve a Disposition, if (A)
there is established, or there is imposed on Company's
successor an obligation to establish, with respect to the
Transferred Benefit a trust which, in the opinion of counsel,
has terms substantially similar to any one of the Trusts
under Executive Benefit Plan(s) established by BellSouth or a
subsidiary on or before the date hereof, as such trusts are
then in effect, with a bank as trustee, and which when
established is funded to at least the funding level of this
Trust; or (B) the Transferred Benefit becomes covered, as of
the effective date of such corporate transaction, by any
trust described in, or previously established pursuant to,
(A) above and which trust, if such transfer takes place on or
after a Change in Control has occurred, is funded (after
taking into account the Transferred Benefit) to at least the
funding level of this Trust. The determination of whether
the requirements of the preceding sentence have been
satisfied shall be made by BellSouth; provided, however, that
following the engagement of a Trustee's Contractor, such
determinations shall be made by Trustee's Contractor. The
opinions of counsel contemplated in this Section 13(g)(3)
shall be in writing and delivered to Trustee, rendered by
counsel for BellSouth or, following the engagement of a
Trustee's Contractor, counsel selected by Trustee's
Contractor. Trustee may rely on the accuracy of all such
determinations and opinions. For purposes of this Section
13(g)(3), "funding level" shall have the meaning ascribed to
such term in Section 1(e)(2) hereof, except that (i) in
determining Current Liability of a trust other than this
Trust, reference shall be made to liabilities under the
plan(s) covered by each such trust and (ii) in determining
funding level as of any date other than the last day of any
trust's (including this Trust's) fiscal year, there may be
employed reasonable estimation techniques, consistently
applied.
(g)(4) For purposes of this Trust Agreement, there
shall be a "Disposition" of Company or its business, or a
portion thereof, whenever as a result of any transaction the
Company, successor(s) to Company or its business, or a
portion thereof as the case may be, is not a member of
BellSouth's "controlled group of corporations", as such term
is defined in Section 1563(a) of the Internal Revenue Code of
1986, as amended, substituting "more than 50 percent" for the
phrase "at least 80 percent" each place it appears in Section
1563(a)(1).
(h) This Trust Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but
all of which shall together constitute only one Agreement.
(i) Communications to Trustee shall be sent to Bankers
Trust Company, 280 Park Avenue, New York, New York 10017
ATTENTION: Senior Vice President, Retirement Services Group, or
to such other address as Trustee may specify in writing. No
communication shall be binding upon Trustee until it is received
by Trustee. Communications to BellSouth, Company and the
Trustee's Contractor shall be sent to the principal offices of
BellSouth, Company or the Trustee's Contractor, as the case may
be, or to such other address as BellSouth, Company or the
Trustee's Contractor, as applicable, may specify in writing.
(j) In the event the participants and beneficiaries in one
or more of the Plan(s) are determined generally to be subject to
federal income tax on any amount in the Trust prior to the time of
payment hereunder, the entire amount determined to be so taxable
shall be distributed by Trustee to each affected participant or
beneficiary. Company may, at its option, make such payments
directly to affected participants and beneficiaries. An amount
shall be determined to be subject to federal income tax upon the
earliest of: (a) a final determination by the United States
Internal Revenue Service addressed to a participant or beneficiary
which is not appealed to the courts; (b) a final determination by
the United States Tax Court or any other federal court affirming
any such determination by the Internal Revenue Service; or (c) an
opinion by counsel for BellSouth reasonably acceptable to Trustee
addressed to BellSouth and Trustee, that, by reason of the
Treasury Regulations, amendments to the Internal Revenue Code,
published Internal Revenue Service rulings, court decisions or
other substantial precedent, amounts hereunder are generally
subject to federal income tax prior to payment; provided, that
following a Change of Control, only an opinion by counsel selected
by the Trustee's Contractor may be accepted by Trustee for
purposes of (c). Company shall undertake at its sole expense to
defend any tax claims described herein which are asserted by the
Internal Revenue Service against any participant or beneficiary
and which it determines would affect participants or beneficiaries
generally, including attorneys' fees and costs of appeal, and
shall have the sole authority to determine whether or not to
appeal any determination made by the Internal Revenue Service or
by a lower court. Company also agrees to reimburse any
participant or beneficiary for any interest or penalties in
respect of tax claims hereunder which it determines would affect
participants or beneficiaries generally, upon receipt of
documentation of same. Any distributions from the Trust to a
participant or beneficiary under this Section 13(j) (other than
reimbursements
of interest or penalties referred to in the preceding sentence)
shall reduce the benefits payable to such participant and/or
beneficiary under the Plan(s).
(k) In the event that Company shall fail to satisfy any
obligation of Company to a Plan participant or beneficiary under
this Trust Agreement, or in one or more of the Plan(s), after
reasonable notice and demand with respect thereto, and one or more
participants or beneficiaries obtains a final determination by a
court of competent jurisdiction that Company has so failed, such
participant(s) or beneficiary(ies) shall be indemnified by the
Trust against reasonable and appropriate costs and expenses
(including without limitation reasonable attorneys' fees and
expenses) relating thereto and the Trust shall be primarily liable
for such payments. Interest on any Plan benefit payments which
such court determines have been delayed to the extent interest or
similar payments in an equal or greater amount are not provided in
the Plan or by the court or otherwise shall also be paid from the
assets of the Trust. Such interest shall be calculated using a
rate of interest equal to the rate of interest on ten (10) year
United States Treasury obligations, as determined on the first day
of each calendar quarter, compounded quarterly. If such costs,
expenses and interest are not paid from the Trust for any reason
(including without limitations insufficiency of the Trusts assets
to satisfy such obligations) in a reasonably timely manner, such
participant(s) or beneficiary(ies) may obtain payment from
Company.
(l) Nothing herein shall be construed as restricting or
limiting in any way amendment of the Plan(s) in accordance with
the terms of the Plan(s).
(m) Any other provisions of this Trust Agreement to the
contrary notwithstanding, this Trust shall terminate no later than
the twenty-first anniversary of the date of death of the survivor
from among a class consisting of all of the descendants of the
late Joseph P. Kennedy, the former Ambassador to the Court of
Saint James, who are living on the date of the establishment of
the Trust and, if the Trust is still in existence on such
anniversary date, Trustee shall dispose of the Trust as Company
shall direct.
(n) In case of any conflict or inconsistency between the
terms of this Trust Agreement and any Plan, the terms of this
Trust Agreement shall control.
Section 14. Effective Date.
The effective date of the Trust Agreement shall be the date
of its execution set forth on page 1 of the Trust Agreement.
IN WITNESS WHEREOF, the parties hereto have caused the Trust
Agreement to be duly executed and their respective corporate seals
to be hereto affixed on the date set forth on page 1 of the Trust
Agreement.
BELLSOUTH CORPORATION
By: /s/Kincaid Paterson for
Title: Vice President, Secretary
and Treasurer
(CORPORATE SEAL)
ATTEST:/s/Marcy A. Bass
Title:General Attorney & Assistant Secretary
BELLSOUTH TELECOMMUNICATIONS, INC.
By: /s/Patrick H. Casey
Title:Vice President and Comptroller
(CORPORATE SEAL)
ATTEST: /s/Eric B. Rudolph
Title: Assistant Secretary
BANKERS TRUST COMPANY,
as Trustee
By: /s/ Robert M. Bysshe
Title: Managing Director
(CORPORATE SEAL)
ATTEST: /s/ David Abramson_
Title: Vice President and Counsel
APPENDIX A
BellSouth Nonqualified Deferred Compensation Plan
BellSouth Nonqualified Deferred Income Plan
BellSouth Corporation Supplemental Executive Retirement Plan
BellSouth Corporation Executive Incentive Award Deferral
Plan
BellSouth Corporation Section 415 Excess Pension Plan
BELLSOUTH CORPORATION
TRUST UNDER BOARD OF DIRECTORS BENEFIT
PLAN(S) TABLE OF CONTENTS
Section 1. Establishment of Trust 2
Section 2. Payments to Plan Participants and
Their Beneficiaries 6
Section 3. Trustee Responsibility Regarding
Payments to Trust Beneficiary When
Company is Insolvent 9
Section 4. Payments to Company 10
Section 5. Investment Authority 11
Section 5A. Sale of Company Stock by Trustee 15
Section 6. Disposition of Income 19
Section 7. Accounting by Trustee 20
Section 8. Responsibility of Trustee 21
Section 9. Compensation and Expenses of
Trustee 21
Section 10. Resignation and Removal of
Trustee 21
Section 11. Appointment of Successor 22
Section 12. Amendment or Termination 23
Section 13. Miscellaneous 24
Section 14. Effective Date 29
BELLSOUTH CORPORATION
TRUST UNDER BOARD OF DIRECTORS BENEFIT PLAN(S)
This Agreement made this 23rd day of May, 1996, by
and between BellSouth Corporation, a Georgia corporation
(Company) and Bankers Trust Company, a New York
corporation (Trustee);
(a) WHEREAS, Company has adopted the nonqualified
deferred compensation Plan(s) as listed in Appendix A
for certain members of its Board of Directors;
(b) WHEREAS, Company has incurred or expects to
incur
liability under the terms of such Plan(s) with respect
to the individuals participating in such Plan(s);
(c) WHEREAS, to make certain provisions for the
payment of such liability, Company and Trustee on April
25, 1990 executed a trust agreement for the benefit of
certain directors of Company and Company's affiliates
who participate in the Plan(s) (the "Predecessor
Trust");
(d) WHEREAS, Company and Trustee on November 9, 1993
amended and restated the Predecessor Trust insofar as it
related to Company's obligations (but not obligations of
subsidiary or other affiliated entities) to pay benefits
under the Plan(s) (hereinafter, called "Trust") and
contributed assets to the Trust, subject to the claims
of Company's creditors in the event of Company's
Insolvency, as herein defined, until full payment has
been made in respect of such obligations of Company to
Plan participants and their beneficiaries in such manner
and at such times as specified in the Plan(s);
(e) WHEREAS, Company and Trustee on April 28, 1995
amended and restated the Trust;
(f) WHEREAS, Company and Trustee now desire once
again to amend and restate the Trust in the form of this
Trust Agreement;
(g) WHEREAS, it is the intention of the parties that
this Trust shall constitute an unfunded arrangement and
shall not affect the status of the Plan(s) as an
unfunded plan maintained for the purpose of providing
deferred compensation for members of Company's board of
directors who are not employees of Company or affiliated
entities; and
(h) WHEREAS, it is the intention of Company to
make contributions to the Trust to provide itself with a
source of funds to assist it in the meeting of its
liabilities under the Plan(s);
NOW, THEREFORE, the parties do hereby establish the
Trust and agree that the Trust shall be comprised, held
and disposed of as follows:
Section 1. Establishment of Trust.
(a) Company and Trustee hereby amend and restate in
all respects the Trust in the form of this Trust
Agreement. The principal of the Trust shall be held,
administered and disposed of by Trustee as provided in
this Trust Agreement
(b) The Trust hereby established shall be
irrevocable.
(c) The Trust is intended to be a grantor trust,
of which Company is the grantor, within the meaning of
subpart E, part I, subchapter J, chapter 1, subtitle A
of the Internal Revenue Code of 1986, as amended, and
shall be construed accordingly.
(d) The principal of the Trust, and any earnings
thereon shall be held separate and apart from other
funds of Company and shall be used exclusively for the
uses and purposes of Plan participants and general
creditors as herein set forth. Plan participants and
their beneficiaries shall have no preferred claim on, or
any beneficial ownership interest in, any assets of the
Trust. Any rights created under the Plan(s) and this
Trust Agreement shall be mere unsecured contractual
rights of Plan participants and their beneficiaries
against Company. Any assets held by the Trust will be
subject to the claims of Company's general creditors
under federal and state law
in the event of Insolvency, as defined in Section 3(a)
herein.
(e)(1) Company, in its sole discretion, may
at
any time, or from time to time, make additional
deposits of cash or other property acceptable to
Trustee in trust with Trustee to augment the
principal to be held, administered and disposed of
by Trustee as provided in this Trust Agreement.
Neither Trustee nor any Plan participant or
beneficiary shall have any right to compel any such
additional deposits under this subsection (1).
(2) If, as of the last day of a fiscal year
of the Trust, the funding level of the Trust shall
be less than eighty percent (80%) of the Trust's
funding level as of the last day of any of the five
(5) most recently preceding fiscal years of the
Trust (taking into account contributions made under
this Section 1(e)(2) for each such year),
disregarding for purposes of this Section 1(e)(2)
fiscal years ending prior to January 1, 1994,
Company shall notify Trustee of such situation and
Company shall make an irrevocable contribution to
the Trust as soon as possible, but in no event
longer than one hundred twenty (120) days following
the last day of such fiscal year. Such
contribution shall be in an amount sufficient to
bring the Trust's funding level equal to the
Trust's funding level as of the last day of the
fiscal year among the five (5) most recently
preceding fiscal years on which the Trust's funding
level was highest. In no event shall such
contribution be required if, as of the last day of
such fiscal year, the fair market value of the
Trust's assets is one hundred percent (100%), or
greater, of the aggregate Current Liability (as
defined in subsection (5) of this Section 1(e)) of
Company under the Plan(s). For purposes of this
Section 1(e)(2), "funding level" shall mean the
ratio (stated as a percentage) that the fair market
value of the assets in the Trust bears to the
aggregate Current Liability of Company under the
Plan(s). The Trust's funding level shall be
determined as of the last day of each fiscal year,
except that in determining the amount of the
required contribution, the fair market value of the
Trust's assets
shall be determined as of the valuation date most
recently preceding the date on which such
contribution is made.
(3) If, as of the last day of a fiscal year of
the Trust, the funding level of the Trust (taking
into account any contribution required under
subsection (2) of this Section 1(e)) shall be less
than one hundred percent (100%), Company shall notify
Trustee of such situation and shall make an
irrevocable contribution to the Trust within one
hundred eighty (180) days following the last day of
such fiscal year. Such contribution shall be in the
amount which, had the contribution been made as of
the last day of such fiscal year of the Trust, would
have been sufficient to bring the Trust's funding
level to 100% as of the last day of such fiscal year.
For purposes of this Section 1(e)(3), "funding level"
shall mean the ratio (stated as a percentage) that
the fair market value of the assets in the Trust
bears to the aggregate Current Liability of Company
under the Plan(s); provided, that
such Current Liability shall be determined using,
instead of the interest rate described in Section
1(e)(5) hereof, the valuation interest rate
assumption reported by the enrolled actuary for
Company's principal defined benefit pension plan
(measured by the number of active management
employees of Company and affiliated entities
participating in all such plans at the end of the
respective plan year which coincides with or ends
within the fiscal year of the Trust), in its
actuarial valuation report for such plan for such
plan year, for purposes of funding such respective
plan for such plan year. Notwithstanding the
foregoing, (1) if the enrolled actuary for Company's
principal defined benefit pension plan changes the
applicable valuation interest rate reported for a
plan year, as described in the sentence above, in the
enrolled actuary's actuarial statement and opinion
subsequently prepared as part of the annual report
required by the Employee Retirement Income Security
Act of 1974, as amended, for such plan year, (i)
Company shall so notify the Trustee, (ii) the changed
valuation interest rate shall be substituted for the
originally reported valuation interest rate in
determining Company's contribution required under
this Section 1(e)(3) above, and (iii) Company shall
make any additional required contribution resulting
from such change within sixty (60) days after the
change, and (2) if as of the end of a fiscal year of
the Trust, Company and affiliated entities do not
maintain a defined benefit pension plan covering
management employees with assets having an aggregate
market value of at least Fifty Million Dollars
($50,000,000.00), Current Liability for purposes of
this Section 1(e)(3) shall be determined using an
interest rate assumption equal to the average of the
monthly averages of the 30-year constant maturity
U.S. Treasury rate, expressed in percent per annum,
during such fiscal year of the Trust, as published in
the Federal Reserve Report, a successor report or, if
there is no successor report, comparable data, plus
one percent (1%) per annum.
(4) For purposes of subsections (2) and (3) of
this Section 1(e), the funding level of the Trust and all
related determinations shall be made by Company; provided,
however, that following the engagement of a Trustee's
Contractor, such determination shall be made by Trustee's
Contractor. The Trustee may rely on the accuracy of all such
determinations.
(5)(A) For purposes of this Trust, "Current
Liability" shall mean the amount required to pay each Plan
participant or beneficiary the benefits to which Plan
participants or their beneficiaries would be entitled pursuant
to the terms of the Plan(s), to the extent such benefits are
obligations of Company (and not obligations of subsidiary or
other affiliated entities). The Current Liability on any date
with respect to a Plan shall be determined as if the Plan
terminated as of such date using an interest rate (subject to
Section 1(e)(3)) equal to the Pension Benefit Guaranty
Corporation valuation interest rate for immediate annuities as
in effect on such date, the 1983 Group Annuity Mortality Table
published by the Society of Actuaries, and reasonable actuarial
calculation principles consistently applied. Current Liability
shall be determined, as of the last day of each fiscal year of
the Trust and at such additional times as are necessary to
implement the provisions of this Trust Agreement, by Company;
provided, however, that following the engagement of
a Trustee's Contractor, such determinations shall be made
by Trustee's Contractor. The Trustee may rely on the
accuracy of all such determinations.
(5)(B) In the event that the interest rate
assumption described in subsection (5)(A) above is at any
time no longer available or the mortality assumption
described above is at any time no longer considered a
reasonable and reliable mortality assumption, other
interest rate (subject to Section 1(e)(3)) or mortality
assumptions,
as the case may be, deemed generally comparable to the above
specified assumptions, may be used instead. All determinations
regarding substitute assumptions, including whether such
substitution is reasonably necessary and the selection of the
substitute assumption(s), shall be made by Company; provided,
however, that following the engagement of a Trustee's
Contractor, such determinations shall be made by Trustee's
Contractor.
(f) Upon a Change of Control, Company shall promptly
notify Trustee thereof and, as soon as possible, but in no
event longer than one hundred twenty (120) days following the
Change of Control, as defined herein, Company shall make an
irrevocable contribution to the Trust in an amount that is
sufficient to pay each Plan participant or beneficiary the
benefits to which Plan participants or their beneficiaries
would be entitled pursuant to the terms of the Plan(s), to the
extent such benefits are obligations of Company (and not
obligations of subsidiary or other affiliated entities), as of
the date on which the Change of Control occurred. Such
contribution shall be in an amount equal to the excess, if any,
of the aggregate Current Liability as of the date on which the
Change of Control occurred over the fair market value of the
Trust's assets as of the valuation date most recently preceding
the date on which such contribution is made. Thereafter,
Company shall make an additional contribution each fiscal year
to the Trust, as soon as possible, but in no event longer than
one hundred twenty (120) days following the last day of each
such fiscal year, in an amount equal to the excess, if any, of
the aggregate Current Liability under the Plan(s) as of the
last day of the fiscal year over the fair market value of the
Trust's assets as determined on the valuation date most
recently preceding the date on which such contribution is made.
