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 March 31, 1998
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 58-1533433
(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 April 30, 1998, a total of 990,094,691 common shares was
outstanding.
Table of Contents
Item Page
Part I
1. Financial Statements 3
Consolidated Statements of Income 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Consolidated Statements of Shareholders' Equity
and Comprehensive Income 6
Notes to Consolidated Financial Statements 8
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 17
Other Income Statement Items 18
Financial Condition 19
Regulatory Developments and Competition 20
Federal Developments 20
State Developments 20
Other Matters 20
Safe Harbor Statement 21
Part II
6. Exhibits and Reports on Form 8-K 22
PART I - FINANCIAL INFORMATION
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Millions, Except Per Share Amounts)
For the Three Months
Ended March 31,
1998 1997
Operating Revenues:
Network and related services:
Local service $ 2,262 $ 2,104
Interstate access 945 917
Intrastate access 206 218
Toll 175 174
Wireless communications 1,116 765
Directory advertising and
publishing 362 361
Other services 360 306
Total Operating Revenues 5,426 4,845
Operating Expenses:
Cost of services and
products 1,667 1,422
Depreciation and
amortization 1,043 960
Selling, general and
administrative 1,262 1,110
Total Operating Expenses 3,972 3,492
Operating Income 1,454 1,353
Interest Expense 190 183
Gain on Sale of Operations 155 --
Other Income (Expense), net 28 (7)
Income Before Income Taxes 1,447 1,163
Provision for Income Taxes 555 470
Net Income $ 892 $ 693
Weighted-Average Common
Shares Outstanding:
Basic 991 992
Diluted 997 994
Dividends Declared Per Common
Share $ .36 $ .36
Earnings Per Share:
Basic $ .90 $ .70
Diluted $ .89 $ .70
The accompanying notes are an integral part of these consolidated
financial statements.
BELLSOUTH CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Millions, Except Per Share Amounts)
March 31, December 31,
1998 1997
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 2,120 $ 2,570
Temporary cash investments 9 17
Accounts receivable, net of allowance for
uncollectibles of $253 and $246 4,433 4,750
Material and supplies 421 393
Other current assets 533 387
Total Current Assets 7,516 8,117
Investments and Advances 2,896 2,675
Property, Plant and Equipment:
Property, plant and equipment 55,283 53,828
Accumulated depreciation 31,933 30,967
Property, Plant and Equipment, net 23,350 22,861
Deferred Charges and Other Assets 754 702
Intangible Assets, net 2,427 1,946
Total Assets $ 36,943 $ 36,301
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Debt maturing within one year $ 3,302 $ 3,706
Accounts payable 1,619 1,825
Other current liabilities 3,620 3,252
Total Current Liabilities 8,541 8,783
Long-Term Debt 7,673 7,348
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 2,016 2,023
Unamortized investment tax credits 201 213
Other liabilities and deferred credits 2,820 2,769
Total Deferred Credits and Other
Liabilities 5,037 5,005
Shareholders' Equity:
Common stock, $1 par value 1,010 1,010
Paid-in capital 7,706 7,714
Retained earnings 7,919 7,382
Accumulated other comprehensive income 40 36
Shares held in trust and treasury (614) (575)
Guarantee of ESOP debt (369) (402)
Total Shareholders' Equity 15,692 15,165
Total Liabilities and Shareholders' Equity $ 36,943 $ 36,301
The accompanying notes are an integral part of these consolidated
financial statements.
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Millions, Except Per Share Amounts)
For the Three Months
Ended March 31,
1998 1997
Cash Flows from Operating Activities:
Net income $ 892 $ 693
Adjustments to net income:
Depreciation and amortization 1,043 960
Gain on sale of operations (155) -
Net losses (earnings) and dividends from
unconsolidated affiliates 37 69
Provision for uncollectibles 76 66
Deferred income taxes and unamortized
investment tax credits (16) (10)
Net change in:
Accounts receivable and other current assets 88 (18)
Accounts payable and other current liabilities 30 178
Deferred charges and other assets (9) (70)
Other liabilities and deferred credits 46 (10)
Other reconciling items, net 24 16
Net cash provided by operating activities 2,056 1,874
Cash Flows from Investing Activities:
Capital expenditures (1,226) (871)
Purchases of licenses and other intangible
assets (105) (24)
Proceeds from sale of operations 155 -
Proceeds from disposition of short-term
investments 19 63
Purchases of short-term investments (11) (55)
Investments in and advances to unconsolidated
affiliates (483) (290)
Other investing activities, net 58 11
Net cash used for investing activities (1,593) (1,166)
Cash Flows from Financing Activities:
Net repayments of short-term borrowings (499) (626)
Proceeds from long-term debt 231 28
Repayments of long-term debt (199) (9)
Dividends paid (357) (357)
Other financing activities, net (89) 24
Net cash used for financing activities (913) (940)
Net Decrease in Cash and Cash Equivalents (450) (232)
Cash and Cash Equivalents at Beginning of Period 2,570 1,178
Cash and Cash Equivalents at End of Period $ 2,120 $ 946
The accompanying notes are an integral part of these consolidated
financial statements.
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
(Unaudited)
(In Millions)
<TABLE>
<CAPTION>
For the Three Months Ended March 31, 1998
--------------------------------------------------------------------------------------
Number of
Shares Amount
------------ -----------------------------------------------------------------------
Shares Shares
Held Accum. Held
In Other In Guarantee
Trust Compre- Trust of
Common and Common Paid-in Retained hensive and ESOP
Stock Treasury Stock Capital Earnings Income Treasury Debt Total
(a) (a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1,010 (18) $1,010 $7,714 $7,382 $36 $(575) $(402) $15,165
1997
Net income 892 892
Other compre-
hensive
income,
net of tax:
Foreign
currency
translation 4 4
adjustment
Total compre-
hensive income 896
Dividends (357) (357)
declared
Shares issued
for:
Employee
benefit (13) 32 19
plans
Acquisitions 1 5 33 38
Purchase of
treasury
stock (2) (80) (80)
Purchase of
stock for
grantor trust (24) (24)
ESOP activities
and related
tax 2 33 35
benefit
----- ---- ------ ------ ------ ---- -------- ------- -------
Balance at
March 31, 1998 1,010 (19) $1,010 $7,706 $7,919 $40 $(614) $(369) $15,692
===== ==== ====== ====== ====== ==== ======== ====== =======
</TABLE>
(a) Such shares are not considered to be outstanding for financial
reporting purposes. As of March 31, 1998 there were approximately
17.6 million shares held in trust and 1.6 million treasury shares held
by the company.
The accompanying notes are an integral part of these consolidated
financial statements.
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
(Unaudited)
(In Millions)
<TABLE>
<CAPTION>
For the Three Months Ended March 31, 1997
---------------------------------------------------------------------------------
Number of
Shares Amount
----------------- -----------------------------------------------------------------
Shares Shares
Held Accum. Held
In Other In Guarantee
Trust Compre- Trust of
Common and Common Paid-in Retained hensive and ESOP
Stock Treasury Stock Capital Earnings Income Treasury Debt Total
(a) (a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1,009 (18) $1,009 $7,672 $5,541 $25 $(532) $(466) $13,249
1996
Net income 693 693
Other compre-
hensive income,
net of tax:
Foreign
currency
translation 10 10
adjustment
Total compre-
hensive income 703
Dividends (357) (357)
declared
Shares issued
for Employee
benefit plans 1 (9) 33 24
ESOP activities
and related
tax benefit 2 32 34
----- ---- ----- ------ ------ --- ------ ----- -------
Balance at
March 31, 1997 1,009 (17) $1,009 $7,663 $5,879 $35 $(499) $(434) $13,653
===== ==== ====== ======= ====== === ====== ====== =======
</TABLE>
(a) Such shares are not considered to be outstanding for financial
reporting purposes. As of March 31, 1997 there were approximately
15.8 million shares held in trust and 1.1 million treasury shares held
by the company.
The accompanying notes are an integral part of these consolidated
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. BellSouth believes, however, that the disclosures
made are adequate for a fair presentation of results of operations,
financial position and cash flows.
Beginning in 1998, BellSouth adopted Statement of Financial Accounting
Standards (SFAS) No. 130 - "Comprehensive Income". The calculation of
comprehensive income is included in the accompanying Consolidated
Statements of Shareholders' Equity and Comprehensive Income.
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.
Note B -- Earnings per Share
In 1997, BellSouth adopted SFAS No. 128 - "Earnings per Share," which
requires the presentation of both basic and diluted earnings per
share. Basic earnings per share is computed based on the weighted-
average number of common shares outstanding during each year. Diluted
earnings per share is based on the sum of the weighted-average number
of common shares outstanding plus common stock equivalents arising out
of employee stock options and benefit plans. Earnings per share
information for the prior period has been restated to conform to the
requirements of the standard. Common stock equivalents included in
the calculation of diluted earnings per share were approximately 6
million and 2 million for the three-month periods ended March 31, 1998
and 1997, respectively. BellSouth's earnings, used for per share
calculations, are the same for both the basic and diluted methods.
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(In Millions, Except Per Share Amounts)
Note C -- Supplemental Cash Flow Information
For the Three Months
Ended March 31,
1998 1997
Cash Paid For:
Income taxes $ 45 $ 59
Interest $ 149 $ 133
In January 1998, BellSouth began consolidating certain operations
which had previously been accounted for under the equity method. Such
consolidation resulted in an increase in assets of $519 (net of a $228
decrease in investments and advances) and a corresponding increase in
liabilities.
Note D -- Gain on Sale of Operations
In July 1997, BellSouth sold its 20% interest in ITT World Directories
(ITTWD) to ITT Corporation (ITT). The sale agreement contained
certain provisions which called for additional sales proceeds to be
paid to BellSouth in the event that ITT subsequently resold ITTWD
above a certain price. As a result of ITT's subsequent sale of ITTWD,
BellSouth received additional proceeds which resulted in a pretax gain
of $155 ($96 after tax) in the first quarter of 1998.
BELLSOUTH CORPORATION
SELECTED OPERATING DATA
(Unaudited)
Percent Change
1998 vs. 1997 vs.
1998 1997 1996
Network Access Lines in Service at March 31 (Thousands)(a):
By Type:
Residence 16,127 4.8% 3.6%
Business 7,148 4.3 7.6
Other 273 2.6 3.5
Total Access Lines 23,548 4.6 4.8
By State:
Florida 6,333 5.4 5.4
Georgia 4,057 5.6 6.0
Tennessee 2,653 2.7 4.4
North Carolina 2,370 5.0 5.7
Louisiana 2,305 4.3 3.5
Alabama 1,950 3.5 3.6
South Carolina 1,427 4.5 4.0
Mississippi 1,262 3.9 3.2
Kentucky 1,191 3.4 3.3
Total Access Lines 23,548 4.6 4.8
Percent Change for
the Periods Ended
1998 vs. 1997 vs.
1998 1997 1996
Access Minutes of Use (Millions)(a)(b):
Interstate 18,998 7.2% 6.4%
Intrastate 6,084 9.6 8.4
Total Access Minutes of Use 25,082 7.8 6.9
Toll Messages (Millions)(a) 201 (12.4) (18.1)
(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)
Cellular and Personal Communications Service (PCS) customers served at
March 31(Equity basis)(Thousands)(c):
Percent Change
1998 vs. 1997 vs.
1998 1997 1996
Domestic Cellular 4,230 12.4% 23.6%
International Cellular(d) 2,098 39.8% 75.6%
PCS 105 113.4% --
(c) Includes customers served based on BellSouth's ownership
percentage in all markets served.
(d) Excluding the customers of Optus Communications, which was sold in
July 1997, from all periods, the growth rates would have been 83.2%
for 1998 compared to 1997 and 92.8% for 1997 compared to 1996.
For the Three
Months Ended
March 31,
1998
Ratio of Earnings to Fixed Charges (e) 7.5
(e) 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.
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 and intraLATA 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 66% and 70% of BellSouth's Total Operating Revenues for
each of the three-month periods ended March 31, 1998 and 1997 were
from wireline services provided by BellSouth Telecommunications.
Charges for local, access and toll services for the three-month period
ended March 31, 1998 accounted for approximately 63%, 32% and 5%,
respectively, of the wireline revenues discussed above. Revenues from
wireless communications services and directory advertising and
publishing services accounted for approximately 21% and 7%,
respectively, of Total Operating Revenues for the three months ended
March 31, 1998. The remainder of such revenues was derived
principally from sales and maintenance of customer premises equipment
and other nonregulated services provided by BellSouth
Telecommunications.
RESULTS OF OPERATIONS
For the Three
Months Ended
March 31,
1998 1997
Net Income $ 892 $ 693
Earnings Per Share:
Basic $ .90 $ .70
Diluted $ .89 $ .70
For the three-month period ended March 31, 1998, Net Income increased
by $199 (28.7%) when compared to the same 1997 period. Basic Earnings
Per Share increased $.20 (28.6%) and Diluted Earnings Per Share
increased $.19 (27.1%) when compared to the same 1997 period.
The increases for the three-month period were primarily attributable
to continued strong growth in key business volumes in BellSouth's
wireline and wireless businesses. In addition, the increases were also
due to an after-tax gain of $96 resulting from additional proceeds
received in connection with the sale of ITT World Directories (see
Note D to the Consolidated Financial Statements).
Volumes of Business
The total number of access lines in service as of March 31, 1998
increased by approximately 1,034,000 (4.6%) since March 31, 1997 to
23,548,000, compared to a 4.8% rate of increase for the same 1997
period. Business and residence access lines increased by 4.3% and
4.8%, respectively, compared to growth rates of 7.6% and 3.6% in the
same 1997 period. The decrease in the growth rate for business lines
was primarily due to the migration of business customers from
traditional business line services to high-capacity service
arrangements which are not included in business line counts. To a
lesser degree, the growth rate for business lines was also affected by
the increased presence of facilities-based competition. Many
residential customers order additional access lines for home office
purposes, access to on-line computer services and children's phones.
The number of such additional residence lines included in total
residence lines increased by 338,000 (20.3%) to 2,000,000 and
accounted for approximately 46.1% and 32.7% of the overall increase in
residence access lines and total access lines, respectively, since
March 31, 1997. The growth in access lines continues to reflect
economic growth in the Southeast and successful marketing programs.
Access minutes of use represent the volume of traffic carried by
interexchange carriers, both interstate and intrastate, using
BellSouth Telecommunications' local facilities. Total access minutes
of use increased by 1,809 million (7.8%) for the three-month period
ended March 31, 1998 compared to an increase of 6.9% for the same 1997
period. 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-month period
ended March 31, 1998, toll messages decreased by 29 million (12.4%)
compared to a decrease of 18.1% for the same 1997 period. The
decrease in 1998 is primarily attributable to continuing competition
from interexchange carriers in the intraLATA toll market as well as
the continuing expansion of local area calling plans (LACPs).
Effects of competition and the expansion of LACPs result in the
transfer of calls from toll to access and local service categories,
respectively, but the corresponding revenues are not generally shifted
at commensurate rates. Competition in the intraLATA toll market will
adversely impact future toll message volumes.
Domestic cellular customers (equity-weighted) increased by 466,000
(12.4%) since March 31, 1997 to 4,230,000. The moderation in the
customer growth rate reflects the impact of increased competition.
BellSouth's penetration rate (number of equity-basis customers as a
percentage of the equity-basis population in the service territory)
increased from 9.2% at March 31, 1997 to 10.5% at March 31, 1998.
While total minutes of use have continued to increase, average minutes
of use per cellular customer declined since first quarter 1997 due to
the continuing trends of increased penetration into lower-usage market
segments and increased competition for high-usage customers.
BellSouth expects these trends to continue.
International cellular customers (equity-weighted) increased by
597,000 (39.8%) since March 31, 1997 to 2,098,000. Such growth
reflects increased demand for wireless services in the international
markets which BellSouth serves and the impact of the acquisitions of
cellular properties in Nicaragua, Ecuador and Peru, partially offset
by the sale of Optus Communications. Excluding the customers of Optus
Communications from all periods, the number of international cellular
customers (equity-weighted) increased by 953,000 (83.2%) in 1998
compared to 1997 and 92.8% in 1997 compared to 1996. Growth in total
minutes of use for international cellular properties remained strong,
primarily due to demand stimulated by market-driven pricing programs,
enhanced services and underdeveloped land-line service. However,
average minutes of use per international customer declined due to the
addition of customers in lower-usage market segments.
Domestic PCS customers (equity-weighted) increased 113.4% to 105,000
at March 31, 1998.
Operating Revenues
Total Operating Revenues increased $581 (12.0%) for the three-month
period ended March 31, 1998 when compared to the same 1997 period.
Such increase includes revenues from certain of BellSouth's
operations which had been accounted for under the equity method in
first quarter 1997 and were consolidated in first quarter 1998. If
these operations had been consolidated in 1997, Total Operating
Revenues would have increased approximately 9.5%. The components of
Total Operating Revenues were as follows:
For the Three
Months Ended
March 31,
1998 1997
Local Service $ 2,262 $ 2,104
Interstate Access 945 917
Intrastate Access 206 218
Toll 175 174
Wireless Communications 1,116 765
Directory Advertising and
Publishing 362 361
Other Services 360 306
Total Operating Revenues $ 5,426 $ 4,845
Local Service revenues increased $158 (7.5%) for the three-month
period ended March 31, 1998, as compared to the same 1997 period. The
increase for the period was due primarily to a 4.6% growth in access
lines in service since March 31, 1997. Also contributing was an
increase of $50 due to higher customer demand for optional services
such as custom calling features. Such increases were partially offset
by rate impacts which reduced revenues by $13 for the three-month
period.
Interstate Access revenues increased $28 (3.1%) for the three-month
period ended March 31, 1998 as compared to the same 1997 period. The
increase was primarily due to a $40 increase in special access
revenues and an increase in end-user charges attributable to an
increase in access lines. These increases were partially offset by
rate reductions which decreased revenues by $29.
Intrastate Access revenues decreased $12 (5.5%) for the three-month
period ended March 31, 1998 compared to the same 1997 period. The
decrease was primarily due to rate reductions of $38. The decrease
was partially offset by growth in minutes of use of 9.6%.
Toll revenues increased $1 (0.6%) for the three-month period ended
March 31, 1998 when compared to the same 1997 period. The increase
was primarily attributable to charges to interexchange carriers,
beginning in the second quarter of 1997, for toll messages originating
on BellSouth's public telephones. Such increase was substantially
offset by a decline in toll messages of 12.4%.
Wireless Communications revenues increased $351 (45.9%) for the three-
month period ended March 31, 1998 when compared to the same 1997
period. Such increase includes revenues from certain of BellSouth's
operations which had been accounted for under the equity method in
first quarter 1997 and were consolidated in first quarter 1998. If
these operations had been consolidated in 1997, Wireless
Communications revenues would have increased approximately 27.4%.
That increase was primarily attributable to continued growth of the
customer base in international and domestic wireless markets and the
acquisition in 1997 of various international wireless operations.
Directory Advertising and Publishing revenues increased $1 (0.3%) for
the three-month period ended March 31, 1998 when compared to the same
1997 period. The increase primarily reflects volume growth and price
increases substantially offset by one-time adjustments in 1997. The
revenue growth rate associated with increases in volume and pricing
for the three-month period ended March 31, 1998 was 5.7%.
Other Services revenues are principally comprised of revenues from
customer premises equipment (CPE) sales, maintenance services and
other services (primarily inside wire, billing and collection and
voice messaging services) offered by BellSouth Telecommunications.
Other Services revenues increased $54 (17.6%) for the three-month
period ended March 31, 1998 when compared with the same 1997 period.
The increase reflects increased demand and prices for nonregulated
services and higher billing-related fees.
Operating Expenses
Total Operating Expenses increased $480 (13.7%) for the three-month
period ended March 31, 1998 compared to the same 1997 period. Such
increase includes expenses from certain of BellSouth's operations
which had been accounted for under the equity method in first quarter
1997 and were consolidated in first quarter 1998. If these operations
had been consolidated in 1997, Total Operating Expenses would have
increased approximately 10.2%. The components of Total Operating
Expenses were as follows:
For the Three
Months Ended
March 31,
1998 1997
Depreciation and Amortization $ 1,043 $ 960
Other Operating Expenses:
Cost of Services and
Products 1,667 1,422
Selling, General and
Administrative 1,262 1,110
2,929 2,532
Total Operating Expenses $ 3,972 $ 3,492
Depreciation and Amortization increased $83 (8.6%) for the three-month
period ended March 31, 1998 compared to the same period in 1997. The
increase was due primarily to higher levels of property, plant and
equipment since March 31, 1997 resulting from continued growth in the
customer base and continued modernization of the networks utilized in
the wireless businesses. The increase also included $38 in
depreciation and amortization from the first-time consolidation of
certain operations in 1998 which were treated as equity investments in
1997.
Other Operating Expenses increased $397 (15.7%) for the three-month
period ended March 31, 1998 when compared to the same 1997 period.
Such increase includes $125 in expenses from certain of BellSouth's
operations which had been accounted for under the equity method in
first quarter 1997 and were consolidated in first quarter 1998. The
increase for the period was also attributable to increased expenses in
international wireless operations of $108 related to acquisitions and
sustained growth in the international cellular customer bases. Such
increase reflects additional marketing and operational costs
associated with higher levels of sales and expanded operations.
At BellSouth Telecommunications, Other Operating Expenses increased
$136 (7.4%) for the three-month period ended March 31, 1998 when
compared to the same 1997 period. The increase for the period was
primarily attributable to increased costs in the company's telephone
operations associated with higher business volumes, implementation of
the Telecommunications Act of 1996 and payments to the Universal
Service Fund.
Other Income Statement Items
The other income statement components were as follows:
For the Three
Months Ended
March 31,
1998 1997
Interest Expense $190 $183
Gain on Sale of Operations 155 -
Other Income (Expense), net 28 (7)
Provision for Income Taxes 555 470
Interest Expense increased $7 (3.8%) for the three-month period ended
March 31, 1998 compared to the same 1997 period. The increase was
primarily attributable to higher average debt balances and interest
rates on short-term borrowings, partially offset by an increase in
interest capitalized for investments being developed.
Gain on Sale of Operations for the three-month period ended March 31,
1998 represents additional proceeds received from the sale of ITT
World Directories. See Note D to the Consolidated Financial
Statements.
Other Income, net improved $35 for the three-month period ended March
31, 1998 compared to the same 1997 period. The increase was primarily
attributable to improved equity in earnings of unconsolidated
affiliates and an increase in interest income partially offset by
higher net minority interest deductions.
Equity in earnings of unconsolidated affiliates was $11 for the three-
month period ended March 31, 1998 compared to equity in losses of
($44) for the same 1997 period. The improvement in overall equity in
earnings primarily reflects (i) the first-time consolidation in 1998
of the mobile data communications business; (ii) more favorable
results at other unconsolidated international operations; and (iii)
the cessation of losses incurred by Optus following its sale in 1997.
The improvement was partially offset by losses from the start-up
operations in Brazil and the consolidation in 1998 of certain
international wireless operations previously accounted for under the
equity method.
Provision for Income Taxes for the three-month period ended March 31,
1998 increased $85 (18.1%) when compared to the same 1997 period. For
the three-month period ended March 31, 1998, BellSouth's effective tax
rate was 38.4% compared to 40.4% for the same 1997 period. The
decrease in the effective tax rate in 1998 resulted primarily from
improvements in the earnings of equity investments which are generally
reported net of income tax expense and from the lower effective tax
rate of newly consolidated international operations.
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. On occasion,
BellSouth's current liabilities exceed current assets. However,
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 Three Months
Ended March 31,
1998 1997
Net Cash Provided by Operating Activities $2,056 $1,874
Operating Activities. Net cash provided by operating activities
increased $182 (9.7%) in the three-month period ended March 31, 1998
when compared to the same 1997 period. The change is primarily due to
a $184 increase in operating income before depreciation and
amortization.
For the Three Months
Ended March 31,
1998 1997
Net Cash Used for Investing Activities $(1,593) $(1,166)
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 increased $427 (36.6%) in the three-month period ended
March 31, 1998 when compared to the same 1997 period. The increase
was primarily due to capital expenditures and investments in
BellSouth's consolidated and unconsolidated Latin American affiliates.
Internal sources provided substantially all cash required for capital
expenditures and international investments in the three-month period
ended March 31, 1998. For the remainder of 1998, BellSouth expects to
continue to finance capital expenditures and international investments
primarily through internally generated funds and, to the extent
necessary, from external sources.
For the Three Months
Ended March 31,
1998 1997
Net Cash Used for Financing Activities $(913) $(940)
Financing Activities. Net cash used for financing activities was
relatively flat with a decrease of $27 (2.9%) in the three-month
period ended March 31, 1998 compared to the same 1997 period.
BellSouth's debt to total capitalization ratio decreased to 41.1% at
March 31, 1998 from 42.1% at December 31, 1997. The decrease was
primarily caused by an increase in stockholders' equity resulting from
undistributed earnings.
As of April 30, 1998, shelf registration statements were on file with
the Securities and Exchange Commission under which $1,927 of debt
securities could be publicly offered.
In September 1997, BellSouth announced a plan to repurchase up to $1
billion of its Common Stock through 1998.
REGULATORY DEVELOPMENTS AND COMPETITION
Federal Developments
Local Number Portability Cost Recovery. On May 5, 1998 the FCC
adopted an order that will allow telecommunications carriers, such
as BellSouth Telecommunications, to recover, over five years, their
carrier-specific costs of implementing long-term number
portability, which allows customers to retain their local telephone
numbers in the event they change local carriers. The order allows for
such cost recovery to begin no earlier than February 1, 1999
in the form of a surcharge from customers to whom number portability is
available. BellSouth is currently evaluating the impact the order
will have in future periods.
