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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 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
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BELLSOUTH CORPORATION
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<S> <C>
A GEORGIA I.R.S. EMPLOYER
CORPORATION NO. 58-1533433
1155 Peachtree Street, N.E., Room 15G03, Atlanta, Georgia 30309-3610
Telephone number 404 249-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock New York, Boston, Chicago,
(par value $1 per share) Pacific and Philadelphia
and Stock Exchanges
Preferred Stock Purchase Rights
Support Obligations for New York Stock Exchange
7.12% Debentures due 7/15/2097 of
BellSouth Capital Funding Corporation
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None.
At February 1, 1999, 1,942,470,779 shares of Common Stock and Preferred
Stock Purchase Rights were outstanding.
At February 1, 1999, the aggregate market value of the voting stock held by
nonaffiliates was $86,682,758,513.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
Indicate by check mark whether the registrant (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 / /
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement dated March 9, 1999,
issued in connection with the 1999 annual meeting of shareholders (Part III).
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TABLE OF CONTENTS
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ITEM PAGE
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PART I
Safe Harbor Statement......................................................................................... 1
1. Business........................................................................................... 1
General............................................................................................ 1
Wireline Communications............................................................................ 2
Domestic Wireless.................................................................................. 9
International Operations........................................................................... 12
Advertising and Publishing......................................................................... 14
Other Services..................................................................................... 15
Research and Development........................................................................... 16
Employees.......................................................................................... 16
2. Properties......................................................................................... 17
General............................................................................................ 17
Capital Expenditures............................................................................... 17
Other Commitments.................................................................................. 18
Environmental Matters.............................................................................. 18
3. Legal Proceedings.................................................................................. 18
4. Submission of Matters to a Vote of Shareholders.................................................... 19
Additional Information -- Description of BellSouth Stock...................................................... 19
Executive Officers............................................................................................ 22
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters.............................. 23
6. Selected Financial and Operating Data.............................................................. 24
7. Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 25
Results of Operations.............................................................................. 26
Volumes of Business................................................................................ 27
Operating Revenues................................................................................. 30
Operating Expenses................................................................................. 32
Other Income Statement Items....................................................................... 34
Results of Segment Operations...................................................................... 35
Financial Condition................................................................................ 36
Operating Environment and Trends of the Business................................................... 38
Safe Harbor Statement.............................................................................. 43
8. Consolidated Financial Statements.................................................................. 44
Report of Management............................................................................... 44
Audit Committee Chairman's Letter.................................................................. 45
Report of Independent Accountants.................................................................. 45
Consolidated Statements of Income.................................................................. 46
Consolidated Balance Sheets........................................................................ 47
Consolidated Statements of Cash Flows.............................................................. 48
Consolidated Statements of Shareholders' Equity and Comprehensive Income........................... 49
Notes to Consolidated Financial Statements......................................................... 50
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............... 74
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ITEM PAGE
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PART III
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*10. Directors and Executive Officers of the Registrant................................................. 74
*11. Executive Compensation............................................................................. 74
*12. Security Ownership of Certain Beneficial Owners and Management..................................... 74
*13. Certain Relationships and Related Transactions..................................................... 74
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.................................... 74
Signatures.................................................................................................... 78
Consent of Independent Accountants............................................................................ 79
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*Included in BellSouth Corporation's definitive proxy statement dated March 9,
1999 and incorporated herein by reference.
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PART I
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 DOMESTIC ECONOMIC GROWTH AND DEMAND FOR BELLSOUTH'S SERVICES; (2)
ECONOMIC, MONETARY, REGULATORY AND POLITICAL STABILITY WHERE BELLSOUTH CONDUCTS
ITS INTERNATIONAL OPERATIONS; (3) THE REASONABLE ACCURACY OF BELLSOUTH'S
EXPECTATIONS OF THE IMPACT ON ITS INTERNATIONAL OPERATIONS OF WEAKENING
CURRENCIES IN LATIN AMERICA AS COMPARED TO THE U.S. DOLLAR; (4) THE REASONABLE
ACCURACY OF BELLSOUTH'S EXPECTATIONS OF THE RESULTS OF REGULATORY ACTIONS AS
WELL AS COSTS AND RECOVERIES WITH RESPECT TO ACCESS REFORM, UNIVERSAL SERVICE
AND INTERCONNECTION; (5) 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 (6) SATISFACTORY IDENTIFICATION AND
COMPLETION OF YEAR 2000 SOFTWARE AND HARDWARE REVISIONS BY BELLSOUTH AND
ENTITIES WITH WHICH IT DOES BUSINESS. 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.
ITEM 1. BUSINESS
GENERAL
BellSouth Corporation (BellSouth) is a holding company providing
telecommunications services, systems and products primarily through two
wholly-owned subsidiaries, BellSouth Telecommunications, Inc. (BellSouth
Telecommunications) and BellSouth Enterprises, Inc. (BellSouth Enterprises).
BellSouth has its principal executive offices at 1155 Peachtree Street, N.E.,
Atlanta, Georgia 30309-3610 (telephone number 404 249-2000).
BellSouth was incorporated in 1983 under the laws of the State of Georgia.
On December 31, 1983, pursuant to a consent decree approved by the U.S. District
Court for the District of Columbia entitled "Modification of Final Judgment"
(the MFJ) settling antitrust litigation brought by the U.S. Department of
Justice (the Justice Department) in 1974 and the related Plan of Reorganization,
American Telephone and Telegraph Company, now AT&T Corp. (AT&T), formed several
holding companies, including BellSouth (the Holding Companies), and transferred
to them one or more of the operating telephone companies (the Operating
Telephone Companies) that were formerly part of the Bell System. As a result,
AT&T transferred to BellSouth its 100% ownership of South Central Bell Telephone
Company (South Central Bell) and Southern Bell Telephone and Telegraph Company
(Southern Bell). On January 1, 1984, ownership of the Holding Companies was
transferred by AT&T to its shareholders. As a result, BellSouth became a
publicly traded company. BellSouth Telecommunications is the surviving
corporation from the merger of South Central Bell and Southern Bell, effective
at midnight, December 31, 1991.
Under the MFJ, the Operating Telephone Companies could provide local
exchange, network access, information access and long distance
telecommunications services within their assigned geographical territories,
termed "Local Access and Transport Areas" (LATAs). Although prohibited from
providing wireline service between LATAs, the Operating Telephone Companies
provided network access services that linked a subscriber's telephone or other
equipment in one of their LATAs to the transmission facilities of long distance
carriers, which provided telecommunications services between different LATAs.
The Telecommunications Act of 1996 (the 1996 Act) supersedes the MFJ,
providing for the development of competition in local telecommunications
markets; the conditions under which the Holding Companies can provide interLATA
wireline telecommunications and other services; and the provision by the Holding
Companies of video services within their service areas. The ability of the
Holding Companies
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to enter businesses previously proscribed to them by the MFJ is, however,
generally subject to numerous and rigorous criteria and the development of and
compliance with newly mandated regulations of the Federal Communications
Commission (FCC). To date, the FCC has rejected all applications to provide
interLATA wireline service. (See "Wireline Communications--InterLATA Long
Distance Service.")
BellSouth is subject to increasing competition in all areas of its business.
Regulatory, legislative and judicial actions and technological developments have
expanded the types of available services and products and the number of
companies that may offer them. Increasingly, this competition is from large
companies and joint ventures that have substantial capital, technological and
marketing resources.
BellSouth has developed three key strategies that govern its business
decisions in the increasingly competitive telecommunications industry.
COMMUNICATIONS LEADERSHIP. Grow and systematically transform the core
wireline business to ensure that BellSouth is the leading communications
company in its nine-state region.
DOMESTIC WIRELESS STRATEGY. Grow the domestic wireless business
profitably, emphasizing strong in-region synergies.
INTERNATIONAL STRATEGY. Grow the existing operations and expanding into
new markets and related network services, focusing on Latin America.
Overlaying each of the three key growth strategies is digital and data
communications. BellSouth does not view data as a separate strategy because it
is an integral, vital and essential part of each of the strategies.
BellSouth markets its domestic services and products under the BellSouth
brand name to give them a clear, consistent identity in the marketplace.
BellSouth believes that its brand name is widely recognized and held in high
esteem by its customers. A primary marketing strategy is to enhance the
recognition and reputation of this mark throughout its service territory by
jointly marketing BellSouth's services and products with special attention to
each customer base. BellSouth's goal is for its brand name to be synonymous with
quality service and state-of-the-art technology. BellSouth advertises in the
various media in its territory, in connection with major events, such as the
Olympics, the Super Bowl, PGA tournaments and NASCAR events, and through its
affiliation with several professional and collegiate sports organizations, which
offer BellSouth a broad platform to showcase its services and products.
WIRELINE COMMUNICATIONS
BUSINESS OPERATIONS
GENERAL
BellSouth Telecommunications provides wireline communications services,
including local exchange, network access and intraLATA long distance services.
For 1998, 1997 and 1996, BellSouth Telecommunications generated 71%, 74% and
77%, respectively, of BellSouth's total operating revenues. BellSouth
Telecommunications is the predominant telephone service provider in the
Southeastern U.S., serving substantial portions of the population within
Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina,
South Carolina and Tennessee. Total equivalent access lines, which include
traditional switched access lines as well as digital and data transmission
lines, increased 14.7% over the prior year to 37,187,000 at December 31, 1998.
This growth is attributable to increasing demand for high-capacity digital and
data services, continued economic expansion in the region and additional access
lines ordered by existing customers.
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While BellSouth Telecommunications provides telephone service to the
majority of the metropolitan areas in its region, there are many localities and
some sizable geographic areas within the region that are served by nonaffiliated
telephone providers. In addition, BellSouth Telecommunications is increasingly
facing competition for local and intraLATA business customers, and to a lesser
extent, residential customers, within its territory.
BellSouth Telecommunications has organized its marketing efforts to parallel
its four major customer bases: consumer, small business, complex business, and
network and carrier services.
A substantial portion of the growth in BellSouth Telecommunications'
revenues from local service is derived from the sale of optional calling
services and additional residence lines to its residential customers. These
offerings are marketed in a variety of packages with varying pricing options
that are designed to appeal to a wide range of BellSouth Telecommunications'
residential customers. A substantial number of these sales are made by customer
service representatives, as they are contacted by subscribers on other matters.
BellSouth Telecommunications' small business services, which have varied
pricing and service options, are marketed by customer service representatives.
BellSouth Telecommunications' products and services, such as video conferencing,
ISDN service and telecommunications equipment and systems, are also demonstrated
and sold through marketing arrangements with retailers and other independent
sales representatives.
BellSouth Telecommunications markets highly specialized services and
products to large and complex business customers. In addition to telephone
lines, product and service offerings to these customers include Internet access,
special networks, high-speed data transmission, business teleconferencing and
industry-specific communications configurations.
In response to the 1996 Act, BellSouth Telecommunications has developed a
unit to market to competitors interconnection to its network and other related
services. The unit markets to both affiliated and nonaffiliated customers in six
carrier markets: wireless service providers, competitive local exchange carriers
(CLECs), competitive switched and special access providers, long distance
carriers, information service providers and public payphone service providers.
Through BellSouth Telecommunications' infrastructure, services are provided to
these carriers for voice, data and video transmission, as well as advanced
products, transport, interconnection and vertical services.
LOCAL SERVICE
Local service revenues for the years ended December 31, 1998, 1997 and 1996
accounted for approximately 41%, 41% and 42%, respectively, of BellSouth's total
operating revenues. Local service operations provide lines from telephone
exchange offices to subscribers' premises for the origination and termination of
telecommunications, including the following: basic local telephone service
provided through the regular switched network; dedicated private line facilities
for voice and special services, such as transport of data, radio and video;
switching services for customers' internal communications through facilities
owned by BellSouth Telecommunications; services for data transport that include
managing and configuring special service networks; and dedicated low- or
high-capacity public or private digital networks. Other local service revenue is
derived from information and directory assistance and public payphone services.
BellSouth Telecommunications offers various convenience features, such as
Caller ID, Call Waiting Deluxe, Call Return and 3-Way Calling on a monthly
subscription or per-use basis. Total revenues from such optional features were
approximately $1.5 billion, $1.2 billion and $1.0 billion for the years ended
December 31, 1998, 1997 and 1996, respectively.
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NETWORK ACCESS
BellSouth Telecommunications provides network access and interconnection
services by connecting the equipment and facilities of its subscribers with the
communications networks of long distance carriers, CLECs and wireless providers.
These connections are provided by linking these carriers and subscribers through
the public switched network of BellSouth Telecommunications or through dedicated
private lines furnished by BellSouth Telecommunications.
Network access charges, which are payable by long distance carriers, CLECs,
wireless providers and end-user subscribers, provided approximately 20%, 22% and
23% of BellSouth's total operating revenues for the years ended December 31,
1998, 1997 and 1996, respectively. These charges are designed to recover the
costs of the common and dedicated facilities and equipment used to connect
networks of long distance carriers with the telephone company's local network
and to subsidize the cost of providing local service to rural and other
high-cost areas.
LONG DISTANCE
Long distance services provided approximately 3%, 4% and 4% of BellSouth's
total operating revenues for the years ended December 31, 1998, 1997 and 1996,
respectively. These services include the following: intraLATA service beyond the
local calling area; Wide Area Telecommunications Service (WATS or 800 services)
for customers with highly concentrated demand; and special services, such as
transport of data, radio and video. In recent years, these revenues have
decreased as competition for such customers has intensified and as more
customers have subscribed to local area calling plans. Long distance revenues
from intraLATA calls are expected to continue to decline.
DIGITAL AND DATA
A key driver in BellSouth Telecommunications' growth in local service and
network access revenues is the provision of digital and data services. Revenues
from these services were $1.9 billion, $1.3 billion and $1.1 billion for 1998,
1997 and 1996, respectively. These services and products are provided primarily
over non-switched access lines that typically have significantly greater
capacity per line than a traditional switched access line. These lines are well
suited for high-capacity applications that previously could not be provided over
traditional switched access lines. Uses of these lines include bulk data
transmission, video conferencing, ATMs, check/credit card authentication,
multimedia and interconnection with wireless networks.
BellSouth believes that the data telecommunications business will eventually
become substantially larger than the traditional voice telephony market, and
that BellSouth must significantly expand its operations in the data
communications market. Data communications, however, are subject to the same
laws and regulations as voice communications. BellSouth believes that it must be
allowed the freedom to offer interLATA data communications to fully compete in
the data communications marketplace.
OTHER WIRELINE
Other wireline revenues accounted for approximately 7% of BellSouth's total
operating revenues for the years ended December 31, 1998, 1997 and 1996. Other
wireline revenues are primarily comprised of charges for inside wire maintenance
contracts, billing and collection services for long distance carriers and CLECs,
customer premises equipment sales and maintenance services, voice messaging
(MemoryCall-SM-) service, Internet access and interconnection charges to
unaffiliated wireless carriers.
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REGULATION
LOCAL SERVICE
BellSouth Telecommunications is subject to regulation of its local services
by a state authority in each state where it provides intrastate
telecommunications services. Such regulation covers prices, services,
competition and other issues.
Traditionally, BellSouth Telecommunications' rates were set in each state in
its wireline service territory at levels that were anticipated to generate
revenues sufficient to cover its allowed expenses and to provide an opportunity
to earn a fair rate of return on its capital investment. Such a regulatory
structure, generally known as rate of return regulation, was acceptable in a
less competitive era. However, the regulatory processes have changed in response
to the increasingly competitive telecommunications environment.
Under the first generation of alternative regulation, generally known as
incentive regulation, economic incentives were provided to lower costs and
increase productivity through the potential availability of "shared" earnings
over a benchmark rate of return. Generally, when levels above targeted returns
were reached, earnings were "shared" by providing refunds or price reductions to
customers.
Under the next generation of alternative regulation, generally known as
price regulation, the state authorities established maximum prices that could be
charged for certain telecommunications services. While such plans limit the
amount of increases in prices for specified services, they enhance BellSouth
Telecommunications' ability to adjust prices and service options to respond more
effectively to changing market conditions and competition and provide an
opportunity to benefit more fully from productivity enhancements. The majority
of these plans, during the early years, have price cap provisions in effect on
basic local exchange services with provisions for inflation-based price
increases in later years. These plans are now operational throughout BellSouth
Telecommunications' wireline service territory although appeals relating to
plans in South Carolina and Tennessee are pending. While some plans are not
subject to either review or renewal, other plans contain specified termination
dates and/or review periods. Some plans are expected to be reviewed in 1999. No
assurance can be given that plans subject to review or renewal will retain
prices or other terms currently applicable.
NETWORK ACCESS
The FCC regulates rates and other aspects of interstate network access
services through its price cap and access charge rules. State regulatory
commissions have jurisdiction over the provision of network access to the long
distance carriers to complete intrastate telecommunications.
Historically, network access charges paid by long distance carriers have
been set at levels that subsidize the cost of providing local residential
service. The 1996 Act requires that the FCC identify the local service subsidy
implicitly provided by such network access charges; provide for the removal of
such subsidy from network access rates in order that network access charges
reflect underlying costs; arrange for a fund (the Universal Service Fund) to
ensure the continuation of universal service to high-cost, low-income service
areas; and develop the arrangements for payments into that fund by all carriers.
The FCC's price cap plan limits aggregate price changes to the rate of
inflation minus a productivity offset, plus or minus exogenous cost changes
recognized by the FCC. In May 1997, the FCC adopted orders regarding revisions
to the price cap plan, access charge reform and the establishment of the
Universal Service Fund. The orders on the price cap plan and access charge
reform resulted in access rate reductions related to per-minute-of-use charges
and increases to per-line charges. BellSouth Telecommunications has been pricing
its services based on a 6.5% productivity factor, which means that price
increases could only occur to the extent that the Gross Domestic Product Price
Index of the U.S.
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(the Index) increased by greater than 6.5% over an annual period. If the Index
increases by less than 6.5%, price reductions would occur.
In October 1998, the FCC announced its intent to review the productivity
factor used in the calculation of interstate network access charges. Any
increase in this factor would result in reductions of network access charges
paid to BellSouth by long distance carriers, subscribers or both. The FCC also
solicited comments as to whether it should abandon its market-based approach to
the pricing of network access charges and adopt, instead, a prescriptive
approach. FCC represcription of network access rates could result in a reduction
of network access charge revenues.
The FCC's 1997 network access charge reform order, which has been upheld by
the U.S. Court of Appeals for the Eighth Circuit, resulted in several changes to
the existing interstate network access rate structure designed to move network
access charges, over time, to more economically efficient levels and to create
more efficient rate structures. Non-traffic-sensitive costs, that were
previously recovered on a per-minute-of-use basis, were changed to be recovered
on a flat-rate, per-line basis. As part of this plan, subscriber line charges
(SLCs) were increased and a new presubscribed long distance carrier charge
(PICC) was established. As SLC and PICC levels are increased over time, usage
charges are reduced. At January 1, 1999, SLCs for primary residence and
single-line business access lines remained unchanged at $3.50 per line, per
month. Beginning in January 1999, SLCs for non-primary (or "additional")
residence access lines increased from $5.00 to $6.07 per line, per month, and
SLCs for multi-line business customers increased from $8.17 to $8.25 per line,
per month. PICCs were established on January 1, 1998 and are charged to long
distance carriers for recovery of non-traffic-sensitive costs not recovered
through SLCs. These charges were established for primary residence and
single-line business access lines, non-primary residence access lines and
multi-line business access lines and were initially set at $.53, $1.50 and
$2.75, respectively, per line, per month, beginning January 1998. BellSouth
believes that the net effect of these changes has been substantially
revenue-neutral.
The universal service order, which has been appealed to the U.S. Court of
Appeals for the Fifth Circuit, established new funding mechanisms for high-cost,
low-income service areas. BellSouth Telecommunications began contributing to the
new funds on January 1, 1998 and is allowed recovery of its contributions
through increased interstate network access charges. Major changes to the
support mechanism to subsidize the provision of services to high-cost areas will
occur July 1, 1999. The new support mechanism, when implemented in 1999, will be
based on forward-looking economic costs.
The order also established significant discounts to be provided to eligible
schools and libraries for all telecommunications services, internal connections
and Internet access. It also established support for rural health care providers
so that they may pay rates comparable to those that urban health care providers
pay for similar services. Industry-wide annual costs of the program, estimated
at approximately $1.9 billion through June 1999, are to be funded out of the
Universal Service Fund. Local and long distance carriers' contributions to the
education and health care funds would be assessed by the fund administrator on
the basis of their interstate and intrastate end-user revenues.
INTERLATA LONG DISTANCE SERVICE
As a result of the 1996 Act, BellSouth and the other Holding Companies and
their affiliates are freed from the judicial restrictions of the MFJ that
generally prohibited the provision of interLATA communications throughout their
wireline service territories and elsewhere. The 1996 Act establishes in its
place a new restriction and a procedure for its removal. These companies may
apply to the FCC on a state-by-state basis to offer in-region interLATA wireline
service, and the FCC must act on each such application within 90 days. The FCC
must grant such application if it determines that the applicant (a) has met a
competitive checklist; (b) has shown (i) the presence of a facilities-based
provider offering both residential and business local services (Track A) or (ii)
if there is no such provider, a statement that has been approved or permitted to
take effect by state regulatory authorities of the terms under which it would be
willing to interconnect with a CLEC (Track B); (c) will operate in accordance
with the separate affiliate
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requirement; and (d) has presented an application consistent with the public
interest. The FCC is required to consult with state regulatory authorities and
the Justice Department when reviewing the application.
BellSouth believes, that in order to remain competitive, it must
aggressively pursue a corporate strategy of expanding its offerings beyond its
traditional businesses and markets. These offerings include interLATA voice,
information and data communications. BellSouth plans to begin offering interLATA
wireline service in each of its in-region states as soon as the FCC approves its
application for each state. BellSouth has received favorable determinations from
the regulatory commissions in several states in its wireline service territory,
but the FCC has rejected all applications to provide in-region interLATA service
on which it has ruled. BellSouth and other Holding Companies have unsuccessfully
challenged portions of the 1996 Act as unconstitutional bills of attainder but
have petitioned the U.S. Supreme Court (the Supreme Court) to consider the
issue. The Supreme Court has denied the other Holding Companies' requests, but
BellSouth's request remains pending.
BellSouth has a three-pronged approach to gaining authorization to provide
in-region interLATA service: (a) continuing to modify its facilities and
operating support systems to facilitate competition and aggressively seeking
approvals from the FCC and state commissions; (b) seeking judicial review of
adverse decisions which it believes to be erroneous; and (c) participating in
actions by Congress to urge the FCC to implement the 1996 Act in a timely
fashion. Because of the scrutiny of interLATA applications by the FCC and the
Justice Department; the time required to obtain judicial review of adverse
decisions; and the possible challenges by the existing long distance carriers of
any approved applications or proposed or enacted legislation, it is uncertain
when BellSouth will be authorized to commence interLATA service in any of its
in-region states.
COMPETITION
LOCAL SERVICE
The 1996 Act requires the elimination of state legislative and regulatory
barriers to competition for local telephone service, subject only to
competitively neutral requirements to preserve and advance universal service,
protect the public safety and welfare, maintain the quality of
telecommunications services and safeguard the rights of customers. The 1996 Act
also includes requirements that incumbent local exchange carriers (ILECs), such
as BellSouth Telecommunications, negotiate with other carriers for
interconnection, use of network elements on an unbundled basis, access fees for
local calls terminating on the network of a carrier other than the originating
carrier and resale of telecommunications services. If a negotiated agreement
cannot be reached, either party may seek arbitration with the state regulatory
authority, or the FCC if the state fails to act. If rates are disputed, the
arbitrator must set rates for access to network elements on an unbundled basis,
based on cost, which may include a reasonable profit. ILECs are also required to
negotiate to provide their retail services at wholesale rates for the purpose of
resale by competing carriers. If agreement cannot be reached, the arbitrator
shall set the wholesale rates at the ILEC's retail rates less costs that are
avoided. BellSouth Telecommunications has executed numerous interconnection or
resale agreements with such carriers. Many of these agreements expire during
1999 and must be renegotiated. The arbitration results for the wholesale
discount rates vary by state from 14.8% to 21.8%. At December 31, 1998,
BellSouth Telecommunications had provisioned approximately 520,000 equivalent
access lines to such carriers for resale, an increase of 299,000 since December
31, 1997.
In connection with the requirements of the 1996 Act, in August 1996, the FCC
released an order adopting rules governing interconnection and related matters,
and in July 1997, the U.S. Court of Appeals for the Eighth Circuit vacated
substantial aspects of the order. In January 1999, the Supreme Court reinstated
significant portions of the vacated order. The Supreme Court held that with
regard to setting the pricing of interconnection between ILECs and other
carriers, the FCC has jurisdiction to set pricing standards to be implemented by
the state commissions. The FCC has prescribed a forward-looking economic cost
approach for pricing interconnection and unbundled network elements. That
methodology is still under review by the U.S. Court of Appeals for the Eighth
Circuit.
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Under the 1996 Act, access to certain network elements can be given only
when "necessary" or when the failure to provide access would "impair" the
ability of the requesting carrier to provide service. The Supreme Court held
that the FCC did not adequately consider the "necessary" and "impair" standards
when adopting rules giving access to such network elements on an unbundled
basis. Until the FCC reconsiders this issue, it is uncertain which of BellSouth
Telecommunications' network elements it will be required to offer on an
unbundled basis, and at what prices.
The Supreme Court upheld the FCC's "all elements" rule which allows
competing carriers to provide local telephone service relying solely on the
elements in an ILEC's network, approving the FCC's refusal to impose a
requirement of facility ownership on carriers who seek to lease network
elements. The Supreme Court also upheld the FCC's rule forbidding ILECs from
separating already combined network elements before leasing them to a CLEC.
Finally, the Supreme Court upheld the FCC's "pick and choose" rule. This rule
requires that ILECs make available to requesting CLECs contractual provisions,
including related rates and terms, contained in any other agreements that have
been previously approved by the state commission for that same state. Exceptions
are allowed when the ILEC can prove to the state commission that providing the
particular item requested is either more costly than providing it to the
original carrier or is technically infeasible. These rulings may make it easier
for a CLEC to compete with BellSouth.
In attempting to comply with the technical requirements of interconnection,
BellSouth Telecommunications is incurring, and expects to continue to incur,
significant costs associated with the facilitation of interconnection. BellSouth
Telecommunications incurred approximately $367 million of costs associated with
these efforts in the year ended December 31, 1998. Of this amount, approximately
$232 million was expensed as incurred, and the remainder was capitalized. Total
costs incurred through December 31, 1998 were approximately $700 million.
In May 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. It remains unclear to what degree, if any,
BellSouth Telecommunications will be compensated for the noncarrier-specific
costs of interconnection.
The state public service commissions to which BellSouth Telecommunications
is subject have granted numerous carrier applications for authority to offer
local telephone service. As a result, substantial competition has developed for
BellSouth Telecommunications' business customers, which provide a greater
concentration of higher margin revenues than do its residential customers.
Competitors include long distance carriers and CLECs, which resell the local
services of BellSouth Telecommunications or provide services over their own
facilities. BellSouth believes that certain long distance carriers have been
slow to enter the local residential market due to lower margins compared to the
business market and to deter competition by the Holding Companies in the long
distance market. However, MCI WorldCom recently announced its intent to offer
residential local service in certain areas of the country using the unbundled
network elements of ILECs.
An increasing number of voice and data communications networks utilizing
fiber optic lines have been and are being constructed by telecommunications
providers in all major metropolitan areas throughout BellSouth
Telecommunications' wireline service territory. These networks offer certain
high-volume users a competitive alternative to the public and private line
offerings of BellSouth Telecommunications. Furthermore, wireless services, such
as cellular, personal communications service (PCS) and paging services, and
Internet services increasingly compete with wireline communications services.
Such wireless services are provided by a number of well-capitalized entities in
most of BellSouth's markets.
As technological and regulatory developments make it more feasible for cable
television networks to carry data and voice communications, BellSouth
Telecommunications will face increased competition within its region from cable
television ventures. For example, MediaOne began offering local wireline service
in Atlanta in 1998 over its enhanced cable television network, and AT&T has
stated that, after its acquisition of TCI, it intends to upgrade and use TCI's
cable facilities to offer telephony over coaxial cable and fiber optic lines.
AT&T has also announced that it intends to form joint ventures with other cable
television companies to expand such offerings nationwide.
8
<PAGE>
Federal and state policies strongly favor further changes to Operating
Telephone Company networks and business operations to encourage local service
competition, and regulators have stated that such changes must be made before
they will allow Holding Companies to provide interLATA long distance services
within their local service territories. Therefore, BellSouth expects that local
service competition will steadily increase. While competition for local service
revenues could adversely affect BellSouth's results of operations, BellSouth is
working to support the opening of local markets to competition by facilitating
interconnection of its facilities and systems with those of CLECs. These
actions, among other things, can allow BellSouth to qualify to offer in-region
interLATA service as contemplated in the 1996 Act. (See "Regulation--InterLATA
Long Distance Service").
NETWORK ACCESS
FCC rules require BellSouth Telecommunications to offer expanded
interconnection for interstate special and switched network access transport. As
a result, BellSouth Telecommunications must permit competitive carriers and
customers to terminate their transmission lines on BellSouth Telecommunications'
facilities in its central office buildings through collocation arrangements. The
effects of the rules are to increase competition for network access transport.
Furthermore, long distance carriers are increasingly connecting their lines
directly to their customers' facilities, bypassing the networks of BellSouth
Telecommunications and thereby avoiding network access charges entirely. In
addition, commercial applications of Internet telephony are being developed.
This medium could attract substantial interLATA traffic because of its lower
cost structure, due to the fact that FCC rules do not currently impose access
charges on most Internet communications.
LONG DISTANCE
A number of companies compete with BellSouth Telecommunications in its
nine-state region for intraLATA long distance business by reselling long
distance services obtained at bulk rates from BellSouth Telecommunications or
providing long distance services over their own facilities. As of February 8,
1999, BellSouth Telecommunications has implemented intraLATA long distance
subscription (single digit access code 1+ dialing) in all nine states in its
region.
The 1996 Act permits the Holding Companies to offer interLATA long distance
service outside of the states containing their local wireline service
territories. Holding Companies and other carriers have announced plans to
compete for such interLATA long distance service in BellSouth
Telecommunications' territory. AT&T, MCI WorldCom, Sprint and a number of other
carriers, including other Holding Companies, currently provide long distance
service to BellSouth's local service customers.
FRANCHISES AND LICENSES
BellSouth Telecommunications' local exchange business is typically provided
under certificates of public convenience and necessity granted pursuant to state
statutes and public interest findings of the various public utility commissions
of the states in which BellSouth Telecommunications does business. These
certificates provide for franchises of indefinite duration, subject to the
maintenance of satisfactory service at reasonable rates.
DOMESTIC WIRELESS
BUSINESS OPERATIONS
BellSouth is one of the largest wireless communications providers in the
United States, with operations primarily in its wireline service territory.
BellSouth has cellular and PCS operations in 14 states, encompassing
approximately 78 million total POPs, 58 million on a proportionate ownership
basis. This extensive wireless footprint includes some of the top wireless
markets in the country including Los Angeles, Houston, Miami-Fort Lauderdale,
Atlanta and Tampa-St. Petersburg. BellSouth ended
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<PAGE>
1998 with approximately 4.8 million cellular and PCS customers on a
proportionate basis. BellSouth's penetration rate at December 31, 1998 was 8.2%
of the POPs in its domestic markets.
Domestic wireless revenues comprised approximately 12%, 13% and 12% of
BellSouth's total operating revenues for the years ended December 31, 1998, 1997
and 1996, respectively. In addition, BellSouth has non-controlling financial
interests in a number of wireless businesses whose revenues are not reflected in
operating revenues because of the method of accounting for such investments.
Wireless revenues are derived from monthly access and airtime charges, sales of
phones and equipment, roaming charges, custom calling and convenience features,
long distance charges and service activation fees. Neither the FCC nor the state
regulatory commissions have power to regulate prices of wireless services.
BellSouth's proportional wireless customers have grown by 14.4%, 15.1% and
28.0%, while proportional revenues have grown by 6.1%, 10.7% and 22.8% for the
years ended December 31, 1998, 1997 and 1996, respectively. Excluding the impact
of certain ownership changes during 1998, proportional customers grew by 18.6%.
The growth trend in customers and revenues reflects the increasingly challenging
dynamics of adding new customers as penetration rises and competition
intensifies because of new entrants into BellSouth's markets.
One of the key competitive strengths of BellSouth's wireless service is the
BellSouth brand. BellSouth believes that its brand identity is a significant
factor in its success because of its high name recognition and reputation for
providing superior coverage, network reliability and customer service.
BellSouth and its partners are responding to the competitive conditions by
aggressively reducing expenses, offering a variety of innovative plans and new
products and targeting the lower-usage customer through use of prepaid calling
and other service options.
BellSouth has broadened its sales distribution channels to reduce the most
significant cost driver-- customer acquisition costs. Wireless services are
marketed through company-owned stores, authorized agents and national retail
outlets. In addition, BellSouth is increasingly utilizing cross-selling efforts
by BellSouth Telecommunications' customer service representatives, a less costly
alternative to independent agents and a natural entrant to selling bundled
services. New methods of addressing the issue of customer retention are also
being implemented, including the use of prediction models to identify customers
who are likely to discontinue service before it happens.
In response to competition, BellSouth has introduced variations of
fixed-rate calling plans that appeal to a broad base of customers. BellSouth is
also introducing new wireless products to differentiate its service, such as
BellSouth One Number Service, text messaging and multiple product offerings,
including Internet and wireline service. BellSouth has also introduced prepaid
cellular calling plans in many areas to further penetrate the market. These
plans allow consumers to receive service with no credit check, minimum contract,
monthly access or activation fees.
Under the MFJ, the Holding Companies generally were prohibited from
providing interLATA wireless communications. The 1996 Act lifted this
prohibition, and in February 1996, BellSouth began offering the interLATA
component of its wireless communication in conjunction with its wireless
offerings. Approximately 3.5 million customers subscribe to such interLATA
service. In areas where it does not have long distance telephone facilities,
BellSouth connects with the networks of long distance carriers.
TECHNOLOGY
BellSouth offers both analog and digital cellular service in most of its
markets as well as PCS in certain markets. BellSouth acquired the PCS licenses
as part of its strategy to extend the wireless footprint in its Southeastern
region. BellSouth has upgraded its cellular analog networks with a digital
transmission technology known as TDMA (Time Division Multiple Access) in all its
markets. Both TDMA
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and GSM (Global System for Mobile Communications) technologies are currently
being utilized in the PCS markets.
Digital cellular technology offers many advantages over analog technology,
including a three-fold gain in channel capacity, the ability to provide advanced
services and functionality, inherent privacy and transmission security and the
opportunity to provide improved data transmissions.
The dual-mode network (analog and digital) will remain in place for the
foreseeable future due to the fact that analog networks provide the only common
roaming platform currently available throughout the U.S. Some manufacturers
currently offer dual-mode cellular phones capable of sending and receiving both
analog and certain digital transmissions, thereby facilitating roaming by
digital users. However, there is currently no dual-mode cellular phone capable
of receiving transmissions from multiple digital technologies. BellSouth
believes that its dual-mode network with its extended coverage currently
provides a significant competitive advantage over PCS providers.
COMPETITION
The FCC has jurisdiction over the licensing of wireless mobile radio
services in domestic markets. The FCC limits entry for providers of cellular
mobile telecommunications to two licensees for each defined metropolitan
statistical area (MSA) and each rural service area (RSA) within the country.
Each MSA and RSA in which BellSouth participates in the provision of cellular
mobile communications has a competing service provider. The functionality of PCS
and cellular service are very similar, and PCS offered by other carriers
competes with BellSouth's cellular service throughout its service territories.
The FCC grants licenses to offer PCS to multiple carriers. If all PCS licensees
construct and operate wireless businesses, there could be six or more PCS
systems and two cellular systems operating in certain areas.
The FCC has approved construction of enhanced specialized mobile radio
(ESMR) systems in many cities around the country. These digital mobile
communications systems provide service very similar to cellular telephone
service. There has been a consolidation of the licenses required to provide ESMR
service, so that control of this business is concentrated in the hands of a few
operators, giving them the ability to offer services like nationwide roaming on
their own network. ESMR systems currently compete with BellSouth in a number of
markets.
The presence of multiple aggressive competitors in BellSouth's wireless
markets makes it more difficult to attract new customers and retain existing
ones. Furthermore, while BellSouth does not compete primarily on the basis of
price, low prices offered by competitors attempting to build a subscriber base
have pressured BellSouth to reduce prices and develop pricing plans attractive
to lower usage customers. For this reason, BellSouth seeks to reduce costs to
protect profit margins.
LICENSES AND REGULATION
The domestic cellular and PCS systems in which BellSouth has an interest are
operated under licenses granted by the FCC. A carrier holding a license to
provide cellular service in a territory has limited eligibility for PCS
licensure covering the same territory. Prior approval by the FCC is required for
the assignment of a license or the transfer of control of a license. The
licenses are generally issued for up to 10-year periods. At the end of the
license period, a renewal application must be filed. BellSouth believes renewal
will generally be granted on a routine basis upon showing compliance with FCC
regulations and continuing service to the public. Licenses may be revoked and
license renewal applications may be denied for cause. With regard to cellular
licenses, the FCC has established the procedures and standards for conducting
comparative renewal proceedings, including the award of a "renewal expectancy"
that effectively eliminates the need to consider competing applicants when the
incumbent meets specified criteria.
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INTERNATIONAL OPERATIONS
BUSINESS OPERATIONS
BellSouth owns interests in consortia that hold licenses for, and are
building and/or operating, wireless telephone systems in Argentina, Brazil,
Chile, Denmark, Ecuador, Germany, India, Israel, Nicaragua, Panama, Peru,
Uruguay and Venezuela. At December 31, 1998, these systems covered a population
of approximately 231 million and provided wireless service or PCS to a total of
approximately 7.1 million international customers. BellSouth's proportionate
share of those customers, based on its percentage ownership interests in such
systems, was approximately 3.4 million customers. BellSouth's proportionate
interests in the aggregate population covered by its international wireless
systems was approximately 108 million persons at December 31, 1998, and its
penetration rate, excluding areas in which service has not yet been initiated,
was approximately 3.5%.
The structure of BellSouth's international wireless interests typically
reflects government preferences or requirements that local owners hold
significant interests in their telecommunications licenses. In structuring its
international investments, BellSouth attempts to obtain operating influence
through board representation, the right to appoint certain key members of
management and consent rights with respect to significant matters, including
amounts of capital contributions. In addition, BellSouth tries to assure its
ability to maintain a position of influence in the venture by obtaining rights
of first refusal on future sales by other partners and issuances of equity by
the venture. The particular governance rights of BellSouth vary from venture to
venture, and often are dependent upon the size of BellSouth's investment
relative to other investors. Under the governing documents for some of these
ventures, certain key matters such as the approval of business plans and
decisions as to the timing and amount of cash distributions require the consent
of BellSouth's partners. BellSouth will likely enter into similar arrangements
to pursue additional opportunities.
BellSouth usually plays the lead role in the design, construction, operation
and maintenance of the wireless networks for the ventures in which it has
ownership interests.
COMPETITION
BellSouth's international wireless operations are subject to significant
competition, generally from at least one other wireless provider and
increasingly, from multiple new PCS providers. These competing service providers
generally have partners who are at least as well capitalized as BellSouth and
its partners. In some cases, the government-owned telephone companies have a
substantial investment in the competing cellular provider. In all cases, the
competing cellular providers generally have access to substantial financial
resources. Many governments have privatized the government-owned telephone
companies, and these privatized companies often become more formidable
competitors due to the availability of additional capital and technical
expertise. BellSouth anticipates an increasing number of facilities-based
competitors in its wireless service markets.
LICENSES AND REGULATION
BellSouth's international wireless operations provide services pursuant to
the terms of licenses granted by the telecommunications agency or similar
supervisory authority in the various countries. Such agencies typically also
promulgate and enforce regulations regarding the construction and operation of
network equipment. Other regulations commonly encountered in international
markets include legal restrictions on the percentage ownership of
telecommunications licensees by foreign entities, such as BellSouth, and
transfer restrictions or government approval requirements regarding changes in
the ownership of such licensees.
The terms of the licenses granted to BellSouth's international ventures and
conditions of the license renewal vary from country to country. The initial
terms of service under these licenses generally range
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from 5 to 50 years. Although license renewal is not usually guaranteed, most
licenses do address the renewal process and terms, which BellSouth believes it
will be able to satisfy. As licenses approach the end of their terms, it is
BellSouth's intention to pursue renewal as provided by these license agreements.
FOREIGN EXCHANGE RATE RISKS
Foreign currency exchange rates can affect BellSouth's results of operations
in several different ways. A significant weakening against the U.S. Dollar of
the currency of a country where BellSouth has operations can result in increased
obligations in local currency terms with respect to U.S. Dollar-denominated
liabilities. Further, a weakening currency often has a negative impact on the
local economy, which can adversely affect revenues and expenses. From the local
operation's perspective, a strengthening of the U.S. Dollar relative to local
currencies could increase BellSouth's obligations to make
local-currency-denominated capital investments. Where appropriate and feasible,
BellSouth attempts to mitigate the effects of foreign currency fluctuations
through the use of forward contracts and similar instruments. However, there can
be no assurance that these efforts will be successful or that all exposures will
be hedged.
During January 1999, the Brazilian currency suffered a significant
devaluation against the U.S. Dollar. (See "MD&A--Operating
Environment--International Operations" for further discussion of this matter and
its impact on BellSouth.)
INTERNATIONAL STRATEGY
BellSouth's international strategy is to: (a) grow its existing businesses,
(b) evolve its wireless businesses into a wider array of telecommunications
services and (c) expand BellSouth's presence in Latin America.
GROWTH IN CUSTOMER BASES. BellSouth's market penetration is 3.5% of the POPs
in its international markets as compared to 8.2% in its domestic markets.
BellSouth believes that substantial additional growth is achievable in Latin
America, notwithstanding average per capita incomes being lower than the U.S.
average. BellSouth is offering prepaid wireless service in virtually all of its
international markets. BellSouth's prepaid wireless service has substantially
increased customers by making the service available to a broad customer base.
EVOLVING FROM A WIRELESS PROVIDER TO A FULL SERVICE PROVIDER. Where local
regulations permit, BellSouth's joint ventures offer wireless service that is
designed and priced to be directly competitive with traditional wireline
service. In several of its markets, BellSouth's joint ventures offer or plan to
offer international long distance services either to its wireless subscriber
bases or, in some cases, to the entire population. In addition, BellSouth offers
domestic long distance service in certain markets to its wireless subscribers
through its nationwide wireless facilities.
In May 1998, BellSouth won a bid for a concession to offer cellular
telephone service to more than 17 million people in Peru in the provinces
outside of Lima. BellSouth bid $35 million for the concession and expects to
invest over $200 million to build out and offer service in the new concession
area. BellSouth has also acquired directory businesses in Latin America. See
"Advertising and Publishing."
BellSouth's ability to introduce new products and services depends to a
large extent upon whether the new products and services are permitted by the
local laws and regulatory authorities. As countries have encouraged foreign
investment in telecommunications and have privatized their government-owned
wireless telephone companies, the general trend has been toward increasing
deregulation of telecommunications. In most of the Latin American countries in
which BellSouth does business, telecommunications regulatory bodies have
announced plans to deregulate telecommunications over time, which, if
implemented, should permit BellSouth's joint ventures to offer additional
products and services.
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EXPANDING BELLSOUTH'S LATIN AMERICAN PRESENCE. BellSouth is developing
regional synergies among its Latin American joint ventures. To the extent
possible, BellSouth is using its BellSouth brand on a regional basis throughout
Latin America. BellSouth is currently using the BellSouth brand in its local
joint ventures or other operations in Chile, Ecuador, Nicaragua, and Panama.
BellSouth is creating its own international network including advanced undersea
cables as well as regional switching centers, to be used to offer voice and data
international long distance services linking its wireless joint ventures and
other operations in Latin America when permitted by local law. In addition,
BellSouth has created the first roaming clearinghouse in Latin America,
permitting its Latin American and U.S. wireless customers who travel throughout
the Americas to roam when in a BellSouth service area.
BellSouth plans to continue pursuing selected opportunities to acquire
interests in telecommunications businesses throughout the world, focusing
primarily on Latin America. BellSouth believes its proven technical, operating
and marketing expertise make it a highly desired participant in consortia formed
to pursue new international opportunities and that such expertise has been a
significant factor in the success of license applications and bids by its
consortia. BellSouth measures each international investment against criteria
such as demographic factors, the degree of economic, political and regulatory
stability, the quality of local partners and the degree to which BellSouth will
control or meaningfully participate in management. During 1998, BellSouth began
offering wireless service in its Brazilian markets which resulted in the
addition of 350,000 proportionate customers. The pursuit of new international
wireless telecommunications opportunities is expected to remain highly
competitive and may introduce a greater degree of political and currency risk as
new opportunities are concentrated in developing economies.
BellSouth continually evaluates opportunities to increase its ownership in
its existing international ventures, especially where contractual rights of
first refusal provide BellSouth with favorable opportunities. In 1998, BellSouth
increased its equity interest in its joint ventures in Brazil, Ecuador, and
Venezuela. In November, BellSouth and Grupo Safra acquired additional interests
in BellSouth's Brazilian joint ventures. BellSouth's interest in its Sao Paulo
operating company increased from approximately 41% to 44.5% and in its Northeast
Brazil operation from 42.5% to 46.8%. In June, BellSouth acquired an additional
24.9% interest in its Venezuelan joint venture, increasing BellSouth's interest
to 78.2%. In July, BellSouth acquired an additional 28.2% of its joint venture
in Ecuador from its principal partner, increasing BellSouth's interest to 89.4%.
INTERNATIONAL DISPOSITIONS
On October 30, 1998, BellSouth sold to Vodafone Group Plc its 65% ownership
interest in BellSouth New Zealand for total proceeds of $254 million. The gain
totaled $180 million ($110 million after tax).
ADVERTISING AND PUBLISHING
BUSINESS OPERATIONS
BellSouth Enterprises owns a group of companies that publish, print, sell
advertising in, and perform related services concerning, alphabetical and
classified telephone directories. Advertising and publishing revenues are
derived primarily from sales of directory advertising, which represented
approximately 8%, 9% and 9% of BellSouth's total operating revenues for each of
the last three years.
BellSouth Enterprises' wholly-owned subsidiary, BellSouth Advertising &
Publishing Corporation (BAPCO), is one of the leading publishers of telephone
directories in the United States. In 1998, it published alphabetical white page
directories of business and residential telephone subscribers in over 500 of
BellSouth Telecommunications' markets and sold advertising in and published
classified directories under The Real Yellow Pages-Registered Trademark-
trademark in the same markets.
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Another subsidiary of BellSouth Enterprises, The Berry Company (Berry), acts
as sales agent for advertising in yellow page directories of nonaffiliated
telephone companies and receives a portion of the advertising revenue as a
commission. During 1998, Berry contracted with 143 nonaffiliated telephone
companies to sell advertising in over 300 of these classified directories in
over 40 states. A Berry subsidiary also acts as agent for national yellow page
ad placements in all 50 states on behalf of over 700 companies.
In addition to publishing directories in traditional paper form, BellSouth
companies publish white and yellow page directories in other media. For example,
BAPCO offers white page directories on CD ROM for major markets of BellSouth
Telecommunications, and a separate subsidiary of BellSouth Enterprises publishes
Internet yellow page directories for most large market areas served by BellSouth
Telecommunications. This service links to similar on-line directories with
information for businesses nationwide. BellSouth sells additional advertising to
local and national businesses for its on-line yellow pages.
BellSouth seeks to expand its advertising and publishing business by
increasing advertising sales of its traditional directory products. In addition,
BAPCO has expanded its offerings to include a complementary line of advertising
products in other media, including radio, television, newspaper and billboards.
Recorded ads delivered by telephone are also available. BellSouth has also
developed and markets advertising in directory products for Latin America.
BellSouth also markets to organizations and companies with unique directory
needs. Export directories, audio text advertising, a restaurant and
entertainment guide, co-op advertising through other media, and Internet
directories are examples of such directory services and products.
BellSouth Enterprises owns a printing company, which prints substantially
all white and yellow pages and specialty directories distributed in BellSouth
Telecommunications' markets. In 1998, it printed 57 million white page, yellow
page and specialty directories. This company also prints other materials for
BellSouth and its affiliates and, to a limited extent, documents for
nonaffiliated companies.
BAPCO owns interests in companies that publish telephone directories in Peru
and Brazil. As BellSouth seeks further business opportunities overseas, it will
likely consider other investments in international directory companies to
complement its telecommunications service offerings there.
COMPETITION
Competition for advertising revenues continues to expand. Many different
media compete for advertising revenues, and some newspaper organizations and
other companies have begun publishing their own directories. Competition for
directory sales agency contracts for the sale of advertising in publications of
nonaffiliated companies also continues to be strong. Competitors offer directory
listings in various media such as CD ROM, the Internet and other electronic
databases. As such offerings expand and are enhanced through interactivity and
other features, BellSouth will experience heightened competition in its
directory advertising and publishing businesses. BellSouth has responded to the
increased competition and its changing market environment with new directory
products, product enhancements, multi-media delivery options, including Internet
directory services, pricing changes, competitive advertising, local promotions,
directory redeliveries and extended distributions.
OTHER SERVICES
INTERNET ACCESS
In 1996, BellSouth Telecommunications began providing Internet access, a
customized version of Netscape Navigator-TM-, electronic mail and a gateway to
local and national information. Internet access was provided as
BellSouth.net-SM- service to over 370,000 customers at December 31, 1998.
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WIRELESS DATA
BellSouth owns interests in five wireless data communications networks
worldwide utilizing L.M. Ericsson's Mobitex technology. The networks provide
services in the United States, the United Kingdom, the Netherlands, Belgium and
Singapore and enable wireless data applications for two-way paging, corporate
transactions, access to information and messaging. The networks are also
well-suited for applications such as credit card, debit card and ATM
authorizations and telemetry.
ENTERTAINMENT
BellSouth develops, implements and manages video systems in several areas
within its region. These systems include wireline and wireless based systems
designed to compete with cable operators market by market. BellSouth currently
operates 100% digital wireless video systems covering more than one million
homes in Atlanta, New Orleans and Orlando. In addition, it operates wired
systems in subdivisions near Atlanta, Birmingham, Charleston, S.C. and
Jacksonville, FL. As of December 31, 1998, BellSouth had invested $465 million
in licenses and related fixed assets to operate these systems within its region.
Programming content for the cable systems is provided by
americast-Registered Trademark-, a joint venture partnership of which BellSouth
is a part owner.
RESEARCH AND DEVELOPMENT
BellSouth conducts its research and development activities internally and
through external vendors, primarily Bell Communications Research, Inc.
(Bellcore). Bellcore provides research and development and other services to
BellSouth and the other Holding Companies. BellSouth has contracted with
Bellcore for ongoing support of engineering and systems. In addition, BellSouth
is a member of the National Telecommunications Alliance, an organization which
supports its commitment to national security and emergency preparedness.
EMPLOYEES
At December 31, 1998, 1997 and 1996, BellSouth and its consolidated
subsidiaries employed approximately 88,400, 81,000 and 81,200 persons,
respectively. Of those totals, approximately 60,600, 57,600 and 62,400,
respectively, were employees engaged in the telephone operations of BellSouth
Telecommunications. About 56% of BellSouth's employees at December 31, 1998 were
represented by the Communications Workers of America (the CWA), which is
affiliated with the AFL-CIO. In September 1998, members of the CWA ratified new
three-year contracts with BellSouth, effective August 9, 1998. The contracts
include basic wage increases totaling 12.39% over the three years covered by the
contracts. In addition, the agreement provides for a standard award of between
2% and 2.5% of base salary and overtime compensation which is subject to
adjustment based on company performance measures for plan years 1999 and 2000.
Other terms of the agreement include pension band increases and pension plan
cash balance improvements for active employees.
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ITEM 2. PROPERTIES
GENERAL
BellSouth's properties do not lend themselves to description by character or
location of principal units. BellSouth's investment in property, plant and
equipment consisted of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Outside plant.................................................... 39% 40%
Central office equipment......................................... 35 35
Operating and other equipment.................................... 12 9
Land and buildings............................................... 8 9
Furniture and fixtures........................................... 5 6
Plant under construction......................................... 1 1
---- ----
100% 100%
---- ----
---- ----
</TABLE>
BellSouth's properties are divided among its operating segments as follows:
wireline communications, 86.7%; domestic wireless, 7.5%; international
operations, 3.9%; advertising and publishing, 0.5%; and other, 1.4%.
Outside plant consists of connecting lines (aerial, underground and buried
cable) not on customers' premises, the majority of which is on or under public
roads, highways or streets, while the remainder is on or under private property.
BellSouth currently self-insures all of its outside plant against casualty
losses. Central office equipment substantially consists of digital electronic
switching equipment and circuit equipment. Land and buildings consist
principally of central offices. Operating and other equipment consists of
wireless network equipment, embedded intrasystem wiring (substantially all of
which is on the premises of customers), motor vehicles and other equipment.
Central office equipment, buildings, furniture and fixtures and certain
operating and other equipment are insured under a blanket property insurance
program. This program provides substantial limits of coverage against "all
risks" of loss including fire, windstorm, flood, earthquake and other perils not
specifically excluded by the terms of the policies.
Substantially all of the installations of central office equipment for the
wireline communications business are located in buildings and on land owned by
BellSouth Telecommunications. Many garages, administrative and business offices
and telephone service centers are in leased quarters. Most of the land and
buildings associated with BellSouth's nonwireline businesses and administrative
functions are leased.
CAPITAL EXPENDITURES
Capital expenditures consist of gross additions to property, plant and
equipment having an estimated service life of one year or more, plus the
incidental costs of preparing the asset for its intended use.
The total investment in property, plant and equipment has increased from
$42.0 billion at January 1, 1994 to $58.0 billion at December 31, 1998, not
including deductions of accumulated depreciation. Significant additions to
property, plant and equipment will be required to meet the growing demand for
telecommunications services and to continually modernize and improve such
services to meet competitive demands. Continued population and economic
expansion is projected by BellSouth in certain growth centers within its
nine-state area during the next five to ten years. In addition, growth in
international markets will require investment to expand existing wireless
networks.
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BellSouth's capital expenditures for 1994 through 1998 were as follows:
<TABLE>
<CAPTION>
MILLIONS
--------
<S> <C>
1998........................................................ $ 5,212
1997........................................................ 4,858
1996........................................................ 4,455
1995........................................................ 4,203
1994........................................................ 3,600
</TABLE>
BellSouth projects capital expenditures of approximately $4.8 billion to
$5.2 billion for 1999, consisting primarily of $3.5 billion for its wireline
communications and $1.1 billion to $1.2 billion primarily for BellSouth's
consolidated domestic wireless and international businesses. A majority of the
expenditures will be to expand, enhance and modernize its current wireline and
domestic cellular operating systems, to develop international wireless and other
businesses and for property additions for further construction of PCS systems in
the United States.
During 1998, BellSouth generated substantially all of its funds through
internal sources and, to the extent necessary, from external financing sources.
In 1999, these expenditures are expected to be financed primarily through
internally generated funds and, to the extent necessary, from external financing
sources.
OTHER COMMITMENTS
BellSouth has announced plans to purchase up to $3 billion of its
outstanding Common Stock during 1999. Such purchases are subject to a number of
factors, including market conditions, cash requirements and legal
considerations. BellSouth expects to finance the purchase primarily from
existing cash reserves and through internally generated funds.
ENVIRONMENTAL MATTERS
BellSouth is subject to a number of environmental matters as a result of its
operations and the shared liability provisions related to the divestiture from
AT&T. As a result, BellSouth expects that it will be required to expend funds to
remedy certain facilities, including those Superfund sites for which BellSouth
has been named as a potentially responsible party, for the remediation of sites
with underground fuel storage tanks and other expenses associated with
environmental compliance. At December 31, 1998, BellSouth's recorded liability,
related primarily to remediation of these sites, was approximately $30 million.
BellSouth monitors its operations with respect to potential environmental
issues, including changes in legally mandated standards and remediation
technologies. BellSouth's recorded liability reflects those specific issues
where remediation activities are currently deemed to be probable and where the
cost of remediation is estimable. BellSouth continues to believe that
expenditures in connection with additional remedial actions under the current
environmental protection laws or related matters would not be material to its
results of operations, financial position or cash flows.
ITEM 3. LEGAL PROCEEDINGS
Following the enactment of the 1996 Act, BellSouth Telecommunications and
various CLECs entered into interconnection agreements providing for, among other
things, the payment of reciprocal compensation for local calls initiated by the
customers of one carrier that are completed on the network of the other carrier.
Numerous CLECs claim entitlement from BellSouth Telecommunications for
compensation associated with dial-up calls originating on BellSouth
Telecommunications' network and connecting with Internet service providers
(ISPs) served by the CLECs' networks. BellSouth Telecommunications has
maintained that, because the FCC has previously determined that Internet calls
over dedicated lines are jurisdictionally interstate, dial-up calls to ISPs are
not local calls for which terminating compensation is due under the
interconnection agreements. The courts and state commissions that
18
<PAGE>
have considered the matter have ruled that such calls invoke the reciprocal
compensation obligation. The FCC has indicated that it would release an order in
which it would address the jurisdictional nature of switched ISP traffic.
BellSouth Telecommunications believes that it has a good basis for its claims
that such reciprocal compensation is not owed to the CLECs. However, at December
31, 1998, BellSouth Telecommunications' exposure related to unrecorded amounts
withheld from CLECs was approximately $135 million, including accrued interest.
In addition, BellSouth and its subsidiaries are subject to claims arising in
the ordinary course of business involving allegations of personal injury, breach
of contract, anti-competitive conduct, employment law issues, regulatory matters
and other actions. While complete assurance cannot be given as to the outcome of
any legal claims, BellSouth believes that any financial impact would not be
material to its results of operations, financial position or cash flows. (See
Note N to the Consolidated Financial Statements.)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
No matter was submitted to a vote of shareholders in the fourth quarter of
the fiscal year ended December 31, 1998.