The amount of all such contributions shall be determined by
Trustee's Contractor. The Trustee may rely on the accuracy of
all such determinations.
(g) If, as of a Distribution Date with respect to
outstanding rights to purchase Series A First Preferred Stock,
under the terms of and as defined in a Rights Agreement between
Company and Chemical Bank, as Rights Agent, under an agreement
originally dated November 27, 1989 (a "Distribution Date"), the
aggregate Current Liability exceeds the fair market value of
the Trust's assets (such fair market value determined as of the
valuation date most recently preceding such Distribution Date),
Company shall be required to make an additional contribution to
the Trust in an amount equal to such excess or, at Company's
option, to obtain a letter of credit, or a series of letters of
credit, adequate to fund such amount as of such Distribution
Date under the Plan(s) and maintain such letter(s) of credit
until such time as the aggregate Current Liability no longer
exceeds the fair market value of the Trust's assets. The
determination of whether the aggregate Current Liability
exceeds the fair market value of the Trust's assets upon a
Distribution Date and, if so, the amount of such excess, shall
be made by Company; provided, however, that following the
engagement of a Trustee's Contractor, such determinations shall
be made by Trustee's Contractor. The Trustee may rely on the
accuracy of all such determinations. Any such letter of
credit, or series of letters of credit, shall be part of the
general assets of Company and
shall not be an asset of this Trust and, unless otherwise
agreed to in writing by Trustee, Trustee shall have no
responsibility whatsoever with respect to the adequacy of, or
selection of the issuer or issuers of, any such letter or
letters of credit.
(h) If, in any five (5) consecutive calendar year period,
(i) there are five (5) or more final determinations by courts
of competent jurisdiction that (A) Company or a subsidiary of
Company which both is a member of Company's controlled group
of corporations and has adopted a Plan (a "Participating
Company") has failed to pay (after reasonable notice and
demand for payment)
any benefit due under the terms and conditions of a Plan and
that (B) there was no material issue of fact or law respecting
such company's obligation to make such benefit payment, or
(ii) there are two (2) or more final determinations by courts
of competent jurisdiction, in lawsuits instituted after
reasonable notice and demand with respect thereto, in which
the court determines that Company or a Participating Company
had acted in bad faith and with a clear and deliberate
disregard for such company's obligations under the Plan(s),
there shall be deemed to have occurred a Change of Control as
defined in this Trust Agreement and Company shall give Trustee
prompt written notice of such event. For purposes of this
Trust Agreement, (i) the term "controlled group of
corporations" has the meaning ascribed to such term in Section
1563(a) of the Internal Revenue Code of 1986, as amended,
substituting "more than 50 percent" for the phrase "at least
80 percent" each place it appears in Section 1563(a)(1), and
(ii) the term "final determination" means a determination with
respect to which all rights of appeal or to request a review,
a rehearing or redetermination have been exhausted or have
lapsed.
Section 2. Payments to Plan Participants and Their
Beneficiaries.
(a) Company, or the Trustee's Contractor if one shall have
been engaged, shall deliver to Trustee a schedule (the
"Payment Schedule") that indicates the amounts payable in
accordance with the terms and conditions of the Plan(s) in
respect of each Plan participant (and his or her
beneficiaries), that provides a formula or other instructions
acceptable to Trustee for determining the amounts so payable,
the form in which such amount is to be paid (as provided for
or available under the Plan(s)), and the time of commencement
for payment of such amounts. Except as otherwise provided
herein, Trustee shall make payments to the Plan participants
and their beneficiaries in accordance with such Payment
Schedule. The Trustee shall make provision for the reporting
and withholding of any federal, state or local taxes that may
be required to be withheld with respect to the payment of
benefits pursuant to the terms of the Plan(s) and shall pay
amounts withheld to the appropriate taxing authorities or
determine that such amounts have been reported, withheld and
paid by Company. Payments may be made in cash or, where
called for under the terms of the Plan(s), in Company Stock
(as such term is defined in Section 5(g) hereof).
Notwithstanding the foregoing, if a benefit which is
distributable in the form of Company Stock under the terms of
a Plan becomes payable at a time when there is no (or
insufficient) Company Stock in the Trust with which to satisfy
such benefit obligation and if the Company fails or refuses to
pay such benefit within a reasonable time after notice from
Trustee that it has become so payable, Trustee shall use other
assets of the Trust to acquire Company Stock, on the open
market or otherwise in its discretion, sufficient to satisfy
such benefit obligation.
(b) The entitlement of a Plan participant or his or her
beneficiaries to benefits payable by Company under the Plan(s)
shall be determined in accordance with the terms of the
Plan(s) by Company or such party as it shall designate under
the Plan(s), or the Trustee's Contractor if one shall have
been engaged, and any claim for such benefits shall be
considered and reviewed and paid or not paid under the
procedures set out in the Plan(s). Notwithstanding any Plan
provision to the contrary, if a Trustee's Contractor shall
have been engaged, all such determinations shall be made by
the Trustee's Contractor whose determinations shall be final,
conclusive and binding on all persons. Neither Trustee nor
Trustee's Contractor shall have any obligation for determining
whether any Plan participant or beneficiary has died and shall
be entitled to rely upon any information in this regard
furnished by
Company.
(c) Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under
the terms of the Plan(s). In such event, Company shall make
provision for the reporting and withholding of any federal,
state or local taxes that may be required to be withheld with
respect to the payment of benefits pursuant to the terms of
the Plan(s) and shall pay amounts withheld to the appropriate
taxing authorities. Company shall notify Trustee of its
decision to make payment of benefits directly prior to the
time amounts are payable to participants or their
beneficiaries. In addition, if the principal of the Trust,
and any earnings thereon, are not sufficient to make payments
of benefits payable by Company in accordance with the terms of
the Plan(s), Company shall make the balance of each such
payment as it falls due. Trustee shall notify Company where
principal and earnings are not sufficient.
(d) Company may engage a third party administrator as a
contractor of the Trustee ("Trustee's Contractor"), who shall
not be a Plan participant or beneficiary (but who may be the
Trustee), to perform functions described in this Section 2(d)
and elsewhere in this Trust Agreement which would otherwise be
performed by Company.
(1) Upon engagement of a Trustee's Contractor, as
soon as practicable but in no event longer than thirty
(30) days thereafter, Company shall furnish to the
Trustee's Contractor copies of the Plan documents,
employment records of participants, and other information
necessary to determine the benefits which are or may
become payable by
Company to or with respect to each participant in each Plan,
including any benefits payable after the participant's death,
and the recipient of same and the procedures which Company has
adopted to calculate such benefit payments. Company shall
regularly, at least annually, and upon each benefit change
under the Plan(s) furnish revised, updated information to the
Trustee's Contractor. In the event Company refuses or
neglects to provide updated participant information as
contemplated herein, the Trustee's Contractor shall be
entitled to rely on the most recent information furnished to
it by Company.
(2) In the event of a Change of Control, Company shall
have the duty to engage, as soon as practicable thereafter, a
Trustee's Contractor reasonably acceptable to the Trustee if
there shall at that time be no Trustee's Contractor then
serving. In addition, if as of a Distribution Date (as such
term is defined in Section 1(g) hereof), there shall be no
Trustee's Contractor then serving, Company shall have the duty
to designate on a stand-by basis a Trustee's Contractor who
shall commence to serve as Trustee's Contractor in the event
such Distribution Date is followed by a Change of Control.
After a Change of Control, Company shall not have any control
or authority with respect to the Trustee's Contractor so
engaged or then serving, or any successor Trustee's
Contractor, including without limitation any rights with
respect to the removal or
replacement of any such Trustee's Contractor or its duties
pursuant to this Trust Agreement.
(3) Unless Trustee agrees to perform the functions of
the Trustee's Contractor described herein, Trustee shall have
no responsibility hereunder for any obligation assigned to a
Trustee's Contractor or (subject to subsection (4) below) for
the performance of a Trustee's Contractor's duties and
responsibilities under this Trust Agreement.
(4) Company may replace or remove any Trustee's
Contractor from time to time serving hereunder, in its sole
discretion, prior to the occurrence of a Change of Control.
Following a Change of Control, Trustee, in its sole
discretion, may remove a Trustee's Contractor engaged by
Company or any successor Trustee's Contractor and shall remove
any such person and engage a successor to such person if
Trustee deems such person's performance as a Trustee's
Contractor unsatisfactory. At all times following a Change of
Control, upon any such removal, or the voluntary resignation
of any such Trustee's Contractor or the occurrence of any
other event which shall result in the cessation of performance
of the Trustee's Contractor's duties hereunder, Trustee shall
use its best efforts to engage a new Trustee's Contractor
(which may be Trustee); provided, however, Trustee shall
perform the duties of the Trustee's Contractor during any
period for which Trustee is unable to find a new Trustee's
Contractor (so that there will be no default in payments under
the Plan(s) as a result of the absence of a Trustee's
Contractor), and any person engaged as a Trustee's Contractor
shall in the judgment of Trustee be independent of Company.
The person who removes or replaces a Trustee's Contractor
shall be responsible for assuring that there is a timely and
complete transfer of records from such Trustee's Contractor to
such person's successor.
(5) Except for the records dealing solely with the
assets of the Trust and investment of those assets, which
shall be maintained by the Trustee, if a Trustee's Contractor
shall be engaged, the Trustee's Contractor shall maintain all
Plan participant records contemplated by this Agreement,
including the Payment Schedule. All such records and copies
of the Plan(s) documents and employment records of the
participants in the possession of the Trustee's Contractor
shall be made available promptly upon request of Trustee or
Company. The Trustee's Contractor shall also prepare and
distribute participant statements to participants and
beneficiaries and shall perform such other duties and
responsibilities contemplated under the terms of this Trust
Agreement as Company or Trustee, as the case may be,
determines is necessary or advisable to achieve the objectives
of this Trust Agreement.
(6) Company shall indemnify and hold harmless the
Trustee's Contractor for any liability or expenses,
including without limitation advances for or prompt
reimbursement of reasonable fees and expenses of counsel
and other agents retained by it, incurred by the
Trustee's Contractor with respect to keeping the records
for participants' benefits, reporting thereon to
participants and beneficiaries, certifying benefit
information to Trustee, determining the status of
benefits hereunder and otherwise carrying out its
obligations under this Trust Agreement, other than those
resulting from Trustee's Contractor's negligence or
willful misconduct or its failure to reasonably calculate
and certify the amount of benefits based on the
applicable terms of the Plan documents and other
information and procedures furnished by Company to the
Trustee's Contractor in accordance with this Trust
Agreement. The Trustee's Contractor shall be entitled to
reasonable compensation for services hereunder, the
amount of which shall be agreed upon from time to time
by Company or, following a Change of Control, the
Trustee, and the Trustee's Contractor in writing, and
reimbursement for reasonable expenses incurred in
connection with its performance of such services.
Following a Change of Control, Trustee's good faith
determination of compensation to be paid to a Trustee's
Contractor (including Trustee when it acts in such
capacity) shall be binding on the Company and each other
person having an interest in the Trust. All such
compensation and expenses shall be paid by Trustee from
the assets of the Trust. If not so paid, such
compensation and
expenses shall be paid by Company.
(7) Except as may be otherwise agreed by the
Trustee's Contractor and Company, or Trustee following a
Change of Control, the Trustee's Contractor's obligations
are limited solely to those explicitly set forth herein
and the Trustee's Contractor shall have no
responsibility, authority or control, direct or indirect,
over the maintenance or investment of the Trust and shall
have no obligation in respect of Trustee or the Trustee's
compliance with the Trustee's Contractor's certifications
to Trustee.
Section 3. Trustee Responsibility Regarding Payments to
Trust Beneficiary When Company Is Insolvent.
(a) Trustee shall cease payment of benefits to Plan
participants and their beneficiaries if the Company is
Insolvent. Company shall be considered "Insolvent" for
purposes of this Trust Agreement if (i) Company is unable to
pay its debts as they become due, or (ii) Company is subject
to a pending proceeding as a debtor under the United States
Bankruptcy Code.
(b) At all times during the continuance of this Trust, as
provided in Section 1(d) hereof, the principal and income of
the Trust shall be subject to claims of general creditors of
Company under federal and state law as set forth below.
(1) The Board of Directors and the Chief Executive
Officer of Company shall have the duty to inform Trustee
in writing of Company's Insolvency. If a person claiming
to be a creditor of Company alleges in writing to Trustee
that Company has become Insolvent, Trustee shall
determine whether Company is Insolvent and, pending such
determination, Trustee shall discontinue payment of
benefits to Plan participants or their beneficiaries.
(2) Unless Trustee has actual knowledge of
Company's Insolvency, or has received notice from Company
or a person claiming to be a creditor alleging that
Company is Insolvent, Trustee shall have no duty to
inquire whether Company is Insolvent. Trustee may in all
events rely on such evidence concerning Company's
solvency as may be furnished to Trustee and that provides
Trustee with a reasonable basis for making a
determination concerning Company's solvency.
(3) If at any time Trustee has determined that
Company is Insolvent, Trustee shall discontinue payments
to Plan participants or their beneficiaries and shall
hold the assets of the Trust for the benefit of Company's
general creditors. Nothing in this Trust Agreement shall
in any way diminish any rights of Plan participants or
their beneficiaries to pursue their rights as general
creditors of Company with respect to benefits due under
the Plan(s) or otherwise.
(4) Trustee shall resume the payment of benefits to
Plan participants or their beneficiaries in accordance
with Section 2 of this Trust Agreement only after Trustee
has
determined that Company is not Insolvent (or is no longer
Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant
to Section 3(b) hereof and subsequently resumes such payments,
the first payment following such discontinuance shall include
the aggregate amount of all payments due from Company to Plan
participants or their beneficiaries under the terms of the
Plan(s) for the period of such discontinuance, less the
aggregate amount of any payments made to Plan participants or
their beneficiaries by Company in lieu of the payments
provided for hereunder during any such period of
discontinuance.
Section 4. Payments to Company.
(a) Except as provided in Sections 3, 4(b), 4(c), 4(d),
5(b) and 12(c) hereof, after the Trust has become irrevocable,
Company shall have no right or power to direct Trustee to
return to Company or to divert to others any of the Trust
assets before all payment of benefits have been made to Plan
participants and their beneficiaries pursuant to the terms of
the Plan(s) to the extent such benefits are obligations of
Company.
(b) If, prior to a Change of Control, within sixty (60)
days following the end of a fiscal year of the Trust, Company
provides a written certification to Trustee, reasonably
acceptable to the Trustee that, as of the last day of the
fiscal year, the fair market value of the assets of the Trust
exceeds one hundred twenty percent (120%) of the aggregate
Current Liability, Trustee shall, at Company's request,
distribute to Company all or part of such excess. No
distribution pursuant to this Section 4(b) may be made
following a Change of Control.
(c) Prior to a Change of Control, Trustee shall, if so
instructed by Company in writing within thirty (30) days after
the actual filing of Company's federal income tax return for a
year, reimburse Company from the assets of the Trust for
federal, state or local income taxes, or any part thereof,
which Company certifies that it has paid, attributable to
income of the Trust for such year, as determined by Company,
within thirty (30) days after receipt of such request. No
reimbursement for taxes pursuant to this Section 4(c) may be
made following a Change of Control.
(d) Notwithstanding any other provision of this Trust
Agreement, including without limitation Section 1(b) hereof,
prior to a Change of Control Company shall have the right with
respect to each contribution to the Trust (other than
contribution(s) required pursuant to subsections (2) and (3)
of Section 1(e) hereof) to cause Trustee to return all or any
portion of a contribution and any and all income on such
contribution to Company. Such right shall be exercised by
giving written notice to Trustee and shall be exercisable in a
nonfiduciary capacity without the approval or consent of
Trustee or any other person. Such right shall expire with
respect to each contribution to the Trust upon the earlier of
(i) thirty days following the date on which the contribution
is made, (ii) the last day of the taxable year of Company in
which the contribution is made or (iii) a Change of Control.
Company's right under this Section 4(d) shall expire upon a
Change of Control.
Section 5. Investment Authority.
(a) Except as otherwise provided in subsections (c), (d),
(e) and (g) of this Section 5, the assets of the Trust shall
be invested and reinvested by Trustee, without distinction
between principal and income, at such time or times in such
investments and pursuant to such investment strategies or
courses of action and in such shares and proportions, as
Trustee, in its sole discretion, shall deem advisable. Except
as otherwise provided herein, Trustee may invest in
securities (including stock or
rights to acquire stock) or obligations issued by Company.
All rights associated with assets of the Trust shall be
exercised by Trustee or the person designated by Trustee, and
shall in no event be exercisable by or rest with Plan
participants.
(b) Company shall have the right, at any time, and from
time to time in its sole discretion, to substitute assets of
equal fair market value for any asset held by the Trust. This
right is exercisable by Company in a nonfiduciary capacity
without the approval or consent of any person in a fiduciary
capacity. In connection with any substitution of assets
described in this Section 5(b), Company Stock may not revert
to Company in kind at
any time following a voting record date for any meeting of
Company stockholders and before such meeting, unless Trustee
shall have voted such shares by proxy. Such reversion may
occur immediately following the stockholders' meeting to which
such record date relates. Further, any such substitution may
be made only out of property available to the Company for the
purchase of shares of stock under applicable state law, as
determined by Company.
(c) Subject to the provisions of Section 5A, investment
authority over the Trust's assets, or any portion thereof,
other than dividends on Company Stock held by the Trust, may
be reserved by Company to itself from time to time in its
absolute discretion, prior to a Change of Control. Any such
reservation of discretionary authority by Company shall be
communicated to Trustee in writing. In this regard, unless
Company notifies Trustee to the contrary, Company shall act
through its Treasurer, or any person who such Treasurer
authorizes in writing to act on his behalf or any other person
who is authorized to act on Company's behalf by a resolution
of Company's Board of Directors. Company shall furnish Trustee
from time to time with a list of the names and signatures of
all persons authorized to so act. Notwithstanding anything to
the contrary contained herein, following a Change of Control,
Company may not reserve discretionary authority for the
management and control of any assets of the Trust and any
prior reservation then in effect shall immediately be
nullified.
(d) Trustee shall be under no duty or obligation to review
or to question any direction of Company pursuant to authority
reserved under subsection (c) of this Section 5, or to review
securities or any other property so held with respect to
prudence or proper diversification, or to make any suggestions
or recommendation to Company with respect to the retention or
investment of any such assets and shall have no authority to
take any action or to refrain from taking any action with
respect to any such assets unless and until it is directed to
do so by Company. Notwithstanding anything to the contrary in
this Trust Agreement, Company does hereby discharge, indemnify
and hold harmless Trustee, its directors, officers, employees,
and agents, from and against any and all losses, costs,
damages, claims, penalties, expenses (including reasonable
attorneys' fees and expenses) or liabilities arising in
connection with Trustee's administration of the Trust
consistent with Section 5(c).