State Developments
Reciprocal Compensation for Internet Traffic. Several Competitive
Local Exchange Carriers (CLECs) are engaged in regulatory proceedings
with several Incumbent Local Exchange Carriers (ILECs), including
BellSouth, concerning the payment of reciprocal compensation to the
CLECs for calls originating on the ILECs' networks and terminating
with Internet Service Providers served by the CLECs' networks. The
CLECs have asserted that such reciprocal compensation is provided for
in interconnection agreements between the CLECs and the ILECs.
BellSouth denies any liability for this form of compensation. It is
too early to assess the impact of the ultimate resolution of these
issues on the results of operations, financial position and cash flows
of BellSouth.
OTHER MATTERS
Capitalization of Internal Use Software. In March 1998, the AICPA
issued Statement of Position 98-1 (SOP 98-1), "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use".
SOP 98-1 requires capitalization of certain direct costs and interest
costs after preliminary development efforts have been made. SOP 98-1
requires adoption by BellSouth no later than January 1, 1999.
BellSouth intends to adopt SOP 98-1 beginning January 1, 1999.
Adoption of SOP 98-1 will result in a temporary increase in earnings
in the year of adoption as a result of the capitalization of costs
which had previously been expensed. If expenditures remain at a
consistent level, the earnings impact will decline in each year
following the change. The decline will continue until the
amortization expense related to the capitalized software costs equals
the level of software costs treated as expense prior to the change.
In addition, adoption of SOP 98-1 will result in higher levels of
capitalized software costs on the balance sheet.
SAFE HARBOR STATEMENT
Statements that do not address historical performance are 'forward-
looking statements' within the meaning of the Private Securities
Litigation Reform Act of 1995 and are based on a number of
assumptions, including but not limited to: (1) continued economic
growth and demand for BellSouth's services; (2) continued monetary,
regulatory and political stability where BellSouth conducts its
international operations; (3) the reasonable accuracy of BellSouth's
expectations of costs and recoveries with respect to access reform,
universal service and interconnection; (4) the reasonable accuracy of
BellSouth's estimate of regulatory authorization to provide wireline
long distance services and the impact of competition in its markets;
and (5) satisfactory resolution of Year 2000 software revisions. Any
developments significantly deviating from these assumptions could
cause actual results to differ materially from those forecast or
implied in the aforementioned forward-looking statements.
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number
3a Amended Articles of Incorporation of BellSouth
Corporation as of April 27, 1998.
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.
10i BellSouth Corporation Supplemental Executive Retirement
Plan as amended March 23, 1998.
10q-4 Amendment dated April 17, 1998 to the BellSouth Personal
Retirement Account Pension Plan.
10w-3 Amendment dated May 5, 1998 to the BellSouth Retirement
Savings Plan.
10z BellSouth Compensation Deferral Plan as amended and
restated effective October 1, 1997.
10aa BellSouth Employee Stock Investment Plan.
10aa-1 Amendment dated November 27, 1996 to the BellSouth Employee
Stock Investment Plan.
10aa-2 Amendment dated March 21, 1997 to the BellSouth Employee
Stock Investment Plan.
10aa-3 Amendment dated May 5, 1998 to the BellSouth Employee Stock
Investment Plan.
10bb BellSouth Officer Motor Vehicle Policy.
11 Computation of Earnings Per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule as of March 31, 1998.
27-a Revised Financial Data Schedule as of December 31, 1997.
27-b Revised Financial Data Schedule as of December 31, 1996.
27-c Revised Financial Data Schedule as of December 31, 1995.
27-d Revised Financial Data Schedule as of September 30, 1997.
27-e Revised Financial Data Schedule as of June 30, 1997.
Item 6. Exhibits and Reports on Form 8-K (continued)
27-f Revised Financial Data Schedule as of March 31, 1997.
27-g Revised Financial Data Schedule as of September 30, 1996.
27-h Revised Financial Data Schedule as of June 30, 1996.
27-i Revised Financial Data Schedule as of March 31, 1996.
(b) Reports on Form 8-K:
Date of Event Subject
February 27, 1998 ITT World Directories Additional Proceeds
and BellSouth Capital Funding Registration
Statement Exhibits
April 20, 1998 First Quarter 1998 Earnings Release
and 1998 Financial Projection
April 27, 1998 Chairman's comments to shareholders
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/ W. Patrick Shannon
W. PATRICK SHANNON
Vice President and Controller
(Principal Accounting Officer)
May 13, 1998
EXHIBIT INDEX
Exhibit
Number
3a Amended Articles of Incorporation of BellSouth
Corporation as of April 27, 1998.
10i BellSouth Corporation Supplemental Executive Retirement
Plan as amended March 23, 1998.
10q-4 Amendment dated April 17, 1998 to the BellSouth Personal
Retirement Account Pension Plan.
10w-3 Amendment dated May 5, 1998 to the BellSouth Retirement
Savings Plan.
10z BellSouth Compensation Deferral Plan as amended and
restated effective October 1, 1997.
10aa BellSouth Employee Stock Investment Plan.
10aa-1 Amendment dated November 27, 1996 to the BellSouth Employee
Stock Investment Plan.
10aa-2 Amendment dated March 21, 1997 to the BellSouth Employee
Stock Investment Plan.
10aa-3 Amendment dated May 5, 1998 to the BellSouth Employee Stock
Investment Plan.
10bb BellSouth Officer Motor Vehicle Policy.
11 Computation of Earnings Per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule as of March 31, 1998.
27-a Revised Financial Data Schedule as of December 31, 1997.
27-b Revised Financial Data Schedule as of December 31, 1996.
27-c Revised Financial Data Schedule as of December 31, 1995.
27-d Revised Financial Data Schedule as of September 30, 1997.
27-e Revised Financial Data Schedule as of June 30, 1997.
27-f Revised Financial Data Schedule as of March 31, 1997.
27-g Revised Financial Data Schedule as of September 30, 1996.
27-h Revised Financial Data Schedule as of June 30, 1996.
27-i Revised Financial Data Schedule as of March 31, 1996.
12
BELLSOUTH CORPORATION
ARTICLES OF INCORPORATION
Incorporated Under the Laws
of the State of Georgia
on October 13, 1983
Amended and Restated by the Board of Directors February 23,
1998
Filed with the Secretary of State March 12, 1998
Amended by Shareholders April 27, 1998
Filed with the Secretary of State May 8, 1998
Secretary's Department
19A01 Campanile Building
1155 Peachtree Street, N.E.
Atlanta, Georgia 30309-3610
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
BELLSOUTH CORPORATION
1.
The name of the Corporation is BellSouth Corporation.
2.
The Corporation is organized pursuant to the provisions
of the Georgia Business Corporation Code.
3.
The Corporation shall have perpetual duration.
4.
The purposes for which the Corporation is organized
are:
(1) To act as a holding company for the stock of
companies engaged in the telephone and other
communications businesses; and
(2) To conduct any business and engage in any
activities not specifically prohibited to
corporations for profit under the laws of the State
of Georgia; and the Corporation shall have all the
powers necessary to conduct such businesses and
engage in such activities, including, but not
limited to, the powers enumerated in the Georgia
Business Corporation Code or any amendment thereto.
5.
The aggregate number of shares of stock which the
Corporation is authorized to issue is 2,300,000,000
shares, consisting of 2,200,000,000 shares of Common
Stock having a par value of $1 per share and 100,000,000
shares of First Preferred Stock having a par value of $1
per share.
The Common Stock shall be deemed to be stock entitled
to vote within the meaning of any of the provisions of
the laws of the State of Georgia, and each holder of
Common Stock shall, at every meeting of stockholders, be
entitled to one vote, in person or by proxy, for each
share of such stock held by such holder.
The authorized but unissued shares of First Preferred
Stock and Common Stock shall be available for issue and
sale at any time and from time to time, either in whole
or in part, and upon such terms and conditions and for
such consideration, not less than the par value thereof,
as may be provided by the Board of Directors of the
Corporation or, if authorized by the By-laws of the
Corporation, the Executive Committee of the Board of
Directors.
The Corporation may issue fractional shares in
connection with any dividend reinvestment plan and for
any other legitimate corporate purposes permitted by the
Georgia Business Corporation Code.
The following is a description of the terms,
provisions, preferences, rights, voting powers,
restrictions and limitations of the First Preferred
Stock:
A. Dividends on the First Preferred Stock shall be
cumulative.
B. The First Preferred Stock shall rank superior to
the Common Stock both as to the payment of dividends
(other than dividends payable solely in shares of Common
Stock) and as to amounts distributable upon the voluntary
or involuntary liquidation of the Corporation.
C. At any time after full cumulative dividends for all
previous dividend periods shall have been paid on the
First Preferred Stock and each other class of stock
ranking superior to or in parity with the First Preferred
Stock as to dividends, and after declaring and making
provision for the payment in full of the quarterly
dividends for the current dividend period on the First
Preferred Stock and on each other class of stock ranking
superior to or in parity with the First Preferred Stock
as to dividends, and after all requirements with respect
to any purchase, retirement or sinking fund or funds for
all series of the First Preferred Stock and each other
class of stock ranking superior to or in parity with the
First Preferred Stock have been complied with, then, but
not prior thereto, out of any funds of the Corporation
lawfully available therefor, dividends may be declared
and paid on the class or classes of stock junior to the
First Preferred Stock as to dividends, subject to the
respective terms and provisions applying thereto. The
provisions of this paragraph shall not be applicable to
dividends payable solely in shares of Common Stock to
holders of the Common Stock. If at any time the
Corporation shall fail to pay full cumulative dividends
on any shares of the First Preferred Stock or on any
other class of stock ranking superior to or in parity
with the First Preferred Stock, or if at any time the
Corporation shall be in default under the requirements
with respect to any purchase, retirement or sinking fund
or funds applicable to any series of the First Preferred
Stock or any other class of stock ranking superior to or
in parity with the First Preferred Stock, thereafter
until such dividends shall have been paid or declared and
set apart for payment and any other such default
remedied, the Corporation shall not purchase, redeem, or
otherwise acquire for consideration any shares of any
class of stock then outstanding and ranking in parity
with or junior to the First Preferred Stock.
D. In the event of any voluntary or involuntary
liquidation of the Corporation, after payment or
provision for payment of the debts and other liabilities
of the Corporation, after making provision for preferred
stock superior to the First Preferred Stock as to
payments upon liquidation and before any distribution to
the holders of the Common Stock or any subordinate
preferred stock, the holders of each series of the First
Preferred Stock shall be entitled to receive out of the
net assets of the Corporation an amount in cash for each
share equal to the amount fixed and determined by the
Board of Directors in the resolution providing for the
issuance of the particular series of First Preferred
Stock, plus all dividends accumulated and unpaid on each
such share of First Preferred Stock up to the date fixed
for distribution, and no more. If the amount payable to
the holders of the First Preferred Stock cannot be paid
in full, the holders of the shares of First Preferred
Stock shall share ratably in any distribution of assets
in proportion to the sums which would have been paid to
them upon such distribution if all sums payable to
holders of the First Preferred Stock and all classes of
stock in parity with the First Preferred Stock were paid
and discharged in full. For the purposes of this
paragraph, the voluntary sale, conveyance, lease,
exchange or transfer of all or substantially all the
property or assets of the Corporation or a consolidation
or merger of the Corporation with one or more other
corporations (whether or not the Corporation is the
corporation surviving such consolidation or merger) shall
not be deemed to be a voluntary or involuntary
liquidation.
E. For purposes hereof, any class or classes of stock
shall be deemed to rank (i) superior to the First
Preferred Stock, either as to dividends or as to
distributions in liquidation, if the holders of such
class or classes shall be entitled to the receipt of
dividends or to the receipt of amounts distributable upon
liquidation or the Corporation, as the case may be, in
preference or priority to the holders of the First
Preferred Stock; (ii) in parity with the First Preferred
Stock, either as to dividends or as to distributions in
liquidation, whether or not the dividend rates, dividend
payment dates or redemption or liquidation prices per
share thereof be different from those of the First
Preferred Stock, if the holders of such class or classes
of stock shall be entitled to the receipt of dividends or
to the receipt of amounts distributable upon liquidation
of the Corporation, as the case may be, in proportion to
their respective dividend rates or liquidation prices,
without preference or priority one over the other with
respect to the holders of the First Preferred Stock; and
(iii) junior to the First Preferred Stock, either as to
dividends or as to distributions in liquidation, if the
rights of the holders of such class or classes shall be
subject or subordinate to the rights of the holders of
the First Preferred Stock in respect of receipt of
dividends (other than dividends payable in shares of
Common Stock) or to the receipt of amounts distributable
upon liquidation of the Corporation, as the case may be.
F. All shares of First Preferred Stock shall be
identical except that the Board of Directors of the
Corporation is hereby expressly authorized and empowered
to divide the First Preferred Stock into one or more
series, and, prior to the issuance of any of such shares
in any particular series, to fix and determine, in the
manner provided by law, the following provisions of such
series:
(a) The distinctive designation of such series and the
number of shares to be
included in such series;
(b) The rate of dividend, the times of payment and the date
from which the
dividends shall be accumulated;
(c) Whether shares can be redeemed and, if so, the
redemption price and the
terms and conditions of redemption;
(d) The amount payable upon shares in the event of
voluntary or involuntary
liquidation;
(e) Purchase, retirement or sinking fund provisions, if
any, for the redemption
or purchase of shares;
(f) The terms and conditions, if any, on which
shares may be converted;
(g) Whether or not shares have voting rights, and the
extent of any such
voting rights, which rights may include, without
limitation, the right to
vote generally with the Common Stock for the
election of members of the
Board of Directors and on other matters and/or the
right, either generally
or upon the occurrence of specified circumstances,
to vote specially as a
class for the election of one or more members of
the Board of Directors;
and
(h) Any other preferences, rights, restrictions and
qualifications of shares of
such class or series, permitted by law and these
Articles of Incorporation.
G. After the Board of Directors of the Corporation has
established a series in accordance with the terms of
applicable law and these Articles of Incorporation, the
Board of Directors may at any time and from time to time
increase or decrease the number of shares contained in
such series, but not below the number of shares thereof
then issued, by adopting a resolution making such change.
H. Each share of First Preferred Stock within an
individual series shall be identical in all respects with
the other shares of such series, except as to the date,
if any, from which dividends thereon shall accumulate.
5A. SERIES A FIRST PREFERRED STOCK
Designation and Amount. There shall be a series of the
First Preferred Stock designated as "Series A First
Preferred Stock". The number of shares constituting such
series shall be 30,000,000 and such series shall have the
preferences, limitations and relative rights set forth
below.
Section 1. Dividends and Distributions.
(A) Subject to the prior and superior rights of the
holders of any shares of any other series of First
Preferred Stock or any other shares of preferred stock of
the Corporation ranking prior and superior to the shares
of Series A First Preferred Stock with respect to
dividends, each holder of one one-hundredth (1/100) of a
share (a "Unit") of Series A First Preferred Stock shall
be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for
that purpose, (i) quarterly dividends payable in cash on
the first day of January, April, July, and October in
each year (each such date being a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of such
Unit of Series A First Preferred Stock, in an amount per
Unit (rounded to the nearest cent) equal to the greater
of (a) $.63 or (b) subject to the provision for
adjustment hereinafter set forth, the aggregate per share
amount of all cash dividends declared on shares of the
Common Stock of the Corporation, par value $1.00 per
share (the "Common Stock"), since the immediately
preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date,
since the first issuance of a Unit of Series A First
Preferred Stock, and (ii) subject to the provision for
adjustment hereinafter set forth, quarterly distributions
(payable in kind) on each Quarterly Dividend Payment Date
in an amount per Unit equal to the aggregate per share
amount of all non-cash dividends or other distributions
(other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common
Stock, by reclassification or otherwise) declared on
shares of Common Stock since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first
issuance of a Unit of Series A First Preferred Stock. In
the event that the Corporation shall at any time after
November 27, 1989, (the "Rights Declaration Date") (i)
declare any dividend on outstanding shares of Common
Stock payable in shares of Common Stock, (ii) subdivide
outstanding shares of Common Stock, or (iii) combine
outstanding shares of Common Stock into a smaller number
of shares, then in each such case, the amount to which
the holder of a Unit of Series A First Preferred Stock
was entitled immediately prior to such event pursuant to
the preceding sentence shall be adjusted by multiplying
such amount by a fraction, the numerator of which shall
be the number of shares of Common Stock that are
outstanding immediately after such event, and the
denominator of which shall be the number of shares of
Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or
distribution on Units of Series A First Preferred Stock
as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the shares of
Common Stock (other than a dividend payable in shares of
Common Stock); provided, however, that, in the event no
dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $.63 per Unit on the
Series A First Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment
Date.
(C) Dividends shall begin to accrue and shall be
cumulative on each outstanding Unit of Series A First
Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issuance of such Unit of
Series A First Preferred Stock, unless the date of
issuance of such Unit is prior to the record date for the
first Quarterly Dividend Payment Date, in which case,
dividends on such Unit shall begin to accrue from the
date of issuance of such Unit, or unless the date of
issuance is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of
holders of Units of Series A First Preferred Stock
entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest.
Dividends paid on Units of Series A First Preferred Stock
in an amount less than the aggregate amount of all such
dividends at the time accrued and payable on such Units
shall be allocated pro rata on a unit-by-unit basis among
all Units of Series A First Preferred Stock at the time
outstanding. The Board of Directors may fix a record
date for the determination of holders of Units of Series
A First Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record
date shall be no more than 30 days prior to the date
fixed for the payment thereof.
Section 2. Voting Rights. The holders of Units of
Series A First Preferred Stock shall have the following
voting rights:
(A) Subject to the provision for adjustment
hereinafter set forth, each Unit of Series A First
Preferred Stock shall entitle the holder thereof to one
vote on all matters submitted to a vote of the
shareholders of the Corporation. In the event the
Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on outstanding
shares of Common Stock payable in shares of Common Stock,
(ii) subdivide outstanding shares of Common Stock, or
(iii) combine the outstanding shares of Common Stock into
a smaller number of shares, then in each such case the
number of votes per Unit to which holders of Units of
Series A First Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately
after such event and the denominator of which shall be
the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the
holders of Units of Series A First Preferred Stock and
the holders of shares of Common Stock shall vote together
as one class on all matters submitted to a vote of
shareholders of the Corporation.
(C) (i) If at any time dividends on any Units of
Series A First Preferred Stock shall be in arrears in an
amount equal to six quarterly dividends thereon, then
during the period (a "default period") from the
occurrence of such event until such time as all accrued
and unpaid dividends for all previous quarterly dividend
period and for the current quarterly dividend period on
all Units of Series A First Preferred Stock then
outstanding shall have been declared and paid or set
apart for payment, all holders of Units of Series A First
Preferred Stock, voting separately as a class, shall have
the right to elect two Directors.
(ii) During any default period, such voting rights
of the holders of Units of Series A First Preferred Stock
may be exercised initially at a special meeting, called
pursuant to subparagraph (iii) of this Section 3(C) or at
any annual meeting of shareholders, and thereafter at
annual meetings of shareholders, provided that neither
such voting rights nor any right of the holders of Units
of Series A First Preferred Stock to increase, in certain
cases, the authorized number of Directors may be
exercised at any meeting unless one-third of the
outstanding Units of Series A Preferred Stock shall be
present at such meeting in person or by proxy. The
absence of a quorum of the holders of Common Stock shall
not affect the exercise by the holders of Units of Series
A First Preferred Stock of such rights. At any meeting
at which the holders of Series A First Preferred Stock
shall exercise such voting right initially during an
existing default period, they shall have the right,
voting separately as a class, to elect Directors to fill
two vacancies in the Board of Directors, if any such
vacancies may then exist, or, if such right is exercised
at an annual meeting, to elect two Directors. If the
number which may be so elected at any special meeting
does not amount to the required number, the holders of
the Series A First Preferred Stock shall have the right
to make such increase in the number of Directors as shall
be necessary to permit the election by them of the
required number. After the holders of Units of Series A
First Preferred Stock shall have exercised their right to
elect Directors during any default period, the number of
Directors shall not be increased or decreased except as
approved by a vote of the holders of Units of Series A
First Preferred Stock as herein provided or pursuant to
the rights of any equity securities ranking senior to the
Series A First Preferred Stock.
(iii) Unless the holders of Series A First
Preferred Stock shall, during an existing default period,
have previously exercised their right to elect Directors,
the Board of Directors may order, or any stockholder or
shareholders owning in the aggregate not less than two-
thirds of the total number of Units of Series A First
Preferred Stock outstanding may request in writing, the
calling of a special meeting of the holders of Units of
Series A First Preferred Stock, which meeting shall
thereupon be called by the Secretary of the Corporation.
Notice of such meeting and of any annual meeting at which
holders of Units of Series A First Preferred Stock are
entitled to vote pursuant to this paragraph (C)(iii)
shall be given to each holder of record of Units of
Series A First Preferred Stock by mailing a copy of such
notice to him at his last address as the same appears on
the books of the Corporation. Such meeting shall be
called for a time not earlier than 30 days and not later
than 50 days after such order or request or, if the
Corporation is in default of the calling of such meeting
within 50 days after such order or request, such meeting
may be called on similar notice by any stockholder or
shareholders owning in the aggregate not less than two-
thirds of the total number of outstanding Units of Series
A First Preferred Stock.
(iv) During any default period, the holders of
shares of Common Stock and Units of Series A First
Preferred Stock, and other classes or series of stock of
the Corporation, if applicable, shall continue to be
entitled to elect all the Directors until the holders of
Units of Series A First Preferred Stock shall have
exercised their right to elect two Directors voting as a
separate class, after the exercise of which right (x) the
Directors so elected by the holders of Units of Series A
First Preferred Stock shall continue in office until
their successors shall have been elected by such holders
or until the expiration of the default period, and (y)
any vacancy in the Board of Directors may (except as
provided in paragraph (C)(ii) of this Section 3) and
filled by vote of a majority of the remaining Directors
theretofore elected by the holders of the class of
capital stock which elected the Director whose office
shall have become vacant. References in this paragraph
(C) to Directors elected by the holders of a particular
class of capital stock shall include Directors elected by
such Directors to fill vacancies as provided in clause
(y) of the foregoing sentence.
(v) Immediately upon the expiration of a default
period, (x) the right of the holders of Units of Series A
First Preferred Stock as a separate class to elect
Directors shall cease, (y) the term of any Directors
elected by the holders of Units of Series A First
Preferred Stock as a separate class shall terminate, and
(z) the number of Directors shall be such number as may
be provided for in the Articles or By-Laws irrespective
of any increase made pursuant to the provisions of
paragraph (C)(ii) of this Section 3 (such number being
subject, however, to change thereafter in any manner
provided by law or in the Articles or By-Laws). Any
vacancies in the Board of Directors effected by the
provisions of clauses (y) and (z) in the preceding
sentence may be filled by a majority of the remaining
Directors.
(vi) The provisions of this paragraph (C) shall
govern the election of Directors by holders of Units of
Series A First Preferred Stock during any default period
notwithstanding any provisions of the Articles to the
contrary.
(D) Except as set forth herein, holders of Units of
Series A First Preferred Stock shall have no special
voting rights and their consent shall not be required
(except to the extent they are entitled to vote with
holders of Shares of Common Stock as set forth herein)
for taking any corporate action.
Section 3. Certain Restrictions.
(A) Until all accrued and unpaid dividends and
distributions, whether or not declared, on outstanding
Units of Series A First Preferred Stock shall have been
paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise
acquire for consideration any shares of junior stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of parity stock, except
dividends paid ratably on Units of Series A First
Preferred Stock and shares of all such parity stock on
which dividends are payable or in arrears in proportion
to the total amounts to which the holders of such Units
and all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any parity stock, provided,
however, that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such parity
stock in exchange for shares of any junior stock;
(iv) purchase or otherwise acquire for
consideration any Units of Series A First Preferred
Stock, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of
Directors) to all holders of such Units.
(B) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation
unless the Corporation could, under paragraph (A) of this
Section 4, purchase or otherwise acquire such shares at
such time and in such manner.
Section 4. Reacquired Shares. Any Units of Series A
First Preferred Stock purchased or otherwise acquired by
the Corporation in any manner whatsoever shall become
Treasury shares.
Section 5. Liquidation, Dissolution or Winding Up.
(A) Upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, no
distributions shall be made (i) to the holders of shares
of junior stock unless the holders of Units of Series A
First Preferred Stock shall have received, subject to
adjustment as hereinafter provided in paragraph (B), the
greater of either (a) $.01 per Unit plus an amount equal
to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such
payment, or (b) an amount per unit equal to the aggregate
per share amount to be distributed to holders of shares
of Common Stock or (ii) to the holders of shares of
parity stock, unless simultaneously therewith
distributions are made ratably on Units of Series A First
Preferred Stock and all other shares of such parity stock
in proportion to the total amounts to which the holders
of Units of Series A First Preferred Stock are entitled
under clause (i)(a) of this sentence and to which the
holders of shares of such parity stock are entitled, in
each case, upon such liquidation, dissolution or winding
up.