------------------------
ADDITIONAL INFORMATION
DESCRIPTION OF BELLSOUTH STOCK
GENERAL
The Articles of Incorporation of BellSouth authorize the issuance of
4,400,000,000 shares of common stock, par value $1 per share (the Common Stock),
and 100,000,000 shares of cumulative, first preferred stock, par value $1 per
share (the Preferred Stock). BellSouth's Board of Directors (the Board) is
authorized to provide for the issuance, from time to time, of the Preferred
Stock in series and, as to each series, to fix the number of shares in such
series and the voting, dividend, redemption, liquidation, retirement and
conversion provisions applicable to the shares of such series. No shares of
Preferred Stock are outstanding. The Board has created Series A First Preferred
Stock consisting of 30 million shares (the Series A Preferred Stock) for
possible issuance under BellSouth's Shareholder Rights Plan. (See "Preferred
Stock Purchase Rights" and "Market for Registrant's Common Equity and Related
Stockholder Matters.")
DIVIDEND RIGHTS
The holders of Common Stock are entitled to receive, from funds legally
available for the payment thereof, dividends when and as declared by resolution
of the Board. While any series of Preferred Stock is outstanding, no dividends
(other than dividends payable solely in Common Stock) may be declared or paid on
Common Stock, and no Common Stock may be purchased, redeemed or otherwise
acquired for value, (a) unless dividends on all outstanding shares of Preferred
Stock for the current and all past dividend periods have been paid or declared
and provision made for payment thereof and (b) unless all requirements with
respect to any purchase, retirement or sinking fund or funds applicable to all
outstanding series of Preferred Stock have been satisfied. Dividends on the
Preferred Stock would be cumulative.
VOTING RIGHTS
Except in connection with the "business combinations" and "fair price"
provisions discussed below, holders of shares of Common Stock are entitled to
one vote, in person or by proxy, for each share held on the applicable record
date with respect to each matter submitted to a vote at a meeting of
shareholders, but such holders do not have cumulative voting rights. The holders
of any series of Preferred Stock, when issued, may receive the right to vote as
a class on certain amendments to the
19
<PAGE>
Articles of Incorporation and on certain other matters, including the election
of directors in the event of certain defaults, which may include non-payment of
Preferred Stock dividends.
LIQUIDATION RIGHTS
In the event of voluntary or involuntary liquidation of BellSouth, holders
of the Common Stock will be entitled to receive, after creditors have been paid
and the holders of the Preferred Stock, if any, have received their liquidation
preferences and accumulated and unpaid dividends, all the remaining assets of
BellSouth.
PRE-EMPTIVE RIGHTS; CONVERSION RIGHTS; REDEMPTION
No shareholders of any class shall be entitled to any pre-emptive rights to
subscribe for or purchase any shares or other securities issued by BellSouth.
The Common Stock has no conversion rights and is not subject to redemption.
PREFERRED STOCK PURCHASE RIGHTS
The Board has declared a dividend of one preferred stock purchase right
(Right) for each share of Common Stock from time to time outstanding. Under
certain circumstances, each Right will entitle the holder to purchase one
one-hundredth of a share of Series A Preferred Stock, $1.00 par value (Common
Equivalent Preferred Stock), which unit is substantially equivalent in voting
and dividend rights to one whole share of the Common Stock, at a price of $43.75
per one-hundredth of a share of Common Equivalent Preferred Stock (the Purchase
Price). The Rights are not presently exercisable and may be exercised only if a
person or group (Acquiring Person) acquires 10% of the outstanding voting stock
of BellSouth without the prior approval of the Board or announces a tender or
exchange offer that would result in ownership of 25% or more of the Common
Stock.
If an Acquiring Person becomes such without prior Board approval, the Rights
are adjusted, and each holder, other than the Acquiring Person, then has the
right to receive, on payment of the Purchase Price, the number of shares of
Common Stock, units of the Common Equivalent Preferred Stock or other assets
having a market value equal to twice the Purchase Price.
The Rights currently trade with the Common Stock and expire in December
1999.
BUSINESS COMBINATIONS
The Georgia legislature has enacted legislation which generally prohibits a
corporation which has adopted a by-law electing to be covered thereby (which
BellSouth has done) from engaging in any "business combination" (i.e., a merger,
consolidation or other specified corporate transaction) with an "interested
shareholder" (i.e., a 10% shareholder or an affiliate of the corporation which
was a 10% shareholder at any time within the preceding two years) for a period
of five years from the date such person becomes an interested shareholder,
unless the interested shareholder (a) prior to becoming an interested
shareholder, obtained the approval of the Board of Directors for either the
business combination or the transaction which resulted in the shareholder
becoming an interested shareholder, (b) becomes the owner of at least 90% of the
outstanding voting stock of the corporation in the same transaction in which the
interested shareholder became an interested shareholder, excluding for purposes
of determining the number of shares outstanding those shares owned by officers,
directors, subsidiaries and certain employee stock plans of the corporation or
(c) subsequent to the acquisition of 10% or more of the outstanding voting stock
of the corporation, acquires additional shares resulting in ownership of at
least 90% of the outstanding voting stock of the corporation and obtains
approval of the business combination by the holders of a majority of the shares
of voting stock of the corporation, other than those shares held by an
interested shareholder, officers, directors, subsidiaries and certain employee
stock plans of the corporation. BellSouth's "business combinations" by-law may
be repealed only by an affirmative vote of two-thirds of the continuing
directors and a majority of the votes entitled to be cast by the shareholders,
other than interested shareholders, and shall not be effective until 18
20
<PAGE>
months after such shareholder vote. The Georgia statute provides that a domestic
corporation which has thus repealed such a by-law may not thereafter readopt the
by-law as provided therein.
FAIR PRICE PROVISIONS
"Fair price" provisions contained in the Articles of Incorporation require,
generally, in connection with a merger or similar transaction between BellSouth
and an "interested shareholder" (a 10% shareholder or an affiliate of BellSouth
which was a 10% shareholder at any time within the preceding two years), the
unanimous approval of BellSouth's directors not affiliated with the interested
shareholder or the affirmative vote of two-thirds of such directors and a
majority of the outstanding shares held by disinterested shareholders, unless
(a) within the past three years the shareholder has been an interested
shareholder and has not increased its shareholdings by more than one percent in
any 12-month period or (b) all shareholders receive at least the same
consideration for their shares as the interested shareholder previously paid.
Additionally, these provisions may be revised or rescinded only upon the
affirmative vote of at least two-thirds of the directors not affiliated with an
interested shareholder and a majority of the outstanding shares held by
disinterested shareholders.
BOARD CLASSIFICATION; REMOVAL OF DIRECTORS
Board classification provisions adopted by the shareholders and contained in
the By-laws prescribe a shareholder vote for approximately one-third of the
directors, instead of all directors, at each annual meeting of shareholders for
a three-year term. Additionally, such provisions provide that shareholders may
remove directors from office only for cause, and can amend the By-laws with
respect to the number of directors or amend the board classification provisions
only by the affirmative vote of the holders of at least 75% of the outstanding
shares entitled to vote for the election of directors.
LIMITATION ON SHAREHOLDERS' PROCEEDINGS
BellSouth's By-laws require that notice of shareholder nominations for
directors and of other matters to be brought before annual shareholders'
meetings must be provided in writing to the Secretary of BellSouth not later
than the 75th day nor earlier than the 120th day prior to the date which is the
anniversary of the annual meeting of shareholders held in the prior year. Such
By-laws also provide that a special shareholders' meeting may be called by
shareholders only upon written request signed by the holders of at least
three-quarters of the outstanding shares entitled to vote at the meeting.
------------------------
The provisions discussed under the five preceding sub-headings and the
ability to issue Preferred Stock, such as the Series A Preferred Stock described
above, with characteristics established by the Board and without the consent of
the holders of Common Stock and the ability to issue additional shares of Common
Stock may have the effect of discouraging takeover attempts and may also have
the effect of maintaining the position of incumbent management. In addition,
these provisions may have a significant effect on the ability of shareholders of
BellSouth to benefit from certain kinds of transactions that may be opposed by
the incumbent Board.
21
<PAGE>
EXECUTIVE OFFICERS
The executive officers of BellSouth Corporation are listed below:
<TABLE>
<CAPTION>
THIS
OFFICER OFFICE
NAME AGE OFFICE SINCE SINCE
- - ------------------------- --- ------------------------------------------------------------ ------- ------
<S> <C> <C> <C> <C>
F. Duane Ackerman 56 Chairman of the Board, President and Chief Executive Officer 1983 1997
Richard A. Anderson 40 Group President -- BellSouth Business 1993 1998
C. Sidney Boren 55 Executive Staff Officer 1984 1997
Robert L. Capell, III 50 Senior Vice President -- Advanced Data Networks 1995 1998
Keith O. Cowan 42 Vice President -- Corporate Development 1996 1996
Francis A. Dramis, Jr. 50 Executive Vice President and Chief Information Officer 1998 1998
Mark E. Droege 45 Vice President -- Financial Management and Treasurer 1996 1996
Jere A. Drummond 59 President and Chief Executive Officer -- BellSouth 1983 1998
Communications Group
Ronald M. Dykes 51 Executive Vice President and Chief Financial Officer 1988 1995
Donna A. Lee 44 Senior Vice President -- Managed Network Solutions 1998 1998
David J. Markey 58 Vice President -- Governmental Affairs 1986 1993
Charles C. Miller, III 46 President -- International 1990 1995
Charles R. Morgan 52 Executive Vice President and General Counsel 1998 1998
William C. Pate 38 Vice President -- Advertising and Public Relations 1997 1997
William F. Reddersen 51 Group President -- Value Added Services 1987 1998
John G. Robinson 36 Vice President -- Strategic Management 1997 1998
W. Patrick Shannon 36 Vice President and Controller 1997 1997
Richard D. Sibbernsen 51 Vice President -- Human Resources 1997 1997
Carl E. Swearingen 52 Senior Vice President -- Corporate Compliance and Corporate 1989 1998
Secretary
</TABLE>
The following officers of the companies indicated may be deemed to be
executive officers of BellSouth Corporation:
<TABLE>
<S> <C> <C> <C> <C>
Charles B. Coe 51 President -- BellSouth Telecommunications 1988 1998
Earle Mauldin 58 President and Chief Executive Officer -- BellSouth 1987 1995
Enterprises, Inc.
</TABLE>
All of the executive officers of BellSouth, other than Mr. Cowan, Mr.
Dramis, Ms. Lee, Mr. Morgan, Mr. Pate, Mr. Shannon and Mr. Sibbernsen have for
at least the past five years held high level management or executive positions
with BellSouth or its subsidiaries. Mr. Cowan was a partner at the law firm of
Alston & Bird before joining BellSouth in 1996. Mr. Dramis joined BellSouth
December 1, 1998 from CIO Strategy, Inc., a Clifton, Virginia-based information
technology consulting firm. Prior to joining BellSouth in June 1998, Ms. Lee was
employed by AT&T where she was Vice President -- Global Services and responsible
for Internet and data services as well as other areas. Prior to joining
BellSouth in February 1998, Mr. Morgan was a partner with Mayer, Brown & Platt,
a Chicago-based international law firm, and prior to that was Vice President,
General Counsel and Secretary of Chiquita Brands International, Inc. Mr. Pate,
prior to joining BellSouth in 1996, was employed by MCI where he was responsible
for that company's domestic and international advertising. Prior to joining
BellSouth in 1997, Mr. Shannon was employed by U S West, Inc. as Chief Financial
Officer of MediaOne, a company that provides cable television services. In 1997,
Mr. Sibbernsen joined BellSouth from TNT Limited, a worldwide transportation
company where he was head of corporate human resources and responsible for that
company's global human resources strategies and programs.
All officers serve until their successors have been elected and qualified.
22
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The principal market for trading in BellSouth Common Stock is the New York
Stock Exchange, Inc. (NYSE). BellSouth Common Stock is also listed on the
Boston, Chicago, Pacific and Philadelphia exchanges in the United States and the
London, Frankfurt, Amsterdam and Swiss exchanges. The ticker symbol for
BellSouth Common Stock is BLS. At February 1, 1999, there were 978,796 holders
of record of BellSouth Common Stock. The market price and dividend information
listed below has been adjusted for the two-for-one stock split effective in
December 1998. Market price data were obtained from the NYSE Composite Tape,
which encompasses trading on the principal United States stock exchanges as well
as off-board trading. High and low prices represent the highest and lowest sales
prices for the periods indicated.
<TABLE>
<CAPTION>
MARKET PRICES PER SHARE
------------------ DIVIDENDS
HIGH LOW DECLARED
------- ------- ----------
<S> <C> <C> <C>
1996
First Quarter................................................................... $22 15/16 $18 $ .18
Second Quarter.................................................................. 21 3/16 17 5/8 .18
Third Quarter................................................................... 21 11/16 17 5/8 .18
Fourth Quarter.................................................................. 22 18 1/8 .18
1997
First Quarter................................................................... $23 13/16 $19 1/16 $ .18
Second Quarter.................................................................. 24 5/16 19 11/16 .18
Third Quarter................................................................... 24 1/2 21 21/32 .18
Fourth Quarter.................................................................. 29 1/16 22 5/8 .18
1998
First Quarter................................................................... $34 7/32 $27 1/16 $ .18
Second Quarter.................................................................. 34 3/4 30 1/2 .18
Third Quarter................................................................... 39 1/16 32 5/32 .18
Fourth Quarter.................................................................. 50 36 5/8 .19
</TABLE>
STOCK TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services, L.L.C. is BellSouth's stock transfer agent
and registrar.
23
<PAGE>
ITEM 6. SELECTED FINANCIAL AND OPERATING DATA
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating Revenues................................ $23,123 $20,561 $19,040 $17,886 $16,845
Operating Expenses (1)............................ 17,219 15,185 14,261 14,594 12,787
--------- -------- -------- -------- --------
Operating Income.................................. 5,904 5,376 4,779 3,292 4,058
Interest Expense.................................. 837 761 721 724 666
Gain on Sale of Operations (2).................... 335 787 442 -- --
Other Income, net................................. 349 19 108 20 11
--------- -------- -------- -------- --------
Income Before Income Taxes and Extraordinary
Losses........................................... 5,751 5,421 4,608 2,588 3,403
Provision for Income Taxes........................ 2,224 2,151 1,745 1,024 1,243
--------- -------- -------- -------- --------
Income Before Extraordinary Losses................ 3,527 3,270 2,863 1,564 2,160
Extraordinary Losses, net of tax (3).............. -- (9) -- (2,796) --
--------- -------- -------- -------- --------
Net Income (Loss)............................... $ 3,527 $ 3,261 $ 2,863 $(1,232) $ 2,160
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
Earnings (Loss) Per Share (4):
BASIC:
Income Before Extraordinary Losses.............. $ 1.79 $ 1.65 $ 1.44 $ .79 $ 1.09
Extraordinary Losses, net of tax (3)............ -- -- -- (1.41) --
--------- -------- -------- -------- --------
Net Income (Loss) (5)........................... $ 1.79 $ 1.64 $ 1.44 $ (.62) $ 1.09
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
DILUTED:
Income Before Extraordinary Losses.............. $ 1.78 $ 1.64 $ 1.44 $ .79 $ 1.09
Extraordinary Losses, net of tax (3)............ -- -- -- (1.41) --
--------- -------- -------- -------- --------
Net Income (Loss)............................... $ 1.78 $ 1.64 $ 1.44 $ (.62) $ 1.09
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
Dividends Declared Per Common Share (4)........... $ .73 $ .72 $ .72 $ .71 $ .69
Book Value Per Share (4).......................... $ 8.26 $ 7.65 $ 6.68 $ 5.95 $ 7.24
Return to Average Common Equity................... 22.3% 22.8% 22.4% (9.2%) 15.4%
Weighted-Average Common Shares Outstanding
(millions) (4):
Basic........................................... 1,970 1,984 1,987 1,986 1,985
Diluted......................................... 1,984 1,989 1,992 1,989 1,986
Return on Average Total Capital................... 15.1% 15.8% 15.0% (2.7%) 11.5%
Total Assets...................................... $39,410 $36,301 $32,568 $31,880 $34,397
Capital Expenditures.............................. $ 5,212 $ 4,858 $ 4,455 $ 4,203 $ 3,600
Long-Term Debt.................................... $ 8,715 $ 7,348 $ 8,116 $ 7,924 $ 7,435
Debt Ratio at End of Period....................... 43.0% 42.1% 43.5% 46.7% 39.3%
Ratio of Earnings to Fixed Charges................ 7.09 7.17 6.55 4.24 5.34
Total Employees................................... 88,450 81,000 81,241 87,571 92,121
Telephone Employees (6)........................... 60,561 57,619 62,425 68,585 73,764
Telephone Employees per 10,000 Switched Access
Lines............................................ 25.2 24.8 28.2 32.5 36.5
Business Volumes (7):
Network Equivalent Access Lines in Service
(thousands):
Switched Access Lines......................... 24,025 23,201 22,135 21,133 20,220
Access Line Equivalents....................... 13,162 9,218 6,158 4,723 3,716
--------- -------- -------- -------- --------
Total Equivalent Access Lines................. 37,187 32,419 28,293 25,856 23,936
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
Access Minutes of Use (millions)................ 104,373 97,106 88,861 81,608 74,666
Long Distance Messages (millions)............... 784 894 1,023 1,374 1,559
Wireless Customers (thousands) (8):
Domestic...................................... 4,796 4,193 3,643 2,847 2,156
International................................. 3,439 1,882 1,244 655 361
--------- -------- -------- -------- --------
Total Wireless Customers.................... 8,235 6,075 4,887 3,502 2,517
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
</TABLE>
- - ------------------------------
(1) Operating Expenses for 1995 include a work force reduction charge of $1,082,
which reduced net income by $663.
(2) For 1998, represents the pretax gains associated with the sale of BellSouth
New Zealand as well as additional proceeds received in 1998 on the 1997 sale
of ITT World Directories, Inc. The pretax gains on those sales were $180
($110 after tax) and $155 ($96 after tax), respectively. For 1997,
represents the pretax gains on the sale of Optus Communications and ITT
World Directories, Inc. The pretax gains on such sales were $578 ($352 after
tax) and $209 ($128 after tax), respectively. See Note B to the Consolidated
Financial Statements. For 1996, represents the pretax gain on the sale of
BellSouth's paging business of $442 ($344 after tax).
(3) For 1997, reflects charges related to the extinguishment of long-term debt
issues. See Note E to the Consolidated Financial Statements. For 1995,
reflects charges of $2,718 ($1.37 per share) for the discontinuance of
Statement of Financial Accounting Standards No. 71, "Accounting for the
Effects of Certain Types of Regulation," and $78 ($.04 per share) related to
the refinancing of long-term debt issues.
(4) Number of shares and per share amounts for prior years have been restated
for a 2-for-1 stock split which occurred in 1998.
(5) Basic earnings per share amounts for 1997 do not sum due to rounding.
(6) Telephone employees exclude those employees in BellSouth Telecommunications'
subsidiaries which are unrelated to telephone operations.
(7) Prior period operating data are revised at later dates to reflect the most
current information. The above information reflects the latest data
available for the periods indicated.
(8) Calculated on the equity basis, which includes customers served based on
BellSouth's ownership percentage in all markets served.
24
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
BellSouth Corporation (BellSouth) is a holding company headquartered in
Atlanta, Georgia. BellSouth has two principal and wholly-owned subsidiaries,
BellSouth Telecommunications, Inc. (BellSouth Telecommunications) and BellSouth
Enterprises, Inc. (BellSouth Enterprises). For management purposes, the
operations of these subsidiaries are organized into five operating segments:
wireline communications; domestic wireless; international operations;
advertising and publishing; and other.
Wireline communications is comprised primarily of the operations of
BellSouth Telecommunications. BellSouth Telecommunications operates in nine
Southeastern states and primarily provides (i) local exchange and long distance
service within but not between geographic areas, called Local Access and
Transport Areas (LATAs), and (ii) network access services to enable interLATA
communications using the facilities of long distance carriers. Approximately
71%, 74% and 77% of BellSouth's Total Operating Revenues for the years ended
December 31, 1998, 1997 and 1996, respectively, were from the wireline
communications business. Charges for local service, network access and long
distance service for the year ended December 31, 1998 accounted for
approximately 57%, 28% and 4%, respectively, of the revenues from the wireline
communications business. The remainder of such revenues was derived principally
from sales and maintenance of customer premises equipment and other nonregulated
services provided by BellSouth Telecommunications.
Domestic wireless is comprised of cellular and personal communications
service (PCS) businesses within the U.S. Approximately 12%, 13% and 12% of
BellSouth's Total Operating Revenues for the years ended December 31, 1998, 1997
and 1996, respectively, were from the domestic wireless business. In addition,
BellSouth Enterprises has noncontrolling financial interests in a number of
wireless businesses whose revenues are not reflected in operating revenues
because of the method of accounting for such investments.
International operations is comprised primarily of cellular and PCS
businesses in nine countries in Latin America as well as China, Denmark,
Germany, India and Israel. Approximately 9%, 5% and 3% of BellSouth's Total
Operating Revenues for the years ended December 31, 1998, 1997 and 1996,
respectively, were from international operations. In addition, BellSouth
Enterprises has noncontrolling financial interests in a number of international
businesses whose revenues are not reflected in Total Operating Revenues because
of the method of accounting for such investments.
BellSouth's advertising and publishing business is comprised of companies
that publish, print, sell advertising in, and perform related services
concerning alphabetical and classified telephone directories. Advertising and
publishing revenues accounted for approximately 8%, 9% and 9%, respectively, of
BellSouth's Total Operating Revenues for the years ended December 31, 1998, 1997
and 1996.
BellSouth's other operating segment is comprised primarily of companies
providing Internet access, wireless data, entertainment and various start-up
operations.
25
<PAGE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
PERCENT CHANGE
----------------------
1998 VS. 1997 VS.
1998 1997 1996 1997 1996
--------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Income (a)..................................... $ 3,527 $ 3,261 $ 2,863 8.2% 13.9%
Earnings Per Share (a):
Basic............................................ $ 1.79 $ 1.64 $ 1.44 9.1 13.9
Diluted.......................................... $ 1.78 $ 1.64 $ 1.44 8.5 13.9
</TABLE>
- - ------------------------
(a) Net Income and Earnings Per Share for 1997 include an Extraordinary Loss on
Early Extinguishment of Debt of $9.
Net Income for 1998 increased $266 (8.2%) compared to 1997. Diluted Earnings
Per Share increased $.14 (8.5%) and Basic Earnings Per Share increased $.15
(9.1%) when compared to 1997. The increases were due primarily to continued
strong growth in key business volumes in BellSouth's wireline communications
business and improved results from BellSouth's international operations. The
increases also include an after-tax gain of $110 resulting from the sale in 1998
of BellSouth New Zealand, an after-tax gain of $96 resulting from additional
proceeds received during 1998 in connection with the sale of ITT World
Directories and additional income of $62 which resulted from the early repayment
of a loan. (See Note B to the Consolidated Financial Statements.) Net Income
during 1997 was reduced by an after-tax charge of $47 related to a regulatory
settlement in South Carolina. The increases were partially offset by gains on
the sales of Optus Communications ($352 after tax) and ITT World Directories
($128 after tax), which occurred during 1997.
Net Income for 1997 increased $398 (13.9%), and Diluted Earnings Per Share
increased $.20 (13.9%) compared to 1996. The increases were primarily
attributable to the after-tax gains on the sale in 1997 of Optus Communications
($352) and ITT World Directories ($128). (See Note B to the Consolidated
Financial Statements.) In addition, the increases were due to continued strong
growth in key business volumes and expense savings within the wireline
communications business due to employee reductions under BellSouth
Telecommunications' work force reduction plan initiated in 1995. The increases
were partially offset by a $344 after-tax gain on the sale of BellSouth's paging
business during the first quarter of 1996. The increases were further offset by
an after-tax charge of $47 related to a regulatory settlement in South Carolina
during the second quarter of 1997.
26
<PAGE>
VOLUMES OF BUSINESS
WIRELINE COMMUNICATIONS VOLUMES
Equivalent Access Lines in Service at December 31 (thousands) (a):
<TABLE>
<CAPTION>
PERCENT CHANGE
----------------------
1998 VS. 1997 VS.
1998 1997 1996 1997 1996
--------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
By Type:
Switched Access Lines:
Residence..................................... 16,457 15,841 15,140 3.9% 4.6%
Business...................................... 7,294 7,088 6,732 2.9 5.3
Other......................................... 274 272 263 0.7 3.4
--------- --------- ---------
Total Switched Access Lines................. 24,025 23,201 22,135 3.6 4.8
--------- --------- ---------
Access Line Equivalents (b)(c):
Basic Rate ISDN............................... 178 143 96 24.5 49.0
Primary Rate ISDN............................. 526 288 98 82.6 193.9
DS0........................................... 697 644 657 8.2 (2.0)
DS1........................................... 4,343 3,400 2,299 27.7 47.9
DS3........................................... 7,418 4,743 3,008 56.4 57.7
--------- --------- ---------
Total Access Line Equivalents............... 13,162 9,218 6,158 42.8 49.7
--------- --------- ---------
Total Equivalent Access Lines in
Service................................. 37,187 32,419 28,293 14.7 14.6
--------- --------- ---------
--------- --------- ---------
Switched Access Lines By State
(thousands) (a):
Florida......................................... 6,496 6,237 5,899 4.2 5.7
Georgia......................................... 4,159 3,990 3,772 4.2 5.8
Tennessee....................................... 2,677 2,623 2,544 2.1 3.1
North Carolina.................................. 2,444 2,337 2,213 4.6 5.6
Louisiana....................................... 2,344 2,267 2,178 3.4 4.1
Alabama......................................... 1,960 1,928 1,857 1.7 3.8
South Carolina.................................. 1,456 1,404 1,344 3.7 4.5
Mississippi..................................... 1,280 1,238 1,193 3.4 3.8
Kentucky........................................ 1,209 1,177 1,135 2.7 3.7
--------- --------- ---------
Total Switched Access Lines............... 24,025 23,201 22,135 3.6 4.8
--------- --------- ---------
--------- --------- ---------
</TABLE>
- - --------------
(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) Access line equivalents are based on conversion factors that result from the
estimated capacity of one switched access line. The conversion factors used
are as follows: Basic Rate ISDN, 2.5/1; Primary Rate ISDN, 24/1; DS0, 1/1;
DS1, 24/1; and DS3, 672/1. Basic Rate ISDN lines are included in BellSouth
Telecommunications' switched access line count as equaling one line. The
amounts shown as access line equivalents are the estimated incremental
equivalent access lines resulting from these lines.
(c) Revenues associated with digital and data services are derived from the sale
of specific high-bandwidth products provisioned over transmission lines with
DS0 or greater capacity. While access line equivalent counts have a
directional relationship with digital and data revenues, growth rates cannot
be compared on an equivalent basis.
27
<PAGE>
Switched residence lines increased by 3.9% in the period ended December 31,
1998, compared to a growth rate of 4.6% in 1997. In addition to continued
economic growth in the region, the growth rate reflects demand for additional
lines related to home office purposes, access to on-line computer services and
children's phones. The number of such additional lines increased by 375,000
(19.9%) to 2,259,000 and accounted for approximately 61% of the overall increase
in switched residence access lines since December 31, 1997. The slower growth
rate in 1998 primarily reflects the higher penetration rates in the residential
market.
Switched business lines increased by 2.9% in the period ended December 31,
1998, compared to a growth rate of 5.3% in 1997. The decrease in the growth rate
was primarily due to the migration of business customers from traditional
business line services to digital and data services and, to a lesser degree, by
the increased presence of facilities-based competition.
Access line equivalents increased by 42.8% in 1998 compared to an increase
of 49.7% in 1997. The increase is attributable to continued growth in demand for
digital and data lines that provide services such as bulk data transmission,
video conferencing, ATMs, check/credit card authentication, multimedia and
interconnection with wireless networks.
Total equivalent access lines at December 31, 1998 include 520,000 resold
lines, an increase of 299,000 over the prior year.
<TABLE>
<CAPTION>
PERCENT CHANGE
------------------------
1998 VS. 1997 VS.
1998 1997 1996 1997 1996
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Access Minutes of Use (millions).............. 104,373 97,106 88,861 7.5% 9.3%
</TABLE>
Access minutes of use represent the volume of traffic carried by long
distance carriers between LATAs, both interstate and intrastate, using BellSouth
Telecommunications' local facilities. In 1998, access minutes of use increased
by 7,267 million (7.5%) compared to an increase of 9.3% in 1997. The increases
in access minutes of use were primarily attributable to access line growth,
promotions by the long distance carriers and intraLATA long distance
competition, which has the effect of increasing access minutes of use while
reducing long distance messages carried over BellSouth Telecommunications'
facilities. The growth rate in access minutes of use continues to be negatively
impacted by competition and the migration of long distance 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.
<TABLE>
<CAPTION>
PERCENT CHANGE
------------------------
1998 VS. 1997 VS.
1998 1997 1996 1997 1996
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Long Distance Messages (millions)............. 784 894 1,023 (12.3%) (12.6%)
</TABLE>
Long distance messages are comprised of Message Telecommunications Service
and Wide Area Telecommunications Service within LATAs. Long distance messages
decreased by 110 million (12.3%) in 1998 compared to a decrease of 12.6% in
1997. The decrease in 1998 was primarily attributable to continued competition
from long distance carriers in the intraLATA long distance market as well as the
increased penetration of local area calling plans (LACPs) in existing calling
plan areas. Effects of competition and the increasing penetration in existing
LACPs result in the transfer of calls from long distance to the access and local
service categories, respectively, but the corresponding revenues are not
generally shifted at commensurate rates. Competition in the intraLATA long
distance market will continue to adversely impact long distance message volumes.
28
<PAGE>
DOMESTIC WIRELESS VOLUMES
Cellular and PCS customers served at December 31 (equity basis) (thousands):
<TABLE>
<CAPTION>
PERCENT CHANGE
------------------------
1998 VS. 1997 VS.
1998 1997 1996 1997 1996
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Customers............................................. 4,796 4,193 3,643 14.4% 15.1%
</TABLE>
Domestic wireless customers (equity basis) increased by 603,000 (14.4%)
during 1998 compared to 550,000 (15.1%) during 1997. The decrease in the growth
rate is primarily due to a reorganization of BellSouth's ownership interests in
its Los Angeles and Houston/Galveston cellular investments. If all periods were
adjusted for the effects of the ownership changes, domestic wireless customers
would have increased 18.6% and 15.4%, respectively, for 1998 and 1997. Average
revenue per wireless customer decreased from 1997 to 1998. The decrease was due
primarily to the continuing shifts to lower-priced usage plans by existing
customers in response to competition and increased penetration into lower-usage
market segments. BellSouth expects these trends to continue.
INTERNATIONAL OPERATIONS VOLUMES
International wireless customers served at December 31 (equity basis)
(thousands):
<TABLE>
<CAPTION>
PERCENT CHANGE
------------------------
1998 VS. 1997 VS.
1998 1997 1996 1997 1996
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Customers (a)(b)...................................... 3,439 1,882 1,244 82.7% 51.3%
</TABLE>
- - ------------------------------
(a) International cellular customers at December 31, 1998 includes 247,000 net
customer additions resulting from BellSouth's purchase of additional
ownership interests in several Latin American markets and excludes the
customers of BellSouth New Zealand, which was sold in 1998. International
cellular customers at December 31, 1997 excludes the customers of Optus
Communications, which was sold in 1997.
(b) Excluding the customers resulting from the 1998 purchases (see note a), and
excluding the customers of Optus Communications and BellSouth New Zealand
from all periods, the number of international cellular customers (equity
basis) increased by 75% and 108.9%, respectively, for the years ended
December 31, 1998 and 1997.
International cellular customers (equity basis) increased by 1,557,000
(82.7%) since December 31, 1997 to 3,439,000. Such growth reflects increased
demand for wireless services in the international markets which BellSouth serves
as well as the effect of BellSouth's purchase of additional ownership interests
in several of its Latin American markets. This growth also included an increase
of 350,000 equity-basis customers resulting from the start-up of operations in
Brazil in mid-1998. These increases were offset by the sale of BellSouth's 65%
ownership interest in its operations in New Zealand during the fourth quarter of
1998. Excluding the effects of the purchases of additional ownership interest
from the 1998 period as well as the customers of BellSouth New Zealand from the
1997 period, equity-basis customers increased 75% from 1997 to 1998. Growth in
equity-basis customers and total minutes of use for international cellular
properties remained strong, primarily due to demand stimulated by successful
marketing programs such as prepaid cellular service and enhanced services and
due to underdeveloped land-line service. Average minutes of use per
international customer, however, declined due to increased penetration of
lower-usage market segments.
International cellular customers increased by 638,000 (51.3%) from December
31, 1996 to 1,882,000 at December 31, 1997. 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. 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,
29
<PAGE>
average minutes of use per international customer declined due to the addition
of customers in lower-usage market segments.
OPERATING REVENUES
Total Operating Revenues increased $2,562 (12.5%) in 1998 compared to an
increase of $1,521 (8.0%) during 1997. The increases resulted primarily from
increases in revenues from BellSouth's wireline communications segment coupled
with significant increases in revenues from BellSouth's international
operations. The increase in revenues includes revenues from certain businesses
in BellSouth's international operations and other services that had previously
been accounted for under the equity method and were consolidated for the first
time in either fourth quarter of 1997 or first quarter of 1998. If these
operations had been consolidated in all periods presented, and excluding the
effect of the South Carolina settlement in 1997, Total Operating Revenues would
have increased approximately $2,020 (9.6%) during 1998 and $1,754 (9.1%) during
1997.
The components of Total Operating Revenues were as follows:
<TABLE>
<CAPTION>
PERCENT CHANGE
----------------------
1998 VS. 1997 VS.
1998 1997 1996 1997 1996
--------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Wireline communications:
Local service................................ $ 9,399 $ 8,499 $ 8,082 10.6% 5.2%
Network access............................... 4,632 4,483 4,365 3.3 2.7
Long distance................................ 713 734 794 (2.9) (7.6)
Other wireline............................... 1,657 1,462 1,383 13.3 5.7
Domestic wireless.............................. 2,723 2,581 2,204 5.5 17.1
International operations....................... 1,995 948 547 110.4 73.3
Advertising and publishing..................... 1,891 1,837 1,651 2.9 11.3
Other services................................. 113 17 14 N/A 21.4
--------- --------- ---------
Total Operating Revenues..................... $ 23,123 $ 20,561 $ 19,040 12.5 8.0
--------- --------- ---------
--------- --------- ---------
</TABLE>
LOCAL SERVICE revenues reflect amounts billed to customers for local
exchange services, which include connection to the network, optional services
such as custom calling features and certain digital and data services. Local
service revenues for 1998 increased $900 (10.6%) compared to an increase of $417
(5.2%) in 1997.
The increase for 1998 was due primarily to a 3.6% increase in switched
access lines since December 31, 1997, an increase of $246 due to higher customer
demand for optional services such as custom calling features, and an increase in
revenues from the provision of digital and data services. Also contributing were
net rate impacts of $161. These impacts were due primarily to revenue sharing
accruals recorded during 1997 as well as a nonrecurring revenue reduction of $64
in 1997 related to the local service portion of the regulatory settlement in
South Carolina.
The increase in 1997 was due primarily to a 4.8% growth in switched access
lines since December 31, 1996. Also contributing was an increase of $241 due to
higher customer demand for optional services. Such increases were partially
offset by rate impacts which reduced revenues by $252 primarily due to revenue
sharing accruals recorded in 1997 and a nonrecurring revenue reduction of $64
related to the local service portion of the regulatory settlement in South
Carolina.
NETWORK ACCESS revenues result from the provision of network access services
to long distance carriers to provide telecommunications services between LATAs,
both interstate and intrastate, and from end-user charges collected from
residential and business customers. Network access revenues also include special
access charges for the provision of certain digital and data services. Network
access revenues increased $149 (3.3%) in 1998 compared to an increase of $118
(2.7%) in 1997.
30
<PAGE>
The increase in 1998 was attributable primarily to an increase of $148 due
to higher demand for special access services and increases in end-user charges
attributable to increases in switched access lines. Special access revenues are
comprised primarily of revenues from the provision of digital and data services.
Such increases were partially offset by rate reductions which decreased revenues
by $122 since December 31, 1997.
The increase in 1997 was attributable primarily to growth in access minutes
of use of 9.3%, an increase of $97 due to higher demand for special access
services and an increase in end-user charges attributable to growth in the
number of switched access lines. Such increases were partially offset by rate
reductions which decreased revenues by $243.
LONG DISTANCE revenues are received from the provision of long distance
services within LATAs. These services include intraLATA service beyond the local
calling area; Wide Area Telecommunications Service (WATS or 800 services) for
customers with highly concentrated demand; and special services, such as
transport of voice, data and video. Long distance revenues decreased $21 (2.9%)
in 1998 compared to a decrease of $60 (7.6%) in 1997.
The decrease for 1998 was primarily attributable to continuing competition
from long distance carriers in the intraLATA long distance market as well as the
increased penetration of LACPs in existing calling plan areas. The decreases
were partially offset by increases in charges to long distance carriers for
messages originating on BellSouth's public payphones as well as increased
revenues from the provision of digital and data services.
The decrease for 1997 was primarily attributable to continuing competition
from long distance carriers in the intraLATA long distance market as well as the
continuing expansion of LACPs, the effect of which reduced long distance
messages by 12.6%. The decrease was partially offset by $62 related to revenues
from long distance carriers beginning in the second quarter of 1997 for long
distance messages originating on BellSouth Telecommunications' public payphones.
The overall decline in intraLATA long distance revenues is expected to
continue over the long term.
OTHER WIRELINE revenues are principally comprised of revenues from customer
premises equipment sales, maintenance services and other services (primarily
inside wire, billing and collection and voice messaging services) offered by
BellSouth Telecommunications. Other wireline revenues also include billings for
interconnections by unaffiliated wireless carriers with BellSouth
Telecommunications' network. Other wireline revenues increased $195 (13.3%) in
1998 compared to an increase of $79 (5.7%) in 1997.
The increase for 1998 primarily reflects increased demand and prices for
nonregulated services totaling $162.
The increase for 1997 reflects increased demand and prices for nonregulated
services and higher billing-related fees at BellSouth Telecommunications
totaling $138. The increase was partially offset by the effect in 1996 of
positive rate impacts and the sale of a subsidiary which performed computer
maintenance.
DOMESTIC WIRELESS revenues include revenues from the domestic cellular and
PCS businesses. BellSouth's interests in the net income or loss of the
unconsolidated domestic wireless businesses within BellSouth Enterprises, which
are accounted for under the equity method of accounting, are recorded in Other
Income, net.
Domestic wireless revenues increased $142 (5.5%) in 1998 compared to an
increase of $377 (17.1%) in 1997. The increases for both years were primarily
due to continued growth in the domestic customer base. The decline in the growth
rate for 1998 is primarily attributable to decreases in per-customer revenue
which resulted from the increased use of lower-priced usage plans by existing
higher-
31
<PAGE>
usage customers in response to competition and increased penetration into
lower-usage market segments.
INTERNATIONAL OPERATIONS revenues result primarily from wireless businesses
in Latin America. BellSouth's interests in the net income or loss of the
unconsolidated international businesses within BellSouth Enterprises, which are
accounted for under the equity method of accounting, are recorded in Other
Income, net.
International operations revenues increased $1,047 (110.4%) in 1998 compared
to an increase of $401 (73.3%) in 1997. Such increases include the revenues of
certain operations which had previously been accounted for under the equity
method and were consolidated for the first time in either first quarter 1998 or
fourth quarter 1997. If these operations had been consolidated in all periods
presented, international operations revenues would have increased approximately
$608 (43.8%) and $553 (66.3%), respectively, in 1998 and 1997. Such increases
were primarily due to continued growth in the customer bases of BellSouth's
established Latin American markets in 1998 and 1997 as well as the acquisition
in 1997 of wireless operations in Peru and Ecuador.
ADVERTISING AND PUBLISHING revenues include revenues derived from
publishing, printing, selling advertising in, and performing related services
concerning, alphabetical and classified telephone directories. Advertising and
publishing revenues increased $54 (2.9%) in 1998 compared to a $186 (11.3%)
increase in 1997.
The increase for 1998 primarily reflects volume growth and price increases,
partially offset by the effects of one-time adjustments in 1997. The revenue
growth rate associated with increases in volume and pricing for 1998 was 4.1%.
The increase for 1997 primarily reflects volume growth, price increases and
the reclassification to Operating Expenses of commissions associated with
national accounts which had previously reduced revenues. The revenue growth rate
associated with increases in volume and pricing for 1997 was 6.7%.
OPERATING EXPENSES
Total Operating Expenses increased $2,034 (13.4%) in 1998 compared to an
increase of $924 (6.5%) in 1997. Such increases include expenses from certain
businesses in BellSouth's international operations and other segments that had
previously been accounted for under the equity method. These operations were
consolidated for the first time in either first quarter 1998 or fourth quarter
1997. If these operations had been consolidated in all periods presented, Total
Operating Expenses would have increased $1,501 (9.5%) and $1,094 (7.5%) during
1998 and 1997, respectively. The 1998 increase was primarily attributable to
growth within BellSouth's wireline communications and international operations.
The 1997 increase was primarily attributable to growth within BellSouth's
domestic wireless and international operations. The components of Total
Operating Expenses were as follows:
<TABLE>
<CAPTION>
PERCENT CHANGE
------------------------
<S> <C> <C> <C> <C> <C>
1998 VS 1997 VS.
1998 1997 1996 1997 1996
--------- --------- --------- ----------- -----------
Depreciation and amortization.............. $ 4,357 $ 3,964 $ 3,719 9.9% 6.6%
--------- --------- ---------
Other operating expenses:
Cost of services and products............ 7,080 6,254 6,072 13.2 3.0
Selling, general and administrative...... 5,782 4,967 4,470 16.4 11.1
--------- --------- ---------
12,862 11,221 10,542 14.6 6.4
--------- --------- ---------
Total Operating Expenses............... $ 17,219 $ 15,185 $ 14,261 13.4 6.5
--------- --------- ---------
--------- --------- ---------
</TABLE>
DEPRECIATION AND AMORTIZATION increased $393 (9.9%) in 1998 compared to a
$245 (6.6%) increase in 1997. Adjusted for the effects of expenses related to
operations which were previously accounted for
32
<PAGE>
under the equity method, the growth rates for Depreciation and amortization for
1998 and 1997 would have been $270 (6.6%) and $247 (6.4%), respectively.
The 1998 increase was primarily due to higher levels of property, plant and
equipment in the international operations and domestic wireless segments
resulting from the continued growth in the related customer bases and continued
modernization of the networks utilized. The increase also includes additional
amortization expense related to goodwill resulting from BellSouth's purchase of
additional ownership interests in several of its Latin American operations as
well as amortization of new wireless licenses.
The 1997 increase was due primarily to higher levels of property, plant and
equipment since December 31, 1996 resulting from continued growth in the
customer base for the international operations and domestic wireless businesses
and continued modernization of the networks.
OTHER OPERATING EXPENSES are comprised of Cost of services and products and
Selling, general and administrative. Cost of services and products includes
employee and employee-related expenses associated with network repair and
maintenance, material and supplies expense, cost of tangible goods sold and
other expenses associated with providing services. Selling, general and
administrative include expenses related to sales activities such as salaries,
commissions, benefits, travel, marketing and advertising expenses and
administrative expenses.
Other operating expenses increased $1,641 (14.6%) in 1998 compared to an
increase of $679 (6.4%) in 1997. Adjusted for the effects of expenses related to
operations that were previously accounted for under the equity method, the
growth rate for Other operating expenses for 1998 and 1997 would have been
$1,231 (10.6%) and $847 (7.9%), respectively.
The 1998 increase was primarily due to increased expenses in the wireline
communications business of $561. These increases were primarily attributable to
increased labor costs of $263 in the telephone operations associated with higher
customer service staffing levels, increased expenses of $164 at unregulated
subsidiaries associated with higher business volumes, and payments to the fund
(Universal Service Fund) provided for by the Telecommunications Act of 1996 (the
1996 Act).
Also contributing to the 1998 increase was growth in expenses within
BellSouth's international operations and domestic wireless businesses of $375
and $112. Such increases reflect additional marketing, customer acquisition, and
operational costs which are associated with higher levels of sales and expanded
operations. The increase in other operating expenses also reflects expenses
related to start-up operations.
The 1997 increase was due primarily to increased expenses of $436 and $234
related to the international and domestic wireless customer bases, respectively,
reflecting additional marketing and operating costs associated with higher sales
and expanded operations. The increase in Other operating expenses also reflects
increased expenses of $167 in the advertising and publishing operations.
At the wireline communications business, Other operating expenses in 1997
increased $12 due principally to costs associated with 1996 Act compliance of
$230, as well as increased costs due to higher business volumes, new service
offerings and intensified marketing and advertising efforts. The increases were
partially offset by an estimated reduction of $232 in employee-related costs in
the core wireline communications business, including expenses for employee
benefits. The decrease in employee-related costs reflected net employee
reductions in BellSouth Telecommunications' telephone operations of
approximately 4,800 since December 31, 1996, partially offset by annual
compensation increases. The employee reductions were primarily attributable to a
work force reduction plan which was initiated in 1995 and substantially
completed in 1997. The increase in Other operating expenses at BellSouth
Telecommunications was further offset by the 1996 sale of a subsidiary which
performed computer maintenance.
33
<PAGE>
OTHER INCOME STATEMENT ITEMS
<TABLE>
<CAPTION>
PERCENT CHANGE
------------------------
1998 VS. 1997 VS.
1998 1997 1996 1997 1996
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Interest Expense................................... $ 837 $ 761 $ 721 10.0% 5.5%
Gain on Sale of Operations......................... 335 787 442 -- --
Other Income, net.................................. 349 19 108 -- --
Provision for Income Taxes......................... 2,224 2,151 1,745 3.4 23.3
</TABLE>
INTEREST EXPENSE includes interest on debt, certain other accrued
liabilities and capital leases, partially offset by interest capitalized as a
cost of installing equipment and constructing plant. Interest Expense increased
$76 (10.0%) in 1998 compared to an increase of $40 (5.5%) in 1997.
The increase for 1998 was due primarily to higher average debt balances,
partially offset by an increase in interest capitalized for investments being
developed. The increase in average debt balances and related interest expense
primarily reflects the consolidation of several international operations which
had previously been accounted for under the equity method.
The increase for 1997 was primarily attributable to higher average debt
balances and interest rates on short-term borrowings.
GAIN ON SALE OF OPERATIONS for 1998 represents the pretax gains on the sale
of BellSouth New Zealand and additional proceeds received from the sale of ITT
World Directories of $180 and $155, respectively.
Gain on Sale of Operations for 1997 represents the pretax gains on the sales
of BellSouth's investments in Optus Communications and ITT World Directories,
which totaled $578 and $209, respectively.
OTHER INCOME, NET includes earnings and losses from unconsolidated
affiliates; income and losses from the sale of investments; interest and
dividend income; minority interests; and other nonoperating items. Other Income,
net increased $330 in 1998 compared to a decrease of $89 in 1997.
The increase from 1997 to 1998 was primarily attributable to improved equity
in earnings of unconsolidated affiliates, increased interest income, and
additional income from the settlement of a loan. (See Note B to the Consolidated
Financial Statements.) This increase was partially offset by a decrease in other
nonoperating items.
Equity in earnings (losses) was $92 in 1998 compared to $(242) in 1997. The
improvement in overall equity in earnings primarily reflects (1) the first-time
consolidation in 1998 of the wireless data communications business; (2) more
favorable results at other unconsolidated international operations; and (3)
following its sale in July 1997, the cessation of recording losses incurred by
Optus Communications. The improvement was partially offset by expenses
associated with the start-up operations in Brazil in 1998.
The decrease in Other Income, net in 1997 was primarily attributable to
increased equity in losses of unconsolidated affiliates, net, partially offset
by income from the sale of Bellcore, an increase in interest income and other
nonoperating items.
Equity in losses of unconsolidated affiliates was $(242) in 1997 compared to
$(76) in 1996. The higher overall equity in losses of unconsolidated affiliates
reflects losses incurred by recently acquired and start-up international
businesses, principally in Latin America, as well as increased losses in the
wireless data communications business and lower earnings from unconsolidated
domestic wireless operations. The increased losses were partially offset by more
favorable results at other unconsolidated international operations, principally
in Israel, Germany and Panama.
34
<PAGE>
PROVISION FOR INCOME TAXES increased $73 (3.4%) in 1998 compared to an
increase of $406 (23.3%) in 1997. BellSouth's effective tax rates were 38.7%,
39.7% and 37.9% in 1998, 1997 and 1996, respectively.
The lower effective tax rate in 1998 resulted primarily from improved
results in foreign equity-method subsidiaries which are recorded net of tax
benefits or expense. The effective rate was further reduced by a change in the
mix of income among taxing jurisdictions. The decreases were partially offset by
a reduction in the benefit from investment tax credits.
The higher effective tax rate for 1997 compared to 1996 was due primarily to
a higher tax than book basis for a paging business which was sold in 1996. The
difference in the basis resulted in a lower gain on sale for computing tax
expense.
A reconciliation of the statutory federal income tax rates to these
effective tax rates is provided in Note J to the Consolidated Financial
Statements.
RESULTS OF SEGMENT OPERATIONS
BellSouth's reportable segments reflect strategic business units that offer
products and services and/or serve different customers. They are managed
differently because each business requires different technologies and/or
marketing strategies. BellSouth evaluates performance based on the Net Income,
exclusive of certain intercompany and certain nonoperating transactions, of each
strategic business unit.
<TABLE>
<CAPTION>
PERCENT CHANGE
------------------------
1998 VS. 1997 VS.
1998 1997 1996 1997 1996
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Segment Income:
Wireline Communications.................................... $ 2,751 $ 2,314 $ 2,005 18.9% 15.4%
Domestic Wireless.......................................... 283 333 303 (15.0) 9.9
International Operations................................... (62) (187) (190) 66.8 1.6
Advertising & Publishing................................... 530 543 526 (2.4) 3.2
Other...................................................... (210) (182) (116) (15.4) (56.9)
</TABLE>
WIRELINE COMMUNICATIONS. Segment income for 1998 increased $437 (18.9%)
compared to $309 (15.4%) for 1997. The increase in both years was primarily
attributable to significant increases in revenues driven by increasing demand
for digital and data services, optional and unregulated services, and services
provided by unregulated subsidiaries. The increase in 1998 revenues was
partially offset by increases in other operating expenses of $561 due primarily
to increased staffing levels within customer service functions and increased
costs at unregulated subsidiaries. 1997 expenses were relatively flat with
increases in costs associated with 1996 Act compliance being offset by reduced
employee costs. In addition, segment income for 1997 was reduced by an after-tax
charge of $47 relating to a regulatory settlement in South Carolina.
DOMESTIC WIRELESS. Segment income for 1998 decreased $50 (15.0%) compared
to an increase of $30 (9.9%) for 1997. Strong customer growth drove increases in
revenues for both years, although revenue per customer decreased as a result of
increased competition, increased penetration into lower-usage market segments
and the increased use of package pricing plans for existing higher-usage
customers. Total expenses increased during both years due to marketing costs
driven by competitive initiatives, customer acquisition costs and depreciation
associated with continuing build-out and upgrade of the network. 1998 expenses
as compared to 1997 increased due primarily to new marketing initiatives,
customer acquisition costs associated with higher customer additions and
expenses related to the build-out of the PCS network. 1997 expenses as compared
to 1996 increased primarily due to costs associated with the start-up of PCS
operations.
35
<PAGE>
INTERNATIONAL OPERATIONS. Losses for the segment were $(62) in 1998
compared to $(187) in 1997 and $(190) in 1996. The overall improvement from 1997
to 1998 primarily reflects (1) improved operating results in BellSouth's
operations in Germany, Venezuela, Argentina and Denmark and (2) following its
sale in July 1997, the cessation of recording losses of Optus Communications.
The improvement was offset by losses associated with the start-up of BellSouth's
Brazilian operations as well as lower results at BellSouth's Chilean operations.
Results in 1997 were flat compared to 1996 and included improved results from
BellSouth's operations in Israel and New Zealand offset by losses associated
with the start-up of several operations in Latin America. Strong customer growth
during both years was partially offset by the effect of lower average monthly
revenue per customer.
ADVERTISING AND PUBLISHING. Segment income remained relatively flat at
$530, $543 and $526 for 1998, 1997 and 1996, respectively. External revenues
increased in both 1998 and 1997 primarily due to increases related to volume and
pricing. Operating expenses increased due primarily to volume increases.
OTHER. Losses within the segment were $(210) in 1998 as compared to $(182)
in 1997 and $(116) in 1996. The increased loss for 1998 was primarily
attributable to losses associated with the wireless cable start-up operations,
offset by improved results in the wireless data business. The increased loss for
1997 compared to 1996 was primarily attributable to continuing losses within the
wireless data business as well as expenses related to preparations for entry
into the interLATA long distance business.
FINANCIAL CONDITION
BellSouth uses the net cash generated from its operations and external
financing to invest in and operate its existing and new businesses and to pay
dividends. While current liabilities exceeded current assets at both December
31, 1998 and 1997, 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.
BellSouth believes that such sources of funds will be sufficient to meet the
needs of its business for the foreseeable future.
<TABLE>
<CAPTION>
PERCENT CHANGE
------------------------
1998 VS. 1997 VS.
1998 1997 1996 1997 1996
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Cash Provided by Operating Activities.......... $ 7,741 $ 7,039 $ 5,863 10.0% 20.1%
</TABLE>
OPERATING ACTIVITIES. Net cash provided by operating activities increased
$702 (10.0%) in 1998 compared to an increase of $1,176 (20.1%) in 1997. The 1998
increase is primarily attributable to a $921 increase in operating income before
depreciation and amortization.
The increase in 1997 was primarily due to a decrease of $1,288 in cash
expenditures for accounts payable and other current liabilities. The increase
was also due to an $842 increase in operating income before depreciation and
amortization. The increases were partially offset by a decrease of $494 in other
liabilities and deferred credits.
<TABLE>
<CAPTION>
PERCENT CHANGE
------------------------
1998 VS. 1997 VS.
1998 1997 1996 1997 1996
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Cash Used for Investing Activities.......... $ (5,627) $ (4,949) $ (4,199) 13.7% 17.9%
</TABLE>
INVESTING ACTIVITIES. BellSouth's primary use of funds continues to be for
capital expenditures to support expansion and development of networks for its
wireline communications, domestic wireless and international operations
segments. Capital expenditures were $5,212 in 1998 and $4,858 and $4,455 in 1997
and 1996, respectively. BellSouth expects capital expenditures in 1999 to
aggregate approximately $5,000.
36
<PAGE>
Net cash used for investing activities increased $678 (13.7%) during 1998
compared to 1997. The increase was primarily due to the purchase of additional
ownership interests in BellSouth's wireless operations in Venezuela, Ecuador and
Brazil during 1998 as well as capital expenditures. The increase was partially
offset by cash proceeds from the repayment of a loan in 1998. (See Note B to the
Consolidated Financial Statements.)
Net cash used for investing activities increased $750 (17.9%) in 1997
compared to 1996. The increase in 1997 was primarily due to investments in
unconsolidated international affiliates, specifically in Latin America.
Cash used in investing activities for 1998 and 1997 was partially offset by
proceeds from sales of various BellSouth interests. Proceeds of $410 in 1998
consisted of the sale of BellSouth's interest in BellSouth New Zealand ($255) as
well as additional proceeds associated with the sale of ITT World Directories
($155). Proceeds of $1,000 in 1997 consisted of the sale of BellSouth's
interests in Optus Communications ($735) and ITT World Directories ($265).
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Net Cash Used for Financing Activities................................ $ (1,681) $ (698) $ (2,197)
</TABLE>
FINANCING ACTIVITIES. During 1998 and 1997, cash used for financing
activities totaled $1,681 and $698, respectively.
Dividends paid in 1998 were $1,420 as compared to $1,428 and $1,430 in 1997
and 1996, respectively. In December 1998, BellSouth announced a quarterly
dividend payment of $.19 per share, an annual rate of $.76 per share. Cash
dividends declared in each of the first, second and third quarters of 1998 were
$.18 per share. In 1997 and 1996, cash dividends were $.18 per share each
quarter, or $.72 for the year.
BellSouth increased its long-term debt and short-term borrowings by
approximately $1,115 in 1998. Approximately $361 of this increase relates to the
first time consolidation of certain businesses in BellSouth's international
operations and other segments. This compares to an increase of $814 in 1997 over
1996 balances.
BellSouth has committed credit lines aggregating $2,536 with various banks.
Borrowings under the committed credit lines totaled $634 and $241, respectively,
at December 31, 1998 and 1997. BellSouth also maintains uncommitted lines of
credit aggregating $169. At December 31, 1998, borrowings under the uncommitted
lines of credit totaled $45. There were no borrowings under the uncommitted
lines as of December 31, 1997. As of February 3, 1999, shelf registration
statements were on file with the Securities and Exchange Commission under which
$927 of debt securities could be publicly offered.
Treasury share purchases totaled $1,261 during 1998. In November 1998,
BellSouth announced its intent to repurchase up to $3,000 of its Common Stock
during 1999. BellSouth expects to finance the 1999 repurchase primarily through
cash generated from operations.
BellSouth's debt to total capitalization ratio was 43.0% at December 31,
1998, compared to 42.1% at December 31, 1997 and 43.5% at December 31, 1996.
MARKET RISK
BellSouth is exposed to various types of market risk in the normal course of
business, including the impact of interest rate changes and foreign currency
exchange rate fluctuations. To manage this exposure, BellSouth employs risk
management strategies including the use of derivatives such as interest rate
swap agreements, foreign currency forwards and currency swap agreements.
BellSouth does not hold derivatives for trading purposes.
37
<PAGE>
INTEREST RATE RISK. BellSouth's objective in managing interest rate risk is
to maintain a balance of fixed and variable rate debt that will lower its
overall borrowing costs within reasonable risk parameters. Interest rate swaps
are used to convert a portion of BellSouth's debt portfolio from a variable rate
to a fixed rate or from a fixed rate to a variable rate.
FOREIGN EXCHANGE RISK. BellSouth's objective in managing foreign exchange
risk is to protect against earnings and cash flow volatility resulting from
changes in foreign exchange rates. Short-term foreign currency transactions and
commitments expose BellSouth to changes in foreign exchange rates. BellSouth
occasionally enters into forward contracts and similar instruments to mitigate
the potential impacts of such risks.