(e) Trustee shall be responsible for assuring the daily
investment of cash balances, unless directed otherwise by the
Company pursuant to authority reserved in subsection (c) of
this Section 5, so as to maintain uninvested cash balances at
a minimum.
(f) Without in any way limiting the powers and discretions
conferred upon Trustee by the other provisions of this Trust
Agreement, Trustee (and Company acting pursuant to authority
reserved under subsection (c) of this Section 5) shall be
vested
with the following powers and discretions (to be exercised in
light of the nature and purpose of this Trust) with respect to
the assets of the Trust subject to its management and control:
(1) To invest and reinvest in any property, real,
personal or mixed, wherever situated and whether or not
productive of income or consisting of wasting assets,
including without limitation, common and preferred
stocks, bonds, notes, debentures (including convertible
stocks and securities), leaseholds, mortgages,
certificates of deposit or demand or time deposits
(including any such deposits with Trustee), shares of
investment companies and mutual funds, interests in
partnerships and trusts, insurance policies and annuity
contracts, and oil, mineral or gas properties,
royalties, interests or rights, without being limited to
the classes of property in which trustees are authorized
to invest by any law or any rule of court of any state
and without regard to the proportion any such property
may bear to the entire amount of the Trust;
(2) To invest and reinvest all or any portion of
the Trust collectively through the medium of any common,
collective or commingled trust fund that may be established
and maintained by Trustee, to be held and invested subject
to all of the terms and conditions thereof, and such
trust shall be deemed adopted as a part of the Trust to
the extent that assets of the Trust are invested therein;
(3) To retain any property at any time received by
the Trustee;
(4) To sell or exchange any property held by it at
public or private sale, for cash or on credit, to grant
and exercise options for the purchase or exchange
thereof, to exercise all conversion or subscription
rights pertaining to any such property and to enter into
any covenant or agreement to purchase any property in the
future;
(5) To participate in any plan of reorganization,
consolidation, merger, combination, liquidation or other
similar plan relating to property held by it and to
consent to or oppose any such plan or any action
thereunder or any contract, lease, mortgage, purchase,
sale or other action by any person;
(6) To deposit any property held by it with any
protective, reorganization or similar committee, to
delegate discretionary power thereto, and to pay part of
the expenses and compensation thereof and any assessments
levied with respect to any such property so deposited;
(7) To extend the time of payment of any obligation
held by it;
(8) To hold uninvested any monies received by it,
without liability for interest thereon until such
monies shall be invested, reinvested or disbursed;
(9) To exercise all voting or other rights with
respect to any property held by it and to grant
proxies, discretionary or otherwise;
(10) For the purposes of the Trust, to borrow
money from others, to issue its promissory note or
notes therefor, and to secure the repayment thereof by
pledging any property held by it;
(11) To manage, administer, operate, insure,
repair, improve, develop, preserve, mortgage, lease or
otherwise
deal with, for any period, any real property or any oil,
mineral or gas properties, royalties, interests, or
rights held by joining with others, using other Trust
assets for any such purposes, to modify, extend, renew,
waive or otherwise adjust any provision for amortization
of the investment in or depreciation of the value of such
property;
(12) To employ suitable agents (including but not
limited to actuarial and employee benefit consulting
firms) and counsel, who may be counsel to Company or
Trustee, and to pay their reasonable expenses and
compensation from the Trust to the extent not paid by
Company;
(13) To register any securities held in the Trust in
the name of a nominee and to hold any investment in
bearer form,
and to combine certificates representing such investments with
certificates of the same issue held by the Trustee in other
fiduciary capacities or to deposit or
arrange for the deposit of such securities in a qualified
central depository even though, when so deposited, such
securities may be merged and held in bulk in the name of
the nominee of such depository with other securities
deposited therein by any other person, or to deposit or
arrange for the deposit of any securities issued by the
United States Government, or an agency or instrumentality
thereof, with a federal reserve bank, but the books and
records of Trustee shall at all times show that all such
investments are part of the Trust;
(14) To settle, compromise, or submit to arbitration
any claims, debts, or damages due or owing to or from the
Trust, respectively, to commence or defend suits or legal
proceedings to protect any interest of the Trust, and to
represent the Trust in all suits or legal proceedings in
any court or before any other body or tribunal; provided,
however, Trustee shall not be required to take any such
action unless it shall have been indemnified by Company or
the Trust to its reasonable satisfaction against liability
and expense it might incur therefrom;
(15) To organize under laws of any state a
corporation or trust for the purpose of acquiring and
holding title to any property which it is authorized to
acquire hereunder and to exercise with respect thereto any
or all of the powers set forth herein; and
(16) Generally, to do all acts consistent with its
duties hereunder, whether or not expressly authorized,
that Trustee may deem necessary or desirable for the
protection of the Trust.
(g) Notwithstanding anything to the contrary contained
herein (other than the provisions of Section 5A hereof), unless
and until directed otherwise by Company, or the occurrence of a
Change of Control, the assets of the Trust (other than
dividends on Company Stock held by the Trust) shall be invested
and reinvested exclusively in the common stock, par value $1.00
per share, of Company ("Company Stock") except to the extent
that Company directs otherwise with respect to a portion of the
assets in anticipation of reasonable liquidity needs of the
Trust. Trustee shall purchase from Company any such Company
Stock acquired for the Trust, unless Trustee is instructed
otherwise by Company in writing. With respect to assets of the
Trust invested in Company Stock, Trustee shall have no
obligation to diversify investments in the Trust, and shall not
be subject to any rule of applicable law which might otherwise
make necessary, require, or in any way deem appropriate
diversification of investments in the Trust, all such rules
being hereby expressly waived.
Notwithstanding anything to the contrary in this Trust
Agreement, Company does hereby discharge, indemnify and hold
harmless Trustee, its directors, officers, employees and
agents, from and against any and all losses, costs, damages,
claims, penalties, expenses (including reasonable attorneys'
fees and expenses) or liabilities arising in connection with
such Trustee's administration of the Trust consistent with this
Section 5(g).
(h) Following a Change of Control, Trustee may no longer
invest in Company Stock or any other securities or obligations
issued by Company, and Section 5(g) shall no longer apply.
After a Change of Control, Trustee shall have and exercise all
discretionary authority for the management and control of Trust
assets and shall commence the orderly disposition of Company
Stock, subject to the provisions of Section 5A hereof to the
extent applicable. Trustee may, in its sole discretion, retain
Company Stock acquired prior to a Change of Control for such
period of time as Trustee deems appropriate and in the best
interest of
participants and beneficiaries in the Plan(s). In no event may
Trustee make additional investments in Company Stock on behalf
of the Trust after a Change of Control, other than (i) amounts
held in diversified common investment vehicles in which Trustee
invests, and (ii) through the exercise of rights to acquire
Company Stock attributable to shares held at the time of the
Change of Control, in the Trustee's sole discretion, if the
Trustee deems such exercise appropriate and in best interest of
the participants and beneficiaries in the Plan(s).
Section 5A. Sale of Company Stock by Trustee
(a) Except as otherwise specifically permitted herein,
Trustee may not sell Company Stock except: (1) as necessary
from time to time to satisfy benefit obligations under the
Plan(s) which are required to be paid by Trustee under this
Trust; (2) pursuant to a tender or exchange offer, by other
than Company, for all or substantially all of the issued and
outstanding Company Stock; or (3) following a Change of
Control; and then only as specifically permitted herein.
(b) Trustee shall provide Company with not less than 30
days prior notice that it proposes to sell any Company Stock,
unless Trustee determines in good faith that such delay would
cause irreparable harm to Trustee or to the Trust, in which
event Trustee shall provide reasonable notice of such proposed
sale. Notice shall be given by telephone, confirmed promptly by
facsimile or first class mail, postage prepaid. Trustee shall
specify in any event the number of shares proposed to be sold.
(c) Trustee shall make sales of Company Stock pursuant to
an effective registration statement under, or an exemption
(including but not limited to Rule 144) from, the registration
requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and in compliance with applicable state
securities laws.
(d) Should either Company or Trustee determine in good
faith, with the written advice of counsel delivered to and in
form reasonably acceptable to the other party hereto, that such
proposed sale could not reasonably be made pursuant to an
exemption from the Securities Act, then Trustee may demand in
writing that Company, at Company's option, either purchase
under Section 5A(f) or register under the Securities Act under
Section 5A(e), such number of shares of Company Stock held and
proposed to be sold by Trustee. Company shall promptly notify
Trustee by telephone, confirmed promptly by facsimile or first
class mail, postage prepaid, whether it elects to proceed under
Section 5A(f) or 5A(e).
(e) If Company elects registration pursuant to a demand
under Section 5A(d) above, then:
(1) As soon as practicable, but in any event within
90 days after receipt of the demand from Trustee, Company
shall:
(i) file with the Securities and Exchange
Commission (the "Commission") a registration
statement covering the shares to be sold and use its
reasonable best efforts to have such registration
statement filed pursuant to this Agreement declared
effective as promptly as practicable. Company shall
advise Trustee of the progress of such filing and of
any review thereof undertaken by the Commission, and
promptly notify Trustee, and confirm such advice in
writing, (x) when such registration statement becomes
effective, (y) when any post-effective amendment to
such registration statement becomes effective and (z)
of any request by the Commission for any amendment or
supplement to such registration statement or any
prospectus relating thereto or for additional
information;
(ii) use its reasonable best efforts to
register, qualify, or effect compliance not later
than the effective date of any registration statement
filed pursuant to this Trust Agreement, the shares of
Company Stock registered thereunder under the blue
sky laws of such states or the District of Columbia
as the Trustee may reasonably request; provided,
however, that Company shall not be obligated to
qualify as a foreign corporation or as a dealer in
securities or to execute or file any general consent
to service of process under the laws of any such
jurisdiction where it is not so subject; and,
provided, further, that Company reserves the right
not to register or qualify shares of Company Stock in
any jurisdiction where registration or qualification
of such shares would be unreasonably burdensome;
(iii) from time to time (x) after the
Company has elected to satisfy a demand for sale by
means of registration, immediately advise Trustee of
any event or development, including a material
adverse change in the financial condition, business
or affairs of Company, known to Company (other than
events or developments affecting market or economic
conditions generally), which may have a material
adverse impact on the proposed offering; and (y)
within the period of effectiveness of such
registration statement, advise Trustee of any event
or development requiring amendment or supplement
(which amendment or supplement shall be prepared with
reasonable promptness by Company) of the registration
statement or prospectus used in connection therewith
or rendering it inadvisable to use the prospectus
until it is supplemented or amended; and
(iv) furnish to Trustee such number of copies of
any preliminary and final prospectuses and any
amendments and supplements thereto as Trustee may
reasonably request.
(2) Trustee and Company shall negotiate with an
underwriter selected or approved by Company with regard to the
underwriting of such requested registration. Company shall
enter into an underwriting agreement in customary form with the
underwriter(s) and Trustee in which Company and Trustee (to the
extent applicable based only on such information as is provided
in writing by Trustee) shall provide customary indemnification
to such underwriter(s) and each other.
(3) Company shall have the right to terminate or
withdraw any registration contemplated by it under this
Section 5A(e) prior to or following the effectiveness of
such registration for any reason whatsoever, provided that
it shall thereupon be required to purchase shares pursuant
to Section 5A(f).
(4) Trustee shall provide all such information and
materials and take all such actions, furnish all such
information, execute all such documents and cooperate with
Company in good faith, all as may be reasonably required
in order to permit Company to comply with all applicable
requirements of the Commission and all other applicable
laws or regulations and to obtain acceleration of the
effective date of the registration statement.
(5) All expenses incurred in connection with any
registration, qualification or compliance pursuant to this
Trust Agreement, including without limitation, all
registration, filing and qualification fees, printing and
engraving expenses, fees and disbursements of counsel for
Company, and expenses of any special audits or comfort
letters incidental to or required by such registration,
shall be borne by Company, provided that Trustee may pay
such expenses and recover same from the Trust if Company
fails to pay such expenses in a timely manner.
(f) Notwithstanding any contrary provision of this
Agreement, if Company advises Trustee of any delays in filing
or effectiveness of more than 60 days, if Company and Trustee
are unable despite good faith efforts to agree as to
registration or an exempt sale, or if a registered sale would
not permit Trustee to sell Company Stock expeditiously enough
to meet Trustee's good faith needs, Trustee may demand that
Company purchase, or if Company elects to purchase stock
pursuant to Section 5A(d), (e)(3) or (g), Company shall
purchase the Company Stock desired to be sold at fair market
value, which shall be the volume weighted average trading price
(including only trades which would meet the time of purchases
conditions under Rule 10b-18 under the Securities Exchange Act
of 1934, as amended ("Rule 10b-18"), of a share of such
security on the New York Stock Exchange on the day that Company
receives such demand or gives notice of such election. Company
and Trustee shall use their reasonable best efforts to agree as
to the prompt execution, closing and delivery of shares and
proceeds therefor.
(g) Until a Change of Control, Company may, on notice of
a proposed sale by Trustee, whether or not exempt, elect to
purchase such Company Stock from Trustee at fair market value,
as defined in Section 5A(f), and with the manner, conditions,
and closing of such sale to be agreed upon by Company and
Trustee.
(h) Company shall be entitled to postpone the filing of
any
registration statement and any amendment or supplement thereto
otherwise required to be prepared and filed by it, or to direct
that Trustee postpone any sale or put if, at the time it
receives a request for registration or sale, (i) Company
determines, in its reasonable business judgment, that such
filing, registration and offering, or sale or put, would
materially interfere with the likely success of a proposed
purchase or sale of securities by Company; or (ii) counsel for
Company opines in writing that the filing of such registration
statement, amendment or supplement, or sale or put would have a
material adverse impact on any material ongoing or pending
transaction or program of Company or any of its subsidiaries or
any other circumstances; provided, that should such delays
adversely affect Trustee's ability to pay benefits as
contemplated by this Trust Agreement, then Company shall
advance such funds as may be reasonably needed by Trustee for
such proposed pending sale.
(i) Notwithstanding any provisions above permitting sale
by
Trustee of Company Stock, Trustee shall, until a Change of
Control or a tender or exchange offer for all or substantially
all of the issued and outstanding Common Stock, limit sales,
whether registered or exempt (other than sales described in
Section 5A(f)), by reference to the volume limitations for
issuer repurchases within Rule 10b-18; provided, that block
sales may not exceed 25% of the trading volume on the New York
Stock Exchange, Inc. for the 14 day period prior to such sale.
Company shall provide all information reasonably required by
Trustee to make determinations as to the number of shares which
may be sold, and Trustee shall promptly notify Company as to
all sales made other than through a registered public offering.
(j) Company and Trustee shall each cooperate in good faith
and employ their reasonable best efforts in permitting and
effecting any purchase or sale of Company Stock as contemplated
in this Section 5A and each shall comply with all applicable
laws and regulations relating to the foregoing including,
without limitation, federal and state securities laws, rules
and regulations issued thereunder, and any other governmental
or stock exchange requirements or regulations relating thereto.
Section 6. Disposition of Income.
During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and
reinvested.
Section 7. Accounting by Trustee.
Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other
transactions required to be made, including such specific
records as shall be agreed upon in writing between Company and
Trustee. Within forty five (45) days following the close of
each calendar year and within forty-five (45) days after the
removal or resignation of the Trustee, Trustee shall deliver to
Company a written account of its administration of the Trust
during such year or during the period from the close of the
last preceding year to the date of such removal or resignation,
setting forth all investments, receipts, disbursements and
other transactions effected by it, including a description of
all securities and investments purchased and sold with the cost
or net proceeds of such purchases or sales (accrued interest
paid or receivable being shown separately), and showing all
cash, securities and other property held in the Trust at the
end of such year or as of the date of such removal or
resignation, as the case may be. In addition, as of the end of
each calendar month (referred to in this Trust as a "valuation
date"), within ten (10) days after each such month-end, Trustee
shall deliver to Company a written account setting forth the
value of the Trust's assets, together with such other
information as shall be agreed upon between Company and
Trustee.
Section 8. Responsibility of Trustee.
(a) Trustee shall act with the care, skill, prudence and
diligence under the circumstances then prevailing that a
prudent person acting in like capacity and familiar with such
matters would use in the conduct of an enterprise of a like
character and with like aims, provided, however, that Trustee
shall incur no liability to any person for (i) any action taken
pursuant to a direction, request or approval given by Company
or a Trustee's Contractor which is contemplated by, and in
conformity with, the terms of the Plan(s) or this Trust and is
given in writing by Company or a Trustee's Contractor (other
than Trustee when it
acts as Trustee's Contractor), or (ii) the investment in, or
retention of, Company Stock pursuant to the terms of this
Agreement, and no such action shall be considered a breach of
the fiduciary standard herein set forth. In the event of a
dispute between Company or a Trustee's Contractor and a party,
Trustee may apply to a court of competent jurisdiction to
resolve the dispute.
(b) If Trustee undertakes or defends any litigation
arising in connection with this Trust or a Plan (including
without limitation any action to compel funding of the Trust
pursuant to Section 1 hereof, to compel Company to take any
action under the Trust or the Plan(s), or to determine
Trustee's obligations hereunder), Trustee shall be indemnified
by the Trust against Trustee's costs, expenses and liabilities
(including, without limitation, reasonable attorneys' fees and
expenses) relating thereto and the Trust shall be primarily
liable for such payments,
other than those arising from Trustee's negligence or willful
misconduct. Trustee shall also be entitled to reasonable
payment from the Trust for the allocation of Trustee's
personnel to the investigation and defense or prosecution
thereof, at Trustee's normal hourly billing rates. If such
costs, expenses and liabilities are not paid from the Trust for
any reason (including without limitation insufficiency of the
Trust's assets to satisfy such obligations) in a reasonably
timely manner, Company agrees to indemnify Trustee against such
costs, expenses and liabilities. Anything in this subsection
(b) to the contrary notwithstanding, Company shall indemnify
and hold Trustee harmless from and against all costs, expenses
and liabilities arising out of or relating to the acquisition,
retention or disposition of Company Stock, except with respect
to matters covered by the Trustee's indemnity to be provided
under Section 5A(e)(2).
(c) Trustee may consult with legal counsel (who may also
be counsel for Company generally) with respect to any of its
duties or obligations hereunder.
(d) Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other
professionals to assist it in performing any of its duties or
obligations hereunder.
(e) Trustee shall have, without exclusion, all powers
consistent with the terms hereof conferred on trustees by
applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an
asset of the Trust, Trustee shall have no power to name a
beneficiary of the policy other than the Trust, to assign the
policy (as distinct from conversion of the policy to a
different form) other than to a successor Trustee, or to loan
to any person the proceeds of any borrowing against such
policy.