(B) In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any
dividend on outstanding shares of Common Stock payable in
shares of Common Stock, (ii) subdivide outstanding shares
of Common Stock, or (iii) combine outstanding shares of
Common Stock into a smaller number of shares, then in
each such case, the aggregate amount to which holders of
Units of Series A First Preferred Stock were entitled
immediately prior to such event pursuant to clause (i)(b)
of paragraph (A) of this Section 6 shall be adjusted by
multiplying such amount by a fraction, the numerator of
which shall be the number of shares of Common Stock that
are outstanding immediately after such event, and the
denominator of which shall be the number of shares of
Common Stock that were outstanding immediately prior to
such event.
Section 6. Consolidation, Merger, etc. In case the
Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of
Common Stock are exchanged for or converted into other
stock or securities, cash and/or any other property, then
in any such case, Units of Series A First Preferred Stock
shall at the same time be similarly exchanged for or
converted into an amount per Unit (subject to the
provision for adjustment hereinafter set forth) equal to
the aggregate amount of stock, securities, cash and/or
any other property (payable in kind), as the case may be,
into which or for which each share of Common Stock is
converted or exchanged. In the event the Corporation
shall at any time after the Rights Declaration Date (i)
declare any dividend on outstanding shares of Common
Stock payable in shares of Common Stock, (ii) subdivide
outstanding shares of Common Stock, or (iii) combine
outstanding shares of Common Stock into a smaller number
of shares, then in each such case, the amount set forth
in the immediately preceding sentence with respect to the
exchange or conversion of Units of Series A First
Preferred Stock shall be adjusted by multiplying such
amount by a fraction, the numerator of which shall be the
number of shares of Common Stock that are outstanding
immediately after such event, and the denominator of
which shall be the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. Redemption. The units of Series A First
Preferred Stock shall not be redeemable.
Section 8. Ranking. The Units of Series A First
Preferred Stock shall rank junior to all other series of
the Preferred Stock and to any other class of preferred
stock that hereafter may be issued by the Corporation as
to the payment of dividends and the distribution of
assets, unless the terms of any such series or class
shall provide otherwise.
Section 9. Amendment. The Articles shall not
hereafter be amended, either directly or indirectly, or
through merger or consolidation with another corporation,
in any manner that would alter or change the powers,
preferences or special rights of the Series A First
Preferred Stock so as to affect them adversely without
the affirmative vote of the holders of a majority or more
of the outstanding Units of Series A First Preferred
Stock, voting separately as a class.
Section 10. Fractional Shares. The Series A First
Preferred Stock may be issued in Units or other fractions
of a share, which Units or fractions shall entitle the
holder, in proportion to such holder's fractional shares,
to exercise voting rights, receive dividends, participate
in distributions, and to have the benefit of all other
rights of holders of Series A First Preferred Stock.
Section 11. Certain Definitions. As used herein with
respect to the Series A First Preferred Stock, the
following terms shall have the following meanings:
(A) The term "junior stock" (i) as used in Section 4,
shall mean the Common Stock and any other class or series
of capital stock of the Corporation hereafter authorized
or issued over which the Series A First Preferred Stock
has preference or priority as to the payment of
dividends, and (ii) as used in Section 6, shall mean the
Common Stock and any other class or series of capital
stock of the Corporation over which the Series A First
Preferred Stock has preference or priority in the
distribution of assets on any liquidation, dissolution or
winding up of the Corporation.
(B) The term "parity stock" (i) as used in Section 4,
shall mean any class or series of stock of the
Corporation hereafter authorized or issued ranking pari
passu with the Series A First Preferred Stock as to
dividends, and (ii) as used in Section 6, shall mean any
class or series of stock of the Corporation ranking pari
passu with the Series A First Preferred Stock in the
distribution of assets on any liquidation, dissolution or
winding up.
5B. TREASURY STOCK
Shares of stock of the Corporation which have been
issued, have been subsequently acquired by and belong to
the Corporation and have not been canceled, shall be
designated treasury shares, and shall be deemed to be
issued but not outstanding.
6.
No holder of shares of stock of the Corporation of any
class shall have or be entitled to any preemptive rights
to subscribe for or to purchase any shares or other
securities issued by the Corporation.
7.
Subject to the provisions of the Georgia Business
Corporation Code, the Board of Directors shall have the
power to distribute a portion of the assets of the
Corporation, in cash or in property, to holders of shares
of the Corporation out of the capital surplus of the
Corporation.
8.
The Corporation shall have the full power to purchase
and otherwise acquire, and dispose of, its own shares and
securities granted by the laws of the State of Georgia
and shall have the right to purchase its shares out of
its unreserved and unrestricted capital surplus available
therefor as well as out of its unreserved and
unrestricted earned surplus available therefor.
9.
The Corporation shall not commence business until it
shall have received not less than $500 in payment for the
issuance of its shares.
10.
I. As used in this Article 10, the term:
(1) "Affiliate" means a person that directly, or
indirectly through one or more intermediaries,
controls, or is controlled by, or is under common
control with, a specified person.
(2) "Announcement date" means the date of the
first general public announcement of the proposal
of the business combination.
(3) "Associate," when used to indicate a
relationship with any person, means:
(A) Any corporation or organization, other
than the corporation or a subsidiary of the
corporation, of which such person is an
officer, director, or partner or is the
beneficial owner of l0 percent or more of any
class of equity securities;
(B) Any trust or other estate in which such
person has a beneficial interest of 10 percent
or more, or as to which such person serves as
trustee or in a similar fiduciary capacity;
and
(C) Any relative or spouse of such person, or
any relative of such spouse, who has the same
home as such person.
(4) "Beneficial owner" -- a person shall be
considered to be the beneficial owner of any
equity securities:
(A) Which such person or any of such person's
affiliates or associates owns, directly or
indirectly;
(B) Which such person or any of such person's
affiliates or associates, directly or
indirectly, has:
(i) The right to acquire, whether such
right is exercisable immediately or only
after the passage of time, pursuant to any
agreement, arrangement, or understanding or
upon the exercise of conversion rights,
exchange rights, warrants or options, or
otherwise; or
(ii) The right to vote pursuant to any
agreement, arrangement, or understanding;
or
(C) Which are owned, directly or indirectly,
by any other person with which such person or
any of such person's affiliates or associates
has any agreement, arrangement, or
understanding for the purpose of acquiring,
holding, voting, or disposing of equity
securities.
(5) "Business combination" means:
(A) Any merger of the corporation or any
subsidiary with (i) any interested shareholder
or (ii) any other corporation, whether or not
itself an interested shareholder, which is, or
after the merger would be, an affiliate of an
interested shareholder that was an interested
shareholder prior to the consummation of the
transaction;
(B) Any share exchange with (i) any interested
shareholder or (ii) any other corporation,
whether or not itself an interested
shareholder, which is, or after the share
exchange would be, an affiliate of an
interested shareholder that was an interested
shareholder prior to the consummation of the
transaction;
(C) Any sale, lease, transfer, or other
disposition, other than in the ordinary
course of business, in one transaction or in a
series of transactions in any 12 month period,
to any interested shareholder or any affiliate
of any interested shareholder, other than the
corporation or any of its subsidiaries, of any
assets of the corporation or any subsidiary
having, measured at the time the transaction
or transactions are approved by the board of
directors of the corporation, an aggregate
book value as of the end of the corporation's
most recently ended fiscal quarter of 10
percent or more of the net assets of the
corporation as of the end of such fiscal
quarter;
(D) The issuance or transfer by the
corporation, or any subsidiary, in one
transaction or a series of transactions in any
12 month period, of any equity securities of
the corporation or any subsidiary which have
an aggregate market value of 5 percent or more
of the total market value of the outstanding
common and preferred shares of the corporation
whose shares are being issued, to any
interested shareholder or any affiliate of any
interested shareholder, other than the
corporation or any of its subsidiaries, except
pursuant to the exercise of warrants or rights
to purchase securities offered pro rata to all
holders of the corporation's voting shares or
any other method affording substantially
proportionate treatment to the holders of
voting shares;
(E) The adoption of any plan or proposal for
the liquidation or dissolution of the
corporation in which anything other than cash
will be received by an interested shareholder
or an affiliate of any interested shareholder;
or
(F) Any reclassification of securities,
including any reverse stock split, or
recapitalization of the corporation, or any
merger of the corporation with any of its
subsidiaries, or any share exchange with any
of its subsidiaries, which has the effect,
directly or indirectly, in one transaction or
a series of transactions in any 12 month
period, of increasing by 5 percent or more the
proportionate amount of the outstanding shares
of any class or series of equity securities of
the corporation or any subsidiary which is
directly or indirectly beneficially owned by
any interested shareholder or any affiliate of
any interested shareholder.
(6) "Continuing director" means any member of the
board of directors who is not an affiliate or
associate of an interested shareholder or any of
its affiliates, other than the corporation or any
of its subsidiaries, and who was a director of
the corporation prior to the determination date,
and any successor to such continuing director who
is not an affiliate or an associate of an
interested shareholder or any of its affiliates,
other than the corporation or its subsidiaries,
and is recommended or elected by a majority of
all of the continuing directors.
(7) "Control," including the terms "controlling,"
"controlled by," and "under common control with,"
means the possession, directly or indirectly, of
the power to direct or cause the direction of the
management and policies of a person, whether
through the ownership of voting securities, by
contract, or otherwise, and the beneficial
ownership of shares representing 10 percent or
more of the votes entitled to be cast by a
corporation's voting shares shall create an
irrebuttable presumption of control.
(8) "Corporation," in addition to the definition
contained in Georgia Business Corporation Code
Section 14-2-140, shall include any trust merging
with a domestic corporation pursuant to Georgia
Business Corporation Code Section 53-12-59.
(9) "Determination date" means the date on which
an interested shareholder first became an
interested shareholder.
(10) "Fair market value" means:
(A) In the case of securities, the highest
closing sale price, during the period
beginning with and including the
determination date and for 29 days prior to
such date, of such a security on the
principal United States securities exchange
registered under the Securities Exchange Act
of 1934 on which such securities are listed,
or, if such securities are not listed on any
such exchange, the highest closing sales
price or, if none is available, the average
of the highest bid and asked prices reported
with respect to such a security, in each case
during the 30 day period referred to above,
on the National Association of Securities
Dealers, Inc., Automatic Quotation System, or
any system then in use, or, if no such
quotations are available, the fair market
value on the date in question of such a
security as determined in good faith at a
duly called meeting of the board of directors
by a majority of all of the continuing
directors, or, if there are no continuing
directors, by the entire board of directors;
and
(B) In the case of property other than
securities, the fair market value of such
property on the date in question as
determined in good faith at a duly called
meeting of the board of directors by a
majority of all of the continuing directors,
or, if there are no continuing directors, by
the entire board of directors of the
corporation.
(11) "Interested shareholder" means any person,
other than the corporation or its subsidiaries,
that:
(A) Is the beneficial owner of 10 percent or
more of the voting power of the outstanding
voting shares of the corporation; or
(B) Is an affiliate of
the corporation and, at any time within the
two-year period immediately prior to the date
in question, was the beneficial owner of 10
percent or more of the voting power of the
then outstanding voting shares of the
corporation.
For the purpose of determining whether a
person is an interested shareholder, the
number of voting shares deemed to be
outstanding shall not include any unissued
voting shares which may be issuable pursuant
to any agreement, arrangement, or
understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
(12) "Net assets" means the amount by which the
total assets of the corporation exceed the total
debts of the corporation.
(13) "Voting shares" means shares entitled to
vote generally in the election of directors.
11.
No director of the Corporation shall be liable to the
Corporation or its shareholders for monetary damages for
any action taken, or any failure to take any action, as a
director, except for liability (i) for any appropriation,
in violation of his or her duties, of any business
opportunity of the Corporation, (ii) for acts or
omissions which involve intentional misconduct or a
knowing violation of law, (iii) for the types of
liability set forth in Section 14-2-832 of the Georgia
Business Corporation Code, or (iv) for any transaction
from which the director received an improper personal
benefit.
H:\admin\articles.doc
BELLSOUTH CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
BELLSOUTH CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
TABLE OF CONTENTS
SECTION 1. STATEMENT OF PURPOSE 1
SECTION 2. DEFINITIONS 1
ACTIVE SERVICE 1
ADEA 1
AFFILIATE 1
BELLSOUTH CORPORATION 1
CHAIRMAN OF THE BOARD 1
PRESIDENT 1
BOARD OF DIRECTORS 1
BOARD 1
CLAIM REVIEW COMMITTEE 1
CODE 1
COMMITTEE 1
EXECUTIVE 1
FORMER AFFILIATE 2
INCLUDED EARNINGS 2
INTERCHANGE COMPANY 2
INTERCHANGE COMPANY COMMITTEE 2
LUMP SUM PAYMENTS 2
MANDATORY RETIREMENT AGE 2
NET CREDITED SERVICE 2
PARTICIPANTS 2
PARTICIPATING COMPANY 2
PARTICIPATING COMPANY CLAIM REVIEW COMMITTEE 2
PARTICIPATING COMPANY COMMITTEE 2
PENSION ACT 2
PENSION COMMENCEMENT DATE 3
PENSION PLAN 3
PLAN 3
PREDECESSOR PLAN 3
SHORT TERM INCENTIVE AWARD 3
STANDARD ANNUAL INCENTIVE AWARD 3
STANDARD SHORT TERM INCENTIVE AWARD 3
STANDARD AWARD 3
VESTING SERVICE CREDIT 3
SECTION 3. ADMINISTRATION 3
SECTION 4. BENEFITS 4
PARTICIPATION 4
MANDATORY RETIREMENT AGE 5
ELIGIBILITY 5
BENEFIT AMOUNTS 6
MONTHLY PAYMENTS 12
DURATION OF PAYMENTS 12
TREATMENT DURING SUBSEQUENT EMPLOYMENT 12
SECTION 5. DEATH BENEFITS 13
ELIGIBILITY AND ADMINISTRATION 13
SOURCE OF PAYMENTS 13
SECTION 6. GENERAL PROVISIONS 13
EFFECTIVE DATE 13
RIGHTS TO BENEFIT 13
INVOLUNTARY TERMINATION 14
GOVERNING LAW 14
ASSIGNMENT OR ALIENATION 14
DETERMINATION OF ELIGIBILITY 15
OPTION DURING DISABILITY 15
BREAK IN SERVICE 15
LEAVES OF ABSENCE 15
SPECIAL CLASSIFICATION 15
METHOD OF PAYMENT 15
AMOUNTS ACCRUED PRIOR TO DEATH 15
PAYMENTS TO OTHERS 15
CLAIMS RELEASE 15
DAMAGE CLAIMS OR SUITS 16
JUDGMENT OR SETTLEMENT 16
PAYMENT UNDER LAW 16
PLAN TERMINATION 17
SECTION 7. INTERCHANGE OF BENEFIT OBLIGATION 17
SECTION 8. PLAN MODIFICATION 17
BELLSOUTH CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
SECTION 1. STATEMENT OF PURPOSE
The purpose of the BellSouth Corporation Supplemental Executive
Retirement Plan is to provide supplementary pension payments,
commencing January 1, 1984, to Executives and certain other
employees of BellSouth Corporation and certain subsidiaries of
BellSouth Corporation, hereinafter referred to as Participants,
who retire or terminate from service, or in the event of death,
to their annuitant. These pension and death benefits are
predicated on a percent of the Participant's Included Earnings,
offset by retirement benefits payable from the Pension Plan and
actual Primary Social Security benefits.
SECTION 2. DEFINITIONS
1. The term "Active Service" shall mean active employment but
includes any time the Participant was absent on account of
disability and receiving sickness or accident disability
benefits under his or her Company's or any Participating
Company's Sickness and Accident Disability Plan.
2. The term "ADEA" shall mean the Age Discrimination in
Employment Act of 1967, as amended from time to time.
3. The word "Affiliate" shall mean any corporation, other than
BellSouth Corporation (or a Participating Company), which is
a member of the same controlled group of corporations
(within the meaning of Code Section 414(b)) as BellSouth
Corporation and any trade or business (whether or not
incorporated) which is under common control with BellSouth
Corporation within the meaning of Code Section 414(c).
4. The words "BellSouth Corporation" and "Company" shall mean
BellSouth Corporation, a Georgia corporation, or its
successors.
5. The words "Chairman of the Board", "President" and "Board of
Directors" or "Board" shall mean the Chairman of the Board
of Directors, President and Board of Directors,
respectively, of the Company.
6. The term "Claim Review Committee" shall have the same
meaning as is attributed to such term under the Pension
Plan.
7. The word "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
8. The word "Committee" shall mean the Employees' Benefit
Committee appointed by the Company to administer the Pension
Plan.
9. The term "Executive" shall mean an employee on the active
roll of any Participating Company on or after January 1,
1984 who holds a position that a Participating Company's
Board of Directors has designated to be within that
company's executive compensation group.
10. The term "Former Affiliate" shall have the same meaning as
is attributed to such term under the Pension Plan.
11. The term "Included Earnings" shall have the meaning ascribed
to such term in Section 4.4(a)(ii) of this Plan.
12. The term "Interchange Company" shall have the same meaning
as is attributed to such term under the Pension Plan.
13. The term "Interchange Company Committee" shall mean the
Employees' Benefit Committee appointed by the Interchange
Company to administer the Interchange Company Management
Pension Plan.
14. The term "Lump Sum Payments" shall mean those lump sum
payments and other special payments paid annually to a
Participant other than an Executive which are included in
the calculation of pension benefits under the Pension Plan.
15. The term "Mandatory Retirement Age" shall have the same meaning as is
#attributed to such term under the Pension Plan. #
16. The term "Net Credited Service", except as expressly limited or
otherwise provided %
in this Plan, shall have the same meaning as is attributed to such
term under the
Pension Plan and shall be interpreted in the same manner as that term
is interpreted % for purposes of the Pension Plan.
17. The term "Participants" shall mean all Executives as defined herein,
as well as all
other employees designated by the Chief Executive Officer of BellSouth
Corporation * or his or her delegated representative. *
18. The term "Participating Company" shall mean BellSouth
Corporation, and each subsidiary of BellSouth Corporation
which shall have determined with the concurrence of the
Committee to participate in the Plan.
19. The term "Participating Company Claim Review Committee"
shall mean a committee appointed by a Participating Company,
other than BellSouth Corporation, having the powers and
authorities of the Claim Review Committee with respect to
Participants from such Participating Company.
20. The term "Participating Company Committee" shall mean the
Employees' Benefit Committee appointed by each Participating
Company, other than BellSouth Corporation, to administer the
Pension Plan in such Participating Company in accordance
with the provisions of Section 3.
21. The words "Pension Act" shall mean the Employee Retirement
Income Security Act of 1974 (ERISA) as it may be amended
from time to time.
*Text Revised 04/11/86
#Text Revised 08/12/88
%Text Added 11/28/94
22. The term "Pension Commencement Date" shall have the
same meaning as is *
attributed to such term under the Pension Plan. *
23. The term "Pension Plan" shall mean the BellSouth Personal
Retirement Account Pension Plan.
24. The word "Plan" shall mean this BellSouth Corporation
Supplemental Executive Retirement Plan.
25. The term "Predecessor Plan" shall mean the Bell System
Senior Management Non Qualified Pension Plan as such Plan
existed prior to January 1, 1984.
26. The term "Short Term Incentive Award" shall mean the award
made annually to an Executive pursuant to his or her
company's Short Term Incentive Plan or comparable or
successor plan.
27. The term "Standard Annual Incentive Award" shall mean an
amount determined periodically for each Participant (other
than an Executive) upon which an actual annual team award,
or award under a comparable or successor program, is based.
28. The terms "Standard Short Term Incentive Award" and
"Standard Award" shall mean an amount determined
periodically for each Executive upon which an actual Short
Term Incentive Award is based.
29. The term "Vesting Service Credit", except as expressly
limited or otherwise provided *
in this Plan, shall have the same meaning as is attributed
to such term under the
Pension Plan and shall be interpreted in the same manner as
that term is interpreted *
for purposes of the Pension Plan.
30. The use in this Plan of personal pronouns of the masculine
gender is intended to include both the masculine and
feminine genders.
SECTION 3. ADMINISTRATION
1. The Company shall be the Plan Administrator and the Plan
Sponsor of the Plan as those terms are defined in the
Pension Act. The Company may allocate all or any part of
its responsibilities for the operation and administration of
the Plan, except to the extent expressly prohibited by the
Plan's terms, including allocation of all or any part of its
responsibilities to Participating Companies, Participating
Company Committees or Participating Company Claim Review
Committees. The Company may designate in writing other
persons to carry out its responsibilities under the Plan,
and may employ persons to advise it with regard to such
responsibilities. The Company, acting through the
Committee, the Claim Review Committee, a Participating
Company, a Participating Company Committee, a Participating
Company Claim Review
*Text Added 11/28/94
Committee or any other person designated by the Company, as
applicable, shall have the exclusive responsibility and
complete discretionary authority to interpret the terms of
the Plan (including the power to construe ambiguous or
uncertain terms), to control the operation and
administration of the Plan and to resolve all questions in
connection therewith, with all powers necessary to enable it
to properly carry out such responsibilities, including
without limitation the powers and responsibilities set forth
in this Section 3, and its determinations shall be final,
conclusive and binding on all persons.
2. (a) The procedures for the adoption of by-laws, and
rules of procedure, for the employment of a Secretary
and assistants, and for the appointment of
Participating Company Committees with authority with
respect to claims of employees, both within the Company
and the Participating Companies, shall be the same as
are set forth in the Pension Plan.
(b) The Committee and each Participating Company
Committee shall have the power to determine status,
coverage, eligibility for and the amount of benefits
under the Plan and all questions arising in connection
therewith, to grant or deny claims for benefits under
the Plan with respect to employees of each
Participating Company, respectively, and shall have the
power to authorize disbursements according to this
Plan. Adequate notice, pursuant to applicable law and
prescribed Participating Company practices, shall be
provided in writing to any Participant or beneficiary
whose claim has been denied, setting forth the specific
reasons for such denial.
3. The review and appeal procedures for Participants and
beneficiaries whose claims have been denied shall be the
procedures set forth in the summary plan description for
Pension Plan and shall be administered and interpreted in
accordance with Section 503 of the Pension Act and
procedures in effect under the Pension Plan.
4. The expenses of the Committee in administering the Plan
shall be borne by the Company and the expenses of each
Participating Company Committee shall be borne by the
related Participating Company.
5. The Company, the Committee, each Participating Company and
each Participating Company Committee are each a named
fiduciary as that term is used in the Pension Act with
respect to the particular duties and responsibilities herein
provided to be allocated to each of them.
6. Any person or group of persons may serve in more than one
fiduciary capacity with respect to the Plan.
SECTION 4. BENEFITS
1. Participation
All persons included in the definition of the term "Participants"
are deemed participants in this Plan. In addition, each
individual who has participated in this Plan but who has ceased
to be included in the definition of "Participants", whether due
to demotion, termination or otherwise, shall continue to be a
Participant in this Plan, except for purposes of accruing
additional benefits
under Section 4.4, and shall be entitled to a benefit under this
Plan if, at the time such individual ceased to be included in the
definition of "Participants", he or she had satisfied the service
requirements for a deferred vested pension under the Pension
Plan. Each such individual shall receive a benefit under the
terms of the Plan as in effect immediately prior to the effective
date of such demotion, termination or other event, the amount of
such benefit to be calculated as if the individual retired (or
otherwise terminated employment) on such date, it being the
Company's intent that any such demotion, termination or other
event removing individuals from the definition of "Participants"
shall not adversely affect entitlement to such benefits.
2. Mandatory Retirement Age
Each Participant, whether or not eligible for benefits under this
Plan, shall cease to be eligible for continued employment no
later than the last day of the month in which such Participant
attains the Mandatory Retirement Age.
3. Eligibility
(a) Service Benefit
An individual who is both a Participant in this Plan
and who is eligible for a service pension pursuant to
the terms of the Pension Plan at the time of employment
termination is eligible for a service benefit pursuant
to this Plan, which shall commence immediately
following his or her retirement. Additionally, *
each Participant who has attained age 62 or older and
whose Net Credited Service
is ten years or more at the time of employment
termination is eligible for a
service benefit under this Plan. For purposes of the
preceding sentence, "Net
Credited Service" shall include only the portion of a
Participant's Net Credited
Service as is attributable to service with the Company,
a Participating Company,
or other Affiliates. *
Each Participant, other than an Executive, whose
employment terminates between #
October 1, 1992 and December 31, 1995, inclusive, is
also eligible for a service
benefit under this Plan, if at the time of employment
termination (A) plus (B)
equals or exceeds sixty-five (65), where (A) is the
Participant's attained age as of
his or her most recent birthday and (B) is the number
of full years of the #
Participant's Net Credited Service; provided, however,
that with respect to any %
such Participant who is employed by BellSouth
Telecommunications, Inc. at the
time of employment termination, "December 31, 1997"
shall be substituted for
"December 31, 1995" where such date appears above. %
(b) Deferred Benefit
(i) Except as otherwise specified in
Paragraph 7 of this Section 4, any individual not
described in Paragraph 3(a)of this Section 4 who
is a Participant in this Plan at the time of
voluntary employment termination is eligible for a
deferred vested pension pursuant to this Plan,
provided he is eligible for a deferred vested
pension pursuant to the Pension Plan.
*Text Added 05/25/90
#Text Added 10/01/92
%Text Added 05/15/95
(ii) A Participant who leaves the service of
a Participating Company and who has elected to
have his or her deferred vested pension payable
early in reduced amounts, pursuant to the terms
and conditions of the Pension Plan, shall be
deemed to have elected to have his or her deferred
benefit under this Plan payable early in reduced
amounts under the same terms and conditions. In
the event of such an election, the amount of
deferred benefit otherwise payable at Mandatory
Retirement Age under this Plan to such person
shall be reduced in accordance with the same
formula set forth in the Pension Plan for the
discounting of the deferred vested pension.