BellSouth's equity investments in Brazil hold approximately $2,300 in U.S.
Dollar-denominated liabilities and recognize foreign currency gains or losses
when converting those liabilities into local currency. BellSouth's equity income
related to these investments is subject to fluctuations in the U.S.
Dollar/Brazilian Real exchange rate. (See "MD&A--Operating
Environment--International Operations.")
BellSouth is subject to risk from changes in foreign exchange rates for its
international operations which use a foreign currency as their functional
currency and are translated to U.S. Dollars. Such changes result in cumulative
translation adjustments which are included in Shareholders' Equity. At December
31, 1998, BellSouth had translation exposure to various foreign currencies with
the most significant being the Brazilian Real and the German Mark. Operations in
countries with hyperinflationary economies consider the U.S. Dollar the
functional currency and reflect translation gains and losses in the
determination of net income.
RISK SENSITIVITY. BellSouth's use of derivative financial instruments is
designed to mitigate foreign currency and interest rate risks, although to some
extent they expose BellSouth to credit risks. The credit risks associated with
these instruments are controlled through the evaluation and continual monitoring
of the creditworthiness of the counterparties. In the event that a counterparty
fails to meet the terms of a contract or agreement, BellSouth's exposure is
limited to the then current value of the currency rate or interest rate
differential, not the full notional or contract amount. Such contracts and
agreements have been executed with creditworthy financial institutions, and as
such, BellSouth considers the risk of nonperformance to be remote.
The following table provides information, by maturity date, about
BellSouth's interest rate sensitive financial instruments, which consist of
fixed and variable rate debt obligations. Fair values for the majority of
BellSouth's long-term debt obligations are based on quotes from dealers.
<TABLE>
<CAPTION>
TOTAL
RECORDED
1999 2000 2001 2002 2003 THEREAFTER AMOUNT FAIR VALUE
--------- --------- --------- --------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Debt:
Fixed Rate Debt.............. $ 3,425 $ 476 $ 184 $ 318 $ 644 $ 6,778 $ 11,825 $ 12,118
Average Interest Rate........ 6.07% 6.61% 6.98% 7.66% 6.52% 6.65%
Variable Rate Debt........... $ 29 $ 38 $ 235 $ 19 $ 2 $ 51 $ 374 $ 398
Average Interest Rate........ 6.16% 6.08% 7.01% 6.08% 7.75% 6.55%
</TABLE>
OPERATING ENVIRONMENT AND TRENDS OF THE BUSINESS
REGULATION
BellSouth's future operations and financial results will be substantially
influenced by developments in a number of federal and state regulatory
proceedings. Adverse results in these proceedings could materially affect
BellSouth's revenues and expenses and its ability to compete effectively against
other telecommunications carriers.
38
<PAGE>
Federal policies being implemented by the Federal Communications Commission
(FCC) strongly favor access reform, whereby the historical subsidy for local
service that is contained in network access charges paid by long distance
carriers is eliminated. Unless compensatory changes are adopted, such as
Universal Service Fund contribution mandates, BellSouth's revenues from this
source, which constituted 20% of its revenues during 1998, are at risk. In
addition, other aspects of access charge regulation and Universal Service Fund
contribution requirements that are applicable to local service carriers such as
BellSouth are also under consideration and could result in greater expense
levels or reduced revenues.
As a result of litigation challenging a number of the FCC's rulings under
the 1996 Act, the U.S. Supreme Court has ruled that the FCC has considerable
authority to establish many pricing, interconnection and other policies that
have been considered within the exclusive jurisdiction of the state public
service commissions. BellSouth expects the FCC to accelerate the growth of local
service competition by aggressively utilizing such power to require
interconnection with competing carriers and the sale of network elements to
competitors who wish to provide communications services to customers in
BellSouth's region.
BellSouth has petitioned the FCC for permission under the 1996 Act to offer
full long distance services. The FCC has denied all of BellSouth's petitions.
BellSouth expects that the FCC will require further changes in BellSouth's
network interconnection elements and operating systems before it will approve
such petitions. Such changes will result in significant additional expenses and
promote local service competition.
BellSouth's intrastate prices are regulated under price regulation plans
provided by statute or approved by state public service commissions. Appeals of
approvals of plans in South Carolina and Tennessee are pending. Some plans are
subject to periodic review and require renewal, with several plans scheduled for
renewal during 1999. These commissions generally required price reductions and
other concessions from BellSouth as a condition to approving these plans, and
there is no assurance that the commissions will not require further
modifications when they consider their renewal.
BellSouth Telecommunications is involved in numerous legal proceedings
associated with state and federal regulatory matters, the disposition of which
could materially impact its operating results and prospects. See Note N to the
Consolidated Financial Statements.
COMPETITION
There are many competitive forces that impact BellSouth's businesses. The
1996 Act removed the regulatory barriers to local service competition and
required BellSouth to open its network to other carriers. The auction of PCS
licenses has created as many as six new wireless competitors in BellSouth's
markets, and the deregulation of international communications markets has
introduced new global competitors to nearly all of BellSouth's international
businesses.
BellSouth expects local service competition to steadily increase,
particularly with respect to its business customers. While competition for local
service revenues could adversely affect BellSouth's results of operations,
opening of local markets can lead to qualification to offer in-region interLATA
long distance wireline services.
The presence of multiple aggressive competitors in BellSouth's domestic and
international wireless markets makes it more difficult to attract new customers
and retain existing ones. Furthermore, while BellSouth does not compete
primarily on the basis of price, low prices offered by competitors attempting to
obtain market share have pressured BellSouth to reduce prices and develop
pricing plans attractive to lower usage customers. These trends are expected to
continue and could adversely affect BellSouth's results of operations in the
future.
39
<PAGE>
BellSouth plans to compete through aggressive marketing, competitive pricing
and technical innovation. It will offer consumers a full range of
services--local, long distance, Internet access, wireless and more--while
remaining committed to its high level of customer service and value.
TECHNOLOGY
BellSouth is continually upgrading its networks with digital and optical
technologies, making it capable of delivering a full complement of voice and
data services. This modernization of the network is critical to BellSouth's
success in providing the data connectivity demanded by its customers and to
compete with fiber networks being constructed or currently utilized by start-ups
and cable companies. This effort will require investment of significant amounts
of capital in the future.
BellSouth believes that its dual-mode network with its extended coverage
currently provides a significant competitive advantage over PCS providers.
Digital wireless technology, however, is rapidly evolving and the development of
a common roaming platform for digital wireless technologies could reduce this
advantage. This would result in more intense competition and could have an
adverse effect on BellSouth's results of operations.
INTERNATIONAL OPERATIONS
BellSouth owns significant interests in a number of foreign operations,
primarily in Latin America, which are subject to greater political, monetary,
economic and regulatory risks than its domestic businesses. In particular,
BellSouth holds equity interests in two wireless communications consortia in
Brazil, which are accounted for under the equity method of accounting. At
December 31, 1998, the Brazilian operations had incurred approximately $2,300 in
U.S. Dollar-denominated liabilities. During January 1999 the Brazilian
government allowed its currency to trade freely against other currencies
resulting in an immediate devaluation of the Brazilian Real. For January 1999,
the latest internal financial reporting period, BellSouth will recognize a
foreign exchange rate loss resulting from the devaluation of approximately $364
through recording its share of equity in earnings of its Brazilian equity
investments. The aforementioned exchange loss is subject to further upward or
downward adjustment based on fluctuations in the U.S. Dollar/Brazilian Real
exchange rate.
The impact of the devaluation on an operation depends on the devaluation's
effect on the local economy and the ability of an operation to raise prices
and/or reduce expenses. Additionally, the economies of other countries in Latin
America could be adversely impacted by Brazil's economic and monetary problems.
The likelihood and extent of further devaluation and deteriorating economic
conditions in Brazil and other Latin American countries and the resulting
impacts on BellSouth's results of operations, financial position and cash flows
is not known.
YEAR 2000 READINESS DISCLOSURE
BellSouth has initiated a company-wide program to identify and address
issues associated with the ability of its date-sensitive information, telephony
and business systems and certain equipment to properly recognize the Year 2000
as a result of the century change on January 1, 2000. The program is also
designed to assess the readiness of other entities with which BellSouth does
business.
Inability to reach substantial Year 2000 compliance in BellSouth's systems
and integral third party systems could result in interruption of
telecommunications services, interruption or failure of BellSouth's customer
billing, operating and other information systems and failure of certain
date-sensitive equipment. Such failures could result in substantial claims by
customers as well as loss of revenue due to service interruption, delays in
BellSouth's ability to bill its customers accurately and timely, and increased
expenses associated with litigation, stabilization of operations following such
failures or execution of contingency plans.
40
<PAGE>
The Year 2000 program is being conducted by a management team that is
coordinating efforts of internal resources as well as third party providers and
vendors in identifying and making necessary changes to BellSouth's systems
hardware, software and date-sensitive equipment. The program also includes the
international and domestic companies in which BellSouth holds an interest. Some
of the changes that are necessary in BellSouth's operations are being made as a
part of ongoing systems upgrades.
BellSouth's Year 2000 program has been divided into six phases: planning;
inventory; impact analysis; conversion; testing; and implementation. BellSouth
monitors its progress within these six phases based on the number of inventoried
items that have been addressed. Management's target date for completion of all
phases for most of its mission critical applications is June 30, 1999. Mission
critical applications include those that (1) directly affect delivery of primary
services to BellSouth's customers; (2) directly affect BellSouth revenue
recognition and collection; (3) would create noncompliance with any statutes or
laws; and (4) would require significant costs to address in the event of
noncompliance.
BellSouth has identified three main areas of focus for its Year 2000
program. Each focus area includes the hardware, software, embedded chips, third
party vendors and suppliers as well as third party networks that are associated
with the identified systems.
The first focus area, network components, consists of the switches,
transmission systems and associated software that comprise the core of
BellSouth's telephony systems including land-line and wireless domestic and
international services. Outside suppliers provide all hardware and most software
that comprise BellSouth's networks; these components are being remediated by
those third party suppliers. Testing of these components for Year 2000
compliance is being performed by the vendors, BellSouth, and industry groups
such as the Telco Year 2000 Forum. As of December 31, 1998, the planning,
inventory and impact analysis phases for BellSouth Telecommunications were 100%
complete with the remaining phases each approximately 65% complete. The
planning, inventory and impact analysis phases for BellSouth's other domestic
operations were each almost 100% complete with the remaining phases each more
than 25% complete. The planning, inventory and impact analysis phases for
BellSouth's international operations were each approximately 70% complete with
the remaining phases each approximately 50% complete.
The second focus area, information technology systems, consists of those
systems that primarily support "customer care" operations such as order taking
and billing. The software for these systems was developed by both BellSouth and
vendors, and is being remediated and tested by both. As of December 31, 1998,
the planning, inventory and impact analysis phases for BellSouth
Telecommunications were each approximately 95% complete with the remaining
phases each approximately 70% complete. The planning, inventory and impact
analysis phases for BellSouth's other domestic operations were each almost 100%
complete with the remaining phases each approximately 75% complete. The
planning, inventory and impact analysis phases for BellSouth's international
operations were each approximately 70% complete with the remaining phases each
approximately 25% complete.
Building and environmental systems, the third focus area, includes various
products and systems that are not used in support of network or customer care
functions. Building and environmental systems are primarily provided by third
parties and include building operations, office equipment, utilities, etc. As of
December 31, 1998, the planning, inventory and impact analysis phases for
BellSouth Telecommunications were each almost 100% complete with the remaining
phases each approximately 15% complete. The planning, inventory and impact
analysis phases for BellSouth's other domestic operations were each almost 100%
complete with the remaining phases each approximately 10% complete. BellSouth's
international operations are currently in the planning, inventory and impact
analysis phases for their environmental systems.
BellSouth has developed numerous contingency plans for conducting its
business operations in the event of crises including system outages and natural
disasters. As a part of its Year 2000 compliance
41
<PAGE>
efforts, BellSouth has chartered a Year 2000 Business Continuity project to
ensure that tested contingency plans are in place in the event that planned Year
2000 compliance activities for its mission critical applications are not
successfully accomplished. This effort is not limited to the risks posed by the
potential Year 2000 failures of internal information systems and
infrastructures, but also includes the potential secondary impact on BellSouth
of Year 2000 failures, including potential systems failures of business partners
and infrastructure service providers. A master Year 2000 Contingency Planning
Guide and associated workbook have been developed and internal training has been
completed. Other major milestones for the contingency planning project include
assessments by the end of first quarter 1999, and the completion of testing and
sign-off of contingency plans during third quarter 1999. Additionally, BellSouth
is a member, together with other large telecommunications companies, of several
industry groups that are addressing the Year 2000 issue and related contingency
plans.
Some of the costs associated with BellSouth's Year 2000 compliance efforts
were incurred in 1997 and 1998. The remainder has been or will be incurred
during 1999 and 2000. Costs are not incurred equally over all phases of the
project, but increase over time. BellSouth anticipates that the conversion and
testing phases will require an increase in spending over the earlier phases of
the project. As of December 31, 1998, approximately $87 of external costs had
been expended towards Year 2000 compliance. BellSouth estimates the total
external cost of its compliance efforts will be between $250 and $350 over the
life of the project. BellSouth intends to continually reassess the estimated
costs and status of Year 2000 remediation efforts.
BellSouth currently anticipates that most of its mission critical
applications will be Year 2000 compliant by June 30, 1999. However, no assurance
can be given that unforeseen circumstances will not arise during the performance
of the testing and implementation phases that would adversely affect the Year
2000 compliance of BellSouth's systems. Furthermore, the Year 2000 compliance
status of integral third party suppliers and networks, which could adversely
impact BellSouth's mission critical applications, cannot be fully known. As a
result, BellSouth is unable to determine the impact that any system interruption
would have on its results of operations, financial position and cash flows.
CWA CONTRACTS
In September 1998, members of the Communications Workers of America (CWA)
ratified new three-year contracts with BellSouth, effective August 9, 1998. The
contracts include basic wage increases totaling 12.39% over the three years
covered by the contracts. In addition, the agreement provides for a standard
award of between 2% and 2.5% of base salary and overtime compensation which is
subject to adjustment based on company performance measures for plan years 1999
and 2000. Other terms of the agreement include pension band increases and
pension plan cash balance improvements for active employees.
NEW ACCOUNTING PRONOUNCEMENTS
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. In June 1998,
the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities." The standard requires that all derivative instruments (1)
be recognized as assets or liabilities and (2) be adjusted to fair value each
period. BellSouth will adopt SFAS No. 133 on January 1, 2000 and is currently
assessing the impact that adoption will have on its results of operations and
financial position.
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. BellSouth adopted SOP 98-1 on January 1,
1999.
42
<PAGE>
Adoption of SOP 98-1 will result in a temporary increase in earnings in the
year of adoption, compared to the prior period, as a result of the
capitalization of costs which had previously been expensed. BellSouth currently
believes that this increase will be approximately $375 to $425 ($225 to $250
after tax) for 1999. If expenditures remain at a consistent level, the
comparative 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 Consolidated Balance Sheets.
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 domestic economic growth and demand for BellSouth's services; (2)
economic, monetary, regulatory and political stability where BellSouth conducts
its international operations; (3) the reasonable accuracy of BellSouth's
expectations of the impact on its international operations of weakening
currencies in Latin America as compared to the U.S. Dollar; (4) the reasonable
accuracy of BellSouth's expectations of the results of regulatory actions as
well as costs and recoveries with respect to access reform, universal service
and interconnection; (5) 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 (6) satisfactory identification and
completion of Year 2000 software and hardware revisions by BellSouth and
entities with which it does business. 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.
43
<PAGE>
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF MANAGEMENT
To the Shareholders of BellSouth Corporation:
These financial statements have been prepared in conformity with generally
accepted accounting principles and have been audited by PricewaterhouseCoopers
LLP, independent accountants, whose report is contained herein.
The integrity and objectivity of the data in these financial statements,
including estimates and judgments relating to matters not concluded by the end
of the year, are the responsibility of the management of BellSouth. Management
has also prepared all other information included therein unless indicated
otherwise.
Management maintains a system of internal accounting controls which is
continuously reviewed and evaluated. However, there are inherent limitations
that should be recognized in considering the assurances provided by any system
of internal accounting controls. The concept of reasonable assurance recognizes
that the cost of a system of internal accounting controls should not exceed, in
management's judgment, the benefits to be derived. Management believes that
BellSouth's system does provide reasonable assurance that the transactions are
executed in accordance with management's general or specific authorizations and
are recorded properly to maintain accountability for assets and to permit the
preparation of financial statements in conformity with generally accepted
accounting principles. Management also believes that this system provides
reasonable assurance that access to assets is permitted only in accordance with
management's authorizations, that the recorded accountability for assets is
compared with the existing assets at reasonable intervals and that appropriate
action is taken with respect to any differences. Management also seeks to assure
the objectivity and integrity of its financial data by the careful selection of
its managers, by organizational arrangements that provide an appropriate
division of responsibility and by communications programs aimed at assuring that
its policies, standards and managerial authorities are understood throughout the
organization. Management is also aware that changes in operating strategy and
organizational structure can give rise to disruptions in internal controls.
Special attention is given to controls while the changes are being implemented.
Management maintains a strong internal auditing program that independently
assesses the effectiveness of the internal controls and recommends possible
improvements thereto. In addition, as part of its audit of these financial
statements, PricewaterhouseCoopers LLP completed a review of the accounting
controls to establish a basis for reliance thereon in determining the nature,
timing and extent of audit tests to be applied. Management has considered the
internal auditor's and PricewaterhouseCoopers LLP's recommendations concerning
the system of internal controls and has taken actions that it believes are
cost-effective in the circumstances to respond appropriately to these
recommendations. Management believes that as of December 31, 1998, the system of
internal controls was adequate to accomplish the objectives discussed herein.
Management also recognizes its responsibility for fostering a strong ethical
climate so that BellSouth's affairs are conducted according to the highest
standards of personal and corporate conduct. This responsibility is communicated
to all employees through policies and guidelines addressing such issues as
conflict of interest, safeguarding of BellSouth's real and intellectual
properties, providing equal employment opportunities and ethical relations with
customers, suppliers and governmental representatives. BellSouth maintains a
program to assess compliance with these policies and our ethical standards
through its Senior Vice President -- Corporate Compliance and Corporate
Secretary.
<TABLE>
<S> <C>
/s/ F. Duane Ackerman /s/ Ronald M. Dykes
F. Duane Ackerman Ronald M. Dykes
CHAIRMAN OF THE BOARD, EXECUTIVE VICE PRESIDENT AND
PRESIDENT AND CHIEF FINANCIAL OFFICER
CHIEF EXECUTIVE OFFICER
</TABLE>
February 3, 1999
44
<PAGE>
AUDIT COMMITTEE CHAIRMAN'S LETTER
The Audit Committee of the Board of Directors consists of four members who
are neither officers nor employees of BellSouth Corporation. Information as to
these persons, as well as their duties, is provided in the Proxy Statement. The
Audit Committee met six times during 1998 and reviewed with the Chief Corporate
Auditor, PricewaterhouseCoopers LLP and management current audit activities,
plans and the results of selected internal audits. The Audit Committee also
reviewed the objectivity of the financial reporting process and the adequacy of
internal controls. The Audit Committee recommended, subject to shareholder
ratification, the appointment of the independent accountants and considered
factors relating to their independence. In addition, the Audit Committee
provided guidance in matters regarding ethical considerations and business
conduct, reviewed the operations of political action committees and monitored
compliance with laws and regulations. The Chief Corporate Auditor and
PricewaterhouseCoopers LLP each met privately with the Audit Committee on
occasion to encourage confidential discussions as to any auditing matters.
/s/ Ronald A. Terry
Ronald A. Terry
CHAIRMAN, AUDIT COMMITTEE
February 3, 1999
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders
BellSouth Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, cash flows and shareholders' equity and
comprehensive income present fairly, in all material respects, the financial
position of BellSouth Corporation and its subsidiaries at December 31, 1998 and
1997, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Atlanta, Georgia
February 3, 1999
45
<PAGE>
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Operating Revenues:
Wireline communications:
Local service....................................................... $ 9,399 $ 8,499 $ 8,082
Network access...................................................... 4,632 4,483 4,365
Long distance....................................................... 713 734 794
Other wireline...................................................... 1,657 1,462 1,383
Domestic wireless..................................................... 2,723 2,581 2,204
International operations.............................................. 1,995 948 547
Advertising and publishing............................................ 1,891 1,837 1,651
Other services........................................................ 113 17 14
--------- --------- ---------
Total Operating Revenues............................................ 23,123 20,561 19,040
--------- --------- ---------
Operating Expenses:
Cost of services and products......................................... 7,080 6,254 6,072
Depreciation and amortization......................................... 4,357 3,964 3,719
Selling, general and administrative................................... 5,782 4,967 4,470
--------- --------- ---------
Total Operating Expenses............................................ 17,219 15,185 14,261
--------- --------- ---------
Operating Income........................................................ 5,904 5,376 4,779
Interest Expense........................................................ 837 761 721
Gain on Sale of Operations (Note B)..................................... 335 787 442
Other Income, net....................................................... 349 19 108
--------- --------- ---------
Income Before Income Taxes and Extraordinary Losses..................... 5,751 5,421 4,608
Provision for Income Taxes (Note J)..................................... 2,224 2,151 1,745
--------- --------- ---------
Income Before Extraordinary Losses...................................... 3,527 3,270 2,863
Extraordinary Loss on Early Extinguishment of Debt,
net of tax (Note E).................................................... -- (9) --
--------- --------- ---------
Net Income........................................................ $ 3,527 $ 3,261 $ 2,863
--------- --------- ---------
--------- --------- ---------
Weighted-Average Common Shares Outstanding: (Notes A, G)
Basic................................................................. 1,970 1,984 1,987
Diluted............................................................... 1,984 1,989 1,992
Dividends Declared Per Common Share (Note G)............................ $ .73 $ .72 $ .72
Earnings Per Share: (Notes A, G)
Basic................................................................. $ 1.79 $ 1.64 $ 1.44
Diluted............................................................... $ 1.78 $ 1.64 $ 1.44
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
46
<PAGE>
BELLSOUTH CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents...................................................................... $ 3,003 $ 2,570
Temporary cash investments..................................................................... 184 17
Accounts receivable, net of allowance for uncollectibles of $251 and $246...................... 4,629 4,750
Material and supplies.......................................................................... 431 393
Other current assets........................................................................... 459 387
--------- ---------
Total Current Assets......................................................................... 8,706 8,117
Investments and Advances (Note B)................................................................ 2,861 2,675
Property, Plant and Equipment, net (Note C)...................................................... 23,940 22,861
Deferred Charges and Other Assets................................................................ 1,028 702
Intangible Assets, net........................................................................... 2,875 1,946
--------- ---------
Total Assets................................................................................. $ 39,410 $ 36,301
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Debt maturing within one year (Note E)......................................................... $ 3,454 $ 3,706
Accounts payable............................................................................... 2,219 1,825
Other current liabilities (Note D)............................................................. 3,477 3,252
--------- ---------
Total Current Liabilities.................................................................... 9,150 8,783
--------- ---------
Long-Term Debt (Note E).......................................................................... 8,715 7,348
--------- ---------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes.............................................................. 2,512 2,023
Unamortized investment tax credits............................................................. 167 213
Other liabilities and deferred credits (Note F)................................................ 2,756 2,769
--------- ---------
Total Deferred Credits and Other Liabilities................................................. 5,435 5,005
--------- ---------
Shareholders' Equity (Note G):
Common stock, $1 par value (4,400 shares authorized; 1,950 and 1,984 shares outstanding)....... 2,020 1,010
Paid-in capital................................................................................ 6,766 7,714
Retained earnings.............................................................................. 9,479 7,382
Accumulated other comprehensive income......................................................... (64) 36
Shares held in trust and treasury.............................................................. (1,752) (575)
Guarantee of ESOP debt (Note H)................................................................ (339) (402)
--------- ---------
Total Shareholders' Equity................................................................... 16,110 15,165
--------- ---------
Total Liabilities and Shareholders' Equity................................................... $ 39,410 $ 36,301
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
47
<PAGE>
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
--------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................................ $ 3,527 $ 3,261 $ 2,863
Adjustments to net income:
Gain on sale of operations...................................................... (335) (787) (442)
Depreciation and amortization................................................... 4,357 3,964 3,719
Provision for uncollectibles.................................................... 334 304 254
Deferred income taxes and unamortized investment tax credits.................... 304 243 120
Pension income.................................................................. (259) (164) (14)
Dividends from unconsolidated affiliates........................................ 174 198 130
(Income) losses from unconsolidated affiliates, net............................. (92) 242 76
Extraordinary loss on early extinguishment of debt.............................. -- 15 --
Additional income from settlement of loans and advances......................... (102) -- --
Net change in:
Accounts receivable and other current assets.................................. (458) (742) (645)
Accounts payable and other current liabilities................................ 300 580 (708)
Deferred charges and other assets............................................. 1 (125) (126)
Other liabilities and deferred credits........................................ (25) 87 581
Other reconciling items, net.................................................... 15 (37) 55
--------- ---------- ----------
Net cash provided by operating activities....................................... 7,741 7,039 5,863
--------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.............................................................. (5,212) (4,858) (4,455)
Purchases of licenses and other intangible assets................................. (559) (328) (147)
Proceeds from sale of operations.................................................. 410 1,000 930
Proceeds from disposition of short-term investments............................... 210 267 355
Purchases of short-term investments............................................... (376) (233) (336)
Proceeds from investment dispositions and repayments of advances.................. 432 59 102
Investments in and advances to unconsolidated affiliates.......................... (637) (1,083) (620)
Other investing activities, net................................................... 105 227 (28)
--------- ---------- ----------
Net cash used for investing activities.......................................... (5,627) (4,949) (4,199)
--------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments of) proceeds from short-term borrowings........................... (71) 879 (497)
Proceeds from long-term debt...................................................... 1,752 645 392
Repayments of long-term debt...................................................... (782) (692) (544)
Dividends paid.................................................................... (1,420) (1,428) (1,430)
Purchase of treasury shares....................................................... (1,261) (157) (85)
Other financing activities, net................................................... 101 55 (33)
--------- ---------- ----------
Net cash used for financing activities.......................................... (1,681) (698) (2,197)
--------- ---------- ----------
Net Increase (Decrease) in Cash and Cash Equivalents................................ 433 1,392 (533)
Cash and Cash Equivalents at Beginning of Period.................................... 2,570 1,178 1,711
--------- ---------- ----------
Cash and Cash Equivalents at End of Period.......................................... $ 3,003 $ 2,570 $ 1,178
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
48
<PAGE>
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
(IN MILLIONS)
<TABLE>
<CAPTION>
AMOUNT
NUMBER OF SHARES -------------------------------------
------------------------------
SHARES
COMMON HELD IN TRUST COMMON PAID-IN RETAINED
STOCK AND TREASURY STOCK CAPITAL EARNINGS
----------- ----------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995........................ 1,007 (13) $ 1,007 $ 7,624 $ 4,099
Net income.......................................... 2,863
Other comprehensive income, net of tax:
Foreign currency translation adjustment...........
Total comprehensive income......................
Dividends declared.................................. (1,430)
Share issuances:
Employee benefit plans............................ 1 1 14
Grantor trusts.................................... 1 (1) 1 34
Share purchases:
Treasury.......................................... (3)
Grantor trusts.................................... (1)
ESOP activities and related tax benefit............. 9
----- --- ----------- ----------- -----------
Balance at December 31, 1996........................ 1,009 (18) 1,009 7,672 5,541
Net income.......................................... 3,261
Other comprehensive income, net of tax:
Foreign currency translation adjustment...........
Total comprehensive income......................
Dividends declared.................................. (1,428)
Share issuances:
Employee benefit plans............................ 2 (25)
Grantor trusts.................................... 1 (1) 1 59
Acquisition-related transactions.................... 2 8
Purchase of treasury stock.......................... (3)
ESOP activities and related tax benefit............. 8
----- --- ----------- ----------- -----------
Balance at December 31, 1997........................ 1,010 (18) 1,010 7,714 7,382
Two-for-one stock split (Note G).................... 1,010 (19) 1,010 (1,010)
Net income.......................................... 3,527
Other comprehensive income, net of tax:
Foreign currency translation adjustment...........
Total comprehensive income......................
Dividends declared.................................. (1,435)
Share issuances for employee benefit plans.......... 3 (36) (2)
Acquisition-related transactions.................... 1 92
Share purchases:
Treasury.......................................... (36)
Grantor trusts.................................... (1)
Tax benefit related to stock options................ 6
ESOP activities and related tax benefit............. 7
----- --- ----------- ----------- -----------
Balance at December 31, 1998........................ 2,020 (70) $ 2,020 $ 6,766 $ 9,479
----- --- ----------- ----------- -----------
----- --- ----------- ----------- -----------
<CAPTION>
ACCUMULATED
OTHER SHARES
COMPREHENSIVE HELD IN TRUST GUARANTEE OF
INCOME AND TREASURY ESOP DEBT TOTAL
----------------- ------------- ------------- ---------
<S> <C> <C> <C> <C>
Balance at December 31, 1995........................ $ (5) $ (374) $ (526) $ 11,825
Net income.......................................... 2,863
Other comprehensive income, net of tax:
Foreign currency translation adjustment........... 30 30
---------
Total comprehensive income...................... 2,893
Dividends declared.................................. (1,430)
Share issuances:
Employee benefit plans............................ 11 26
Grantor trusts.................................... (35) --
Share purchases:
Treasury.......................................... (85) (85)
Grantor trusts.................................... (49) (49)
ESOP activities and related tax benefit............. 60 69
------ ------------- ------ ---------
Balance at December 31, 1996........................ 25 (532) (466) 13,249
Net income.......................................... 3,261
Other comprehensive income, net of tax:
Foreign currency translation adjustment........... 11 11
---------
Total comprehensive income...................... 3,272
Dividends declared.................................. (1,428)
Share issuances:
Employee benefit plans............................ 85 60
Grantor trusts.................................... (60) --
Acquisition-related transactions.................... 89 97
Purchase of treasury stock.......................... (157) (157)
ESOP activities and related tax benefit............. 64 72
------ ------------- ------ ---------
Balance at December 31, 1997........................ 36 (575) (402) 15,165
Two-for-one stock split (Note G).................... --
Net income.......................................... 3,527
Other comprehensive income, net of tax:
Foreign currency translation adjustment........... (100) (100)
---------
Total comprehensive income...................... 3,427
Dividends declared.................................. (1,435)
Share issuances for employee benefit plans.......... 89 51
Acquisition-related transactions.................... 33 125
Share purchases:
Treasury.......................................... (1,261) (1,261)
Grantor trusts.................................... (38) (38)
Tax benefit related to stock options................ 6
ESOP activities and related tax benefit............. 63 70
------ ------------- ------ ---------
Balance at December 31, 1998........................ $ (64) $ (1,752) $ (339) $ 16,110
------ ------------- ------ ---------
------ ------------- ------ ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
49
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE A -- ACCOUNTING POLICIES
ORGANIZATION. BellSouth Corporation (BellSouth) is a holding company
headquartered in Atlanta, Georgia. BellSouth has two principal and wholly-owned
subsidiaries, BellSouth Telecommunications, Inc. (BellSouth Telecommunications)
and BellSouth Enterprises, Inc. (BellSouth Enterprises). BellSouth
Telecommunications primarily provides (i) local exchange and long distance
services within geographic areas, called Local Access and Transport Areas
(LATAs) and (ii) network access services. BellSouth Enterprises owns businesses
providing domestic and international wireless communications services as well as
advertising and publishing products. For management purposes, these operations
are organized into five operating segments: wireline communications; domestic
wireless; international operations; advertising and publishing; and other.
BASIS OF PRESENTATION. The Consolidated Financial Statements include the
accounts of BellSouth and subsidiaries in which it has a controlling financial
interest. Investments in certain partnerships, joint ventures and subsidiaries
are accounted for using the equity method. All significant intercompany
transactions and accounts have been eliminated. Certain amounts in the prior
period Consolidated Financial Statements have been reclassified to conform to
the current year's presentation.
USE OF ESTIMATES. BellSouth's Consolidated Financial Statements have been
prepared in accordance with generally accepted accounting principles. Such
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.
CASH AND CASH EQUIVALENTS. BellSouth considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents. Investments with an original maturity of over three months to one
year are not considered cash equivalents and are included as temporary cash
investments in the Consolidated Balance Sheets. Interest income on cash
equivalents, temporary cash investments and other interest-bearing instruments
was $313, $193 and $163 for the years ended December 31, 1998, 1997 and 1996,
respectively.
MATERIAL AND SUPPLIES. New and reusable material is carried in inventory,
principally at average original cost, except that specific costs are used in the
case of large individual items. Nonreusable material is carried at estimated
salvage value.
PROPERTY, PLANT AND EQUIPMENT. The investment in Property, Plant and
Equipment is stated at original cost. For plant dedicated to providing regulated
telecommunications services, depreciation is based on the remaining life method
of depreciation and straight-line composite rates determined on the basis of
equal life groups of certain categories of telephone plant acquired in a given
year. When depreciable telephone plant is disposed of, the original cost less
net salvage value is charged to accumulated depreciation. The cost of other
property, plant and equipment is depreciated using either straight-line or
accelerated methods over the estimated useful lives of the assets. Gains or
losses on disposal of other depreciable property, plant and equipment are
recognized in the year of disposition as an element of Other Income, net.
INTANGIBLE ASSETS. Intangible Assets consist of the excess consideration
paid over the fair value of net tangible assets acquired in business
combinations, and include acquired licenses and customer lists. Intangible
Assets are being amortized using the straight-line and accelerated methods over
periods of benefit. Such periods do not exceed 40 years. The carrying value of
Intangible Assets is periodically reviewed to determine whether such intangibles
are fully recoverable from projected net cash flows of
50
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE A -- ACCOUNTING POLICIES (CONTINUED)
the related business unit. Amortization of such intangibles was $135, $58 and
$49 for the years ended December 31, 1998, 1997 and 1996, respectively. At
December 31, 1998 and 1997, accumulated amortization of intangibles was $462 and
$321, respectively.
FOREIGN CURRENCY. Assets and liabilities of foreign subsidiaries and equity
investees with a functional currency other than U.S. Dollars are translated into
U.S. Dollars at exchange rates in effect at the end of the reporting period.
Foreign entity revenues and expenses are translated into U.S. Dollars at the
average rates that prevailed during the period. The resulting net translation
gains and losses are reported as foreign currency translation adjustments in
Shareholders' Equity as a component of other accumulated comprehensive income.
Operations in countries with hyperinflationary economies consider the U.S.
Dollar the functional currency.
Exchange gains and losses on transactions of BellSouth and its equity
investments denominated in a currency other than their functional currency are
generally included in results of operations as incurred unless the transactions
are hedged (see "Derivative Financial Instruments" below).
DERIVATIVE FINANCIAL INSTRUMENTS. BellSouth generally enters into
derivative financial instruments only for hedging purposes. Deferral accounting
is applied when the derivative reduces the risk of the underlying hedged item
effectively as a result of high inverse correlation with the value of the
underlying exposure. If a derivative instrument either initially fails or later
ceases to meet the criteria for deferral or settlement accounting, any
subsequent gains or losses are recognized currently in income.
REVENUE RECOGNITION. Revenues are recognized when earned. Certain revenues
derived from local telephone and wireless services are billed monthly in advance
and are recognized the following month when services are provided. Advertising
and publishing revenues and related directory costs are recognized upon
publication of directories. Revenues derived from other telecommunications
services, principally network access, long distance and wireless airtime usage,
are recognized monthly as services are provided. Allowances for uncollectible
billed services are adjusted monthly. The provision for such uncollectible
accounts was $334, $304 and $254 for the years ended December 31, 1998, 1997 and
1996, respectively.
MAINTENANCE AND REPAIRS. The cost of maintenance and repairs of plant,
including the cost of replacing minor items not resulting in substantial
betterments, is charged to Operating Expenses.
INCOME TAXES. The Consolidated Balance Sheets reflect deferred tax balances
associated with the anticipated tax impact of future income or deductions
implicit in the Consolidated Balance Sheets in the form of temporary
differences. Temporary differences primarily result from the use of accelerated
methods and shorter lives in computing depreciation for tax purposes.
For financial reporting purposes, BellSouth is amortizing deferred
investment tax credits earned prior to the 1986 repeal of the investment tax
credit and also some transitional credits earned after the repeal. The credits
are being amortized as a reduction to the Provision for Income Taxes over the
estimated useful lives of the assets to which the credits relate.
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 weighted-average number of common shares
outstanding plus net incremental shares arising out of employee stock options
and benefit plans. Net incremental shares included in the calculation of diluted
earnings per share were approximately 14 million, 5 million and 5 million,
respectively, for the years
51
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE A -- ACCOUNTING POLICIES (CONTINUED)
ended December 31, 1998, 1997 and 1996. BellSouth's earnings, used for per share
calculations, are the same for both the basic and diluted methods.
NEW ACCOUNTING PRONOUNCEMENTS. 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. BellSouth adopted SOP 98-1 on January 1, 1999. Adoption of SOP
98-1 will result in a temporary increase in earnings in the year of adoption,
compared to the prior period, as a result of the capitalization of costs which
had previously been expensed.
NOTE B -- INVESTMENTS AND ADVANCES
Investments and Advances as of December 31 consist of the following:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Investments accounted for under the equity method.................................. $ 2,148 $ 2,007
Advances to and notes receivable from affiliates................................... 677 631
Other investments.................................................................. 36 37
--------- ---------
Total Investments and Advances................................................... $ 2,861 $ 2,675
--------- ---------
--------- ---------
</TABLE>
BellSouth's equity method investments primarily include various partnerships
in domestic and international wireless properties and other international
communications consortia. Equity in earnings related to investments accounted
for under the equity method was $92 for the year ended December 31, 1998 while
equity in losses for these investments were $(242) and $(76) for the two years
ended December 31, 1997 and 1996, respectively, and are included as a component
of Other Income, net.
DOMESTIC WIRELESS. BellSouth's domestic wireless equity method investments
consist primarily of its noncontrolling interests in partnerships serving the
Los Angeles and Houston/Galveston Metropolitan Service Areas. In November 1998,
BellSouth and AT&T contributed their respective interests in these partnerships,
and AT&T contributed approximately $1,000, into a new joint venture. BellSouth's
ownership share of Los Angeles, Houston and Galveston changed from 60.0%, 43.6%
and 36.6%, respectively, to 44.4%, 44.4% and 38.8%, respectively. As a result of
the reorganization, BellSouth's proportionate share of the net assets of the new
venture exceeded BellSouth's aggregate book investment balance. The related
excess is being amortized into income using the straight-line method over a
period of approximately 30 years.
INTERNATIONAL OPERATIONS. BellSouth has equity investments in international
wireless operations in Latin America, Europe and other international markets
with ownership ranging from 22.5% to 46.8%.
During 1998, BellSouth purchased additional ownership interests in its
wireless operations in Venezuela, Brazil and Ecuador for approximately $536.
These purchases increased BellSouth's ownership interest in Venezuela by 24.9%
to 78.2% and its interest in Ecuador by 28.2% to 89.4%. In Brazil, the purchases
increased BellSouth's investment in its Sao Paulo operating company to 44.5% and
in its Northeast operation to 46.8%. In all transactions, the excess of the
respective purchase price over the net book value of the assets acquired was
assigned to customer lists and wireless licenses. The excess consideration paid
over net assets acquired, along with other intangible assets, is being amortized
using either straight-line or accelerated methods over periods of benefit, which
do not exceed 40 years.
52
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE B -- INVESTMENTS AND ADVANCES (CONTINUED)
WIRELESS DATA. Prior to 1998, BellSouth and RAM Broadcasting Corporation
(RAM) were partners in an entity that owned and operated certain wireless data
communications networks in the U.S., the U.K. and various other countries.
During 1998, BellSouth purchased the issued and outstanding stock of RAM. As a
result of the transaction, BellSouth holds a 90.0% interest in the United States
operations and a 100% interest in the U.K. operations. Accordingly, these
operations were consolidated at December 31, 1998.
SUMMARY FINANCIAL INFORMATION OF EQUITY INVESTEES. A summary of combined
financial information as reported by the equity investees of BellSouth is set
forth below:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Balance Sheet Information:
Current Assets................................................................... $ 1,367 $ 1,294
Noncurrent Assets................................................................ 7,073 6,837
Current Liabilities.............................................................. 1,425 4,360
Noncurrent Liabilities........................................................... 6,070 3,928
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Income Statement Information:
Revenues............................................................... $ 3,819 $ 4,734 $ 4,827
Operating Income....................................................... 179 120 91
Net Loss............................................................... (99) (592) (404)
</TABLE>
ADVANCES AND NOTES RECEIVABLE. BellSouth has noncontrolling financial
interests ranging from 70% to 80% in the CSL Ventures and 1155 Peachtree
Associates real estate partnerships. BellSouth had notes receivable from and
advances to these partnerships totaling $161 and $194 at December 31, 1998 and
1997, respectively. The notes bear interest at rates ranging from 6.31% to 7.88%
while the advances bear interest at the federal funds rate plus .30%. Principal
amounts outstanding at December 31, 1998 are due and payable to BellSouth
between November 14, 2001 and January 15, 2038. The instruments require periodic
payments of interest and are collateralized by various real estate holdings.
During 1993, BellSouth entered into a credit agreement with Prime South
Diversified, Inc. (Prime) to provide up to $250 in financing, all of which was
outstanding as of December 31,1997. The loan was collateralized by the stock of
Prime, which indirectly owned Community Cable TV (CCTV) in Las Vegas. The loan
bore interest at a variable rate of 10% to 11%. The loan agreement specified
that in the event Prime sold CCTV, BellSouth would be repaid the principal
balance as well as additional amounts for contingent interest and prepayment
penalties. During 1998, Prime sold its investment in CCTV. As specified in the
loan agreement, BellSouth was repaid the full principal balance as well as
amounts for contingent interest, prepayment penalties and regular interest. As a
result, in 1998, BellSouth recorded additional income of $102 ($62 after tax),
for the amount related to the proceeds from contingent interest and prepayment
penalties.
SALE OF OPERATIONS AND INVESTMENTS. On October 30, 1998, BellSouth sold to
Vodafone Group Plc its 65% ownership interest in BellSouth New Zealand for total
proceeds of $254. The pretax gain on the sale was $180 ($110 after tax).
53
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE B -- INVESTMENTS AND ADVANCES (CONTINUED)
In 1997, BellSouth sold its 24.5% interest in Optus Communications to Cable
and Wireless, a U.K. telecommunications company. Under the agreement, BellSouth
received approximately $735 in cash for its 490 million shares in Optus
Communications. In addition, BellSouth was given an option to receive either an
ownership interest in a cellular communications company located in Colombia or
the equivalent value of that interest in cash. The pretax gain on the sale was
$578 ($352 after tax). During 1998, BellSouth exercised its option and received
an additional $64, which is included in other investing activities in the
Consolidated Statements of Cash Flows.
In 1997, BellSouth sold its 20% interest in ITT World Directories (ITTWD) to
ITT Corporation (ITT) for total proceeds of $265. The pretax gain on such sale
was $209 ($128 after tax). The sale agreement contained certain provisions that
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 that resulted
in a pretax gain of $155 ($96 after tax) in the first quarter of 1998.
In 1997, BellSouth Telecommunications sold to Science Applications
International Corporation its 14.3% interest in Bell Communications Research,
Inc. (Bellcore) for total proceeds of $65. The pretax gain on the sale, included
as a component of Other Income, net, was $38.
NOTE C -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized as follows at December 31:
<TABLE>
<CAPTION>
ESTIMATED
DEPRECIABLE
LIVES
(IN YEARS) 1998 1997
------------- --------- ---------
<S> <C> <C> <C>
Outside plant..................................................... 12-20 $ 22,496 $ 21,642
Central office equipment.......................................... 8-10 20,056 18,716
Operating and other equipment..................................... 5-15 6,262 4,523
Building and building improvements................................ 25-45 4,485 4,433
Furniture and fixtures............................................ 10-15 3,089 2,987
Station equipment................................................. 6 563 522
Land.............................................................. -- 207 190
Plant under construction.......................................... -- 816 815
--------- ---------
57,974 53,828
Less: Accumulated depreciation.................................. 34,034 30,967
--------- ---------
Total Property, Plant and Equipment, net...................... $ 23,940 $ 22,861
--------- ---------
--------- ---------
</TABLE>
54
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE D -- OTHER CURRENT LIABILITIES
Other current liabilities are summarized as follows at December 31:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Advanced billing and customer deposits............................................. $ 754 $ 620
Taxes accrued...................................................................... 645 835
Dividends payable.................................................................. 379 365
Salaries and wages payable......................................................... 351 335
Interest and rents accrued......................................................... 340 309
Compensated absences............................................................... 254 248
Deferred taxes..................................................................... 207 41
Other.............................................................................. 547 499
--------- ---------
Total Other Current Liabilities.................................................. $ 3,477 $ 3,252
--------- ---------
--------- ---------
</TABLE>
NOTE E -- DEBT
DEBT MATURING WITHIN ONE YEAR. Debt maturing within one year is summarized
as follows at December 31:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Short-term notes payable:
Bank loans................................................................... $ 765 $ 465
Commercial paper............................................................. 2,378 2,438
Current maturities of long-term debt........................................... 311 803
--------- ---------
Total Debt Maturing Within One Year.......................................... $ 3,454 $ 3,706
--------- ---------
--------- ---------
Weighted-average interest rate at end of period:
Bank loans................................................................... 7.85% 7.05%
Commercial paper............................................................. 5.30% 5.92%
</TABLE>
BellSouth has committed credit lines aggregating $2,536 with various banks.
Borrowings under the committed credit lines totaled $634 and $241, respectively,
at December 31, 1998 and 1997. BellSouth also maintains uncommitted lines of
credit aggregating $169. At December 31, 1998, borrowings under the uncommitted
lines of credit totaled $45. There were no borrowings under the uncommitted
lines as of December 31, 1997. There are no significant commitment fees or
requirements for compensating balances associated with any lines of credit.
55
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE E -- DEBT (CONTINUED)
LONG-TERM DEBT. Long-term debt, summarized below, consists primarily of
debentures and notes issued by BellSouth Telecommunications. Interest rates and
maturities in the table below are for the amounts outstanding at December 31,
1998.
<TABLE>
<CAPTION>
WEIGHTED-
CONTRACTUAL AVERAGE
INTEREST RATES INTEREST RATE MATURITIES 1998 1997
------------------ -------------- -------------- --------- ---------
<S> <C> <C> <C> <C> <C>
BellSouth Telecommunications..... 4.375% - 6% 5.70% 2000 - 2045 $ 1,495 $ 1,565
6.125% - 7% 6.48% 2000 - 2033 3,219 2,730
7.5% - 8.25% 7.79% 2032 - 2035 1,150 1,150
6.65% - 7% 6.92% 2095 654 644
--------- ---------
6,518 6,089
BellSouth Capital Funding
Corporation..................... 5.25% - 8.65% 6.45% 1999 - 2097 1,469 1,290
Guarantee of ESOP debt........... 9.125% - 9.19% 2003 467 534
Other................................................................................ 602 275
Unamortized discount, net of premium................................................. (30) (37)
--------- ---------
9,026 8,151
Current maturities................................................................... (311) (803)
--------- ---------
Total Long-Term Debt............................................................... $ 8,715 $ 7,348
--------- ---------
--------- ---------
</TABLE>
Maturities of long-term debt outstanding (principal amounts) at December 31,
1998 are summarized below. Maturities after the year 2003 include $500 principal
amount of 6.65% debentures due in 2095. At December 31, 1998, such debentures
had an accreted book value of $154.
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 THEREAFTER TOTAL
--------- --------- --------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Maturities.................. $ 311 $ 514 $ 419 $ 337 $ 646 $ 7,175 $ 9,402
--------- --------- --------- --------- --------- ----------- ---------
--------- --------- --------- --------- --------- ----------- ---------
</TABLE>
Debt issued by BellSouth's wholly-owned subsidiary, BellSouth Capital
Funding Corporation (Capital Funding) is used to finance the businesses of
BellSouth Enterprises and the unregulated subsidiaries of BellSouth
Telecommunications. BellSouth has agreed to ensure the timely payment of
principal, premium, if any, and interest on Capital Funding's debt securities.
In December 1998, Capital Funding issued $300 of 5.375% Notes, due December
22, 2008. The purpose of these issues was to retire commercial paper.
In June 1998, BellSouth Telecommunications issued $500 of 6 3/8% Debentures,
due June 1, 2028. In addition, during June 1998, BellSouth Telecommunications
issued $500 of 6% Reset Put Securities due June 15, 2012 (REPS). REPS are a debt
instrument with embedded put and call option features. The REPS are subject to
mandatory redemption from the existing holders on June 15, 2002 through either
(i) the exercise by the callholder of its right to purchase the REPS or (ii) the
repurchase of the REPS by BellSouth Telecommunications. If the call option is
exercised, the callholder will, based on BellSouth Telecommunications' then
current credit spreads, determine the interest to be paid on the REPS.
During 1997, BellSouth Telecommunications retired certain long-term debt
issues totaling $600. As a result of the early extinguishment of these issues,
extraordinary losses of $9, net of current tax benefits of $6, were recognized
in 1997.
56
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE E -- DEBT (CONTINUED)
At December 31, 1998, shelf registration statements were on file with the
Securities and Exchange Commission under which $927 of debt securities could be
publicly offered.
NOTE F -- OTHER LIABILITIES AND DEFERRED CREDITS
Other liabilities and deferred credits are summarized as follows at December
31:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Postretirement benefits other than pensions (Note H)............................... $ 792 $ 787
Compensation related............................................................... 544 495
Accrued pension cost (Note H)...................................................... 470 559
Minority interests................................................................. 451 504
Postemployment benefits............................................................ 243 242
Other.............................................................................. 256 182
--------- ---------
Total Other Liabilities and Deferred Credits..................................... $ 2,756 $ 2,769
--------- ---------
--------- ---------
</TABLE>
NOTE G -- SHAREHOLDERS' EQUITY
STOCK SPLIT. In November 1998, BellSouth's Board of Directors approved a
two-for-one stock split effected in the form of a stock dividend, whereby each
shareholder of record as of December 3, 1998 received on December 24, 1998 one
additional share of Common Stock for each share owned as of the record date. As
a result of the split, 1,010,156,851 shares were issued and $1,010 was
transferred from Paid-In Capital to Common Stock. Also in November 1998,
BellSouth's Board of Directors approved an increase in the number of authorized
shares of Common Stock to 4,400,000,000 from 2,200,000,000. Amounts related to
common shares for all periods presented have been restated to reflect the stock
split.
PREFERRED STOCK AUTHORIZED. BellSouth's Articles of Incorporation authorize
100 million shares of cumulative First Preferred Stock having a par value of $1
per share, of which 30 million shares have been reserved and designated Series A
for possible issuance under BellSouth's Shareholder Rights Plan. As of December
31, 1998, no preferred shares had been issued.
SHAREHOLDER RIGHTS PLAN. In 1989, BellSouth adopted a Shareholder Rights
Plan by declaring a dividend of one right for each share of Common Stock then
outstanding and to be issued thereafter. Each right entitles shareholders to buy
one one-hundredth of a share of Series A First Preferred Stock for $43.75 per
share. The rights may be exercised only if a person or group acquires 10% of the
Common Stock of BellSouth without the prior approval of the Board of Directors
or announces a tender or exchange offer that would result in ownership of 25% or
more of the Common Stock. If a person or group acquires 10% of BellSouth's stock
without prior Board approval, other shareholders are then allowed to purchase
BellSouth Common Stock at half price. The rights currently trade with BellSouth
Common Stock and may be redeemed by the Board of Directors for one cent per
right until they become exercisable, and thereafter under certain circumstances.
The rights expire in December 1999.
SHARES HELD IN TRUST AND TREASURY. During 1996 and 1997, BellSouth issued
shares to grantor trusts to provide partial funding for the benefits payable
under certain nonqualified benefit plans. The trusts are irrevocable, and assets
contributed to the trusts can only be used to pay such benefits with certain
exceptions. At December 31, 1998 and 1997, the assets held in the trusts consist
of cash and
57
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE G -- SHAREHOLDERS' EQUITY (CONTINUED)
35,578,926 and 34,313,326 shares, respectively, of BellSouth Common Stock. Of
the total shares of BellSouth Common Stock held by the trusts, 31,893,326 were
issued by BellSouth directly to the trusts out of previously unissued shares and
3,685,600 shares were acquired in open market transactions through use of the
trusts' funds.
The total cost of the shares issued by BellSouth as of the date of funding
the trusts is included in Common Stock and Paid-In Capital; however, because
these shares are not considered outstanding for financial reporting purposes,
the shares are included within Shares Held in Trust and Treasury, a reduction to
Shareholders' Equity. In addition, there is no earnings per share impact of
these shares. The cost of shares acquired in open market purchases by the trusts
are also included in Shares Held in Trust and Treasury.
In addition to shares held by the grantor trusts, Shares Held in Trust and
Treasury includes treasury shares purchased in connection with BellSouth's
announced plan to repurchase shares of its Common Stock. In 1998 and 1997,
BellSouth purchased 36,170,168 and 6,827,978 shares for an aggregate of $1,261
and $157, respectively. A total of 4,294,072 and 8,249,248 shares, respectively,
were reissued under various employee benefit plans and for other purposes.
In November 1998, BellSouth announced its intent to repurchase up to $3,000
of its Common Stock during 1999.
Shares Held in Trust and Treasury, at cost, as of December 31, 1998 and 1997
are comprised of the following:
<TABLE>
<CAPTION>
1998 1997
------------------------ --------------------------
SHARES AMOUNT SHARES AMOUNT
------------- --------- ------------- -----------
<S> <C> <C> <C> <C>
Shares Held by Grantor Trusts........................ 35,578,926 $ 557 34,313,326 $ 519
Shares Held in Treasury.............................. 34,316,794 1,195 2,440,698 56
------------- --------- ------------- -----
Total Shares Held in Trust and Treasury.......... 69,895,720 $ 1,752 36,754,024 $ 575
------------- --------- ------------- -----
------------- --------- ------------- -----
</TABLE>
GUARANTEE OF ESOP DEBT. The amount equivalent to BellSouth's guarantee of
the amortizing notes issued by its ESOP trusts are presented as a reduction to
Shareholders' Equity. The amount recorded as a decrease in Shareholders' Equity
represents the cost of unallocated BellSouth Common Stock purchased with the
proceeds of the amortizing notes and the timing difference resulting from the
shares allocated accounting method. (See Note H.)
58
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE H -- EMPLOYEE BENEFIT PLANS
PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS. Substantially all
nonrepresented and represented employees of BellSouth are covered by
noncontributory defined benefit pension plans, as well as postretirement health
and life insurance welfare plans. Principal plans are discussed below; other
plans are not significant individually or in the aggregate.
The pension plan covering nonrepresented employees is a cash balance plan,
which provides pension benefits determined by a combination of
compensation-based service and additional credits and individual account-based
interest credits. The cash balance plan is subject to a minimum benefit
determined under a plan in existence for nonrepresented employees prior to July
1, 1993 which provided benefits based upon credited service and employees'
average compensation for a specified period. The minimum benefit under the prior
plan is applicable to employees retiring through 2005. The 1998 and 1997
projected benefit obligations assumed interest and additional credits greater
than the minimum levels specified in the written plan. Pension benefits provided
for represented employees are based on specified benefit amounts and years of
service through 1998. During 1998, BellSouth established a cash balance plan for
represented employees based upon an initial cash balance amount, negotiated
pension band increases and interest credits effective January 1, 1999. The 1998
and 1997 represented pension obligations included the projected effect of future
bargained-for improvements. The accounting for the health care plan does not
anticipate future adjustments to the cost-sharing arrangements provided for in
the written plan for employees who retire after December 31, 1991.
59
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE H -- EMPLOYEE BENEFIT PLANS (CONTINUED)
Effective for fiscal year 1998, BellSouth adopted SFAS No. 132, "Employers
Disclosure about Pensions and Other Postretirement Benefits." The new standard
revises and combines disclosures for pensions and other postretirement benefits,
but does not change the measurement or recognition of those plans. Accrued
health care costs and prepaid life assets have been combined. The following
tables, prepared in accordance with the new standard, reconcile the changes in
obligations, plan assets and funded status at December 31:
<TABLE>
<CAPTION>
RETIREE HEALTH
PENSION BENEFITS AND LIFE
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at the beginning of the year....... $ 12,335 $ 11,303 $ 3,879 $ 3,590
Service cost.......................................... 273 247 34 37
Interest cost......................................... 841 818 263 263
Amendments............................................ 670 (55) 110 --
Actuarial losses...................................... 319 910 651 200
Benefits paid......................................... (932) (877) (247) (211)
Curtailments.......................................... (4) (13) -- --
Special termination benefits.......................... 2 2 -- --
--------- --------- --------- ---------
Benefit obligation at the end of the year............. $ 13,504 $ 12,335 $ 4,690 $ 3,879
--------- --------- --------- ---------
--------- --------- --------- ---------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year........ $ 17,313 $ 15,614 $ 2,597 $ 2,157
Actual return on plan assets.......................... 1,602 2,576 224 410
Employer contribution................................. -- -- 262 234
Plan participants' contributions...................... -- -- 9 7
Benefits paid......................................... (932) (877) (247) (211)
--------- --------- --------- ---------
Fair value of plan assets at end of year.............. $ 17,983 $ 17,313 $ 2,845 $ 2,597
--------- --------- --------- ---------
--------- --------- --------- ---------
FUNDED STATUS
As of end of year..................................... $ 4,479 $ 4,978 $ (1,845) $ (1,282)
Unrecognized prior service cost....................... 380 (335) 162 86
Unrecognized net (gain) or loss....................... (4,714) (4,743) 243 (346)
Unrecognized net (asset) or obligation................ (89) (109) 740 823
--------- --------- --------- ---------
Prepaid or (accrued) benefit cost..................... $ 56 $ (209) $ (700) $ (719)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Amounts recognized in the Consolidated Balance Sheets consist of:
<TABLE>
<CAPTION>
RETIREE HEALTH
PENSION BENEFITS AND LIFE
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Prepaid benefit cost.................................. $ 526 $ 350 $ 92 $ 68
Accrued benefit liability............................. (470) (559) (792) (787)
</TABLE>
60
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE H -- EMPLOYEE BENEFIT PLANS (CONTINUED)
The components of pension and retiree health and life (income) cost are as
follows:
<TABLE>
<CAPTION>
PENSION BENEFITS RETIREE HEALTH AND LIFE
------------------------------- -------------------------------
1998 1997 1996 1998 1997 1996
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost.............................. $ 273 $ 247 $ 288 $ 34 $ 37 $ 47
Interest cost............................. 841 818 799 263 263 268
Expected return on plan assets............ (1,209) (1,101) (1,056) (167) (149) (136)
Amortization of prior service cost........ (40) (3) (1) 35 34 34
Amortization of (gain)/loss............... (103) (104) (23) (4) (2) 9
Amortization of transition
(asset)/obligation...................... (21) (21) (21) 82 83 83
--------- --------- --------- --------- --------- ---------
Net periodic benefit/(income) cost........ $ (259) $ (164) $ (14) $ 243 $ 266 $ 305
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
Effective December 31, 1997, the nonrepresented cash balance plans were
recombined from six into one cash balance plan. Although only one nonrepresented
cash balance plan exists, separate demographic pools are maintained to generate
pension income based upon specific company information. The change in net
pension income and net retiree health and life costs is affected by several
variables, including changes in actuarial assumptions such as discount rate,
return on plan assets and plan amendments. The consolidated net pension income
and postretirement cost amounts above are exclusive of curtailment effects
reflected in the work force reduction activity and do not reflect pension
curtailment gains in the amount of $9, $36 and $43 in 1998, 1997 and 1996,
respectively.