(f) Notwithstanding any powers granted to Trustee pursuant
to this Trust Agreement or to applicable law, Trustee shall not
have any power that could give this Trust the objective of
carrying on a business and dividing the gains therefrom, within
the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal
Revenue Code.
Section 9. Compensation and Expenses of Trustee.
All administrative and Trustee's fees as agreed upon
between Trustee and Company and reasonable expenses actually
incurred by the Trustee in performing its duties hereunder
including the fees and expenses of any third party which
provides services contemplated herein or in the Plan(s) shall
be
paid by Trustee from the assets of the Trust and, until so
paid, shall constitute a lien on the assets of the Trust. If
not so paid, the fees and expenses shall be paid by Company.
Section 10. Resignation and Removal of Trustee.
(a) Trustee may resign at any time by written notice to
Company, which shall be effective sixty (60) days after
receipt of such notice unless Company and Trustee agree
otherwise; provided that in no event shall any such
resignation take effect prior to the appointment of a
successor Trustee.
(b) Trustee may be removed by Company on sixty (60) days
notice or upon shorter notice accepted by Trustee.
(c) Upon a Change of Control, as defined herein, Trustee
may not be removed by Company for one (1) year. Additionally,
after the expiration of the one (1) year period following a
Change of Control, Trustee may be removed by Company only if
Company
first obtains the express written consent to such removal of
more than one-half of a combination of the participants and
beneficiaries of deceased participants in the Plan(s).
(d) If Trustee resigns or is removed within one (1) year
of a Change of Control, as defined herein, Trustee shall
select a successor Trustee in accordance with the provisions
of Section 11(b) hereof prior to the effective date of
Trustee's resignation or removal. Additionally, if Trustee
resigns or is removed after expiration of the one (1) year
period following a Change of Control, Company may select a
successor Trustee in accordance with the provisions of Section
11(b) hereof if it shall first obtain the express written
consent to the appointment of the proposed successor of more
than one-half of a combination of the participants and
beneficiaries of deceased participants in the Plan(s). If
Company fails to so appoint a successor Trustee, Trustee shall
select a successor Trustee. Upon the appointment and
acceptance by, and transfer of assets to, a successor Trustee,
Trustee shall have no further responsibilities under this
Trust Agreement.
(e) Upon resignation or removal of Trustee and appointment
of a successor Trustee, all assets shall subsequently be
transferred to the successor Trustee. The transfer shall be
completed within sixty (60) days after receipt of notice of
resignation, removal or transfer, unless Company extends the
time limit.
(f) If Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the
effective date of resignation or removal under paragraph (a)
of this section. If no such appointment has been made,
Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses
of Trustee in connection with the proceeding shall be allowed
and charged to the Trust as administrative expenses of the
Trust.
Section 11. Appointment of Successor.
(a) If Trustee resigns or is removed in accordance with
Section 10(a) or (b) or (c) hereof, Company may, subject to
Section 10(d), appoint any third party, such as a bank trust
department or other party that may be granted corporate
trustee powers under state or federal law, as a successor to
replace Trustee upon resignation or removal. The appointment
shall be effective when accepted in writing by the new
Trustee, who shall have all the rights and powers of the
former Trustee, including ownership rights in the Trust
assets. The former Trustee shall execute any instrument
necessary or reasonably requested by Company or the successor
Trustee to evidence the transfer.
(b) If Trustee resigns or is removed pursuant to the
provisions of Section 10(a), (b), (c) or (d) hereof and
selects a successor Trustee pursuant to Section 10(d) hereof,
Trustee may appoint any third party such as a bank trust
department or other party that may be granted corporate
trustee powers under state or federal law. The appointment of
a successor Trustee shall be effective when accepted in
writing by the new Trustee. The new Trustee shall have all the
rights and powers of the former Trustee, including ownership
rights in Trust assets. The former Trustee shall execute any
instrument necessary or reasonably requested by the successor
Trustee to evidence the transfer.
(c) A former Trustee shall prepare and deliver to Company
and to the successor Trustee a final accounting unless Company
waives Company's right to such accounting, and such accounting
shall be effective through the date of the former Trustee's
transfer of all assets to its successor. The successor
Trustee need not examine the records and acts of any prior
Trustee unless requested to do so by Company (and, after a
Change of Control, unless the successor Trustee in addition
concludes that there is a reasonable basis for such request by
Company) and may retain or dispose of existing Trust assets,
subject to Sections 7 and 8 hereof. Subject to the foregoing,
the successor Trustee shall not be responsible for and Company
shall indemnify and defend the successor Trustee from any
claim or liability resulting from any action or inaction of
any prior Trustee or from any other past event, or any
condition existing at the time it becomes successor Trustee.
The compensation arrangement for the successor Trustee shall
be reasonable in relation to the services to be performed by
the successor Trustee.
Section 12. Amendment or Termination.
(a) This Trust Agreement (including Appendix A hereto) may
be amended by a written instrument executed by Trustee and
Company. Notwithstanding the foregoing, (i) no such amendment
shall conflict with the terms of the Plan(s) as then in effect
or shall make the Trust revocable after it has become
irrevocable in accordance with Section 1(b) hereof and (ii)
the duties and responsibilities of Trustee shall not be
increased without Trustee's written consent.
(1) Furthermore, notwithstanding anything to the
contrary in this Trust Agreement (except as otherwise
provided in this Section 12), (i) prior to a Change of
Control, no amendment shall be made to Section 1(d)
through (h), Section 2, Section 4, Section 5(h), Section
10(c), Section 10(d), this Section 12(a), Section 13(d),
Section 13(g), Section 13(j), and Section 13(k), and no
deletion shall be made in Appendix A, without the prior
written consent of more than one-half of a combination of
the participants and beneficiaries of deceased
participants in the Plan(s) unless such amendment would
not, in the opinion of counsel, have a material and
adverse effect on the rights or interests of such
participants or beneficiaries or procedures for
distribution of benefits to participants or
beneficiaries; and (ii) following a Change of Control, no
amendment shall be made to any provision of this Trust
Agreement (including Appendix A hereto) without the prior
written consent of more than one-half of a combination of
the participants and beneficiaries of deceased
participants in the Plan(s) unless such amendment would
not, in the opinion of counsel, have a material and
adverse effect on the rights or interests of such
participants or
beneficiaries or procedures for distribution of benefits to
participants and beneficiaries.
(2) The limitations contained in Section 12(a)(1)
shall not apply with respect to any amendment which is
reasonably necessary, in the opinion of counsel, to
preserve the status of the Trust as a grantor trust and
the status of the Plan(s) as unfunded for federal income
tax purposes and for purposes of the Employee Retirement
Income Security Act of 1974, as amended, or to guard
against an adverse impact on Plan participants or
beneficiaries and which, in the opinion of counsel, is
drafted primarily to preserve such status or to reduce or
eliminate such adverse impact on such person or persons.
(3) In each instance in which an opinion of counsel
is contemplated in this Section 12(a) prior to a Change
of Control, such opinion shall be in writing and
delivered to Trustee, rendered by a nationally recognized
law firm selected by Company, and in each instance in
which an opinion of counsel is contemplated in this
Section 12(a) after a Change of Control, such opinion
shall be in writing and delivered to Trustee, rendered by
a nationally recognized law firm selected by the
Trustee's Contractor. Trustee may rely on all such
opinions and determinations.
(b) The Trust shall not terminate until the date on which
Plan participants and their beneficiaries are no longer
entitled to benefits from Company pursuant to the terms of the
Plan(s). Upon termination of the Trust any assets remaining in
the Trust shall be returned to Company.
(c) Upon written approval of participants or beneficiaries
entitled to payment of benefits pursuant to the terms of the
Plan(s), Company may terminate this Trust prior to the time
all benefit payments under the Plan(s) have been made. All
assets in the Trust at termination shall be returned to
Company.
(d) Trustee may rely for purposes of this Section 12 on
a certificate furnished by Company prior to a Change of
Control, and by the Trustee's Contractor after a Change of
Control, (i) with respect to any amendment requiring the prior
written consent of more than one-half of the participants and
beneficiaries in the Plan(s) pursuant to subsection (a) of
this Section 12, that such consent has been obtained, (ii)
with respect to subsection (b) of this Section 12, that Plan
participants and their beneficiaries are no longer entitled to
benefits pursuant to the terms of the Plan(s), and (iii) with
respect to subsection (c) of this Section 12, that the written
approval of participants or beneficiaries entitled to payment
of benefits pursuant to the terms of the Plan(s) has been
obtained.
Section 13. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by
law shall be ineffective to the extent of any such
prohibition, without invalidating the remaining provisions
hereof.
(b) Benefits payable to Plan participants and their
beneficiaries under this Trust Agreement may not be
anticipated, assigned (either at law or in equity), alienated,
pledged, encumbered or subjected to attachment, garnishment,
levy, execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and
construed in accordance with the laws of New York.
(d) For purposes of this Trust, Change of Control shall
mean: (i) any "person" (as such term is defined in the
Securities Exchange Act of 1934, as amended), other than a
trustee or other fiduciary holding securities under an
employee benefit plan of Company or a corporation owned
directly or indirectly by the shareholders of Company in
substantially the same proportions as their ownership of stock
of Company, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under said Act), directly or indirectly, of
securities of Company representing 20% or more of the total
voting power represented by Company's then outstanding voting
securities; or (ii) during any period of two consecutive
years, individuals who at the beginning of such period
constitute the Board of Directors of Company and any new
director whose election by the Board of Directors or
nomination for election by Company's shareholders was approved
by a vote of at least twothirds of the directors who either
were directors at the beginning
of the two-year period or whose election or nomination for
election was previously so approved, cease for any reason to
constitute a majority thereof. For all purposes of this Trust
Agreement, Trustee shall have no responsibility whatsoever to
determine whether or not a Change of Control of Company has
occurred.
(e)(1) After the execution of this Trust Agreement,
Company shall promptly file with Trustee, and following
the appointment of a Trustee's Contractor, Company shall
promptly file with the Trustee's Contractor, a certified
list of the names and specimen signatures of the officers
of Company and any delegate authorized to act for it.
Unless Company notifies Trustee to the contrary, Company
shall act through its Treasurer or any person who such
Treasurer authorizes in writing to act on his behalf or
any other person who is authorized to act on Company's
behalf by a resolution of Company's Board of Directors.
Company shall promptly notify Trustee and the Trustee's
Contractor, if applicable, of the addition or deletion of
any person's name to or from such list, respectively.
Until receipt by Trustee and/or the Trustee's Contractor
of notice that any person is no longer authorized so to
act, Trustee or the Trustee's Contractor may continue to
rely on the authority of the person. All certifications,
notices and directions by any such person or persons to
Trustee or the Trustee's Contractor shall be in writing
signed by such person or persons. Trustee and the
Trustee's Contractor may rely on any certification,
notice or direction of Company that the Trustee or the
Trustee's Contractor reasonably believes to have been
signed by a duly authorized officer or agent of Company.
Trustee and the Trustee's Contractor shall have no
responsibility for acting or not acting in reliance upon
any notification reasonably believed by Trustee or the
Trustee's Contractor to have been signed by a duly
authorized officer or agent of Company.
(e)(2) After the engagement of a Trustee's
Contractor (other than Trustee), the Trustee's Contractor
shall promptly file with Trustee a certified list of the
names and specimen signatures of the officers of the
Trustee's Contractor and any delegate authorized to act
for it. Trustee's Contractor shall promptly notify
Trustee of the addition or deletion of any person's name
to or from such list. Until receipt by Trustee of notice
that any person is no longer authorized so to act,
Trustee may continue to rely on the authority of the
person. All certifications, notices and directions by
any such person or persons to Trustee shall be in writing
signed by such person
or persons. Trustee may rely on any such certification,
notice or direction of the Trustee's Contractor that
Trustee reasonably believes to have been signed by or on
behalf of a duly authorized officer or agent of the
Trustee's Contractor. Trustee shall have no
responsibility for acting or not acting in reliance upon
any notification reasonably believed by the Trustee to
have been signed by a duly authorized officer or agent of
the Trustee's Contractor.
(f) Neither the gender nor the number (singular or
plural) of any word shall be construed to exclude another
gender or number when a different gender or number would be
appropriate.
(g)(1) This Trust Agreement shall be binding upon
and inure to the benefit of any successor to Company or
its business, or a portion thereof, which assumes Company
obligations under the Plan(s), as the result of merger,
consolidation, reorganization, spin-off, division,
transfer of assets or otherwise (hereinafter referred to
as a "corporate transaction") and any subsequent
successor thereto which assumes Company obligations under
the Plan(s). All references in this Trust Agreement to
"Company" shall include all such successors. In the
event of any such corporate transaction, the successor to
Company or its business or subsequent successor thereto
shall promptly notify Trustee in writing of its
successorship. In no event shall any such corporate
transaction suspend or delay the payment of benefits to
Plan participants or beneficiaries hereunder.
(g)(2) Except as provided in Section 13(g)(3),
Company shall remain liable for the payment of any Plan
benefits attributable to deferrals made under plans of
deferred compensation prior to the effective date of any
such corporate transaction, or benefits accrued under any
supplemental retirement or pension plan prior to the
effective date of any such corporate transaction, to the
extent of the then assets of the Trust, if such payments
are proper but not timely made by a successor to Company
or its business or any subsequent successor thereto, and
the assets of the Trust shall be available to make such
payments pursuant to Section 2. The obligation to make
any such payments hereunder shall arise only after the
affected Plan participant or beneficiary has exhausted
all claims and review procedures properly imposed under
the terms of the Plan. The Trust shall be subrogated, to
the extent of any payment made pursuant to this Section
13(g)(2) to a Plan participant or beneficiary, to all
rights and remedies of such Plan participant or
beneficiary, and Trustee shall be entitled to sue the
nonpaying successor to Company in the name of the Plan
participant or beneficiary, but Trustee shall not be
required to take any such action unless there are
sufficient assets in the Trust to cover the expense
thereof. Entitlement to any payment hereunder is
expressly conditioned upon the reasonable assistance and
cooperation of the Plan participant or beneficiary in
pursuing such rights and remedies.
(g)(3) The provisions of Section 13(g)(2) shall
be inapplicable to any Plan benefits payable following
any corporate transaction with respect to which Company
shall have contracted with its successor or otherwise
provided for the establishment of a trust providing
substantially similar rights and protections to Plan
participants and beneficiaries as are provided herein and
which at the effective date of such corporate transaction
is funded to at
least the "funding level" (as such term is used in
Section 1(e)(2) hereof) of this Trust. The determination
of whether the requirements of the preceding sentence
have been satisfied shall be made by Company; provided,
however, that following the engagement of a Trustee's
Contractor, such determinations shall be made by
Trustee's Contractor. Trustee may rely on the accuracy of
all such determinations.
(h) This Trust Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an
original, but all of which shall together constitute only one
Agreement.
(i) Communications to Trustee shall be sent to Bankers
Trust Company, 280 Park Avenue, New York, New York 10017
ATTENTION: Senior Vice President, Retirement Services Group,
or to such other address as Trustee may specify in writing.
No communication shall be binding upon Trustee until it is
received by Trustee. Communications to Company and the
Trustee's Contractor shall be sent to the principal offices of
Company or the Trustee's Contractor, as the case may be, or to
such other address as Company or the Trustee's Contractor, as
applicable, may specify in writing.
(j) In the event the participants and beneficiaries in one
or more of the Plan(s) are determined generally to be subject
to federal income tax on any amount in the Trust prior to the
time of payment hereunder, the entire amount determined to be
so taxable shall be distributed by Trustee to each affected
participant or beneficiary. Company may, at its option, make
such payments directly to affected participants and
beneficiaries. An amount shall be determined to be subject to
federal income tax upon the earliest of: (a) a final
determination by the United States Internal Revenue Service
addressed to a participant or beneficiary which is not
appealed to the courts; (b) a final determination by the
United States Tax Court or any other federal court affirming
any such determination by the Internal Revenue Service; or (c)
an opinion by counsel for Company reasonably acceptable to
Trustee addressed to Company and Trustee, that, by reason of
the Treasury Regulations, amendments to the Internal Revenue
Code, published Internal Revenue Service rulings, court
decisions or other substantial precedent, amounts hereunder
are generally subject to federal income tax prior to payment;
provided, that following a Change of Control, only an opinion
by counsel selected by the Trustee's Contractor may be
accepted by Trustee for purposes of (c). Company shall
undertake at its sole expense to defend any tax claims
described herein which are asserted by the Internal Revenue
Service against any participant or beneficiary and which it
determines would affect participants or beneficiaries
generally, including attorneys' fees and costs of appeal, and
shall have the sole authority to determine whether or not to
appeal any determination made by the Internal Revenue Service
or by a lower court. Company also agrees to reimburse any
participant or beneficiary for any interest or penalties in
respect of tax claims hereunder which it determines would
affect participants or beneficiaries generally, upon receipt
of documentation of same. Any distributions from the Trust to
a participant or beneficiary under this Section 13(j) (other
than reimbursements of interest or penalties referred to in
the preceding sentence) shall reduce the benefits payable to
such participant and/or beneficiary under the Plan(s).
(k) In the event that Company shall fail to satisfy any
obligation of Company to a Plan participant or beneficiary
under this Trust Agreement, or in one or more of the Plan(s),
after reasonable notice and demand with respect thereto, and
one or
more participants or beneficiaries obtains a final
determination by a court of competent jurisdiction that
Company has so failed, such participant(s) or beneficiary(ies)
shall be indemnified by the Trust against reasonable and
appropriate costs and expenses (including without limitation
reasonable attorneys' fees and expenses) relating thereto and
the Trust shall be primarily liable for such payments.
Interest on any Plan benefit payments which such court
determines have been delayed to the extent interest or similar
payments in an equal or greater amount are not provided in the
Plan or by the court or otherwise shall also be paid from the
assets of the Trust. Such interest shall be calculated using
a rate of interest equal to the rate of interest on ten (10)
year United States Treasury obligations, as determined on the
first day of each calendar quarter, compounded quarterly. If
such costs, expenses and interest are not paid from the Trust
for any reason (including without limitation insufficiency of
the Trust's assets to satisfy such obligations) in a
reasonably timely manner, such participant(s) or
beneficiary(ies) may obtain payment from Company.
(l) Nothing herein shall be construed as restricting or
limiting in any way amendment of the Plan(s) in accordance
with the terms of the Plan(s).
(m) Any other provisions of this Trust Agreement to the
contrary notwithstanding, this Trust shall terminate no later
than the twenty-first anniversary of the date of death of the
survivor from among a class consisting of all of the
descendants of the late Joseph P. Kennedy, the former
Ambassador to the Court of Saint James, who are living on the
date of the establishment of the Trust and, if the Trust is
still in existence on such anniversary date, Trustee shall
dispose of the Trust as Company shall direct.
(n) In case of any conflict or inconsistency between the
terms of this Trust Agreement and any Plan, the terms of this
Trust Agreement shall control.
Section 14. Effective Date.