(iii)The Committee or Participating Company
Committee, as appropriate, shall notify each
Participant who leaves the employ of such
Participating Company (except to take employment
without a break in service with another
Participating Company, Affiliate or Interchange
Company) of his or her eligibility, if any, for a
deferred benefit by mailing, within a reasonable
time after his or her leaving, a notice to his or
her last known address as shown on the
Participating Company's records.
(iv) When an eligible individual has filed a
written request for a deferred vested pension
pursuant to the requirements of the Pension Plan,
he shall be deemed to have filed a request for the
deferred benefit for which he may be eligible
hereunder.
(c) Disability Pension
An individual who while a Participant in this Plan
has become eligible for a disability pension pursuant
to the terms of the Pension Plan shall be eligible for
a disability pension hereunder, calculated as follows:
the amount is determined in accordance with Paragraph 4
of this Section 4 calculated to one year after date of
disability (pro-rata if less than 20 years of service)
with no reduction factor. Should the disability
pension be discontinued pursuant to the terms of the
Pension Plan, the disability pension hereunder shall be
discontinued as well.
4. Benefit Amounts
(a) Computation of Benefit
(i) (A) Benefit Formula:
The aggregate annual benefit of each
Participant payable as provided in *
the Plan shall be determined by adding
the sum of two percent (2%) of
Included Earnings for each year of the
Participant's Vesting Service Credit
for the first twenty years, plus one and
one-half percent (1.5%) of Included
Earnings for each year of the
Participant's Vesting Service Credit for the
next ten years, plus one percent (1%) of
Included Earnings for each year
of the Participant's Vesting Service
Credit for each additional year up to
the month in which the Participant
retires less (1) 100% of the retirement *
benefit (unreduced for survivor annuity)
payable from the Pension Plan
and (2) 100% of the Primary Social
Security benefit payable at age
65. There is no reduction in the
amount of this benefit in connection #
with electing a post-retirement survivor
annuity under the Pension Plan. *
*Text Revised 9/23/91
#Text Revised 5/24/91
(B) Special Rules
(1) In the case of each Participant who
elects under the terms of the Pension #
Plan to receive his retirement benefit under
the Pension Plan in the form of
a single lump sum payment, the benefit
reduction to be applied pursuant to
Section 4.4(a)(i)(A)(1) above for the
retirement benefit payable from the
Pension Plan shall be the total amount of the
retirement benefit (unreduced
for survivor annuity) which would have been
payable to such individual
from the Pension Plan had such election not
been made. #
(2) In the case of each Participant who is
eligible for a service pension %
under the Pension Plan, the benefit reduction
to be applied pursuant to Section
4.4(a)(i)(A)(1) above for the retirement
benefit payable from the Pension
Plan shall be the amount of such benefit
payable at such Participant's
Pension Commencement Date and shall first be
applied at such Pension
Commencement Date.
(3) In the case of each Participant who is
not eligible for a service pension
under the Pension Plan, the benefit reduction
to be applied pursuant to
Section 4.4(a)(i)(A)(1) above for the
retirement benefit payable from the
Pension Plan shall be the amount of the
deferred vested pension payable
from the Pension Plan at age 65 and shall
first be applied in the month
commencing on or next following his or her
sixty-fifth birthday (regardless
of the Participant's actual Pension
Commencement Date under the Pension
Plan). %
(4) In the case of any Executive (i) who has
attained the age of sixty-two *
(62) (or more) or who is deceased, (ii) who
was previously employed by a
Former Affiliate, (iii) who serves or has
served as an officer (as such term is
used in the employment practices and policies
of the relevant company) of
BellSouth Corporation or an Affiliate, and
(iv) whose service with a Former
Affiliate is disregarded in determining the
Executive's Vesting Service
Credit under the Pension Plan, for purposes
of this Section 4.4(a), the
Executive's Vesting Service Credit shall be
increased by
(x) the Executive's Vesting Service
Credit with the Former Affiliate(s)
(determined under the rules of the
Pension Plan as if the Executive had
been employed by BellSouth Corporation
during such period and had
no other service covered under the
Pension Plan), multiplied by
(y) a fraction, the numerator of which
is the number of whole years
(not to (not to exceed ten (10) of such
Executive's Net Credited Service
as an officer of BellSouth Corporation
or an Affiliate and the
denominator of which is ten (10).
#Text Revised 5/24/91
*Text Added 9/23/91
%Text Revised 11/28/94
Notwithstanding the foregoing, no Executive's
Vesting Service Credit, for
purposes of this Section 4.4(a), shall be
increased for service with a Former
Affiliate to the extent that any such service
would otherwise be considered,
directly or indirectly, in determining such
Executive's benefits under this Plan
by virtue of the terms of any other agreement,
plan or arrangement. *
(5) In the case of any Participant whose Vesting
Service Credit includes a % period of service with an
employer with respect to which the Participant is
entitled to any retirement benefit payable from
defined benefit pension
plan(s ) (including qualified plans and
nonqualified plans such as excess
benefit and supplemental executive retirement
plans), including any
Executive whose Vesting Service Credit under this
Plan is increased
pursuant to Section 4.4(a)(i)(B)(4) preceding, the
benefit reduction
described in Section 4.4(a)(i)(A)(1) above for the
retirement benefit
payable from the Pension Plan shall include any
such retirement benefit
payable by such employer. The determination of
the benefit reduction for
any such benefit shall be made using approaches
which approximate as
nearly as practicable the approaches used in
making such determinations
with respect to benefits payable under the Pension
Plan, as described above
in this Section 4.4(a)(i). In the case of any
Executive whose Vesting
Service Credit under this Plan is increased
pursuant to paragraph (B)(4) of %
Section 4.4(a)(i), the benefit payable by such
employer shall first be multiplied by the fraction
described in that paragraph and the product thereof
shall be the amount of the benefit reduction.
(ii) Included Earnings
Included Earnings shall equal the 12 month average of the
sum of (1) the last %
sixty months of base pay, plus (2) the Short Term Incentive
Awards and Lump %
Sum Payments payable during or after that sixty month
period. The Short Term
Incentive Awards and Lump Sum Payments referred to in the
preceding sentence
are such amounts as would have been paid during and after
the applicable sixty
month period if paid at the regularly scheduled time for
payment of such
amounts, disregarding any temporary variations in the timing
of payment of such
amounts. In the calculation of benefits as of December 31,
1990 in accordance with the #
BellSouth Corporation Voluntary Enhanced Early Retirement
Program, Included
Earnings for a Participant other than an Executive shall
include the standard
MTIA amount for which the Participant was eligible in 1990.
#
The amounts of base pay and other payments used to determine
Included Earnings as described above include all amounts
during the specified period including those amounts
previously deferred pursuant to other plans.
* Text Added 9/23/91
# Text Added 12/1/90
%Text Revised 11/28/94
If a Participant terminates employment eligible for a benefit under
this Plan and % thereafter receives compensation of the types
described in clause (ii)(2) of this % Section 4.4(a), the
additional Included Earnings shall be deemed to have been
paid as of the date the Participant terminated employment, and the
amount of benefit shall be corrected accordingly.
(iii) Alternative VEER Benefit Formula #
(1) In accordance with the BellSouth Corporation
Voluntary Enhanced Early
Retirement Program (VEER) effective December 1,
1990, in the case of each
Participant who, on December 31, 1990, was a
regular, full-time actively
employee, at work (or on a departmental leave not
exceeding thirty days), having
five or more years of service (as such term was
defined in the Pension Plan at that
time), the benefit determined under the benefit
formula described in Paragraph
4(a)(i) of this Section 4, prior to reduction for
the retirement benefit payable from
the Pension Plan and the Primary Social Security
Benefit, shall be the greater of
(A) and (B), where:
(A) is such benefit calculated as of
December 31, 1990 (i) adding five
years to the Participant's age and Vesting Service
Credit and (ii) if the
Participant has a term of employment of thirty or
more years as of such
date (excluding the years added in (a)(i) above),
disregarding any
otherwise applicable age discounts; and (B) is
such benefit calculated
without giving effect to the terms of clause (A).
(2) For purposes of calculating a
Participant's benefit under this Plan
as of December 31, 1990 under clause (A) of
Paragraph 4(a)(iii)(1) above:
(A) the five years added under clause (A)(i) of
Paragraph (4)(a)(iii)(1)
shall not be counted in determining a
Participant's eligibility for a service benefit
under Section 4.3(a) of this Plan;
(B) the five years of age added under clause
(A)(i) of Paragraph
(4)(a)(iii)(1) shall be counted in applying the
early retirement discount
rules described in Paragraph (4)(c) of this
Section 4, with respect to
each Participant who is eligible for a service
pension under the Pension
Plan on December 31, 1990;
(C) if the Participant becomes eligible for a
service pension under the
Pension Plan during the five year period beginning
on January 1, 1991,
and retires after becoming service pension
eligible, the early retirement
discount rules described in Paragraph 4(c) of this
Section 4, applicable
to Participants retiring eligible for a service
benefit in 1990, shall apply
(on the basis of the Participant's age on December
31, 1990, counting the
five years of age added under clause (A)(i)
of Paragraph 4(a)(iii)(1));
and
(D) the reduction in the benefit under
Section 4(a)(i)(A) for the retirement
benefit payable from the Pension Plan shall
be an amount equal to the
greater of (i) 100% of the retirement benefit
(unreduced for survivor
annuity) actually payable from the Pension
Plan, and (ii) 100% of the
%Text Revised 11/28/94
#Text Added 12/1/90
retirement benefit (unreduced for survivor
annuity) which would be
payable from the Pension Plan if the
additional years of age and service in
the Pension Plan amendments made in
connection with VEER were
applicable to the alternative pension benefit
formula under the Pension
Plan (described on pages 14 and 15 of the
summary plan description for
the Pension Plan dated June 1990) taking into
account all rules applicable
to that formula under the Pension Plan.
(3) A Participant who is on a rotational assignment
with Bellcore on December
31,1990, but who is otherwise eligible to have his
or her pension calculated
in accordance with this Section shall have
his or her pension so calculated
if he returns to regular, full-time, active
employment immediately
following such rotational assignment. #
(b) Minimum Benefit
In no event shall a Participant, whose Vesting
Service Credit has been five years or more, who
terminates employment on or after his or her
sixty-second birthday, or who is retired on a service
or disability pension under the Pension Plan, receive a
total annual retirement benefit from the Company of
less than 15% of the employee's annual base salary plus
Standard Award for Executives or Standard Annual
Incentive Award for other Participants in effect on the
employee's last day on the active payroll.
(c) Early Retirement Discount
The service benefit allowance, determined in
accordance with the provisions of this Paragraph 4, for
each Participant who is granted a service benefit for
reasons other than total disability as a result of
sickness or injury, shall be reduced as follows:
*
The pension benefit shall be reduced by
one-half percent (0.5%) for each calendar
month or part thereof by which the employee's
Pension Commencement Date precedes
his or her 56th birthday, except that each
employee retired with thirty (30) or
more years of service shall receive a pension
benefit reduced by one-quarter
percent (0.25%) for each calendar month or part
thereof by which such employee's
Pension Commencement Date precedes his or her 56th
birthday. The age before
which an employee's pension benefit is reduced as provided
above due to early *
retirement shall be increased from age 56 as
specified above to the age in the right
column as of the date in the left column of the
following schedule:
January 1 of
Retirement Prior to Age
1991 57
1994 58
1997 59
2000 60
2003 61
2006 62
#Text Added 12/1/90
*Text Revised 5/1/89
Provided, however, that with respect to a Participant who retires
during a % transition year in the above table, in no event
shall the amount by which such Participant's benefit is
reduced pursuant to this provision be greater than the
amount by which such benefit would have been reduced pursuant to
this provision had the Participant retired on December 31 of
the prior year. %
(d) Deferred Benefit Amount
The benefit allowance for each Participant
eligible for a deferred benefit under the provisions of
Paragraph 3(b) of this Section 4 shall be calculated
exclusively in accordance with the provisions specified
as applicable to those receiving a benefit under
Paragraph 3(a) or 3(c) of this Section 4 effective as
of the date such Participant leaves the service of a
Participating Company other than for reasons of
transfer to another Participating Company, Affiliate or
an Interchange Company, or the date which is the last
day of the month in which he reaches the Mandatory
Retirement Age, whichever is earlier, and, in any case,
as if such Participant had retired on such date and,
except as provided in Section 4.4(a)(ii), no
recomputation of the benefit shall be made after such
date or as a result of amendments made to this Plan
subsequent to such date.
(e) Automatic Survivor Annuity
In the event of the death of an active Participant
who at the time of death was eligible for a deferred
benefit under this Plan and who leaves a surviving
spouse, such surviving spouse shall automatically
receive a survivor annuity for life in the amount of
50% of the Participant's net benefit under this Plan,
after offsets, which would have been payable had such
Participant retired with a service benefit, regardless
of his or her actual eligibility therefor, on the date
of his or her death. For purposes of the automatic
survivor annuity provided in this Paragraph 4(e), the
early retirement discount in Paragraph 4(c) shall not
apply. If an Executive Participant dies prior to
retirement, has a surviving spouse, and does not meet
the *
service eligibility requirements for the automatic
survivor annuity under this Plan,
the death benefit as specified under Section 5,
Paragraph 1 of this Plan will be
increased to include an amount equal to twice the
Participant's annual base salary
at the time of death. *
In the case of a pensioner or former
employee, who at the time of his or her death leaves a
surviving spouse, such surviving spouse shall
automatically receive a survivor annuity for life in
the amount of 50% of the net retirement benefit
received by such Participant under this Plan, after
offsets.
(f) Minimum Survivor Benefit
In no event shall the surviving spouse of a
Participant, entitled to a minimum retirement benefit
or disability allowance under the long term disability
plan which applies to such Participant, receive a total
benefit from the Company of less than 15% of the
deceased Participant's annual base salary plus Standard
Award for
* Text Revised 5/1/89
%Text Revised 11/1/97
Executives or Standard Annual Incentive Award for other
Participants in effect on the employee's last day on the
active payroll.
(g) Special Increases
Service and disability benefit payments, as
determined under this Paragraph 4(a) *
and (b) of this Section 4, of retired Participants
shall be increased by the same *
percentage and pursuant to the same terms and
conditions as are set forth in the Pension Plan.
5. Monthly Payments
Benefits shall normally be paid in monthly disbursements or at
such other periods as the
Committee or a Participating Company Committee as applicable, may
determine in each case. Notwithstanding the foregoing, if at the
time of employment termination, the present value of the *
benefit of a Participant, whether payable as a service benefit, a
deferred benefit, or a survivor's
benefit, is less than $20,000, such benefit shall be paid in the
form of a single lump sum payment
which is the actuarial equivalent of the benefit otherwise
payable. Present value and the amount
of each lump sum payment shall be determined using (i) an
interest rate based on the Pension *
Benefit Guaranty Corporation interest rate for valuing a
participant's vested benefit in a trusteed single employer plan
applicable on the first day of the plan year in which the
distribution is or would be made and (ii) mortality rates equal
to the unisex rates published in the Unisex Pension Mortality
Table - 1984 (UP-1984).
6. Duration of Payments
Except for the reasons specified below, benefits granted under
this Plan shall commence on the day following the date of
retirement, either at the Mandatory Retirement Age, or at such
other time as is herein provided for payment of a deferred
benefit or disability benefit, and shall continue to the death of
the retiree.
7. Treatment During Subsequent Employment
Where a Participant's period of service includes service in more
than one Participating Company or in a company that is not a
Participating Company, the last Participating Company to employ
him or her immediately prior to his or her retirement or
termination of employment with entitlement to a benefit hereunder
shall be responsible for the full benefit under this Plan.
Employment with any Participating Company, Affiliate, or with
Bellcore, pursuant to a BellSouth/Bellcore Interchange Agreement,
for which a Participant is an eligible employee, subsequent to
retirement or termination of employment with entitlement to any
type of benefits described heretofore shall result in the
permanent suspension of the benefit for the period of such
employment or reemployment.
* Text Added 09/01/88
SECTION 5. DEATH BENEFITS
1. Eligibility and Administration
All Participants shall be eligible for death benefits under this
Plan. Death benefits described %
herein are in addition to death benefits payable under the
Pension Plan but shall be subject to the
same terms and conditions of, and administered in the same manner
as, corresponding death
benefit provisions of the Pension Plan. For an Executive, the
benefit equals the annual base
salary plus two times the Standard Award. The above stated
amounts of base salary and %
Standard Award are those amounts in effect at the earlier of
retirement or death including
those amounts previously deferred pursuant to other plans. For
all other Participants,
the benefit equals the Standard Annual Incentive Award in effect
at the earlier of retirement or death. In addition, the death
benefit for all Participants will include the amount of death
benefit, if any, that would otherwise have been payable under the
Pension Plan had there been no deferral of compensation under any
plan of the Company. The benefit amount will also include the *
amount of death benefit, if any, that would otherwise have been
payable under the Pension Plan
had the restriction on the amount of compensation that may be
taken into account under Code
Section 401(a)(17) not been applicable. If a Participant is
eligible for or has retired with a *
service benefit under this Plan but is not eligible for a service
pension under the Pension Plan,
the death benefit under this Plan will include the amount of
death benefit that would have been
payable under the Pension Plan had the Participant been eligible
for or retired with a service pension thereunder.
2. Source of Payments
All death benefits payable pursuant to this Section 5 of the Plan
shall be paid from Company or Participating Company's operating
expenses, or through the purchase of insurance from an Insurance
Company as the Company may determine.
SECTION 6. GENERAL PROVISIONS
1. Effective Date
This Plan is effective January 1, 1984.
2. Rights to Benefit
There is no right to any benefit under this Plan except as may be
provided by the Company or each Participating Company.
Participants have the status of general, unsecured creditors of
the Participating Company and the Plan constitutes a mere promise
by the Participating Company to make benefit payments in the
future. A Participant shall have only a contractual right to
receive the benefits provided for hereunder if and when he
complies with all of the conditions set forth herein. Nothing
contained in this Plan and no action taken pursuant to the
provisions of this Plan shall create or be construed to create a
trust of any kind. The Plan is intended to be "unfunded" for
purposes of the Pension Act and the Code.
* Text Added 09/01/88
% Text Revised 11/28/94
If any payment is made to a Participant, his or her surviving
spouse or other beneficiary #
with respect to benefits described in this Plan from any source
arranged by the Company or a
Participating Company including, without limitation, any fund,
trust, insurance arrangement,
bond, security device, or any similar arrangement, such payment
shall be deemed to be in full
and complete satisfaction of the obligation of the Company or
Participating Company under
this Plan to the extent of such payment as if such payment had
been made directly by the
Company or Participating Company; and (ii) if any payment from a
source described in
clause (i) above shall be made, in whole or in part, prior to the
time payment would be made
under the terms of this Plan, such payment shall be deemed to
satisfy the obligation of the
Company or Participating Company to pay Plan benefits beginning
with the benefit which
would next become payable under the Plan and continuing in the
order in which benefits are
so payable, until the payment from such other source is fully
recovered. In determining the
benefits satisfied by a payment described in clause (ii), Plan
benefits, as they become
payable, shall be discounted to their value as of the date such
actual payment was made using
an interest rate equal to the valuation interest rate for
deferred annuities as last published by
the Pension Benefit Guaranty Corporation prior to the date of
such actual payment. If the
benefits which actually become payable under this Plan, after
applying the discount described
in the preceding sentence, are less than the amount of the
payment described in clause (ii),
any such shortfall shall not be collected from or enforced
against the Participant as a claim by
the Company or Participating Company. #
3. Involuntary Termination
In the event that a Participant's employment is terminated
involuntarily prior to his or her becoming eligible for a
deferred benefit under this Plan, other than for cause, such
Participant shall nevertheless be entitled to a deferred
benefit hereunder, based upon the Participant's Vesting
Service Credit at his or her date of termination.
4. Governing Law
The Company intends that this Plan be an unfunded deferred
compensation plan maintained primarily for a select group of
management and highly compensated employees exempt from Parts 2,
3 and 4 of Title I of the Pension Act by reason of the exemptions
set forth in Sections 201(a), 301(a) and 401(a) of the Pension
Act and from Part 1 of the Pension Act by reason of the exemption
set forth in Section 2520.104-23 of applicable United States
Department of Labor regulations. This Plan shall be interpreted
and administered accordingly. This Plan shall be construed in
accordance with the laws of the State of Georgia to the extent
such laws are not preempted by the Pension Act.
5. Assignment or Alienation
Benefits payable, and rights to benefits, under this Plan may not
in any manner be anticipated, sold, transferred, assigned (either
at law or in equity), alienated, pledged, encumbered or subject
to attachment, garnishment, levy, execution or other legal or
equitable process.
6. Nothing contained in this Plan shall be construed as
conferring upon a Participant the right to continue in the employ
of the Company.
# Text Added 5/25/90
7. Determination of Eligibility
In all questions relating to age and service for eligibility for
any benefit hereunder, or relating to a Participant's period of
service and rates of pay for determining benefits, any decision
of the Claim Review Committee or a Participating Company Claim
Review Committee, as applicable, based upon this Plan and upon
the records of the Participating Company last employing such
individual shall be final, conclusive and binding on all persons.
8. Option During Disability
If a Participant who has left the service of a Participating
Company has elected to continue receiving disability benefits
which he had been receiving prior to his or her termination and
to defer receiving pension payments under the Pension Plan to
which he is eligible, benefits under this Plan shall be deferred
until such time as the Participant begins to receive payments
under the Pension Plan.
9. Break in Service
For purposes of this Plan, a break in service shall be defined
and treated in the same manner as is set forth in the Pension
Plan.
10. Leaves of Absence
For purposes of this Plan, a leave of absence shall be defined
and administered in the same manner as is set forth in the
Pension Plan.
11. Special Classification
For purposes of this Plan, the determination of those causes of
death not classed as due to accident shall be accomplished in the
same manner as is set forth in the Pension Plan.
12. Method of Payment
Payments under this Plan shall be made in the same manner as is
set forth under the Pension Plan.
13. Amounts Accrued Prior to Death
Benefit amounts accrued but not actually paid at the time of
death of a former employee or pensioner shall be paid in
accordance with the standards and procedures set forth in the
Pension Plan.
14. Payments to Others
Benefits payable to a former employee or retiree unable to
execute a proper receipt may be paid to other person(s) in
accordance with the standards and procedures set forth in the
Pension Plan.
15. Claims Release
In case of accident resulting in the death of a Participant which
entitles his or her beneficiaries or his or her annuitants to
benefits under this Plan, such beneficiaries or annuitants shall,
prior to the payment of any such benefits, sign a release,
releasing the Company or other Participating Companies,
Affiliates or Interchange Companies, as applicable, from all
claims and demands which the Participant had, and his or her
beneficiaries or his or her annuitant may have against them,
otherwise than under this Plan, on account of such accident. If
any persons, other than the beneficiaries under this Plan might
legally assert claims against a Participating Company, Affiliate
or Interchange Company on account of the death of the
Participant, no part of the death benefit under this Plan shall
be due or payable until there have also been delivered to the
Committee or Participating Company Committee, the Affiliate or
Interchange Company Committee, as applicable, good and sufficient
releases of all claims, arising from or growing out of the death
of the Participant, which such other persons might legally assert
against any Participating Company, Affiliate or Interchange
Company. The Committee or Participating Company Committee, as
applicable, in its discretion, may require that the releases
above described shall release any other company, connected with
the accident, including the Company or any other Participating
Company, Affiliate or Interchange Company, as applicable. This
requirement of a release shall not apply in the case of survivor
annuities under Section 4 of the Plan.
16. Damage Claims or Suits
Should a claim, other than under the Plan, be presented or suit
brought against the Company or any Participating Company,
Affiliate or Interchange Company for damages on account of the
death of a Participant, nothing shall be payable under the Plan
on account of such death except as provided in Paragraph 15 of
this Section 6; provided, however, that the Committee,
Participating Committee, or the Affiliate, as applicable, may, in
its discretion and upon such terms as it may prescribe, waive
this provision if such claims be withdrawn or if such suit be
discontinued, and provided further that this provision shall not
preclude the payment of survivor annuities under Section 4.
17. Judgment or Settlement
In case any judgment is recovered against any Participating
Company, Affiliate or Interchange Company or any settlement is
made of any claim or suit on account of the death of a
Participant, and the amount paid to the beneficiaries who would
have received benefits under the Plan is less than what would
otherwise have been payable under the Plan, the difference
between the two amounts may, in the discretion of the Company,
Participating Company Committee, or Affiliate, as applicable, be
distributed to such beneficiaries.
18. Payment Under Law
In case any benefit, which the Committee, Participating Company
Committee, or Affiliate, as applicable, shall determine to be of
the same general character as a payment provided by the Plan,
shall be payable under any law now in force or hereafter enacted
to any Participant of a Participating Company, to his or her
beneficiaries or to his or her annuitant under such law, the
excess only, if any, of the amount prescribed by law shall be
payable under the Plan; provided, however, that no benefit
payable under this Plan shall be reduced by reason of any
governmental benefit or pension payable on account of military
service. In those cases where, because of differences in the
beneficiaries, or differences in the time or methods of payment,
or otherwise, whether or not there is such excess is not
ascertainable by mere comparison but adjustments are necessary,
the Committee or Participating Company Committee, as applicable,
has discretion to determine whether or not in fact any such
excess exists and to make the adjustments necessary to carry out
in a fair and equitable manner the spirit of the provision for
the payment of such excess.