During 1998, BellSouth modified the presentation of the salary rate
assumption to reflect a more comparable weighted-average compensation increase.
The revised presentation has been included for all years and has no impact on
BellSouth's expenses or obligations. The significant actuarial assumptions at
December 31, 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
PENSION BENEFITS RETIREE HEALTH AND LIFE
------------------------------- -------------------------------
1998 1997 1996 1998 1997 1996
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER
31:
Discount rate........................... 6.75% 7.00% 7.50% 6.75% 7.00% 7.50%
Expected return on plan assets.......... 8.25% 8.25% 8.25% 8.25% 8.25% 8.25%
Rate of compensation increase........... 5.10% 5.00% 5.00% 5.10% 5.00% 5.00%
Health care cost trend rate............. -- -- -- 8.50% 8.00% 8.50%
</TABLE>
The health care cost trend rate used to value the accumulated postretirement
obligation in 1998 and 1997 is assumed to decrease to 5% by 2003. Assumed health
care cost trend rates have a significant effect on the amounts reported for the
health care plan. A one-percentage-point change in assumed health care cost
trend rates would have the following effects as of December 31, 1998:
<TABLE>
<CAPTION>
1-PERCENTAGE- 1-PERCENTAGE-
POINT INCREASE POINT DECREASE
----------------- -----------------
<S> <C> <C>
Effect on total of service and interest cost components......................... $ 23 $ (18)
Effect on postretirement benefit obligation..................................... $ 322 $ (253)
</TABLE>
61
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE H -- EMPLOYEE BENEFIT PLANS (CONTINUED)
DEFINED CONTRIBUTION PLANS. BellSouth maintains several contributory
savings plans which cover substantially all employees. The BellSouth Retirement
Savings Plan and the BellSouth Savings and Security Plan (collectively, the
Savings Plans) are tax-qualified defined contribution plans. Assets of the plans
are held by two trusts (the Trusts) which, in turn, are part of the BellSouth
Master Savings Trust.
In 1990, a leveraged Employee Stock Ownership Plan (ESOP) was incorporated
into the Savings Plans. The Trusts borrowed $850 by issuing amortizing notes
which are guaranteed by BellSouth. The Trusts used the loan proceeds to purchase
shares of BellSouth Common Stock in the open market. These shares are held in
suspense accounts in the Trusts; a scheduled number of shares is released for
allocation to participants as each semiannual loan payment is made. The Trusts
service the debt with contributions from BellSouth and with dividends paid on
the shares held by the Trusts. None of the shares held by the Trusts is subject
to repurchase.
A portion of employees' eligible contributions to the Savings Plans is
matched by BellSouth at rates determined annually by the Board of Directors.
BellSouth's matching obligation is fulfilled with shares released from the
suspense accounts semi-annually for allocation to participants. The number of
shares allocated to each participant's account is based on the market price of
the shares at the time of allocation. If shares released for allocation do not
fulfill BellSouth's matching obligation, BellSouth makes further contributions
to the Trusts to fund the purchase of additional shares in the open market to
fulfill the remaining obligation.
BellSouth recognizes expense using the shares allocated accounting method,
which combines the cost of the shares allocated for the period plus interest
incurred, reduced by the dividends used to service the ESOP debt. Dividends on
all ESOP shares are recorded as a reduction to Retained earnings, and all ESOP
shares are included in the computation of Earnings Per Share.
<TABLE>
<CAPTION>
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Compensation cost..................................... $46 $76 $58
Interest expense...................................... $28 $31 $33
Actual interest on ESOP Notes......................... $44 $50 $56
Cash contributions, excluding dividends paid to the
Trusts............................................... $80 $90 $91
Dividends paid to the Trusts, used for debt service... $42 $43 $44
Shares allocated to participants...................... 38,310,726 33,421,214 28,611,834
Shares committed to be released....................... -- -- --
Shares unallocated.................................... 25,246,722 30,136,234 34,945,614
</TABLE>
NOTE I -- STOCK COMPENSATION PLANS
At December 31, 1998, BellSouth has stock options outstanding under several
stock-based compensation plans. The BellSouth Corporation Stock Plan (the Stock
Plan) provides for grants to key employees of stock options and various other
stock-based awards. One share of BellSouth Common Stock is the underlying
security for any award. The aggregate number of shares of BellSouth Common Stock
which may be granted under the Stock Plan in any calendar year cannot exceed one
percent of the shares outstanding at the time of grant. Prior to adoption of the
Stock Plan, stock options were granted under the BellSouth Corporation Stock
Option Plan. Stock options granted under both plans entitle an optionee to
purchase shares of BellSouth Common Stock within prescribed periods at a price
62
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE I -- STOCK COMPENSATION PLANS (CONTINUED)
either equal to, or in excess of, the fair market value on the date of grant.
Options granted under these plans generally become exercisable at the end of
three to five years and have a term of 10 years.
BellSouth applies APB Opinion 25 and related Interpretations in accounting
for its stock plans. Accordingly, no compensation cost has been recognized for
grants of stock options. Had compensation cost for BellSouth's stock-based
compensation plans been determined in accordance with the provisions of SFAS No.
123, "Accounting for Stock-Based Compensation," BellSouth's Net Income and
earnings per share would have been changed to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Net income -- as reported.............................................. $ 3,527 $ 3,261 $ 2,863
Net income -- pro forma................................................ $ 3,488 $ 3,242 $ 2,852
Basic earnings per share -- as reported................................ $ 1.79 $ 1.64 $ 1.44
Basic earnings per share -- pro forma.................................. $ 1.77 $ 1.63 $ 1.44
Diluted earnings per share -- as reported.............................. $ 1.78 $ 1.64 $ 1.44
Diluted earnings per share -- pro forma................................ $ 1.76 $ 1.63 $ 1.43
</TABLE>
The pro forma amounts reflected above are not representative of the effects
on reported Net Income in future years because, in general, the options granted
in 1998, 1997 and 1996 do not vest for several years and additional awards are
made each year.
The following table summarizes the activity for stock options outstanding:
<TABLE>
<CAPTION>
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Options outstanding at January 1...................... 45,122,812 37,142,784 28,575,496
Options granted....................................... 17,963,592 12,507,766 10,753,026
Options exercised..................................... (2,784,312) (4,001,490) (1,385,090)
Options forfeited..................................... (1,099,182) (526,248) (800,648)
-------------- -------------- --------------
Options outstanding at December 31.................... 59,202,910 45,122,812 37,142,784
-------------- -------------- --------------
-------------- -------------- --------------
Weighted-average option prices per common share:
Outstanding at January 1............................ $18.67 $17.06 $15.28
Granted at fair market value........................ $31.95 $22.23 $21.25
Exercised........................................... $15.35 $14.69 $13.12
Forfeited........................................... $23.47 $20.02 $16.86
Outstanding at December 31.......................... $22.77 $18.67 $17.06
Weighted-average fair value of options granted at fair
market value during the year......................... $7.22 $4.38 $3.83
Options exercisable at December 31.................... 14,733,210 12,065,032 13,046,582
Shares available for grant at December 31............. 19,504,179 19,835,596 19,821,384
</TABLE>
63
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE I -- STOCK COMPENSATION PLANS (CONTINUED)
The fair value of each option grant is estimated on the grant date using the
Black-Scholes option-pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Expected life (years).............................................. 5 5 7
Dividend yield..................................................... 2.40% 3.24% 3.39%
Expected volatility................................................ 21.0% 19.0% 15.4%
Risk-free interest rate............................................ 5.42% 6.22% 5.56%
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------- ------------------------------
NUMBER WEIGHTED- WEIGHTED- NUMBER WEIGHTED-
RANGE OF OUTSTANDING AVERAGE REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE PRICES AT 12/31/98 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/98 EXERCISE PRICE
- - ----------------- ------------- -------------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
$12.10-$15.08 13,766,824 4.73 years $ 14.27 7,598,268 $ 13.79
$15.13-$21.28 14,994,422 6.62 years $ 20.25 3,957,306 $ 20.12
$21.38-$29.22 12,938,740 8.09 years $ 22.27 2,305,338 $ 21.90
$30.91-$44.48 17,502,924 9.33 years $ 31.99 872,298 $ 30.96
------------- -------------
$12.10-$44.48 59,202,910 7.30 years $ 22.77 14,733,210 $ 17.77
------------- -------------
------------- -------------
</TABLE>
NOTE J -- INCOME TAXES
In accordance with SFAS No. 109, "Accounting for Income Taxes," the
Consolidated Balance Sheets reflect the anticipated tax impact of future taxable
income or deductions implicit in the Consolidated Balance Sheets in the form of
temporary differences. These temporary differences reflect the difference
between the basis in assets and liabilities as measured in the Consolidated
Financial Statements and as measured by tax laws using enacted tax rates.
64
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE J -- INCOME TAXES (CONTINUED)
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Federal:
Current................................................................ $ 1,652 $ 1,619 $ 1,389
Deferred, net.......................................................... 221 252 147
Investment tax credits, net............................................ (45) (65) (77)
--------- --------- ---------
1,828 1,806 1,459
--------- --------- ---------
State:
Current................................................................ 234 289 235
Deferred, net.......................................................... 34 36 27
--------- --------- ---------
268 325 262
--------- --------- ---------
Foreign:
Current................................................................ 34 -- 1
Deferred, net.......................................................... 94 20 23
--------- --------- ---------
128 20 24
--------- --------- ---------
Total provision for income taxes..................................... $ 2,224 $ 2,151 $ 1,745
--------- --------- ---------
--------- --------- ---------
</TABLE>
Temporary differences which gave rise to deferred tax assets and
(liabilities) at December 31 were as follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Compensation related............................................................ $ 657 $ 748
Allowance for uncollectibles.................................................... 97 94
Work force reduction charge..................................................... 53 66
Regulatory sharing accruals..................................................... 47 58
Other........................................................................... 138 186
--------- ---------
992 1,152
Valuation allowance............................................................. (81) (72)
--------- ---------
Deferred Tax Assets............................................................. 911 1,080
--------- ---------
Depreciation.................................................................... (2,297) (2,206)
Equity investments.............................................................. (530) (266)
Licenses........................................................................ (238) (199)
Issue basis accounting.......................................................... (236) (214)
Other........................................................................... (329) (259)
--------- ---------
Deferred Tax Liabilities...................................................... (3,630) (3,144)
--------- ---------
Net Deferred Tax Liability.................................................. $ (2,719) $ (2,064)
--------- ---------
--------- ---------
</TABLE>
The valuation allowance, which increased by $9 and $8 in 1998 and 1997,
respectively, primarily relates to state net operating losses that may not be
utilized during the carryforward period. Of the Net Deferred Tax Asset
(Liability) at December 31, 1998 and 1997, $(207) and $(41), respectively, were
current and $(2,512) and $(2,023), respectively, were noncurrent.
65
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE J -- INCOME TAXES (CONTINUED)
A reconciliation of the federal statutory income tax rate to BellSouth's
effective tax rate follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Federal statutory tax rate....................................................... 35.0% 35.0% 35.0%
State income taxes, net of federal income tax benefit............................ 3.0 3.9 3.7
Amortization of investment tax credits........................................... (0.5) (1.2) (1.7)
Equity of unconsolidated subsidiaries............................................ 0.6 1.6 1.6
Miscellaneous items, net......................................................... 0.6 0.4 (0.7)
--- --- ---
Effective tax rate............................................................. 38.7% 39.7% 37.9%
--- --- ---
--- --- ---
</TABLE>
NOTE K -- SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
CASH PAID FOR:
Income Taxes............................................................. $ 2,021 $ 1,839 $ 1,427
--------- --------- ---------
--------- --------- ---------
Interest................................................................. $ 838 $ 759 $ 740
--------- --------- ---------
--------- --------- ---------
</TABLE>
In 1998, BellSouth contributed its ownership interests in certain domestic
wireless operations to a new joint venture. As a result of the transaction, net
assets were increased by approximately $300 with a corresponding increase to
liabilities.
In 1998 as well as in 1997, 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 and $375 (net of
decreases of $228 and $225 in Investments and Advances), respectively, and
corresponding increases in liabilities.
NOTE L -- SEGMENT INFORMATION
BellSouth Corporation has four reportable operating segments: (1) wireline
communications; (2) domestic wireless; (3) international operations; and (4)
advertising and publishing. Wireline communications include local exchange and
access services to business and residential customers in a nine-state region
located in the Southeastern United States. Domestic wireless consists primarily
of cellular and PCS businesses throughout BellSouth's nine-state wireline
service region and in certain other markets. International operations include a
variety of communications services, mainly wireless telephony, in areas within
nine countries in Latin America, as well as China, Denmark, Germany, India and
Israel. Advertising and publishing businesses publish, print and sell
advertising in alphabetical and classified telephone directories. The operations
of all other businesses which fall below the reporting thresholds are included
in the "Other" segment below, and includes entities providing Internet access,
wireless data, entertainment and various start-up operations.
66
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE L -- SEGMENT INFORMATION (CONTINUED)
BellSouth's reportable segments reflect strategic business units that offer
different products and services and/or serve different customers. They are
managed differently because each business requires different technologies and/or
marketing strategies. BellSouth evaluates performance based on the net income,
exclusive of certain intercompany and certain nonoperating items of each
strategic business unit.
The accounting policies underlying the reported segment data are the same as
those described in the summary of significant accounting policies (see Note A).
Generally, BellSouth accounts for intersegment sales and transfers as if the
sales and transfers were to third parties at current market prices. Corporate
and Eliminations includes intercompany eliminations as well as certain
nonoperating items.
The follow table provides information for each operating segment:
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
WIRELINE DOMESTIC INTERNATIONAL ADVERTISING TOTAL CORPORATE AND
COMMUNICATIONS WIRELESS OPERATIONS AND PUBLISHING OTHER SEGMENTS ELIMINATIONS
------------------ ----------- --------------- --------------- --------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues:
External revenues... $ 16,401 $ 2,723 $ 1,995 $ 1,891 $ 113 $ 23,123 $ --
Intersegment
revenues.......... 221 7 -- -- 227 455 (455)
-------- ----------- ------- ------- --------- ----------- -------
Total Operating
Revenues........ 16,622 2,730 1,995 1,891 340 23,578 (455)
-------- ----------- ------- ------- --------- ----------- -------
Operating Expenses:
Depreciation &
amortization...... 3,363 513 357 25 94 4,352 5
Other operating
expense........... 8,387 1,843 1,404 1,017 607 13,258 (396)
-------- ----------- ------- ------- --------- ----------- -------
Total Operating
Expenses........ 11,750 2,356 1,761 1,042 701 17,610 (391)
-------- ----------- ------- ------- --------- ----------- -------
Operating Income...... 4,872 374 234 849 (361) 5,968 (64)
Interest Expense...... 551 84 85 7 26 753 84
Gain on Sale of
Operations.......... -- -- -- -- -- -- 335
Other Income, net:
Interest income..... 3 17 27 -- 19 66 247
Equity in earnings
(losses) of
unconsolidated
subsidiaries...... -- 165 (69) (4) -- 92 --
Other nonoperating
items............. -- (5) (50) 9 46 -- (56)
-------- ----------- ------- ------- --------- ----------- -------
Income Before Income
Taxes............... 4,324 467 57 847 (322) 5,373 378
Provision for (Benefit
from) Income
Taxes............... 1,573 184 119 317 (112) 2,081 143
-------- ----------- ------- ------- --------- ----------- -------
Segment Net Income.... $ 2,751 $ 283 $ (62) $ 530 $ (210) $ 3,292 $ 235
-------- ----------- ------- ------- --------- ----------- -------
-------- ----------- ------- ------- --------- ----------- -------
Total Assets.......... $ 23,916 $ 6,540 $ 4,449 $ 1,288 $ 1,273 $ 37,466 $ 1,944
-------- ----------- ------- ------- --------- ----------- -------
-------- ----------- ------- ------- --------- ----------- -------
Capital Expenditures.. $ 3,512 $ 692 $ 710 $ 36 $ 253 $ 5,203 $ 9
-------- ----------- ------- ------- --------- ----------- -------
-------- ----------- ------- ------- --------- ----------- -------
Equity Method
Investments......... $ -- $ 1,610 $ 521 $ -- $ 61 $ 2,192 $ (44)
-------- ----------- ------- ------- --------- ----------- -------
-------- ----------- ------- ------- --------- ----------- -------
<CAPTION>
CONSOLIDATED
---------------
<S> <C>
Operating Revenues:
External revenues... $ 23,123
Intersegment
revenues.......... --
---------------
Total Operating
Revenues........ 23,123
---------------
Operating Expenses:
Depreciation &
amortization...... 4,357
Other operating
expense........... 12,862
---------------
Total Operating
Expenses........ 17,219
---------------
Operating Income...... 5,904
Interest Expense...... 837
Gain on Sale of
Operations.......... 335
Other Income, net:
Interest income..... 313
Equity in earnings
(losses) of
unconsolidated
subsidiaries...... 92
Other nonoperating
items............. (56)
---------------
Income Before Income
Taxes............... 5,751
Provision for (Benefit
from) Income
Taxes............... 2,224
---------------
Segment Net Income.... $ 3,527
---------------
---------------
Total Assets.......... $ 39,410
---------------
---------------
Capital Expenditures.. $ 5,212
---------------
---------------
Equity Method
Investments......... $ 2,148
---------------
---------------
</TABLE>
67
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE L -- SEGMENT INFORMATION (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
WIRELINE DOMESTIC INTERNATIONAL ADVERTISING TOTAL CORPORATE AND
COMMUNICATIONS WIRELESS OPERATIONS AND PUBLISHING OTHER SEGMENTS ELIMINATIONS
------------------ ----------- --------------- --------------- --------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues:
External revenues... $ 15,178 $ 2,581 $ 948 $ 1,837 $ 17 $ 20,561 $ --
Intersegment
revenues.......... 168 8 -- 7 185 368 (368)
-------- ----------- ------- ------- --------- ----------- -------
Total Operating
Revenues........ 15,346 2,589 948 1,844 202 20,929 (368)
-------- ----------- ------- ------- --------- ----------- -------
Operating Expenses:
Depreciation &
amortization...... 3,332 446 126 22 33 3,959 5
Other operating
expense........... 7,826 1,731 758 967 312 11,594 (373)
-------- ----------- ------- ------- --------- ----------- -------
Total Operating
Expenses........ 11,158 2,177 884 989 345 15,553 (368)
-------- ----------- ------- ------- --------- ----------- -------
Operating Income...... 4,188 412 64 855 (143) 5,376 --
Interest Expense...... 534 59 37 5 33 668 93
Gain on Sale of
Operations.......... -- -- -- -- -- -- 787
Other income, net:
Interest income..... 4 13 15 -- 59 91 101
Equity in earnings
(losses) of
unconsolidated
subsidiaries...... -- 164 (220) 11 (197) (242) --
Other nonoperating
items............. 37 33 (4) 2 38 106 (37)
-------- ----------- ------- ------- --------- ----------- -------
Income Before Income
Taxes and
Extraordinary
Losses.............. 3,695 563 (182) 863 (276) 4,663 758
Provision for (Benefit
from) Income
Taxes............... 1,372 230 5 320 (94) 1,833 318
Extraordinary Loss on
Early Extinguishment
of Debt, net of
tax................. (9) -- -- -- -- (9) --
-------- ----------- ------- ------- --------- ----------- -------
Segment Net Income.... $ 2,314 $ 333 $ (187) $ 543 $ (182) $ 2,821 $ 440
-------- ----------- ------- ------- --------- ----------- -------
-------- ----------- ------- ------- --------- ----------- -------
Total Assets.......... $ 23,226 $ 5,859 $ 3,278 $ 1,262 $ 1,326 $ 34,951 $ 1,350
-------- ----------- ------- ------- --------- ----------- -------
-------- ----------- ------- ------- --------- ----------- -------
Capital Expenditures.. $ 3,440 $ 823 $ 412 $ 21 $ 158 $ 4,854 $ 4
-------- ----------- ------- ------- --------- ----------- -------
-------- ----------- ------- ------- --------- ----------- -------
Equity Method
Investments......... $ -- $ 1,338 $ 693 $ -- $ 112 $ 2,143 $ (136)
-------- ----------- ------- ------- --------- ----------- -------
-------- ----------- ------- ------- --------- ----------- -------
<CAPTION>
CONSOLIDATED
---------------
<S> <C>
Operating Revenues:
External revenues... $ 20,561
Intersegment
revenues.......... --
---------------
Total Operating
Revenues........ 20,561
---------------
Operating Expenses:
Depreciation &
amortization...... 3,964
Other operating
expense........... 11,221
---------------
Total Operating
Expenses........ 15,185
---------------
Operating Income...... 5,376
Interest Expense...... 761
Gain on Sale of
Operations.......... 787
Other income, net:
Interest income..... 192
Equity in earnings
(losses) of
unconsolidated
subsidiaries...... (242)
Other nonoperating
items............. 69
---------------
Income Before Income
Taxes and
Extraordinary
Losses.............. 5,421
Provision for (Benefit
from) Income
Taxes............... 2,151
Extraordinary Loss on
Early Extinguishment
of Debt, net of
tax................. (9)
---------------
Segment Net Income.... $ 3,261
---------------
---------------
Total Assets.......... $ 36,301
---------------
---------------
Capital Expenditures.. $ 4,858
---------------
---------------
Equity Method
Investments......... $ 2,007
---------------
---------------
</TABLE>
68
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE L -- SEGMENT INFORMATION (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
WIRELINE DOMESTIC INTERNATIONAL ADVERTISING TOTAL CORPORATE AND
COMMUNICATIONS WIRELESS OPERATIONS AND PUBLISHING OTHER SEGMENTS ELIMINATIONS
------------------ ----------- --------------- --------------- --------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues:
External revenues... $ 14,624 $ 2,204 $ 547 $ 1,651 $ 14 $ 19,040 $ --
Intersegment
revenues.......... 152 3 7 -- 123 285 (285)
-------- ----------- ------- ------- --------- ----------- -------
Total Operating
Revenues........ 14,776 2,207 554 1,651 137 19,325 (285)
-------- ----------- ------- ------- --------- ----------- -------
Operating Expenses:
Depreciation &
amortization...... 3,255 324 98 21 16 3,714 5
Other operating
expense........... 7,814 1,497 481 800 187 10,779 (237)
-------- ----------- ------- ------- --------- ----------- -------
Total Operating
Expenses........ 11,069 1,821 579 821 203 14,493 (232)
-------- ----------- ------- ------- --------- ----------- -------
Operating Income...... 3,707 386 (25) 830 (66) 4,832 (53)
Interest Expense...... 552 41 28 3 -- 624 97
Gain on Sale of
Operations.......... -- -- -- -- -- -- 442
Other income, net:
Interest income..... 8 4 19 1 30 62 100
Equity in earnings
(losses) of
unconsolidated
subsidiaries...... -- 195 (163) 23 (131) (76) --
Other nonoperating
items............. 12 (22) 11 (2) (12) (13) 35
-------- ----------- ------- ------- --------- ----------- -------
Income Before Income
Taxes............... 3,175 522 (186) 849 (179) 4,181 427
Provision for (Benefit
from) Income
Taxes............... 1,170 219 4 323 (63) 1,653 92
-------- ----------- ------- ------- --------- ----------- -------
Segment Net Income.... $ 2,005 $ 303 $ (190) $ 526 $ (116) $ 2,528 $ 335
-------- ----------- ------- ------- --------- ----------- -------
-------- ----------- ------- ------- --------- ----------- -------
Total Assets.......... $ 23,038 $ 5,294 $ 1,369 $ 1,226 $ 767 $ 31,694 $ 874
-------- ----------- ------- ------- --------- ----------- -------
-------- ----------- ------- ------- --------- ----------- -------
Capital Expenditures.. $ 3,206 $ 985 $ 177 $ 28 $ 55 $ 4,451 $ 4
-------- ----------- ------- ------- --------- ----------- -------
-------- ----------- ------- ------- --------- ----------- -------
Equity Method
Investments......... $ -- $ 1,355 $ 294 $ 46 $ 136 $ 1,831 $ (155)
-------- ----------- ------- ------- --------- ----------- -------
-------- ----------- ------- ------- --------- ----------- -------
<CAPTION>
CONSOLIDATED
---------------
<S> <C>
Operating Revenues:
External revenues... $ 19,040
Intersegment
revenues.......... --
---------------
Total Operating
Revenues........ 19,040
---------------
Operating Expenses:
Depreciation &
amortization...... 3,719
Other operating
expense........... 10,542
---------------
Total Operating
Expenses........ 14,261
---------------
Operating Income...... 4,779
Interest Expense...... 721
Gain on Sale of
Operations.......... 442
Other income, net:
Interest income..... 162
Equity in earnings
(losses) of
unconsolidated
subsidiaries...... (76)
Other nonoperating
items............. 22
---------------
Income Before Income
Taxes............... 4,608
Provision for (Benefit
from) Income
Taxes............... 1,745
---------------
Segment Net Income.... $ 2,863
---------------
---------------
Total Assets.......... $ 32,568
---------------
---------------
Capital Expenditures.. $ 4,455
---------------
---------------
Equity Method
Investments......... $ 1,676
---------------
---------------
</TABLE>
Net revenues to external customers are based on the location of the
customer. Geographic information as of December 31, 1998, 1997 and 1996 is as
follows:
<TABLE>
<CAPTION>
UNITED
STATES INTERNATIONAL TOTAL
--------- ------------- ---------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
Revenues.................................................................. $ 21,128 $ 1,995 $ 23,123
Long-lived assets......................................................... 27,082 3,622 30,704
YEAR ENDED DECEMBER 31, 1997
Revenues.................................................................. $ 19,613 $ 948 $ 20,561
Long-lived assets......................................................... 25,948 2,236 28,184
YEAR ENDED DECEMBER 31, 1996
Revenues.................................................................. $ 18,493 $ 547 $ 19,040
Long-lived assets......................................................... 25,102 1,168 26,270
</TABLE>
69
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE M -- FINANCIAL INSTRUMENTS
The recorded amounts of cash and cash equivalents, temporary cash
investments, bank loans and commercial paper approximate fair value due to the
short-term nature of these instruments. The fair value for BellSouth
Telecommunications long-term debt is estimated based on the closing market
prices for each issue at December 31, 1998 and 1997. Fair value estimates for
the Guarantee of ESOP Debt, Capital Funding long-term debt, foreign exchange
contracts, foreign currency swaps and interest rate swaps are based on quotes
from dealers. Since judgment is required to develop the estimates, the estimated
amounts presented herein may not be indicative of the amounts that BellSouth
could realize in a current market exchange.
Following is a summary of financial instruments where the fair values differ
from the recorded amounts as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------------------------ ------------------------
ESTIMATED ESTIMATED
RECORDED FAIR RECORDED FAIR
AMOUNT VALUE AMOUNT VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE SHEET FINANCIAL INSTRUMENTS
Long-Term Debt:
BellSouth Telecommunications.............................. $ 6,518 $ 6,771 $ 6,089 $ 6,142
Capital Funding........................................... 1,469 1,523 1,290 1,324
Guarantee of ESOP Debt.................................... 467 519 534 584
OFF BALANCE SHEET FINANCIAL INSTRUMENTS
Interest Rate Swaps......................................... -- (13) -- (6)
Foreign Exchange Forward Contracts.......................... -- -- -- (3)
</TABLE>
DERIVATIVE FINANCIAL INSTRUMENTS. BellSouth is, from time to time, party to
currency swap agreements, interest rate swap agreements and foreign exchange
forward contracts in its normal course of business for purposes other than
trading. These financial instruments are used to mitigate foreign currency and
interest rate risks, although to some extent they expose the company to market
risks and credit risks. The credit risks associated with these instruments are
controlled through the evaluation and continual monitoring of the
creditworthiness of the counterparties. In the event that a counterparty fails
to meet the terms of a contract or agreement, BellSouth's exposure is limited to
the then current value of the currency rate or interest rate differential, not
the full notional or contract amount. Such contracts and agreements have been
executed with creditworthy financial institutions. As such, BellSouth considers
the risk of nonperformance to be remote.
CURRENCY SWAP. BellSouth entered into a currency swap in 1994 to hedge
European Currency Units (ECU) 125,000,000 debt issued by Capital Funding. The
currency swap and related debt mature in February 1999. At December 31, 1998,
the net currency swap receivable, which equals the fair value of the swap, was
$7 and the related net interest receivable was $7, both of which are included in
accounts receivable in the Consolidated Balance Sheets at December 31, 1998.
INTEREST RATE SWAPS. BellSouth enters into interest rate swap agreements to
exchange fixed and variable rate interest payment obligations without the
exchange of the underlying principal amounts. As of December 31, 1998 and 1997,
BellSouth was a party to various interest rate swaps with an aggregate notional
amount of $920. Under swap agreements, BellSouth paid fixed rates averaging
6.11% and 7.13% at December 31, 1998 and 1997 and received variable rates
averaging 5.54% and 5.69% at December 31, 1998 and 1997, respectively. BellSouth
also paid variable rates averaging 5.69% and
70
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE M -- FINANCIAL INSTRUMENTS (CONTINUED)
received fixed rates averaging 6.00% at December 31, 1998. The swaps mature at
dates ranging from 2001 to 2002.
OTHER. BellSouth has also issued letters of credit and financial guarantees
which approximate $523 at December 31, 1998. Of this total, $360 represents the
U.S. Dollar equivalent of the outstanding debt of E-Plus (a partially-owned
wireless communications company located in Germany) guaranteed by BellSouth.
BellSouth has agreed to guarantee E-Plus borrowings up to a U.S. Dollar
equivalent of $422 (705 million German Marks) at December 31, 1998. Since there
is no market for the instruments, it is not practicable to estimate their fair
value.
CONCENTRATIONS OF CREDIT RISK. Financial instruments which potentially
subject BellSouth to credit risk consist principally of trade accounts
receivable. Concentrations of credit risk with respect to these receivables,
other than those from long distance carriers, are limited due to the composition
of the customer base, which includes a large number of individuals and
businesses. At December 31, 1998 and 1997, approximately $472 and $485,
respectively, of trade accounts receivable were from long distance carriers.
NOTE N -- COMMITMENTS AND CONTINGENCIES
LEASES. BellSouth has entered into operating leases for facilities and
equipment used in operations. Rental expense under operating leases was $242,
$273 and $269 for 1998, 1997 and 1996, respectively. Capital leases currently in
effect are not significant.
The following table summarizes the approximate future minimum rentals under
noncancelable operating leases in effect at December 31, 1998:
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 THEREAFTER TOTAL
---- ---- ---- ---- ---- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Minimum rentals......................... $212 $197 $181 $168 $148 $663 $1,569
---- ---- ---- ---- ---- ----- ------
---- ---- ---- ---- ---- ----- ------
</TABLE>
OUTSIDE PLANT. BellSouth currently self-insures all of its outside plant
against casualty losses. The net book value of outside plant was $7,234 and
$7,408 at December 31, 1998 and 1997, respectively. Such outside plant, located
in the nine Southeastern states served by BellSouth Telecommunications, is
susceptible to damage from severe weather conditions and other perils, including
hurricanes.
OUTSOURCING CONTRACTS. Beginning in 1997, BellSouth Telecommunications
contracted with various entities to outsource the performance of certain
engineering functions, as well as its information technology operations and
application development. These contracts expire at various dates through 2008,
are generally renewable, and are cancelable upon the payment of additional fees
or for nonperformance. Future minimum payments for these contracts range from
$400 to $625 annually over the next nine years.
RECIPROCAL COMPENSATION. Following the enactment of the Telecommunications
Act of 1996, BellSouth Telecommunications and various competitive local exchange
carriers (CLECs) entered into interconnection agreements providing for, among
other things, the payment of reciprocal compensation for local calls initiated
by the customers of one carrier that are completed on the network of the other
carrier. Numerous CLECs claim entitlement from BellSouth Telecommunications for
compensation associated with dial-up calls originating on BellSouth
Telecommunications' network and connecting with Internet service providers
(ISPs) served by the CLECs' networks. BellSouth Telecommunications has
71
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE N -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
maintained that, because the Federal Communications Commission (FCC) has
previously determined that Internet calls over dedicated lines are
jurisdictionally interstate, dial-up calls to ISPs are not local calls for which
terminating compensation is due under the interconnection agreements. The courts
and state commissions that have considered the matter have ruled that such calls
invoke the reciprocal compensation obligation. The FCC has indicated that it
would release an order in which it would address the jurisdictional nature of
switched ISP traffic. BellSouth Telecommunications believes that it has a good
basis for its claims that such reciprocal compensation is not owed to the CLECs.
However, at December 31, 1998, BellSouth Telecommunications' exposure related to
unrecorded amounts withheld from CLECs was approximately $135, including accrued
interest.
OTHER CLAIMS. BellSouth and its subsidiaries are subject to claims arising
in the ordinary course of business involving allegations of personal injury,
breach of contract, anti-competitive conduct, employment law issues, regulatory
matters and other actions. BellSouth Telecommunications is also subject to
claims attributable to predivestiture events involving environmental
liabilities, rates, taxes, contracts and torts. Certain contingent liabilities
for predivestiture events are shared with AT&T Corp.
While complete assurance cannot be given as to the outcome of any legal
claims, BellSouth believes that any financial impact would not be material to
its results of operations, financial position or cash flows.
NOTE O -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
In the following summary of quarterly financial information, all adjustments
necessary for a fair presentation of each period were included. The results for
fourth quarter 1998 include a pretax gain of $180 ($110 after tax) on the sale
of BellSouth's operation in New Zealand as well as additional income of $102
($62 after tax) which resulted from the early repayment of a loan. First quarter
1998 results include a pretax gain of $155 ($96 after tax) resulting from
additional proceeds from the sale of ITT World Directories. The results for
third quarter 1997 include pretax gains on sales of operations of $787, which
increased net income by $480.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1998
Operating Revenues........................................... $ 5,426 $ 5,664 $ 5,865 $ 6,168
Operating Income............................................. $ 1,454 $ 1,434 $ 1,463 $ 1,553
Net Income................................................... $ 892 $ 818 $ 814 $ 1,003
Earnings Per Share--Basic and Diluted(a)..................... $ .45 $ .41 $ .41 $ .51
1997
Operating Revenues........................................... $ 4,845 $ 4,923 $ 5,193 $ 5,600
Operating Income............................................. $ 1,353 $ 1,224 $ 1,346 $ 1,453
Net Income................................................... $ 693 $ 654 $ 1,185 $ 729
Earnings Per Share--Basic and Diluted(a)..................... $ .35 $ .33 $ .60 $ .37
</TABLE>
- - ------------------------
(a) Due to rounding, the sum of quarterly EPS amounts may not agree to
year-to-date EPS amounts.
72
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE P -- SUBSEQUENT EVENT
BellSouth holds equity interests in two wireless communications consortia in
Brazil, which are accounted for under the equity method of accounting. At
December 31, 1998, the Brazilian operations had incurred approximately $2,300 in
U.S. Dollar-denominated liabilities. During January 1999 the Brazilian
government allowed its currency to trade freely against other currencies
resulting in an immediate devaluation of the Brazilian Real. For January 1999,
the latest internal financial reporting period, BellSouth will recognize a
foreign exchange rate loss resulting from the devaluation of approximately $364
through recording its share of equity in earnings of its Brazilian equity
investments. The aforementioned exchange loss is subject to further upward or
downward adjustment based on fluctuations in the U.S. Dollar/Brazilian Real
exchange rate.
73
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No change in accountants or disagreements on the adoption of appropriate
accounting standards or financial disclosure has occurred during the periods
included in this report.
PART III
ITEMS 10 THROUGH 13.
Information regarding executive officers required by Item 401 of Regulation
S-K is furnished in a separate disclosure on page 22 in Part I of this report
since the registrant did not furnish such information in its definitive proxy
statement prepared in accordance with Schedule 14A.
The additional information required by these items will be included in the
registrant's definitive proxy statement dated March 9, 1999 as follows, and is
herein incorporated by reference pursuant to General Instruction G(3):
<TABLE>
<CAPTION>
PAGE(S) IN
DEFINITIVE
PROXY
ITEM DESCRIPTION STATEMENT
- - ----------------- ---------------------------------------------------------------------------- -----------------
<S> <C> <C>
10. Directors and Executive Officers of the Registrant.......................... 4-7
11. Executive Compensation...................................................... 10-11; 19*-25
12. Security Ownership of Certain Beneficial
Owners and Management...................................................... 2; 12
13. Certain Relationships and Related Transactions.............................. 7
</TABLE>
- - ------------------------
* Beginning with "Compensation Committee Interlocks and Insider
Participation"
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE(S) IN THIS
FORM 10-K
-------------------
<S> <C>
a. Documents filed as a part of the report:
(1) Financial Statements:
Report of Independent Accountants........................................................ 45
Consolidated Statements of Income........................................................ 46
Consolidated Balance Sheets.............................................................. 47
Consolidated Statements of Cash Flows.................................................... 48
Consolidated Statements of Shareholders' Equity and Comprehensive Income................. 49
Notes to Consolidated Financial Statements............................................... 50
(2) Financial statement schedules have been omitted because the required information is
contained in the financial statements and notes thereto or because such schedules are not
required or applicable.
(3) Exhibits: Exhibits identified in parentheses below, on file with the SEC, are
incorporated herein by reference as exhibits hereto. All management contracts or
compensatory plans or arrangements required to be filed as exhibits to this Form 10-K
Report pursuant to Item 14(c) are filed as Exhibits 10a through 10dd inclusive.
</TABLE>
74
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- - ---------
<S> <C>
3a Amended Articles of Incorporation of BellSouth Corporation as of April 27, 1998. (Exhibit 3a to Form
10-Q for the quarter ended March 31, 1998, File No. 1-8607.)
3b Bylaws of BellSouth Corporation as Amended on November 23, 1998.
4 BellSouth Corporation Shareholder Rights Agreement. (Exhibit 4-b to Form 8-K. Date of report November
27, 1989.)
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.
10a BellSouth Corporation Officer Short Term Incentive Award Plan. (Exhibit 10y to Form 10-Q for the quarter
ended September 30, 1996, File No. 1-8607.)
10b BellSouth Corporation Executive Long Term Incentive Plan. (Exhibit 10e to Form 10-K for the year ended
December 31, 1991, File No. 1-8607.)
10c BellSouth Corporation Executive Long Term Disability and Survivor Protection Plan as amended and
restated effective January 1, 1994. (Exhibit 10c-1 to Form 10-K for the year ended December 31, 1993,
File No. 1-8607.)
10d BellSouth Corporation Executive Transfer Plan. (Exhibit 10ee to Registration Statement No. 2-87846.)
10e BellSouth Corporation Death Benefit Program. (Exhibit 10ff to Form 10-K for the year ended December 31,
1989, File No. 1-8607.)
10f BellSouth Corporation Plan For Non-Employee Directors' Travel Accident Insurance. (Exhibit 10ii to
Registration Statement No. 2-87846.)
10g BellSouth Corporation Executive Incentive Award Deferral Plan as amended and restated effective
September 23, 1996. (Exhibit 10g to Form 10-K for the year ended December 31, 1996, File No. 1-8607.)
10h BellSouth Corporation Nonqualified Deferred Compensation Plan as amended and restated effective November
25, 1996. (Exhibit 10h to Form 10-K for the year ended December 31, 1996, File No. 1-8607.)
10i BellSouth Corporation Supplemental Executive Retirement Plan as amended on March 23, 1998. (Exhibit 10i
to Form 10-Q for the quarter ended March 31, 1998, File No. 1-8607.)
10j BellSouth Corporation Directors Retirement Plan. (Exhibit 10qq to Form 10-K for the year ended December
31, 1986, File No. 1-8607.)
10k BellSouth Corporation Financial Counseling Plan. (Exhibit 10r to Form 10-K for the year ended December
31, 1992, File No. 1-8607.)
</TABLE>
75
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- - ---------
10k-1 Amendment dated November 3, 1995 to the BellSouth Corporation Financial Counseling Plan for Executives.
(Exhibit 10l-1 to Form 10-K for the year ended December 31, 1995, File No. 1-8607.)
<S> <C>
10l BellSouth Corporation Deferred Compensation Plan for Non-Employee Directors. (Exhibit 10gg to
Registration Statement No. 2-87846.)
10m BellSouth Corporation Executive Life Insurance Plan as amended and restated as the BellSouth
Split-Dollar Life Insurance Plan, effective August 31, 1998.
10n BellSouth Corporation Non-Employee Director Stock Plan. (Exhibit 10z to Form 10-Q for the quarter ended
March 31, 1997, File No. 1-8607.)
10o Form of Executive Officer Successor and Retirement Agreement. (Exhibit 10aa to Form 10-Q for the quarter
ended September 30, 1996, File No. 1-8607.)
10p BellSouth Non-Employee Directors Charitable Contribution Program. (Exhibit 10z to Form 10-K for the year
ended December 31, 1992, File No. 1-8607.)
10q BellSouth Personal Retirement Account Pension Plan, as amended and restated effective January 1, 1998.
10q-1 Amendment dated December 22, 1998 to the BellSouth Personal Retirement Account Pension Plan.
10r BellSouth Corporation Trust Under Executive Benefit Plan(s) as amended April 28, 1995. (Exhibit 10u-1 to
Form 10-Q for the quarter ended June 30, 1995, File No. 1-8607.)
10r-1 Amendment dated May 23, 1996 to the BellSouth Corporation Trust Under Executive Benefit Plan(s).
(Exhibit 10s-1 to Form 10-Q for the quarter ended June 30, 1996, File No. 1-8607.)
10s BellSouth Telecommunications, Inc. Trust Under Executive Benefit Plan(s) as amended April 28, 1995.
(Exhibit 10v-1 to Form 10-Q for the quarter ended June 30, 1995, File No. 1-8607.)
10s-1 Amendment dated May 23, 1996 to the BellSouth Telecommunications, Inc. Trust Under Executive Benefit
Plan(s). (Exhibit 10t-1 to Form 10-Q for the quarter ended June 30, 1996, File No. 1-8607.)
10t BellSouth Corporation Trust Under Board of Directors Benefit Plan(s) as amended April 28, 1995. (Exhibit
10w-1 to Form 10-Q for the quarter ended June 30, 1995, File No. 1-8607.)
10t-1 Amendment dated May 23, 1996 to the BellSouth Corporation Trust Under Board Directors Benefit Plan(s).
(Exhibit 10u-1 to Form 10-Q for the quarter ended June 30, 1996, File No. 1-8607.)
10u BellSouth Telecommunications, Inc. Trust Under Board of Directors Benefit Plan(s) as amended April 28,
1995. (Exhibit 10x-1 to Form 10-Q for the quarter ended June 30, 1995, File No. 1-8607.)
10u-1 Amendment dated May 23, 1996 to the BellSouth Telecommunications, Inc. Trust Under Board of Directors
Benefit Plan(s). (Exhibit 10v-1 to Form 10-Q for the quarter ended June 30, 1996, File No. 1-8607.)
10v BellSouth Corporation Stock Plan as amended on September 23, 1996 and November 24, 1996. (Exhibit 10v to
Form 10-K for the year ended December 31, 1996, File No. 1-8607.)
10w BellSouth Retirement Savings Plan as amended and restated effective July 1, 1996. (Exhibit 10x to Form
10-Q for the quarter ended September 30, 1996, File No. 1-8607.)
10w-1 Amendment dated February 18, 1997 to the BellSouth Retirement Savings Plan. (Exhibit 10w-1 to Form 10-Q
for the quarter ended March 31, 1997, File No. 1-8607.)
</TABLE>
76
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- - ---------
10w-2 Amendment dated June 24, 1997 to the BellSouth Retirement Savings Plan. (Exhibit 10w-2 to Form 10-Q/A
for the quarter ended June 30, 1997, File No. 1-8607.)
<S> <C>
10w-3 Amendment dated May 5, 1998 to the BellSouth Retirement Savings Plan. (Exhibit 10w-3 to Form 10-Q for
the quarter ended March 31, 1998, File No. 1-8607.)
10w-4 Amendment dated December 23, 1998 to the BellSouth Retirement Savings Plan.
10x BellSouth Corporation Officer Estate Enhancement Plan and Agreement. (Exhibit 10x to Form 10-K for the
year ended December 31, 1996, File No. 1-8607.)
10y BellSouth Change in Control Executive Severance Agreements. (Exhibit 10y to Form 10-K for the year ended
December 31, 1996, File No. 1-8607.)
10z BellSouth Compensation Deferral Plan as amended and restated effective October 1, 1997. (Exhibit 10z to
Form 10-Q for the quarter ended March 31, 1998, File No. 1-8607.)
10aa BellSouth Employee Stock Investment Plan. (Exhibit 10aa to Form 10-Q for the quarter ended March 31,
1998, File No. 1-8607.)
10aa-1 Amendment dated November 27, 1996 to the BellSouth Employee Stock Investment Plan. (Exhibit 10aa-1 to
Form 10-Q for the quarter ended March 31, 1998, File No. 1-8607.)
10aa-2 Amendment dated March 21, 1997 to the BellSouth Employee Stock Investment Plan. (Exhibit 10aa-2 to Form
10-Q for the quarter ended March 31, 1998, File No. 1-8607.)
10aa-3 Amendment dated May 5, 1998 to the BellSouth Employee Stock Investment Plan. (Exhibit 10aa-3 to Form
10-Q for the quarter ended March 31, 1998, File No. 1-8607.)
10bb BellSouth Officer Motor Vehicle Policy. (Exhibit 10bb to Form 10-Q for the quarter ended March 31, 1998,
File No. 1-8607.)
10cc BellSouth Supplemental Life Insurance Plan, as amended and restated effective August 31, 1998.
10dd Agreement with Chief Executive Officer.
11 Computation of Earnings Per Share.
12 Computation of Ratio of Earnings to Fixed Charges.
21 Subsidiaries of BellSouth.
24 Powers of Attorney.
27 Financial Data Schedule.
99a Annual report on Form 11-K for BellSouth Retirement Savings Plan for the fiscal year ended December 31,
1998 (to be filed as an amendment hereto within 180 days of the end of the period covered by this
report.)
</TABLE>
<TABLE>
<S> <C>
99b Annual report on Form 11-K for BellSouth Savings and Security ESOP Plan for the
fiscal year ended December 31, 1998 (to be filed as an amendment hereto within 180
days of the end of the period covered by this report.)
</TABLE>
b. Reports on Form 8-K:
<TABLE>
<CAPTION>
DATE OF EVENT SUBJECT
- - -------------------- ------------------------------------------------------------------
<S> <C>
January 20, 1999 BellSouth Recognizes Brazilian Currency Devaluation
January 25, 1999 Fourth Quarter 1998 Earnings Release
</TABLE>
77
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BELLSOUTH CORPORATION
/s/ W. PATRICK SHANNON
---------------------------------------------------------------------------
W. Patrick Shannon
VICE PRESIDENT AND CONTROLLER
February 24, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
PRINCIPAL EXECUTIVE OFFICER:
F. Duane Ackerman*
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PRINCIPAL FINANCIAL OFFICER:
Ronald M. Dykes*
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
PRINCIPAL ACCOUNTING OFFICER:
W. Patrick Shannon*
VICE PRESIDENT AND CONTROLLER
<TABLE>
<S> <C>
DIRECTORS:
F. Duane Ackerman* John G. Medlin, Jr.*
Reuben V. Anderson* Leo F. Mullin*
James H. Blanchard* Robin B. Smith*
J. Hyatt Brown* C. Dixon Spangler, Jr.*
Armando M. Codina* William S. Stavropoulos*
Phyllis Burke Davis* Ronald A. Terry*
Kathleen F. Feldstein* J. Tylee Wilson*
*By: /s/ W. PATRICK SHANNON
---------------------------------
</TABLE>
W. Patrick Shannon
(INDIVIDUALLY AND AS ATTORNEY-IN-FACT)
February 24, 1999
78
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference of our report, dated February
3, 1999, on our audits of the consolidated financial statements of BellSouth
Corporation as of December 31, 1998 and 1997, and for each of the three years in
the period ended December 31, 1998, which report is included in this Annual
Report on Form 10-K, in the following Registration Statements:
- Form S-3 (File No. 33-51449),
- Form S-3 (File No. 33-63173),
- Form S-3 (File No. 333-21233),
- Form S-3 (File No. 333-31301),
- Form S-3 (File No. 333-45607),
- Form S-8 (File No. 33-38265),
- Form S-8 (File No. 33-38264),
- Form S-8 (File No. 33-49459),
- Form S-8 (File No. 333-13783),
- Form S-8 (File No. 333-49045),
- Form S-8 (File No. 333-49047),
- Form S-8 (File No. 333-49169).
/s/ PricewaterhouseCoopers LLP
Atlanta, Georgia
February 24, 1999
79
<PAGE>
Exhibit 3(b)
BELLSOUTH CORPORATION
Incorporated under the Laws
of the State of Georgia
on October l3, l983
Adopted
October 24, l983
BY-LAWS
As Amended
Effective November 23, 1998
Secretary Department
19A01 Campanile Building
1155 Peachtree Street, N.E.
Atlanta, Georgia 30309-3610
<PAGE>
CONTENTS
Article I......Shareholders
Article II.....Directors
Article III....Officers
Article IV.....Stock
Article V......Business Combinations
Article VI.....Seal
Article VII....Indemnity
Article VIII...Amendment of By-laws
2
<PAGE>
BY-LAWS
OF
BELLSOUTH CORPORATION
ARTICLE I
Shareholders
Section 1. Annual Meeting. The annual meeting of the shareholders for the
election of Directors and for the transaction of such other business as may
properly come before the meeting shall be held on such date and at such time and
place as the Board of Directors may by resolution provide. Notice of any
nominations of persons for election to the Board of Directors or of any other
business to be brought before an annual meeting of shareholders by a shareholder
must be provided in writing to the Secretary of the Corporation not later than
the close of business on the seventy-fifth (75th) day nor earlier than the close
of business on the one hundred and twentieth (120th) day prior to the date which
is twelve (12) months after the anniversary of the annual meeting of
shareholders held in the prior year. Such shareholder's notice shall set forth
(a) as to each person whom the shareholder proposes to nominate for election as
a director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including such person's written consent to being named
in the Proxy Statement as a nominee and to serving as a director if elected, and
evidence reasonably satisfactory to the Company that such nominee has no
interests that would limit their ability to fulfill their duties of office; (b)
as to any other business that the shareholder proposes to bring before the
meeting, a brief description of the business desired to be brought before the
meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such shareholder and the beneficial owner,
if any, on whose behalf the proposal is made; and (c) as to the shareholder
giving the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made (i) the name and address of such shareholder, as
they appear on the Corporation's books, and of such beneficial owner and (ii)
the class and number of shares of the Corporation that are owned beneficially
and held of record by such shareholder and such beneficial owner. In addition,
if the shareholder intends to solicit proxies from the shareholders of the
Corporation, such shareholder's notice shall notify the Corporation of this
intent. If a shareholder fails to notify the Corporation of his or her intent to
solicit proxies and does in fact solicit proxies, the Chairman of the Board
shall have the authority, in his or her discretion, to strike the proposal or
nomination by the shareholder.
Section 2. Special Meeting. A special meeting of the shareholders may be
called at any time by the Board of Directors or the Chief Executive Officer and
shall be called upon written request to the Chief Executive Officer or
Secretary, signed by the holders of at least three-quarters of the outstanding
shares entitled to vote at such meeting. The written request
3
<PAGE>
shall set forth (a) a brief description of the purpose of the proposed meeting
and business to be brought before such meeting, and any material interest in
such business of any shareholder and beneficial owner, if any, on whose behalf
the proposal is made; (b) if the shareholders requesting the special meeting
propose to nominate one or more persons for election as directors, as to each
such person all information that is required to be disclosed in solicitations of
proxies for elections of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(including each such person's written consent to being named in a proxy
statement as a nominee and to serving as director if elected, and evidence
reasonably satisfactory to the Company that such nominee has no interests that
would limit his or her ability to fulfill his or her duties of office; and (c)
as to the shareholders giving the notice and the beneficial owner, if any on
whose behalf the request is made, (i) the name and address of each such
shareholder, as they appear on the Company's books, and of such beneficial owner
and (ii) the class and number of shares of the Company that are owned
beneficially and held of record by such shareholders and beneficial owners. In
addition, if the shareholder intends to solicit proxies from the shareholders of
the Corporation, such shareholder's notice shall notify the Corporation of this
intent. If a shareholder fails to notify the Corporation of his or her intent to
solicit proxies and does in fact solicit proxies, the Chairman of the Board
shall have the authority, in his or her discretion, to strike the proposal or
nomination proposed by the shareholder.
Section 3. Notice of Meetings of Shareholders. Written notice of each
meeting of shareholders, stating the place and time of the meeting, shall be
mailed to each shareholder entitled to vote at such meeting at such
shareholder's address shown on the records of the Corporation not less than
thirty nor more than sixty days prior to such meeting. If the notice is for a
special meeting, the notice shall also include the purpose or purposes for which
the special meeting is being called and shall indicate that the notice is being
issued by or at the direction of the person or persons calling the meeting.
Failure to receive notice of any meeting of shareholders shall not invalidate
the meeting. Notice of any meeting may be given by or at the direction of the
Chairman, the President, the Secretary or by the person or persons calling such
meeting.
Section 4. Quorum; Required Shareholder Vote. A quorum for the transaction
of business at any meeting of the shareholders shall exist when the holders of
forty per centum of the outstanding shares entitled to vote are represented
either in person or by proxy. At any duly constituted meeting, or at any
adjournment thereof, the affirmative vote of the majority of the shares
represented at the meeting and entitled to vote on the subject matter shall be
the act of the shareholders, unless a greater vote is required by law, by the
Articles of Incorporation or by these By-laws. The holders of a majority of the
voting shares represented at a meeting may adjourn such meeting to another time
or place despite the absence of a quorum.
Section 5. Ballots. All elections by shareholders shall be by ballot.
4
<PAGE>
Section 6. Proxies. A shareholder may vote either in person or by a proxy
which such shareholder has duly executed in writing, or by any other method
permitted by the Official Code of Georgia Annotated.
Section 7. Inspectors of Elections. The Board of Directors, in advance of
any shareholders' meeting, shall appoint an Inspector or Inspectors to act at
the meeting or any adjournment, thereof. Any vacancy may be filled by
appointment of the Board in advance of the meeting or at the meeting by the
person presiding thereat.
ARTICLE II
Directors
Section l. Power of Directors. The Board of Directors shall direct the
management of the business and affairs of the Corporation and may exercise all
of the powers of the Corporation, subject to any restrictions imposed by law, by
the Articles of Incorporation or by these By-laws.
Section 2. Composition of the Board. The Board of Directors of the
Corporation shall consist of fourteen (14) natural persons of the age of
eighteen years or over. The Directors shall be divided into three classes (of at
least three directors each), as nearly equal in number of directors as possible,
with the term of each class to be three years. Each Director shall hold office
for the term for which elected, which term shall end at an Annual Meeting of
Shareholders, and until his successor shall have been elected and qualified, or
until his earlier retirement, resignation, removal from office, or death. The
authorized number of directors may be increased or decreased from time to time
by vote of a majority of the then authorized number of directors or by the
affirmative vote of the holders of at least 75% of the voting power of all
shares of the Corporation entitled to vote generally in the election of
directors, voting together as a single class; provided, however, that such
number shall not be less than nine.
Section 3. Election of Chairman of the Board and Vice Chairmen of the
Board. The Board of Directors may elect from among their number a Chairman of
the Board, and may also elect from among their number a Vice Chairman or Vice
Chairmen of the Board (referred to in these By-laws as a "Vice Chairman" or
"Vice Chairmen").
Section 4. Chairman of the Board. The Chairman of the Board (referred to
in these By-laws as the "Chairman") shall preside, when present, at all meetings
of the Board of Directors and shall have such other powers and duties as may be
conferred upon or assigned to the Chairman by the Board of Directors.
Section 5. Vice Chairmen of the Board. The Vice Chairman (or if there be
more than one Vice Chairman, the Vice Chairman designated by the Chairman) of
the Board, shall preside at meetings of the Board of Directors in the absence of
the Chairman and at meetings of the
5
<PAGE>
Shareholders in the absence of the Chief Executive Officer, and shall perform
such other duties as the Board or Chairman may assign.
Section 6. Meetings of the Board; Notice of Meetings; Waiver of Notice.
The Annual Meeting of the Board of Directors, for the purpose of electing
officers and transacting such other business as may be brought before the
meeting, shall be held each year immediately following the Annual Meeting of the
shareholders. Regular meetings shall be held at such times and places as the
Board of Directors or Committees may determine, and no notice of such regular
meetings need be given. Special meetings of the Board of Directors may be called
at any time by the Chief Executive Officer or by any two members of the
Executive Committee, and shall be called by the Chief Executive Officer or the
Secretary upon request in writing signed by two or more directors and specifying
the purpose or purposes of the meeting. Notice of the time and place of such
special meetings shall be given to each Director, in person or by first class
mail, telegraph, cablegram or telephone, or by any other means customary for
expedited business communications, at least two (2) days before the meeting.