The effective date of this Trust Agreement shall be the
date of its execution set forth on page 1 of the Trust
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused the
Trust Agreement to be duly executed and their respective
corporate seals to be hereto affixed on the date set forth on
page 1 of the Trust Agreement.
BELLSOUTH CORPORATION
By: /s/Kincaid Paterson for
Title: Vice President,
Secretary and
Treasurer
(CORPORATE SEAL)
ATTEST: /s/Marcy A. Bass
Title: General Attorney & Assistant Secretary
BANKERS TRUST
COMPANY, as Trustee
By: /s/ Robert M.
Bysshe Title: Managing
Director
(CORPORATE SEAL)
ATTEST: /s/ David Abramson
Title: Vice President and Counsel
APPENDIX A
BellSouth Nonqualified Deferred Compensation Plan
BellSouth Corporation Directors' Retirement Plan
BellSouth Corporation Deferred Compensation Plan
for Non-Employee Directors
BELLSOUTH TELECOMMUNICATIONS, INC.
TRUST UNDER BOARD OF DIRECTORS
BENEFIT PLAN(S) TABLE OF CONTENTS
Section 1. Establishment of Trust 2
Section 2. Payments to Plan Participants and
Their Beneficiaries 6
Section 3. Trustee Responsibility Regarding
Payments to Trust Beneficiary When
Company is Insolvent 9
Section 4. Payments to Company 10
Section 5. Investment Authority 11
Section 5A. Sale of Company Stock by Trustee 15
Section 6. Disposition of Income 19
Section 7. Accounting by Trustee 19
Section 8. Responsibility of Trustee 20
Section 9. Compensation and Expenses of Trustee 21
Section 10. Resignation and Removal of Trustee 21
Section 11. Appointment of Successor 22
Section 12. Amendment or Termination 23
Section 13. Miscellaneous 24
Section 14. Effective Date 24
BELLSOUTH TELECOMMUNICATIONS, INC.
TRUST UNDER BOARD OF DIRECTORS BENEFIT PLAN(S)
This Agreement made this 23rd day of May, 1996, by
and between BellSouth Corporation, a Georgia corporation
(BellSouth), BellSouth Telecommunications, Inc., a
Georgia corporation whollyowned by BellSouth (Company),
and Bankers Trust Company, a New York corporation
(Trustee);
(a) WHEREAS, Company has adopted the nonqualified
deferred compensation Plan(s) as listed in Appendix A
for
certain members of its Board of Directors;
(b) WHEREAS, Company has incurred or expects to incur
liability under the terms of such Plan(s) with respect to the
individuals participating in such Plan(s);
(c) WHEREAS, to make certain provisions for the payment
of such liability, BellSouth and Trustee on April 25, 1990
executed a trust agreement for the benefit of certain
directors of BellSouth and its affiliates (including Company)
who participate in the Plan(s) (the "Predecessor Trust");
(d) WHEREAS, BellSouth, Company and Trustee on November
9, 1993 amended and restated the Predecessor Trust insofar as
it related to Company's obligations (but not obligations of
subsidiary or other affiliated entities) to pay benefits
under the Plan(s) (hereinafter, called " Trust") and
contributed assets to the Trust, subject to the claims of
Company's creditors in the event of Company's Insolvency, as
herein defined, until full payment has been made in respect
of such obligations of Company to Plan participants and their
beneficiaries in such manner and at such times as specified
in the Plan(s);
(e) WHEREAS, BellSouth, Company and Trustee on April 28,
1995 amended and restated the Trust;
(f) WHEREAS, BellSouth, Company and Trustee now desire
once again to amend and restate the Trust in the form of this
Trust Agreement;
(g) WHEREAS, it is the intention of the parties that this
Trust shall constitute an unfunded arrangement and shall not
affect the status of the Plan(s) as an unfunded plan
maintained for the purpose of providing deferred compensation
for members of Company's board of directors who are not
employees of Company or affiliated entities; and
(h) WHEREAS, it is the intention of Company to make
contributions to the Trust to provide itself with a source of
funds to assist it in the meeting of its liabilities under
the Plan(s);
NOW, THEREFORE, the parties do hereby establish the
Trust and agree that the Trust shall be comprised, held and
disposed of as follows:
Section 1. Establishment of Trust.
(a) BellSouth, Company and Trustee hereby amend and
restate in all respects the Trust in the form of this Trust
Agreement. The principal of the Trust shall be held,
administered and disposed of by Trustee as provided in this
Trust Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of
which Company is the grantor, within the meaning of subpart
E, part I, subchapter J, chapter 1, subtitle A of the
Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust, and any earnings
thereon
shall be held separate and apart from other funds of Company
and shall be used exclusively for the uses and purposes of
Plan participants and general creditors as herein set forth.
Plan participants and their beneficiaries shall have no
preferred claim on, or any beneficial ownership interest in,
any assets of the Trust. Any rights created under the
Plan(s) and this Trust Agreement shall be mere unsecured
contractual rights of Plan participants and their
beneficiaries against Company. Any assets held by the Trust
will be subject to the claims of Company's general creditors
under federal and state law in the event of Insolvency, as
defined in Section 3(a) herein.
(e)(1) Company, in its sole discretion, may at
any time, or from time to time, make additional deposits
of cash or other property acceptable to Trustee in trust
with Trustee to augment the principal to be held,
administered and disposed of by Trustee as provided in
this Trust Agreement. Neither Trustee nor any Plan
participant or beneficiary shall have any right to
compel any such additional deposits under this
subsection (1).
(2) If, as of the last day of a fiscal year of the
Trust, the funding level of the Trust shall be less than
eighty percent (80%) of the Trust's funding level as of
the last day of any of the five (5) most recently
preceding fiscal years of the Trust (taking into account
contributions made under this Section 1(e)(2) for each
such year), disregarding for purposes of this Section
1(e)(2) fiscal years ending prior to January 1, 1994,
BellSouth shall notify Trustee of such situation and
Company shall make an irrevocable contribution to the
Trust as soon as possible, but in no event longer than
one hundred twenty (120) days following the last day of
such fiscal year. Such contribution shall be in an
amount sufficient to bring the Trust's funding level
equal to the Trust's funding level as of the last day of
the fiscal year among the five (5) most recently
preceding fiscal years on which the Trust's funding
level was highest. In no event shall such contribution
be required if, as of the last day of such fiscal year,
the fair market value of the Trust's assets is one
hundred percent (100%), or greater, of the aggregate
Current Liability (as defined in subsection (5) of this
Section 1(e)) of Company under the Plan(s). For
purposes of this Section 1(e)(2), "funding level" shall
mean the ratio (stated as a percentage) that the fair
market value of the assets in the Trust bears to the
aggregate Current Liability of Company under the
Plan(s). The Trust's funding level shall be determined
as of the last day of each fiscal year, except that in
determining the amount of the required
contribution, the fair market value of the Trust's assets
shall be determined as of the valuation date most recently
preceding the date on which such contribution is made.
(3) If, as of the last day of a fiscal year of the Trust,
the funding level of the Trust (taking into account any
contribution required under subsection (2) of this
Section 1(e)) shall be less than one hundred percent
(100%), BellSouth shall notify Trustee of such situation
and Company shall make an irrevocable contribution to the
Trust within one hundred eighty (180) days following the
last day of such fiscal year. Such contribution shall be
in the amount which, had the contribution been made as of
the last day of such fiscal year of the Trust, would have
been sufficient to bring the Trust's funding level to 100%
as of the last day of such fiscal year. For purposes of
this Section 1(e)(3), "funding level" shall mean the ratio
(stated as a percentage) that the fair market value of the
assets in the Trust bears to the aggregate Current
Liability of Company under the Plan(s); provided, that such
Current Liability shall be determined using, instead of the
interest rate described in Section 1(e)(5) hereof, the
valuation interest rate assumption reported by the enrolled
actuary for Company's principal defined benefit pension
plan (measured by the number of active management employees
of Company and affiliated entities participating in all
such plans at the end of the respective plan year which
coincides with or ends within the fiscal year of the
Trust), in its actuarial valuation report for such plan for
such plan year, for purposes of funding
such respective plan for such plan year. Notwithstanding
the foregoing, (1) if the enrolled actuary for Company's
principal defined benefit pension plan changes the
applicable valuation interest rate reported for a plan
year, as described in the sentence above, in the enrolled
actuary's actuarial statement and opinion subsequently
prepared as part of the annual report required by the
Employee Retirement Income Security Act of 1974, as
amended, for such plan year, (i) BellSouth shall so notify
the Trustee, (ii) the changed valuation interest rate shall
be substituted for the originally reported valuation
interest rate in determining Company's contribution
required under this Section 1(e)(3) above, and (iii)
Company shall make any additional required contribution
resulting from such change within sixty (60) days after the
change, and (2) if as of the end of a fiscal year of the
Trust, Company and affiliated entities do not maintain a
defined benefit pension plan covering management employees
with assets having an aggregate market value of at least
Fifty Million Dollars ($50,000,000.00), Current Liability
for purposes of this Section 1(e)(3) shall be determined
using an interest rate assumption equal to the average of
the monthly averages of the 30-year constant maturity U.S.
Treasury rate, expressed in percent per annum, during such
fiscal year of the Trust, as published in the Federal
Reserve Report, a successor report or, if there is no
successor report, comparable data, plus one percent (1%)
per annum.
(4) For purposes of subsections (2) and (3) of this
Section 1(e), the funding level of the Trust and all
related determinations shall be made by BellSouth;
provided, however, that following the engagement of a
Trustee's Contractor, such determination shall be made by
Trustee's Contractor. The Trustee may rely on the accuracy
of all such determinations.
(5)(A) For purposes of this Trust, "Current
Liability" shall mean the amount required to pay each Plan
participant or beneficiary the benefits to which Plan
participants or their beneficiaries would be entitled
pursuant to the terms of the Plan(s), to the extent such
benefits are obligations of Company (and not obligations of
subsidiary or other affiliated entities). The Current
Liability on any date with respect to a Plan shall be
determined as if the Plan terminated as of such date using
an interest rate (subject to Section 1(e)(3)) equal to the
Pension Benefit Guaranty Corporation valuation interest rate
for immediate annuities as in effect on such date, the 1983
Group Annuity Mortality Table published by the Society of
Actuaries, and reasonable actuarial calculation principles
consistently applied. Current Liability shall be determined,
as of the last day of each fiscal year of the Trust and at
such additional times as are necessary to implement the
provisions of this Trust Agreement, by BellSouth; provided,
however, that following the engagement of a Trustee's
Contractor, such determinations shall be made by Trustee's
Contractor. The Trustee may rely on the accuracy of all
such determinations.
(5)(B) In the event that the interest rate
assumption described in subsection (5)(A) above is at any
time no longer available or the mortality assumption
described above is at any time no longer considered a
reasonable and reliable mortality assumption, other interest
rate (subject to Section 1(e)(3)) or mortality assumptions,
as the case may be, deemed generally comparable to the above
specified assumptions, may be used instead. All determinations
regarding substitute assumptions, including whether such
substitution is reasonably necessary and the selection of the
substitute assumption(s), shall be made by BellSouth; provided,
however, that following the engagement of a Trustee's Contractor,
such determinations shall be made by Trustee's Contractor.
(f) Upon a Change of Control, BellSouth shall promptly
notify Trustee thereof and, as soon as possible, but in no event
longer than one hundred twenty (120) days following the Change of
Control, as defined herein, Company shall make an irrevocable
contribution to the Trust in an amount that is sufficient to pay
each Plan participant or beneficiary the benefits to which Plan
participants or their beneficiaries would be entitled pursuant to
the terms of the Plan(s), to the extent such benefits are
obligations of Company (and not obligations of subsidiary
or other affiliated entities), as of the date on which the Change
of Control occurred. Such contribution shall be in an amount
equal to the excess, if any, of the aggregate Current Liability
as of the date on which the Change of Control occurred over the
fair market value of the Trust's assets as of the valuation date
most recently preceding the date on which such contribution is
made. Thereafter, Company shall make an additional contribution
each fiscal year to the Trust, as soon as possible, but in no
event longer than one hundred twenty (120) days following the
last day of each such fiscal year, in an amount equal to the
excess, if any, of the aggregate Current Liability under the
Plan(s) as of the last day of the fiscal year over the fair
market value of the Trust's assets as determined on the valuation
date most recently preceding the date on which such contribution
is made. The amount of all such contributions shall be
determined by Trustee's Contractor. The Trustee may rely on the
accuracy of all such determinations.
(g) If, as of a Distribution Date with respect to
outstanding rights to purchase Series A First Preferred Stock,
under the terms of and as defined in a Rights Agreement between
BellSouth and Chemical Bank, as Rights Agent, under an agreement
originally dated November 27, 1989 (a "Distribution Date"), the
aggregate Current Liability exceeds the fair market value of the
Trust's assets (such fair market value determined as of the
valuation date most recently preceding such Distribution Date),
Company shall be required to make an additional contribution to
the Trust in an amount equal to such excess or, at Company's
option, to obtain a letter of credit, or a series of letters of
credit, adequate to fund such amount as of such Distribution Date
under the Plan(s) and maintain such letter(s) of credit until
such time as the aggregate Current Liability no longer exceeds
the fair market value of the Trust's assets. The determination
of whether the aggregate Current Liability exceeds the fair
market value of the Trust's assets upon a Distribution Date and,
if so, the amount of such excess, shall be made by BellSouth;
provided, however, that following the engagement of a Trustee's
Contractor, such determinations shall be made by Trustee's
Contractor. The Trustee may rely on the accuracy of all such
determinations. Any such letter of credit, or series of letters
of credit, shall be part of the general assets of Company and
shall not be an asset of this Trust and, unless otherwise agreed
to in writing by Trustee, Trustee shall have no responsibility
whatsoever with respect to the adequacy of, or selection of the
issuer or issuers of, any such letter or letters of credit.
(h) If, in any five (5) consecutive calendar year period,
(i) there are five (5) or more final determinations by courts of
competent jurisdiction that (A) BellSouth or a subsidiary of
BellSouth, including Company, which both is a member of
BellSouth's controlled group of corporations and has adopted a
Plan (a "Participating Company") has failed to pay (after
reasonable notice and demand for payment) any benefit due under
the terms and conditions of a Plan and that (B) there was no
material issue of fact or law respecting such company's
obligation to make such benefit payment, or (ii) there are two
(2) or more final determinations by courts of competent
jurisdiction, in lawsuits instituted after reasonable notice and
demand with respect thereto, in which the court determines that
BellSouth or a Participating Company had acted in bad faith and
with a clear and deliberate disregard for such company's
obligations under the Plan(s), there shall be deemed to have
occurred a Change of Control as defined in this Trust Agreement
and BellSouth shall give Trustee prompt written notice of such
event. For purposes of this Trust Agreement, (i) the term
"controlled group of corporations" has the meaning ascribed to
such term in Section 1563(a) of the Internal Revenue Code of
1986, as amended, substituting "more than 50 percent" for the
phrase "at least 80 percent" each place it appears in
Section 1563(a)(1), and (ii) the term "final determination"
means a determination with respect to which all rights of appeal
or to request a review, a rehearing or redetermination have been
exhausted or have lapsed.
Section 2. Payments to Plan Participants and Their
Beneficiaries.
(a) BellSouth, or the Trustee's Contractor if one shall
have been engaged, shall deliver to Trustee a schedule (the
"Payment Schedule") that indicates the amounts payable in
accordance with the terms and conditions of the Plan(s) in
respect of each Plan participant (and his or her beneficiaries),
that provides a formula or other instructions acceptable to
Trustee for determining the amounts so payable, the form in
which such amount is to be paid (as provided for or available
under the Plan(s)), and the time of commencement for payment of
such
amounts. Except as otherwise provided herein, Trustee shall
make payments to the Plan participants and their beneficiaries
in accordance with such Payment Schedule. The Trustee shall
make provision for the reporting and withholding of any federal,
state or local taxes that may be required to be withheld with
respect to the payment of benefits pursuant to the terms of the
Plan(s) and shall pay amounts withheld to the appropriate taxing
authorities or determine that such amounts have been reported,
withheld and paid by Company. Payments may be made in cash or,
where called for under the terms of the Plan(s), in Company
Stock (as such term is defined in Section 5(g) hereof).
Notwithstanding the foregoing, if a benefit which is
distributable in the form of Company Stock under the terms of a
Plan becomes payable at a time when there is no (or
insufficient) Company Stock in the Trust with which to satisfy
such benefit obligation and if the Company fails or refuses to
pay such benefit within a reasonable time after notice from
Trustee that it has become so payable, Trustee shall use other
assets of the Trust to acquire Company Stock, on the open market
or otherwise in its discretion, sufficient to satisfy such
benefit obligation.
(b) The entitlement of a Plan participant or his or her
beneficiaries to benefits payable by Company under the Plan(s)
shall be determined in accordance with the terms of the Plan(s)
by BellSouth (or Company) or such party as it shall designate
under the Plan(s), or the Trustee's Contractor if one shall have
been engaged, and any claim for such benefits shall be
considered and reviewed and paid or not paid under the
procedures set out in the Plan(s). Notwithstanding any Plan
provision to the contrary, if a Trustee's Contractor shall have
been engaged, all such determinations shall be made by the
Trustee's Contractor whose determinations shall be final,
conclusive and binding on all persons. Neither Trustee nor
Trustee's Contractor shall have any obligation for determining
whether any Plan participant or beneficiary has died and shall
be entitled to rely upon any
information in this regard furnished by BellSouth or Company.
(c) Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the
terms of the Plan(s). In such event, Company shall make
provision for the reporting and withholding of any federal,
state or local taxes that may be required to be withheld with
respect to the payment of benefits pursuant to the terms of the
Plan(s) and shall pay amounts withheld to the appropriate taxing
authorities. BellSouth shall notify Trustee of Company's
decision to make payment of benefits directly prior to the time
amounts are payable to participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits payable
by Company in accordance with the terms of the Plan(s), Company
shall make the balance of each such payment as it falls due.
Trustee shall notify BellSouth where principal and earnings are
not sufficient.
(d) BellSouth may engage a third party administrator as a
contractor of the Trustee ("Trustee's Contractor"), who shall
not be a Plan participant or beneficiary (but who may be the
Trustee), to perform functions described in this Section 2(d)
and elsewhere in this Trust Agreement which would otherwise be
performed by BellSouth or Company.
(1) Upon engagement of a Trustee's Contractor, as
soon as practicable but in no event longer than thirty (30)
days thereafter, BellSouth shall furnish to the Trustee's
Contractor copies of the Plan documents, employment records
of participants, and other information necessary to
determine the benefits which are or may become payable by
Company to or with respect to each participant in each Plan,
including any benefits payable after the participant's death,
and the recipient of same and the procedures which BellSouth
has adopted to calculate such benefit payments. BellSouth shall
regularly, at least annually, and upon each benefit change under
the Plan(s) furnish revised, updated information to the
Trustee's Contractor. In the event BellSouth refuses or
neglects to provide updated participant information as
contemplated herein, the Trustee's Contractor shall be entitled
to rely on the most recent information furnished to it by
BellSouth.