19. Plan Termination
Subject to the limitations described below, the Company retains
the right to terminate, in *
whole or in part, and each Participating Company retains the
right to withdraw from this
Plan, at any time, for any reason, with or without notice. The
Company will continue to
make payments, in accordance with the terms and conditions of the
Plan, to all Participants
who were either retired or terminated prior to Plan termination,
and will also continue to
recognize its obligation to the surviving spouse of the
aforementioned individuals.
Additionally, Participants who have satisfied the service
requirements for a deferred vested
pension under the Pension Plan on the date of Plan termination
shall receive benefits under
the terms of the Plan as in effect immediately prior to its
termination, the amount of such
benefit to be calculated as if the Participant retired (or
otherwise terminated employment)
on the termination date of the Plan, it being the Company's
intent that termination of the Plan
shall not adversely affect any entitlement to such benefits and
any amendment, modification
or termination of this Plan inconsistent with this expression of
intent shall be null and void. *
SECTION 7. INTERCHANGE OF BENEFIT OBLIGATION
The same transfer of service credit provisions contained in
interchange agreements presently in existence under the Pension
Plan, or as they may be amended from time to time, between the
Company, on behalf of all Participating Companies, with any
Interchange Company shall apply to the transfer of service credit
for purposes of this Plan.
SECTION 8. PLAN MODIFICATION
The Company may in its sole discretion from time to time make any
changes in the Plan as it deems appropriate, provided, however,
such modifications shall not result in a reduction of *
benefits to either: (i) those participants or their surviving
spouses already receiving benefits
under this Plan, or (ii) those participants who have satisfied
the service requirements for a *
deferred vested pension under the Pension Plan. Specifically, no
Plan modification shall have
the effect of reducing a Participant's benefits under the Plan to
which he or she would be
entitled under the terms of the Plan as in effect in immediately
prior to its modification, the
amount of such benefit to be calculated as if the Participant
retired (or otherwise terminated
employment) on the date the Plan was modified, it being the
Company's intent that any *
modification of the Plan shall not adversely affect any
entitlement to such benefits and any
amendment, modification or termination of this Plan inconsistent
with this expression of
intent shall be null and void. *
In addition, the Company may authorize the execution of
agreements providing retirement benefits subject generally to the
terms and conditions of the Plan and benefits under such
agreements shall be deemed provided hereunder.
* Text Added 08/12/88
BELLSOUTH EMPLOYEES' BENFIT CLAIM REVIEW COMMITTEE
DATE OF MEETING: April 17, 1998
I. RECOMMENDATION:
Approve amendment of the BellSouth Personal Retirement Account Pension
Plan to provide a mandatory lump sum cash out of Plan benefits of any
participant (or surviving spouse) who, at termination or retirement, has
a present value Plan benefit of less than or equal to $5,000. Current
Plan terms provide for cash outs only when such amounts are less than or
equal to $3,500. This change is authorized by changes in applicable law
contained in the Taxpayer Relief Act of 1997.
II. COMMITTEE ACTION:
Approved amendment of the BellSouth Personal retirement Account Pension
Plan, effective April 1, 1998, to provide a mandatory lump sum cash out
of Plan benefits of any participant (or surviving spouse, with respect to
surviving spouse benefits) who, upon the participant's termination of
employment (or, in the case of a surviving spouse, death), has an account
balance or present accrued benefit (or surviving spouse benefit) of less
than or equal to $5,000; and authorized Chairman of the Committee to
approve actual Plan amendment language on behalf of the Committee.
/s/ Susan K. Cooper
Secretary
Employees' Benefit Claim Review Committee
AMENDMENT TO THE
BELLSOUTH RETIREMENT SAVINGS PLAN
This Amendment is made to the BellSouth Retirement
Savings Plan (the "Plan"), which was amended and restated
effective July 1, 1996. The BellSouth Savings Plan
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:
Amend Section 2.1 of the Plan by replacing clause (a)
of the definition of
"Compensation" with the following:
(a) the total of (1) of the Participating Employee's wages,
as defined in Code
section 3401(a), that are reportable by BellSouth and
the other Affiliates for
federal income tax purposes on IRS Form W-2, plus (2)
all before-tax, salary
deferral or reduction contributions made to the Plan
and other Code section 401(k) and section 125 plans of
the Affiliates on behalf of the Participating
Employee for such Plan Year (including any
contributions made under Code
Section 402(e)(3), 402(h) or 403(b)); provided, on a
plan year-by-year basis,
the Committee may elect to use any other definition of
"Compensation" that
satisfies the nondiscrimination requirements of Code
section 414(s); provided
further, in a Plan Year in which a Participating
Employee becomes an Eligible Employee, the total in
clause (1) shall include such wages beginning with the
pay period that begins with or immediately follows the
first day of the month immediately following the date
on which he becomes an Eligible Employee; and
Amend Section 2.1 of the Plan by replacing the first
sentence of the definition of
"Eligible Compensation" with the following:
"Eligible Compensation" shall mean for each Eligible
Employee of a Participating Company, (a) the sum of
such Employee's base salary, lump sum
merit awards and incentive compensation (other than
awards under any long or short term incentive plan for
senior management) received from the Participating
Company as determined from the Participating Company's
payroll records prior to any deferrals under Section
4.1(a) of this Plan, excluding overtime, shift
differentials and other premium pay, or (b) such other
meaning as set forth in
the applicable Adoption Agreement, provided, however,
that in a Plan Year in which a Participating Employee
becomes an Eligible Employee, the sum in clause (a)
shall include such amounts beginning with the pay
period that begins with or immediately follows the
first day of the month immediately following the date
on which he becomes an Eligible Employee.
3.
Amend Section 7.4 of the Plan by replacing the
parenthetical in paragraph b.
thereof with the following: "(excluding the ESOP Account of
a Participating Employee who is an Employer)".
4.
Amend Section 9.1 of the Plan by replacing paragraphs
c.(i) through (iv)
thereof with the following:
(i) Except as otherwise provided in Paragraph d. below, the
payment of any distribution to a Participating Employee
from the Plan shall be in the form selected by the
Participating Employee by written notice delivered to
the
Committee, subject to the terms and limitations set
forth in this Paragraph c. The Participating Employee
may choose between (A) a single lump-sum payment and
(B) equal amount or quarterly installments (adjusted
for investment earnings and
losses between payments) paid over a term certain.
(ii) Unless the value of the Units in the Participating
Employee's
Account exceeds (or at the time of any prior
distribution exceeded) $5,000, or if the payment
constitutes a withdrawal, payment of the Units shall be
made in the form of a single lump-sum payment without
the consent of the Participating Employee.
(iii) If a Participating Employee selects payment in the
form of annual
or quarterly installments over a term certain, the
Participating Employee must select, in accordance with
Plan Rules, payments over a period of (A) 10 years, (B)
the life expectancy of such Participating Employee, or
(C) the joint life and last survivor expectancy of such
Participating Employee and his beneficiary. If a
distribution is to be made to a Participating Employee
in the form of annual or quarterly installments payable
over his life expectancy or the joint life and last
survivor expectancy of such Participating Employee and
his beneficiary, such life expectancy or joint life and
last survivor expectancy shall be calculated at the
time distributions commence and shall not thereafter be
recalculated. The Committee, in its sole discretion,
shall decide whether the Plan shall make the
installment payments directly from the Trust Fund or by
purchasing an annuity contract that is distributed to
the Participating Employee. Notwithstanding anything
herein to the contrary, distributions from the Plan
must satisfy the requirements of Code section
401(a)(9)(G). This means that the incidental benefit
rules as described in Treasury Regulation section
1.401(a)(9)-2 shall be satisfied.
(iv) If a Participating Employee selects payment in the form
of annual
or quarterly installments over a term certain, the
Participating Employee may later elect to receive a
single lump-sum payment of the remaining Units in his
Account.
5.
Amend Section 9.1. of the Plan by replacing paragraph
c.(vi) thereof with following:
(v) If a Participating Employee is to receive or begin
receiving
benefits on or before April 1 of one calendar year as a
result of his attaining age 70 1/2 during the preceding
calendar year (as provided in Section 9.6), the
distribution shall be paid in the form of annual
installments over the life expectancy of such
Participating Employee unless, on or before November 1
of the calendar year in which the Participating
Employee attains age 70 1/2 (or such other date as the
Committee may provide), he elects to commence receiving
his distribution in another form as permitted in
Paragraphs c.(i) and (iii) above and in Code section
401(a)(9) and the regulations issued thereunder.
6.
Amend Section 9.5 of the Plan by replacing "three
thousand five hundred dollars ($3,500.00)" in paragraph a.(ii)
thereof with "five thousand dollars ($5,000.00)."
7.
Amend Section 9.6 of the Plan by replacing the first
sentence thereof with the following:
Unless a Participating Employee elects otherwise under
the provisions of Section
9.5a(ii), distribution of all of the Units in a
Participating Employee's Account shall be made or commenced
to the Participating Employee upon receipt of a written
election form provided by the Committee; provided, however,
distributions in any event shall begin no later than the
April 1 of the calendar year following the calendar year in
which the Participating Employee attains age 70 1/2 even if the
Participating Employee has not retired under this Plan, and,
unless a contrary election is in effect under Section 9.1c.,
all of the Units in a Participating Employee's Account
(other than Units representing nonvested amounts) shall be
distributed in annual installments over the life expectancy
of the Participating Employee.
8.
Amend Section 10.1 of the Plan by replacing paragraph
e. thereof with the following:
e. Unless such Participating Employee elects, in
accordance with Plan
Rules, to pay monthly installments following his
termination of employment
for any reason other than a transfer, the loan, if made
to a Participating Employee who is an Employee, shall
become due and payable in full in the event that the
Participating Employee's employment terminates for any
reason other than a transfer (which does not involve a
Trust-to-Trust Transfer or a distribution) in
accordance with Section 15 prior to the complete
repayment of such loan and,
further, the Trustee shall have the right to deduct any
amount due under the loan from any amount which becomes
distributable under this Plan to, or on behalf of, the
Participating Employee.
The above amendments shall be effective as of April 1,
1998.
APPROVED this 5th day of May, 1998.
SAVINGS PLAN COMMITTEE:
/s/ Richard D. Sibbernsen
Richard D. Sibbernsen
Vice President-Human Resources,
Chairman
BELLSOUTH
COMPENSATION DEFERRAL PLAN
BELLSOUTH COMPENSATION DEFERRAL PLAN
TABLE OF CONTENTS
BACKGROUND AND PURPOSE 1
ARTICLE I DEFINITIONS 2
1.1 "ACCOUNT" 2
1.2 "AFFILIATE" 2
1.3 "BASE SALARY" 2
1.4 "BELLSOUTH" 2
1.5 "BENEFICIARY" 2
1.6 "BOARD" 2
1.7 "BUSINESS DAY" 2
1.8 "CODE" 2
1.9 "COMPANY STOCK" 2
1.10 "COMPENSATION" 3
1.11 "CREDITED INTEREST RATE" 3
1.12 "DEFERRAL CONTRIBUTIONS" 3
1.13 "DEFERRAL ELECTION" 3
1.14 "EFFECTIVE DATE" 3
1.15 "ELECTION DEADLINE" 3
1.16 "ELECTION PACKAGE" 3
1.17 "ELIGIBLE EMPLOYEE" 4
1.18 "ERISA" 4
1.19 "INTEREST INCOME OPTION" 4
1.20 "INTEREST INCOME SUBACCOUNT" 4
1.21 "INVESTMENT ELECTION" 4
1.22 "INVESTMENT OPTIONS" 4
1.23 "PARTICIPANT" 4
1.24 "PARTICIPATING COMPANY" 4
1.25 "PLAN" 4
1.26 "PLAN ADMINISTRATOR" 4
1.27 "PLAN YEAR" 5
1.28 "STOCK UNIT" 5
1.29 "STOCK UNIT OPTION" 5
1.30 "STOCK UNIT SUBACCOUNT" 5
1.31 "VALUATION DATE" 5
ARTICLE II ELIGIBILITY AND PARTICIPATION 6
2.1 ELIGIBILITY. 6
2.2 ELECTION PROCEDURES. 6
2.3 CESSATION OF ELIGIBILITY. 6
ARTICLE III PARTICIPANTS' ACCOUNTS; DEFERRAL CONTRIBUTIONS 7
3.1 PARTICIPANTS' ACCOUNTS. 7
(a) ESTABLISHMENT OF ACCOUNTS. 7
(b) NATURE OF CONTRIBUTIONS AND ACCOUNTS. 7
(c) SEVERAL LIABILITIES. 7
(d) GENERAL CREDITORS. 7
3.2 DEFERRAL CONTRIBUTIONS. 7
(a) EFFECTIVE DATE. 7
(b) TERM. 8
(c) AMOUNT. 8
(d) REVOCATION. 8
(e) CREDITING OF DEFERRED COMPENSATION. 8
3.3 DEFERRAL ELECTIONS AND MULTIPLE PARTICIPATING COMPANIES. 9
3.4 TERMINATION UNDER SEVERANCE ARRANGEMENT 9
3.5 VESTING. 9
ARTICLE IV DETERMINATION AND CREDITING OF INVESTMENT RETURN 10
4.1 GENERAL INVESTMENT PARAMETERS. 10
4.2 PARTICIPANT DIRECTION OF DEEMED INVESTMENTS. 10
(a) NATURE OF PARTICIPANT DIRECTION. 10
(b) INVESTMENT OF CONTRIBUTIONS. 10
(c) INVESTMENT OF EXISTING ACCOUNT BALANCES. 10
(d) INVESTMENT SUBACCOUNTS. 11
4.3 STOCK UNIT OPTION. 11
(a) STOCK UNIT SUBACCOUNT. 11
(b) CASH DIVIDENDS. 11
(c) ADJUSTMENTS FOR STOCK DIVIDENDS AND SPLITS. 11
4.4 INTEREST INCOME OPTION. 12
(a) INTEREST INCOME SUBACCOUNT. 12
(b) CREDITING OF DEEMED INTEREST. 12
(i) AMOUNT INVESTED. 12
(ii) DETERMINATION OF AMOUNT. 12
4.5 GOOD FAITH VALUATION BINDING. 12
4.6 ERRORS AND OMISSIONS IN ACCOUNTS. 12
ARTICLE V PAYMENT OF ACCOUNT BALANCES 13
5.1 BENEFIT AMOUNTS. 13
(a) BENEFIT ENTITLEMENT. 13
(b) VALUATION OF BENEFIT. 13
(c) CONVERSION OF STOCK UNITS INTO DOLLARS. 13
5.2 ELECTIONS OF TIMING AND FORM. 13
(a) TIMING. 13
(b) FORM OF DISTRIBUTION. 13
(c) MULTIPLE SELECTIONS. 14
5.3 BENEFIT PAYMENTS TO A PARTICIPANT. 14
(a) TIMING. 14
(b) FORM OF DISTRIBUTION. 14
(c) VALUATION OF SINGLE SUM PAYMENTS. 14
(d) VALUATION OF INSTALLMENT PAYMENTS. 14
5.4 DEATH BENEFITS. 15
(a) GENERAL 15
(b) VALUATION 15
5.5 BENEFICIARY DESIGNATION. 15
(a) GENERAL. 15
(b) NO DESIGNATION OR DESIGNEE DEAD OR MISSING. 15
(c) DEATH OF BENEFICIARY 16
5.6 TAXES. 16
ARTICLE VI CLAIMS 17
6.1 INITIAL CLAIM. 17
6.2 APPEAL. 17
6.3 SATISFACTION OF CLAIMS. 17
ARTICLE VII SOURCE OF FUNDS 18
ARTICLE VIII PLAN ADMINISTRATION 19
8.1 ACTION BY THE PLAN ADMINISTRATOR. 19
(a) INDIVIDUAL ADMINISTRATOR. 19
(b) ADMINISTRATIVE COMMITTEE. 19
8.2 RIGHTS AND DUTIES OF THE PLAN ADMINISTRATOR. 19
8.3 BOND; COMPENSATION. 20
ARTICLE IX AMENDMENT AND TERMINATION 21
9.1 AMENDMENTS. 21
9.2 TERMINATION OF PLAN. 21
9.3 LIMITATION ON AUTHORITY. 21
(a) PLAN AMENDMENTS 21
(b) PLAN TERMINATION 21
(c) OPINIONS OF COUNSEL 22
ARTICLE X MISCELLANEOUS 23
10.1 TAXATION. 23
10.2 WITHHOLDING. 23
10.3 NO EMPLOYMENT CONTRACT. 23
10.4 HEADINGS. 23
10.5 GENDER AND NUMBER. 23
10.6 ASSIGNMENT OF BENEFITS. 23
10.7 LEGALLY INCOMPETENT. 23
10.8 ENTIRE DOCUMENT. 23
10.9 GOVERNING LAW. 23
BELLSOUTH COMPENSATION DEFERRAL PLAN
Effective as of the 1st day of January, 1997, BellSouth
Corporation ("BellSouth") established the BellSouth Compensation
Deferral Plan (the "Plan"). The Plan is hereby amended and
restated effective as of October 1, 1997.
BACKGROUND AND PURPOSE
A. Goal. BellSouth desires to provide its designated key
management employees, and those of its affiliated companies that
participate in the Plan, with an opportunity (i) to defer the
receipt and income taxation of a portion of such employees' base
salaries; and (ii) to receive an investment return on those
deferred amounts based on the return of BellSouth stock, an
indexed rate of interest, or a combination of the two.
B. Purpose. The purpose of the Plan is to set forth the
terms and conditions pursuant to which these deferrals may be
made and deemed invested and to describe the nature and extent of
the employees' rights to their deferred amounts.
C. Type of Plan. The Plan constitutes an unfunded,
nonqualified deferred compensation plan that benefits certain
designated employees who are within a select group of key
management or highly compensated employees. Each Participating
Company alone has the obligation to pay amounts payable under
this Plan to its Plan Participants, and such payments are not an
obligation of any other Participating Company.
ARTICLE I
DEFINITIONS
For purposes of the Plan, each of the following terms, when
used with an initial capital letter, shall have the meaning set
forth below unless a different meaning plainly is required by the
context.
1.1 "Account" shall mean, with respect to a Participant or
Beneficiary, the total dollar amount or value evidenced by the
last balance posted in accordance with the terms of the Plan to
the account record established for such Participant or
Beneficiary with respect to the Deferral Contributions of such
Participant for any Plan Year.
1.2 "Affiliate" shall mean at any time any corporation,
joint venture or partnership in which BellSouth owns directly or
indirectly, (i) with respect to a corporation, stock possessing
at least ten percent (10%) of the total combined voting power of
all classes of stock in the corporation, or (ii) in the case of a
joint venture or partnership, a ten percent (10%) or greater
interest in the capital or profits of such joint venture or
partnership.
1.3 "Base Salary" shall mean, with respect to each Eligible
Employee for a Plan Year, the gross regular, periodic base salary
paid or payable to him during such Plan Year, including any of
his own before-tax and after-tax contributions to, or deferrals
under, any Code Section 401(k), Code Section 125, nonqualified
deferred compensation or other employee benefit plan or program,
maintained by a Participating Company from time to time, but
excluding any contributions or benefits paid under any such plan
or program by a Participating Company.
1.4 "BellSouth" shall mean BellSouth Corporation, a Georgia
corporation.
1.5 "Beneficiary" shall mean, with respect to a
Participant, the person(s) determined in accordance with Section
5.5 to receive any death benefits that may be payable under the
Plan upon the death of the Participant.
1.6 "Board" shall mean the Board of Directors of BellSouth.
1.7 "Business Day" shall mean each day on which the New
York Stock Exchange operates and is open to the public for
trading.
1.8 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.9 "Company Stock" shall mean the $1.00 par value per
share voting common stock of BellSouth.
1.10 "Compensation" shall mean, for purposes of determining
the maximum amount that a Participant may defer under the Plan
for any Plan Year, the total of such Participant's (i) annualized
Base Salary rate, and (ii) standard short-term incentive award
amount. For a Participant who is designated by the Plan
Administrator as a member of BellSouth's "executive compensation
group" for purposes of this Plan such amount shall be determined
as the rate or amount in effect or applicable on the date such
Participant executes a Deferral Election. For a Participant who
is designated by the Plan Administrator as a "senior manager" for
purposes of this Plan such amount shall be determined as the rate
or amount in effect or applicable on September 1 of the year in
which the Participant executes a Deferral Election. For any
Eligible Employee employed by a Participating Company whose
compensation structure does not readily fit this definition,
"Compensation" shall mean cash compensation as defined by the
Plan Administrator.
1.11 "Credited Interest Rate" shall mean, for each Plan
Year, the rate of return equal to Moody's Monthly Average of
Yields of Aa Corporate Bonds, as published by Moody's Investors
Service, Inc., for the month of July immediately preceding such
Plan Year. If such rate (or any alternative rate described in
this sentence) is at any time no longer available, the Plan
Administrator shall designate an alternative rate which in the
Plan Administrator's reasonable judgment is generally comparable
to the rate described in the preceding sentence, and such
alternative rate shall thereafter be the Credited Interest Rate.
1.12 "Deferral Contributions" shall mean, for each Plan
Year, that portion of a Participant's Base Salary deferred under
the Plan pursuant to Section 3.2.
1.13 "Deferral Election" shall mean a written election form
provided by the Plan Administrator on which an Eligible Employee
may elect to defer under the Plan a portion of his Base Salary.
1.14 "Effective Date" shall mean January 1, 1997.
1.15 "Election Deadline" shall mean, with respect to a Plan
Year, the November 30 (or if November 30 is not a Business Day,
the last Business Day immediately preceding November 30)
immediately preceding the first day of such Plan Year.
Notwithstanding the foregoing, with the approval of the Plan
Administrator, "Election Deadline" may mean, with respect to a
Plan Year, the December 31 (or if December 31 is not a Business
Day, the last Business Day immediately preceding December 31)
immediately preceding the first day of such Plan Year.
1.16 "Election Package" shall mean a package consisting of a
Deferral Election, an Investment Election and such other forms
and documents distributed to Eligible Employees by the Plan
Administrator for the purpose of allowing them to elect to
actively participate in the Plan for a Plan Year.
1.17 "Eligible Employee" shall mean, for each Plan Year,
each management employee of a Participating Company who (i) is a
member of a select group of highly compensated or key management
employees, and (ii) is designated by the Plan Administrator as a
member of BellSouth's "executive compensation group" or as a
"senior manager" for purposes of this Plan for the Plan Year, or
is otherwise designated by the Plan Administrator as eligible to
participate in the Plan for such Plan Year.
1.18 "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
1.19 "Interest Income Option" shall mean the Investment
Option described in Section 4.4, pursuant to which a
Participant's deemed investment earnings are determined on the
basis of the Credited Interest Rate.
1.20 "Interest Income Subaccount" shall mean a bookkeeping
subaccount reflecting that portion of a Participant's Account for
each Plan Year which is deemed to be invested in the Interest
Income Option.
1.21 "Investment Election" shall mean a written election
form provided by the Plan Administrator on which an Eligible
Employee may elect to have his Deferral Contributions for a Plan
Year (and all investment earnings attributable thereto) deemed
invested in either the Stock Unit Option and/or the Interest
Income Option.
1.22 "Investment Options" shall mean the Stock Unit Option
and the Interest Income Option.
1.23 "Participant" shall mean any person participating in
the Plan pursuant to the provisions of Article II.
1.24 "Participating Company" shall mean BellSouth and each
Affiliate listed as a Participating Company as of January 1, 1997
on Exhibit A hereto, and each other Affiliate which, by action of
its board of directors (or equivalent governing body), adopts the
Plan as a Participating Company with the approval of the Plan
Administrator. Exhibit A shall be updated from time to time to
reflect the addition of new Participating Companies, and the
effective dates of their participation, and the deletion of any
entities which are no longer Participating Companies.
1.25 "Plan" shall mean the BellSouth Compensation Deferral
Plan, as contained herein and all amendments hereto.
1.26 "Plan Administrator" shall mean the Chief Executive
Officer of BellSouth and any individual or committee he
designates to act on his behalf with respect to any or all of his
responsibilities hereunder; provided, the Board may designate any
other person or committee to serve in lieu of the Chief Executive
Officer as the Plan Administrator with respect to any or all of
the administrative responsibilities hereunder.
1.27 "Plan Year" shall mean the calendar year.
1.28 "Stock Unit" shall mean an accounting entry that
represents an unsecured obligation of a Participating Company to
pay to a Participant an amount which is based on the fair market
value of one share of Company Stock as set forth herein. A Stock
Unit shall not carry any voting, dividend or other similar rights
and shall not constitute an option or any other right to acquire
any equity securities of BellSouth.
1.29 "Stock Unit Option" shall mean the Investment Option
described in Section 4.3, pursuant to which a Participant's
deemed investment earnings are determined by the rate of return
applicable to Stock Units.
1.30 "Stock Unit Subaccount" shall mean a bookkeeping
subaccount reflecting that portion of a Participant's Account for
each Plan Year which is deemed to be invested in the Stock Unit
Option.
1.31 "Valuation Date" shall mean December 31 (or, if
December 31 is not a Business Day, the last Business Day
immediately preceding December 31), and each other day declared
by the Plan Administrator to be a Valuation Date.
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.1 Eligibility. Each individual who is an Eligible
Employee for a Plan Year shall be eligible to defer a portion of
his Base Salary and thereby to actively participate in the Plan
for such Plan Year. Such individual's participation shall become
effective as of the first day of such Plan Year, assuming he
properly and timely completes the election procedures described
below.