Neither the business to be transacted at, nor the purpose of, any meeting of the
Board of Directors need be stated in the notice of such meeting.
Section 7. Quorum; Vote Requirement. One-third of the number of Directors
fixed in these By-laws at any time shall constitute a quorum for the transaction
of business at any meeting. When a quorum is present, the vote of a majority of
the Directors present shall be the act of the Board of Directors, unless a
greater vote is required by law, by the Articles of Incorporation or by these
By-laws.
Section 8. Action of Board Without Meeting. Any action required or
permitted to be taken at a meeting of the Board of Directors or any committee
thereof may be taken without a meeting if written consent, setting forth the
action so taken, is signed by all the Directors or committee members and filed
with the minutes of the proceedings of the Board of Directors or committee. Such
consent shall have the same force and effect as a unanimous affirmative vote of
the Board of Directors or committee, as the case may be.
Section 9. Committees. The Board of Directors, by resolution adopted by a
majority of all of the Directors, may designate from among its members an
Executive Committee and other committees, each composed of three (3) or more
Directors, and may fix the quorum thereof. Any committee so designated shall
serve at the pleasure of and may exercise such authority as is delegated by the
Board of Directors, provided that no committee shall have the authority of the
Board of Directors to (1) approve or propose to shareholders action required to
be approved by shareholders, (2) fill vacancies on the board of directors or on
any of its committees, (3) amend the Articles of Incorporation, (4) adopt,
amend, or repeal By-laws, or (5) approve a plan of merger not requiring
shareholder approval.
Section l0. Executive Committee. The Executive Committee shall consist of
the Chairman and the President and such other Directors as are designated from
time to time by the Board of Directors. The Chief Executive Officer may
designate an Alternate Chairman who shall preside during the absence or
disability of the Chief Executive Officer. The Executive
6
<PAGE>
Committee shall, except as otherwise provided herein, by law or by resolution of
the Board of Directors, have all the authority of the Board of Directors during
the intervals between the meetings of the Board of Directors.
Section 11. Vacancies. A vacancy occurring in the Board of Directors by
reason of the removal of a Director by the shareholders shall be filled by the
shareholders, or, if authorized by the shareholders, by the remaining Directors.
Any other vacancy occurring in the Board of Directors, including, without
limitation, any vacancy occurring by reason of an amendment to these By-laws
increasing the number of Directors, may be filled by the affirmative vote of a
majority of the remaining Directors, though less than a quorum of the Board of
Directors, or, if the vacancy is not so filled, or if no director remains, by
the shareholders. A Director elected to fill a vacancy shall serve for the
unexpired term of his predecessor in office or, if such vacancy occurs by reason
of an amendment to these By-laws increasing the number of Directors, until the
next election of Directors by the shareholders and the election and
qualification of the successor.
Section l2. Telephone Conference Meetings. Members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board or committee by means of telephone
conference or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this section shall constitute presence in person at such meeting.
Section l3. Removal of Directors. Subject to the rights of the holders of
any series of Preferred Stock then outstanding, any director, or all directors,
may be removed from office at any time, with cause, only by the affirmative vote
of the holders of at least 75% of the voting power of all the shares of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class.
ARTICLE III
Officers
Section l. Executive Structure. The officers of the Corporation shall be
elected by the Board of Directors and shall consist of a Chairman of the Board,
if there be one, a President, a Vice Chairman or Vice Chairmen of the Board, if
there be any and if elected as an officer or officers of the Corporation, such
number of Executive Vice Presidents and Vice Presidents as the Board of
Directors shall from time to time determine, a Secretary, a Treasurer, a
Controller and such other officers or assistant officers as may be elected or
appointed by the Board of Directors. The Board shall designate either the
Chairman or the President as the Chief Executive Officer of the Corporation and
may designate a Chief Operating Officer. Each officer shall hold office for the
term for which such officer has been elected or appointed and until such
officer's successor has been elected or appointed and has qualified, or until
such officer's earlier resignation, removal from office, or death. Any two or
more
7
<PAGE>
offices may be held by the same person, except that neither the Chairman nor the
President shall serve as Secretary or Assistant Secretary.
Section 2. Chief Executive Officer. The Chief Executive Officer shall,
under the direction of the Board of Directors, have responsibility for the
general direction of the Corporation's business, policies and affairs. The Chief
Executive Officer shall preside, when present, at all meetings of the
shareholders and at all meetings of the Executive Committee. The Chief Executive
Officer shall have such other authority and perform such other duties as usually
appertain to the chief executive office in business corporations or as are
provided by the Board of Directors. The Chief Executive Officer shall be
empowered at any time and from time to time to issue and promulgate rules,
regulations and directives relating to the conduct of the business and affairs
of the Corporation, and the Secretary of the Corporation shall maintain a record
of such rules, regulations and directives.
Section 3. Chief Operating Officer. If there be one, the Chief Operating
Officer shall, under the direction of the Chief Executive Officer, have direct
superintendence of the Corporation's business, policies, properties and affairs.
The Chief Operating Officer shall have such further powers and duties as from
time to time may be conferred upon or assigned to such officer by the Board of
Directors or the Chief Executive Officer. In the absence or disability of the
Chief Executive Officer, the Chief Operating Officer shall perform the duties
and exercise the powers of the Chief Executive Officer.
Section 4. President. The President shall have such powers and duties as
from time to time may be conferred upon or assigned to the President by the
Board of Directors or the Chief Executive Officer (if the President is not the
Chief Executive Officer).
Section 5. Vice Presidents. The Executive Vice Presidents, if any, and
Vice Presidents shall have such powers and duties as from time to time may be
conferred upon or assigned to them by the Board of Directors, the Chairman, or
the President. An Executive Vice President or other officer may be responsible
for the assignment of duties to subordinate Vice Presidents.
Section 6. Secretary. The Secretary shall send all requisite notices of
meetings of the shareholders, the Board of Directors, and the Executive
Committee. The Secretary shall attend all meetings of the shareholders, the
Board of Directors, and the Executive Committee, and shall keep a true and
faithful record of the proceedings. The Secretary shall have custody of the seal
of the Corporation, and of all records, books, documents, and papers of the
Corporation, except those required to be in the custody of the Treasurer or the
Controller and except such subsidiary records as may be kept in departmental
offices. The Secretary shall sign and execute all documents which require his
signature and execution, and shall affix the seal of the Corporation thereto and
attest the same when necessary. Assistant Secretaries shall have such of the
authority and perform such of the duties of the Secretary as may be provided in
these By-laws or assigned to them by the Board of Directors or by the Secretary.
During the Secretary's absence or inability, the Secretary's authority and
duties shall be possessed by such Assistant Secretary or Assistant Secretaries
as the Board of Directors, or the Secretary with the approval of the Chairman,
or the President may designate.
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Section 7. Treasurer. The Treasurer shall receive and have charge of all
funds and securities of the Corporation. The Treasurer shall deposit the funds
to the credit of the Corporation in such depositories as shall be approved from
time to time by the Chairman, the President, the Executive Vice President or
Vice President responsible for financial matters, or the Treasurer, and the
Treasurer shall disburse the same only on written approval of the Controller or
the Controller's duly authorized representative, or under such other rules and
regulations and upon such other disbursement instruments as the Chairman or the
Executive Vice President or Vice President responsible for financial matters may
adopt or authorize. The Treasurer shall keep full and regular books showing all
the Treasurer's receipts and disbursements. Assistant Treasurers shall have such
of the authority and perform such of the duties of the Treasurer as may be
provided in these By-laws or assigned to them by the Board of Directors or by
the Treasurer. During the Treasurer's absence or inability, the Treasurer's
authority and duties shall be possessed by such Assistant Treasurer or Assistant
Treasurers as the Board of Directors, or the Treasurer upon the approval of the
Chairman, the President or the officer responsible for financial matters, may
designate. The Treasurer and each Assistant Treasurer shall give such security
for the faithful performance of such officer's duties as the Board of Directors
may require.
Section 8. Controller. The Controller shall be the principal accounting
officer of the Corporation and shall have custody and charge of all books of
account, except those required by the Treasurer in keeping record of the work of
the Treasurer's office, and shall have supervision over such subsidiary
accounting records as may be kept in departmental offices. The Controller shall
have access to all books of account, including the records of the Secretary and
the Treasurer, for obtaining information necessary to verify or complete the
records of the Controller's office. The Controller or a duly authorized
representative shall certify to the authorizations and approvals pertaining to
all vouchers; and no payments from the general cash shall be made by the
Treasurer except on vouchers bearing the written approval of the Controller or
an authorized representative, unless the Board of Directors, the Chairman or
other officer responsible for financial matters provides otherwise. Assistant
Controllers shall have such of the authority and perform such of the duties of
the Controller as may be provided in these By-laws or assigned to them by the
Board of Directors or by the Controller. During the Controller's absence or
inability, the Controller's authority and duties shall be possessed by such
Assistant Controller or Assistant Controllers as the Board of Directors, or the
Controller upon the approval of the Chairman, the President or other officer
responsible for financial matters may designate.
Section 9. Other Duties and Authority. Each officer, employee and agent of
the Corporation shall have such other duties and authority as may be conferred
upon such officer by the Board of Directors or delegated to such officer by the
Chairman, the President or the responsible officer.
Section 10. Removal of Officers. Any officer may be removed at any time by
the Board of Directors with or without cause, and such vacancy may be filled by
the Board of Directors.
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Section 11. Appointed Officers. The Board of Directors, the Chairman, the
President, or the officer responsible for administrative matters may, from time
to time, appoint individuals to serve in such designated capacities for the
Corporation (such as Vice President, Assistant Vice President, Assistant
Secretary, Assistant Treasurer or Assistant Controller) as may be deemed
appropriate. Each appointed officer shall perform such duties and shall have
such authority as shall be delegated to such officer from time to time by the
officer of the Corporation to whom such appointed officer is responsible. Any
duty or authority delegated to any appointed officer pursuant to this Section
may be withdrawn, with or without cause, at any time by the Board of Directors,
the Chairman, the President, the officer responsible for administrative matters
or such officer delegating such duty or authority to the appointed officer.
ARTICLE IV
Stock
Section l. Issuance of Stock, Stock Certificates. The Board of Directors,
and any duly constituted committee of the Board of Directors, shall have the
power and authority to issue shares of capital stock of the Corporation,
provided, however, that the stock issued by a committee of the Board of
Directors shall be issued in connection with a purpose which is within the
authority delegated to such committee by the full Board of Directors. The shares
of stock of the Corporation may be represented by certificates in such form as
may be approved by the Board of Directors, which certificates shall be signed or
signed by facsimile by the Chairman or President and the Secretary or Treasurer
or an Assistant Secretary or Assistant Treasurer of the Corporation; and which
shall be sealed with the seal of the Corporation or a facsimile thereof.
Notwithstanding the foregoing provisions regarding share certificates, officers
of the Corporation may provide that some or all of any or all classes or series
of the Corporation's common or any preferred shares may be uncertificated
shares. No share certificate shall be issued until the consideration for such
shares has been fully paid or otherwise provided for.
Section 2. Transfer of Stock. Shares of stock of the Corporation shall be
transferred on the books of the Corporation upon surrender to the Corporation of
certificates representing the shares to be transferred accompanied by an
assignment in writing of such shares properly executed by the shareholder of
record or such shareholder's duly authorized attorney-in-fact and with all taxes
on the transfer having been paid. The Corporation may refuse any requested
transfer until furnished evidence satisfactory to it that such transfer is
proper. The Board of Directors may make such rules concerning the issuance,
transfer and registration of stock, the cancellation of stock and certificates,
and requirements regarding the replacement of lost, destroyed or wrongfully
taken stock certificates (including any requirement of an indemnity bond prior
to issuance of any replacement certificate) as it deems appropriate.
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Section 3. Registered Shareholders. The Corporation may deem and treat the
holder of record of any stock as the absolute owner for all purposes and shall
not be required to take any notice of any right or claim of right of any other
person.
Section 4. Record Date. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other purpose, the Board of
Directors of the Corporation may fix in advance a date as the record date for
any such determination of shareholders, such date in any case to be not more
than fifty days and, in the case of a meeting of shareholders, not less than ten
days prior to the date on which the particular action requiring such
determination of shareholders is to be taken.
ARTICLE V
Business Combinations
Section 1. All of the requirements within Part 2 of Article 11 of Chapter
2 of Title 14 of the Official Code of Georgia Annotated, in the form enacted and
amended by Georgia Laws, l985, Page 527, as amended, shall be applicable to
business combinations of the Corporation.
Section 2. All of the requirements within Part 3 of Article 11 of Chapter
2 of Title 14 of the Official Code of Georgia Annotated, in the form enacted by
Georgia Laws, 1988, Page 158, as amended, shall be applicable to business
combinations of the Corporation.
ARTICLE VI
Seal
The common seal of the Corporation shall bear within concentric circles
the words "BellSouth Corporation" with the word "Seal" in the center. The seal
and its attestation may be by facsimile.
ARTICLE VII
Indemnity
Section 1. Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (including any action
by or in the right of the Corporation), by reason of the fact that such person
is or was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, shall be indemnified by
the Corporation against expenses (including reasonable attorney's fees),
judgments, fines and amounts paid in
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settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding, to the maximum extent permitted by, and in the
manner provided by, the Georgia Business Corporation Code.
Section 2. The Board of Directors is expressly authorized on behalf of the
Corporation to enter indemnity agreements between the Corporation and any
director or officer of the Corporation, or any person serving at the request of
the Corporation as a director, officer, trustee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust or
enterprise, in form and content acceptable to the Board and substantially in the
form of agreement submitted to and approved by the shareholders of the
Corporation. Such agreements may provide that the Corporation shall indemnify
such persons and provide for procedural rights intended to assure that
appropriate indemnification is available against expenses (including reasonable
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such persons in connection with such action, suit or
proceeding. No indemnification may be made for liability (i) for any
appropriation, in violation of a director's duties, of any business opportunity
of the Corporation, (ii) for acts or omissions not in good faith or constituting
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 person derived an improper
personal benefit.
ARTICLE VIII
Amendment of By-laws
The Board of Directors shall have the power to alter, amend or repeal the
By-laws or adopt new by-laws, but any by-laws adopted by the Board of Directors
may be altered, amended or repealed and new by-laws adopted by the shareholders.
The shareholders may prescribe that any by-law or by-laws adopted by them,
including, without limitation, a by-law establishing the number of Directors,
shall not be altered, amended or repealed by the Board of Directors. Action by
the Board of Directors with respect to the By-laws shall be taken by an
affirmative vote of a majority of all of the Directors then in office. Action by
the shareholders with respect to the By-laws shall be taken by an affirmative
vote of a majority of the shares entitled to vote at an election of Directors.
Notwithstanding the preceding sentence, the affirmative vote of the
holders of at least 75% of the voting power of all shares of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class, shall be required to amend or repeal, or adopt any provision
inconsistent with, Section 2 or l3 of Article II of these By-laws, or this
sentence.
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Exhibit 10(m)
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BELLSOUTH SPLIT-DOLLAR LIFE INSURANCE PLAN
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As Amended and Restated
Effective as of August 31, 1998
1. PURPOSE
The purpose of the BellSouth Split-Dollar Life Insurance Plan (the "Plan")
is to provide a split-dollar insurance arrangement under which BellSouth
Corporation and its subsidiaries and affiliates can assist key employees
in acquiring and financing life insurance coverage. This Plan incorporates
the provisions of the BellSouth Corporation Executive Life Insurance Plan
and the BellSouth Corporation Senior Manager Life Insurance Plan, as
amended as of the effective date of this Plan (the "Prior Plans"), and, as
of such effective date, shall be deemed to constitute a complete
restatement of both Prior Plans, as amended (except to the extent
otherwise specifically provided in Section 3.01 of this Plan).
2. DEFINITIONS
For purposes of this Plan, the following terms have the meanings set forth
below:
2.01 "Agreement" means the agreement executed between the Employer and a
Participant implementing the terms of this Plan, substantially in
the form attached hereto as Exhibit "A".
2.02 "Assignment" means the collateral assignment executed by the Policy
Owner, substantially in the form attached hereto as Exhibit "B".
2.03 "Coverage Amount" means the face amount of the insurance death
benefit provided to a Participant under the Plan, as specified in
the Participant's Agreement.
2.04 "Disability" means that the Participant is receiving disability
benefits under any long-term disability plan sponsored by the
Employer or an affiliated entity.
2.05 "Effective Date" means the effective date of the Plan, which is
January 1, 1998.
2.06 "Employee" means an employee or former employee of the Employer who
is eligible to participate in the Plan.
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2.07 "Employer" means BellSouth Corporation and any subsidiary or
affiliate of BellSouth Corporation which is authorized by the Plan
Administrator to participate in this Plan.
2.08 "Employer Account" means, with respect to a Participant's Policy, a
bookkeeping entry maintained by the Employer pursuant to Section 6
of the Plan, equal to the lesser of (1) the cash value of the
Policy, or (2) the amount of Policy premiums paid by the Employer
(and not collected from the Participant). With respect to a
Replacement Policy, the amount of Policy premiums paid by the
Employer shall be deemed to include the total of all such premiums
paid on the Replacement Policy and the Replaced Policy, reduced by
an amount equal to that portion of the Replaced Policy Cash Value,
if any, paid to the Employer at the time the Replacement Policy is
issued.
2.09 "Employer Premium" means, with respect to a Participant's Policy,
the total Policy premium payable for the Policy Year by the Company
as specified in the Participant's Agreement, less the portion of the
premium to be paid by the Participant pursuant to Section 5.01 of
the Plan.
2.10 "Enrollment Age" means the Participant's age at the time of
enrollment in the Prior Plans as to the Participant's initial
Coverage Amount, and it means the Participant's age at a subsequent
enrollment for an increased Coverage Amount as to the increased
Coverage Amount; provided, however, that with respect to a
Replacement Policy, the age at enrollment shall mean the age at the
time of enrollment for the Replaced Policy.
2.11 "Insurance Cost" means, with respect to a Participant, the annual
cost for the Participant's Coverage Amount determined pursuant to
the Insurance Cost schedule maintained by the Plan Administrator.
The Insurance Cost for a Participant shall be determined as of the
time of the Participant's enrollment in the Prior Plan(s), based on
the Participant's Coverage Amount and Enrollment Age, and shall not
change thereafter. A smoker rate shall be used to determine the
Insurance Cost for any Participant who smoked cigarettes at any time
during the twelve month period immediately preceding the
Participant's enrollment; a nonsmoker rate shall be used for all
other Participants. However, notwithstanding the previous sentence,
if a Replacement Policy is issued for a Participant and the
Participant qualifies as a nonsmoker for the Replacement Policy, the
nonsmoker rate shall thereafter be used to determine the Insurance
Cost for the Participant.
If a Participant's coverage is in effect for a period of less than
twelve (12) months during any Policy Year, the Participant's
Insurance Cost for that
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year shall be determined by multiplying the annual cost as
determined from the insurance cost schedule by a fraction, the
numerator of which is the number of full months that the coverage is
in effect and the denominator of which is twelve (12).
2.12 "Insurer" means, with respect to a Participant's Policy, the
insurance company issuing the insurance policy or group policy
certificate on the Participant's life (or on the joint lives of the
Participant and the Participant's spouse) pursuant to the provisions
of the Plan.
2.13 "Participant" means an Employee who is participating in the Plan.
2.14 "Participant Account" means, with respect to a Participant's Policy,
a bookkeeping entry maintained by the Employer pursuant to Section 6
of the Plan, equal to the excess, if any, of the cash value of the
Policy over the Employer Account.
2.15 "Participant Premium" means, with respect to each Policy Year (or
portion thereof) for a Participant, the greater of (1) the
Participant's Insurance Cost; or (2) the one year term cost for the
Policy Year (or portion thereof) determined based on the
Participant's age at the beginning of the Policy Year, the Insurer's
published one year term rates in effect at the beginning of the
Policy Year, and the Participant's Coverage Amount under the Plan.
The one year term cost amount shall be determined pursuant to the
guidelines set forth in Revenue Ruling 66-110, 1966-1 C.B. 12, and
Revenue Ruling 67-154, 1967-1 C.B. 11, and shall be conclusively
determined by the Plan Administrator.
2.16 "Permanent Policy" means a Participant's Policy having cash values
which are projected to be sufficient to continue to provide death
benefit coverage at least equal to the Participant's Coverage Amount
until the policy maturity date specified in the Participant's Policy
(determined without regard to any Policy rider which extends the
maturity date beyond the originally scheduled policy maturity date),
and which is projected to have a cash accumulation value equal to at
least ninety-five percent (95%) of the Policy Coverage Amount at the
maturity date specified in such Policy, with no further premium
payments, following a withdrawal by the Employer of all amounts to
which it is entitled pursuant to Section 8.02e or
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Section 8.03. A determination as to whether a Policy is at a given
time a Permanent Policy shall be made by the Plan Administrator, and
shall be based on Policy projections provided by the Insurer or its
agent utilizing the Policy's then current mortality rates and Policy
expenses, and the following Policy interest crediting rates. For the
Policy Year of the Employer withdrawal made pursuant to Section
8.02e or Section 8.03, the projections shall reflect the actual
Policy interest crediting rate in effect for such year (or, if such
rate is not known when the determination is made, the actual rate in
effect for the preceding Policy Year). For each of the ten (10)
succeeding Policy Years, the projections shall reflect that rate
decreased ratably such that the rate in the tenth Policy Year
following the Policy Year in which the Employer withdrawal occurs
will be five percent (5%). For all successive Policy Years, the
projections shall reflect a five percent (5%) Policy interest
crediting rate. Notwithstanding the foregoing, if the actual Policy
interest crediting rate in effect when the determination is made is
less than five percent (5%), the projections shall reflect such
lower rate for the Policy Year of the Employer withdrawal and all
subsequent Policy Years.
2.17 "Plan" means the BellSouth Split-Dollar Life Insurance Plan. Except
as otherwise provided in Section 3.01, with respect to each
Participant who participated in the BellSouth Corporation Executive
Life Insurance Plan, the Plan shall be construed and interpreted as
a restatement of the provisions of such plan, as amended; and, with
respect to each Participant who participated in the BellSouth
Corporation Senior Manager Life Insurance Plan, the Plan shall be
construed and interpreted as a restatement of such plan, as amended.
2.18 "Plan Administrator" means the Chief Executive Officer of BellSouth
Corporation 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 of Directors of BellSouth Corporation
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.
2.19 "Policy" means the life insurance coverage acquired on the life of
the Participant (or on the joint lives of the Participant and the
Participant's spouse) by the Participant or other Policy Owner,
which may be issued as a separate insurance policy or a certificate
under a group policy.
2.20 "Policy Owner" means the Participant or that person or entity to
whom the Participant has assigned his interest in the Policy. In the
case of a Replacement Policy issued to replace a Policy for which
the Policy Owner is other than the Participant, the Policy Owner of
the Replacement Policy shall be the same as the Policy Owner of the
Policy being replaced, unless elected otherwise by such Policy
Owner.
2.21 "Policy Year" means the twelve month period (and each successive
twelve month period) beginning on the effective date of the
Agreement.
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2.22 "Premium Payment Years" means, with respect to a Participant's
Policy, the number of consecutive Policy Years (including, for a
Replacement Policy, the number of Policy Years during which the
Replaced Policy was in force), beginning with the first Policy Year,
during which the Employer is required to pay a Policy premium, as
specified in the Participant's Agreement.
2.23 "Replaced Policy" means a Policy which has been replaced by a
Replacement Policy. If a Participant's Policy has been replaced more
than one time, then the term Replaced Policy shall include all prior
Policies.
2.24 "Replaced Policy Cash Value" means the cash value of the Replaced
Policy on the Effective Date.
2.25 "Replacement Policy" means a Policy issued to replace a Policy
previously issued under the Plan.
2.26 "Retirement" means a termination of the Participant's employment
with the Employer under circumstances where the Participant is
immediately eligible to receive pension benefits under the
Supplemental Executive Retirement Plan (SERP) maintained by the
Employer or one of its subsidiaries.
2.27 "Single Life Coverage" means life insurance coverage on the life of
the Participant.
2.28 "Survivorship Coverage" means life insurance coverage on the lives
of the Participant and the Participant's spouse, with the life
insurance death benefit to be payable at the death of the last
survivor of the Participant and the Participant's spouse.
2.29 "Terminated for Cause" means, with respect to a Participant, the
termination of the Participant's employment with the Employer due
to: (i) fraud, misappropriation, embezzlement, or intentional
material damage to the property or business of the Employer; (ii)
commission of a felony involving moral turpitude of which the
Participant is finally adjudicated guilty; or (iii) continuance of
either willful and repeated failure or grossly negligent and
repeated failure by the Participant to materially perform his
duties.
3. ELIGIBILITY
3.01 General. Each Employee with a Prior Plan Agreement in effect on the
day preceding the Effective Date shall be eligible to participate in
the Plan,
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provided that the Employee (and any other appropriate party, such as
the Employee's spouse or a Policy Owner other than the Employee, as
determined by the Plan Administrator) executes an Agreement
consenting to the terms of this Plan, as amended, and completes such
other forms as the Plan Administrator shall require. Any Employee
eligible to participate who fails to execute (or secure execution
of) an enrollment form consenting to the terms of this Plan, as
amended, within the time period prescribed by the Plan
Administrator, shall not be eligible for coverage under the Plan,
but shall remain subject to the terms and conditions of the Prior
Plan(s) in which such Employee participates as in effect on the day
preceding the Effective Date, as amended thereafter from time to
time.
3.02 Type of Coverage. The type(s) of coverage for a Participant on the
Effective Date shall be the type(s) of coverage in place on the day
preceding the Effective Date pursuant to the Participant's
Agreement(s) under the Prior Plan(s). Provided, however, that the
Policy Owner may make a one-time election to exchange Survivorship
Coverage for Single Life Coverage (equal to fifty percent (50%) of
the Participant's Survivorship Coverage Amount), or to exchange
Single Life Coverage for Survivorship Coverage (equal to two hundred
percent (200%) of the Participant's Single Life Coverage Amount),
subject to any proof of insurability required by the Insurer. Such
an election must be made within the time period prescribed by the
Plan Administrator. If an unmarried Participant enrolls for Single
Life Coverage and subsequently marries, then, subject to the
approval of the Plan Administrator, the Participant (or other Policy
Owner) shall have the right to make an election, exercisable no
later than one hundred eighty (180) days following the marriage, to
convert (subject to any proof of insurability required by the
Insurer) the Single Life Coverage to Survivorship Coverage (with the
Coverage Amount equal to two hundred percent (200%) of the Single
Life Coverage Amount). If a married Participant enrolls for
Survivorship Coverage and subsequently divorces, then, subject to
the approval of the Plan Administrator, the Participant (or other
Policy Owner) shall have the right to make an election, exercisable
no later than one hundred eighty (180) days following the
finalization of the divorce, to convert (subject to any proof of
insurability required by the Insurer) the Survivorship Coverage to
Single Life Coverage (with the Coverage Amount equal to fifty
percent (50%) of the Survivorship Coverage Amount). Under no other
circumstances shall a Participant (or other Policy Owner) have any
right to change an election as to type of coverage after the
coverage becomes effective. Any Insurer charges or tax liability
resulting from a conversion shall be borne by the Participant or
other Policy Owner.
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4. AMOUNT OF COVERAGE
The Coverage Amount for a Participant shall be the amount specified in the
Participant's Agreement.
5. PAYMENT OF PREMIUMS; PAYMENT OF CERTAIN TAXES
5.01 Participant Premium Payments. A Participant shall pay the
Participant Premium for each Policy Year which is a Premium Payment
Year for the Participant. The amount shall be paid by the
Participant to the Employer by payroll (or retirement income)
deductions of equal installments during the Policy Year, or in such
other manner as may be agreed to between the Plan Administrator and
the Participant. The Employer shall pay the Participant Premium
amount to the Insurer, and can do so as collected from the
Participant or can advance payments to the Insurer for a Policy Year
at any time during the Policy Year or up to thirty (30) days in
advance of the Policy Year. If a Participant terminates employment
with the Employer, and the Employer has made such an advance payment
of the Participant Premium to the Insurer, the Employer may withhold
any uncollected portion of the advanced Participant Premium from any
amount payable to the Participant by the Employer to the extent
permitted by law. Notwithstanding the other provisions of this
paragraph, no Participant Premium shall be required with respect to
Survivorship Coverage after the death of the Participant, and no
Participant Premium shall be required after termination of the
Participant's Agreement pursuant to Section 8.01.
5.02 Employer Premium Payments. The Employer shall pay the Employer
Premium for a Participant's Policy within thirty (30) days of the
beginning of each Policy Year which is a Premium Payment Year.
However, no Employer Premium shall be required: (1) after the
Participant's Agreement terminates pursuant to Section 8.01; or, (2)
for a Policy Year if the Employer withdrawal and release of
Assignment under Section 8.03 would have occurred at the end of the
prior Policy year but for the requirement in Section 8.03 that the
Policy not constitute a Modified Endowment Contract following such
withdrawal. Also, if the payment of the Employer Premium for a
Policy year would cause the Participant's Policy to constitute a
Modified Endowment Contract (as such term is defined in Section
7702A of the Internal Revenue Code), then the Employer Premium
amount for such Policy year shall be reduced to the largest such
amount that can be paid without causing the Policy to constitute a
Modified Endowment Contract. The Employer may, but shall not be
required to, make additional premium payments with respect to a
Participant's Policy after the last Premium Payment Year.
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5.03 Additional Employer Payments.
a. If, during any year which is not a Premium Payment Year,
participation in the Plan results in the recognition of income
for tax purposes by the Participant for the economic benefit
to the Participant as described in, e.g., Revenue Ruling
64-328, 1964-2 C.B.11, the Employer shall pay to the
Participant an amount determined by the Plan Administrator
which is designed to approximate the (1) sum of the total
federal and state income taxes and additional payroll taxes
which would be payable by the Participant at the highest
marginal rate provided for under applicable federal income tax
laws, and at the highest marginal rate provided for under
applicable state income tax laws for the state of the
Participant's tax domicile, on the additional income so
recognized for the year, plus (2) the total federal and state
income taxes and additional payroll taxes which would be
payable by the Participant on the payment described in clause
(1). Any payment to be made under this subsection a. shall be
made no later than April 1 of the year following the year to
which the payment relates.
b. If, with respect to Survivorship Coverage after the death of
the Participant, participation in the Plan results in the
recognition of income for tax purposes by the Participant's
spouse or other Policy Owner for the economic benefit to the
Participant's spouse or other Policy Owner as described in,
e.g., Revenue Ruling 64-328, 1964-2 C.B.11, the Employer shall
pay to the Participant's spouse or other Policy Owner an
amount determined by the Plan Administrator which is designed
to approximate the total federal and state income taxes which
would be payable by the Participant's spouse or other Policy
Owner at the highest marginal rate provided for under
applicable federal income tax laws, and the highest marginal
rate provided for under applicable state income tax laws for
the state of the tax domicile of the Participant's spouse or
other Policy Owner, on the income so recognized. Any payment
to be made under this subsection b. shall be made no later
than April 1 of the year following the year to which the
payment relates.
c. If the termination of the Employer's interest in a
Participant's Policy pursuant to Section 8.03 of the Plan
results in the recognition of income for tax purposes by the
Participant, the Employer shall pay to the Participant an
amount determined by the Plan Administrator which is designed
to approximate the total federal and state income taxes which
would be payable by the Participant at the highest
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marginal rate provided for under applicable federal income tax
laws, and at the highest marginal rate provided for under
applicable state income tax laws for the state of the
Participant's tax domicile, attributable to such termination.
Such payment shall be made immediately following the
termination of the Employer's interest in the Policy or, if
later, at such time as a determination is made that such a tax
is payable.
d. For purposes of this Section 5.03, a tax shall be deemed
payable or income shall be deemed recognized, if either (i) it
is finally determined by the Internal Revenue Service, or (ii)
an opinion is given by the Employer's counsel, that the tax is
payable.
e. Any amount to be paid to a Participant, a Participant's
spouse, or other Policy Owner under this Section, and the
amounts payable, shall be conclusively determined by the Plan
Administrator, based on generally applicable tax rates and not
based upon the unique tax situation of each Participant,
Participant's spouse, or other Policy Owner.
6. ACCOUNTS
With respect to each Policy covered by an Agreement made under this Plan,
the Employer shall maintain bookkeeping entries reflecting the Employer
Account and Participant Account values.
7. POLICY OWNERSHIP
7.01 Ownership. Except as otherwise provided in this Plan, the Policy
Owner shall be the sole and exclusive owner of a Participant's
Policy and shall be entitled to exercise all of the rights of
ownership including, but not limited to, the right to designate the
beneficiary or beneficiaries to receive payment of the portion of
the death benefit under the Policy equal to the Coverage Amount, and
the right to assign any part or all of the Policy Owner's interest
in the Policy (subject to the Employer's rights, the terms and
conditions of the Assignment specified in Section 7.02 of the Plan,
and the terms and conditions of this Plan) to any person, entity or
trust by the execution of a written instrument delivered to the
Employer.
7.02 Employer's Rights. In exchange for the Employer's agreement to pay
the amounts described in Sections 5.02 and 5.03 of this Plan, the
Policy Owner shall execute an Assignment to the Employer of the
rights provided to the Employer under this Plan. The Employer shall
have the right to direct the Policy Owner in writing to take any
action required consistent with these rights, and upon the receipt
of such written direction from the
-9-
<PAGE>
Employer, the Policy Owner shall promptly take such action as is
necessary to comply therewith. The Employer agrees that it shall not
exercise any rights assigned to it in the Assignment in any way that
might impair or defeat the rights and interest of the Policy Owner
under this Plan. The Employer shall have the right to assign any
part or all of its interest in the Policy (subject to the Policy
Owner's rights and the terms and conditions of this Plan) to any
person, entity or trust by the execution of a written instrument
delivered to the Policy Owner.
7.03 Delivery and Possession of Policy. Any Policy issued pursuant to an
Agreement under the Plan shall be delivered by the Insurer directly
to the Employer, and the Employer shall accept delivery of any such
Policy on behalf of the Participant or other Policy Owner and shall
have the authority to execute any forms or procedures required by
the Insurer in order to complete the issue and delivery of such
Policy. Thereafter, the Employer shall keep possession of the Policy
as long as there is an Assignment in effect with respect to the
Policy. The Employer agrees to make the Policy available to the
Policy Owner or to the Insurer from time to time for the purposes of
endorsing or filing any change of beneficiary on the Policy or
exercising any other rights as the owner of the Policy, but the
Policy shall promptly be returned to the Employer.
7.04 Policy Loans. Except as otherwise specifically provided for in
Section 8 of this Plan, neither the Employer nor the Policy Owner
may borrow against the Policy cash values.
7.05 Withdrawals and Surrender. Except as otherwise specifically provided
for in Section 8 of this Plan, neither the Employer nor the Policy
Owner may withdraw Policy cash values or surrender all or a portion
of the Policy. Provided, however, that a cancellation or exchange of
a Replaced Policy in connection with the acquisition of a
Replacement Policy shall not be deemed a withdrawal from or
surrender of the Replaced Policy.
8. TERMINATION OF AGREEMENT
8.01 Termination Events. Notwithstanding anything herein to the contrary,
the Participant's Agreement, and the Employer's obligation to pay
premiums with respect to the Participant's Policy acquired pursuant
to the Agreement, shall terminate upon the first to occur of any of
the following events:
a. Termination of employment of the Participant with the Employer
prior to the Participant's death for reasons other than
Retirement or Disability; or upon termination of a disabled
Participant's Disability
-10-
<PAGE>
prior to the Participant's death for reasons other than
Retirement or return to active status.
b. Termination of the Participant's Agreement by mutual agreement
of the Participant and the Employer.
c. A unilateral election by the Participant to terminate the
Participant's Agreement; provided, however, that such an
election may be made by a Participant only within sixty (60)
days following the end of the last Premium Payment Year for
the Participant's Policy.
d. The written notice by the Employer to the Participant
following a resolution by the Board of Directors of BellSouth
Corporation to terminate this Plan and all Agreements made
under the Plan.
e. As to Single Life Coverage only, the death of the Participant.
f. As to Survivorship Coverage only, the death of the last
survivor of the Participant and the Participant's spouse.
g. After the release of Assignment pursuant to Section 8.03.
8.02 Disposition of Policy
a. In the event of a termination of a Participant's Agreement
under Section 8.01a or b of the Plan, the Policy Owner shall
be entitled to acquire the Employer's rights under the
Participant's Policy by paying to the Employer an amount equal
to the Employer Account; alternatively, the Policy Owner can
require the Employer to withdraw a portion of the cash values
from the Participant's Policy, partially surrender the Policy,
or borrow a portion of the cash values from the Participant's
Policy, with the amount to be specified by the Policy Owner,
and the Policy Owner's required payment to the Employer under
this Section shall thereby be reduced to an amount equal to
the excess of the Employer Account over the amount withdrawn,
received upon partial surrender, or borrowed by the Employer
(for these purposes, the amount withdrawn, received upon
partial surrender, or borrowed shall refer to the amount
actually received by the Employer after the application of any
charges, such as surrender charges, applicable to the
withdrawal, partial surrender, or borrowing). The Policy Owner
may exercise this right to acquire the Employer's interest in
the Policy by so notifying the Employer within ninety (90)
days after an event of termination under Section 8.01a or b of
this Plan has occurred.
-11-
<PAGE>
Within thirty (30) days after receipt of such notice, the
Employer shall make any required withdrawal, partial
surrender, or policy loan and the Policy Owner shall pay the
Employer the applicable payment, if any. Upon receipt of
payment from the Policy Owner, or immediately following the
withdrawal, partial surrender, or policy loan if no payment is
required, the Employer shall release the Assignment and the
Policy Owner shall have all rights, title, and interest in the
Policy free of all provisions and restrictions of the
Assignment, the Agreement and this Plan.
b. Notwithstanding the provisions of Section 8.02a, if the
Participant is Terminated for Cause by the Employer, then the
Policy Owner shall have no right to acquire the Employer's
interest in the Policy.
c. If the Policy Owner fails to exercise his right to acquire the
Employer's interest in the Policy pursuant to Section 8.02a or
is precluded from exercising such right pursuant to Section
8.02b, the Policy Owner shall transfer title to the Policy to
the Employer, free of all provisions and restrictions of the
Assignment, the Participant's Agreement and this Plan.
d. In the event of a termination of a Participant's Agreement
pursuant to the Participant's election under Section 8.01c,
the Employer shall receive from the Participant's Policy an
amount equal to the Employer Account, with such amount to be
received through a withdrawal, partial surrender, policy loan,
or some combination thereof, as determined by the Employer.
Immediately thereafter, the Employer shall release the
Assignment and the Policy Owner shall have all rights, title
and interest in the Policy free of all provisions and
restrictions of the Assignment, the Participant's Agreement,
and this Plan.
e. Notwithstanding the provisions of Section 2.08 to the
contrary, in the event of a termination of a Participant's
Agreement under Section 8.01d, prior to the application of
Section 8.02, the Employer Account shall be reduced to an
amount equal to the excess, if any, of the cash values of the
Policy over the amount of cash value necessary in order for
such Policy to immediately qualify as a Permanent Policy after
withdrawal of such excess amount. The Employer shall receive
from the Policy the reduced Employer Account value and, with
such amount to be received through a withdrawal, partial
surrender, policy loan, or some combination thereof, as
determined by the Employer, and shall, within thirty (30) days
of the Plan termination, release the
-12-
<PAGE>
Assignment and the Policy Owner shall have all rights, title,
and interest in the Policy free of all provisions and
restrictions of the Assignment, the Agreement and this Plan.
8.03 Release of Assignment. At the end of each Policy Year for a
Participant's Policy, the Plan Administrator shall determine whether
a withdrawal from the Policy by the Employer of an amount equal to
the Employer Account, and a release of the Assignment, shall occur
with respect to the Participant's Policy. Such withdrawal and
release shall be made within ninety (90) days after the end of the
first Policy Year as of the end of which: (1) the Participant's
Policy would qualify as a Permanent Policy following such withdrawal
by the Employer; and, (2) the Participant's Policy would not
constitute a Modified Endowment Contract (as such term is defined in
Section 7702A of the Internal Revenue Code) following such
withdrawal. The Employer withdrawal shall be made though a
withdrawal, partial surrender, or policy loan, or some combination
thereof, as determined by the Employer. Immediately after receiving
the proceeds of the withdrawal, partial surrender, or policy loan,
the Employer shall release the Assignment and the Policy Owner shall
have all rights, title and interest in the Policy free of all
provisions and restrictions of the Assignment, the Participant's
Agreement and this Plan.
8.04 Allocation of Death Benefit. In the event of a termination under
Section 8.01e or 8.01f of the Plan, the death benefit under the
Participant's Policy shall be divided as follows:
a. The beneficiary or beneficiaries of the Policy Owner shall be
entitled to receive an amount equal to the Coverage Amount.
b. The Employer shall be entitled to receive the balance of the
death benefit.
8.05 Employer Undertakings. Upon the death of the Participant (or, in the
case of Survivorship Coverage, the death of the last survivor of the
Participant and the Participant's spouse) while the Participant's
Agreement is in force, the Employer agrees to take such action as
may be necessary to obtain payment from the Insurer of the death
benefit to the beneficiaries, including, but not limited to,
providing the Insurer with an affidavit as to the amount to which
the Employer is entitled under the Agreement and this Plan.
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<PAGE>
9. GOVERNING LAWS AND NOTICES
9.01 Governing Law. This Plan shall be governed by and construed in accordance
with the laws of the State of Georgia.
9.02 Notices All notices hereunder shall be in writing and sent by first
class mail with postage prepaid. Any notice to the Employer shall be
addressed to BellSouth Corporation at its office at 1155 Peachtree
Street, N.E., Atlanta, GA 30367-6000, ATTENTION: Human
Resources-Director Executive Benefits. Any notice to the Employee
shall be addressed to the Employee at the address following such
party's signature on his Agreement. Any party may change the address
for such party herein set forth by giving notice of such change to
the other parties pursuant to this Section.
10. NOT A CONTRACT OF EMPLOYMENT
This Plan and any Agreement executed hereunder shall not be deemed to
constitute a contract of employment between an Employee and the Employer
or a Participant and the Employer, nor shall any provision restrict the
right of the Employer to discharge an Employee or Participant, or restrict
the right of an Employee or Participant to terminate employment.
11. AMENDMENT, TERMINATION, ADMINISTRATION, CONSTRUCTION AND SUCCESSORS
11.01 Amendment. The Board of Directors of BellSouth Corporation, or its
delegate, 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. Notwithstanding
the foregoing, no modification or amendment shall be effective so as
to decrease any benefits of a Participant unless the Participant
consents in writing to such modification or amendment. Written
notice of any material modification or amendment shall be given
promptly to each Participant.
11.02 Termination. The Board of Directors of BellSouth Corporation may
terminate the Plan without the consent of the Participants or
Employees. Provided, however, in the event of a termination of the
Plan by the Employer, the Participants will have those rights
specified in Section 8.02e of the Plan.
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<PAGE>
11.03 Interpretation. As to the provisions of the Assignment, the
Agreement and the Plan, the provisions of the Assignment shall
control. As between the Agreement and the Plan, the provisions of
the Agreement shall control.
11.04 Successors. The terms and conditions of this Plan shall enure to the
benefit of and bind the Employer, the Participant, their successors,
assignees, and representatives. If, subsequent to the Effective Date
of the Plan, substantially all of the stock or assets of the
Employer are acquired by another corporation or entity or if the
Employer is merged into, or consolidated with, another corporation
or entity, then the obligations created hereunder shall be
obligations of the acquirer or successor corporation or entity.
12. PLAN ADMINISTRATION
12.01 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 of Directors of
BellSouth Corporation or its delegate.
12.02 Administrative Committee. If the Plan Administrator is a committee,
or if any of the duties or responsibilities of the Plan
Administrator are vested in 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, 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 other written
direction on behalf of the Plan Administrator.
12.03 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' benefits hereunder;
-15-
<PAGE>
c. to compute and certify the amount and kinds of benefits
payable to Participants, and to determine the time and manner
in which such benefits are to be paid;
d. to authorize all disbursements 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 designate 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 benefits, and its decisions
on such matters shall be final and conclusive on all parties.
12.04 Bond; Compensation. The Plan Administrator and (if applicable) its
members shall serve as such without bond and without compensation
for services hereunder.
13. CLAIMS PROCEDURE
13.01 Named Fiduciary. The Plan Administrator is hereby designated as the
named fiduciary under this Plan.
13.02 Claims Procedures. Any controversy or claim arising out of or
relating to this Plan shall be filed with the Plan Administrator
which shall make all determinations concerning such claim. Any
decision by the Plan Administrator denying such claim shall be in
writing and shall be delivered to all parties in interest in
accordance with the notice provisions of Section 9.02 hereof. Such
decision shall set forth the reasons for denial in plain language.
Pertinent provisions of the Plan shall be cited and, where
appropriate, an explanation as to how the Employee can perfect the
claim will be provided. This notice of denial of benefits will be
provided within 90 days of the Plan Administrator's receipt of the
Employee's claim for benefits. If the Plan Administrator fails to
notify the Employee of its decision regarding the claim, the claim
shall be considered denied, and the Employee shall then be permitted
to proceed with the appeal as provided in this Section.
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<PAGE>
An Employee who has been completely or partially denied a benefit
shall be entitled to appeal this denial of his/her claim by filing a
written statement of his/her position with the Plan Administrator no
later than sixty (60) days after receipt of the written notification
of such claim denial. The Plan Administrator shall schedule an
opportunity for a full and fair review of the issue within thirty
(30) days of receipt of the appeal. The decision on review shall set
forth specific reasons for the decision, and shall cite specific
references to the pertinent Plan provisions on which the decision is
based.
Following the review of any additional information submitted by the
Employee, either through the hearing process or otherwise, the Plan
Administrator shall render a decision on the review of the denied
claim in the following manner:
a. The Plan Administrator shall make its decision regarding the
merits of the denied claim within 60 days following receipt of
the request for review (or within 120 days after such receipt,
in a case where there are special circumstances requiring
extension of time for reviewing the appealed claim). The Plan
Administrator shall deliver the decision to the claimant in
writing. If an extension of time for reviewing the appealed
claim is required because of special circumstances, written
notice of the extension shall be furnished to the Employee
prior to the commencement of the extension. If the decision on
review is not furnished within the prescribed time, the claim
shall be deemed denied on review.
b. The decision on review shall set forth specific reasons for
the decision, and shall cite specific references to the
pertinent Plan provisions on which the decision is based.
-17-
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- - ------------------------------------------------------------------------------
EXHIBIT "A"
BELLSOUTH SPLIT-DOLLAR LIFE INSURANCE PLAN
AGREEMENT
- - ------------------------------------------------------------------------------
This Agreement is made effective as of January 1, 1998, by and between the
Employer and _______________________ (the "Participant").
WHEREAS, the Employer and the Participant executed an agreement (the "Prior
Agreement") under the [BellSouth Corporation Executive Life Insurance Plan]
[BellSouth Corporation Senior Manager Life Insurance Plan] (the "Prior Plan");
and
WHEREAS, the Prior Plan has been amended and restated as the BellSouth
Split-Dollar Life Insurance Plan (the "Plan"); and
WHEREAS, in exchange for coverage under the Plan as amended and restated, the
Participant consents and agrees to the terms of the Plan, as amended and
restated;
NOW, THEREFORE, in consideration of the promises contained herein and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Employer and the Participant hereby mutually covenant and
agree as follows:
1. This Agreement shall constitute an amendment and restatement of the Prior
Agreement and, as of the effective date of this Agreement, the Prior Plan
and Prior Agreement shall be terminated and replaced by the Plan and this
Agreement.
2. The Policy subject to this Agreement is Policy number ______________,
issued by Pacific Life Insurance Company (the "Replacement Policy"), which
replaces the Replaced Policy. As of the effective date of this Agreement,
no further benefits will be provided to the Participant or Employer under
the Replaced Policy, and such Policy will be canceled.
3. The Replaced Policy Cash Value shall be transferred directly to the
Replacement Policy as of the effective date of this Agreement.
4. The Coverage Amount shall be $ __________ of [Single Life] [Survivorship]
Coverage.
5. The Premium Payment Years shall be _______ consecutive Policy Years.
6. For each Policy Year beginning after 1998, the total Policy premium for
each year which is a Premium Payment Year shall be $__________, and the
Employer Premium shall equal such total Policy premium reduced by the
Participant Premium payable by the Participant for such Policy Year.
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7. The Policy Owner for the Replacement Policy shall be the same as the
Policy Owner for the Replaced Policy.
8. The Participant agrees to pay the Participant Premium contribution as
specified in the Plan, and consents to paying such amount to the Employer
through regular payroll (or retirement income) deductions.
9. The Participant has read and understands the provisions of the Plan, and
agrees that all of the terms and conditions specified in the Plan are
hereby incorporated by reference herein and form a part of this Agreement.
10. Subject to the terms of the Plan, this Agreement shall not be amended or
modified without the written consent of the Participant and the Employer.
11. This Agreement shall be governed by the laws of the State of Georgia.
- - --------------------------- ----------------------------------------
Date For the Employer
- - --------------------------- ----------------------------------------
Date Signature of Participant
----------------------------------------
----------------------------------------
----------------------------------------
Address of Participant
-19-
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- - ------------------------------------------------------------------------------
EXHIBIT "B"
BELLSOUTH SPLIT-DOLLAR LIFE INSURANCE PLAN
ASSIGNMENT
- - ------------------------------------------------------------------------------
This Assignment is made by the undersigned Policy Owner effective January 1,
1998.
DEFINITIONS:
<TABLE>
<S> <C> <C>
- - --------------------------------------------------------------------------------
ASSIGNEE: BellSouth Corporation
- - --------------------------------------------------------------------------------
PARTICIPANT:
- - --------------------------------------------------------------------------------
POLICY OWNER:
- - --------------------------------------------------------------------------------
INSURED(S):
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
INSURER: Pacific Life Insurance Company
- - --------------------------------------------------------------------------------
POLICY: Policy # issued by the Insurer.
- - --------------------------------------------------------------------------------
REPLACED POLICY: Policy # issued by the Insurer.
- - --------------------------------------------------------------------------------
SPLIT-DOLLAR LIFE That certain Agreement executed to be effective on
INSURANCE PLAN January 1, 1998, between the Participant and the
AGREEMENT Assignee.
(THE "AGREEMENT"):
- - --------------------------------------------------------------------------------
COVERAGE AMOUNT: That portion of the death benefit coverage under the
Policy equal to $___________________.
- - --------------------------------------------------------------------------------
</TABLE>
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RECITALS:
1. The benefits provided to the Policy Owner under the Policy replace those
previously provided under the Replaced Policy.
2. Under the Agreement, the Assignee has agreed to assist the Policy Owner in
the payment of premiums on the Policy issued by the Insurer.
3. In consideration of such premium payments by the Assignee, the undersigned
Policy Owner intends to grant the Assignee certain limited interests in
the Policy.
THEREFORE, for value received, it is agreed:
1. Assignment. The Policy Owner hereby assigns, transfers, and sets over to
the Assignee, its successors and assigns, the following specific rights in
the Policy and subject to the following terms and conditions:
a. the sole right to make withdrawals or borrow against the cash value
of the Policy, as provided in Sections 8.02a, 8.02d, 8.02e and 8.03
of the Plan;
b. the right to receive from the Insurer upon the death of the
Insured(s) the proceeds of the Policy in excess of the Coverage
Amount;
c. the sole right to surrender all or a portion of the Policy and
receive the surrender value thereof, as provided in Sections 8.02a,
8.02d, 8.02e and 8.03 of the Plan.
2. Retained Rights. Except as expressly provided in Section 1, the Policy
Owner retains all rights under the Policy including but not limited to:
a. the right to designate and change the beneficiary; and
b. the right to elect any optional mode of settlement permitted by the
Policy or Insurer, subject only to the Assignee's right in Section
1.(b).
3. Authorization. For purposes of Sections 1 and 2, the signature of either
the Assignee or the Policy Owner shall be sufficient. Both the Assignee
and the Policy Owner acknowledge that between themselves, they are bound
by the limitations of this Assignment and that the Insurer will recognize
the signature of either.
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4. Insurer. The Insurer is hereby authorized to recognize, and is fully
protected in recognizing the claims of the Assignee to rights hereunder,
without investigating the reasons for such action by the Assignee, or the
validity or the amount of such claims, nor giving notice to the Policy
Owner of such claims of rights or interest to exercise such rights.
Insurer reserves the right to require signatures of both the Assignee and
the Policy Owner to exercise any or all ownership rights, as is their
normal procedure.
5. Death Proceeds. The Insurer shall pay to the Assignee that portion of the
death benefit to which it is entitled. Payment by the Insurer of any or
all of the death proceeds to the Assignee in reliance upon a signed
authorization by any officer of the Assignee as to the share of death
proceeds due it shall be a full discharge of the Insurer for such share
and shall be binding on all parties claiming any interest in the Policy.
6. Release of Assignment. Upon payment to the Assignee of those amounts due
to it under the terms of the Agreement, the Assignee shall execute a
written release of this Assignment to the Insurer who may then treat the
Policy Owner of the Policy as the sole Policy Owner for all purposes.
7. Assignment Controls. In the event of any conflict between the provisions
of this Assignment and provisions of the Agreement with respect to the
Policy or rights of collateral assignment therein, the provisions of this
Assignment shall prevail.
8. Cancellation of Replaced Policy. The Policy Owner agrees that no further
benefits will be provided under the Replaced Policy, and that benefits
provided under the Policy are in lieu of the benefits previously provided
under the Replaced Policy.
IN TESTIMONY WHEREOF, the Policy Owner has executed this Assignment to be
effective January 1, 1998.