(2) In the event of a Change of Control, BellSouth
shall have the duty to engage, as soon as practicable
thereafter, a Trustee's Contractor reasonably acceptable to the
Trustee if there shall at that time be no Trustee's Contractor
then serving. In addition, if as of a Distribution Date (as
such term is defined in Section 1(g) hereof), there shall be no
Trustee's Contractor then serving, BellSouth shall have the duty
to designate on a stand-by basis a Trustee's Contractor who
shall commence to serve as Trustee's Contractor in the event
such Distribution Date is followed by a Change of Control.
After a Change of Control, BellSouth shall not have any control
or authority with respect to the Trustee's Contractor so engaged
or then serving, or any successor Trustee's Contractor,
including without limitation any rights with respect to the
removal or replacement of any such Trustee's Contractor or its
duties pursuant to this Trust Agreement.
(3) Unless Trustee agrees to perform the functions of the
Trustee's Contractor described herein, Trustee shall have no
responsibility hereunder for any obligation assigned to a
Trustee's Contractor or (subject to subsection (4) below) for
the performance of a Trustee's Contractor's duties and
responsibilities under this Trust Agreement.
(4) BellSouth may replace or remove any Trustee's
Contractor from time to time serving hereunder, in its sole
discretion, prior to the occurrence of a Change of Control.
Following a Change of Control, Trustee, in its sole discretion,
may remove a Trustee's Contractor engaged by BellSouth or any
successor Trustee's Contractor and shall remove any such person
and engage a successor to such person if Trustee deems such
person's performance as a Trustee's Contractor unsatisfactory.
At all times following a Change of Control, upon any such
removal, or the voluntary resignation of any such Trustee's
Contractor or the occurrence of any other event which shall
result in the cessation of performance of the Trustee's
Contractor's duties hereunder, Trustee shall use its best
efforts to engage a new Trustee's Contractor (which may be
Trustee); provided, however, Trustee shall perform the duties of
the Trustee's Contractor during any period for which Trustee is
unable to find a new Trustee's Contractor (so that there will be
no default in payments under the Plan(s) as a result of the
absence of a Trustee's Contractor), and any person engaged as a
Trustee's Contractor shall in the judgment of Trustee be
independent of Company and BellSouth. The person who removes or
replaces a Trustee's Contractor shall be responsible for
assuring that there is a timely and complete transfer of records
from such Trustee's Contractor to such person's successor.
(5) Except for the records dealing solely with the
assets of the Trust and investment of those assets, which shall
be maintained by the Trustee, if a Trustee's Contractor shall be
engaged, the Trustee's Contractor shall maintain all Plan
participant records contemplated by this Agreement, including
the Payment Schedule. All such records and copies of the
Plan(s) documents and employment records of the participants in
the possession of the Trustee's Contractor shall be made
available promptly upon request of Trustee, BellSouth or
Company. The Trustee's Contractor shall also prepare and
distribute participant statements to participants and
beneficiaries and shall perform such other duties and
responsibilities contemplated under the terms of this Trust
Agreement as BellSouth or Trustee, as the case may be,
determines is necessary or advisable to achieve the objectives
of this Trust Agreement.
(6) BellSouth and Company shall indemnify and hold
harmless the Trustee's Contractor for any liability or
expenses, including without limitation advances for or
prompt reimbursement of reasonable fees and expenses of
counsel and other agents retained by it, incurred by the
Trustee's Contractor with respect to keeping the records
for participants' benefits, reporting thereon to
participants and beneficiaries, certifying benefit
information to Trustee, determining the status of benefits
hereunder and otherwise carrying out its obligations under
this Trust Agreement, other than those resulting from
Trustee's Contractor's negligence or willful misconduct or
its failure to reasonably calculate and certify the amount
of benefits based on the applicable terms of the Plan
documents and other information and procedures furnished by
BellSouth to the Trustee's Contractor in accordance with
this Trust Agreement. The Trustee's Contractor shall be
entitled to reasonable compensation for services hereunder,
the amount of which shall be agreed upon from time to time
by BellSouth or, following a Change of Control, the
Trustee, and the Trustee's Contractor in writing, and
reimbursement for reasonable expenses incurred in
connection with its performance of such services.
Following a Change of Control, Trustee's good faith
determination of compensation to be paid to a Trustee's
Contractor (including Trustee when it acts in such
capacity)
shall be binding on BellSouth, the Company and each other
person having an interest in the Trust. All such
compensation and expenses shall be paid by Trustee from the
assets of the Trust. If not so paid, such compensation and
expenses shall be paid by Company.
(7) Except as may be otherwise agreed by the
Trustee's Contractor and BellSouth, or Trustee following a
Change of Control, the Trustee's Contractor's obligations
are limited solely to those explicitly set forth herein and
the Trustee's Contractor shall have no responsibility,
authority or control, direct or indirect, over the
maintenance or investment of the Trust and shall have no
obligation in respect of Trustee or the Trustee's
compliance with the Trustee's Contractor's certifications
to Trustee.
Section 3. Trustee Responsibility Regarding Payments to
Trust Beneficiary When Company Is Insolvent.
(a) Trustee shall cease payment of benefits to Plan
participants and their beneficiaries if the Company is
Insolvent. Company shall be considered "Insolvent" for purposes
of this Trust Agreement if (i) Company is unable to pay its
debts as they become due, or (ii) Company is subject to a
pending proceeding as a debtor under the United States
Bankruptcy Code.
(b) At all times during the continuance of this Trust, as
provided in Section 1(d) hereof, the principal and income of the
Trust shall be subject to claims of general creditors of Company
under federal and state law as set forth below.
(1) The Board of Directors and the Chief Executive
Officer of Company shall have the duty to inform Trustee in
writing of Company's Insolvency. If a person claiming to
be a creditor of Company alleges in writing to Trustee that
Company has become Insolvent, Trustee shall determine
whether Company is Insolvent and, pending such
determination, Trustee shall discontinue payment of
benefits to Plan participants or their beneficiaries.
(2) Unless Trustee has actual knowledge of Company's
Insolvency, or has received notice from Company or a person
claiming to be a creditor alleging that Company is
Insolvent, Trustee shall have no duty to inquire whether
Company is Insolvent. Trustee may in all events rely on
such evidence concerning Company's solvency as may be
furnished to Trustee and that provides Trustee with a
reasonable basis for making a determination concerning
Company's solvency.
(3) If at any time Trustee has determined that
Company is Insolvent, Trustee shall discontinue payments to
Plan participants or their beneficiaries and shall hold the
assets of the Trust for the benefit of Company's general
creditors. Nothing in this Trust Agreement shall in any way
diminish any rights of Plan participants or their
beneficiaries to pursue their rights as general creditors
of Company with respect to benefits due under the Plan(s)
or otherwise.
(4) Trustee shall resume the payment of benefits to
Plan participants or their beneficiaries in accordance with
Section 2 of this Trust Agreement only after Trustee has
determined that Company is not Insolvent (or is no longer
Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant to
Section 3(b) hereof and subsequently resumes such payments, the
first payment following such discontinuance shall include the
aggregate amount of all payments due from Company to Plan
participants or their beneficiaries under the terms of the
Plan(s) for the period of such discontinuance, less the
aggregate amount of any payments made to Plan participants or
their beneficiaries by Company in lieu of the payments provided
for hereunder during any such period of discontinuance.
Section 4. Payments to Company.
(a) Except as provided in Sections 3, 4(b), 4(c), 4(d),
5(b) and 12(c) hereof, after the Trust has become irrevocable,
neither BellSouth nor Company shall have the right or power to
direct Trustee to return to Company or to divert to others any
of the Trust assets before all payment of benefits have been
made to Plan participants and their beneficiaries pursuant to
the terms of the Plan(s) to the extent such benefits are
obligations of Company.
(b) If, prior to a Change of Control, within sixty (60)
days following the end of a fiscal year of the Trust, BellSouth
provides a written certification to Trustee, reasonably
acceptable to the Trustee that, as of the last day of the fiscal
year, the fair market value of the assets of the Trust exceeds
one hundred twenty percent (120%) of the aggregate Current
Liability, Trustee shall, at BellSouth's request, distribute to
Company all or part of such excess. No distribution pursuant to
this Section 4(b) may be made following a Change of Control.
(c) Prior to a Change of Control, Trustee shall, if so
instructed by BellSouth in writing within thirty (30) days after
the actual filing of BellSouth's federal income tax return for a
year, reimburse Company from the assets of the Trust for
federal, state or local income taxes, or any part thereof, which
BellSouth certifies that Company has paid, attributable to
income of the Trust for such year, as determined by BellSouth,
within thirty (30) days after receipt of such request. No
reimbursement for taxes pursuant to this Section 4(c) may be
made following a Change of Control.
(d) Notwithstanding any other provision of this Trust
Agreement, including without limitation Section 1(b) hereof,
prior to a Change of Control Company shall have the right with
respect to each contribution to the Trust (other than
contribution(s) required pursuant to subsections 2 and 3 of
Section 1(e) hereof) to cause Trustee to return all or any
portion of a contribution and any and all income on such
contribution to Company. Such right shall be exercised by
giving written notice to Trustee and shall be exercisable in a
nonfiduciary capacity without the approval or consent of Trustee
or any other person. Such right shall expire with respect to
each contribution to the Trust upon the earlier of (i) thirty
days following the date on which the contribution is made, (ii)
the last day of the taxable year of Company in which the
contribution is made or (iii) a Change of Control. Company's
right under this Section 4(d) shall expire upon a Change of
Control.
Section 5. Investment Authority.
(a) Except as otherwise provided in subsections (c), (d),
(e) and (g) of this Section 5, the assets of the Trust shall be
invested and reinvested by Trustee, without distinction between
principal and income, at such time or times in such investments
and pursuant to such investment strategies or courses of action
and in such shares and proportions, as Trustee, in its sole
discretion, shall deem advisable. Except as otherwise provided
herein, Trustee may invest in securities (including stock or
rights to acquire stock) or obligations issued by BellSouth.
All rights associated with assets of the Trust shall be
exercised by Trustee or the person designated by Trustee, and
shall in no event be exercisable by or rest with Plan
participants.
(b) Company shall have the right, at any time, and from
time to time in its sole discretion, to substitute assets of
equal fair market value for any asset held by the Trust. This
right is exercisable by Company in a nonfiduciary capacity
without the approval or consent of any person in a fiduciary
capacity. In connection with any substitution of assets
described in this Section 5(b), Company Stock may not revert to
Company in kind at any time following a voting record date for
any meeting of BellSouth stockholders and before such meeting,
unless Trustee shall have voted such shares by proxy. Such
reversion may occur immediately following the stockholders'
meeting to which such record date relates. Further, any such
substitution may be made only out of property available to the
Company for the purchase of shares of stock under applicable
state law, as determined by Company.
(c) Subject to the provisions of Section 5A, investment
authority over the Trust's assets, or any portion thereof, other
than dividends on Company Stock held by the Trust, may be
reserved by BellSouth to itself from time to time in its
absolute discretion, prior to a Change of Control. Any such
reservation of discretionary authority by BellSouth shall be
communicated to Trustee in writing. In this regard, unless
BellSouth notifies Trustee to the contrary, BellSouth shall act
through its Treasurer, or any person who such Treasurer
authorizes in writing to act on his behalf or any other person
who is authorized to act on BellSouth's behalf by a resolution
of BellSouth's Board of Directors. BellSouth shall furnish
Trustee from time to time with a list of the names and
signatures of all persons authorized to so act. Notwithstanding
anything to the contrary contained herein, following a Change of
Control, BellSouth may not reserve discretionary authority for
the management and control of any assets of the Trust and any
prior reservation then in effect shall immediately be nullified.
(d) Trustee shall be under no duty or obligation to review
or to question any direction of BellSouth pursuant to authority
reserved under subsection (c) of this Section 5, or to review
securities or any other property so held with respect to
prudence or proper diversification, or to make any suggestions
or recommendation to BellSouth with respect to the retention or
investment of any such assets and shall have no authority to
take any action or to refrain from taking any action with
respect to any such assets unless and until it is directed to do
so by BellSouth. Notwithstanding anything to the contrary in
this Trust Agreement, BellSouth does hereby discharge, indemnify
and hold harmless Trustee, its directors, officers, employees,
and agents, from and against any and all losses, costs, damages,
claims, penalties, expenses (including reasonable attorneys'
fees and expenses) or liabilities arising in connection with
Trustee's administration of the Trust consistent with Section
5(c).
(e) Trustee shall be responsible for assuring the daily
investment of cash balances, unless directed otherwise by the
BellSouth pursuant to authority reserved in subsection (c) of
this Section 5, so as to maintain uninvested cash balances at a
minimum.
(f) Without in any way limiting the powers and discretions
conferred upon Trustee by the other provisions of this Trust
Agreement, Trustee (and BellSouth acting pursuant to authority
reserved under subsection (c) of this Section 5) shall be vested
with the following powers and discretions (to be exercised in
light of the nature and purpose of this Trust) with respect to
the assets of the Trust subject to its management and control:
(1) To invest and reinvest in any property, real,
personal or mixed, wherever situated and whether or not
productive of income or consisting of wasting assets,
including without limitation, common and preferred stocks,
bonds, notes, debentures (including convertible stocks and
securities), leaseholds, mortgages, certificates of deposit
or demand or time deposits (including any such deposits
with Trustee), shares of investment companies and mutual
funds, interests in partnerships and trusts, insurance
policies and annuity contracts, and oil, mineral or gas
properties, royalties, interests or rights, without being
limited to the classes of property in which trustees are
authorized to invest by any law or any rule of court of any
state and without regard to the proportion any such
property may bear to the entire amount of the Trust;
(2) To invest and reinvest all or any portion of the
Trust collectively through the medium of any common,
collective or commingled trust fund that may be established and
maintained by Trustee, to be held and invested subject to all of
the terms and conditions thereof, and such trust shall be deemed
adopted as a part of the Trust to the extent that assets of the
Trust are invested therein;
(3) To retain any property at any time received by the
Trustee;
(4) To sell or exchange any property held by it at public
or private sale, for cash or on credit, to grant and exercise
options for the purchase or exchange thereof, to exercise all
conversion or subscription rights pertaining to any such
property and to enter into any covenant or agreement to purchase
any property in the future;
(5) To participate in any plan of reorganization,
consolidation, merger, combination, liquidation or other similar
plan relating to property held by it and to consent to or oppose
any such plan or any action thereunder or any contract, lease,
mortgage, purchase, sale or other action by any person;
(6) To deposit any property held by it with any
protective, reorganization or similar committee, to delegate
discretionary power thereto, and to pay part of the expenses and
compensation thereof and any assessments levied with respect to
any such property so deposited;
(7) To extend the time of payment of any obligation
held by it;
(8) To hold uninvested any monies received by it,
without liability for interest thereon until such
monies shall be invested, reinvested or disbursed;
(9) To exercise all voting or other rights with respect to
any property held by it and to grant proxies, discretionary or
otherwise;
(10) For the purposes of the Trust, to borrow money from
others, to issue its promissory note or notes therefor, and to
secure the repayment thereof by pledging any property held by
it;
(11) To manage, administer, operate, insure, repair,
improve, develop, preserve, mortgage, lease or otherwise deal
with, for any period, any real property or any oil, mineral or
gas properties, royalties, interests, or rights held by joining
with others, using other Trust assets for any such purposes, to
modify, extend, renew, waive or otherwise adjust any provision
for amortization of the investment in or depreciation of the
value of such property;
(12) To employ suitable agents (including but not limited
to actuarial and employee benefit consulting firms) and counsel,
who may be counsel to BellSouth, Company or Trustee, and to pay
their reasonable expenses and compensation from the Trust to the
extent not paid by Company;
(13) To register any securities held in the Trust in the
name of a nominee and to hold any investment in bearer
form, and to combine certificates representing such
investments with certificates of the same issue held by the
Trustee in other fiduciary capacities or to deposit or arrange
for the deposit of such securities in a qualified central
depository even though, when so deposited, such securities may
be merged and held in bulk in the name of the nominee of such
depository with other securities deposited therein by any other
person, or to deposit or arrange for the deposit of any
securities issued by the United States Government, or an agency
or instrumentality thereof, with a federal reserve bank, but the
books and records of Trustee shall at all times show that all
such investments are part of the Trust;
(14) To settle, compromise, or submit to arbitration
any claims, debts, or damages due or owing to or from the
Trust, respectively, to commence or defend suits or legal
proceedings to protect any interest of the Trust, and to
represent the Trust in all suits or legal proceedings in
any court or before any other body or tribunal; provided,
however, Trustee shall not be required to take any such
action unless it shall have been indemnified by BellSouth,
Company or the Trust to its reasonable satisfaction against
liability and expense it might incur therefrom;
(15) To organize under laws of any state a corporation
or trust for the purpose of acquiring and holding title to
any property which it is authorized to acquire hereunder
and to exercise with respect thereto any or all of the
powers set forth herein; and
(16) Generally, to do all acts consistent with its
duties hereunder, whether or not expressly authorized, that
Trustee may deem necessary or desirable for the protection
of the Trust.
(g) Notwithstanding anything to the contrary contained
herein (other than the provisions of Section 5A hereof), unless
and until directed otherwise by BellSouth, or the occurrence of
a Change of Control, the assets of the Trust (other than
dividends on Company Stock held by the Trust) shall be invested
and reinvested exclusively in the common stock, par value $1.00
per share, of BellSouth Corporation ("Company Stock") except to
the extent that BellSouth directs otherwise with respect to a
portion of the assets in anticipation of reasonable liquidity
needs of the Trust. Trustee shall purchase from BellSouth any
such Company Stock acquired for the Trust, unless Trustee is
instructed otherwise by BellSouth in writing. With respect to
assets of the Trust invested in Company Stock, Trustee shall
have no obligation to diversify investments in the Trust, and
shall not be subject to any rule of applicable law which might
otherwise make necessary, require, or in any way deem
appropriate diversification of investments in the Trust, all
such rules being hereby expressly waived. Notwithstanding
anything to the contrary in this Trust
Agreement, BellSouth and Company do hereby discharge, indemnify
and hold harmless Trustee, its directors, officers, employees
and agents, from and against any and all losses, costs, damages,
claims, penalties, expenses (including reasonable attorneys'
fees and expenses) or liabilities arising in connection with
such Trustee's administration of the Trust consistent with this
Section 5(g).