2.2 Election Procedures. Each Eligible Employee shall
elect to defer a portion of his Base Salary and thereby become an
active Participant for a Plan Year by delivering a completed
Deferral Election and an Investment Election by the Election
Deadline for such Plan Year. The Plan Administrator also may
require the Eligible Employee to complete other forms and provide
other data, as a condition of participation in the Plan.
Furthermore, such an election by an individual shall be effective
only if the individual is actively employed as an Eligible
Employee at the time the individual delivers the completed
Deferral Election and Investment Election.
2.3 Cessation of Eligibility. An Eligible Employee's
active participation in the Plan shall terminate, and he shall
not be eligible to make any additional Deferral Contributions for
any portion of a Plan Year following the date his employment with
BellSouth and all Participating Companies terminates (unless he
is reemployed as an Eligible Employee later in such Plan Year).
In addition, an individual who actively participated in the Plan
during prior Plan Years but who is not an Eligible Employee or
does not complete the election procedures, for a subsequent Plan
Year, shall cease his active participation in the Plan for such
subsequent Plan Year. Even if an individual's active
participation in the Plan ends, such individual shall remain an
inactive Participant in the Plan until the earlier of (i) the
date the full amount of his Accounts is distributed from the
Plan, or (ii) the date he again becomes an Eligible Employee and
recommences active participation in the Plan. During the period
of time that an individual is an inactive Participant in the
Plan, his Accounts shall continue to be credited with earnings as
provided in the Plan.
ARTICLE III
PARTICIPANTS' ACCOUNTS; DEFERRAL CONTRIBUTIONS
3.1 Participants' Accounts.
(a) Establishment of Accounts. The Plan Administrator
shall establish and maintain an Account on behalf of each
Participant for each Plan Year for which the Participant makes
Deferral Contributions. The Plan Administrator shall credit each
Participant's Account with his Deferral Contributions for such
Plan Year and earnings attributable thereto, and shall maintain
such Account until the value thereof has been distributed to or
on behalf of such Participant or his Beneficiary.
(b) Nature of Contributions and Accounts. The amounts
credited to a Participant's Accounts shall be represented solely
by bookkeeping entries. Except as provided in Article VII, no
monies or other assets shall actually be set aside for such
Participant, and all payments to a Participant under the Plan
shall be made from the general assets of the Participating
Companies.
(c) Several Liabilities. Each Participating Company
shall be severally (and not jointly) liable for the payment of
benefits under the Plan under Deferral Elections executed by
Eligible Employees with, and while employed by, such
Participating Company.
(d) General Creditors. Any assets which may be
acquired by a Participating Company in anticipation of its
obligations under the Plan shall be part of the general assets of
such Participating Company. A Participating Company's obligation
to pay benefits under the Plan constitutes a mere promise of such
Participating Company to pay such benefits, and a Participant or
Beneficiary shall be and remain no more than an unsecured,
general creditor of such Participating Company.
3.2 Deferral Contributions. Each Eligible Employee may
irrevocably elect to have Deferral Contributions made on his
behalf for a Plan Year by completing in a timely manner a
Deferral Election and an Investment Election and following other
election procedures as provided in Section 2.2. Subject to any
modifications, additions or exceptions that the Plan
Administrator, in its sole discretion, deems necessary,
appropriate or helpful, the following terms shall apply to such
Deferral Elections:
(a) Effective Date. A Participant's Deferral Election
for any Plan Year shall be effective and provide for the
reduction and deferral of a portion of such Participant's Base
Salary otherwise payable in regular, periodic paychecks during
such Plan Year. If an Eligible Employee fails to deliver a
Deferral Election, or to complete any of the other requisite
election procedures, in a timely manner, he shall be deemed to
have elected not to participate in the Plan for that Plan Year.
(b) Term. Each Participant's Deferral Election for a
Plan Year shall remain in effect with respect to a portion of all
Base Salary paid or payable during such Plan Year, but shall not
apply to any subsequent Plan Year.
(c) Amount. Each Eligible Employee's Deferral
Election shall specify a dollar amount, in increments of
$1,000.00, of annual Base Salary to be deferred. The maximum
amount that an Eligible Employee may defer for any Plan Year
shall be as follows:
(i) for an Eligible Employee who is designated as
a "senior manager", or otherwise designated by the Plan
Administrator as eligible to participate in the Plan (and
who is not also designated as a member of BellSouth's
"executive compensation group" for the Plan Year), 10% of
his Compensation; and
(ii) for an Eligible Employee who is designated as
a member of BellSouth's "executive compensation group", 25%
of his Compensation;
in each case, rounded to the next highest thousand dollars. The
total dollar amount shall be withheld from such Eligible
Employee's regular, periodic paychecks of Base Salary in
substantially equal installments throughout the Plan Year.
Notwithstanding any provision of this Plan or a Deferral
Election to the contrary, however, the amount withheld from any
payment of Base Salary shall be reduced automatically, if
necessary, so that it does not exceed the amount of such payment
net of all withholding, allotments and deductions, other than
any reduction pursuant to such Deferral Election. No amounts
shall be withheld during any period an individual ceases to
receive Base Salary as an actively employed Eligible Employee
for any reason during the Plan Year except that, in the case of
an individual on an approved paid leave of absence as an
Eligible Employee (including a paid leave of absence under a
short term disability plan of a Participating Company), amounts
shall be withheld from such leave of absence payments and
otherwise treated in the same manner as if such payments
constituted Base Salary under the Plan. No adjustment shall be
made in the amount to be withheld from any subsequent payment of
Base Salary for a Plan Year to compensate for any missed or
reduced withholding amounts above.
(d) Revocation. Once made for a Plan Year, a
Participant may not revoke his Deferral Election for such Plan
Year.
(e) Crediting of Deferred Compensation. The Plan
Administrator shall credit to each Participant's Account for a
Plan Year, as of the first day of such Plan Year, the entire
amount of the Participant's Deferral Contributions reflected in
his Deferral Election for such Plan Year; provided, that the
Participant's Account shall be automatically adjusted,
retroactively to the first day of such Plan Year, to reflect the
amount of Deferral Contributions actually made from Base Salary
(or pursuant to Section 3.4, if applicable) during the Plan Year
if for any reason the entire amount of the Participant's Deferral
Contributions so reflected is not made.
3.3 Deferral Elections and Multiple Participating
Companies. Any Deferral Election which is timely executed and
delivered to the Plan Administrator shall be effective to defer
Base Salary earned by the Participant from the Participating
Company employing such Participant at the time of his election or
any other Participating Company employing such Participant during
the Plan Year for which the Deferral Election is effective. In
particular, a Participant (i) who timely executes and delivers a
Deferral Election while employed by one Participating Company and
subsequently transfers to another Participating Company, or
(ii) who terminates employment and subsequently becomes employed
by another Participating Company, shall have the Base Salary that
is paid or payable to him by both Participating Companies reduced
under the terms of the Deferral Election and the Plan as if the
transfer or termination and reemployment had not occurred;
provided, that, as provided in Section 3.2(c), no amounts shall
be withheld attributable to any portion of the Plan Year during
which he is not receiving Base Salary as an Eligible Employee of
a Participating Company.
3.4 Termination Under Severance Arrangement. A Participant
eligible to participate in a severance plan or arrangement
sponsored by a Participating Company which provides for a lump-
sum severance payment upon termination of employment may elect,
on such form and at such time and in such manner as shall be
prescribed by the Plan Administrator, to reduce the amount of a
lump-sum severance payment to which the Participant may become
entitled under such plan or arrangement in an amount not to
exceed the dollar amount by which the Participant's Deferral
Contributions for the Plan Year in which such termination occurs
would not have been made at the time of termination of
employment, and the amount so elected shall for all purposes be
treated as Deferral Contributions made under the Plan.
3.5 Vesting. A Participant shall at all times be fully
vested in his Deferral Contributions and all investment earnings
attributable thereto.
ARTICLE IV
DETERMINATION AND CREDITING OF INVESTMENT RETURN
4.1 General Investment Parameters. The rate of return
credited to each Participant's Account shall be determined on the
basis of the Investment Option(s) selected by the Participant.
The terms of this selection process and the manner in which
investment return is credited are set forth in this Article IV.
4.2 Participant Direction of Deemed Investments. Each
Participant generally may direct the manner in which his Deferral
Contributions for each Plan Year shall be deemed invested in and
between the Stock Unit Option and/or the Interest Income Option,
in accordance with the following terms:
(a) Nature of Participant Direction. A Participant's
election of the Stock Unit Option and/or Interest Income Option
shall be for the sole purpose of determining the rate of return
to be credited to his Account for such Plan Year, and shall not
be treated or interpreted in any manner whatsoever as a
requirement or direction to actually invest assets in Company
Stock, an interest income fund or any other investment media.
The Plan, as an unfunded, nonqualified deferred compensation
plan, at no time shall have any actual investment of assets
relative to the benefits or Accounts hereunder.
(b) Investment of Contributions. In conjunction with
completing a Deferral Election for a Plan Year, an Eligible
Employee shall complete an Investment Election prescribing the
percentage of his Deferral Contributions for such Plan Year that
will be deemed to be invested in the Stock Unit Option and/or the
Interest Income Option; provided, such Investment Election shall
specify one of the three alternatives, as follows:
(i) 100% of the Deferral Contributions for such
Plan Year shall be deemed invested in the Stock Unit Option;
(ii) 100% of the Deferral Contributions for such
Plan Year shall be deemed invested in the Interest Income
Option; or
(iii) 50% of the Deferral Contributions for
such Plan Year shall be deemed invested in the Stock Unit
Option, and 50% of the Deferral Contributions for such Plan
Year shall be deemed invested in the Interest Income Option.
(c) Investment of Existing Account Balances. A
Participant may not make an Investment Election changing the
percentage of an existing Account balance that will be deemed to
be invested in the Stock Unit Option and/or the Interest Income
Option. Once an Investment Election is made with respect to an
Account, it shall continue to apply with respect to such Account
until all amounts in such Account are distributed.
(d) Investment Subaccounts. For the sole purpose of
tracking a Participant's investment elections and calculating
investment earnings attributable to a Participant's Account for a
Plan Year pursuant to the terms of this Article IV, the Plan
Administrator shall establish and maintain for such Participant
for such Plan Year a Stock Unit Subaccount and an Interest Income
Subaccount, as necessary, the total of which shall equal such
Participant's Account for such Plan Year.
4.3 Stock Unit Option.
(a) Stock Unit Subaccount. To the extent an Eligible
Employee makes an Investment Election in accordance with Section
4.2 to have all or a portion of his Deferral Contributions for a
Plan Year deemed to be invested in the Stock Unit Option, the
Participant's Stock Unit Subaccount for such Plan Year shall be
credited (subject to the adjustment described in subsection
3.2(e), if applicable), as of the first day of such Plan Year,
with a number of Stock Units equal to the number of full and
fractional shares of Company Stock that could have been purchased
with such portion of the Eligible Employee's Deferral
Contributions elected for such Plan Year at the average of the
high and low sales prices of one share of Company Stock on the
New York Stock Exchange for the last Business Day of each of the
three calendar months immediately preceding the first day of such
Plan Year.
(b) Cash Dividends. As of each date on which
BellSouth has paid a cash dividend on Company Stock, the number
of Stock Units credited to a Participant's Stock Unit Subaccount
for each Plan Year shall be increased by a number of additional
Stock Units equal to the quotient of (i) the amount of dividends
that would have been paid on the number of shares of Company
Stock equivalent to the number of Stock Units credited to such
subaccount as of such dividend payment date, divided by (ii) the
average of the daily high and low sales prices of one share of
Company Stock on the New York Stock Exchange for the period of
five Business Days ending on such dividend payment date (or the
period of five Business Days ending on the immediately preceding
Business Day if such date was not a Business Day).
(c) Adjustments. In the event of any change in
outstanding shares of Company Stock, by reclassification,
recapitalization, merger, consolidation, spinoff, combination,
exchange of shares, stock split, reverse stock split or
otherwise, or in the event of the payment of a stock dividend on
Company Stock, or in the event of any other increase or decrease
in the number of outstanding shares of Company Stock, other than
the issuance of shares for value received by BellSouth or the
redemption of shares for value, the Plan Administrator shall
adjust the number and/or form of Stock Units in the manner it
deems appropriate in its reasonable judgment to reflect such
event, including substituting or adding publicly traded shares of
companies other than the Company as a basis for determining Stock
Units. The Plan Administrator similarly shall make such
adjustments as it deems are appropriate in its reasonable
judgment in the form, including the basis of measurement, of
Stock Units in the event all shares of Company Stock cease for
any reason to be outstanding or to be actively traded on the New
York Stock Exchange. In the event the Plan Administrator
determines in its reasonable judgment that it would not be
possible to appropriately reflect an event under this paragraph
(c) by adjusting the number and/or form of Stock Units, the Plan
Administrator shall establish a special Valuation Date
appropriate to such event for all Stock Unit Subaccounts and
shall cause such subaccounts, as so valued, automatically to be
converted into Interest Income Subaccounts, which thereafter
shall be subject to Section 4.4.
4.4 Interest Income Option.
(a) Interest Income Subaccount. To the extent that an
Eligible Employee makes an Investment Election in accordance with
Section 4.2 to have all or a portion of his Deferral
Contributions for a Plan Year deemed to be invested in the
Interest Income Option, the Participant's Interest Income
Subaccount for such Plan Year shall be credited (subject to the
adjustment described in subsection 3.2(e), if applicable), as of
the first day of such Plan Year, with such portion of the
Eligible Employee's Deferral Contributions elected for such Plan
Year.
(b) Crediting of Deemed Interest. As of each
Valuation Date, the Plan Administrator shall credit a
Participant's Interest Income Subaccounts with the amount of
earnings applicable thereto for the period since the immediately
preceding Valuation Date. Such crediting of earnings for each
Interest Income Subaccount shall be effected, as follows:
(i) Amount Invested. The Plan Administrator
shall determine the amount of (A) in the case of an Interest
Income Subaccount established in connection with a Deferral
Election for the Plan Year ending on such Valuation Date,
such Participant's Deferral Contributions credited to such
Participant's Interest Income Subaccount for such Plan Year;
and (B) in the case of an Interest Income Subaccount for a
prior Plan Year, the balance of such Participant's Interest
Income Subaccount as of the immediately preceding Valuation
Date, minus the amount distributed from such Participant's
Interest Income Subaccount since the immediately preceding
Valuation Date; and
(ii) Determination of Amount. The Plan
Administrator then shall apply the Credited Interest Rate
for such Plan Year to such Participant's adjusted Interest
Income Subaccount (as determined in subparagraph (i)
hereof), and the total amount of investment earnings
resulting therefrom shall be credited to such Participant's
Interest Income Subaccount as of such Valuation Date.
4.5 Good Faith Valuation Binding. In determining the value
of Accounts, the Plan Administrator shall exercise its best
judgment, and all such determinations of value (in the absence of
bad faith) shall be binding upon all Participants and their
Beneficiaries.
4.6 Errors and Omissions in Accounts. If an error or
omission is discovered in the Account of a Participant or in the
amount of a Participant's Deferral Contributions, the Plan
Administrator, in its sole discretion, shall cause appropriate,
equitable adjustments to be made as soon as administratively
practicable following the discovery of such error or omission.
ARTICLE V
PAYMENT OF ACCOUNT BALANCES
5.1 Benefit Amounts.
(a) Benefit Entitlement. As his benefit under the
Plan, each Participant (or his Beneficiary) shall be entitled to
receive the total amount of his Accounts, determined as of the
most recent Valuation Date, and payable at such times and in such
forms as described in this Article V.
(b) Valuation of Benefit. For purposes hereof, each
Account of a Participant as of any Valuation Date shall be equal
to (i) the total amount of all of such Participant's Deferral
Contributions credited thereto; plus (ii) all deemed investment
earnings attributable thereto; minus (iii) the total amount of
all benefit payments previously made therefrom.
(c) Conversion of Stock Units into Dollars. For
purposes of converting some or all of a Participant's Stock Units
into a dollar amount in valuing his Accounts as of any Valuation
Date, the value of each Stock Unit shall be equal to the average
of the high and low sales prices of one share of Company Stock on
the New York Stock Exchange for the last Business Day of each of
the three calendar months ending on or immediately preceding such
Valuation Date.
5.2 Elections of Timing and Form. In conjunction with, and
at the time of, completing a Deferral Election for each Plan
Year, an Eligible Employee shall select the timing and form of
the distribution that will apply to the Account for his Deferral
Contributions (and deemed investment earnings attributable
thereto) for such Plan Year. The terms applicable to this
selection process are as follows:
(a) Timing. For a Participant's Account for each Plan
Year, such Participant may elect that his distribution will be
made or commence as of any January 1 following the Plan Year of
deferral; provided, he may not select a benefit payment or
commencement date for such Account that is later than the
twentieth January 1 following the end of the Plan Year of
deferral.
(b) Form of Distribution. For a Participant's Account
for each Plan Year, such Participant may elect that his
distribution will be paid in one of the following forms:
(i) a single lump-sum cash payment; or
(ii) substantially equal annual installments
(adjusted for investment earnings between payments in the
manner described in Article IV) over a period of one (1) to
ten (10) years; provided that the number of years so elected
shall in no event exceed one (1) year for each full $1,000
of Deferral Contributions elected for such Plan Year.
(c) Multiple Selections. An Eligible Employee may
select a different benefit payment or commencement date and/or a
different form of distribution with respect to his Account for
each Plan Year. For ease of administration, the Plan
Administrator may combine Accounts and subaccounts of a
Participant to which the same benefit payment/commencement date
and the same form of distribution apply.
5.3 Benefit Payments to a Participant.
(a) Timing. A Participant shall receive or begin
receiving a distribution of each of his Accounts as of the
earlier of (i) the January 1 selected by such Participant with
respect to each such Account pursuant to the terms of
Section 5.2(a); or (ii) the January 1 immediately following the
date that such Participant's employment with BellSouth and all
Affiliates ends for any reason, unless he returns to employment
with BellSouth or one of the Affiliates before such January 1. An
amount payable "as of" any January 1 shall be made as soon as
practicable after such January 1 and, unless extenuating
circumstances arise, no later than January 31.
(b) Form of Distribution. A Participant shall receive
or begin receiving a distribution of each of his Accounts in cash
in the form selected by such Participant with respect to such
Account pursuant to the terms of Section 5.2(b).
(c) Valuation of Single Lump-Sum Payments. The amount
of a Participant's single lump-sum distribution of any of his
Accounts as of any applicable January 1 shall be equal to the
value of such Account as of the Valuation Date immediately
preceding the date on which such distribution is paid.
(d) Valuation of Installment Payments. For purposes
of determining the amount of any installment payment to be paid
as of a January 1 from an Account, the following shall apply:
(i) for any amount of such Account attributable
to an Interest Income Subaccount as of the immediately
preceding Valuation Date, such amount shall be divided by
the number of remaining installments to be paid from such
Account (including the current installment); and
(ii) for any portion of such Account attributable
to a Stock Unit Subaccount as of the immediately preceding
Valuation Date, the total number of Stock Units constituting
such portion shall be divided by the number of remaining
installments to be paid from such Account (including the
current installment), and the resulting number of Stock
Units shall be converted into a dollar amount (pursuant to
the terms of Section 5.1(c)) as of such Valuation Date.
5.4 Death Benefits.
(a) General. If a Participant dies before receiving
the entire amount of his benefit under the Plan, such
Participant's Beneficiary shall receive distribution of amounts
remaining in the Participant's Accounts in the form, as elected
by the Participant on a Beneficiary designation form described
in Section 5.5, of either:
(i) a single lump-sum cash payment of the entire
balance in the Participant's Accounts as of the January 1
immediately following the date of the Participant's death;
or
(ii) (A) for Accounts with respect to which
distribution has not commenced under Section 5.2 at the time
of the Participant's death, substantially equal annual
installments (adjusted for investment earnings between
payments in the manner described in Article IV) over a
period of one (1) to ten (10) years, commencing as of the
January 1 immediately following the Participant's death; and
(B) for Accounts with respect to which distribution has
commenced in the form of installments described in
Section 5.2(b)(ii) at the time of the Participant's death,
continuation of such installment payment schedule.
An amount payable "as of" any January 1 shall be made as soon as
practicable after such January 1 and, unless extenuating
circumstances arise, no later than January 31.
(b) Valuation. The valuation rules described in
subsections 5.3(c) and 5.3(d) shall apply to payments described
in this Section 5.4.
5.5 Beneficiary Designation.
(a) General. A Participant shall designate a
Beneficiary or Beneficiaries for all of his Accounts by
completing the form prescribed for this purpose for the Plan by
the Plan Administrator and submitting such form as instructed by
the Plan Administrator. Once a Beneficiary designation is made,
it shall continue to apply until and unless such Participant
makes and submits a new Beneficiary designation form for this
Plan.
(b) No Designation or Designee Dead or Missing. In
the event that:
(i) a Participant dies without designating a
Beneficiary;
(ii) the Beneficiary designated by a Participant
is not surviving or in existence when payments are to be
made or commence to such designee under the Plan, and no
contingent Beneficiary, surviving or in existence, has been
designated; or
(iii) the Beneficiary designated by a
Participant cannot be located by the Plan Administrator
within 1 year from the date benefit payments are to be made
or commence to such designee;
then, in any of such events, the Beneficiary of such Participant
shall be the Participant's surviving spouse, if any can then be
located, and if not, the estate of the Participant, and the
entire balance in the Participant's Accounts shall be paid to
such Beneficiary in the form of a single lump-sum cash payment
described in Section 5.4(a)(i).
(c) Death of Beneficiary. If a Beneficiary who
survives the Participant, and to whom payment of Plan benefits
commences, dies before complete distribution of the Participant's
Accounts, the entire balance in such Accounts shall be paid to
the estate of such Beneficiary in the form of a single lump-sum
cash payment as of the January 1 immediately following such
Beneficiary's death. An amount payable "as of" any January 1
shall be made as soon as practicable after such January 1 and,
unless extenuating circumstances arise, no later than January 31.
The valuation rules described in subsection 5.3(c) shall apply to
any payments described in this subsection 5.5(c).
5.6 Taxes. If the whole or any part of any Participant's
or Beneficiary's benefit hereunder shall become subject to any
estate, inheritance, income, employment or other tax which a
Participating Company shall be required to pay or withhold, the
Participating Company shall have the full power and authority to
withhold and pay such tax out of any monies or other property in
its hand for the account of the Participant or Beneficiary whose
interests hereunder are so affected. Prior to making any
payment, the Participating Company may require such releases or
other documents from any lawful taxing authority as it shall deem
necessary.
ARTICLE VI
CLAIMS
6.1 Initial Claim. Claims for benefits under the Plan may
be filed with the Plan Administrator on forms or in such other
written documents, as the Plan Administrator may prescribe. The
Plan Administrator shall furnish to the claimant written notice
of the disposition of a claim within 90 days after the
application therefor is filed. In the event the claim is denied,
the notice of the disposition of the claim shall provide the
specific reasons for the denial, citations of the pertinent
provisions of the Plan, and, where appropriate, an explanation as
to how the claimant can perfect the claim and/or submit the claim
for review.
6.2 Appeal. Any Participant or Beneficiary who has been
denied a benefit shall be entitled, upon request to the Plan
Administrator, to appeal the denial of his claim. The claimant
(or his duly authorized representative) may review pertinent
documents related to the Plan and in the Plan Administrator's
possession in order to prepare the appeal. The request for
review, together with written statement of the claimant's
position, must be filed with the Plan Administrator no later than
60 days after receipt of the written notification of denial of a
claim provided for in Section 6.1. The Plan Administrator's
decision shall be made within 60 days following the filing of the
request for review. If unfavorable, the notice of the decision
shall explain the reasons for denial and indicate the provisions
of the Plan or other documents used to arrive at the decision.
6.3 Satisfaction of Claims. The payment of the benefits
due under the Plan to a Participant or Beneficiary shall
discharge the Participating Company's obligations under the Plan,
and neither the Participant nor the Beneficiary shall have any
further rights under the Plan upon receipt by the appropriate
person of all benefits. In addition, (i) if any payment is made
to a Participant or Beneficiary with respect to benefits
described in the Plan from any source arranged by BellSouth or a
Participating Company including, without limitation, any fund,
trust, insurance arrangement, bond, security device, or any
similar arrangement, such payment shall be deemed to be in full
and complete satisfaction of the obligation of the Participating
Company under the Plan to the extent of such payment as if such
payment had been made directly by such Participating Company; and
(ii) if any payment from a source described in clause (i) shall
be made, in whole or in part, prior to the time payment would be
made under the terms of the Plan, such payment shall be deemed to
satisfy such Participating Company's obligation to pay Plan
benefits beginning with the benefit which would next become
payable under the Plan and continuing in the order in which
benefits are so payable, until the payment from such other source
is fully recovered. The Plan Administrator or such Participating
Company, as a condition to making any payment, may require such
Participant or Beneficiary to execute a receipt and release
therefor in such form as shall be determined by the Plan
Administrator or the Participating Company. If receipt and
release is required but the Participant or Beneficiary (as
applicable) does not provide such receipt and release in a timely
enough manner to permit a timely distribution in accordance with
the general timing of distribution provisions in the Plan, the
payment of any affected distribution may be delayed until the
Plan Administrator or the Participating Company receives a proper
receipt and release.