----------------------------------------
Signature of Policy Owner
----------------------------------------
Date
-22-
<PAGE>
Exhibit 10(q)
BELLSOUTH PERSONAL RETIREMENT ACCOUNT
PENSION PLAN
Amended and Restated Effective January 1, 1998
<PAGE>
BELLSOUTH PERSONAL RETIREMENT ACCOUNT PENSION PLAN
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
SECTION 1 DEFINITIONS................................................ 1
1.01 ADEA....................................................... 1
1.02 Affiliate.................................................. 1
1.03 Applicable Interest Rate................................... 1
1.04 Applicable Mortality Table................................. 2
1.05 BellSouth.................................................. 2
1.06 BellSouth Management Mortality Table....................... 2
1.07 Benefit Committee.......................................... 2
1.08 Board...................................................... 2
1.09 Claimant................................................... 2
1.10 Claim Review Committee..................................... 2
1.11 Code....................................................... 2
1.12 Compensation............................................... 2
1.13 Effective Date............................................. 5
1.14 Elect...................................................... 5
1.15 Eligible Employee.......................................... 5
1.16 Employee................................................... 6
1.17 ERISA...................................................... 6
1.18 Former Affiliate........................................... 6
1.19 Hour of Service............................................ 7
1.20 Interchange Agreement...................................... 7
1.21 Interchange Company........................................ 7
1.22 Net Credited Service....................................... 8
1.23 Normal Retirement Age...................................... 8
1.24 Occasional Employee........................................ 8
1.25 Participant................................................ 8
1.26 Participating Company...................................... 8
1.27 PBGC Interest Rate......................................... 8
1.28 Pension Commencement Date.................................. 8
1.29 Pension Fund............................................... 8
1.30 Plan....................................................... 9
1.31 Plan Year.................................................. 9
1.32 Prior Plan................................................. 9
1.33 Regular Employee........................................... 9
1.34 Statutory Break in Service................................. 9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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<S> <C> <C>
1.35 Subsidiary................................................. 9
1.36 Temporary Employee......................................... 9
1.37 Vesting Eligibility Year................................... 9
1.38 Vesting Service Credit..................................... 9
SECTION 2 PARTICIPATION AND VESTING.................................. 10
2.01 Participation.............................................. 10
2.02 Waiver of Participation.................................... 10
2.03 Vesting.................................................... 10
SECTION 3 ACCOUNTS................................................... 11
3.01 Account Balance............................................ 11
3.02 Basic Service Credit....................................... 11
3.03 Supplemental Credit........................................ 12
3.04 Interest Credit............................................ 12
(a) In General............................................. 12
(b) Credits Prior to 1998.................................. 12
3.05 Other Credits.............................................. 12
(a) Additional Credit...................................... 13
(b) One-Time Increase to Account Balances.................. 13
(c) Minimum Account........................................ 14
3.06 Interim Account Balances................................... 14
3.07 Accounts for New Participants.............................. 15
3.08 Establishment of Account upon Reemployment................. 15
(a) Initial Participation in the Personal Retirement
Account ............................................... 15
(b) Reemployment After Participating in the Personal
Retirement Account..................................... 15
SECTION 4 RETIREMENT................................................. 18
4.01 Service Pension............................................ 18
4.02 Disability Pension......................................... 18
4.03 Deferred Vested Pension.................................... 19
4.04 Mandatory Retirement....................................... 19
4.05 Certain Transfers.......................................... 19
SECTION 5 PENSION COMMENCEMENT DATE.................................. 20
5.01 Early Retirement........................................... 20
5.02 Normal Retirement.......................................... 20
5.03 Deferred Retirement........................................ 20
(a) General Rule........................................... 20
(b) Participant Attains Age 702 Before January 1, 1999..... 21
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
(c) Five-Percent Owners.................................... 21
5.04 Disability Retirement...................................... 22
5.05 Termination Before Retirement.............................. 22
5.06 Application Required....................................... 22
5.07 Leave of Absence or Layoff................................. 22
5.08 Continuance Upon Reemployment.............................. 23
SECTION 6 BENEFIT AMOUNT............................................. 24
6.01 Accrued Benefit............................................ 24
(a) In General............................................. 24
(b) Years Prior to 1998.................................... 24
6.02 Amount of Benefit.......................................... 25
(a) Service or Deferred Vested Pension..................... 25
(b) Disability Pension..................................... 27
6.03 No Reduction in Accrued Benefits........................... 28
6.04 Offset for Other Pensions.................................. 28
6.05 Limitation of Benefit Amount............................... 29
SECTION 7 PAYMENT OPTIONS............................................ 35
7.01 Annuity Forms of Payment................................... 35
(a) Normal Forms of Benefit................................ 35
(b) Optional Form of Benefit for Married Participant....... 35
7.02 Election of Early Retirement or Alternate Form of Benefit.. 36
(a) Notification Requirements.............................. 36
(b) Election Requirements.................................. 36
(c) Spousal Consent........................................ 37
7.03 Revocation or Change in Status............................. 37
7.04 Pop-up Feature............................................. 37
7.05 Election Periods for Disability Pensioners................. 38
7.06 Cash-out of Small Pensions................................. 38
(a) Payment to Participant................................. 38
(b) Payment to Surviving Spouse............................ 39
7.07 Rollover Distributions..................................... 39
(a) General................................................ 39
(b) Definitions............................................ 40
7.08 Lump Sum Settlement Option................................. 41
7.09 Incidental and Minimum Benefit Rules....................... 43
SECTION 8 PRERETIREMENT SURVIVING SPOUSE PENSION..................... 45
8.01 Eligibility................................................ 45
8.02 Death Prior to Retirement or Termination................... 45
</TABLE>
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<TABLE>
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8.03 Death After Retirement or Termination...................... 46
8.04 Distribution of Benefits................................... 46
SECTION 9 DEATH BENEFIT PLAN......................................... 47
9.01 Accidental Death Benefit................................... 47
9.02 Sickness Death Benefit..................................... 48
9.03 Pensioner Death Benefit.................................... 48
9.04 Beneficiaries Eligible to Receive Death Benefits........... 50
9.05 Method of Payment.......................................... 52
9.06 Source of Payment.......................................... 53
9.07 Special Rules.............................................. 53
SECTION 10 COMPUTATION OF SERVICE..................................... 57
10.01 Hour of Service............................................ 57
10.02 Net Credited Service....................................... 59
10.03 Vesting Service Credit..................................... 59
10.04 Part-time Service.......................................... 60
10.05 Breaks in Service.......................................... 60
10.06 Leaves of Absence.......................................... 61
10.07 Layoffs.................................................... 62
10.08 Vesting Eligibility Year................................... 63
10.09 Initial Periods of Service................................. 63
SECTION 11 INTERCHANGE OF BENEFIT OBLIGATIONS AND TRANSFERS AMONG
AFFILIATES................................................. 64
11.01 Transfers from Interchange Company or BellSouth Pension
Plan ...................................................... 64
11.02 Transfers to Interchange Company........................... 64
11.03 Transfers to BellSouth Pension Plan........................ 64
11.04 Prior Benefits............................................. 65
(a) Former Interchange Company Plan Lump Sum............... 65
(b) Repayment of Plan Lump Sum Benefits.................... 66
(c) Offset for Periodic Distributions...................... 66
11.05 Transfers Between Certain Affiliates and Subsidiaries...... 67
(a) Transfers Among Participating Companies................ 67
(b) Transfer From Affiliate or Subsidiary That is
Not a Participating Company............................ 67
(c) Transfer to an Affiliate or Subsidiary That is
Not a Participating Company............................ 68
(d) More Than One Transfer in a Plan Year.................. 68
SECTION 12 ADMINISTRATION............................................. 69
12.01 Plan Administrator......................................... 69
</TABLE>
<PAGE>
<TABLE>
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12.02 Benefit Committees......................................... 69
12.03 Claim Review Committee..................................... 69
12.04 Named Fiduciary............................................ 70
12.05 Allocation of Responsibilities............................. 71
12.06 Delegation of Responsibilities............................. 71
12.07 Plan Expenses.............................................. 72
12.08 Miscellaneous.............................................. 72
SECTION 13 RIGHTS AND CLAIMS.......................................... 73
13.01 Notice to Employees........................................ 73
13.02 Claims Procedure........................................... 73
13.03 Non-assignability.......................................... 74
13.04 Payment to Others.......................................... 75
13.05 Forfeiture of Benefits by Killers.......................... 75
13.06 Recovery of Overpayment.................................... 76
13.07 No Review by Former Affiliate Plan or Predecessor
Plan Committee ............................................ 76
13.08 No Claims Against a Participating Company.................. 76
13.09 Payment of Interest on Late Payments....................... 77
SECTION 14 PENSION FUND............................................... 78
14.01 Establishment of Pension Fund.............................. 78
14.02 Appointment of Trustees and Investment Managers............ 79
14.03 Contributions Subject to Tax-Deductibility................. 80
14.04 Forfeitures................................................ 81
SECTION 15 PLAN CHANGES............................................... 82
15.01 Plan Amendments............................................ 82
15.02 Plan Termination........................................... 83
15.03 Consolidation, Merger, or Sale of Property................. 84
15.04 Top-Heavy Provisions....................................... 84
SECTION 16 ADOPTION OF THE PLAN BY A PARTICIPATING COMPANY............ 85
16.01 Adoption of Plan........................................... 85
16.02 Amendment.................................................. 85
16.03 Withdrawal From the Plan by a Participating Company........ 85
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Appendix 1 Factors for One Time Increase
Appendix 2 Factors for One Time Increase for Terminations After November
1, 1997 and Before January 1, 1998
Appendix 3 Conversion Factors for Post-1997 Calculations
Appendix A. Calculation of Opening Account
Appendix B. Transition Credit Calculation
Appendix C. Prior Plan Conversion Factors
C-1 - Employees at least 65 on April 1, 1994
C-2 - Employees Attaining Age 65 after April 1, 1994
Appendix D. Prior Plan Benefit
Appendix E. Maximum Annual Pension Benefit
Appendix F. Top-Heavy Provisions
Appendix G. Maximum Lump Sum Under Section 415 for 1995
Schedule 1. Participating Companies
Schedule 2. Modifications for Certain Participating Companies
</TABLE>
<PAGE>
FOREWORD
The BellSouth Management Pension Plan was established by BellSouth as of
January 1, 1984. That plan was renamed the BellSouth Personal Retirement Account
Pension Plan as of July 1, 1993 (the Old PRA). As of January 1, 1994, the Old
PRA was split into the following separate single plans within the meaning of
Code Section 414(l):
BellSouth Personal Retirement Account Pension Plan As Adopted By
BellSouth Telecommunications Companies (Plan No. 006)
BellSouth Personal Retirement Account Pension Plan As Adopted By
BellSouth Advertising & Publishing Corporation (Plan No. 010)
BellSouth Personal Retirement Account Pension Plan As Adopted By
BellSouth Cellular Corp. (Plan No. 011)
BellSouth Personal Retirement Account Pension Plan As Adopted By
BellSouth Corporation et. al. (Plan No. 012)
The following plans were subsequently adopted as separate plans:
Stevens Graphics, Inc. Personal Retirement Account Pension Plan
(Plan No. 006)
BellSouth Personal Retirement Account Pension Plan As Adopted By
L.M. Berry and Company (Plan No. 001)
Effective as of the close of business on December 31, 1997, these separate
plans are being merged into one single plan within the meaning of Code Section
414(l), with the BellSouth Personal Retirement Account Pension Plan As Adopted
By BellSouth Corporation et. al. (Plan No. 012) the surviving plan. The terms of
the Plan shall be effective as of January 1, 1998.
<PAGE>
Except as otherwise specifically provided herein, this document describes
the Plan as it applies to persons actively employed by BellSouth or certain of
its affiliates after December 31, 1997.
This amendment, restatement and merger is expressly conditioned upon
receipt of a favorable determination letter from the Internal Revenue Service
with respect to the Plan as set forth in this document.
All pronouns are masculine, solely for ease of reading, and should be read
as feminine where applicable.
APPROVED this ____ day of December, 1998.
EMPLOYEES BENEFIT CLAIM REVIEW COMMITTEE
By:
-------------------------------------
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<PAGE>
SECTION 1
DEFINITIONS
For purposes of this Plan, the following words shall have the indicated
meanings when such words are capitalized:
1.1 "ADEA" means the Age Discrimination in Employment Act of 1967, as
amended, or any successor law.
1.2 "Affiliate" means, with respect to a Participating Company, (a) any
corporation included with such Participating Company in a controlled group of
corporations as determined under Section 414(b) of the Code, (b) any trade or
business under common control with such Participating Company as determined
under Section 414(c) of the Code, (c) any member of any "affiliated service
group" as such term is defined in Section 414(m) of the Code which includes as
one of its members an entity described in (a) or (b) above, and (d) any trade or
business which is otherwise aggregated with such Participating Company under
Section 414(o) of the Code but only during the period such corporation, trade or
business, or member is, as applicable, in a controlled group of corporations
with such Participating Company, under common control with such Participating
Company, or included in the affiliated service group or otherwise aggregated.
1.3 "Applicable Interest Rate" means, for any date, the average yield,
expressed as an annual rate of interest, of 30-year Treasury securities for the
month of November of the immediately preceding Plan Year.
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<PAGE>
1.4 "Applicable Mortality Table" means the GAM 83 mortality tables,
adjusted to eliminate gender distinctions, or such other table or tables as may
be prescribed by the Secretary of the Treasury from time to time.
1.5 "BellSouth" means BellSouth Corporation, a Georgia corporation, or its
successors.
1.6 "BellSouth Management Mortality Table" means the BellSouth Management
50/50 mortality rates.
1.7 "Benefit Committee" means the applicable Employees' Benefit Committee
appointed by a Participating Company to administer the Plan with respect to its
Employees. The organization and operation of the Benefit Committee is described
in Section 12. "BellSouth Benefit Committee" means the Benefit Committee
appointed by BellSouth.
1.8 "Board" means the Board of Directors of BellSouth.
1.9 "Claimant" means any person claiming benefits under the Plan.
1.10 "Claim Review Committee" means the Employees' Benefit Claim Review
Committee appointed by BellSouth to serve as the final review committee in
connection with all claims or questions dealing with the administration of the
Plan.
1.11 "Code" means the Internal Revenue Code of 1986, as amended, or any
successor law.
1.12 "Compensation" means the sum of the following amounts that are paid
by a Participating Company or Companies during the Plan Year:
(a) basic pay,
(b) differentials,
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<PAGE>
(c) marketing incentive payments and commissions or equivalent
payments approved by BellSouth,
(d) team awards, awards to officers under short term incentive plans
and equivalents, and
(e) salary transition payments.
Compensation is determined before any reduction elected in accordance with a
"cafeteria plan" or a "cash or deferred arrangement" pursuant to Sections 125 or
401(k) of the Code. Compensation shall not include any amounts credited to a
Participant under a nonqualified deferred compensation arrangement.
In no event shall the amount of Compensation taken into account for any
Participant under the Plan for any Plan Year exceed $150,000 or such other
amount as the Secretary of the Treasury may determine or as may apply for such
Plan Year under Section 401(a)(17) of the Code; provided, however, the
limitation for the 1993 Plan Year shall be such amount less the compensation
taken into account in calculating the benefit accrued under the Prior Plan for
the period from January 1, 1993, to June 30, 1993.
If a Participant receives benefits under a Participating Company's short
term disability plan, his Compensation shall be determined as though he received
basic pay (at his last basic pay rate) while he receives such benefits. If the
position rate of his job changes while receiving such benefits, his basic pay
rate shall be deemed to change (prospectively) by the same percentage for the
purpose of determining his Compensation.
3
<PAGE>
If a Participant is reemployed by a Participating Company in accordance
with the terms of a court order, arbitration award or settlement agreement
involving litigation, arbitration or other action relating to a prior
termination from employment, he shall be deemed to have received Compensation at
his basic rate of pay for the "applicable period," as defined below. The
"applicable period" shall be the following:
(a) the period of time specified in the order, award or agreement;
(b) if no period of time is specified, the period that is the number
of weeks determined by dividing the full amount of the award or payment by the
Participant's basic weekly wage rate in effect at the time of this prior
termination; or
(c) the period of time between the date of the prior termination and
the date of reemployment, not in excess of thirty days, if the termination was
converted by the Participating Company from which the Participant was terminated
to a suspension.
If (b) above applies, the amount of the award or payment shall be deemed
to include any amount of compensation or other payment received by the
Participant from other sources which has been offset against the amount awarded
or paid to the Participant in accordance with the order, award, or agreement. In
no event shall the period of time exceed the actual amount of time from the date
of the Participant's termination to the date of the Participant's reemployment.
For purposes of performing discrimination testing to ensure compliance
with Code Section 401(a)(4), the definition of "Compensation" as set forth above
in this Paragraph 1.12 generally shall be used; provided, on a plan year-by-plan
year basis, the Benefit Committee may elect to use as the
4
<PAGE>
definition of "Compensation" any definition that satisfies the nondiscrimination
requirements of Code Section 414(s).
If a Participant receives any Compensation of the type described in clause
(d) hereof after the Participant terminates employment, such Compensation shall
be deemed to have been paid as of the date the Participant terminates, and the
amount of his pension shall be corrected accordingly.
1.13 "Effective Date" means January 1, 1998, which is the effective date
of the amended and restated Plan as described herein, unless another Effective
Date is noted with respect to a Participating Company in Schedule 1. Any
amendment required by law which has an effective date prior to January 1, 1998,
shall be effective as of the date specifically provided herein or as otherwise
required by law. The rights and benefits of any Employee who is a Participant on
or after the Effective Date shall be determined as provided herein. The rights
and benefits of any other person entitled to or receiving benefits under a Prior
Plan (including persons receiving disability benefits under the Prior Plan as of
the Effective Date) shall be determined in accordance with the provisions of the
Prior Plan as in effect on the date such person (or the person upon whose behalf
benefits are being paid) ceased to be an Eligible Employee, except as
specifically provided by subsequent amendment, including this amendment. This
amendment shall not decrease or remove any protected right or benefit which had
already accrued with respect to any Participant as of the Effective Date.
1.14 "Elect" means to make an election in accordance with Paragraph 7.02.
1.15 "Eligible Employee" means any Employee (a) who receives a regular and
stated salary, i.e., pay at a monthly or annual rate, other than a pension or
retainer, from a Participating
5
<PAGE>
Company and who is classified as a salaried employee, or (b) who is a
non-representable Employee and who is employed by a Participating Company that
is a subsidiary of BellSouth Enterprises, Inc., other than BellSouth Advertising
& Publishing Corporation. The term "Eligible Employee" shall not include (a) a
"leased employee," within the meaning of Section 414(n)(2) of the Code, (b) a
represented or representable Employee who is not otherwise an Eligible Employee
and who is temporarily promoted to salaried employee status for one year or
less, (c) any Employee (i) who is a non-resident alien, (ii) who has no U.S.
source income, and (iii) who was not covered by a predecessor plan on September
30, 1980, and (d) any Employee who is a third country national or local national
employee of a Participating Company.
1.16 "Employee" means any person who is employed by a Participating
Company or any Affiliate, and any person who is a "leased employee" within the
meaning of Section 414(n)(2) of the Code of a Participating Company or
Affiliate. Notwithstanding the foregoing, if such "leased employees" constitute
less than 20 percent of the combined non-highly compensated work force of
BellSouth and its Affiliates, within the meaning of Section 414(n)(5)(c)(ii) of
the Code, the term "Employee" shall not include those "leased employees" covered
by a plan described in Section 414(n)(5) of the Code. "Employee" also shall not
include an individual treated as an independent contractor by his Participating
Company, as evidenced by its payroll and accounting practices with respect to
that individual.
1.17 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor law.
6
<PAGE>
1.18 "Former Affiliate" means any of the following companies: American
Telephone and Telegraph Company, American Information Technologies Corporation,
Bell Atlantic Corp., NYNEX Corp., Pacific Telesis Group, Southwestern Bell
Corp., U.S. West Inc., any subsidiary of any such company which participates in
a defined benefit pension plan maintained by any such company or maintains a
comparable plan and with respect to which such company has an interchange
agreement comparable to the Interchange Agreement, and Bell Communications
Research, Inc.
1.19 "Hour of Service" is defined in Paragraph 10.01.
1.20 "Interchange Agreement" means any agreement which provides for the
interchange of benefit obligations and the mutual recognition of service credit
upon the transfer of a person between BellSouth or an Affiliate of BellSouth and
another employer, including, but not limited to, (a) the agreement between
BellSouth, each of the other regional Bell operating companies, and Bell
Communications Research, Inc., which provides for the interchange of benefit
obligations and the mutual recognition of service credit upon the transfer of a
person between a regional Bell operating company and Bell Communications
Research, Inc., under circumstances set forth in the Plan of Reorganization, (b)
the agreement between BellSouth, American Telephone and Telegraph Company and
one or more other companies in connection with the reorganization of American
Telephone and Telegraph Company and its subsidiaries on January 1, 1984, which
provides for the portability of benefits with respect to certain employees, and
(c) the agreement between BellSouth, American Telephone and Telegraph Company,
and each of the other entities subject to the "modified final
7
<PAGE>
judgment" as such term is defined in the Tax Reform Act of 1984, which agreement
provides for the portability of benefits with respect to certain employees.
1.21 "Interchange Company" means a company, other than a Participating
Company, which is a party to an Interchange Agreement.
1.22 "Net Credited Service" is defined in Paragraph 10.02.
1.23 "Normal Retirement Age" means age 65 or, if later, the fifth
anniversary of the date on which the Employee becomes a Participant in the Plan.
1.24 "Occasional Employee" means an Eligible Employee who is hired for a
period not exceeding three consecutive weeks and who is not employed for more
than 30 days in a year.
1.25 "Participant" means an Eligible Employee, a former Eligible Employee
for whom or with respect to whom an account is maintained under Section 3, or an
annuitant.
1.26 "Participating Company" means BellSouth and each Affiliate or
Subsidiary which elects to participate in the Plan in accordance with Section
16. Unless otherwise clearly required by the context, a company shall be
considered a Participating Company only during the period that it participates
in the Plan.
1.27 "PBGC Interest Rate" means the interest rate used by the Pension
Benefit Guaranty Corporation to value (a) immediate annuities, as to annuities
that are in payment status, or (b) deferred annuities, as to annuities that are
not otherwise currently payable, in a trusteed single employer plan that
terminates as of January 1st of the applicable calendar year.
8
<PAGE>
1.28 "Pension Commencement Date" means the first day as of which a
Participant's pension benefits are payable under the Plan.
1.29 "Pension Fund" means the trust established by BellSouth separate from
its assets and the assets of any Participating Company or Affiliate for the
payment of certain Plan benefits and includes any allocable interest in the
Telephone Real Estate Equity Trust.
1.30 "Plan" means the BellSouth Personal Retirement Account Pension Plan
as maintained by one or more Participating Companies for the benefit of their
Eligible Employees.
1.31 "Plan Year" means July 1, 1993, through December 31, 1993, solely for
purposes of determining Plan benefits for the first Plan Year, and the calendar
year for subsequent Plan Years.
1.32 "Prior Plan" means the Plan, if any, as in effect immediately prior
to its amendment and restatement as of the Effective Date, and shall include
each of the individual plans which merged into the Plan as of the Effective
Date.
1.33 "Regular Employee" means an Eligible Employee.
1.34 "Statutory Break in Service" means any calendar year in which an
Employee fails to complete more than 500 Hours of Service.
1.35 "Subsidiary" means any corporation (other than an Affiliate) of which
more than 50% of the voting stock is owned directly or indirectly by BellSouth,
or a partnership, joint venture or other trade or business of which 50% of the
profits or capital interest is owned directly or indirectly by BellSouth.
9
<PAGE>
1.36 "Temporary Employee" means an Eligible Employee who is employed to
work more than 30 days but not more than eighteen months.
1.37 "Vesting Eligibility Year" is defined in Paragraph 10.08.
1.38 "Vesting Service Credit" is defined in Paragraph 10.03.
10
<PAGE>
SECTION 2
PARTICIPATION AND VESTING
2.1 Participation. Each Eligible Employee is a Participant in the Plan on
the later of the Effective Date, or his date of hire by a Participating Company.
2.2 Waiver of Participation. A service pensioner who is reemployed as a
Temporary Employee may elect, prior to reemployment, to waive participation in
the Plan in accordance with procedures established by the BellSouth Benefit
Committee. No benefit shall accrue to such Employee during the period of such
reemployment. Any other Employee may make a prospective election, in an
employment agreement or other written agreement with the applicable
Participating Company, not to participate in the Plan, and no benefit shall
accrue to such Employee during the period such election is in effect.
2.3 Vesting. In order to receive benefits under the Plan, a Participant
must become vested. A Participant becomes vested on the earlier of when he
completes five Vesting Eligibility Years or when he attains Normal Retirement
Age. A Participant also may become vested prior to completing five Vesting
Eligibility Years if his participation in the Plan is terminated incident to the
sale of the Participating Company or some or all of the assets of the
Participating Company to a non-Affiliate and if the Claim Review Committee or
the Nominating and Compensation Committee of the Board, as appropriate,
determines via plan amendment to vest the Participant and similarly situated
Participants.
11
<PAGE>
SECTION 3
ACCOUNTS
3.1 Account Balance. An account shall be maintained for each Participant
in accordance with this Section 3. For new Participants, the account shall be
established in accordance with Paragraph 3.07. For Participants in the Plan as
of the Effective Date, the balance in each Participant's account as of the
Effective Date shall equal his account balance under the Prior Plan on the close
of business on the day immediately preceding the Effective Date, as adjusted, if
applicable, pursuant to Paragraph 3.05(b). For an Eligible Employee who was a
Participant in the Plan, but who terminated employment with all Participating
Companies on or before the Effective Date, the account shall be established and
maintained in accordance with Paragraph 3.08.
On the last day of the Plan Year three types of credits may be added to
each Participant's account: basic service credits, supplemental credits and
interest credits. Each Participant's account also may be credited with
additional credits in accordance with Paragraph 3.05.
3.2 Basic Service Credit. On the last day of each Plan Year each
Participant's account shall be credited with basic service credits equal to the
Participant's Compensation for the Plan Year multiplied by the percentage shown
in the following table based on his full years of Vesting Service Credit at the
end of that Plan Year:
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<TABLE>
<CAPTION>
Years of Vesting Basic Service
Service Credit Credit Percentage
<S> <C> <C>
0 through 4 3%
5 through 9 4%
10 through 14 5%
15 through 19 6%
20 through 24 7%
25 through 29 8%
30 through 34 6%
35 or more 4%
</TABLE>
3.3 Supplemental Credit. On the last day of each Plan Year the account of
each Participant whose Compensation is in excess of the contribution and benefit
base for such year under Section 230 of the Social Security Act shall be
credited with a supplemental credit equal to the amount of such excess
multiplied by 3 percent.
3.4 Interest Credit.
(a) In General. Except as otherwise provided in subparagraph (b), as
of the last day of the 1998 Plan Year and each Plan Year thereafter, each
Participant's account shall be credited with an interest credit equal to the
Participant's account balance on the first day of such Plan Year multiplied by
the Applicable Interest Rate for such Plan Year.
(b) Credits Prior to 1998. For Participants who terminate employment
with all Participating Companies before January 1, 1998, interest credits shall
be applied in accordance with the Prior Plan. Notwithstanding the preceding
sentence, (i) the accounts of Participants who retire or terminate on or after
November 1, 1997 and before January 1, 1998 shall be credited with interest at
the annual rate of 4 percent until December 31, 1997 and thereafter at the
Applicable Interest Rate; and (ii) the accounts of Participants who return to
employment with a Participating Company after
13
<PAGE>
January 1, 1998 and again become eligible to participate in the Plan, shall be
credited with interest at the Applicable Interest Rate for periods after the
date of reemployment or eligibility to participate in the Plan, whichever is
later.
3.5 Other Credits.
(a) Additional Credit. The Board has approved an additional credit
for the 1998 Plan Year equal to the Participant's Compensation multiplied by one
percent, and this additional credit shall be credited to each Participant's
account as of the last day of such Plan Year.
(b) One-Time Increase to Account Balances. An adjustment shall be
made as set forth below to the account balance of each Participant who (i) was
actively employed or on approved leave of absence, including a transition leave
as of January 1, 1998; (ii) was disabled and receiving short term disability
benefits as of January 1, 1998; (iii) was actively employed or on leave of
absence from a Participating Company on November 1, 1997 and retired or
terminated from the service of all Participating Companies and Affiliates on or
before January 1, 1998; or (iv) was disabled and receiving short term disability
benefits on November 1, 1997, whose short term disability benefits expired on or
before January 1, 1998, and was eligible for a Disability Pension as of that
date.
For a Participant described in subparagraph 3.05(b)(i) or (ii), his
account balance shall be increased by multiplying his December 31, 1997 account
balance times the age-appropriate factor listed in Appendix 1, if he is service
pension eligible as of January 1, 1998, or the age 65 factor listed in Appendix
1 (without regard to Participants actual age), if he is not service pension
eligible as of
14
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that date. For any other Participant described in subparagraph 3.05(b), his
account balance shall be increased by multiplying his account balance as of his
last day on payroll prior to January 1, 1998 times the age-appropriate factor
listed in Appendix 2, if he is service pension eligible as of January 1, 1998,
or the age 65 factor listed in Appendix 2 (without regard to Participant's
actual age), if he is not service pension eligible as of that date. For a
Participant described in subparagraph 3.05(b)(iv), his "last day on payroll"
shall be deemed to be the date that his short term disability benefits expired.
(c) Minimum Account. In no event shall the account balance of a
Participant described in subparagraph (b) hereof be less than his December 31,
1997 account balance credited with interest at the rate of 4 percent per year,
compounded annually, provided that no other types of credits shall be made to
such account balance, and additional interest credits shall be made after the
earlier of December 31, 1999 or his date of retirement or termination of
employment with all Affiliates.
3.6 Interim Account Balances. As of any date during the Plan Year, a
Participant's account balance equals the sum of:
(a) his account balance as of the first day of the Plan Year, plus
(b) 1/12th of the interest credit that would be credited to his
account on the last day of the Plan Year multiplied by the number that
corresponds to the calendar month in which such date occurs, plus
(c) the basic service, and, if applicable, supplemental and
additional credits that would be credited to his account on the last day of the
Plan Year, based on the Participant's Compensation for the Plan Year up to such
date, taking into account the full benefit and contribution
15
<PAGE>
base under Section 230 of the Social Security Act for such year, and as approved
by the Board, if applicable.
3.7 Accounts for New Participants. Except as provided in Paragraph 3.08
and Section 11, if an individual first becomes an Eligible Employee on or after
the Effective Date, and was not a participant in the BellSouth Management
Pension Plan or in the BellSouth Pension Plan on June 30, 1993, no account shall
be established on his behalf until the end of the Plan Year in which he became
an Eligible Employee. At such time, his basic service and, if applicable,
supplemental and additional credits shall be based on his Compensation for the
entire Plan Year.
3.8 Establishment of Account upon Reemployment.
(a) Initial Participation in the Personal Retirement Account. If an
individual who has an accrued benefit under the Plan or another defined benefit
plan maintained by the Participating Company or its Affiliates or Subsidiaries,
but who has never had an account balance under the Plan is transferred to or
reemployed by a Participating Company as an Eligible Employee, an account shall
be established for such Eligible Employee upon his transfer or reemployment. The
balance in such account shall be zero if (i) such Eligible Employee received a
lump sum settlement of his entire accrued benefit prior to transfer or
reemployment and is not eligible to or does not buy back into the Plan pursuant
to Paragraph 10.05, (ii) the assets and liabilities respecting such accrued
benefit have not been transferred to the Plan, or (iii) his pension commenced to
be paid prior to reemployment and is not suspended pursuant to Paragraph 5.08.
Otherwise, the balance in such account shall be the amount determined in
accordance with Appendix A.
16
<PAGE>
(b) Reemployment After Participating in the Personal Retirement
Account. If an Eligible Employee retires or terminates employment (other than
pursuant to a transfer of employment between Affiliates that is described in
subparagraph 11.05(a) or (b)) after an account balance has been established for
him under the Plan, his account shall continue to be maintained, and credited
with interest, until (i) he receives or is deemed to receive a lump sum
settlement of his entire accrued benefit, or (ii) his pension commences to be
paid. If an Eligible Employee is reemployed by BellSouth or a Participating
Company, an account shall be established for him at the end of the Plan Year of
his reemployment as an Eligible Employee as set forth below.
(i) Cash Out or Deemed Cash Out. If the Eligible Employee has
received or is deemed to have received a lump sum settlement of his entire
accrued benefit, the initial balance of his account shall be zero unless
he is eligible and he elects or is deemed to buy back into the Plan
pursuant to Paragraphs 7.06 or 10.05. In that case, the initial balance in
his account shall be the amount in his account at the time of his
distribution or deemed distribution, credited with interest from
distribution to rehire at the rate of 4 percent per year, compounded
annually, until December 31, 1997 and thereafter at the Applicable
Interest Rate, compounded annually, and multiplied by the conversion
factor set forth on Appendix 1.
(ii) Pension Payments. If the Eligible Employee has commenced
receipt of his pension and his pension is not suspended upon his
reemployment pursuant to Paragraph 5.08, his initial account balance shall
be zero. If his pension is suspended upon
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reemployment, his initial account balance shall be determined in
accordance with the factors that were used to convert his account balance
to an annuity as of his original Pension Commencement Date.
(iii) No Distribution. If the Eligible Employee has not
received, and is not deemed to have received, a distribution of his
account, and such Eligible Employee terminated employment prior to
November 1, 1997, his initial account balance upon reemployment shall be
the amount in his account as of the date of his termination, credited with
interest at the rate of 4 percent per year, compounded annually, until
December 31, 1997, and thereafter at the Applicable Interest Rate,
compounded annually, and then multiplied by the conversion factor set
forth in Appendix 1.
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SECTION 4
RETIREMENT
4.1 Service Pension. Any Participant may retire on a service pension
provided he has attained any combination of whole years and whole months of age
and whole years and whole months of Net Credited Service, with a minimum of ten
years of Net Credited Service, which totals at least 75 years as of the date of
his retirement. However, if a Participant's final service is with an Affiliate
that is not a Participating Company, he must have completed a minimum of ten
years of Vesting Service Credit to be eligible for a service pension under this
Paragraph.
4.2 Disability Pension. A Participant who (i) becomes totally disabled as
a result of sickness or injury while employed by a Participating Company, (ii)
has at least 15 years of Net Credited Service at the expiration of his short
term disability benefits, (iii) is eligible to apply for long term disability
benefits at the expiration of his short term disability benefits and (iv) is not
then eligible for a service pension, shall immediately be paid a disability
pension; provided, however, such Participant may elect to be paid a deferred
vested pension instead of a disability pension; and provided further, however,
if such Participant is then service pension eligible, he may elect to receive a
service pension in lieu of a disability pension, and if such Participant has
attained Normal Retirement Age and is eligible for a service pension, a service
pension shall be paid instead of a disability pension. The disability pension
shall terminate when (a) it is determined that the
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Participant is no longer totally disabled, or (b) he attains Normal Retirement
Age and is eligible for a service pension, whichever of (a) or (b) occurs first.
For purposes of determining a Participants eligibility for a disability pension,
"total disability" shall be determined in accordance with the long term
disability benefits provided by the Participating Company that employs the
Participant.
4.3 Deferred Vested Pension. A Participant who terminates employment and
meets the vesting rule in Paragraph 2.03 shall receive a deferred vested pension
in accordance with Paragraph 5.05.
4.4 Mandatory Retirement. Each Employee, whether or not a Participant,
shall be retired from active service no later than the last day of the month in
which he attains age 65 or, if later, the earliest age permissible under
applicable provisions of ADEA and any state law.
Mandatory retirement applies only to those Employees referred to in
Section 12(c)(1) of ADEA and those Employees for whom age is a bona fide
occupational qualification within the meaning of Section 4(f)(1) of ADEA.
4.5 Certain Transfers. A Participant who transfers between companies may
not retire until he ceases to be employed by a Participating Company or any
Affiliate.
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SECTION 5
PENSION COMMENCEMENT DATE
5.1 Early Retirement. If a Participant who is eligible for a service
pension retires before he attains Normal Retirement Age, he can Elect to have
his pension payable commencing on any date on or after his retirement, but not
later than the first of the month coincident with or following his attainment of
Normal Retirement Age, and such date shall be his Pension Commencement Date.
5.2 Normal Retirement. If a Participant retires on or after attainment of
his Normal Retirement Age, his pension shall be payable commencing on the first
day following his retirement, and such date shall be his Pension Commencement
Date.
5.3 Deferred Retirement.
(a) General Rule. Except as provided in subparagraph (c), a
Participant who attains age 70-1/? on or after January 1, 1999, and who
continues to work after he attains age 70?, will not be entitled to commence
receipt of his pension until he has terminated employment with all Participating
Companies and Affiliates. His pension shall be adjusted actuarially in
accordance with Code 401(a)(9) and the regulations thereunder to provide an
actuarially equivalent benefit to the benefit that would have been payable had
his pension commenced at his Normal Retirement Age. The actuarial equivalence
shall be no less than the actuarial equivalent of the Participant's pension that
would have been payable as of April 1 following the calendar year in which the
Participant attained 70 1/2 if payments had commenced on that date; plus the
actuarial equivalent of any
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<PAGE>
additional benefit accruals after that date; reduced by the actuarial equivalent
of any distribution made with respect to the Participant's pension after that
date.
(b) Participant Attains Age 70? Before January 1, 1999. If a
Participant attained age 70? by January 1, 1999 and worked until the April 1st
following the calendar year in which he attained age 70?, he shall be treated as
having retired on such April 1st, with his pension, computed as of December 31
of the prior year, payable commencing on such April 1st, and such date shall be
his Pension Commencement Date.
His pension shall be recomputed as of each succeeding January 1st and upon
actual retirement to reflect additional benefit accruals and an actuarial
adjustment for the pension paid (a) during the prior year, if he continues to
work, and (b) during the current year, upon his actual retirement.
(c) Five-Percent Owners. Notwithstanding the preceding subsections,
a Participant who is a five percent owner [within the meaning of Code Section
401(a)(9)] and who continues to work for a Participating Company or Affiliate
until the April 1st following the calendar year in which he attains age 70?
shall be treated as having retired on such April 1st, with his pension, computed
as of December 31 of the prior year, payable commencing on such April 1st, and
such date shall be his Pension Commencement Date.
His pension shall be recomputed as of each succeeding January 1st and upon
actual retirement to reflect additional benefit accruals and an actuarial
adjustment for the pension paid
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(a) during the prior year, if he continues to work, and (b) during the current
year, upon his actual retirement.
5.4 Disability Retirement. A Participant who is eligible for a disability
pension under Paragraph 4.02 shall have his disability pension commence on the
day following the expiration of his short term disability benefits, and such
date shall be the Participant's Pension Commencement Date with respect to such
disability pension.
5.5 Termination Before Retirement. If a Participant terminates employment
with the Participating Company, all other Participating Companies and all
Affiliates after becoming vested, he may Elect to have his pension payable
commencing on the first day following such termination of employment. Absent
such an election his pension shall be payable commencing on his attainment of
Normal Retirement Age. The date on which such pension first is payable shall be
his Pension Commencement Date.
5.6 Application Required. Except as provided in this Section, a
Participant must file a written request with the Benefit Committee to have his
pension commence.
Except for months after Normal Retirement Age, no pension payment shall be
made for any month before the month in which the Benefit Committee receives such
written request. In the case of any Participant who is no longer an Employee on
or after his Normal Retirement Age, pension payments shall commence whether or
not a written request for such payments is received.
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5.7 Leave of Absence or Layoff. Subject to Paragraph 5.03, no pension
shall be paid under this Plan during a period of leave of absence or layoff
unless the Participant elects to retire or terminate his employment and end such
leave or layoff.
5.8 Continuance Upon Reemployment. Except as provided below, once a
Participant begins to receive a pension, it shall continue to be paid during any
subsequent period of employment with a Participating Company, any Affiliate, or
any Interchange Company. A Participant's pension shall be suspended during a
period of subsequent employment with a Participating Company if the Participant
is rehired before attaining age 65, in which case the suspension shall commence
with the first month following the month of rehire; provided, however, that the
Participant's pension shall not be suspended if he is rehired as a Temporary
Employee and waives participation in the Plan pursuant to Paragraph 2.02.
A Participant's pension also shall be suspended if he is hired by an
Interchange Company provided the Participant is covered by the provisions of the
Interchange Agreement and either has not attained age 65 or has attained age 65
and is working more than 40 hours in each month.
Subject to the other restrictions in this Paragraph, if a Participant is
reemployed by a Participating Company before he begins to receive a pension and
prior to attaining age 65, he may not Elect to have payments commence while so
employed.
Subject to Paragraph 5.03, suspensions shall continue for the period of
reemployment, and a Participant's suspended pension shall recommence beginning
with the month in which his reemployment terminates.
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<PAGE>
SECTION 6
BENEFIT AMOUNT
6.1 Accrued Benefit.
(a) In General. A Participant's accrued benefit is a monthly
benefit, commencing at his Normal Retirement Age, that is the actuarial
equivalent of the Participant's account balance. Except as provided in
subparagraph (b), such accrued benefit shall be computed by (i) taking the
amount of such account balance at Normal Retirement Age (or the Participant's
actual age if he has already attained his Normal Retirement Age), (ii)
converting such amount into a single life annuity at the Participant's Normal
Retirement Age (or the Participant's actual age if he has already attained his
Normal Retirement Age) using the appropriate factor from the table set forth in
Appendix 3 (which shall change annually and shall be based on the Applicable
Mortality Table), and (iii) dividing the resulting amount by 12.
(b) Years Prior to 1998. The accrued benefit of a Participant who
terminates employment with all Participating Companies on or before November 1,
1997 shall be calculated by (i) crediting his account balance with interest at
the rate of 4 percent per year, compounded annually, projected to Normal
Retirement Age (or the Participant's actual age if he has already attained his
Normal Retirement Age), (ii) converting such amount into a single life annuity
at the Participant's Normal Retirement Age (or the Participant's actual age if
he has already attained his Normal Retirement Age), using the appropriate factor
from the table set forth in Appendix C, which
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<PAGE>
shall be based on the BellSouth Management Mortality Tables, and (iii) dividing
the resulting amount by 12.
6.2 Amount of Benefit.
(a) Service or Deferred Vested Pension. Except as provided below, a
Participant's account shall be converted into an actuarially equivalent, monthly
single life annuity on his Pension Commencement Date. Such annuity shall be
computed using the appropriate factor from the table set forth in Appendix 3
(which shall change annually), and dividing the resulting amount by 12.
Notwithstanding the preceding sentence, the monthly single life annuity payable
to a Participant shall be calculated as follows, if such alternate calculation
results in a larger benefit:
(i) With respect to a Participant who had an accrued benefit
under the BellSouth Management Pension Plan on June 30, 1993 and who is or
would become eligible to retire with a service pension on or before
December 31, 2005, assuming continuous Net Credited Service until such
date, the benefit payable shall be determined under the terms of the
BellSouth Management Pension Plan in accordance with Appendix D hereto,
taking into account the Participant's age and service as of the date of
his retirement and the Participant's compensation, as appropriate, on and
after the Effective Date in accordance with the provisions of Appendix D.
(ii) With respect to Participants eligible for the one-time
increase in the account balance described in subparagraph 3.05(b), the
benefit payable shall be derived from the Participant's "Minimum Account
Balance," which shall be based on the Participant's
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<PAGE>
December 31, 1997 account balance (prior to the one-time increase)
credited only with interest as set out in subparagraph 3.05(c) (and no
other credits) and converting such amount to a lifetime annuity, using the
appropriate factor, from the table set forth in Appendix C, which shall be
based on the BellSouth Management Mortality Tables; provided that the
"Minimum Account Annuity" so determined shall become a frozen benefit as
of, and shall not increase after, December 31, 1999.
(iii) With respect to a Participant who first becomes eligible
for a service pension in 1998 and who retires on or after January 1, 1998
and before January 1, 2000, the benefit payable shall be derived from the
Participant's December 31, 1997 account balance (prior to the one-time
increase), credited with service credits, supplemental credits and
interest credits at the rate of 4 percent per year, compounded annually,
and converting such amount to a lifetime annuity using the appropriate
factor from the table set forth in Appendix C, which shall be based on the
BellSouth Management Mortality Tables.
The amount of the annuity actually payable to a Participant may be reduced
in accordance with subparagraph 7.01(a)(1) and may be increased in accordance
with the last paragraph of Paragraph 1.12. In no event shall a Participant's
accrued benefit as of any date be less than his accrued benefit as of any
retirement date prior to his Normal Retirement Age.
Except as otherwise provided in Paragraph 5.08, all pensions shall be paid
through the month of the pensioner or annuitant's death.
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<PAGE>
Notwithstanding anything to the contrary contained in this Paragraph
6.02(a), the monthly single life annuity payable to a Participant who retired or
terminated employment with all Participating Companies on or before November 1,
1997 shall be calculated in accordance with the terms of the Prior Plan. That
is, the Participant's account shall be converted into a monthly single life
annuity on his Pension Commencement Date using the appropriate factor from the
table set forth in Appendix C, and dividing the resulting amount by 12.
(b) Disability Pension. If a Participant who is eligible for a
disability pension under Paragraph 4.02 has not attained age 62 upon the
expiration of his short term disability benefits, his disability pension shall
be payable immediately at the expiration of such benefits in the amount which
would have been payable to the Participant had (i) he terminated employment at
the expiration of his short term disability benefits; (ii) his account been
credited with interest at the Applicable Interest Rate in effect on his Pension
Commencement Date, compounded annually, from such date to his 62nd birthday
(provided that the account of a disabled Participant whose short term disability
benefits expired on or before October 31, 1997 shall be credited with interest
at the rate of 4 percent per year, compounded annually); and (iii) his account
been converted into an actuarially equivalent, monthly single life annuity when
he attained age 62 in accordance with subparagraph 6.02(a), except that his
benefit shall be calculated using the age 62 factor in effect on his Pension
Commencement Date. If a Participant who is eligible for a disability pension
under Paragraph 4.02 has attained age 62 upon the expiration of his short term
disability benefits, his disability pension shall be payable immediately at the
expiration of his short term disability benefits in the amount which would have
28
<PAGE>
been payable to the Participant had his account been converted into an
actuarially equivalent, monthly single life annuity in accordance with
subparagraph 6.02(a) at such time; provided, however, such Participant may elect
to be paid a deferred vested pension instead of a disability pension.
The amount of the annuity actually payable to a participant may be reduced
in accordance with subparagraph 7.01(a)(1).
In the event a disability pension is not terminated earlier under
Paragraph 4.02, it shall be paid through the month of the pensioner's death.
6.3 No Reduction in Accrued Benefits. In no event shall any Participant's
accrued benefit as of the Effective Date be less than his accrued benefit under
the Prior Plan, reduced, if applicable, for early commencement and the election
of an optional form of pension in accordance with the provisions of the Prior
Plan. In addition, in no event shall the accrued benefit of a Participant who is
or would be eligible for a service pension on December 31, 2005, (assuming
continuous Net Credited Service until such date) be less than his accrued
benefit under the BellSouth Management Pension Plan, if any, on such date. This
Plan shall be deemed to incorporate the provisions of the Prior Plan to the
extent required to determine benefit rights under the Prior Plan.
6.4 Offset for Other Pensions. If a Participant is entitled to an
employer-provided pension under another defined benefit pension plan that is
qualified under Section 401(a) of the Code which is attributable to employment
with respect to which an account has been established under this Plan, his
pension under this Plan shall be reduced by the amount of such other pension. If
the other
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<PAGE>
pension is paid in a different form, or commences at a different time, the
offset under this Plan is based on what the other pension would have been had it
been paid in the same form as the pension under this Plan and commenced at the
same time as the pension under this Plan. In case any benefit or pension, which
the Claim Review Committee 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 employee of a Participating Company, to his
beneficiaries or to his annuitant under such law, the excess only, if any, of
the amount prescribed in the Plan above the amount of such payment prescribed by
law shall be payable under the Plan; provided, however, that no benefit or
pension payable under this Plan shall be reduced by reason of any governmental
benefit or pensions payable on account of military service or by reason of any
benefit which the recipient would be entitled to receive under the Social
Security Act. In those cases where, because of differences in the beneficiaries,
or differences in the time or methods of payment, or otherwise, whether there is
such excess or not is not ascertainable by mere comparison but adjustments are
necessary, the Claim Review Committee in its discretion is authorized to
determine whether or not in fact any such excess exists, and in case of such
excess, 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.
6.5 Limitation of Benefit Amount. Notwithstanding any other provision of
the Plan, the actuarially equivalent monthly lifetime pension which is derived
from the account of any Participant, when added to any pension benefits payable
to such Participant under any other defined benefit pension plan maintained by a
Participating Company or Affiliate, shall not exceed the "maximum permissible
amount" described in subparagraph (a) below. The portion of any pension or
survivor annuity with respect to any Participant in excess of the applicable
"maximum
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permissible amount" shall be paid by the Participating Company which last
employed such Participant directly to the Participant or beneficiary entitled
thereto and shall be charged to its operating expense accounts when and as paid.
If such portion is not to be paid as a lump sum settlement pursuant to
subparagraph 7.08(a), it shall be paid (i) if the Participant has not elected to
receive a lump sum settlement of his pension, in the same form in which the
Participant is to receive his pension, subject to the same reduction for payment
in the form of a joint and 50% survivor annuity as provided in subparagraph
7.01(a)(1), or (ii) if the Participant has elected to receive a lump sum
settlement of his pension, in the form of annuity elected by the Participant in
accordance with rules established by the Plan Administrator, subject to the same
reduction for payment in the form of a joint and 50% survivor annuity as
provided in subparagraph 7.01(a)(1).
(a) The "maximum permissible amount" shall be equal to the lesser of
(1) ninety thousand dollars ($90,000) or (2) one hundred percent (100%) of the
Participant's average annual earnings for the period of three consecutive Plan
Years during which such Participant both was an active Participant in the Plan
and had the greatest aggregate earnings from a Participating Company. For
purposes of this Paragraph 6.05, the term "earnings" shall mean earnings as
defined in Appendix F of the Plan. However, the "maximum permissible amount" may
not exceed the amount from the applicable table in Appendix E related to the
Participant's completed years and months of age. The term "Social Security
Retirement Age" shall mean the age used as the retirement age for the
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Participant under Section 216(1) of the Social Security Act, except that such
section shall be applied without regard to the age increase factor and as if the
early retirement age under Section 216(1) of such Act was 62.
(b) If a pension or survivor annuity is payable with respect to a
Participant who has less than ten years of participation in the Plan, the amount
specified in subparagraph (a)(1) above shall be multiplied by a fraction, the
numerator of which is the Participant's years of participation and the
denominator of which is 10. If a pension or survivor annuity is payable with
respect to a participant who has less than ten years of Vesting Service Credit,
the amount specified in subparagraph (a)(2) above shall be multiplied by a
fraction, the numerator of which is the Participant's years of Vesting Service
Credit and the denominator of which is 10.
(c) If a pension or survivor annuity is payable with respect to a
Participant who was a Participant in the Plan as of December 31, 1986, the
"maximum permissible amount" shall not be less than the lesser of (i) the
Participant's accrued benefit under the Plan as of December 31, 1986, or (ii)
the maximum limitation applicable to such Participant as of December 31, 1986
under Section 415(b) of the Code.
(d) Effective January 1, 1988, and each January 1 thereafter, the
$90,000 limitation specified in the first sentence of subparagraph (a) above
shall be automatically adjusted to the new dollar limitation determined by the
Commissioner of Internal Revenue for that calendar year. The new limitation
shall apply to Plan Years ending with the calendar year of the adjustment.
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(e) If a Participant's pension hereunder is payable as a joint and
50% survivor annuity with the Participant's spouse as the beneficiary, the
modification of the pension for such form of payment shall be made before the
application of the limitation hereunder and, as so modified, shall be subject to
such limitation.
(f0 If an individual is a Participant in this Plan and has ever
participated in one or more of the following:
(1) the BellSouth Retirement Savings Plan (the "Savings
Plan");
(2) the BellSouth Savings and Security Plan (the "Savings and
Security Plan");
(3) the BellSouth Employee Stock Ownership Plan (the "ESOP");
or
(4) any other defined contribution plan maintained by a
Participating Company or Affiliate,
the applicable "maximum permissible amount" under subparagraph (a) or (c) shall
be reduced to the extent necessary to prevent the sum of the following
fractions, computed as of the close of any year, from exceeding 1.0.
(1) A fraction, the numerator of which is the individual's
projected annual benefit under the Plan and the projected annual benefit
under any other defined benefit pension plan qualified under Section
401(a) of the Code and maintained by a Participating Company or Affiliate
(computed in accordance with Section 415(e)(2) of the Code), and the
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<PAGE>
denominator of which is the product of 1.25 and the applicable "maximum
permissible amount" under subparagraph (a) or (c) above.
PLUS
(2) A fraction, the numerator of which is the sum of (A) the
annual additions (computed in accordance with Section 415(e)(3) of the
Code) to the individual's account in any of the plans referred to in this
subparagraph (f), and (B) the annual additions prior to 1984 to the
individual's account in the Bell System Savings Plan for Salaried
Employees, and the Bell System Savings and Security Plan and the Bell
System Employees Stock Ownership Plan (if the individual's accounts in
such plans have been transferred to the Savings Plan and the Savings and
Security Plan and ESOP respectively), and the denominator of which is the
total of the lesser of the following amounts separately computed for each
year of service with any company participating in such plans:
(A) 35 percent of the Participant's earnings for each year, or
(B) 125 percent of the dollar limitation under Section
415(c)(1)(A) of the Code for each such year.
Pursuant to regulations to be prescribed by the Secretary of the Treasury or his
delegate, an amount shall be subtracted from the numerator of the under (2)
above with respect to any Participant (but not exceeding such numerator), so
that the sum of the "defined benefit plan fraction" and the "defined
contribution plan fraction" computed as of December 31, 1986 under Section
415(e)(1) of the Code does not exceed 1.0.
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<PAGE>
(g) If a Participant participates in a defined benefit plan or plans
maintained by a Participating Company or Affiliate and a defined contribution
plan or plans maintained by a Participating Company or Affiliate, such
Participant's rate of benefit accrual under such defined benefit plan or plans,
and/or the allocation to his account under such defined contribution plan or
plans, shall be reduced if such reduction is required to comply with the
limitations set forth in section 415 of the Code. If a reduction in the rate of
benefit accrual or a reduction in the allocation to an account is required,
benefits payable from, or allocations under, the following plans shall be
reduced in the order the Plans are listed:
(1) BellSouth Personal Retirement Account Pension Plan (not
including the benefits payable in excess of the "maximum permissible
amount" under this Paragraph 6.05);
(2) BellSouth Pension Plan;
(3) Any other defined benefit pension plan maintained by an
Affiliate;
(4) Savings Plan;
(5) Savings and Security Plan;
(6) ESOP; and
(7) Any other defined contribution plan maintained by an
Affiliate.
(h) This Paragraph 6.05 is intended to comply with Code Section 415
and should be interpreted to limit benefits only to the extent required by that
Code Section. Accordingly, the limits of this Paragraph 6.05 shall be applied by
considering all plans maintained by a Participating
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<PAGE>
Company and its Affiliates [(as defined in this subparagraph 6.05(h)], in which
a Participant participates or has participated, but without combining plans
maintained by Participating Companies that are not Affiliates. For purposes of
this Paragraph 6.05, "Affiliate" shall have the same meaning as in Paragraph
1.02, except that the provisions of subparagraphs 1.02(a) and 1.02(b) shall be
applied by substituting the phrase "more than 50 percent" for the phrase "at
least 80 percent" each place it appears in Code Section 1563(a)(1).
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<PAGE>
SECTION 7
PAYMENT OPTIONS
7.1 Annuity Forms of Payment.
(a) Normal Forms of Benefit.
(i) Married Participant. If a Participant is married on his
Pension Commencement Date, his pension shall be payable as a joint and 50%
survivor annuity unless he Elects otherwise as provided in Paragraph 7.02.
The joint and 50% survivor annuity shall be 90 percent of the benefit
amount described in Section 6, and 50 percent of such reduced pension
shall be paid to the Participant's surviving spouse (if such spouse is the
one to whom the Participant was married on his Pension Commencement Date)
for the remainder of the surviving spouse's lifetime.
(ii) Unmarried Participant. If a Participant is not married on
his Pension Commencement Date, his pension shall be unreduced and shall be
a single life annuity.
(b) Optional Form of Benefit for Married Participant. A married
Participant may Elect to waive the joint and 50% survivor annuity and to receive
in lieu thereof a single life annuity.
7.2 Election of Early Retirement or Alternate Form of Benefit. A
Participant who wants to Elect to have his pension commence prior to attaining
his Normal Retirement Age and a married
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Participant who wants to Elect a single life annuity form of benefit may do so
in accordance with the following procedures.
(a) Notification Requirements. The Participant must be given written
notification, as described below, during the 90-day period preceding his Pension
Commencement Date. The notification must explain (i) the Participant's right to
make the election, (ii) the effect of his making the election, (iii) the rights
of his spouse with respect to such election, (iv) his right to revoke the
election during the election period, (v) the effect of such a revocation, and
(vi) if applicable, his right to defer receipt of his pension. Any notification
with respect to the joint and 50% survivor annuity must include (i) a written
explanation of the terms, conditions and relative values of that option and (ii)
a reasonable estimate of both the joint and 50% survivor annuity payable and the
single life annuity payable if he so Elects.
(b) Election Requirements. The notification must include an election
form on which the Participant may make the applicable election. The election
form must be signed and must acknowledge the effect of such election, and all
signatures on the form must be notarized. The election must be made during the
30 to 90-day period (the length of which shall be set by the plan administrator)
following receipt of the notification and the election form and may be revoked
at any time during such period by filing a new election form. Notwithstanding
the foregoing, however, a Participant may waive, subject to spousal consent, the
right to consider his election for a full 30 days by appropriately completing
and signing the election form, provided his election may not be revoked
following such waiver; and provided further, that the Participant's benefits may
not commence prior
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<PAGE>
to the date which is 7 days after the date on which the notification [described
in paragraph (a)] was given to the Participant. However, nothing contained
herein shall be construed to require the plan administrator to accelerate
benefit payments.
(c) Spousal Consent. If the Participant is married on the Pension
Commencement Date, the Participant's spouse must consent to the election of a
single life annuity or the lump sum settlement option described in Paragraph
7.08, and such consent must (i) be written and the spouse's signature must be
notarized, (ii) state the elected form of benefit (or expressly permit the
Participant to designate other forms of benefit without any requirement of
further consent by the spouse), and (iii) acknowledge the effect of such
election and form of benefit. Any such spousal consent shall be irrevocable.
Spousal consent is not required if the Participant establishes to the
satisfaction of the Benefit Committee that such consent cannot be obtained
because there is no spouse, because the spouse cannot be located or because of
any other circumstances under which spousal consent is not required under
Section 417 of the Code.
7.3 Revocation or Change in Status. If the Participant's spouse dies after
the Participant has made an election and before his Pension Commencement Date,
notwithstanding subparagraph 7.02(c) above, such election shall be deemed to be
revoked. If the marriage of the Participant and his spouse terminates after the
Pension Commencement Date, such person shall continue to be regarded as the
Participant's spouse for purposes of this Section 7 unless a qualified domestic
relations order provides otherwise.
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<PAGE>
7.4 Pop-up Feature. If the spouse of a former Participant who is receiving
a joint and 50% survivor annuity (a) was married to the Participant on his
Pension Commencement Date or was entitled to part or all of the survivor portion
of the Participant's annuity under the terms of a qualified domestic relations
order in effect on such Date, and (b) dies after such date, his pension shall be
increased by the amount his pension was originally reduced to provide the
survivor benefit to such spouse, starting with the pension payment for the month
following the death of the spouse.
7.5 Election Periods for Disability Pensioners. Any Participant determined
to be eligible for disability pension payments shall be covered by the election
provisions in Paragraph 7.02, above. The provisions shall apply both at the time
the disability pension payments commence and at the time the disability pension
converts to a service pension. If a Participant eligible for a disability
pension Elects a single life annuity form of benefit for his disability pension
and dies prior to age 65, the provisions of Section 8 that apply to terminated
vested employees are applicable.
7.6 Cash-out of Small Pensions.
(a) Payment to Participant. If the greater of the Participant's
account balance or the present value of the Participant's accrued benefit
(determined using the Applicable Mortality Table and the Applicable Interest
Rate) is less than or equal to $5,000 as of the date of his Pension Commencement
Date (or, at the time of any prior distribution never exceeded $5,000), a
lump-sum settlement equal to such greater amount shall be payable to him on such
date in lieu of any other benefits under the Plan, if the greater of such
amounts remains $5,000 or less through the date of
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<PAGE>
payment; provided that, if a Participant's Pension Commencement Date occurs
before April 1, 1998, the lump sum settlement shall be payable with respect to
benefits of $3,500 or less.
If a Participant ceases to be an Employee prior to becoming vested in his
accrued benefit hereunder, such Participant shall be deemed to have received a
lump sum settlement of $0, and his entire accrued benefit shall immediately be
forfeited. In the event such a Participant again becomes an Employee before he
has incurred five consecutive Statutory Breaks in Service, he shall be deemed to
have immediately repaid to the Plan the amount which was deemed to have been
distributed upon his prior termination of employment, and his account shall be
restored in accordance with Paragraph 3.08.
(b) Payment to Surviving Spouse. A lump sum settlement shall be
payable to the Participant's surviving spouse in lieu of the benefits otherwise
payable to such spouse pursuant to Paragraph 8.02 or 8.03 if (i) with respect to
survivor benefits payable under Paragraph 8.02, the greater of 45 percent of the
Participant's account balance, as increased by the interest credits provided in
clause (ii) of that Paragraph, and the present value of the benefit payable to
such spouse (determined using the assumptions in subparagraph 7.06(a) above) is
less than or equal to $5,000 ($3,500 if the Pension Commencement Date occurs
before April 1, 1998), or (ii) with respect to survivor benefits payable under
Paragraph 8.03, the greater of 45 percent of the Participant's account balance
as of the date of his death and the present value of the benefit payable to such
spouse (determined using the assumptions in subparagraph 7.06(a) above) is less
than or equal to $5,000
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<PAGE>
($3,500 if the Pension Commencement Date occurs before April 1, 1998) but only
if such greater amount remains $5,000 ($3,500 if applicable) or less through the
date of payment.
7.7 Rollover Distributions.
(a) General. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under this
Paragraph 7.07, a distributee may elect, at the time and in the manner
prescribed by the Committee, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by the
distributee in a direct rollover.
(b) Definitions.