(h) Following a Change of Control, Trustee may no longer
invest in Company Stock or any other securities or obligations
issued by BellSouth or Company, and Section 5(g) shall no longer
apply. After a Change of Control, Trustee shall have and
exercise all discretionary authority for the management and
control of Trust assets and shall commence the orderly
disposition of Company Stock, subject to the provisions of
Section 5A hereof to the extent applicable. Trustee may, in its
sole discretion, retain Company Stock acquired prior to a Change
of Control for such period of time as Trustee deems appropriate
and in the best interest of participants and beneficiaries in
the Plan(s). In no event may Trustee make additional
investments in Company Stock on behalf of the Trust after a
Change of Control, other than (i) amounts held in diversified
common investment vehicles in which Trustee invests, and (ii)
through the exercise of rights to acquire Company Stock
attributable to shares held at the time of the Change of
Control, in the Trustee's sole discretion, if the Trustee deems
such exercise appropriate and in best interest of the
participants and beneficiaries in the Plan(s).
Section 5A. Sale of Company Stock by Trustee
(a) Except as otherwise specifically permitted herein,
Trustee may not sell Company Stock except: (1) as necessary
from time to time to satisfy benefit obligations under the
Plan(s) which are required to be paid by Trustee under this
Trust; (2) pursuant to a tender or exchange offer, by other than
BellSouth, for all or substantially all of the issued and
outstanding Company Stock; or (3) following a Change of Control;
and then only as specifically permitted herein.
(b) Trustee shall provide BellSouth with not less than 30
days prior notice that it proposes to sell any Company Stock,
unless Trustee determines in good faith that such delay would
cause irreparable harm to Trustee or to the Trust, in which
event Trustee shall provide reasonable notice of such proposed
sale. Notice shall be given by telephone, confirmed promptly by
facsimile or first class mail, postage prepaid. Trustee shall
specify in any event the number of shares proposed to be sold.
(c) Trustee shall make sales of Company Stock pursuant to
an
effective registration statement under, or an exemption
(including but not limited to Rule 144) from, the registration
requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and in compliance with applicable state
securities laws.
(d) Should either BellSouth or Trustee determine in good
faith, with the written advice of counsel delivered to and in
form reasonably acceptable to the other party hereto, that such
proposed sale could not reasonably be made pursuant to an
exemption from the Securities Act, then Trustee may demand in
writing that BellSouth, at BellSouth's option, either purchase
under Section 5A(f) or register under the Securities Act under
Section 5A(e), such number of shares of Company Stock held and
proposed to be sold by Trustee. BellSouth shall promptly notify
Trustee by telephone, confirmed promptly by facsimile or first
class mail, postage prepaid, whether it elects to proceed under
Section 5A(f) or 5A(e).
(e) If BellSouth elects registration pursuant to a demand
under Section 5A(d) above, then:
(1) As soon as practicable, but in any event within
90 days after receipt of the demand from Trustee, BellSouth
shall:
(i) file with the Securities and Exchange
Commission (the "Commission") a registration
statement
covering the shares to be sold and use its reasonable
best efforts to have such registration statement filed
pursuant to this Agreement declared effective as
promptly as practicable. BellSouth shall advise Trustee of
the progress of such filing and of any review thereof
undertaken by the Commission, and promptly notify Trustee,
and confirm such advice in writing, (x) when such
registration statement becomes effective, (y) when any post-
effective amendment to such registration statement becomes
effective and (z) of any request by the Commission for any
amendment or supplement to such registration statement or
any prospectus relating thereto or for additional
information;
(ii) use its reasonable best efforts to register,
qualify, or effect compliance not later than the effective
date of any registration statement filed pursuant to this
Trust Agreement, the shares of Company Stock registered
thereunder under the blue sky laws of such states or the
District of Columbia as the Trustee may reasonably request;
provided, however, that neither BellSouth nor Company shall
be obligated to qualify as a foreign corporation or as a
dealer in securities or to execute or file any general
consent to service of process under the laws of any such
jurisdiction where it is not so subject; and, provided,
further, that BellSouth reserves the right not to register
or qualify shares of Company Stock in any jurisdiction
where registration or qualification of such shares would be
unreasonably burdensome;
(iii) from time to time (x) after BellSouth has
elected to satisfy a demand for sale by means of
registration, immediately advise Trustee of any event or
development, including a material adverse change in the
financial condition, business or affairs of BellSouth,
known to BellSouth (other than events or developments
affecting market or economic conditions generally), which
may have a material adverse impact on the proposed
offering; and (y) within the period of effectiveness of
such registration statement, advise Trustee of any event or
development requiring amendment or supplement (which
amendment or supplement shall be prepared with reasonable
promptness by BellSouth) of the registration statement or
prospectus used in connection therewith or rendering it
inadvisable to use the prospectus until it is supplemented
or amended; and
(iv) furnish to Trustee such number of copies of any
preliminary and final prospectuses and any amendments and
supplements thereto as Trustee may reasonably request.
(2) Trustee and BellSouth shall negotiate with an
underwriter selected or approved by BellSouth with regard to the
underwriting of such requested registration. BellSouth shall
enter into an underwriting agreement in customary form with the
underwriter(s) and Trustee in which BellSouth and Trustee (to
the extent applicable based only on such information as is
provided in writing by Trustee) shall provide customary
indemnification to such underwriter(s) and each other.
(3) BellSouth shall have the right to terminate or
withdraw any registration contemplated by it under this
Section 5A(e) prior to or following the effectiveness of such
registration for any reason whatsoever, provided that it shall
thereupon be required to purchase shares pursuant to
Section 5A(f).
(4) Trustee shall provide all such information and
materials and take all such actions, furnish all such
information, execute all such documents and cooperate with
BellSouth in good faith, all as may be reasonably required
in order to permit BellSouth to comply with all applicable
requirements of the Commission and all other applicable
laws or regulations and to obtain acceleration of the
effective date of the registration statement.
(5) All expenses incurred in connection with any
registration, qualification or compliance pursuant to this
Trust Agreement, including without limitation, all
registration, filing and qualification fees, printing and
engraving expenses, fees and disbursements of counsel for
BellSouth, and expenses of any special audits or comfort
letters incidental to or required by such registration,
shall be borne by BellSouth, provided that Trustee may pay
such expenses and recover same from the Trust if BellSouth
fails to pay such expenses in a timely manner.
(f) Notwithstanding any contrary provision of this
Agreement, if BellSouth advises Trustee of any delays in filing
or effectiveness of more than 60 days, if BellSouth and Trustee
are unable despite good faith efforts to agree as to
registration or an exempt sale, or if a registered sale would
not permit Trustee to sell Company Stock expeditiously enough to
meet Trustee's good faith needs, Trustee may demand that
BellSouth purchase, or if BellSouth elects to purchase stock
pursuant to Section 5A(d), (e)(3) or (g), BellSouth shall
purchase the Company Stock desired to be sold at fair market
value, which shall be the volume weighted average trading price
(including only trades which would meet the time of purchases
conditions under Rule 10b-18 under the Securities Exchange Act
of 1934, as amended ("Rule 10b-18"), of a share of such security
on the New York Stock Exchange on the day that BellSouth
receives such demand or gives notice of such election.
BellSouth and Trustee shall use their reasonable best efforts to
agree as to the prompt execution, closing and delivery of shares
and proceeds therefor.
(g) Until a Change of Control, BellSouth may, on notice of
a proposed sale by Trustee, whether or not exempt, elect to
purchase such Company Stock from Trustee at fair market value,
as defined in Section 5A(f), and with the manner, conditions,
and closing of such sale to be agreed upon by BellSouth and
Trustee.
(h) BellSouth shall be entitled to postpone the filing of
any registration statement and any amendment or supplement
thereto otherwise required to be prepared and filed by it, or to
direct that Trustee postpone any sale or put if, at the time it
receives a request for registration or sale, (i) BellSouth
determines, in its reasonable business judgment, that such
filing, registration and offering, or sale or put, would
materially interfere with the likely success of a proposed
purchase or sale of securities by BellSouth; or (ii) counsel for
BellSouth opines in writing that the filing of such registration
statement, amendment or supplement, or sale or put would have a
material adverse impact on any material ongoing or pending
transaction or program of BellSouth or any of its subsidiaries
or any other circumstances; provided, that should such delays
adversely affect Trustee's ability to pay benefits as
contemplated by this Trust Agreement, then BellSouth shall
advance such funds as may be reasonably needed by Trustee for
such proposed pending sale.
(i) Notwithstanding any provisions above permitting sale
by Trustee of Company Stock, Trustee shall, until a Change of
Control or a tender or exchange offer for all or substantially
all of the issued and outstanding Common Stock, limit sales,
whether registered or exempt (other than sales described in
Section
5A(f)), by reference to the volume limitations for issuer
repurchases within Rule 10b-18; provided, that block sales may
not exceed 25% of the trading volume on the New York Stock
Exchange, Inc. for the 14 day period prior to such sale.
BellSouth shall provide all information reasonably required by
Trustee to make determinations as to the number of shares which
may be sold, and Trustee shall promptly notify BellSouth as to
all sales made other than through a registered public offering.
(j) BellSouth and Trustee shall each cooperate in good
faith and employ their reasonable best efforts in permitting and
effecting any purchase or sale of Company Stock as contemplated
in this Section 5A and each shall comply with all applicable
laws and regulations relating to the foregoing including,
without limitation, federal and state securities laws, rules and
regulations issued thereunder, and any other governmental or
stock exchange requirements or regulations relating thereto.
Section 6. Disposition of Income.
During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and
reinvested.
Section 7. Accounting by Trustee.
Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions
required to be made, including such specific records as shall be
agreed upon in writing between BellSouth and Trustee. Within
forty-five (45) days following the close of each calendar year
and within forty-five (45) days after the removal or resignation
of the Trustee, Trustee shall deliver to BellSouth a written
account of its administration of the Trust during such year or
during the period from the close of the last preceding year to
the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other transactions
effected by it, including a description of all securities and
investments purchased and sold with the cost or net proceeds of
such purchases or sales (accrued interest paid or receivable
being shown separately), and showing all cash, securities and
other property held in the Trust at the end of such year or as
of the date of such removal or resignation, as the case may be.
In addition, as of the end of each calendar month (referred to
in this Trust as a "valuation date"), within ten (10) days after
each such month-end, Trustee shall deliver to BellSouth a
written account setting forth the value of the Trust's assets,
together with such other information as shall be agreed upon
between BellSouth and Trustee.
Section 8. Responsibility of Trustee.
(a) Trustee shall act with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent
person acting in like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character
and with like aims, provided, however, that Trustee shall incur
no liability to any person for (i) any action taken pursuant to
a direction, request or approval given by BellSouth, Company or
a Trustee's Contractor which is contemplated by, and in
conformity with, the terms of the Plan(s) or this Trust and is
given in writing by BellSouth, Company or a Trustee's Contractor
(other than Trustee when it acts as Trustee's Contractor), or
(ii) the investment in, or retention of, Company Stock pursuant
to the terms of this Agreement, and no such action shall be
considered a breach of the fiduciary standard herein set forth.
In the event of a dispute between BellSouth, Company or a
Trustee's Contractor
and a party, Trustee may apply to a court of competent
jurisdiction to resolve the dispute.
(b) If Trustee undertakes or defends any litigation
arising in connection with this Trust or a Plan (including
without limitation any action to compel funding of the Trust
pursuant to Section 1 hereof, to compel BellSouth or Company to
take any action under the Trust or the Plan(s), or to determine
Trustee's obligations hereunder), Trustee shall be indemnified
by the Trust against Trustee's costs, expenses and liabilities
(including, without limitation, reasonable attorneys' fees and
expenses) relating thereto and the Trust shall be primarily
liable for such payments, other than those arising from
Trustee's negligence or willful misconduct. Trustee shall also
be entitled to reasonable payment from the Trust for the
allocation of Trustee's personnel to the investigation and
defense or prosecution thereof, at Trustee's normal hourly
billing rates. If such costs, expenses and liabilities are not
paid from the Trust for any reason (including without limitation
insufficiency of the Trust's assets to satisfy such obligations)
in a reasonably timely manner, Company agrees to indemnify
Trustee against such costs, expenses and liabilities. Anything
in this subsection (b) to the contrary notwithstanding,
BellSouth and Company shall indemnify and hold Trustee harmless
from and against all costs, expenses and liabilities arising out
of or relating to the acquisition, retention or disposition of
Company Stock, except with respect to matters covered by the
Trustee's indemnity to be provided under Section 5A(e)(2).
(c) Trustee may consult with legal counsel (who may also
be counsel for BellSouth generally) with respect to any of its
duties or obligations hereunder.
(d) Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other
professionals to assist it in performing any of its duties or
obligations hereunder.
(e) Trustee shall have, without exclusion, all powers
consistent with the terms hereof conferred on trustees by
applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an
asset of the Trust, Trustee shall have no power to name a
beneficiary of the policy other than the Trust, to assign the
policy (as distinct from conversion of the policy to a different
form) other than to a successor Trustee, or to loan to any
person the proceeds of any borrowing against such policy.
(f) Notwithstanding any powers granted to Trustee pursuant
to this Trust Agreement or to applicable law, Trustee shall not
have any power that could give this Trust the objective of
carrying on a business and dividing the gains therefrom, within
the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal
Revenue Code.
Section 9. Compensation and Expenses of Trustee.
All administrative and Trustee's fees as agreed upon
between Trustee and BellSouth and reasonable expenses actually
incurred by the Trustee in performing its duties hereunder
including the fees and expenses of any third party which
provides services contemplated herein or in the Plan(s) shall be
paid by Trustee from the assets of the Trust and, until so paid,
shall constitute a lien on the assets of the Trust. If not so
paid, the fees and expenses shall be paid by Company.
Section 10. Resignation and Removal of Trustee.
(a) Trustee may resign at any time by written notice to
BellSouth, which shall be effective sixty (60) days after
receipt of such notice unless BellSouth and Trustee agree
otherwise; provided that in no event shall any such resignation
take effect prior to the appointment of a successor Trustee.
(b) Trustee may be removed by BellSouth on sixty (60) days
notice or upon shorter notice accepted by Trustee.
(c) Upon a Change of Control, as defined herein, Trustee
may not be removed by BellSouth for one (1) year. Additionally,
after the expiration of the one (1) year period following a
Change of Control, Trustee may be removed by BellSouth only if
BellSouth first obtains the express written consent to such
removal of more than one-half of a combination of the
participants and beneficiaries of deceased participants in the
Plan(s).
(d) If Trustee resigns or is removed within one (1) year
of a Change of Control, as defined herein, Trustee shall select
a successor Trustee in accordance with the provisions of Section
11(b) hereof prior to the effective date of Trustee's
resignation or removal. Additionally, if Trustee resigns or is
removed after expiration of the one (1) year period following a
Change of Control, BellSouth may select a successor Trustee in
accordance with the provisions of Section 11(b) hereof if it
shall first obtain the express written consent to the
appointment of the proposed successor of more than one-half of a
combination of the participants and beneficiaries of deceased
participants in the Plan(s). If BellSouth fails to so appoint a
successor Trustee, Trustee shall select a successor Trustee.
Upon the appointment and acceptance by, and transfer of assets
to, a successor Trustee, Trustee shall have no further
responsibilities under this Trust Agreement.
(e) Upon resignation or removal of Trustee and appointment
of a successor Trustee, all assets shall subsequently be
transferred to the successor Trustee. The transfer shall be
completed within sixty (60) days after receipt of notice of
resignation, removal or transfer, unless BellSouth extends the
time limit.
(f) If Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the
effective date of resignation or removal under paragraph (a) of
this section. If no such appointment has been made, Trustee may
apply to a court of competent jurisdiction for appointment of a
successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed and charged to
the Trust as administrative expenses of the Trust.
Section 11. Appointment of Successor.
(a) If Trustee resigns or is removed in accordance with
Section 10(a) or (b) or (c) hereof, BellSouth may, subject to
Section 10(d), appoint any third party, such as a bank trust
department or other party that may be granted corporate trustee
powers under state or federal law, as a successor to replace
Trustee upon resignation or removal. The appointment shall be
effective when accepted in writing by the new Trustee, who
shall have all the rights and powers of the former Trustee,
including ownership rights in the Trust assets. The former
Trustee shall execute any instrument necessary or reasonably
requested by BellSouth or the successor Trustee to evidence the
transfer.
(b) If Trustee resigns or is removed pursuant to the
provisions of Section 10(a), (b), (c) or (d) hereof and selects
a successor Trustee pursuant to Section 10(d) hereof, Trustee
may appoint any third party such as a bank trust department or
other party that may be granted corporate trustee powers under
state or federal law. The appointment of a successor Trustee
shall be effective when accepted in writing by the new Trustee.
The new Trustee shall have all the rights and powers of the
former Trustee, including ownership rights in Trust assets.
The former
Trustee shall execute any instrument necessary or reasonably
requested by the successor Trustee to evidence the transfer.
(c) A former Trustee shall prepare and deliver to
BellSouth and to the successor Trustee a final accounting unless
BellSouth waives BellSouth's right to such accounting, and such
accounting shall be effective through the date of the former
Trustee's transfer of all assets to its successor. The
successor Trustee need not examine the records and acts of any
prior Trustee unless requested to do so by BellSouth (and, after
a Change of Control, unless the successor Trustee in addition
concludes that there is a reasonable basis for such request by
BellSouth) and may retain or dispose of existing Trust assets,
subject to Sections 7 and 8 hereof. Subject to the foregoing,
the successor Trustee shall not be responsible for and BellSouth
shall indemnify and defend the successor Trustee from any claim
or liability resulting from any action or inaction of any prior
Trustee or from any other past event, or any condition existing
at the time it becomes successor Trustee. The compensation
arrangement for the successor Trustee shall be reasonable in
relation to the services to be performed by the successor
Trustee.
Section 12. Amendment or Termination.
(a) This Trust Agreement (including Appendix A hereto) may
be amended by a written instrument executed by Trustee,
BellSouth and Company. Notwithstanding the foregoing, (i) no
such amendment shall conflict with the terms of the Plan(s) as
then in effect or shall make the Trust revocable after it has
become irrevocable in accordance with Section 1(b) hereof and
(ii) the duties and responsibilities of Trustee shall not be
increased without Trustee's written consent.
(1) Furthermore, notwithstanding anything to the
contrary in this Trust Agreement (except as otherwise
provided in this Section 12), (i) prior to a Change of
Control, no amendment shall be made to Section 1(d) through
(h), Section 2, Section 4, Section 5(h), Section 10(c),
Section 10(d), this Section 12(a), Section 13(d), Section
13(g), Section 13(j), and Section 13(k), and no deletion
shall be made in Appendix A, without the prior written
consent of more than one-half of a combination of the
participants and beneficiaries of deceased participants in
the Plan(s) unless such amendment would not, in the opinion
of counsel, have a material and adverse effect on the
rights or interests of such participants or beneficiaries
or procedures for distribution of benefits to participants
or beneficiaries; and (ii) following a Change of Control,
no amendment shall be made to any provision of this Trust
Agreement (including Appendix A hereto) without the prior
written consent of more than one-half of a combination of
the participants and beneficiaries of deceased participants
in the Plan(s) unless such amendment would not, in the
opinion of counsel, have a material and adverse effect on
the rights or interests of such participants or
beneficiaries or procedures for distribution of benefits to
participants and beneficiaries.