ARTICLE VII
SOURCE OF FUNDS
Each Participating Company shall provide the benefits
described in the Plan from its general assets. However, to the
extent that funds in one or more trusts, or other funding
arrangement(s), allocable to the benefits payable under the Plan
are available, such assets may be used to pay benefits under the
Plan. If such assets are not sufficient or are not used to pay
all benefits due under the Plan, then the appropriate
Participating Company shall have the obligation, and the
Participant or Beneficiary, who is due such benefits, shall look
to such Participating Company to provide such benefits. No
Participant or Beneficiary shall have any interest in the assets
of any trust, or other funding arrangement, or in the general
assets of the Participating Companies other than as a general,
unsecured creditor. Accordingly, a Participating Company shall
not grant a security interest in the assets held by the trust in
favor of the Participants, Beneficiaries or any creditor.
ARTICLE VIII
PLAN ADMINISTRATION
8.1 Action by the Plan Administrator.
(a) Individual Administrator. If the Plan
Administrator is an individual, he shall act and record his
actions in writing. Any matter concerning specifically such
individual's own benefit or rights hereunder shall be determined
by the Board or its designee.
(b) Administrative Committee. If the Plan
Administrator is a committee, action of the Plan Administrator
may be taken with or without a meeting of committee members;
provided, action shall be taken only upon the vote or other
affirmative expression of a majority of the committee members
qualified to vote with respect to such action. If a member of
the committee is a Participant or Beneficiary, he shall not
participate in any decision which solely affects his own benefit
under the Plan. For purposes of administering the Plan, the Plan
Administrator shall choose a secretary who shall keep minutes of
the committee's proceedings and all records and documents
pertaining to the administration of the Plan. The secretary may
execute any certificate or any other written direction on behalf
of the Plan Administrator.
8.2 Rights and Duties of the Plan Administrator. The Plan
Administrator shall administer the Plan and shall have all powers
necessary to accomplish that purpose, including (but not limited
to) the following:
(a) to construe, interpret and administer the Plan;
(b) to make determinations required by the Plan, and
to maintain records regarding Participants' and Beneficiaries'
benefits hereunder;
(c) to compute and certify to Participating Companies
the amount and kinds of benefits payable to Participants and
Beneficiaries, and to determine the time and manner in which such
benefits are to be paid;
(d) to authorize all disbursements by a Participating
Company pursuant to the Plan;
(e) to maintain all the necessary records of the
administration of the Plan;
(f) to make and publish such rules and procedures for
the regulation of the Plan as are not inconsistent with the terms
hereof;
(g) to delegate to other individuals or entities from
time to time the performance of any of its duties or
responsibilities hereunder; and
(h) to hire agents, accountants, actuaries,
consultants and legal counsel to assist in operating and
administering the Plan.
The Plan Administrator shall have the exclusive right to construe
and interpret the Plan, to decide all questions of eligibility
for benefits and to determine the amount of such benefits, and
its decisions on such matters shall be final and conclusive on
all parties.
8.3 Bond; Compensation. The Plan Administrator and (if
applicable) its members shall serve as such without bond and
without compensation for services hereunder. All expenses of the
Plan Administrator shall be paid by the Participating Companies.
ARTICLE IX
AMENDMENT AND TERMINATION
9.1 Amendments. Subject to Section 9.3, the Board shall
have the right, in its sole discretion, to amend the Plan in
whole or in part at any time and from time to time. In addition,
the Plan Administrator shall have the right, in its sole
discretion, to amend the Plan at any time and from time to time
so long as such amendment is not of a material nature.
9.2 Termination of Plan. Subject to Section 9.3, BellSouth
reserves the right to discontinue and terminate the Plan at any
time, for any reason. Any action to terminate the Plan shall be
taken by the Board and such termination shall be binding on all
Participating Companies, Participants and Beneficiaries.
9.3 Limitation on Authority. Except as otherwise provided
in this Section 9.3, no contractual right created by and under
any Deferral Election made prior to the effective date of any
amendment or termination shall be abrogated by any amendment or
termination of the Plan, absent the express, written consent of
the Participant who made the Deferral Election.
(a) Plan Amendments. The limitation on authority
described in this Section 9.3 shall not apply to any amendment
of the Plan which is reasonably necessary, in the opinion of
counsel, (i) to preserve the intended income tax consequences of
the Plan described in Section 10.1, (ii) to preserve the status
of the Plan as an unfunded, nonqualified deferred compensation
plan for the benefit of a select group of management or highly
compensated employees and not subject to the requirements of
Part 2, Part 3 and Part 4 of Title I of ERISA, or (iii) to guard
against other material adverse impacts on Participants and
Beneficiaries, and which, in the opinion of counsel, is drafted
primarily to preserve such intended consequences, or status, or
to guard against such adverse impacts.
(b) Plan Termination. The limitation on authority
described in this Section 9.3 shall not apply to any termination
of the Plan as the result of a determination that, in the
opinion of counsel, (i) Participants and Beneficiaries generally
are subject to federal income taxation on Deferral Contributions
or other amounts in Participant Accounts prior to the time of
distribution of amounts under the Plan, or (ii) the Plan is
generally subject to Part 2, Part 3 or Part 4 of Title I of
ERISA, but in either case only if such termination is reasonably
necessary, in the opinion of counsel, to guard against material
adverse impacts on Participants and Beneficiaries, or BellSouth
or Participating Companies. Upon such termination, the entire
amount in each Participant's Accounts shall be distributed in a
single lump-sum distribution as soon as practicable after the
date on which the Plan is terminated. In such event, the Plan
Administrator shall declare that the date of termination (or, if
such day is not a Business Day, the last Business Day
immediately preceding such day) shall be a Valuation Date and
all distributions shall be made based on the value of the
Accounts as of such Valuation Date.
(c) Opinions of Counsel. In each case in which an
opinion of counsel is contemplated in this Section 9.3, such
opinion shall be in writing and delivered to the Board, rendered
by a nationally recognized law firm selected or approved by the
Board.
ARTICLE X
MISCELLANEOUS
10.1 Taxation. It is the intention of BellSouth that the
benefits payable hereunder shall not be deductible by the
Participating Companies nor taxable for federal income tax
purposes to Participants or Beneficiaries until such benefits are
paid by the Participating Company to such Participants or
Beneficiaries. When such benefits are so paid, it is the
intention of the Participating Companies that they shall be
deductible by the Participating Companies under Code Section 162.
10.2 Withholding. All payments made to a Participant or
Beneficiary hereunder shall be reduced by any applicable federal,
state or local withholding or other taxes or charges as may be
required under applicable law.
10.3 No Employment Contract. Nothing herein contained is
intended to be nor shall be construed as constituting a contract
or other arrangement between a Participating Company and any
Participant to the effect that the Participant will be employed
by the Participating Company or continue to be an employee for
any specific period of time.
10.4 Headings. The headings of the various articles and
sections in the Plan are solely for convenience and shall not be
relied upon in construing any provisions hereof. Any reference
to a section shall refer to a section of the Plan unless
specified otherwise.
10.5 Gender and Number. Use of any gender in the Plan will
be deemed to include all genders when appropriate, and use of the
singular number will be deemed to include the plural when
appropriate, and vice versa in each instance.
10.6 Assignment of Benefits. The right of a Participant or
his Beneficiary to receive payments under the Plan may not be
anticipated, alienated, sold, assigned, transferred, pledged,
encumbered, attached or garnished by creditors of such
Participant or Beneficiary, except by will or by the laws of
descent and distribution and then only to the extent permitted
under the terms of the Plan.
10.7 Legally Incompetent. The Plan Administrator, in its
sole discretion, may direct that payment be made to an
incompetent or disabled person, for whatever reason, to the
guardian of such person or to the person having custody of such
person, without further liability on the part of a Participating
Company for the amount of such payment to the person on whose
account such payment is made.
10.8 Entire Document. This Plan document sets forth the
entire Plan and all rights and limits. Except for a formal
amendment hereto, no document shall modify the Plan or create any
additional rights or benefits.
10.9 Governing Law. The Plan shall be construed,
administered and governed in all respects in accordance with
applicable federal law (including ERISA) and, to the extent not
preempted by federal law, in accordance with the laws of the
State of Georgia. If any provisions of this instrument shall be
held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof shall continue to
be fully effective.
EXHIBIT A
Participating Companies
Participating Company Names Effective Date
BellSouth Advertising and Publishing Corporation January 1, 1997
BellSouth Applied Technologies, Inc. January 1, 1997
BellSouth BSE, Inc. January 1, 1998
BellSouth Business Systems, Inc. January 1, 1997
BellSouth Cellular Corp. January 1, 1997
BellSouth Cellular National Marketing, Inc. January 1, 1997
BellSouth Communication Systems, Inc. January 1, 1997
BellSouth Corporate Aviation and Travel
Services, Inc. January 1, 1997
BellSouth Corporation January 1, 1997
BellSouth D.C., Inc. January 1, 1997
BellSouth Information Systems, Inc. (BIS) January 1, 1997
BellSouth Interactive Media Services, Inc. January 1, 1997
BellSouth International, Inc. January 1, 1997
BellSouth Long Distance, Inc. January 1, 1997
BellSouth Mobile Data Services, Inc. January 1, 1997
BellSouth.net Inc. January 1, 1997
BellSouth Personal Communications, Inc. January 1, 1997
BellSouth Public Communications, Inc. January 1, 1998
BellSouth Resources, Inc. January 1, 1997
BellSouth Telecommunications, Inc. January 1, 1997
BellSouth Wireless, Inc. January 1, 1997
Intelligent Media Ventures, Inc. January 1, 1997
L. M. Berry and Company January 1, 1997
Ondacom Wireless Services, Inc. January 1, 1998
Stevens Graphics, Inc. January 1, 1997
Sunlink Corporation January 1, 1997
Westel-Indianapolis Company January 1, 1998
-7-
BELLSOUTH EMPLOYEE STOCK INVESTMENT PLAN
ARTICLE I -- PURPOSE
The BellSouth Employee Stock Investment Plan is intended to
provide a method whereby employees of BellSouth Corporation and
certain of its affiliates will have an opportunity to acquire a
proprietary interest in BellSouth Corporation through the
purchase of shares of its common stock.
ARTICLE II -- DEFINITIONS, GENDER AND NUMBER
2.01 Definitions
Each term set forth in this Section 2.01 shall have the
respective meaning set forth opposite such term for purposes of
this Plan, and when the defined meaning is intended the term
shall be capitalized.
"Affiliate" means any entity that, directly or indirectly,
controls, is controlled by, or is commonly controlled with
BellSouth.
"BellSouth" means BellSouth Corporation, a Georgia
corporation.
"Contribution Account" means the bookkeeping entry
maintained by the Plan Administrator with respect to a
Participant showing the payroll deductions, matching
contributions, cash dividends and other contributions credited to
the Participant for the Contribution Period.
"Contribution Period" means the applicable calendar month
during which the Plan is in effect.
"Eligible Employee" means any regular full- or part-time
Employee who is in active status, who is not an "Eligible
Employee" under the terms of the Employee Stock Purchase Plan,
who has reached the age of majority in the state of his residence
and who is not an officer.
"Eligible Pay" means base salary.
"Employee" means any individual employed by a Participating
Company.
"Employee Stock Purchase Plan" means the BellSouth Employee
Stock Purchase Plan for represented employees.
"Participant" means any Eligible Employee who has elected to
have payroll deductions credited to his Contribution Account
during a Contribution Period pursuant to Article III or any
former Eligible Employee who has amounts credited to his
Contribution Account or shares credited to his Stock Account.
"Participating Company" means BellSouth and any of its
Affiliates that have elected, with the consent of BellSouth, to
maintain the Plan for its Employees.
"Plan" means the BellSouth Employee Stock Investment Plan.
"Plan Administrator" means the person or persons designated
by BellSouth to administer the Plan.
"Purchasing Agent" means the person or persons designated by
BellSouth as its agent to purchase shares of Stock under the
Plan.
"Stock" means the $1.00 par value common stock of BellSouth.
"Stock Account" means the bookkeeping entry maintained by
the Plan Administrator with respect to a Participant showing the
number of shares of Stock credited to the Participant under the
Plan.
2.02 Gender and Number
Unless the context clearly requires otherwise, the masculine
pronoun whenever used shall include the feminine and neuter
pronouns, the singular shall include the plural and the plural
shall include the singular.
ARTICLE III -- ELIGIBILITY AND PARTICIPATION
Any Eligible Employee who is employed by a Participating
Company on the first day of a Contribution Period shall be
eligible to participate in the Plan for each pay period that
begins during such Contribution Period. An Eligible Employee may
become a Participant by following the procedures established by
the Plan Administrator for commencing participation on or before
the date set therefor by the Plan Administrator, which date shall
be prior to the first day of such Contribution Period. Payroll
deductions elected by a Participant shall commence as of the
first day of the first pay period that begins during the
Contribution Period.
ARTICLE IV -- PAYROLL DEDUCTIONS AND MATCHING CONTRIBUTIONS
4.01 Credits to Contribution Accounts
(a) A Participant shall elect, in accordance with
procedures established by the Plan Administrator, to have
deductions made from his Eligible Pay for each pay period that
begins during the Contribution Period in $5 increments from $10
to $500. Payroll deductions shall continue at the rate elected
by the Participant for subsequent Contribution Periods until the
Participant changes or terminates the rate of deduction in
accordance with Section 4.03, his employment is terminated or the
applicable Participating Company terminates its participation in
the Plan. No payroll deduction shall be credited to a
Participant's Contribution Account for a payroll period in which
the amount to be deducted exceeds the amount of the Participant's
Eligible Pay available for allotment. The amount of such payroll
deductions shall be credited to the Participant's Contribution
Account on the date of the deduction and used monthly to purchase
Stock in accordance with Section 5.01.
(b) A Participant's Contribution Account shall be credited
with the amount of any dividends paid on the shares of stock
credited to his Stock Account on the date such dividends are
paid.
(c) Each Employee of BellSouth Telecommunications, Inc., on
April 1, 1996, shall have credited to his Contribution Account on
such date an amount equal to $1,200 reduced by any withholding
and payroll taxes occasioned by such credit.
4.02 Matching Contributions
The Plan Administrator shall credit a matching contribution
equal to 15% of a Participant's payroll deductions during a
Contribution Period to such Participant's Contribution Account.
The Plan Administrator shall not credit matching contributions
with respect to the amounts referenced in paragraphs 4.01(b) and
(c).
The Participant's Eligible Pay shall be reduced by any
withholding and payroll taxes occasioned by the match. The Plan
Administrator shall credit such matching contributions to the
Participant's Contribution Account on the date of the related
payroll deduction.
4.03 Changes in Payroll Deductions
A Participant may elect, in accordance with procedures
established by the Plan Administrator, to change the rate of his
payroll deductions or to terminate payroll deductions at any time
up to and including the last day of a Contribution Period, with
such election being effective as of the first day of the first
full pay period of the following Contribution Period. A
Participant may make up to four such elections per calendar year.
Unless it is his fourth election during a calendar year, a
Participant's termination of payroll deductions for any
Contribution Period shall not have any effect upon his
eligibility to participate in any succeeding Contribution Period.
If, as his fourth election during a calendar year, a participant
elects to terminate his payroll deductions, he may not elect to
have payroll deductions recommence until the first full pay
period in the first Contribution Period of the following calendar
year.
4.04 Interest
The amounts credited to Participants' Contribution Accounts
shall not be credited with interest.
4.05 Employment Transfers
(a) If a Participant transfers employment to another
Participating Company, his election pursuant to Section 4.01
shall remain in effect with his new employer and any matching
contribution attributable to the amount credited to his
Contribution Account as of the date of his transfer shall become
the obligation of his new employer.
(b) If a Participant becomes eligible to participate in the
Employee Stock Purchase Plan, he must make a new election under
the terms of that plan.
(c) If a Participant transfers employment to an Affiliate
of BellSouth that is not a Participating Company, his active
participation shall terminate after any amounts attributable to
his last paycheck from the Participating Company are credited to
his Contribution Account. The Plan Administrator shall continue
to hold the shares of Stock credited to his Stock Account subject
to the Participant's election to receive a distribution in
accordance with, or a distribution mandated by, Section 5.03.
ARTICLE V -- PURCHASE, ALLOCATION AND DISTRIBUTION OF STOCK
5.01 Purchase of Stock
At such time after the end of a Contribution Period as
prescribed by the Purchasing Agent, each Participating Company
shall transfer to the Purchasing Agent the aggregate amount
credited to the Contribution Accounts of Participants that it
employs. The Purchasing Agent shall use such amounts to purchase
shares of Stock on such day or days after the end of a
Contribution Period, and during the immediately following
Contribution Period, as it shall determine in its sole and
absolute discretion. The Purchasing Agent may purchase shares of
Stock on the open market, or it may purchase newly issued shares
or treasury shares of Stock.
5.02 Allocation of Stock
As soon as practicable following the purchase of shares
pursuant to Section 5.01, the Plan Administrator shall credit to
the Stock Account of each Participant a number of the purchased
shares that is the product of (a) and (b), where (a) is the total
number of shares of Stock purchased under Section 5.01 for the
Contribution Period, and (b) is the number that results from
dividing the amount credited to the Participant's Contribution
Account for such Contribution Period by the aggregate amount
credited to the Contribution Accounts of all Participants for
such Contribution Period.
A Participant shall have no interest in the shares of Stock
purchased for a Contribution Period until the Plan Administrator
credits the applicable number of shares of Stock to the
Participant's Stock Account.
5.03 Distributions of Stock and Cash
(a) Subject to the terms of this Section 5.03, a
Participant may elect to receive a distribution of some or all of
the shares of Stock credited to his Stock Account at any time,
and the Plan Administrator shall process such request for the
distribution to occur in the month following the month in which
it receives such election. A Participant may not elect to
receive a distribution of (i) shares of Stock purchased with
matching contributions until the first day of the second calendar
year after such matching contributions were credited to his
Contribution Account, or (ii) less than 20 shares of Stock.
(b) (i) If a Participant terminates employment with
BellSouth and its Affiliates or the Plan is terminated
by the Participating Company that employs the
Participant, the Plan Administrator shall distribute to
him in cash the amount credited to his Contribution
Account.
(ii) If the Participant has less than 20 shares of
Stock credited to his Stock Account when he terminates
employment with BellSouth and its Affiliates or when
the Plan is terminated, the Plan Administrator shall
distribute to him, at his election, either (A) cash
equal to the fair market value of the shares in his
Stock Account on the date such shares are sold, less
the administrative fee provided in paragraph 5.03(c),
or (B) the shares in his Stock Account, with the number
of shares distributed being reduced by the
administrative fee provided in paragraph 5.03(c). If
the Participant has 20 or more shares of Stock credited
to his Stock Account when he terminates employment with
BellSouth and its Affiliates or when the Plan is
terminated, the Plan Administrator shall distribute
such shares of Stock to the Participant, with the
number of shares distributed being reduced by the
administrative fee provided in paragraph 5.03(c).
In all cases above, the distribution shall be processed by the
Plan Administrator as soon as practicable following the event
that causes the distribution. The Plan Administrator shall
determine the fair market value of any shares that are sold on a
given day based on the amount realized from all sales of shares
under the Plan on such day.
(c) All distributions shall be reduced by a $25
administrative fee. If a Participant is to receive a
distribution of Stock, the Plan Administrator shall withhold from
such distribution shares or fractional shares of Stock with a
fair market value of $25 determined as provided in paragraph
5.03(b). Cash equal to the fair market value of any fractional
shares shall be distributed in lieu of the fractional shares.
(d) A Participant may make up to two elections during a
calendar year to receive distributions of Stock. The
distributions provided in paragraph 5.03(b) above shall not count
as one of such elections.
ARTICLE VI -- ADMINISTRATION
Except as such duties may be delegated to the Plan
Administrator by BellSouth or under the terms of the Plan,
BellSouth shall administer the Plan and shall have plenary
authority in its discretion to interpret and construe any and all
provisions of the Plan, to adopt procedures for administering the
Plan, and to make all other determinations deemed necessary or
advisable for administering the Plan. BellSouth's determination,
or the determination of its delegate, if applicable, on the
foregoing matters shall be conclusive.
ARTICLE VII -- MISCELLANEOUS
7.01 Transferability
Payroll deductions and matching contributions credited to a
Participant's Stock Account and any rights with regard to the
purchase of shares of Stock under the Plan may not be assigned,
transferred, pledged, or otherwise disposed of in any way by the
Participant. Any such attempted assignment, transfer, pledge or
other disposition shall be without effect.
7.02 Designation of Beneficiary
In accordance with procedures established by the Plan
Administrator, a Participant may designate one or more
beneficiaries to receive the shares credited to his Stock Account
and the cash credited to his Contribution Account upon his death
while a Participant. If a Participant dies without designating a
beneficiary, the Plan Administrator cannot locate the beneficiary
or there is a dispute as to the validity of the designation, such
shares and cash shall be distributed to his estate.
7.03 Use of Funds
Prior to the time such funds are transferred to the
Purchasing Agent, all payroll deductions received or held by the
Participating Company under this Plan may be used by the
Participating Company for any corporate purpose, and the
Participating Company shall not be obligated to segregate such
payroll deductions.
7.04 Amendment and Termination
Unless the BellSouth Savings Plan Committee terminates the
Plan earlier or extends the duration of the Plan, the Plan shall
terminate at the close of business on December 31, 2000. In
addition, a Participating Company may elect to terminate its
participation in the Plan at any time. The BellSouth Savings
Plan Committee shall have complete power and authority to amend
the Plan. No termination or amendment of the Plan shall cause a
Participant to forfeit any amount credited to his Contribution
Account or the shares credited to his Stock Account.
7.05 Effective Date
The Plan shall become effective generally as of April 1,
1996, and shall become effective as to a Participating Company on
the date specified by BellSouth.
7.06 No Employment Rights
The Plan does not, directly or indirectly, create any right
for the benefit of any Employee or class of Employees to purchase
any shares of Stock under the Plan except in accordance with its
terms, or create in any Employee or class of Employees any right
with respect to continuation of employment by the Participating
Company, and it shall not be deemed to interfere in any way with
the Participating Company's right to terminate, or otherwise
modify, an Employee's employment at any time.
7.07 Effect of Plan
The provisions of the Plan shall, in accordance with its
terms, be binding upon, and inure to the benefit of, all
successors of each Participant, including, without limitation,
such Participant's estate and the executors, administrators or
trustees thereof, heirs and legatees, and any receiver, trustee
in bankruptcy or representative of creditors of such Participant.
7.08 Governing Law
The laws of the State of Georgia will govern all matters
relating to this Plan except to the extent they are superseded by
the laws of the United States.
AMENDMENT TO THE
BELLSOUTH EMPLOYEE STOCK INVESTMENT PLAN
This Amendment is made to the BellSouth Employee Stock
Investment Plan (the "Plan"), which was adopted effective
April 1, 1996. Pursuant to Section 7.04 of the Plan, the
BellSouth Savings Plan Committee hereby amends the Plan,
effective January 1, 1997, as follows:
1.
Amend Section 2.01 of the Plan by replacing the
definition of "Eligible Employee" with the following:
"Eligible Employee" means any regular full- or
part-time Employee who is in active status, who is not an
"Eligible Employee" under the terms of the Employee Stock
Purchase Plan, and who has reached the age of majority in
the state of his residence.
2.
Amend Paragraph 4.01(a) of the Plan by replacing the
first sentence of said Paragraph with the following:
(a) A Participant shall elect, in accordance with
procedures established
by the Plan Administrator, to have deductions made from his
Eligible Pay for each pay period that begins during the
Contribution Period in $5 increments from $10 to $500
($1,000 in the case of Participants on a monthly payroll
system).
APPROVED this 27 day of November, 1996.
BELLSOUTH SAVINGS PLAN COMMITTEE:
/s/ H.C. Henry, Jr.
H. C. Henry, Jr.
Executive Vice President - Corporate Relations,
Chairman
3/19/97-65934
AMENDMENT TO THE BELLSOUTH
EMPLOYEE STOCK INVESTMENT PLAN
This amendment is made to the BellSouth Employee Stock
Investment Plan (the "Plan"), which was adopted effective as of
April 1, 1996. Pursuant to the authority reserved to the
BellSouth Savings Plan Committee in Section 7.04 of the Plan, the
Plan is hereby amended, effective April 1, 1997, as follows:
By deleting the first sentence of subparagraph 4.01(a)
thereof and substituting the following:
(a) A Participant shall elect, in accordance with
procedures established by the Plan Administrator, to have
deductions made from his Eligible Pay for each pay period in Five
Dollars ($5) increments
- - from Ten Dollars ($10) to Two Hundred Thirty Dollars ($230)
if paid weekly;
- - from Ten Dollars ($10) to Four Hundred Sixty Dollars ($460)
if paid bi-weekly;
- - from Ten Dollars ($10) to Five Hundred Dollars ($500) if
paid semi-monthly; and
- - from Ten Dollars ($10) to One Thousand Dollars ($1,000) if
paid monthly.
APPROVED this 21st day of March, 1997.
BELLSOUTH SAVINGS PLAN COMMITTEE
BY: /s/ H.C. Henry, Jr.
H.C. Henry, Jr.
Executive Vice President - Corporate Relations
Chairman
AMENDMENT TO THE
BELLSOUTH EMPLOYEE STOCK INVESTMENT PLAN
This Amendment is made to the BellSouth
Employee Stock Investment Plan (the "Plan"),
which was adopted effective April 1, 1996.
Pursuant to Section 7.04 of the Plan, the
BellSouth Savings Plan Committee hereby amends
the Plan, effective April 1, 1998, as follows:
1.