(i) Eligible Rollover Distribution. An eligible rollover
distribution is any distribution of all or any portion of the balance to
the credit of the distributee, except that an eligible rollover
distribution does not include any distribution that is one of a series of
substantially equal periodic payments (not less frequently than annually)
made for the life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified period of ten
years or more; any distribution to the extent such distribution is
required under Code Section 401(a)(9); and the portion of any distribution
that is not includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to employer
securities).
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(ii) Eligible Retirement Plan. An eligible retirement plan is
an individual retirement account described in Code Section 408(a), an
individual retirement annuity described in Code Section 408(b), an annuity
plan described in Code Section 403(a), or a qualified trust described in
Code Section 401(a), that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution to
the surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(iii) Distributee. A distributee includes an Employee or
former Employee. In addition, the Employee's or former Employee's
surviving spouse and the Employee's or former Employee's spouse or former
spouse who is the alternate payee under a qualified domestic relations
order, as defined in Code Section 414(p), are distributees with regard to
the interest of the spouse or former spouse.
(iv) Direct Rollover. A direct rollover is a payment by the
Plan to the eligible retirement plan specified by the distributee.
7.8 Lump Sum Settlement Option. A Participant may Elect to receive a lump
sum settlement as determined below in lieu of the forms of benefit described in
Paragraph 7.01.
(a) An election to receive a lump sum settlement described in this
Paragraph 7.08 by a Participant shall include amounts payable by Participating
Companies pursuant to Paragraph 6.05 of the Plan which are in excess of the
"maximum permissible amount" described in such Paragraph only if the present
value of such amounts, determined on the Pension
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<PAGE>
Commencement Date using the Applicable Mortality Table and the Applicable
Interest Rate, does not exceed $20,000.
(b) A Participant who wants to Elect to receive a lump sum
settlement as described above must do so in accordance with the procedures in
Paragraph 7.02.
(c) Except as set forth in subparagraphs (d) and (e) hereof, the
lump sum settlement of any Participant who Elects the lump sum settlement option
shall equal the Participant's account balance.
(d) A Participant's lump sum settlement option shall equal the
greatest lump sum present value set out below if such value is greater than the
Participant's account balance and the Participant is eligible for the monthly
benefit on which such lump sum present value is based. In each case, the lump
sum present value shall represent the value of (1) the Participant's pension on
his Pension Commencement Date if he is service pension eligible, or (2) the
Participant's pension payable as of his Normal Retirement Age, if he is not
eligible for a service pension. Such present value shall be determined using the
Applicable Mortality Table and the Applicable Interest Rate unless the combined
use of the BellSouth Management Mortality Table and the PBGC Interest Rate
results in a greater amount. If the BellSouth Management Mortality Table and the
PBGC Interest Rate are used to calculate the present value and the single sum so
determined exceeds $25,000, 120 percent of the PBGC Interest Rate shall be used,
and then if the single sum determined using 120 percent is less than $25,000,
the single sum shall be deemed to be $25,000. Lump sum present values shall be
determined with respect to the following monthly benefits.
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(i) For a Participant whose Pension Commencement Date occurs
before January 1, 2001, the monthly benefit accrued under the BellSouth
Management Pension Plan, calculated in accordance with subparagraph
6.02(a)(i).
(ii) The monthly benefit based on the Minimum Account Balance,
calculated in accordance with subparagraph 6.02(a)(ii).
(iii) For a Participant who first becomes service pension
eligible during 1998 and whose Pension Commencement Date occurs before
January 1, 2000, the monthly benefit calculated in accordance with
subparagraph 6.02 (a)(iii).
(iv) For a Participant who terminates employment from all
Participating Companies before November 1, 1997, whose account balance is
not restored in accordance with Paragraph 3.08, and whose Pension
Commencement Date occurs before January 1, 2000, the monthly benefit
calculated in accordance with the terms of the Prior Plan and Paragraph
6.02.
(e) The provisions of subparagraph (d) shall apply with respect to
the calculation of the lump sum present value of the monthly benefits set forth
below, except that present value shall be determined using only the Applicable
Interest Rate and the Applicable Mortality Table. If the lump sum present value
so determined is greater than the Participant's account balance, the Participant
shall be entitled to such amount under the lump sum settlement option.
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<PAGE>
(i) For a Participant whose Pension Commencement Date occurs
on or after January 1, 2001, the monthly benefit accrued under the
BellSouth Management Pension Plan, calculated in accordance with
subparagraph 6.02(a)(i).
(ii) For a Participant who retired or terminated employment
with all Participating Companies before November 1, 1997 and whose Pension
Commencement Date occurs on or after January 1, 2000, the monthly benefit
calculated in accordance with the terms of the Prior Plan and Paragraph
6.02.
7.9 Incidental and Minimum Benefit Rules. All distributions shall be made
in accordance with Code 401(a)(9) and the regulations promulgated under Code
401(a)(9), including proposed Treasury Regulation 1.401(a)(9)-2 (relating to
incidental benefit limitations), and the terms of the Plan reflecting the
requirements of Code 401(a)(9) shall override the distribution options and
suspension of benefit provisions in the Plan if they are inconsistent with those
requirements.
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<PAGE>
SECTION 8
PRERETIREMENT SURVIVING SPOUSE PENSION
8.1 Eligibility. If a Participant dies after becoming vested but before
his Pension Commencement Date, the benefits described in this Section 8 are
payable to his surviving spouse.
A Participant's spouse is not eligible for benefits under this Section 8
unless the Participant and spouse were married to each other throughout the
one-year period ending on the date of his death.
8.2 Death Prior to Retirement or Termination. If the Participant dies
after becoming vested but while actively employed by a Participating Company or
Affiliate or while receiving benefits under the short term disability plan of a
Participating Company or Affiliate, his surviving spouse may elect to have
payments begin at any time following the Participant's death.
The surviving spouse's monthly pension shall be 45 percent of the amount
which would have been payable to the Participant had (i) he terminated
employment with a deferred vested pension on the date of his death, (ii) if he
had not attained age 62 as of his death, his account been credited with interest
at the rate applicable to the Participant (as set forth in Paragraph 3.04) in
the year of his death, from the date of his death to his 62nd birthday, and
(iii) his account been converted into an actuarially equivalent single life
annuity at age 62, if he had not attained age 62 on the date of his death, or on
the date of his death, if he had attained age 62 as of such date, using the age
62 factor from the table in Appendix 3, as in effect on the date of his death.
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<PAGE>
Effective for a Participant who dies on or after July 22, 1996, if such
Participant has a surviving spouse, in lieu of the monthly pension described
above, the surviving spouse may elect to receive a lump sum settlement that is
equal to the greater of (I) 45% of the Participant's account balance determined
in steps (i) and (ii), above, and (II) the lump sum amount that would be payable
to Participant under Paragraph 7.08. If such a Participant dies and does not
have a surviving spouse (or he and his surviving spouse have not been married
throughout the one-year period ending on the date of his death), the amount
determined in the prior sentence shall be paid to his estate in a lump sum.
8.3 Death After Retirement or Termination. If the Participant dies after
retirement or termination of employment but before his Pension Commencement
Date, his surviving spouse may elect to have payments begin at any time
following the Participant's death.
In either case, the surviving spouse's pension is the amount such spouse
would have received had the Participant lived until the date payments begin to
be paid to the surviving spouse, elected payments to begin on such date in the
form of the joint and 50% survivor annuity, and then died.
8.4 Distribution of Benefits. Benefits payable to a Participant's spouse
under this Section 8 shall commence not later than the end of the calendar year
following the calendar year in which the Participant would have attained age
70????. Any lump sum payable under the terms of this Section 8 to the estate of
the Participant shall be distributed within five years after the date of the
Participant's death.
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<PAGE>
SECTION 9
DEATH BENEFIT PLAN
9.1 Accidental Death Benefit. In the event an Eligible Employee dies as a
result of an accidental injury arising out of and in the course of employment of
a Participating Company (including while the Eligible Employee is in travel
status such that his expenses are being paid by a Participating Company), there
shall be paid to his beneficiary, as determined under Paragraph 9.04, an
Accidental Death Benefit not to exceed three years' wages, as such term is
defined in subparagraph 9.07(c), plus an amount equal to the necessary expenses
of burial of the Eligible Employee not in excess of $500. The Benefit Committee
must determine that the injury causing the Eligible Employee's death resulted
solely from an accident occurring during and in connection with the performance
of services by the Eligible Employee for a Participating Company, which services
the Eligible Employee was properly directed to perform or which he voluntarily
elected to perform in protecting a Participating Company's property or interest.
The Benefit Committee must further determine that such injury resulted in the
Eligible Employee's death and that, based on administrative and interpretative
guidelines used by the Benefit Committee, the use of illegal drugs, the
consumption of alcohol, involvement in illegal acts, failure to use seat belts
or suicide did not contribute to or cause the death. In any case where an
Eligible Employee's death is determined to result from either (a) an infection
of a cut, abrasion, scratch, puncture, or other wound which was not immediately
disabling and which was not reported at the time of the occurrence or (b)
sunstroke
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<PAGE>
or frostbite, the Accidental Death Benefit shall not be payable unless otherwise
determined by the Benefit Committee. In any case where an Accidental Death
Benefit is paid following the disability of the Eligible Employee, the amount of
the Accidental Death Benefit shall not exceed the amount which could have been
paid if the disabled Eligible Employee had died on the day he ceased to be an
Employee of a Participating Company.
9.2 Sickness Death Benefit. In any case where the Accidental Death Benefit
provided under Paragraph 9.01 is not payable upon the death of an Eligible
Employee, there shall be paid to the Eligible Employee's beneficiary, as
determined under Paragraph 9.04, a Sickness Death Benefit not to exceed one
year's wages.
9.3 Pensioner Death Benefit.
(a) Upon the death of any Participant who retired from service
pursuant to a service pension or disability pension under a predecessor plan or
the Prior Plan, or terminated employment after becoming eligible for a service
pension under Paragraph 4.01 (hereinafter referred to as a "Pensioner"), and
such retirement occurred on or after the date specified in such plan for the
payment of an unreduced death benefit, there shall be paid a Pensioner Death
Benefit to the beneficiary of the Pensioner, as determined under Paragraph 9.04,
provided (i) the Pensioner was receiving or entitled to receive the pension at
the time of his death and neither the Accidental Death Benefit nor the Sickness
Death Benefit is payable and (ii) all of the Pensioner's Vesting Service Credit
was with a Former Affiliate and one or more Participating Companies. The total
amount of Pensioner Death Benefit shall not exceed the maximum amount which
could have been paid as a
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Sickness Death Benefit under Paragraph 9.02 if the Pensioner had died on his
last day of active service before retirement or, in the case of a Pensioner who
retired after the last day of the month in which his 65th birthday occurred and
whose pension was effective during the period from January 2, 1979 to August 10,
1980, inclusive, the maximum Sickness Death Benefit which could have been paid
if the Pensioner had died on the last day of the month in which his 65th
birthday occurred. In no event, however, shall the amount of the Pensioner Death
Benefit payable on account of a participant in the BellSouth Management Pension
Plan or a predecessor plan who retired prior to January 1, 1988, be less than
the annual pension allowance as determined under paragraph 2 of Section 4 of the
BellSouth Management Pension Plan or, if applicable, twelve (12) times the
monthly lifetime pension determined under subparagraph 6.02(a) or (b).
(b) If the Pensioner has satisfied the requirements of paragraph (a)
above but retired under a predecessor plan or the BellSouth Management Pension
Plan prior to the date specified in such plan for the payment of an unreduced
death benefit subsequent to retirement, the Pensioner Death Benefit shall not be
less than the amount specified in paragraph (a) above reduced by 10 percent for
each full year which has elapsed since his retirement. In no event shall the
Pensioner Death Benefit be less than the annual pension allowance as determined
under paragraph 2 of Section 4 of the BellSouth Management Pension Plan.(c) In
any case where the Pensioner transferred from a Participating Company to an
Affiliate which is not a Participating Company or from such an Affiliate to a
Participating Company and who at the time of death was receiving either a
service pension or disability pension under a predecessor plan or the BellSouth
Management
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<PAGE>
Pension Plan, or who was receiving or entitled to receive a pension benefit
under this Plan after satisfying the requirements of either Paragraph 4.01 or
Paragraph 4.02, the Pensioner Death Benefit shall not exceed a pro rata portion
of the Sickness Death Benefit which could have been paid if the Pensioner had
died on his last day of active service with a Participating Company. The pro
rata amount shall be based upon the Pensioner's years of Vesting Service Credit
as follows:
<TABLE>
<CAPTION>
Years of Percentage of
Vesting Service Credit Death Benefit Paid
---------------------- ------------------
<S> <C> <C>
0 - less than 10 years 0%
10 - less than 15 years 25%
15 - less than 20 years 50%
20 - less than 25 years 75%
25 or more years 100%
</TABLE>
(c) In the case of a Pensioner described in subparagraph 9.03(a),
(b), or (c) above, who retires on or after January 1, 1988, no Pensioner Death
Benefit shall be payable upon the death of such a person if such person's
Vesting Service Credit as of January 1, 1988 (including periods of employment
prior to such date which may be included subsequent to such date under the Plan
bridging rules), is less than ten years. In any case where such a pensioner
completed 20 or more years of Vesting Service Credit as of January 1, 1988
(including periods of employment occurring prior to such date which may be
included subsequent to such date under the Plan bridging rules), the Pensioner
Death Benefit amount shall equal one year's wages of such person determined as
of December 31, 1987. In any case where such a Pensioner completed at least ten
years of Vesting Service Credit but less than 20 years of Vesting Service Credit
as of January 1, 1988 (including periods of employment occurring prior to such
date which may be included subsequent to such date
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<PAGE>
under the Plan bridging rules), the Pensioner Death Benefit shall equal 50
percent of one year's wages of such person determined as of December 31, 1987.
9.4 Beneficiaries Eligible to Receive Death.
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<PAGE>
(a) The Accidental Death Benefit, Sickness Death Benefit and
Pensioner Death Benefit shall be payable to any one or more of the following
individuals, who shall be the Eligible Employee's "mandatory beneficiaries": the
spouse of the deceased Participant or Pensioner if living with him at the time
of his death; the unmarried child or children of the deceased Participant or
Pensioner under the age of 23 years (or over that age if they become physically
or mentally incapable of self support prior to age 23) who were actually
supported in whole or in part by the deceased Participant or Pensioner at the
time of death; or a dependent parent who lives in the same household with the
Participant or Pensioner or who lives in a separate household which is provided
for the parent by the Participant or Pensioner. If the Participant or Pensioner
is survived by two or more mandatory beneficiaries, the Benefit Committee shall
pay the applicable Death Benefit to or for any one or more of such possible
beneficiaries in such portions as it may determine, taking into consideration
the degree of dependency and such other facts as it may deem pertinent.
(b) If the Participant or Pensioner is not survived by any spouse,
child or parent, as herein described, the Death Benefit may be paid to a
"discretionary beneficiary" who may be any other relative who is receiving or is
entitled to receive support from the deceased Participant or Pensioner at the
time of his death.
(c) In making its determinations hereunder, the Benefit Committee
may take into account, but shall not be bound by, any beneficiary designation
made by the Participant or Pensioner specifying the person or persons to whom
benefits shall be paid and the amount payable to each. In any case where no
beneficiary survives the Participant or Pensioner or if the amount of the death
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<PAGE>
benefit authorized by the Benefit Committee is less than the maximum award
payable, the Benefit Committee may authorize that payment be made to defray the
necessary expenses incident to the death of the Participant or Pensioner and any
disability immediately preceding death, together with, in the case of the
Sickness Death Benefit, the necessary expenses of burial not in excess of $500.
9.5 Method of Payment.
(a) The Benefit Committee shall have the discretion to determine
whether death benefits are payable in a lump sum or installments and, if paid in
installments, the frequency of payments as well as the period over which
payments are made. Any Participant or Pensioner may file a written Death Benefit
Direction with the Benefit Committee requesting that death benefits be paid in
equal monthly installments over a period which does not exceed five years (ten
years in the case of a written request filed with the Committee prior to January
1, 1984). Death Benefits, if payable, shall be paid in accordance with such
Death Benefit Direction. In the event a beneficiary who is receiving or is
entitled to receive installment payments hereunder dies prior to the receipt of
all such payments, the Benefit Committee may direct that the remaining portion
of such payments be payable to any other eligible beneficiary or to the estate
of the deceased beneficiary in a manner determined by it, subject, however, to
the requirement that payments be completed within five years of the death of the
Participant or Pensioner. Any installment payments hereunder shall be credited
with interest at a rate determined by the Benefit Committee, which rate may be
redetermined no more than once in any calendar year. No interest shall be
credited beyond the date of death of the
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<PAGE>
initial beneficiary unless the Benefit Committee determines to pay the unpaid
balance of such benefit to another beneficiary in installments.
(b) The Benefit Committee may pay, before finally selecting a
beneficiary or beneficiaries, a portion of any death benefit to the spouse of
the deceased Participant or Pensioner, or some other person designated by the
Benefit Committee, which is equivalent to the wages, disability benefits or
pension which the deceased person would have received. Such payment shall be
made for the balance of the payroll period in which death occurs. In addition,
the Benefit Committee may authorize payment of a portion of the death benefit
not in excess of $1,500 to meet urgent expenses incident to the death and the
immediately preceding disability of the deceased or the burial of the deceased.
Any such payments shall reduce the balance of the death benefit.
9.6 Source of Payment. Sickness Death Benefits and Pensioner Death
Benefits when paid due to the death of a service or disability Pensioner,
together with interest thereon, shall be payable from the assets of the Plan if
payment is made to a mandatory beneficiary. Accidental Death Benefits in excess
of the maximum Sickness Death Benefit which could have been payable to the
Participant or, if greater, $50,000, shall be paid through insurance maintained
by such Participating Company on the life of such Participant or Pensioner. All
other death benefits shall be paid from the assets of the Participating Company
which last employed the Participant or Pensioner. Notwithstanding anything above
to the contrary, any death benefit payable under Paragraph 9.03 with respect to
a Participant who has received a lump sum settlement pursuant to Paragraph 7.08,
and any interest thereon, shall be paid from the assets of the Participating
Company that last
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<PAGE>
employed the Participant or from a trust established by such Participating
Company to fund a voluntary employees' beneficiary association under which such
benefit is payable.
9.7 Special Rules.
(a) The death benefits payable under this Section 9 are in addition
to any pre-retirement surviving spouse benefits payable under Section 8 and any
survivor annuity payable under Section 7. In no event, however, shall more than
one death benefit described in this Section 9 be payable upon the death of any
Participant or Pensioner.
(b) No death benefits shall be payable under this Section 9 in any
case where a claim is presented or suit brought against any Participating
Company, Affiliate or Former Affiliate for damages resulting from the death of a
Participant or Pensioner until such time as such claims are withdrawn or such
suit is discontinued. No Accidental Death Benefit shall be payable hereunder
until such time as the Benefit Committee receives a written release of all
claims and demands which the Participant, his beneficiaries and heirs may have
had against a Participating Company, Affiliate, Interchange Company, or any
other entity determined by the Benefits Committee, which claims and demands
arise out of the accident which resulted in the Participant's death.
(c) For purposes of this Section 9, the term "wages" shall mean
wages, including contributions made under a "cafeteria plan" or a "cash or
deferred arrangement" pursuant to Sections 125 or 401(k) of the Code for
full-time service (not including overtime), computed at the Participant's annual
rate of pay which was in effect at the time of death or other date specified in
this
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<PAGE>
Section 9 or, if greater, the basic rate of pay at the date of death or other
date specified in this Section 9, as determined in accordance with Paragraph
1.12 (except that wages shall not include any short term incentive award or
plan). The "rate of pay" is the annualized base salary rate plus lump sum
payments (including, for example, team or equivalent awards, commissions,
marketing incentive payments, differentials, and salary transition payments, but
excluding any executive short-term awards) paid during the 12 months prior to
the time of death or retirement. No payments made after the death of the
employee are included. "Rate of pay" includes increases in the basic pay
approved before a disability absence began, a position rate increase approved
after a disability absence began or basic rate increases scheduled to be
effective but withheld during a disability absence. No lump sum payments are
included. In any case where a Participant's Years of Service are split between
two or more Participating Companies or Affiliates, "wages" shall be computed
based on the Participant's rate of pay on the last day in which he was on the
payroll of a Participating Company. In any case where a Participant was working
on a part-time basis, the death benefits under this Section 9 shall be computed
on the basis of the time constituting the Participant's normal service under his
contract of hire, except that Accidental Death Benefits shall be computed on the
basis of full-time service (not including overtime) in the case of any
Participant who has been continuously in the service of a Participating Company
or an Interchange Company since December 31, 1980.
(c) Participants who have been authorized to waive death benefits by
the Participating Company, Former Affiliate, or Bell Communications Research,
Inc. which employed them are permitted to waive the Sickness and Pensioner Death
Benefits provided under this Section
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<PAGE>
9. Any such waiver shall remain in effect until revoked by the Participant,
provided such revocation has been authorized by the Participating Company,
Former Affiliate or Bell Communications Research, Inc., as applicable.
(d) Except for the Pensioner Death Benefit, a Death Benefit shall
not be payable in the case of any person who dies after he has ceased to be an
employee of either a Participating Company or an Affiliate, unless such person
became disabled by reason of accident or sickness while an employee and
continued disabled, until death, to such degree as to be unable to engage in any
gainful occupation. In such a case, a Death Benefit may be paid upon approval of
the Benefit Committee.
(e) All claims for Death Benefits must be made within one year of
the death on which the claim is based. If the Benefit Committee is made aware of
a mandatory or discretionary beneficiary after one year, the Benefit Committee
shall not be required to recognize any claim made by or in behalf of such
beneficiary.
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<PAGE>
SECTION 10
COMPUTATION OF SERVICE
10.1 Hour of Service. An Hour of Service shall be determined in accordance
with the following rules:
(a) An Hour of Service is each hour for which an Employee is paid,
or entitled to payment, by a Participating Company or an Affiliate either for
the performance of duties or on account of a period of time during which no
duties are performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty, or leave of absence.
(b) Except as may otherwise be provided in Paragraphs 10.06 and
10.07, only the first 501 Hours of Service shall be recognized for any single
continuous period during which the Employee performs no duties.
(c) No Hour of Service shall be recognized if payment for such hour
is made or due under a plan maintained solely for the purpose of complying with
applicable workers' compensation or unemployment compensation or disability
insurance laws.
(d) No Hour of Service shall be recognized for any payments which
solely reimburse an Employee for medical or medically related expenses incurred
by the Employee.
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(e) Hours of Service also include hours for which back pay,
irrespective of mitigation of damages, is either awarded or agreed to by a
Participating Company or Affiliate, except for hours already recognized in
accordance with the preceding rules.
(f) An Hour of Service need not have occurred prior to termination
of employment.
(g) A part-time Employee or an Occasional Employee is deemed to have
completed 10 Hours of Service for each day in which he completed one or more
Hours of Service. Any full-time Employee is deemed to have completed 45 Hours of
Service for each week in which he completed one or more Hours of Service.
(h) Any Eligible Employee who is recalled as a Regular Employee
following a temporary layoff within six months of the date of such layoff shall
be credited with the same number of Hours of Service which would otherwise
normally have been credited to such Employee under Paragraph (g) above but for
such layoff unless the layoff began within twelve months of a prior layoff, and
the total layoff period during the twelve month period exceeds six months.
(i) For purposes of determining whether a Participant has incurred a
Statutory Break in Service, the Participant shall be credited with the Hours of
Service with which he would have been credited but for such absence for each
week during an absence from work for any period by reason of the Participant's
pregnancy, the birth of the Participant's child, the placement of a child with
the Participant in connection with the adoption of such child by the
Participant, or caring for such child for a period beginning immediately
following such birth or placement; provided, no hours
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shall be credited for such absence unless such Participant timely furnishes to
the Benefit Committee such evidence of the nature and duration of such absence
as may be required by the Benefit Committee. The hours to be credited for such a
child-related absence shall be credited (to the extent of such absence in a
calendar year) exclusively to the calendar year in which the absence from work
begins, but only to the extent such credit is necessary to prevent such
Participant from incurring a Statutory Break in Service in such period or, if no
credit is necessary to prevent a Statutory Break in Service in such period, the
hours shall be credited (to the extent of such absence in the immediately
following calendar year) exclusively to the immediately following calendar year.
10.2 Net Credited Service. A Participant's Net Credited Service is the
number of years and fractions thereof he has been continuously employed by
Participating Companies and Affiliates. Net Credited Service shall include
service creditable pursuant to Paragraph 11.05 of the Plan or under the
provisions of an Interchange Agreement or acquisition or merger agreement. Net
Credited Service also may include service creditable under the term of a court
order, arbitration award or settlement agreement; provided, however, that the
service so credited shall not exceed the period from the Participant's
termination to his reemployment under the terms of the order, award or
agreement. If the Participant has had a break in service, the Net Credited
Service is adjusted in accordance with the bridging rules in effect at the time
he returns to work. If a Participant was hired or rehired on or after January 1,
1990, and has been classified as a part-time employee at any time after his hire
or rehire, the Net Credited Service is credited on a prorated basis in
accordance with Paragraph 10.04.
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10.3 Vesting Service Credit. A Participant's Vesting Service Credit is the
number of years and fractions thereof he has been employed by Participating
Companies. Vesting Service Credit shall include service creditable pursuant to
Paragraph 11.05 of the Plan or under the provisions of an Interchange Agreement
or acquisition or merger agreement. Vesting Service Credit may also include such
periods as are included in a Participant's Net Credited Service pursuant to the
terms of a court order, arbitration award or settlement agreement. The same
part-time service rules applied to Net Credited Service also apply to Vesting
Service Credit. Except as provided in Paragraph 10.05, Vesting Service Credit
shall be bridged automatically at time of rehire following a break-in-service
for the purposes of this Plan.
10.4 Part-time Service. Employees hired or rehired on or after January 1,
1990, who are classified as part-time employees at any time after hire or rehire
accrue Net Credited Service and Vesting Service Credit on a prorated monthly
basis. The proration is determined by the number of hours worked per week as a
percent of 37.5 hours. Vesting Service Credit is adjusted, and Net Credited
Service may be adjusted, for any other part-time service at the time a service,
disability or deferred vested pension is computed.
10.5 Breaks in Service. The continuity of a Participant's Net Credited
Service is broken by any absence without pay from the service of a Participating
Company or an Affiliate, except as provided in this Section 10. Such continuity
is broken upon transfer of employment to an Interchange Company or Former
Affiliate unless an applicable Interchange Agreement provides to the contrary.
If a Participant is reemployed after a break in service, his Net Credited
Service shall
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be determined based on his employment after such break unless and until his
service before such break is recognized under the Company bridging rules.
Prior Net Credited Service shall be credited upon reemployment if the
Participant returns to active service after an absence of six months or less.
Otherwise the prior Net Credited Service is credited when the Participant
completes three years of continuous employment after such absence. The period of
absence, however, shall not be recognized as a period of employment for purposes
of computing Net Credited Service.
Notwithstanding anything above to the contrary, if a Participant receives
a lump sum settlement pursuant to Paragraph 7.06 or Paragraph 7.08, the
Participant's Net Credited Service and Vesting Service Credit after he receives
the lump sum settlement shall not reflect (subject to their restoration as
provided below) his Net Credited Service and Vesting Service Credit prior to the
settlement date. The Participant's Net Credited Service and Vesting Service
Credit shall be restored if he is reemployed in accordance with the terms of a
court order, arbitration award or settlement agreement involving litigation,
arbitration, or other action relating to a prior termination of employment and
within two years of such reemployment, or such longer period as may be specified
in such order, award or agreement, repays to the Plan the amount distributed
plus interest permitted under Section 411(c)(2)(C) of the Code compounded
annually at a rate of 5% from July 1, 1993 through December 31, 1995. The
Participant's Net Credited Service shall be restored under the bridging rules in
the preceding paragraph if he receives a lump sum settlement as a deferred
vested pensioner.
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10.6 Leaves of Absence. A leave of absence does not constitute a break in
continuity of Net Credited Service if formally granted in conformity with the
rules of a Participating Company or Affiliate, and either (a) is so granted
prior to the commencement of such leave or (b) is for attendance at an
educational institution.
A leave of absence must be approved by the Benefit Committee if it is for
a period of more than one month.
If required to be approved by the Benefit Committee, such approval must
indicate whether or not such period is deemed to be a period of employment for
purposes of computing Net Credited Service and Vesting Service Credit. A
Participant shall be deemed to have been employed during the period of any leave
that does not need Benefit Committee approval for purposes of computing his Net
Credited Service and Vesting Service Credit, and such Participant's account
shall be credited with interest credits upon his reemployment, retroactive to
the date such leave of absence commenced, as if he had been actively employed
during such leave of absence.
10.7 Layoffs. In the case of a Participant, other than a Temporary or
Occasional Employee, a layoff (which for purposes of this Paragraph shall mean
termination under a force surplus condition) on account of reduction in force
does not constitute a break in continuity of Net Credited Service provided such
Participant is reemployed as a Regular Employee within three years of such
layoff. For purposes of computing his Net Credited Service and Vesting Service
Credit, a Participant, other than a Temporary or Occasional Employee, shall be
deemed to have been employed during any layoff of less than six months and such
Participant's account shall be credited
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with interest credits upon his reemployment retroactive to the date of his
layoff as if he had been actively employed during such layoff. If a layoff or
layoffs aggregate more than six months in any twelve-month period, only the
layoff or layoffs which in aggregate did not exceed six months shall be included
in his Net Credited Service and Vesting Service Credit, and no subsequent
periods of layoff shall be so included until such Participant is continuously
employed for twelve months.
10.8 Vesting Eligibility Year. A Vesting Eligibility Year is any calendar
year in which an Employee completes 1,000 or more Hours of Service, whether or
not that service is performed as an Eligible Employee. If an Employee transfers
to or from an Interchange Company and the applicable Interchange Agreement so
provides, Vesting Eligibility Years shall include years of vesting service
recognized under the Plan of the Interchange Company. Vesting Eligibility Years
also shall include years creditable pursuant to Paragraph 11.05 of the Plan or
under the provisions of an acquisition or merger agreement. All Vesting
Eligibility Years shall be taken into account under the Plan with the exception
of (a) any Vesting Eligibility Year completed in a calendar year which ends
prior to the calendar year in which the Employee's eighteenth birthday occurs,
and (b) any Vesting Eligibility Years completed before a period of 5 consecutive
Statutory Breaks in Service if the Participant had less than 5 Vesting
Eligibility Years at the time such period of Breaks commences or under the
provisions of an acquisition or merger agreement.
10.9 Initial Periods of Service. Effective as of August 1, 1997, any
initial period of service which was less than six months shall be recognized for
all purposes, including Net Credited Service, Pension Service Credit and Vesting
Service Credit, upon the bridging of such service under the
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appropriate Plan rules. Pension Service Credit is used only for calculations
under the BellSouth Management Pension Plan.
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SECTION 11
INTERCHANGE OF BENEFIT OBLIGATIONS
AND TRANSFERS AMONG AFFILIATES
11.1 Transfers from Interchange Company or BellSouth Pension Plan. If an
Eligible Employee's accrued benefit is transferred to this Plan from the plan of
an Interchange Company or the BellSouth Pension Plan, an account shall
immediately be established for such Eligible Employee in accordance with
Appendix A.
Basic service, and, if applicable, additional and supplemental credits
shall be added to such account based on the Eligible Employee's Compensation
after the date the Eligible Employee becomes a Participant.
In no event shall the Eligible Employee's accrued benefit under this Plan
be less than the benefit so transferred.
11.2 Transfers to Interchange Company. If a Participant leaves employment
with a Participating Company or an Affiliate for employment with an Interchange
Company, he shall not be eligible to retire under this Plan if the applicable
Interchange Agreement provides for transfer of his accrued benefit obligation to
a defined benefit pension plan of the Interchange Company.
Upon the transfer of the Participant's accrued benefit to the plan of the
Interchange Company, he shall not be entitled to any further benefits under this
Plan.
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11.3 Transfers to BellSouth Pension Plan. If a Participant's position
changes so that he becomes covered under the BellSouth Pension Plan, his account
shall be maintained and credited with interest as if he were not actively
employed. For such a Participant who became covered under the BellSouth Pension
Plan before November 1, 1997, his account shall be credited with interest at the
rate of 4 percent per year, compounded annually. For a Participant who becomes
covered under the BellSouth Pension Plan on or after November 1, 1997, his
account shall be credited with interest at the rate of 4 percent per year,
compounded annually, until December 31, 1997, and thereafter at the Applicable
Interest Rate. If a Participant who became covered under the BellSouth Pension
Plan before November 1, 1997 subsequently changes his position and again becomes
eligible to participate in the Plan, his account balance shall be computed in
accordance with subparagraph 3.08(b)(iii) (provided that no cash out
distribution has occurred or is deemed to have occurred).
11.4 Prior Benefits.
(a) Former Interchange Company Plan Lump Sum. Notwithstanding any
other Plan provision, in the case of any individual who becomes a Participant in
the Plan after receiving a lump sum distribution of his accumulated plan benefit
under an Interchange Company pension plan and whose service otherwise would be
recognized by the Plan under an Interchange Agreement, such individual's service
with the Interchange Company shall not be recognized by the Plan for purposes
other than eligibility to participate in or to vest any pension benefit under
the Plan, unless and until such individual satisfies the provisions of the
Interchange Company pension plan for the repayment or other treatment of such
previous lump sum distribution. If the Interchange Company pension plan
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does not require repayment of a lump sum distribution by reemployed participants
as a condition to recognizing prior pension service credit, but instead provides
for an offset in benefits to reflect a prior lump sum distribution, the Plan
shall recognize such individual's service with the Interchange Company and
provide a benefit offset as determined by such company in accordance with the
provisions of its plan, provided that such company transfers assets under the
Interchange Agreement sufficient to provide for the plan benefits to be so
recognized.
(b) Repayment of Plan Lump Sum Benefits. Notwithstanding any other
Plan provision, if a Participant becomes a covered employee under an Interchange
Company pension plan subsequent to receiving a lump sum distribution of his
accumulated plan benefit under the Plan and if such Interchange Company pension
plan requires the repayment of such lump sum to the Plan, and corresponding
transfer of assets from the Plan to such Interchange Company pension plan as a
condition of recognizing such individual's service under the Plan, such
individual shall have the right under the Plan to repay to the Plan, within two
years after becoming a covered employee subject to interchange or portability
treatment under an Interchange Agreement, or such earlier date as it established
under the Interchange Company pension plan, the lump sum amount distributed by
the Plan plus interest permitted under Section 411(c)(2)(C) of the Code.
(c) Offset for Periodic Distributions. Notwithstanding any other
Plan provisions, if a Participant during any period receives periodic annuity
benefits under the Plan, or under an Interchange Company pension plan for which
the benefit obligation has been or will be transferred to the Plan pursuant to
an Interchange Agreement, and if such Participant subsequently receives
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service credit for such period pursuant to a court order, arbitration award,
settlement agreement or otherwise, the pension subsequently payable to such
Participant under the Plan shall be adjusted actuarially to reflect such
periodic benefits using (i) the PBGC Interest Rate for immediate annuities on
the first day of the Plan Year in which such credit is made and (ii) mortality
rates equal to the unisex rates published in the Unisex Pension Mortality Table
- - - 1984 (UP-1984).
11.5 Transfers Between Certain Affiliates and Subsidiaries. This Paragraph
11.05 is intended to apply only to a Participant who transfers employment
between Participating Companies or who transfers employment from an Affiliate
that sponsors a defined benefit pension plan in which the Participant is an
active participant to a Participating Company. In all other transfer of
employment situations, the Participant shall be treated as a new hire as of the
effective date of transfer except as may otherwise be provided in the Plan
(e.g., with respect to Vesting Eligibility Years). For purposes of this
Paragraph 11.05, a Participant shall be deemed to transfer employment if his
termination of employment with one Affiliate is followed immediately by his
employment with another Affiliate such that, counting employment with both
Affiliates, his employment is continuous.
(a) Transfers Among Participating Companies. If a Participant
transfers employment from a Participating Company that maintains the Plan to
another Participating Company that maintains the Plan, the Participant's account
balance shall continue to be maintained under the Plan, as if no transfer had
occurred. The Participant's Basic Service Credit, Additional Credit and
Supplemental Credit, if any, for the year of transfer shall be based on his
total
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Compensation for the year. The Participant's Vesting Service Credit, Net
Credited Service and Vesting Eligibility Years shall continue to be credited as
if no transfer had occurred.
(b) Transfer From Affiliate or Subsidiary That is Not a
Participating Company. If (i) a Participant transfers employment from an
Affiliate or Subsidiary that is not a Participating Company but that maintains a
defined benefit pension plan (for purposes of this subparagraph, the "Former
Pension Plan") in which the Participant is an active participant as of the date
of transfer to a Participating Company, and (ii) the Former Pension Plan
provides for the transfer of (A) the Participant's accrued benefit and (B) an
amount of assets with respect to such accrued benefit as determined in
accordance with Code Section 414(l) to the Plan, an account shall be established
for the Participant under the Plan effective as of the first day of the month in
which the Participant's transfer occurs, with an opening account balance
determined in accordance with Paragraph 5 of Appendix A. Effective as of the
date of transfer, the Participant's Vesting Service Credit, Net Credited Service
and Vesting Eligibility Years shall equal the number of years of service,
however defined, with which the Participant was credited for benefit accrual,
pension eligibility and vesting purposes, respectively, under the Former Pension
Plan immediately prior to such transfer.
(c) Transfer to an Affiliate or Subsidiary That is Not a
Participating Company. The account balance of a Participant who transfers to an
Affiliate or a Subsidiary that is not a Participating Company shall be treated
in accordance with Paragraph 11.03, in the same manner as a Participant who
changes positions and becomes covered under the BellSouth Pension Plan.
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(d) More Than One Transfer in a Plan Year. If a Participant
transfers employment more than once in a Plan Year and more than one such
transfer is covered under the provisions of this Paragraph 11.05, the provisions
of this Paragraph 11.05 shall be applied successively to each such transfer.
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SECTION 12
ADMINISTRATION
12.1 Plan Administrator. BellSouth is the Plan Administrator and the
sponsor of the Plan, as those terms are defined in ERISA.
12.2 Benefit Committees. Each Benefit Committee shall consist of three to
seven persons. Each Benefit Committee shall have the administrative
responsibilities set forth in this Paragraph and have such powers as may be
necessary to enable them to administer the Plan, except for powers expressly
provided to others in this Plan document.
Each Benefit Committee shall adopt such by-laws and uniform and
nondiscriminatory rules of procedure as it may find appropriate. The by-laws and
rules of procedure of any Benefit Committee may not be inconsistent with the
by-laws and rules of procedure of the BellSouth Benefit Committee.
Each Benefit Committee may employ a Secretary and such assistants as may
be required in the administration of the Plan. The Secretaries are hereby
designated as agents for service of legal process with respect to any claims
arising under the Plan.
Each Benefit Committee shall grant or deny claims for benefits under the
Plan and authorize disbursements according to the Plan.
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12.3 Claim Review Committee. The Claim Review Committee shall have the
exclusive right and authority to determine benefits under the Plan and to
interpret the provisions of the Plan, and its determinations and interpretations
shall be final and conclusive.
12.4 Named Fiduciary. The Claim Review Committee, each Participating
Company and each Participating Company Committee is each a named fiduciary, as
that term is used in ERISA, with respect to the particular duties and
responsibilities allocated to it in this Plan document, including the duties and
responsibilities that may be specifically allocated to BellSouth under the
instrument of trust creating any group, commingled, common or master trust fund
in which Plan assets are invested.
American Telephone and Telegraph Company ("AT&T") is a named fiduciary
with respect to any assets of the Plan (or any trust or trusts associated with
the Plan) which are held in the Telephone Real Estate Equity Trust, whether or
not the Plan's allocable share in the assets of such trusts is determinable at
any particular time. Until such time as any assets of the Plan with respect to
which AT&T is the named fiduciary are distributed to the Plan and/or its
associated trust or trusts from the Telephone Real Estate Equity Trust, AT&T
shall, consistent with the terms of the Telephone Real Estate Equity Trust and
the Asset Management Agreement between BellSouth and AT&T, with respect to such
trust, have sole authority over the selection, retention and supervision of any
trustees or investment managers with respect to such assets. As a named
fiduciary, AT&T shall have the same rights as any other named fiduciary of the
Plan to allocate or delegate any of its responsibilities to others, including
the right to delegate the responsibility to select, retain and
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supervise trustees and investment managers and the right to establish the terms
and conditions with respect to which such individuals or entities shall perform
their responsibilities.
AT&T, to the extent it accepts and acknowledges such in writing, shall
also be the named fiduciary with respect to, and all other provisions of this
paragraph shall apply to it in such capacity, any assets of the Plan and/or its
associated trust or trusts, including assets previously distributed to the Plan
and/or its trust or trusts from the Bell System Trust or the Bell System Pension
Plan Trust or any successor to such trust or trusts, including the Telephone
Real Estate Equity Trust with respect to which BellSouth or any person or entity
to which BellSouth has delegated the authority designates AT&T as the named
fiduciary.
AT&T shall have no rights or responsibilities nor shall it be the named
fiduciary with respect to any assets of the Plan which are held in a trust or
trusts (other than the Telephone Real Estate Equity Trust) or any account
thereunder with respect to which AT&T has no designated responsibility.
12.5 Allocation of Responsibilities. BellSouth may allocate
responsibilities for the operation and administration of the Plan consistent
with the Plan's terms, including allocation of responsibilities to Participating
Companies or Benefit Committees.
12.6 Delegation of Responsibilities. BellSouth and other named fiduciaries
may delegate any of their responsibilities by designating in writing other
persons to carry out their respective responsibilities under the Plan. BellSouth
may employ persons to advise them with regard to any such responsibilities.
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BellSouth may delegate or allocate, as applicable, to another fiduciary
the responsibility to appoint, retain and terminate trustees and investment
managers and to define the authorities and responsibilities of each. The
provisions of this paragraph shall apply to the responsibilities of BellSouth or
any other named fiduciary under the Plan relating to any trusts associated with
the Plan, including any group, commingled, common or master trust associated
with the Plan and with respect to which BellSouth or any other named fiduciary
under the Plan has responsibilities.
12.7 Plan Expenses. The expenses of the Claim Review Committee in
administering the Plan shall be borne by BellSouth. The expenses of each Benefit
Committee shall be borne by the applicable Participating Company. All other
expenses relating to the administration of the Plan may be paid from Plan
assets, to the extent permitted under ERISA. Any expenses not paid from plan
assets shall be paid by a Participating Company.
12.8 Miscellaneous. Any person or group of persons may serve in more than
one fiduciary capacity with respect to the Plan (including service both as a
trustee and as an administrator).
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SECTION 13
RIGHTS AND CLAIMS
13.1 Notice to Employees. The Benefit Committee shall notify all
Participants of their eligibility to retire as they become eligible and shall
notify each vested Participant who leaves the employ of a Participating Company
of his eligibility for a deferred pension. In the latter case, such notice shall
be mailed, within a reasonable time of leaving, to his last known address as
shown on the Participating Company's records.
13.2 Claims Procedure. Any person claiming benefits under the Plan must do
so by delivering a written notice of his claim to the person designated by the
Benefit Committee to initially determine claims for Plan benefits. The notice
must set forth all of the facts necessary to permit such person to determine
whether or not the Claimant is entitled to the benefit claimed.
Within 90 days following receipt of such written notice, the Claimant
shall be informed in writing as to whether the claim will be allowed or wholly
or partially denied. If the claim is wholly or partially denied, the notice must
include the specific reason or reasons for the denial. It must also include
specific reference to the pertinent Plan provisions on which the denial is
based, a description of any material and information necessary to perfect the
claim, an explanation of why such material and information is necessary, and an
explanation of the Plan's claim review procedure.
If a claim for benefits is denied, in whole or in part, the Claimant is
entitled to have such denial reviewed by the Claim Review Committee, provided he
files a written request for such review
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with the Claim Review Committee within 60 days after he receives or is notified
of the denial of his claim.
Upon receipt of such request, the Claim Review Committee shall make a full
and fair review of the Benefit Committee's decision. In connection with such
review, the Claimant is entitled to review pertinent documents and to submit
issues and comments in writing.
The Claim Review Committee shall make a decision with respect to such
claim within 60 days after it receives the Claimant's written request for
review, or within an additional 60 days, provided the Claimant is notified of
the delay and the reasons for requiring such additional time.
The Claim Review Committee shall notify the Claimant of the review
decision. Such notice must be in writing and must include specific reasons for
its decision and specific references to the provisions of the Plan on which its
decision was based.
The Claims Review Committee is the fiduciary to which the Plan grants full
discretion, with the advice of counsel, to interpret the Plan; to determine
whether a Claimant is eligible for benefits; to decide the amount, form and
timing of benefits; and to resolve any other matter under the Plan which is
raised by a Claimant or identified by the Claims Review Committee. All questions
arising from or in connection with the provisions of the Plan and its
administration shall be determined by the Claims Review Committee, and any
determination so made shall be conclusive and binding upon all persons affected
thereby.
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13.3 Non-assignability. Benefits under this Plan may not be assigned or
alienated, except (a) as required under Section 206(d) of ERISA or (b) in
accordance with the applicable requirements of a "qualified domestic relations
order" as that term is defined in Section 414(p) of the Code.
The Benefit Committee shall (a) promptly notify the Employee and any
"alternate payee," as that term is defined in Section 414(p)(8) of the Code, of
the receipt of a domestic relations order and the Plan's procedures for
determining the qualified status of such order, (b) determine the qualified
status of such order, and (c) administer any distributions under this Plan
pursuant to such order in accordance with the rules set forth in Section 414(p)
of the Code.
Any such determination or payment shall be final and binding on all
parties.
13.4 Payment to Others. Any benefits payable to a Participant or surviving
spouse, but not actually paid to such person at the time of his death, may be
paid to a suitable person selected by the Benefit Committee if permitted under
applicable law. Any such payment shall be for use in payment of expenses
incident to the death of the deceased person or for the benefit of any one or
more persons who were dependent upon him at the time of his death.
Any benefits payable to a Participant or surviving spouse who is unable to
execute a proper receipt, whether because of minority or mental or physical
disability or for such other reason as the Benefit Committee deems appropriate,
may be paid to a suitable person selected by the Benefit Committee to use for
the benefit of such Participant or surviving spouse. Payment of such benefit to
such person shall fully and completely discharge any liability of the Plan or
its fiduciaries.
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13.5 Forfeiture of Benefits by Killers. No survivor or death benefit shall
be paid under any provision of the Plan to any individual who, by virtue of his
involvement in the death of a Participant with respect to whom such survivor or
death benefits would otherwise be payable, would be denied entitlement to an
interest in assets of the deceased (whether or not there is in fact any such
entitlement) under any applicable law, state or federal, including without
limitation laws governing intestate succession, wills, jointly-owned property,
bonds, and life insurance policies.
The Benefit Committee may withhold distribution of benefits otherwise
payable under the Plan for such period of time as is necessary or appropriate
under the circumstances to make a determination with regard the application of
this provision.
13.6 Recovery of Overpayment. If for any reason the benefits paid on
account of a Participant from the Pension Fund exceed the amount payable on
account of such Participant pursuant to the terms of the Plan, the amount of
such overpayment may be recovered from the payee by the Benefit Committee on
behalf of the Pension Fund. The Benefit Committee may recover such overpayment
by (i) the payee's direct payment to the Pension Fund, (ii) set-off against the
future benefits otherwise payable to such payee on account of the Participant,
or (iii) a combination of (i) and (ii).
13.7 No Review by Former Affiliate Plan or Predecessor Plan Committee. No
claim for benefits under this Plan is subject to review by any committee of any
Former Affiliate plan or any committee of any plan which preceded this Plan.
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13.8 No Claims Against a Participating Company. Neither the establishment
of this Plan nor any action taken by the Board or by the Committees or any
Participating Company gives any officer, agent or employee a right to be
retained by a Participating Company or any Affiliate or Subsidiary, or any right
or claim to any benefits under the Plan or to the assets of the Pension Fund,
except as expressly provided in this document.
13.9 Payment of Interest on Late Payments. If payment of a Participant's
lump sum settlement or pension payment is delayed or underpaid for a period of
more than thirty days beyond his Pension Commencement Date because of
administrative delay or for any other reason, interest shall be paid on such
late payment or underpayment at the Applicable Interest Rate in effect for the
period of the delay.
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SECTION 14
PENSION FUND
14.1 Establishment of Pension Fund. BellSouth has established the Pension
Fund for the payment of all Plan benefits (other than excess plan benefits
described in Paragraph 6.05, disability pension payments before January 1, 1994,
payments to mandatory beneficiaries payable on account of the deaths of
disability pensioners before October 1, 1994, and certain death benefits under
Section 9, all of which are paid by the Participating Company that last employed
the individuals with respect to whom the benefits are due). The Pension Fund
shall be held by the trustee for the exclusive purpose of providing benefits to
Participants and their beneficiaries and defraying reasonable expenses of
administering the Plan. Except as provided in Paragraph 14.03, no part of the
Pension Fund shall at any time inure to the benefit of any Participating
Company, Affiliate or Subsidiary.
Any assets related to the Plan held under any group, commingled, common or
master trust shall be considered as part of and held under the Pension Fund.
The Pension Fund shall be disbursed as directed by the applicable
Participating Company. All pensions shall be paid from the Pension Fund either
directly, or through the purchase of annuities from an insurance company, as
BellSouth shall determine.
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<PAGE>
14.2 Appointment of Trustees and Investment Managers. BellSouth shall
appoint one or more trustees which are responsible for holding and managing
assets of the Plan and paying benefits from such assets, except as otherwise set
forth in this Section 14.
BellSouth may appoint one or more investment managers to manage all or
portions of the assets of the Plan.
BellSouth may issue general or specific investment directions and
guidelines to trustees and investment managers and may also issue specific
directions to them for investment in investment companies or trusts and
companies or trusts that hold or propose to hold two or more parcels of real
property or interests therein or hold non-marketable interests in companies or
trusts which hold interests in debt or equity obligations.
By notice to a trustee, BellSouth may assume responsibility for management
of all or a designated portion of the assets held by such trustee, in which
event BellSouth shall issue specific investment directions to the trustee with
respect to such assets.
BellSouth may invest, or direct a trustee to invest, all or a portion of
the Plan's assets in contracts issued by insurance companies, including
contracts under which the insurance company holds Plan assets in a separate
account or commingled separate account managed by the insurance company.
The Company may direct or authorize a trustee to invest all or a portion
of the Plan's assets in a group, commingled, common or master trust fund or
funds (including specifically the Telephone Real Estate Equity Trust, which is
hereby designated, regardless of any further direction or
84
<PAGE>
authorization of the Company, to hold any Plan assets allocable to the Plan and
which related to the division of such trusts as of January 1, 1984, until such
time assets become subject to a physical allocation) established for the purpose
of commingling assets of participating trusts, including such fund or funds
managed in whole or in part by the Company or by a trustee or trustees or
investment manager or managers appointed by the Company or with respect to which
the Company has authority to issue general investment directions and guidelines,
in which event the instrument of trust creating any such group, commingled,
common or master trust fund, to the extent the Plan's equitable share thereof,
shall be deemed to have been adopted as a part of the Plan for purposes of
Section 401(a) of the Internal Revenue Code of 1986 or any corresponding
provision of any subsequent federal tax law. The Company may authorize a trustee
to invest part of the Plan's assets in deposits with such trustee bearing a
reasonable interest rate. The Company may invest, or direct a trustee to invest,
or if the Company has appointed an investment manager to manage all or a portion
of the assets of the plan, an investment manager may invest, or direct a trustee
to invest, all or a portion of the assets of the Plan in any other investment,
whether or not specifically expressed herein, so long as any such investment is
not prohibited by or inconsistent with the requirements of ERISA, any applicable
trust agreement (including the Telephone Real Estate Equity Trust) or any asset
management agreement relating to such trust.
BellSouth shall establish and carry out appropriate funding policies and
methods.
85
<PAGE>
14.3 Contributions Subject to Tax-Deductibility. All payments to the
Pension Fund are made on the condition that current tax deductions are allowed
for such payments under Section 404 of the Code.
To the extent a deduction would not be allowed for payments for a taxable
year, the amount so disallowed shall be repaid to BellSouth within one year
after such disallowance.
Any contribution made pursuant to a mistake of fact, within the meaning of
Section 403(c)(2)(A) of ERISA, shall be returned to BellSouth within one year
from the date of such contribution.
14.4 Forfeitures. If the interest of any Participant is forfeited or
unclaimed, such interest shall be applied as soon as practicable to reduce
contributions. In the case of any Participant, spouse, or beneficiary whose
whereabouts are unknown, the Benefit Committee shall notify the Participant,
spouse, or beneficiary at his last known address by certified mail with return
receipt requested advising him of his right to benefits under the Plan. If the
Participant, spouse, or beneficiary cannot be located in this manner, the
accrued benefit shall be forfeited and the proceeds used to reduce Participating
Company contributions for subsequent years. If a claim for forfeited benefits is
subsequently made by the Participant, spouse, or beneficiary, the forfeited
benefits shall be restored. No amounts forfeited or unclaimed shall escheat to
any state or revert to any party. Such amounts shall be applied solely to reduce
contributions to the Plan.
86
<PAGE>
SECTION 15
PLAN CHANGES
15.1 Plan Amendments. The Claim Review Committee may, from time to time,
amend the Plan so long as such amendment (i) is not of a material nature or is
required by or advisable in order to comply with the provisions of ERISA, the
Code or other applicable law, and (ii) does not materially increase the required
contribution of a Participating Company. The Directors' Nominating and
Compensation Committee of the Board must authorize or consent to any amendment
that the Claim Review Committee is not authorized to make under the above rule.
The foregoing notwithstanding, no amendment is permitted that would:
(a) cause any part of the Pension Fund to be used for or diverted to
any purpose other than the exclusive benefit of the Participants or their
beneficiaries;
(b) cause any reduction in the amount of any Participant's accrued
benefit in violation of Section 411(d)(6) of the Code; or
(c) change any vesting schedule in violation of Section 411(a)(10)
of the Code unless, in the case of an Employee who is a Participant on --
(i) the date the amendment is adopted, or
(ii) the date the amendment is effective, if later, the vested
percentage of such Participant's right to his accrued benefit is not less
than his percentage computed under the Plan without regard to such
amendment. Furthermore, no such amendment shall
87
<PAGE>
otherwise change any vesting schedule unless each Participant having three
or more Vesting Eligibility Years is permitted to elect, in accordance
with the Code and applicable regulations, to have the vested percentage of
his accrued benefit determined under the Plan without regard to such
amendment; provided that no election shall be given to any Participant
whose vested percentage under the Plan as amended cannot at any time be
less than such percentage determined without regard to such amendment.
15.2 Plan Termination.
(a) The Board may terminate the Plan at any time as to any
particular group of persons who have or may become entitled to benefits under
the Plan or all such persons. In the event of termination or partial termination
of the Plan, the rights of all participants to benefits accrued to the date of
such termination or partial termination, to the extent funded as of such date,
shall be nonforfeitable.
(b) Upon termination of the Plan in its entirety, BellSouth shall
allocate the Pension Fund among all persons entitled to benefits under the Plan
in accordance with Section 4044 of ERISA. Any assets remaining after providing
for all accrued benefits of all persons entitled to benefits under the Plan
shall be applied solely for pension purposes in an equitable manner consistent
with the purposes of the Plan.
(c) If this Plan is terminated, the benefit of any highly
compensated Participant (as defined under Section 414(q) of the Code and the
regulations and other guidance issued thereunder) and any highly compensated
former Participant shall be limited to a benefit that is
88
<PAGE>
nondiscriminatory under Section 401(a)(4) of the Code. In addition, the annual
benefit payments to each of the 25 highest paid Participants shall be restricted
to an amount equal to the payments that would be made on behalf of such
Participant under a single life annuity that is the actuarial equivalent of the
Participant's benefits under the Plan. The foregoing restrictions shall not
apply, however, if:
(1) after payment to an affected Participant of all benefits,
the value of Plan assets equals or exceeds 110 percent of the value of
current liabilities (as defined in Section 412(1)(7) of the Code), or
(2) the value of the benefits for the affected Participants is
less than one percent of the value of current liabilities.
For purposes of the foregoing subparagraphs (1) and (2), the term
"benefits" includes any periodic income, withdrawal values payable to a
living Participant, and any uninsured death benefits which are payable
from Plan assets.
(d) Nothing herein shall be construed to permit the assets of this
Plan to be utilized to provide any benefits under any other plan.
15.3 Consolidation, Merger, or Sale of Property. No merger or
consolidation with, or transfer of assets or liabilities to, any other pension
or retirement plan shall be made unless the benefit each Participant and
beneficiary would receive, if the Plan were terminated immediately after such
merger, consolidation or transfer, would be at least as great as the benefit he
would have received had the Plan terminated immediately before such merger,
consolidation or transfer.
89
<PAGE>
15.4 Top-Heavy Provisions. If required, the Plan shall be administered in
accordance with Appendix F.
90
<PAGE>
SECTION 16
ADOPTION OF THE PLAN BY A PARTICIPATING COMPANY
16.1 Adoption of Plan. Any Affiliate or Subsidiary may, by action of its
board of directors or comparable governing body and with the consent of the
Claim Review Committee or its delegate, adopt this Plan and the Pension Fund as
a Participating Company on behalf of such Affiliate or Subsidiary, or one or
more divisions or subdivisions thereof. The name of such Participating Company
and the Effective Date of its adoption of the Plan shall be set out on Schedule
1.
Such Participating Company may elect to modify the terms of the Plan as
such terms apply to the Participating Company and its employees with the consent
of the Claim Review Committee or its delegate and, to the extent the terms of
the Plan are so modified, such modifications (a) shall be set out on Schedule 2
and (b) shall control as to such Participating Company. Without limitation, such
modifications may include provisions to recognize past service with respect to
employers that are acquired by a Participating Company, or immediate vesting
with respect to Participants who are terminated in connection with the sale of a
Participating Company.
16.2 Amendment. Any amendment of the Plan automatically shall be effective
as to each Participating Company without any further action by a Participating
Company.
16.3 Withdrawal From the Plan by a Participating Company. Any
Participating Company may cease participation in and withdraw from the Plan by
action of its board of directors or comparable governing body, subject to the
consent of the Claim Review Committee and any
91
<PAGE>
restrictions or conditions on such withdrawal as may be imposed in the
discretion of the Claim Review Committee. The last date of such Participating
Company's participation in the Plan shall be set out on Schedule 1.