(2) The limitations contained in Section 12(a)(1)
shall not apply with respect to any amendment which is
reasonably necessary, in the opinion of counsel, to
preserve the status of the Trust as a grantor trust and the
status of the Plan(s) as unfunded for federal income tax
purposes and for purposes of the Employee Retirement Income
Security Act of 1974, as amended, or to guard against an
adverse impact on Plan participants or beneficiaries and
which, in the opinion of
counsel, is drafted primarily to preserve such status or to
reduce or eliminate such adverse impact on such person or
persons.
(3) In each instance in which an opinion of counsel
is contemplated in this Section 12(a) prior to a Change of
Control, such opinion shall be in writing and delivered to
Trustee, rendered by a nationally recognized law firm
selected by BellSouth, and in each instance in which an
opinion of counsel is contemplated in this Section 12(a)
after a Change of Control, such opinion shall be in writing
and delivered to Trustee, rendered by a nationally
recognized law firm selected by the Trustee's Contractor.
Trustee may rely on all such opinions and determinations.
(b) The Trust shall not terminate until the date on which
Plan participants and their beneficiaries are no longer entitled
to benefits from Company pursuant to the terms of the Plan(s).
Upon termination of the Trust any assets remaining in the Trust
shall be returned to Company.
(c) Upon written approval of participants or beneficiaries
entitled to payment of benefits pursuant to the terms of the
Plan(s), Company may terminate this Trust prior to the time all
benefit payments under the Plan(s) have been made. All assets
in the Trust at termination shall be returned to Company.
(d) Trustee may rely for purposes of this Section 12 on a
certificate furnished by BellSouth prior to a Change of Control,
and by the Trustee's Contractor after a Change of Control, (i)
with respect to any amendment requiring the prior written
consent of more than one-half of the participants and
beneficiaries in the Plan(s) pursuant to subsection (a) of this
Section 12, that such consent has been obtained, (ii) with
respect to subsection (b) of this Section 12, that Plan
participants and their beneficiaries are no longer entitled to
benefits pursuant to the terms of the Plan(s), and (iii) with
respect to subsection (c) of this Section 12, that the written
approval of participants or beneficiaries entitled to payment of
benefits pursuant to the terms of the Plan(s) has been obtained.
Section 13. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by
law shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
(b) Benefits payable to Plan participants and their
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and
construed in accordance with the laws of New York.
(d) For purposes of this Trust, Change of Control shall
mean: (i) any "person" (as such term is defined in the
Securities Exchange Act of 1934, as amended), other than a
trustee or other fiduciary holding securities under an employee
benefit plan of BellSouth or Company or other corporation owned
directly or indirectly by the shareholders of BellSouth in
substantially the same proportions as their ownership of stock
of BellSouth, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under said Act), directly or indirectly, of
securities of BellSouth representing 20% or more of the total
voting power represented by
BellSouth's then outstanding voting securities; or (ii) during
any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of
BellSouth and any new director whose election by the Board of
Directors or nomination for election by BellSouth's shareholders
was approved by a vote of at least two-thirds of the directors
who either were directors at the beginning of the two year
period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a
majority thereof; or (iii) any "person" (as such term is used in
Section 13(c) and 14(d) of the Securities Exchange Act of 1934,
as amended), other than a trustee or other fiduciary holding
securities under an employee benefit plan of BellSouth or
Company or other corporation owned directly or indirectly by the
shareholders of BellSouth in substantially the same proportions
as their ownership of stock of BellSouth, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of Company representing
more than 50% of the total voting power represented by Company's
then outstanding voting securities. For all purposes of this
Trust Agreement, Trustee shall have no responsibility whatsoever
to determine whether or not a Change of Control has occurred.
(e)(1) After the execution of this Trust Agreement,
BellSouth shall promptly file with Trustee, and following
the appointment of a Trustee's Contractor, BellSouth shall
promptly file with the Trustee's Contractor, a certified
list of the names and specimen signatures of the officers
of BellSouth and any delegate authorized to act for it.
Unless BellSouth notifies Trustee to the contrary,
BellSouth shall act through its Treasurer or any person who
such Treasurer authorizes in writing to act on his behalf
(who shall in this regard act exclusively on behalf of
BellSouth) or any other person who is authorized to act on
BellSouth's behalf by a resolution of BellSouth's Board of
Directors. BellSouth shall promptly notify Trustee and the
Trustee's Contractor, if applicable, of the addition or
deletion of any person's name to or from such list,
respectively. Until receipt by Trustee and/or the
Trustee's Contractor of notice that any person is no longer
authorized so to act, Trustee or the Trustee's Contractor
may continue to rely on the authority of the person. All
certifications, notices and directions by any such person
or persons to Trustee or the Trustee's Contractor shall be
in writing signed by such person or persons. Trustee and
the Trustee's Contractor may rely on any certification,
notice or direction of BellSouth
that the Trustee or the Trustee's Contractor reasonably
believes to have been signed by a duly authorized officer
or agent of BellSouth. Trustee and the Trustee's
Contractor shall have no responsibility for acting or not
acting in reliance upon any notification reasonably
believed by Trustee or the Trustee's Contractor to have
been signed by a duly authorized officer or agent of
BellSouth.
(e)(2) After the engagement of a Trustee's
Contractor (other than Trustee), the Trustee's Contractor
shall promptly file with Trustee a certified list of the
names and specimen signatures of the officers of the
Trustee's Contractor and any delegate authorized to act for
it. Trustee's Contractor shall promptly notify Trustee of
the addition or deletion of any person's name to or from
such list. Until receipt by Trustee of notice that any
person is no longer authorized so to act, Trustee may
continue to rely on the authority of the person. All
certifications, notices and directions by any such person
or persons to Trustee shall be in writing signed by such
person or persons. Trustee may rely on any such
certification, notice or direction of the Trustee's
Contractor that Trustee reasonably believes to have been
signed by or on behalf of a duly authorized officer or
agent of the Trustee's Contractor. Trustee shall have no
responsibility for acting or not acting in reliance upon
any notification reasonably believed by the Trustee to have
been signed by a duly authorized officer or agent of the
Trustee's Contractor.
(f) Neither the gender nor the number (singular or plural)
of any word shall be construed to exclude another gender or
number when a different gender or number would be appropriate.
(g)(1) This Trust Agreement shall be binding upon
and inure to the benefit of any successor to Company or its
business, or a portion thereof, which assumes Company
obligations under the Plan(s), as the result of merger,
consolidation, reorganization, spin-off, division, transfer
of assets or otherwise (hereinafter referred to as a
"corporate transaction") and any subsequent successor
thereto which assumes Company obligations under the
Plan(s). All references in this Trust Agreement to
"Company" shall include all such successors. In the event
of any such corporate transaction, the successor to Company
or its business or subsequent successor thereto shall
promptly notify Trustee in writing of its successorship.
In no event shall any such corporate transaction suspend or
delay the payment of benefits to Plan participants or
beneficiaries hereunder.
(g)(2) Except as provided in Section 13(g)(3),
Company shall remain liable for the payment of any Plan
benefits attributable to deferrals made under plans of
deferred compensation prior to the effective date of any
such corporate transaction, or benefits accrued under any
supplemental retirement or pension plan prior to the
effective date of any such corporate transaction, to the
extent of the then assets of the Trust, if such payments
are proper but not timely made by a successor to Company or
its business or any subsequent successor thereto, and the
assets of the Trust shall be available to make such
payments pursuant to Section 2. The obligation to make any
such payments hereunder shall arise only after the affected
Plan participant or beneficiary has exhausted all claims
and review procedures properly imposed under the terms of
the Plan. The Trust shall be subrogated, to the extent of
any payment made pursuant to this Section 13(g)(2) to a
Plan participant or beneficiary, to all rights and remedies
of such Plan participant or beneficiary, and Trustee shall
be entitled to sue the nonpaying successor to Company in
the name of the Plan participant or beneficiary, but
Trustee shall not be required to take any such action
unless there are sufficient assets in the Trust to cover
the expense thereof. Entitlement to any payment hereunder
is expressly conditioned upon the reasonable assistance and
cooperation of the Plan participant or beneficiary in
pursuing such rights and remedies.
(g)(3) The provisions of Section 13(g)(2) shall be
inapplicable to any Plan benefits payable following any
corporate transaction with respect to which Company shall
have contracted with its successor or otherwise provided
for the establishment of a trust providing substantially
similar rights and protections to Plan participants and
beneficiaries as are provided herein and which at the
effective date of such corporate transaction is funded to
at least the "funding level" (as such term is used in
Section 1(e)(2) hereof) of
this Trust. The determination of whether the requirements
of the preceding sentence have been satisfied shall be made
by BellSouth; provided, however, that following the
engagement of a Trustee's Contractor, such determinations
shall be made by Trustee's Contractor. Trustee may rely on
the accuracy of all such determinations.
(h) This Trust Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but all of which shall together constitute only one Agreement.
(i) Communications to Trustee shall be sent to Bankers
Trust Company, 280 Park Avenue, New York, New York 10017
ATTENTION: Senior Vice President, Retirement Services Group, or
to such other address as Trustee may specify in writing. No
communication shall be binding upon Trustee until it is received
by Trustee. Communications to BellSouth, Company and the
Trustee's Contractor shall be sent to the principal offices of
BellSouth, Company or the Trustee's Contractor, as the case may
be, or to such other address as BellSouth, Company or the
Trustee's Contractor, as applicable, may specify in writing.
(j) In the event the participants and beneficiaries in one
or more of the Plan(s) are determined generally to be subject to
federal income tax on any amount in the Trust prior to the time
of payment hereunder, the entire amount determined to be so
taxable shall be distributed by Trustee to each affected
participant or beneficiary. Company may, at its option, make
such payments directly to affected participants and
beneficiaries. An amount shall be determined to be subject to
federal income tax upon the earliest of: (a) a final
determination by the United States Internal Revenue Service
addressed to a participant or beneficiary which is not appealed
to the courts; (b) a final determination by the United States
Tax Court or any other federal court affirming any such
determination by the Internal Revenue Service; or (c) an opinion
by counsel for BellSouth reasonably acceptable to Trustee
addressed to BellSouth, Company and Trustee, that, by reason of
the Treasury Regulations, amendments to the Internal Revenue
Code, published Internal Revenue Service rulings, court
decisions or other substantial precedent, amounts hereunder are
generally subject to federal income tax prior to payment;
provided, that following a Change of Control, only an opinion by
counsel selected by the Trustee's Contractor may be accepted by
Trustee for purposes of (c). Company shall undertake at its
sole expense to defend any
tax claims described herein which are asserted by the Internal
Revenue Service against any participant or beneficiary and which
it determines would affect participants or beneficiaries
generally, including attorneys' fees and costs of appeal, and
shall have the sole authority to determine whether or not to
appeal any determination made by the Internal Revenue Service or
by a lower court. Company also agrees to reimburse any
participant or beneficiary for any interest or penalties in
respect of tax claims hereunder which it determines would affect
participants or beneficiaries generally, upon receipt of
documentation of same. Any distributions from the Trust to a
participant or beneficiary under this Section 13(j) (other than
reimbursements of interest or penalties referred to in the
preceding sentence) shall reduce the benefits payable to such
participant and/or beneficiary under the Plan(s).
(k) In the event that Company shall fail to satisfy any
obligation of Company to a Plan participant or beneficiary under
this Trust Agreement, or in one or more of the Plan(s), after
reasonable notice and demand with respect thereto, and one or
more participants or beneficiaries obtains a final determination
by a
court of competent jurisdiction that Company has so failed, such
participant(s) or beneficiary(ies) shall be indemnified by the
Trust against reasonable and appropriate costs and expenses
(including without limitation reasonable attorneys' fees and
expenses) relating thereto and the Trust shall be primarily
liable for such payments. Interest on any Plan benefit payments
which such court determines have been delayed to the extent
interest or similar payments in an equal or greater amount are
not provided in the Plan or by the court or otherwise shall also
be paid from the assets of the Trust. Such interest shall be
calculated using a rate of interest equal to the rate of
interest on ten (10) year United States Treasury obligations, as
determined on the first day of each calendar quarter, compounded
quarterly. If such costs, expenses and interest are not paid
from the Trust for any reason (including without limitation
insufficiency of the Trust's assets to satisfy such obligations)
in a reasonably timely manner, such participant(s) or
beneficiary(ies) may obtain payment from Company.
(l) Nothing herein shall be construed as restricting or
limiting in any way amendment of the Plan(s) in accordance with
the terms of the Plan(s).
(m) Any other provisions of this Trust Agreement to the
contrary notwithstanding, this Trust shall terminate no later
than the twenty-first anniversary of the date of death of the
survivor from among a class consisting of all of the descendants
of the late Joseph P. Kennedy, the former Ambassador to the
Court of Saint James, who are living on the date of the
establishment of the Trust and, if the Trust is still in
existence on such anniversary date, Trustee shall dispose of the
Trust as Company shall direct.
(n) In case of any conflict or inconsistency between the
terms of this Trust Agreement and any Plan, the terms of this
Trust Agreement shall control.
Section 14. Effective Date.
The effective date of this Trust Agreement shall be the
date of its execution set forth on page 1 of the Trust
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused the
Trust Agreement to be duly executed and their respective
corporate seals to be hereto affixed on the date set forth on
page 1 of the Trust Agreement.
BELLSOUTH CORPORATION
By: /s/ Kincaid Paterson for
Title: Vice President, Secretary
(CORPORATE SEAL) and Treasurer
ATTEST: /s/ Marcy A. Bass
Title: General Attorney & Assistant Secretary
BELLSOUTH TELECOMMUNICATIONS, INC.
By: /s/ Patrick H/ Casey
Title: Vice President
and
Comptroller
(CORPORATE SEAL)
ATTEST: /s/ Eric B. Rudolph
Title: Assistant Secretary
BANKERS TRUST
COMPANY, as Trustee
By: /s/ Robert M. Bysshe
Title: Managing Director
(CORPORATE SEAL)
ATTEST: /s/ David Abramson
Title: Vice President and Counsel
APPENDIX A
BellSouth Nonqualified Deferred Compensation Plan
BellSouth Corporation Directors' Retirement Plan
BellSouth Corporation Deferred Compensation Plan for Non-
Employee Directors
Southern Bell Telephone and Telegraph Company Deferred
Compensation Plan for Non-Employee Directors
South Central Bell Telephone Company Deferred
Compensation Plan for Non-Employee Directors
EXHIBIT 11
BellSouth Corporation
Computation of Earnings Per Share
For the Three Month For the Six Month
Periods Ended Periods Ended
June 30, June 30,
1996 1995 1996 1995
Earnings Per Common Share:
Income Before
Extraordinary
Losses $ 629 $ 557 $ 1,599 $ 1,104
Extraordinary
Loss for
Discontinuance of
SFAS No.71, net of
tax -- (2,718) -- (2,718)
Extraordinary Loss
on Early
Extinguishment of
Debt, net of tax -- (16) -- (16)
Net Income (Loss) $ 629 $(2,177) $ 1,599 $(1,630)
Weighted average
shares outstanding 994 993 994 993
Earnings per Common
Share Before
Extraordinary
Losses $ .63 $ .56 $ 1.61 $ 1.11
Extraordinary
Loss for
Discontinuance of
SFAS No.71, net of
tax -- (2.73) -- (2.73)
Extraordinary Loss
on Early
Extinguishment of
Debt, net of tax -- (.02) -- (.02)
Earnings (Loss) Per
Common Share $ .63 $ (2.19) $ 1.61 $ (1.64)
EXHIBIT 11
BellSouth Corporation
Computation of Earnings Per Share (continued)
For the Three Month For the Six Month
Periods Ended Periods Ended
June 30, June 30,
1996 1995 1996 1995
Primary Earnings Per Common Share:
Income Before
Extraordinary
Losses $ 629 $ 557 $ 1,599 $ 1,104
Extraordinary
Loss for
Discontinuance of
SFAS No.71, net of
tax -- (2,718) -- (2,718)
Extraordinary Loss
on Early
Extinguishment of
Debt, net of tax -- (16) -- (16)
Net Income (Loss) $ 629 $(2,177) $ 1,599 $(1,630)
Weighted average
shares outstanding 994 993 994 993
Incremental shares
from assumed
exercise of stock
options and
payment of
performance share
awards 2 1 3 1
Total Shares 996 994 997 994
Earnings per Common
Share Before
Extraordinary
Losses $ .63 $ .56 $ 1.60 $ 1.11
Extraordinary
Loss for
Discontinuance of
SFAS No.71, net of
tax -- (2.73) -- (2.73)
Extraordinary Loss
on Early
Extinguishment of
Debt, net of tax -- (.02) -- (.02)
Earnings (Loss) Per
Common Share $ .63 $ (2.19) $ 1.60 $ (1.64)
EXHIBIT 11
BellSouth Corporation
Computation of Earnings Per Share (continued)
For the Three Month For the Six Month
Periods Ended Periods Ended
June 30, June 30,
1996 1995 1996 1995
Fully Diluted Earnings Per Common Share:
Income Before
Extraordinary
Losses $ 629 $ 557 $ 1,599 $ 1,104
Extraordinary
Loss for
Discontinuance of
SFAS No.71, net of
tax -- (2,718) -- (2,718)
Extraordinary Loss
on Early
Extinguishment of
Debt, net of tax -- (16) -- (16)
Net Income (Loss) $ 629 $(2,177) $ 1,599 $(1,630)
Weighted average
shares outstanding 994 993 994 993
Incremental shares
from assumed
exercise of stock
options and
payment of
performance share
awards 3 1 3 1
Total Shares 997 994 997 994
Earnings per Common
Share Before
Extraordinary
Losses $ .63 $ .56 $ 1.60 $ 1.11
Extraordinary
Loss for
Discontinuance of
SFAS No.71, net of
tax -- (2.73) -- (2.73)
Extraordinary Loss
on Early
Extinguishment of
Debt, net of tax -- (.02) -- (.02)
Earnings (Loss) Per
Common Share $ .63 $ (2.19) $ 1.60 $ (1.64)
EXHIBIT 12
BellSouth Corporation
Computation Of Earnings To Fixed Charges
(Dollars In Millions)
For the Six
Months Ended
June 30,
1996
1. Earnings
(a) Income from continuing operations
before deductions for taxes and interest $2,865
(b) Portion of rental expense
representative of interest factor 46
(c) Equity in losses from less-than-50%
owned investments (accounted for under the
equity method of accounting) 100
(d) Excess of earnings over distributions
of less-than-50%-owned investments
(accounted for under the equity mehtod of
accounting) (19)
TOTAL $2,992
2. Fixed Charges
(a) Interest $363
(b) Portion of rental expense
representative of interest factor 46
TOTAL $409
Ratio (1 divided by 2) 7.3
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0
0
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