Amend Section 2.01 of the Plan by replacing the
definition of "Participant" with the following:
"Participant" means any Eligible
Employee who has elected to have payroll
deductions credited to his Contribution Account
during a Contribution Period pursuant to
Article III or any Eligible Employee or former
Eligible Employee who has amounts credited to
his Contribution Account or share credited to
his Stock Account.
2.
Amend Section 5.02 by adding the following
paragraph between the first and second
paragraphs of said Section:
If an Eligible Employee of BellSouth
receives a Signal Award (or an award that
is a successor to the Signal Award) that
is designated to be payable in Stock, the
Plan Administrator shall credit the
awarded number of shares of Stock to such
Eligible Employee's Stock Account as of
the date the Purchasing Agent purchases
such Stock at the direction of the Plan
Administrator. Stock purchased pursuant
to the prior sentence shall not be counted
for purposes of clause (a) in the
preceding paragraph.
3.
Amend Section 5.03 by replacing paragraph
5.03(a) with the following:
(a) Subject to the terms of this Section
5.03, and in accordance with
procedures established by the Plan Administrator, a
Participant may elect
to receive a distribution of some or all of the
shares credited to his Stock Account at any
time, and the Plan Administrator shall process
such request for the distribution to occur in
the month following the month
in which it receives such election. A
Participant may not elect to receive a
distribution of (x) shares purchased with
matching contributions until the first day
of the second calendar year after such
matching contributions were credited to his
Contribution Account, (y) shares purchased
pursuant to the second paragraph of Section
5.02 until such shares have been credited
to his Contribution Account for at least
one year, or (z) less than 20 shares, of
Stock.
4.
Amend Section 5.03 by replacing the last
sentence of subparagraph 5.03(b)(ii) with
the following:
If the Participant has 20 or more
shares of Stock credited to his Stock
Account when he terminates employment
with BellSouth and its Affiliates or when
the Plan is terminated, the Participant
may elect, in accordance with procedures
established by the Plan Administrator,
(X) to receive cash equal to the value of
the shares credited to his Stock Account,
(Y) to receive a distribution of the
shares credited to his Stock Account, or
(Z) to have the shares credited to his
Stock Account transferred to the BellSouth
Direct Stock Purchase and Dividend
Reinvestment Plan.
5.
Amend Section 7.02 by adding the following
sentence after the first sentence thereof.
A Participant's beneficiary or
beneficiaries shall have the same distribution
options as those provided to terminated
Participants in paragraph 5.03(b).
APPROVED this 5th day of May, 1998.
BELLSOUTH SAVINGS PLAN COMMITTEE:
/s/ Richard D. Sibbernsen
Richard D. Sibbernsen
Vice President-Human Resources,
Chairman
Officer Motor Vehicle Policy
Purpose
This policy provides for the assignment of an automobile to
those officers who have a continuous need for business
transportation to direct the activities of their
subordinates and to otherwise conduct company business. It
is also in the Corporation's best interests for its officers
to be involved in community activities including certain
civic and social affairs, and automobiles are provided to
the officers to facilitate participation in these
activities. There may be occasions where the appropriate
driver is the officer's duly licensed spouse.
Automobiles may be purchased or leased, at the discretion of
the employing company. The assigned company motor vehicle
support group will be responsible for the maintenance of the
automobile on a routine basis. A vehicle credit card will
be provided to the officer to facilitate the purchase of gas
and oil during extended trips.
Tax Considerations
The procedures contained in this document constitute a
reasonable approach to the requirement of the tax laws as we
understand them at this time. Revisions to the IRS
regulations or changes in the laws themselves could cause
further changes in these procedures.
Internal Revenue Service (IRS) regulations currently require
an employer to include in an employee's taxable income the
value of personal use of an employer provided motor vehicle.
Business deductions and tax credits for automobiles used
less them 100% for "qualified business use" are available
only in proportion to business usage. "Qualified business
use" includes personal use by employees when the "fair
value" of such use is treated as compensation.
Accordingly, income will be imputed to each officer on an
annual basis in accordance with the Annual Lease Value
special rule established by the IRS. For the purpose of
this plan, the annual reporting period is defined as
November 1 of the prior year through October 31 of the
current year. The annual lease value determination will be
made during November of the current year with resulting
taxable compensation imputed to the officer prior to year-
end. Generally, lease value is determined by the age, make,
model and purchase price of the vehicle.
To facilitate proper tax treatment, the annual lease value
for each automobile will be prorated among the three
categories, based upon each category's respective mileage as
a percent of the total miles driven during that reporting
period. Each category's portion of the annual lease value
will receive the following tax treatment:
Out-of-town Business: Trips of a business nature which
exceed 50 miles from the officer's residence will be
categorized as business mileage. The prorated annual
lease value associated with this category will be
considered as a fully deductible business expense for the
employing company. No taxable compensation will accrue
to the employee for substantiated out-of-town business
trips.
Out-of-town Personal: Trips of a personal nature which
exceed 50 miles from the officer's residence will be
categorized as out-of-town personal mileage. The
prorated annual lease value associated with this category
will be treated as taxable compensation to the employee.
There will be no gross-up of these amounts for applicable
taxes. The employee will be responsible for any
resulting tax obligations associated with these amounts.
In-town Personal: The remaining mileage driven during
the reporting period (excluding reported business and out-
of-town personal mileage) will be categorized as in-town
personal mileage. In all instances, the daily commuting
between the officer's residence and his/her primary
officer location will be included in this category,
regardless of the distance between these two locations.
The prorated annual lease value associated with this
category will be treated as taxable compensation to the
employee. These amounts will be grossed-up for
applicable taxes and appropriate payroll withholdings
applied.
Reporting Requirements
In order to minimize required record keeping on the part of
both the company and the officer, the following reporting
procedures have been developed. It is crucial that these
procedures be followed in order to retain for the company
any tax benefits for motor vehicle expenses associated with
officer vehicles.
Exhibit A, Report of Monthly Officer Data, should be used to
log and report each out-of-town trip made during the course
of the month, whether of a business or personal nature. An
"out-of-town" trip is defined as one which is at lease 50
miles one-way from the officer's primary residence. Round
trips may be reported as a single line item for simplicity.
A brief business description must be provided in the
appropriate field. Personal trips should be so noted. If
no out-of-town trips occur, the report should be marked
"NOTHING TO REPORT" for documentation purposes.
The completed report should be forwarded by the 10th of the
following month to:
Executive Payroll Office
15B04 Campanile
1155 Peachtree Street NE
Atlanta, GA 30367-6000
A copy should be retained by the officer's secretary in the
event the original is lost.
It is the responsibility of the motor vehicle maintenance
organization in each company to record the odometer readings
of each officer vehicle at the beginning and end of the
annual reporting period and at the time of acquisition or
disposition of the vehicle, if appropriate. Should a single
vehicle be assigned to more than one officer during the
course of the year, an interim odometer reading should be
taken at the time of transfer between the two officers to
ensure proper income applications.
A detailed listing by vehicle of the odometer readings,
along with the name of the officer to which the vehicle was
assigned and the period of assignment, must be reported by
the 5th workday of November to:
BellSouth Corporate Tax Office
15K09 Campanile
1155 Peachtree Street NE
Atlanta, GA 30367-6000
Upon receipt, the Corporate Tax Office is responsible for
computing the annual lease value to be applied to each
vehicle and forwarding these amounts along with other
pertinent information to the Executive Payroll Office by
November 15.
The Executive Payroll Office is responsible for categorizing
the mileage reported by each officer and developing the
proration factors to be applied to the annual lease value
for each category. The Executive Payroll Office is also
responsible for ensuring that the appropriate tax treatment
is afforded the officer with respect to the income resulting
from the automobiles assigned to him/her during the
reporting period. Exhibit B provides an example of the
proration, gross-up and tax withholding processes.
Exhibit A
REPORT OF MONTHLY OFFICER DATA
OFFICER NAME: ________ FOR: ___________________
(Month) (Year)
Prepared by: ___________ Telephone:________________
MOTOR VEHICLE INFORMATION (Report business or personal
trips exceeding 50 miles one-way from officer's residence)
VEHICLE NUMBER ____________________________
DATE FROM TO BUSINESS REASON MILES
DRIVEN
Total Business Miles Reported ______________
Total Out-of-town Personal Miles Reported ______________
LICENSE FEE EXEMPTIONS (Report number of days worked
outside jurisdiction)
CITY OF BIRMINGHAM, AL _____ JEFFERSON COUNTY, AL ___________
EXCEPTION TIME REPORTING (Report number of hours worked
during month on specified activity)
GRASS ROOTS ____________ OTHER:_______________________________
(hours) (description)
FED PAC ____________ OTHER:__________________________________
(hours) (description)
Exhibit B
OFFICER MOTOR VEHICLE POLICY
WORKSHEET FOR COMPUTING IMPUTED INCOME, WITHHOLDING AND
GROSS-UPS
NAME YEAR
________________________ _________
1 DEVELOPMENT OF PRORATION FACTORS
.
a. Annual Lease Value (from BellSouth $4,850.00
Tax Office)
b. Odometer at beginning of period 12,650 see Note a.
(Nov 1 of prior year)
c. Odometer at end of period (Oct 31 24,773 see Note a.
of current year)
d. Total miles during annual reporting 12,123 see Note a.
period (line 1c - line 1b)
e. Total out-of-town business miles 2,000
from logs
f. Total out-of-town personal miles 252
from logs
g. Total in-town personal miles (line 9,871
1d - line 1e - line 1f)
2 DEVELOPMENT OF IMPUTED INCOME FOR OUT-OF-TOWN PERSONAL
a. Prorata share of annual lease value 100.82
includible in income
(line 1a * line 1f / line 1d)
b. Additional includible at $.055 per 13.86
mile (line 1f * $.055)
c. Total imputed income for out-of- 114.68
town personal (line 2a + line 2b)
3 DEVELOPMENT OF IMPUTED INCOME FOR IN-TOWN PERSONAL
a. Prorata share of annual lease value 3,949.05
includible in income
(line 1a * line 1g / line 1d)
b. Additional includible at $.055 per 542.91
mile (line 1g * $.055)
c. Total imputed income for in-town 4,491.96
personal (line 3a + line 3b)
4 DEVELOPMENT OF GROSS-UP FOR IN-TOWN PERSONAL
Rates:
r1=Federal Highest expected rate 33.93%
for federal
r2=FICA-OASDI For Gross-up (FICA 0.00%
max will not be met)
r3=FICA-HI For Gross-up (FICA max 0.00%
will not be met)
r4=FICA-OASDI For Withholding 0.00% see Note b.
(FICA max will be met)
r5=FICA-HI For Withholding (FICA 0.00% see Note b.
max will be met)
r6=State Highest rate for state 5.00%
r7=Local 1 Highest rate for 0.00%
jurisdiction
r8=Local 2 Highest rate for 0.00%
jurisdiction
a. Gross-up factor [100% / (100% - 1.6375
r1 - r2 - r3 - r6 - r7 - r8)]
b. Total imputed income (line 3c * 7,355.58
line 4a)
b. Federal income tax grossed-up and 2,639.02
withheld (r1 * line 3c)
c. FICA-OASDI grossed-up and withheld 0.00
(r2 * line 3c)
d. FICA-HI grossed-up and withheld 0.00
(r3* line 3c)
c. FICA-OASDI withholding only (r4 * 0.00
line 3c)
d. FICA-HI withholding only (r5 * line 0.00
3c)
e. State income tax grossed-up and 224.60
withheld (r6 * line 3c)
f. Local 1 income tax grossed-up and 0.00
withheld (r7 * line 3c)
g. Local 2 income tax grossed-up and 0.00
withheld (r8 * line 3c)
h. Total taxes withheld (sum lines 4a 2,863.62
through 4g)
NOTES:
a. For 1986 and later years, the annual reporting
period begins with November 1 of the preceding year
and ends October 31 of the current year.
b. FICA taxes must be withheld if FICA wage maximum has
not been reached. No gross-up will be applied if it
is expected that the FICA maximum will be reached by
year-end.
EXHIBIT 11
BellSouth Corporation
Computation of Earnings Per Share
For the Three Month
Periods Ended
March 31,
1998 1997
Basic Earnings Per Common Share:
Net Income $ 892 $ 693
======= =======
Weighted
average shares
Outstanding 991 992
======= =======
Earnings Per
Common Share $ .90 $ .70
======= =======
EXHIBIT 11
BellSouth Corporation
Computation of Earnings Per Share (continued)
For the Three Month
Periods Ended
March 31,
1998 1997
Diluted Earnings Per Common Share:
Net Income $ 892 $ 693
======= =======
Weighted
average shares
Outstanding 991 992
Incremental
shares from
Assumed
exercise of
stock options
and payment of
performance
share awards 6 2
------- -------
Total Shares 997 994
======= =======
Earnings Per
Common Share $ .89 $ .70
======= =======
EXHIBIT 12
BellSouth Corporation
Computation Of Earnings To Fixed Charges
(Dollars In Millions)
For the Three
Months Ended
March 31,
1998
1. Earnings
(a) Income from continuing operations $ 1,637
before deductions for taxes and interest
(b) Portion of rental expense 22
representative of interest factor
(c) Equity in losses from less-than-50% 16
owned investments (accounted for under the
equity method of accounting)
(d) Excess of earnings over distributions
of less-than-50%-owned investments
(accounted for under the equity mehtod of
accounting) (12)
TOTAL $ 1,663
2. Fixed Charges
(a) Interest $ 199
(b) Portion of rental expense
representative of interest factor 22
TOTAL $ 221
Ratio (1 divided by 2) 7.5
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,120
<SECURITIES> 9
<RECEIVABLES> 4,686
<ALLOWANCES> 253
<INVENTORY> 421
<CURRENT-ASSETS> 7,516
<PP&E> 55,283
<DEPRECIATION> 31,933
<TOTAL-ASSETS> 36,943
<CURRENT-LIABILITIES> 8,541
<BONDS> 7,673
0
0
<COMMON> 1,010
<OTHER-SE> 14,682
<TOTAL-LIABILITY-AND-EQUITY> 36,943
<SALES> 110
<TOTAL-REVENUES> 5,426
<CGS> 204
<TOTAL-COSTS> 2,710
<OTHER-EXPENSES> 1,262
<LOSS-PROVISION> 76
<INTEREST-EXPENSE> 190
<INCOME-PRETAX> 1,447
<INCOME-TAX> 555
<INCOME-CONTINUING> 892
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 892
<EPS-PRIMARY> 0.90
<EPS-DILUTED> 0.89
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,570
<SECURITIES> 17
<RECEIVABLES> 4,996
<ALLOWANCES> 246
<INVENTORY> 393
<CURRENT-ASSETS> 8,117
<PP&E> 53,828
<DEPRECIATION> 30,967
<TOTAL-ASSETS> 36,301
<CURRENT-LIABILITIES> 8,873
<BONDS> 7,348
0
0
<COMMON> 1,010
<OTHER-SE> 14,155
<TOTAL-LIABILITY-AND-EQUITY> 36,301
<SALES> 487
<TOTAL-REVENUES> 20,561
<CGS> 1,000
<TOTAL-COSTS> 10,218
<OTHER-EXPENSES> 4,967
<LOSS-PROVISION> 304
<INTEREST-EXPENSE> 761
<INCOME-PRETAX> 5,421
<INCOME-TAX> 2,151
<INCOME-CONTINUING> 3,270
<DISCONTINUED> 0
<EXTRAORDINARY> (9)
<CHANGES> 0
<NET-INCOME> 3,261
<EPS-PRIMARY> 3.29<F1>
<EPS-DILUTED> 3.28<F2>
<FN>
<F1> REPRESENTS BASIC EPS PREPARED IN ACCORDANCE WITH SFAS NO. 128.
<F2> REPRESENTS DILUTED EPS PREPARED IN ACCORDANCE WITH SFAS NO. 128.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,178
<SECURITIES> 51
<RECEIVABLES> 4,267
<ALLOWANCES> 180
<INVENTORY> 451
<CURRENT-ASSETS> 6,298
<PP&E> 50,059
<DEPRECIATION> 28,234
<TOTAL-ASSETS> 32,568
<CURRENT-LIABILITIES> 6,441
<BONDS> 8,116
0
0
<COMMON> 1,009
<OTHER-SE> 12,240
<TOTAL-LIABILITY-AND-EQUITY> 32,568
<SALES> 436
<TOTAL-REVENUES> 19,040
<CGS> 769
<TOTAL-COSTS> 9,791
<OTHER-EXPENSES> 4,470
<LOSS-PROVISION> 254
<INTEREST-EXPENSE> 721
<INCOME-PRETAX> 4,608
<INCOME-TAX> 1,745
<INCOME-CONTINUING> 2,863
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,863
<EPS-PRIMARY> 2.88<F1>
<EPS-DILUTED> 2.87<F2>
<FN>
<F1> REPRESENTS BASIC EPS PREPARED IN ACCORDANCE WITH SFAS NO. 128.
<F2> REPRESENTS DILUTED EPS PREPARED IN ACCORDANCE WITH SFAS NO. 128.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,711
<SECURITIES> 71
<RECEIVABLES> 3,943
<ALLOWANCES> 171
<INVENTORY> 430
<CURRENT-ASSETS> 6,505
<PP&E> 46,869
<DEPRECIATION> 25,777
<TOTAL-ASSETS> 31,880
<CURRENT-LIABILITIES> 7,390
<BONDS> 7,924
0
0
<COMMON> 1,007
<OTHER-SE> 10,818
<TOTAL-LIABILITY-AND-EQUITY> 31,880
<SALES> 455
<TOTAL-REVENUES> 17,886
<CGS> 640
<TOTAL-COSTS> 9,639
<OTHER-EXPENSES> 4,955
<LOSS-PROVISION> 213
<INTEREST-EXPENSE> 724
<INCOME-PRETAX> 2,588
<INCOME-TAX> 1,024
<INCOME-CONTINUING> 1,564
<DISCONTINUED> 0
<EXTRAORDINARY> (2,796)
<CHANGES> 0
<NET-INCOME> (1,232)
<EPS-PRIMARY> (1.24) <F1>
<EPS-DILUTED> (1.24) <F2>
<FN>
<F1> REPRESENTS BASIC EPS PREPARED IN ACCORDANCE WITH SFAS NO. 128.
<F2> REPRESENTS DILUTED EPS PREPARED IN ACCORDANCE WITH SFAS NO. 128.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,084
<SECURITIES> 18
<RECEIVABLES> 4,415
<ALLOWANCES> 223
<INVENTORY> 358
<CURRENT-ASSETS> 7,103
<PP&E> 52,320
<DEPRECIATION> 30,113
<TOTAL-ASSETS> 34,765
<CURRENT-LIABILITIES> 6,948
<BONDS> 7,873
0
0
<COMMON> 1,010
<OTHER-SE> 13,805
<TOTAL-LIABILITY-AND-EQUITY> 34,765
<SALES> 476
<TOTAL-REVENUES> 14,961
<CGS> 690
<TOTAL-COSTS> 7,463
<OTHER-EXPENSES> 3,575
<LOSS-PROVISION> 209
<INTEREST-EXPENSE> 565
<INCOME-PRETAX> 4,191
<INCOME-TAX> 1,659
<INCOME-CONTINUING> 2,532
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,532
<EPS-PRIMARY> 2.55<F1>
<EPS-DILUTED> 2.55<F2>
<FN>
<F1> REPRESENTS BASIC EPS PREPARED IN ACCORDANCE WITH SFAS NO. 128.
<F2> REPRESENTS DILUTED EPS PREPARED IN ACCORDANCE WITH SFAS NO. 128.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,308
<SECURITIES> 58
<RECEIVABLES> 4,262
<ALLOWANCES> 198
<INVENTORY> 409
<CURRENT-ASSETS> 6,326
<PP&E> 51,364
<DEPRECIATION> 29,424
<TOTAL-ASSETS> 33,395
<CURRENT-LIABILITIES> 7,197
<BONDS> 7,406
0
0
<COMMON> 1,010
<OTHER-SE> 12,973
<TOTAL-LIABILITY-AND-EQUITY> 33,395
<SALES> 295
<TOTAL-REVENUES> 9,768
<CGS> 443
<TOTAL-COSTS> 4,895
<OTHER-EXPENSES> 2,296
<LOSS-PROVISION> 125
<INTEREST-EXPENSE> 370
<INCOME-PRETAX> 2,233
<INCOME-TAX> 886
<INCOME-CONTINUING> 1,347
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,347
<EPS-PRIMARY> 1.36<F1>
<EPS-DILUTED> 1.35<F2>
<FN>
<F1> REPRESENTS BASIC EPS PREPARED IN ACCORDANCE WITH SFAS NO. 128.
<F2> REPRESENTS DILUTED EPS PREPARED IN ACCORDANCE WITH SFAS NO. 128.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 946
<SECURITIES> 43
<RECEIVABLES> 4,167
<ALLOWANCES> 185
<INVENTORY> 423
<CURRENT-ASSETS> 5,941
<PP&E> 50,727
<DEPRECIATION> 28,944
<TOTAL-ASSETS> 32,526
<CURRENT-LIABILITIES> 6,137
<BONDS> 7,961
0
0
<COMMON> 1,009
<OTHER-SE> 12,644
<TOTAL-LIABILITY-AND-EQUITY> 32,526
<SALES> 138
<TOTAL-REVENUES> 4,845
<CGS> 213
<TOTAL-COSTS> 2,382
<OTHER-EXPENSES> 1,110
<LOSS-PROVISION> 66
<INTEREST-EXPENSE> 183
<INCOME-PRETAX> 1,163
<INCOME-TAX> 470
<INCOME-CONTINUING> 693
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 693
<EPS-PRIMARY> .70<F1>
<EPS-DILUTED> .70<F2>
<FN>
<F1> REPRESENTS BASIC EPS PREPARED IN ACCORDANCE WITH SFAS NO. 128.
<F2> REPRESENTS DILUTED EPS PREPARED IN ACCORDANCE WITH SFAS NO. 128.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,338
<SECURITIES> 44
<RECEIVABLES> 4,008
<ALLOWANCES> 162
<INVENTORY> 416
<CURRENT-ASSETS> 6,048
<PP&E> 49,232
<DEPRECIATION> 27,625
<TOTAL-ASSETS> 32,068
<CURRENT-LIABILITIES> 6,247
<BONDS> 7,878
0
0
<COMMON> 1,009
<OTHER-SE> 12,049
<TOTAL-LIABILITY-AND-EQUITY> 32,068
<SALES> 322
<TOTAL-REVENUES> 13,990
<CGS> 563
<TOTAL-COSTS> 7,243
<OTHER-EXPENSES> 3,175
<LOSS-PROVISION> 180
<INTEREST-EXPENSE> 531
<INCOME-PRETAX> 3,567
<INCOME-TAX> 1,337
<INCOME-CONTINUING> 2,230
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,230
<EPS-PRIMARY> 2.24<F1>
<EPS-DILUTED> 2.24<F2>
<FN>
<F1> REPRESENTS BASIC EPS PREPARED IN ACCORDANCE WITH SFAS NO. 128.
<F2> REPRESENTS DILUTED EPS PREPARED IN ACCORDANCE WITH SFAS NO. 128.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,169
<SECURITIES> 35
<RECEIVABLES> 4,006
<ALLOWANCES> 154
<INVENTORY> 434
<CURRENT-ASSETS> 5,856
<PP&E> 48,372
<DEPRECIATION> 26,999
<TOTAL-ASSETS> 31,644
<CURRENT-LIABILITIES> 6,118
<BONDS> 7,897
0
0
<COMMON> 1,009
<OTHER-SE> 11,774
<TOTAL-LIABILITY-AND-EQUITY> 31,644
<SALES> 202
<TOTAL-REVENUES> 9,161
<CGS> 293
<TOTAL-COSTS> 4,787
<OTHER-EXPENSES> 2,003
<LOSS-PROVISION> 113
<INTEREST-EXPENSE> 354
<INCOME-PRETAX> 2,511
<INCOME-TAX> 912
<INCOME-CONTINUING> 1,599
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,599
<EPS-PRIMARY> 1.61<F1>
<EPS-DILUTED> 1.60<F2>
<FN>
<F1> REPRESENTS BASIC EPS PREPARED IN ACCORDANCE WITH SFAS NO. 128.
<F2> REPRESENTS DILUTED EPS PREPARED IN ACCORDANCE WITH SFAS NO. 128.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 988
<SECURITIES> 57
<RECEIVABLES> 3,790
<ALLOWANCES> 161
<INVENTORY> 450
<CURRENT-ASSETS> 5,596
<PP&E> 47,389
<DEPRECIATION> 26,359
<TOTAL-ASSETS> 30,869
<CURRENT-LIABILITIES> 5,736
<BONDS> 7,904
0
0
<COMMON> 1,008
<OTHER-SE> 11,488
<TOTAL-LIABILITY-AND-EQUITY> 30,869
<SALES> 85
<TOTAL-REVENUES> 4,541
<CGS> 129
<TOTAL-COSTS> 2,371
<OTHER-EXPENSES> 987
<LOSS-PROVISION> 56
<INTEREST-EXPENSE> 180
<INCOME-PRETAX> 1,481
<INCOME-TAX> 511
<INCOME-CONTINUING> 970
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 970
<EPS-PRIMARY> .98<F1>
<EPS-DILUTED> .97<F2>
<FN>
<F1> REPRESENTS BASIC EPS PREPARED IN ACCORDANCE WITH SFAS NO. 128.
<F2> REPRESENTS DILUTED EPS PREPARED IN ACCORDANCE WITH SFAS NO. 128.
</FN>
</TABLE>