92
<PAGE>
APPENDIX A - CALCULATION OF OPENING ACCOUNT
1. Calculate the Participant's annual accrued benefit under the BellSouth
Management Pension Plan as of June 30, 1993, without giving credit for 5 years
of age and service added by VEER.
2. Convert annuity in 1. to a lump sum at age 62 by multiplying the
annuity by the age 62 single life annuity factor in Appendix C, which is
9.331015.
If the Participant has attained age 62 as of June 30, 1993, use the
annuity factor determined using the same mortality and interest rate assumptions
for his age on such date.
3. If the Participant has not attained age 62 on such date, calculate the
present value of the lump sum in 2. at July 1, 1993, by using a 4 percent
discount rate and discounting for the period from the date that will be the
Participant's 62nd birthday to July 1, 1993. The resulting amount is the
Participant's opening account balance.
4. If a Participant is on a leave of absence or has been laid off
temporarily (for six months or less) as of July 1, 1993, establish an account
for the Participant upon his reemployment in accordance with Paragraphs 1
through 3 above retroactive to July 1, 1993, and credit such account with
interest as if the Participant were actively employed from July 1, 1993 to the
date of his reemployment. For a Participant who is on a leave of absence as of
July 1, 1993 and who terminates
A-1
<PAGE>
employment before returning to active employment, treat the Participant as if he
were reemployed on July 1, 1993 and terminated employment that same day.
5. If an individual first becomes a Participant after June 30, 1993, and
his benefit under another plan is transferred to the Plan, use such benefit in
lieu of the BellSouth Management Pension Plan benefit in 1. and use the date on
which such individual becomes a Participant in lieu of July 1, 1993, in 3.
6. Upon his rehire, establish an account for an Eligible Employee who (a)
is receiving or under the BellSouth Management Pension Plan is entitled to
receive (either at the time of rehire or upon attaining the applicable age under
the BellSouth Management Pension Plan) a service or deferred vested pension, (b)
has not attained age 65 upon his reemployment and (c) does not elect to waive
participation in the Plan pursuant to Paragraph 2.02. Determine the amount
credited to such account by multiplying the amount of the Eligible Employee's
annual annuity, if he is receiving a single life annuity or his benefit has not
commenced, or the amount of his annual annuity divided by 0.9, if he is
receiving a joint and 50% survivor annuity, by the factor in Appendix C
corresponding to the Eligible Employee's age when he is reemployed.
A-2
<PAGE>
Appendix C 1998 GATT 6.11%
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------
1998 Appendix C - to be used for 1) Conversion of PRA Balance to Disability Annuity,
2) Conversion of PRA Balance to an Auto Survivor Annuity and
3) Conversion of prior plan accrued benefits to a PRA Opening Account Balance
- - -------------------------------------------------------------------------------------------
This table is a GATT table, using GAM83 Mortality and a 30-Year T-bill rate of
6.11%, discounting the Age 62 factor by 6.11%.
- - -------------------------------------------------------------------------------------------
0 1 2 3 4 5 6
- - -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
20 0.931841 0.936458 0.941098 0.945760 0.950446 0.955155 0.959887
- - -------------------------------------------------------------------------------------------
21 0.988777 0.993676 0.998599 1.003546 1.008518 1.013515 1.018536
- - -------------------------------------------------------------------------------------------
22 1.049191 1.054389 1.059613 1.064863 1.070139 1.075440 1.080769
- - -------------------------------------------------------------------------------------------
23 1.113297 1.118812 1.124355 1.129926 1.135524 1.141150 1.146804
- - -------------------------------------------------------------------------------------------
24 1.181319 1.187172 1.193053 1.198964 1.204905 1.210874 1.216873
- - -------------------------------------------------------------------------------------------
25 1.253498 1.259708 1.265949 1.272221 1.278524 1.284859 1.291224
- - -------------------------------------------------------------------------------------------
26 1.330086 1.336676 1.343299 1.349954 1.356642 1.363363 1.370118
- - -------------------------------------------------------------------------------------------
27 1.411355 1.418347 1.425374 1.432436 1.439533 1.446665 1.453832
- - -------------------------------------------------------------------------------------------
28 1.497588 1.505008 1.512464 1.519958 1.527488 1.535056 1.542661
- - -------------------------------------------------------------------------------------------
29 1.589091 1.596964 1.604876 1.612827 1.620818 1.628848 1.636918
- - -------------------------------------------------------------------------------------------
30 1.686184 1.694539 1.702934 1.711371 1.719850 1.728371 1.736934
- - -------------------------------------------------------------------------------------------
31 1.789210 1.798075 1.806983 1.815936 1.824933 1.833974 1.843060
- - -------------------------------------------------------------------------------------------
32 1.898531 1.907937 1.917390 1.926889 1.936436 1.946030 1.955671
- - -------------------------------------------------------------------------------------------
33 2.014531 2.024512 2.034542 2.044622 2.054752 2.064932 2.075163
- - -------------------------------------------------------------------------------------------
34 2.137619 2.148210 2.158853 2.169549 2.180298 2.191100 2.201955
- - -------------------------------------------------------------------------------------------
35 2.268228 2.279465 2.290759 2.302108 2.313514 2.324976 2.336495
- - -------------------------------------------------------------------------------------------
36 2.406816 2.418741 2.430724 2.442767 2.454869 2.467032 2.479255
- - -------------------------------------------------------------------------------------------
37 2.553873 2.566526 2.579241 2.592020 2.604862 2.617768 2.630737
- - -------------------------------------------------------------------------------------------
38 2.709915 2.723341 2.736833 2.750393 2.764019 2.777713 2.791475
- - -------------------------------------------------------------------------------------------
39 2.875490 2.889737 2.904054 2.918442 2.932901 2.947431 2.962034
- - -------------------------------------------------------------------------------------------
40 3.051183 3.066300 3.081491 3.096758 3.112101 3.127520 3.143015
- - -------------------------------------------------------------------------------------------
41 3.237610 3.253651 3.269770 3.285970 3.302250 3.318611 3.335053
- - -------------------------------------------------------------------------------------------
42 3.435428 3.452449 3.469553 3.486743 3.504018 3.521378 3.538824
- - -------------------------------------------------------------------------------------------
43 3.645333 3.663393 3.681543 3.699783 3.718113 3.736534 3.755047
- - -------------------------------------------------------------------------------------------
44 3.868063 3.887227 3.906485 3.925840 3.945290 3.964837 3.984480
- - -------------------------------------------------------------------------------------------
45 4.104401 4.124736 4.145172 4.165709 4.186347 4.207088 4.227932
- - -------------------------------------------------------------------------------------------
46 4.355180 4.376757 4.398442 4.420233 4.442133 4.464141 4.486258
- - -------------------------------------------------------------------------------------------
47 4.621282 4.644177 4.667186 4.690310 4.713547 4.736900 4.760369
- - -------------------------------------------------------------------------------------------
48 4.903642 4.927937 4.952352 4.976888 5.001545 5.026325 5.051227
- - -------------------------------------------------------------------------------------------
49 5.203254 5.229033 5.254940 5.280975 5.307139 5.333433 5.359857
- - -------------------------------------------------------------------------------------------
50 5.521173 5.548527 5.576017 5.603643 5.631406 5.659306 5.687344
- - -------------------------------------------------------------------------------------------
51 5.858517 5.887542 5.916712 5.946026 5.975485 6.005090 6.034841
- - -------------------------------------------------------------------------------------------
52 6.216472 6.247271 6.278223 6.309328 6.340587 6.372001 6.403570
- - -------------------------------------------------------------------------------------------
<CAPTION>
7 8 9 10 11
- - -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
20 0.964643 0.969422 0.974225 0.979051 0.983902
- - -----------------------------------------------------------------
21 1.023582 1.028654 1.033750 1.038872 1.044019
- - -----------------------------------------------------------------
22 1.086123 1.091504 1.096912 1.102347 1.107808
- - -----------------------------------------------------------------
23 1.152485 1.158195 1.163933 1.169700 1.175495
- - -----------------------------------------------------------------
24 1.222902 1.228961 1.235050 1.241169 1.247318
- - -----------------------------------------------------------------
25 1.297621 1.304050 1.310511 1.317004 1.323529
- - -----------------------------------------------------------------
26 1.376906 1.383728 1.390583 1.397473 1.404397
- - -----------------------------------------------------------------
27 1.461035 1.468274 1.475548 1.482859 1.490205
- - -----------------------------------------------------------------
28 1.550304 1.557985 1.565704 1.573461 1.581257
- - -----------------------------------------------------------------
29 1.645028 1.653178 1.661369 1.669600 1.677872
- - -----------------------------------------------------------------
30 1.745539 1.754187 1.762878 1.771612 1.780390
- - -----------------------------------------------------------------
31 1.852192 1.861368 1.870590 1.879858 1.889171
- - -----------------------------------------------------------------
32 1.965361 1.975098 1.984883 1.994717 2.004600
- - -----------------------------------------------------------------
33 2.085444 2.095776 2.106160 2.116594 2.127081
- - -----------------------------------------------------------------
34 2.212865 2.223828 2.234846 2.245918 2.257045
- - -----------------------------------------------------------------
35 2.348071 2.359704 2.371395 2.383144 2.394951
- - -----------------------------------------------------------------
36 2.491538 2.503882 2.516287 2.528754 2.541282
- - -----------------------------------------------------------------
37 2.643771 2.656869 2.670032 2.683261 2.696555
- - -----------------------------------------------------------------
38 2.805305 2.819204 2.833171 2.847208 2.861314
- - -----------------------------------------------------------------
39 2.976709 2.991457 3.006278 3.021172 3.036141
- - -----------------------------------------------------------------
40 3.158586 3.174235 3.189962 3.205766 3.221649
- - -----------------------------------------------------------------
41 3.351576 3.368181 3.384868 3.401638 3.418491
- - -----------------------------------------------------------------
42 3.556357 3.573977 3.591684 3.609478 3.627361
- - -----------------------------------------------------------------
43 3.773651 3.792347 3.811136 3.830018 3.848993
- - -----------------------------------------------------------------
44 4.004221 4.024059 4.043996 4.064032 4.084167
- - -----------------------------------------------------------------
45 4.248879 4.269929 4.291084 4.312344 4.333709
- - -----------------------------------------------------------------
46 4.508485 4.530822 4.553269 4.575828 4.598499
- - -----------------------------------------------------------------
47 4.783953 4.807655 4.831474 4.855411 4.879467
- - -----------------------------------------------------------------
48 5.076253 5.101403 5.126677 5.152077 5.177602
- - -----------------------------------------------------------------
49 5.386412 5.413099 5.439917 5.466869 5.493954
- - -----------------------------------------------------------------
50 5.715522 5.743839 5.772296 5.800895 5.829635
- - -----------------------------------------------------------------
51 6.064740 6.094787 6.124984 6.155329 6.185825
- - -----------------------------------------------------------------
52 6.435296 6.467179 6.499220 6.531420 6.563779
- - -----------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
Appendix C 1998 GATT 6.11%
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
53 6.596299 6.628980 6.661822 6.694828 6.727996 6.761330 6.794828
- - -------------------------------------------------------------------------------------------
54 6.999333 7.034010 7.068860 7.103882 7.139077 7.174447 7.209992
- - -------------------------------------------------------------------------------------------
55 7.426992 7.463788 7.500767 7.537929 7.575275 7.612806 7.650523
- - -------------------------------------------------------------------------------------------
56 7.880781 7.919826 7.959064 7.998496 8.038124 8.077948 8.117970
- - -------------------------------------------------------------------------------------------
57 8.362297 8.403727 8.445363 8.487204 8.529253 8.571511 8.613978
- - -------------------------------------------------------------------------------------------
58 8.873233 8.917195 8.961374 9.005772 9.050391 9.095230 9.140292
- - -------------------------------------------------------------------------------------------
59 9.415388 9.462035 9.508914 9.556025 9.603370 9.650949 9.698763
- - -------------------------------------------------------------------------------------------
60 9.990668 10.040166 10.089909 10.139898 10.190135 10.240622 10.291358
- - -------------------------------------------------------------------------------------------
61 10.601098 10.653620 10.706402 10.759446 10.812753 10.866324 10.920160
- - -------------------------------------------------------------------------------------------
62 11.248825 11.304556 11.360563 11.416848 11.473412 11.530256 11.587382
- - -------------------------------------------------------------------------------------------
63 11.936128 11.995264 12.054694 12.114418 12.174437 12.234755 12.295371
- - -------------------------------------------------------------------------------------------
64 12.665425 12.728175 12.791236 12.854609 12.918296 12.982298 13.046618
- - -------------------------------------------------------------------------------------------
65 13.439283 13.505866 13.572780 13.640025 13.707603 13.775516 13.843766
- - -------------------------------------------------------------------------------------------
66 14.260423 14.331075 14.402077 14.473431 14.545138 14.617201 14.689620
- - -------------------------------------------------------------------------------------------
67 15.131735 15.206704 15.282044 15.357757 15.433846 15.510311 15.587156
- - -------------------------------------------------------------------------------------------
68 16.056284 16.135833 16.215777 16.296116 16.376854 16.457992 16.539531
- - -------------------------------------------------------------------------------------------
69 17.037323 17.121733 17.206561 17.291809 17.377480 17.463575 17.550096
- - -------------------------------------------------------------------------------------------
70 18.078303 18.167870 18.257882 18.348339 18.439244 18.530599 18.622407
- - -------------------------------------------------------------------------------------------
71 19.182888 19.277927 19.373438 19.469422 19.565881 19.662819 19.760236
- - -------------------------------------------------------------------------------------------
72 20.354962 20.455809 20.557155 20.659004 20.761357 20.864217 20.967587
- - -------------------------------------------------------------------------------------------
73 21.598650 21.705659 21.813197 21.921269 22.029876 22.139021 22.248706
- - -------------------------------------------------------------------------------------------
74 22.918328 23.031874 23.145984 23.260658 23.375901 23.491715 23.608102
- - -------------------------------------------------------------------------------------------
75 24.318637 24.439122 24.560203 24.681885 24.804169 24.927059 25.050558
- - -------------------------------------------------------------------------------------------
76 25.804506 25.932352 26.060832 26.189948 26.319703 26.450102 26.581147
- - -------------------------------------------------------------------------------------------
77 27.381162 27.516819 27.653149 27.790154 27.927837 28.066203 28.205255
- - -------------------------------------------------------------------------------------------
78 29.054151 29.198097 29.342756 29.488132 29.634228 29.781048 29.928596
- - -------------------------------------------------------------------------------------------
79 30.829359 30.982100 31.135598 31.289857 31.444879 31.600670 31.757233
- - -------------------------------------------------------------------------------------------
80 32.713033 32.875107 33.037983 33.201667 33.366162 33.531471 33.697600
- - -------------------------------------------------------------------------------------------
<CAPTION>
- - -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
53 6.828492 6.862324 6.896322 6.930490 6.964826
- - -----------------------------------------------------------------
54 7.245713 7.281612 7.317688 7.353942 7.390377
- - -----------------------------------------------------------------
55 7.688426 7.726518 7.764798 7.803268 7.841929
- - -----------------------------------------------------------------
56 8.158189 8.198608 8.239228 8.280048 8.321071
- - -----------------------------------------------------------------
57 8.656655 8.699543 8.742644 8.785959 8.829488
- - -----------------------------------------------------------------
58 9.185576 9.231085 9.276820 9.322781 9.368970
- - -----------------------------------------------------------------
59 9.746815 9.795105 9.843634 9.892403 9.941414
- - -----------------------------------------------------------------
60 10.342345 10.393586 10.445080 10.496829 10.548834
- - -----------------------------------------------------------------
61 10.974263 11.028634 11.083274 11.138185 11.193368
- - -----------------------------------------------------------------
62 11.644790 11.702483 11.760462 11.818728 11.877283
- - -----------------------------------------------------------------
63 12.356287 12.417505 12.479026 12.540852 12.602985
- - -----------------------------------------------------------------
64 13.111256 13.176214 13.241495 13.307099 13.373027
- - -----------------------------------------------------------------
65 13.912354 13.981281 14.050550 14.120162 14.190119
- - -----------------------------------------------------------------
66 14.762398 14.835537 14.909039 14.982904 15.057136
- - -----------------------------------------------------------------
67 15.664381 15.741989 15.819981 15.898360 15.977127
- - -----------------------------------------------------------------
68 16.621475 16.703824 16.786582 16.869749 16.953329
- - -----------------------------------------------------------------
69 17.637047 17.724428 17.812242 17.900491 17.989177
- - -----------------------------------------------------------------
70 18.714670 18.807391 18.900570 18.994211 19.088316
- - -----------------------------------------------------------------
71 19.858137 19.956522 20.055395 20.154757 20.254612
- - -----------------------------------------------------------------
72 21.071469 21.175866 21.280779 21.386213 21.492169
- - -----------------------------------------------------------------
73 22.358936 22.469711 22.581035 22.692911 22.805341
- - -----------------------------------------------------------------
74 23.725067 23.842610 23.960736 24.079448 24.198747
- - -----------------------------------------------------------------
75 25.174668 25.299394 25.424737 25.550702 25.677290
- - -----------------------------------------------------------------
76 26.712840 26.845187 26.978189 27.111850 27.246173
- - -----------------------------------------------------------------
77 28.344995 28.485428 28.626556 28.768384 28.910914
- - -----------------------------------------------------------------
78 30.076874 30.225887 30.375639 30.526132 30.677371
- - -----------------------------------------------------------------
79 31.914571 32.072689 32.231590 32.391279 32.551758
- - -----------------------------------------------------------------
80 33.864551 34.032330 34.200940 34.370386 34.540671
- - -----------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
APPENDIX D - PRIOR PLAN BENEFIT
The monthly pension benefit amount payable to a Participant who is
entitled to a service pension under the BellSouth Management Pension Plan is
calculated as follows:
The monthly pension benefit amount shall equal the greater of the monthly
amounts determined in the two paragraphs below:
1) 1/12th of 1.6 percent multiplied by the Participant's adjusted
career income, as defined below;
2) 1/12th of the sum of (a) the product of (1) 1.6 percent of the
Participant's annual adjusted career income, as defined below, multiplied by (2)
the Participant's term of employment, as defined below, plus (b) the product of
(1) .3 percent of the amount, if any, by which such Participant's annual
adjusted career income exceeds 200 percent of the average Social Security
covered wage base, as defined below, multiplied by (2) such Participant's term
of employment or 35 years, whichever is less; provided , however, that if a
Participant had compensation in excess of $150,000 in any pre-1994 plan year
that is taken into account under the integrated formula (the "Formula") in this
subparagraph 2), his accrued benefit will be the sum of (i) his accrued benefit
under the Formula frozen as of December 31, 1993, plus (ii) his benefit under
the Formula using his annual adjusted career income after 1993 and his total
service (not in excess of 35 years) minus his service as of December 31, 1993.
D-1
<PAGE>
For Participants who were eligible for such treatment under the Voluntary
Enhanced Early Retirement Plan ("VEER"), such pension amount described above
shall be calculated by adding five years to such employee's age and term of
employment.
The monthly pension allowance of a Participant who elects to commence a
service pension prior to age 65 shall be reduced as follows:
(1) If determined according to Paragraph 1), above, the monthly pension
benefit shall be reduced by 0.5 percent for each calendar month or part thereof
by which the Participant's annuity starting date precedes his 56th birthday,
except that for each Participant retired with a term of employment of 30 or more
years, "0.25" shall be substituted for "0.5" above. Effective July 1, 1991, the
age before which a Participant's monthly pension benefit is reduced due to early
retirement shall be determined from the following table:
<TABLE>
<CAPTION>
January 1 of Retirement Prior to Age
------------ -----------------------
<S> <C>
1994 58
1997 59
2000 60
2003 61
2006 62
</TABLE>
In no event shall the discount that would apply to the benefit of a
Participant who retires during a transition year in the above table be greater
than the discount that would have applied to such benefit had the Participant
retired on December 31 of the prior year.
D-2
<PAGE>
(2) If determined according to Paragraph 2) , above, the monthly pension
benefit shall be reduced by 0.5 percent for each calendar month or part thereof
by which the Participant's annuity starting date precedes his 62nd birthday.
Definitions:
Adjusted career income shall mean the greater of
(1) the sum of (i) the product of the Participant's average annual
compensation for the period from January 1, 1980, to December 31, 1992,
inclusive, and such Participant's term of employment as of December 31, 1992,
plus (ii) such Participant's compensation for all periods after December 31,
1992, which are included in the Participant's term of employment; or
(2) the sum of (i) the product of the Participant's average annual
compensation for the period from April 1, 1979, to March 31, 1988, inclusive,
and such Participant's term of employment as of March 31, 1988, plus (ii) such
Participant's compensation for all periods after March 31, 1988, which are
included in the Participant's term of employment; or
(3) the sum of (i) the product of the Participant's average annual
compensation for the period from April 1, 1979, to March 31, 1985, inclusive,
and such Participant's term of employment as of March 31, 1985, plus (ii) such
Participant's compensation for all periods after March 31, 1985, which are
included in the Participant's term of employment; or
(4) the sum of (i) the product of the Participant's average annual
compensation for the period from April 1, 1978, to March 31, 1983, inclusive,
and such Participant's term of
D-3
<PAGE>
employment as of March 31, 1983, plus (ii) such Participant's compensation for
all periods after March 31, 1983, which are included in the Participant's term
of employment; or
(5) the sum of (i) the product of the Participant's average annual
compensation for the period from October 1, 1977, to September 30, 1982,
inclusive, and such Participant's term of employment as of September 30, 1982,
plus (ii) such Participant's compensation for all periods after September 30,
1982, which are included in the Participant's term of employment; or
(6) the sum of (i) the product of the Participant's average annual
compensation for the period from October 1, 1976, to September 30, 1981,
inclusive, and such Participant's term of employment as of September 30, 1981,
plus (ii) such Participant's compensation for all periods after September 30,
1981, which are included in the Participant's term of employment; or
(7) the sum of (i) the product of the Participant's average annual
compensation for the period from January 1, 1975, to December 31, 1979,
inclusive, and such Participant's term of employment as of December 31, 1979,
plus (ii) such Participant's compensation for all periods after December 31,
1979, which are included in the Participant's term of employment.
The period referred to in clause (i) of (1), (2), (3), (4), (5), (6), or
(7) above shall hereinafter be referred to as the "averaging period."
For any Participant who has no service prior to the applicable averaging
period which is included in the Participant's term of employment, the "adjusted
career income" shall equal such Participant's compensation for all periods
included in the Participant's term of employment.
D-4
<PAGE>
For purposes of determining a Participant's average annual compensation
for the applicable averaging period:
(1) if during such averaging period there was any period included in
the Participant's term of employment for which the Participant received no
compensation, the Participant shall be considered to have earned compensation
during such non-compensated period at the same annual basic rate of pay which he
earned immediately preceding such period;
(2) if during such averaging period there was a period not included
in the Participant's term of employment, the Participant shall be considered to
have earned compensation during such excluded period equal to the amount of
compensation which he earned for the most recent equivalent period of time,
preceding the applicable averaging period, for which he did earn compensation;
and
(3) if during the applicable averaging period the Participant was
employed on a part-time basis, the compensation of such Participant for any such
period of part-time employment shall be considered to be the compensation such
Participant would have received had such Participant been employed on a
full-time basis during such period of part-time employment.
Annual adjusted career income shall mean the Participant's adjusted career
income divided by the Participant's term of employment; provided, however, that
if a Participant had compensation in excess of $150,000 in any pre-1994 plan
year that is taken into account under the Formula, his "annual adjusted career
income after 1993" for purposes of clause (ii) of the Formula shall be his
D-5
<PAGE>
adjusted career income after 1993 [(determined in accordance with Code Section
401(a)(17)] divided by (b)(i) his total service minus (ii) his service as of
December 31, 1993.
Average social security covered wage base shall mean the lesser of (a) the
average of the social security covered wage base (as determined under Code
Section 3121(a) (1)) for the 35 years prior to and ending with such
Participant's normal social security retirement year and (b) the social security
covered wage base (as determined under Code Section 3121(a) (1)) for the then
current year.
Compensation shall mean a Participant's (1) basic pay, differentials paid
for night tours, differentials paid for temporary work in a higher
classification, lump sum merit wage payments, incentive compensation for
Directory or Marketing employees, Team Management Incentive Compensation,
special project allowances for assignments which began on or before November 30,
1983, and area differentials, and (2) basic pay, commissions, differentials,
wage incentives, and other special payments used in computing a Participant's
monthly pension benefit under the BellSouth Pension Plan for any period of
service a Participant was covered by such plan if such service is included in
the term of employment in computing such Participant's monthly pension benefit
under this Plan. For a Participant who has any period of time during or after
the applicable averaging period during which such Participant received sickness
or accident disability benefits under a Participating Company's Sickness and
Accident Disability Benefit Plan (or any predecessor of such plan), such
Participant's basic pay on any day during such period on disability benefits
shall be considered as an amount which bears the same relationship to the
position rate of the Participant's
D-6
<PAGE>
job for such day, as the Participant's basic pay immediately prior to the
disability period bore to the position rate of such Participant's job
immediately prior to the disability period. For a Participant who has any period
of time during or after the applicable averaging period during which such
Participant is on a leave of absence to an Affiliate or a subsidiary of
BellSouth or such other entity as a Participating Company's Board of Directors
may designate in which a Participating Company has a substantial interest and
during such period the Participant receives service credit, such Participant's
compensation for the period on such a leave shall be the compensation, as
defined in this paragraph, from such Affiliate or subsidiary company or such
other entity. The term "compensation" shall be limited to the first $200,000 (as
adjusted for changes in the cost of living as provided in Code Section 415(d))
of each Participant's compensation.
Term of employment shall mean, effective for periods prior to January 1,
1990, for any employee, however classified, and effective for periods beginning
on or after January 1, 1990, for full-time employees, a period of continuous
employment in the service of one or more Participating Companies, Interchange
Companies or Portability Companies (to the extent that an Interchange or
Portability Agreement is applicable to a person at the time such person becomes
an employee under the Plan or with respect to any person who was an employee of
a Former Affiliate on December 31, 1983, and became an employee under the Plan
on January 1, 1984) or in the service of an Affiliate (solely for purposes of
determining eligibility for service pension) or a Former Affiliate before 1984
provided employment with a Participating Company commenced after the completion
of such service with a Former Affiliate but before January 1, 1984, with no
intervening period of
D-7
<PAGE>
employment with any Former Affiliate prior to January 1, 1984. A Participant's
term of employment shall not include any period for which an election was in
effect under Section 4.1.h of the BellSouth Management Pension Plan.
Term of employment shall not include any period of employment which is
included in a Participant's computation of term of employment under an
Interchange Company Pension Plan or a Portability Company Pension Plan if the
applicable Interchange or Portability Agreement is not in force and effect at
the time an individual becomes employed or reemployed by a Participating Company
or if such agreement does not provide for the recognition of such individual's
term of employment by a Participating Company.
The term of employment of a Participant who was employed on a part-time
basis during or prior to the applicable averaging period shall be pro-rated for
such period of part-time employment, based on a ratio which shall be determined
by dividing the number of such Participant's regular scheduled work hours,
excluding any overtime hours, during such periods of part-time employment by the
number of hours, excluding overtime hours, the Participant would have worked had
such Participant been a regular full-time employee during such period of
part-time employment.
D-8
<PAGE>
Appendix E 1998 415 Annuities
<TABLE>
<CAPTION>
- - --------------------------------------
1998 Table
- - --------------------------------------
Year SSRA 65 SSRA 66 SSRA 67
- - --------------------------------------
<S> <C> <C> <C>
45 33,041 30,977 28,912
- - --------------------------------------
46 33,041 30,977 28,912
- - --------------------------------------
47 33,041 30,977 28,912
- - --------------------------------------
48 35,570 33,347 31,123
- - --------------------------------------
49 38,279 35,887 33,495
- - --------------------------------------
50 41,187 38,612 36,039
- - --------------------------------------
51 44,318 41,547 38,777
- - --------------------------------------
52 47,694 44,714 41,732
- - --------------------------------------
53 51,348 48,139 44,930
- - --------------------------------------
54 55,312 51,854 48,398
- - --------------------------------------
55 59,622 55,895 52,169
- - --------------------------------------
56 64,322 60,302 56,281
- - --------------------------------------
57 69,459 65,117 60,776
- - --------------------------------------
58 75,088 70,396 65,702
- - --------------------------------------
59 81,276 76,196 71,117
- - --------------------------------------
60 88,097 82,590 77,084
- - --------------------------------------
61 95,638 89,660 83,683
- - --------------------------------------
62 104,000 97,500 87,500
- - --------------------------------------
63 113,244 104,000 93,750
- - --------------------------------------
64 121,333 113,244 100,000
- - --------------------------------------
65 130,000 121,333 108,333
- - --------------------------------------
66 130,000 130,000 116,667
- - --------------------------------------
67 130,000 130,000 130,000
- - --------------------------------------
68 130,000 130,000 130,000
- - --------------------------------------
69 130,000 130,000 130,000
- - --------------------------------------
70 130,000 130,000 130,000
- - --------------------------------------
71 130,000 130,000 130,000
- - --------------------------------------
72 130,000 130,000 130,000
- - --------------------------------------
73 130,000 130,000 130,000
- - --------------------------------------
</TABLE>
Page 1
<PAGE>
APPENDIX F - TOP-HEAVY PROVISIONS
Definitions
The following terms and definitions shall apply if required for
qualification under Section 416 of the Code:
Top-Heavy Plan means (i) a plan if, as of the Determination Date, the
present value of the accumulated pension plan benefits for Participants who are
Key Employees for the Plan Year exceeds 60 percent of the present value of the
accumulated accrued benefits for all Participants under the Plan, or (ii) a plan
which is part of a Top-Heavy Group. For purposes of determining the present
value of the cumulative accrued benefits of Participants, the present value of
the accrued benefit shall be increased by the aggregate payments to any
Participant or beneficiary during the five-year period ending on the
Determination Date, notwithstanding that the Plan may have terminated within the
five-year period of the terminated plan would have been required to be included
in an aggregation group but for its termination. If a Participant has not
performed services for a Participating Company or an Affiliate at any time
during the five-year period ending on the Determination Date, then his Pension
Plan benefit shall not be included in determining the present value of the
cumulative Pension Plan benefits for all Participants. There is also excluded,
from the computation of the aggregate Pension Plan benefits of Participants, the
Pension Plan benefit of any Participant who was formerly a Key Employee.
F-1
<PAGE>
A Super Top-Heavy Plan is any plan that would be a Top-Heavy Plan as
defined above if 90 percent were substituted for 60 percent.
Top-Heavy Group means, as of any Determination Date, an aggregation group
of plans in which any of the Key Employees participate and plans which are
grouped by BellSouth to meet the coverage and nondiscrimination tests of Section
401(a) (4) or 410(b) of the Code. An aggregation group is a Top-Heavy Group if
the accumulated accrued benefits for Key Employees exceed 60 percent of the same
amount determined for all Employees under all plans included in the aggregation
group.
If an aggregation group is a Top-Heavy Group, each plan required to be
included in the Top-Heavy Group is a Top-Heavy Plan. BellSouth may permissively
aggregate plans not required to be in the aggregation group if the group as so
aggregated continues to meet the requirements of Section 401(a) (4) and 410 (b)
of the Code. When aggregating plans, the value of accrued benefits and account
balances, if any, shall be calculated with reference to the Determination Dates
that fall within the same calendar year.
Key Employee means an Employee who, at any time during the calendar year
containing the Determination Date or the four previous Plan Years, was:
(1) an officer of a Participating Company having Earnings greater than 50
percent of the dollar limitation in effect under Section 415 (c) (1) (A) of the
Code for any such Plan Year,
F-2
<PAGE>
(2) one of the ten Employees having Earnings greater than the dollar
limitation in effect under Section 415 (c) (1) (A) of the Code and who owns (or
who is considered to own within the meaning of Section 318 of the Code) the
largest interest in any Participating Company (if two (2) or more Employees have
equal ownership interests, the one with the larger annual Earnings has the
larger interest),
(3) a 5 percent owner of any Participating Company, or a 1 percent owner
of any Participating Company whose Earnings is greater than $150,000. The
beneficiary of a Key Employee or a former Key Employee shall be treated
respectively as a Key Employee or a former Key Employee. A Non-Key Employee is
any Employee who is not a Key Employee. Determination Date means, for any Plan
Year, the last day of the preceding Plan Year.
For purposes of Section 416 of the Code, the present value of a
Participant's accumulated accrued benefit shall be determined using the assumed
mortality rates equal to unisex rates for pensioners in 1984 as published in
Unisex Pension Mortality Table - 1984 (UP-1984) and a 5 percent interest
assumption. The term "Earnings" shall mean compensation for personal services
rendered in the course of employment with a Participating Company or Affiliate
as defined in Section 415(c)(3) of the Code and amounts contributed by the
Participating Company or Affiliate pursuant to a salary reduction agreement that
are excludable from the Employee's gross income under Section 125, 402(c)(e),
402(h)(1)(B), or 403(b) of the Code.
F-3
<PAGE>
Defined Benefit Plan and Defined Contribution Plan Fractions
If for any calendar year the Plan does not satisfy the provisions of
Section 416 (h) (2) of the Code, the defined benefit plan fraction and the
defined contribution plan fraction applicable to determining the limits of
Section 415 (c) of the Code shall be computed by replacing 125 percent by 100
percent where applicable.
Minimum Benefit Requirement
For any calendar year in which this Plan is Top-Heavy, the accrued benefit
of each Non-Key Employee who is otherwise entitled to a Pension Plan benefit
shall not be less than the lesser of (i) 20 percent of the Employee's Highest
Average Earnings or (ii) 2 percent of the Employee's Highest Average Earnings
multiplied by his years of service beginning on and after January, 1984 as of
the date of determination.
An Employee's "Highest Average Earnings" shall be determined by
aggregating his Earnings for the five consecutive calendar years (or such lesser
number of Plan Years during which the Employee is covered under the Pension
Plan) during which the Employee had the greatest aggregate Earnings, and
dividing this aggregate amount by the number of calendar years in such period.
The minimum Pension Plan benefit shall be provided solely by employer
contributions and expressed as a life annuity commencing at Normal Retirement
Age. If the form of benefit payable is other than a single life annuity, or
commences on a date other than Normal Retirement Age, the
F-4
<PAGE>
Employee must receive at least an amount that is the actuarial equivalent of the
minimum single life annuity benefit commencing at Normal Retirement Age.
No duplication of minimum benefits shall be required if Non-Key Employees
participate in both a defined contribution plan and a defined benefit plan
maintained by a Participating Company, however, the required benefit provided by
a Participating Company cannot be reduced or eliminated on account of benefits
attributable to taxes paid by a Participating Company under the Social Security
Act.
If a Non-Key Employee participates in both a defined benefit plan and a
defined contribution plan maintained by a Participating Company, the minimum
benefit required under this Section shall be provided in the first of the
following plans in which the Non-Key Employee participates: (a) BellSouth
Personal Retirement Account Pension Plan; (b) BellSouth Pension Plan; (c) Any
other defined benefit plan maintained by an affiliated company; (d) BellSouth
Management Savings and Employee Stock Ownership Plan; (e) BellSouth Savings and
Security Plan; (f) BellSouth Employee Stock Ownership Plan; and (g) any other
defined contribution plan maintained by an affiliated company.
Vesting
For any calendar year in which this Plan is Top-Heavy, a Non-Key Employee
who completes three Vesting Eligibility Years shall be entitled to a fully
vested Plan benefit.
F-5
<PAGE>
Appendix G 1998 415 LS
<TABLE>
<CAPTION>
- - ---------------------------------------
1998 Table
- - ---------------------------------------
Age SSRA 65 SSRA 66 SSRA 67
- - ---------------------------------------
<S> <C> <C> <C>
20 77,060 72,244 67,427
- - ---------------------------------------
21 82,077 76,947 71,817
- - ---------------------------------------
22 87,421 81,957 76,493
- - ---------------------------------------
23 93,115 87,295 81,475
- - ---------------------------------------
24 99,181 92,982 86,783
- - ---------------------------------------
25 105,644 99,041 92,438
- - ---------------------------------------
26 112,530 105,497 98,464
- - ---------------------------------------
27 119,867 112,376 104,884
- - ---------------------------------------
28 127,685 119,705 111,725
- - ---------------------------------------
29 136,017 127,516 119,015
- - ---------------------------------------
30 144,895 135,839 126,783
- - ---------------------------------------
31 154,358 144,711 135,063
- - ---------------------------------------
32 164,443 154,166 143,888
- - ---------------------------------------
33 175,193 164,244 153,294
- - ---------------------------------------
34 186,653 174,987 163,321
- - ---------------------------------------
35 198,870 186,441 174,012
- - ---------------------------------------
36 211,899 198,655 185,411
- - ---------------------------------------
37 225,789 211,677 197,565
- - ---------------------------------------
38 240,601 225,563 210,526
- - ---------------------------------------
39 256,398 240,373 224,348
- - ---------------------------------------
40 273,251 256,173 239,095
- - ---------------------------------------
41 291,235 273,033 254,831
- - ---------------------------------------
42 310,431 291,029 271,627
- - ---------------------------------------
43 330,928 310,245 289,562
- - ---------------------------------------
44 352,823 330,772 308,720
- - ---------------------------------------
45 376,222 352,709 329,195
- - ---------------------------------------
46 401,242 376,165 351,087
- - ---------------------------------------
47 428,011 401,260 374,509
- - ---------------------------------------
48 456,666 428,124 399,582
- - ---------------------------------------
49 487,355 456,895 426,436
- - ---------------------------------------
50 520,241 487,726 455,211
- - ---------------------------------------
51 555,496 520,777 486,059
- - ---------------------------------------
52 593,307 556,225 519,143
- - ---------------------------------------
53 633,878 594,261 554,643
- - ---------------------------------------
54 677,432 635,093 592,753
- - ---------------------------------------
55 724,218 678,954 633,690
- - ---------------------------------------
56 774,505 726,099 677,692
- - ---------------------------------------
57 828,597 776,810 725,022
- - ---------------------------------------
58 886,831 831,405 775,977
- - ---------------------------------------
59 949,598 890,248 830,898
- - ---------------------------------------
60 1,017,340 953,757 890,173
- - ---------------------------------------
61 1,090,571 1,022,410 954,249
- - ---------------------------------------
62 1,169,877 1,096,760 1,023,642
- - ---------------------------------------
63 1,245,922 1,144,218 1,072,705
- - ---------------------------------------
64 1,304,141 1,217,197 1,117,839
- - ---------------------------------------
65 1,363,497 1,272,594 1,187,753
- - ---------------------------------------
66 1,328,955 1,328,955 1,240,355
- - ---------------------------------------
67 1,293,765 1,293,765 1,293,765
- - ---------------------------------------
68 1,258,015 1,258,015 1,258,015
- - ---------------------------------------
69 1,221,781 1,221,781 1,221,781
- - ---------------------------------------
</TABLE>
Page 1
<PAGE>
Appendix G 1998 415 LS
<TABLE>
<CAPTION>
- - ---------------------------------------
1998 Table
- - ---------------------------------------
Age SSRA 65 SSRA 66 SSRA 67
- - ---------------------------------------
<S> <C> <C> <C>
- - ---------------------------------------
70 1,185,127 1,185,127 1,185,127
- - ---------------------------------------
71 1,185,127 1,185,127 1,185,127
- - ---------------------------------------
72 1,185,127 1,185,127 1,185,127
- - ---------------------------------------
73 1,185,127 1,185,127 1,185,127
- - ---------------------------------------
</TABLE>
Page 2
<PAGE>
Schedule 1
<TABLE>
<CAPTION>
Effective Date
Effective Date of Termination
Participating Company of Participation of Participation
--------------------- ---------------- ----------------
<S> <C> <C>
BellSouth Telecommunications, Inc. January 1, 1994
BellSouth Applied Technology, Inc. January 1, 1996
BellSouth Business Systems, Inc. January 1, 1994
BellSouth Communications Systems, Inc. January 1, 1994
BellSouth Financial Services Corporation January 1, 1994
BellSouth Public Communications, Inc. April 1, 1997
BellSouth Corporation January 1, 1994
BellSouth Asia/Pacific Enterprises, Inc. January 1, 1994
BellSouth Corporate Aviation and Travel
Services, Inc. August 1, 1996
BellSouth D.C., Inc. January 1, 1994
BellSouth Enterprises, Inc. January 1, 1994
BellSouth Information Systems, Inc. January 1, 1994
BellSouth Interactive Media Services, Inc. July 1, 1996
BellSouth International, Inc. January 1, 1994
BellSouth Long Distance, Inc. April 1, 1996
BellSouth Mobile Data Services, Inc. January 1, 1994
BellSouth Personal Communications, Inc. January 1, 1995
BellSouth Resources, Inc. January 1, 1994
Intelligent Media Ventures, Inc. January 1, 1994
Sunlink Corporation January 1, 1994
BellSouth Entertainment, Inc. April 1, 1997
BellSouth Advertising & Publishing
Corporation January 1, 1994
American Cellular Communications
Corporation January 1, 1994
Bakersfield Cellular Telephone Company January 1, 1994
BellSouth Cellular Corp. January 1, 1994
BellSouth Cellular National Marketing, Inc. January 1, 1994
BellSouth Mobility Inc. January 1, 1994
BellSouth Wireless, Inc. January 1, 1994
Gulf Coast Cellular Telephone Company January 1, 1994
Honolulu Cellular Telephone Company January 1, 1994
Madison Cellular Telephone Company January 1, 1994
MCTA January 1, 1994
Richmond Cellular Telephone Company January 1, 1994
Westel-Indianapolis Company January 1, 1994
Westel-Milwaukee Company, Inc. January 1, 1994
Stevens Graphics, Inc. January 1, 1995
L.M. Berry and Company January 1, 1996
</TABLE>
<PAGE>
Schedule 2
With respect to Eligible Employees of all Participating Companies, service
with the following companies shall be credited, if such Employee was employed on
the date of acquisition (or other date agreed to pursuant to such acquisition):
<TABLE>
<CAPTION>
------------------
Type of Service
Credited
- - ----------------------------------------------------------------------------------------------
Acquisition Net Vesting Effective
Service With Date Credited Vesting Eligibility Date
- - ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Cellular Communications 4/4/89 X X 1/1/96
Corporation
- - ----------------------------------------------------------------------------------------------
Bakersfield Cellular Telephone 4/4/89 X X 1/1/96
Company
- - ----------------------------------------------------------------------------------------------
Gulf Coast Cellular Telephone 4/4/89 X X 1/1/96
Company
- - ----------------------------------------------------------------------------------------------
Honolulu Cellular Telephone 4/4/89 X X 1/1/96
Company
- - ----------------------------------------------------------------------------------------------
Houston Cellular Corporation 4/4/89 X X 1/1/96
- - ----------------------------------------------------------------------------------------------
Los Angeles Cellular Telephone 4/4/89 X X 1/1/96
Company
- - ----------------------------------------------------------------------------------------------
Madison Cellular Telephone 9/20/91 X X 1/1/96
Company
- - ----------------------------------------------------------------------------------------------
MCTA 4/4/89 X X 1/1/96
- - ----------------------------------------------------------------------------------------------
Richmond Cellular Telephone 4/4/89 X X 1/1/96
Company
- - ----------------------------------------------------------------------------------------------
Westel-Indianapolis Company 4/4/89 X X 1/1/96
- - ----------------------------------------------------------------------------------------------
Westel-Milwaukee Company, Inc. 4/4/89 X X 1/1/96
- - ----------------------------------------------------------------------------------------------
360E Communications Company and 2/24/97 X X X 10/31/97
Affiliates
- - ----------------------------------------------------------------------------------------------
United States Cellular 2/4/97 X X X 10/31/97
Corporation
- - ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Participants who meet the conditions indicated below shall become 100 percent
vested in their accrued benefits as of the date indicated below:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
100%
Terminated In Vested As
Employed By: Employed As Of: Connection With: Of:
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Berry-Sprint Date of sale Sale of Berry-Sprint Date of
Publishing, Inc. Publishing to Sprint sale
Publishing and
Advertising, Inc.
- - --------------------------------------------------------------------------------
BellSouth Wireless, Inc. Date of Formation of Date of
formation of Cellemetry, LLC formation
Cellemetry, LLC
- - --------------------------------------------------------------------------------
Westel-Milwaukee 5/30/97 Exchange Agreement Date of
Company, Inc. with BellSouth closing
Cellular,
Westel-Milwaukee,
United States Cellular
Corporation
- - --------------------------------------------------------------------------------
RCTC Wholesale 5/30/97 Contribution Agreement Date of
Corporation with 360E closing
(Non-represented Communications
employees) Investment Company,
Virginia Metronet,
Inc., Orlando CGSA,
Inc.
- - --------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 2
Modifications to Plan
BellSouth Advertising & Publishing Corporation modifies the Plan by adding a new
paragraph Section 9.03(e) to Section 9, Pensioner Death Benefits, as follows:
(e) The foregoing notwithstanding, no Pensioner Death Benefit shall be
paid with respect to any Pensioner of BellSouth Advertising &
Publishing Corporation ("BAPCO") if such Pensioner, within two years
of retirement, engages in any of the following forfeiture events.
1. acquires ownership of more than 5% of any class of stock of,
or acquires beneficial ownership of, more than 5% of the
earnings or profits of a Competitor; or
2. becomes employed by, consults with, or renders service to a
Competitor, unless the former employee's activities on behalf
of the Competitor make no use, directly or indirectly, of (i)
BellSouth Confidential Information or (ii) the specialized
skills the former employee developed or the training provided
to the employee or (iii) relationships established or
maintained by the former employee whether directly or through
the employee's subordinate(s), during his or her last two
years of employment with BellSouth or any of its affiliates;
or
3. discloses to any Competitor, or uses for himself or another,
Confidential Information relative to the business of
BellSouth. "Confidential Information" includes, without
limitation, the following types of information: information,
whether generated internally or externally, relating to
BellSouth's business or to its affiliates' businesses which
derives economic value, actual or potential, from not being
generally known to other persons and is the subject of efforts
that are reasonable under the circumstances to maintain its
secrecy or confidentiality, including, but not limited to,
studies and analyses, technical or nontechnical data,
programs, patterns, compilations, devices, methods, models
(including cost and/or pricing models and operating models),
techniques, drawings, processes, employee compensation data,
and financial data (including sales and marketing information
and strategies, customer account records, billing information,
and personnel data); or
4. whether for his own account or the account of a Competitor,
solicits business from any person or entity known by the
former employee to be a customer or
<PAGE>
actively sought prospective customer of BellSouth or any of
its affiliates, if (i) the former employee had direct or
indirect contact with such person or entity during and by
reason of the former employee's employment at BellSouth or any
of its affiliates, and (ii) the business or service solicited
displaces or is in competition with any line of business in
which BellSouth or any of its affiliates is engaged. The
activities prohibited under this paragraph include soliciting
advertising business, for or through a certified marketing
representative ("CMR") or similar business, that BellSouth is
in the business of directly providing to customers, even if
such sales by a CMR or similar business provides a business
benefit to BellSouth or its affiliates.
A "Competitor" of BellSouth or its affiliates is one who, in
BellSouth's judgment, directly or through an affiliate, provides
goods or services, represents for sale, refers, promotes, negotiates
or otherwise markets any goods or services, which displace or are in
competition with any line of business in which BellSouth or one or
more of its affiliates is engaged, such as, but not limited to: (i)
the provision of telecommunications goods or services; (ii) the
printing, sale, publication, or provision of classified directories,
or directory advertising; (iii) the provision of cellular
communications; and (iv) the provision of paging goods or services.
A "Competitor" includes any agency that is not related to BellSouth
by ownership and that sells advertising, directly or indirectly, for
publications of BellSouth or its affiliates, such as a CMR or other
such provider.
For purposes of the Benefits Forfeiture Provision, the business
activities of BellSouth and its affiliates at the point in time that
a former non-represented employee retires from his or her employment
at BAPCO will determine whether that entity is a Competitor.
Such Pensioner Death Benefit is deemed terminated upon the date of
occurrence of the forfeiture event. Upon learning of a forfeiture
event, BAPCO reserves the right to seek the reimbursement of any
benefits that were paid following the occurrence of that event.
<PAGE>
Stevens Graphics, Inc. modifies the Plan with respect to its Employees, as
follows:
1) The defined term "Compensation" shall include overtime.
2) Paragraph 4.04 regarding mandatory retirement and Section 9
regarding death benefits shall not apply.
3) The Plan, as modified, applies only to salaried employees of Stevens
Graphics, Inc.
4) Active participants in the Retirement Pension Plan of Stevens
Graphics, Inc. ("Stevens Plan") on December 31, 1994, will have
their pension benefits and rights and features of the Stevens Plan
protected through the earlier of (i) December 31, 2004, and (ii) the
date a participant terminates employment with Stevens Graphics, Inc.
If they retire or terminate with respect to all Affiliates and
Participating Companies effective January 1, 2005 or earlier, they
may elect to have their pension calculated and paid either under the
Stevens Plan with its related optional forms of pension payments or
under the Plan with the forms of pension payments available under
the Plan at their termination or retirement dates. After December
31, 2004, such participants will earn future benefits only under the
Plan; the benefits they have earned as of December 31, 2004 under
the Stevens Plan will be frozen as of that date.
5) Paragraph 7.08 regarding the lump sum settlement option, and the
portion of Paragraph 5.05 providing for an immediately payable
annuity shall apply only to participants whose Pension Commencement
Date is on or after January 1, 1997.
6) The last sentence of Paragraph 8.02, regarding the election of lump
sum settlement by a surviving spouse and the payment of a lump sum
to the estate of a participant who dies and does not have a
surviving spouse, shall be effective with respect to participants
who die on or after January 1, 1997.
<PAGE>
L.M. Berry and Company modifies the Plan with respect to its Employees, as
follows:
1) Definitions: The capitalized terms set forth below shall have the
following meanings unless otherwise indicated:
"Grandfathered Participant" (subsequent to December 31, 1995) means a
person who either (a) on December 31, 1995 was an employee (as defined in
the Prior Plan), was a Participant (as defined in and determined in
accordance with Section 2.01 and other relevant provisions of the Prior
Plan), and was not a Grandfathered Disabled Participant, or (b) on
December 31, 1995 was an employee (as defined in the Prior Plan), was
rehired on or after January 1, 1995 and would be a Participant under
Section 2.02(b) of the Prior Plan upon completion of a Year of Service (as
defined in the Prior Plan) for eligibility purposes computed from the date
of rehire, has completed such Year of Service (as defined in the Prior
Plan) within a year from rehire, and was not a Grandfathered Disabled
Participant.
"Grandfathered Disabled Participant" means (subsequent to December 31,
1995) a person who on December 31, 1995 was alive, was a Participant under
the Prior Plan, was receiving credit for Credited Service (as defined in
the Prior Plan) under the second paragraph of Section 1.01(q) of the Prior
Plan (or who would have been receiving such service credit but for the
twenty-five (25) year maximum), and whose retirement benefit under the
Prior Plan had not been paid or commenced.
"Vesting Grandfathered Participant" means (subsequent to December 31,
1995) a person who on December 31, 1995 was credited with service for
vesting purposes under the Prior Plan.
"Prior Plan" means the Employees Pension Plan of L. M. Berry and Company,
as amended, as in effect on December 31, 1995 or, if applicable, such
earlier or later time as indicated in this Schedule.
Other capitalized terms used herein shall have the meanings set forth in the
Plan, unless otherwise indicated.
2) Application of Plan Terms: The terms of the Plan shall apply only to
persons who on or after January 1, 1996 are Eligible Employees. The
benefits (if any) of a person who is not an Eligible Employee at any time
after December 31, 1995 shall be determined under the terms of the Prior
Plan as in effect with respect to such person. A Grandfathered Disabled
Participant shall in no event be an Eligible Employee unless his Total and
Permanent Disability (as defined in the Prior Plan) has ended and he has
returned to active, eligible employment with a Participating Company.
Notwithstanding the foregoing, all matters pertaining to funding,
administration, amendments, and termination (as opposed to eligibility for
and amount of benefits) shall on and after January 1, 1996 be determined
under the terms of the Plan without regard to the Prior Plan.
<PAGE>
3) Amendment of Prior Plan Provisions:
(a) Effective as of December 31, 1995, Section 1.01(x) of the Prior
Plan is hereby amended by deleting therefrom "April 1" each place it
appears and substituting therefor (in each such place) "first day of the
Plan Year" and by adding at the end thereof the following: If a change in
Plan Year changes the time for determining the Applicable Interest Rate,
any distribution for which the annuity starting date occurs in the
one-year period commencing at the time the Plan Year change is effective,
which shall be the first day following the end of the applicable short
Plan Year, shall be determined using the Applicable Interest Rate
determined at either the date for determining the Applicable Interest Rate
before the change in Plan Year or the date for determining the Applicable
Interest Rate after the change in Plan Year, whichever results in the
larger distribution.
(b) The provisions of the Prior Plan may be amended further after
December 31, 1995 in the manner set forth in the Plan for amending the
Plan.
4) Modifications to Certain Plan Provisions
(a) The defined term "Compensation" (Paragraph 1.12) shall be
modified to include overtime.
(b) The definition of "PBGC Interest Rate" (Paragraph 1.27) shall be
modified by deleting "January 1st of the applicable calendar year" and by
substituting therefor: ?the first day of the applicable Plan Year" and by
adding at the end thereof the following: If a change in Plan Year changes
the time for determining the interest rate, the present value of any lump
sum distribution for which the annuity starting date occurs in the
one-year period commencing at the time the Plan Year change is effective,
which shall be the first day following the end of the applicable short
Plan Year, shall be determined using the interest rate determined at
either the date for determining the interest rate before the change in
Plan Year or the date for determining the interest rate after the change
in Plan Year, whichever results in the larger distribution.
(c) Paragraph 2.02 shall not apply.
(d) Paragraph 10.08 shall not apply with respect to a Vesting
Grandfathered Participant. With respect to a Vesting Grandfathered
Participant, a "Vesting Eligibility Year" shall mean a year of Credited
Service for vesting purposes as defined in and determined in accordance
with the provisions of the Prior Plan.
(e) Paragraph 2.03 shall be modified with respect to Vesting
Grandfathered Participants by deleting therefrom "Normal Retirement Age"
and by substituting therefor the following:
"age 62 in the case of a Participant whose employment covered under
the Plan (including the Prior Plan) began before his 57th birthday
and the fifth anniversary of his participation in the Plan
(including the Prior Plan) in the case of a Participant whose
employment covered under the Plan began after his 57th birthday.
(f) Paragraph 3.04 shall be modified to provide as follows:
<PAGE>
3.04 Interest Credit. As of the last day of each Plan Year, each
Participant's account shall be credited with interest under the terms of
the Plan in effect as of December 31, 1997, subject to any subsequent
amendments of this Schedule 2.
(g) Paragraph 3.05(b) shall not apply.
(h) The provisions of Paragraphs 3.08(b)(i) and (iii) respecting the
interest credits and conversion factors shall not apply. Instead, a
Participant's account balance shall be credited with interest at the rate
of 4 percent per year.
(i) Paragraph 4.04 shall not apply.
(j) Paragraphs 6.01(a) shall not apply, and a Participant's accrued
benefit shall be determined in accordance with Paragraph 6.01(b) (without
regard to whether the Participant terminates before January 1, 1998).
(k) Paragraph 7.05 shall be modified to provide as follows:
7.05 Election Period for Disability Pensioners. Any Participant who
receives disability pension payments shall be covered by the
election provisions in Paragraph 7.02 above only at the time the
disability pension converts to a service pension. If a Participant
receiving disability pension payments dies before the disability
pension converts to a service pension (before his Pension
Commencement Date), the provisions of Section 8 shall apply.
(l) Paragraph 7.08 shall be modified to provide as follows:
7.08 Lump Sum Settlement Option. A Participant described in
subparagraph (a) of this Paragraph 7.08 may Elect to receive a lump
sum settlement as determined below in lieu of the forms of benefit
described in Paragraph 7.01.
(a) The Participants to whom the lump sum settlement option
described in this Paragraph 7.08 applies are (i) the vested
Employees of Participating Companies who retire or whose
employment otherwise terminates other than by reason of death
on or after January 1, 1996 and who are (or will be at the end
of the 90-day period preceding the Participant's Pension
Commencement Date) service pension eligible, and (ii)
Employees who terminated employment with a Participating
Company pursuant to the sale of Berry-Sprint Publishing, Inc.
to Sprint Publishing and Advertising, Inc.
(b) The lump sum settlement of any Participant described in
subparagraph 7.08(a) who Elects the lump sum settlement option
shall equal the greater of (i) the Participant's account
balance, and (ii) the present value of the Participant's
pension on his Pension Commencement Date, which shall be
determined for Pension Commencement Dates before January 1,
2000, in accordance with subparagraph 7.08(d) of the Plan,
<PAGE>
and for Pension Commencement Dates on or after January 1,
2000, in accordance with paragraph 7.08(e) of the Plan.
(c) A Participant who wants to Elect to receive a lump sum
settlement as described above must do so in accordance with
the procedures in Paragraph 7.02.
(m) Section 9 shall not apply.
(n) The definition of Plan Year (Section 1.31) shall be modified to
provide as follows:
"Plan Year" means the Plan Year determined under the Prior Plan and
the short period ending on the first December 31st coincident with
or next following the date on which any governmental approval to
change the Plan Year is not required or is received, and, thereafter
the calendar year for subsequent Plan Years. Notwithstanding the
foregoing, for purposes of determining Plan benefits, Plan Year
shall mean the calendar year 1996 and each subsequent calendar year.
(o) The second sentence of Paragraph 6.05 shall not apply.
(p) Paragraph 11.05 shall be modified by adding the following at the
end thereof:
(d) Notwithstanding the foregoing (or any other provisions of the
Plan), this Paragraph 11.05 shall apply only with respect to
transfers of employment to coverage under the Plan that occur on or
after April 1, 1995.
(q) Appendix A shall be replaced by the Appendix A as set forth on
Attachment I of the Amendment for this Schedule.
(r) Paragraph 11.04 shall be modified by adding the following at the
end thereof:
(d) If a Participant left employment with a Participating Company or
an Affiliate or an Employer (as defined in the Prior Plan) and the
liabilities attributable to the Participant's benefit under the Plan
or Prior Plan were transferred to another pension plan maintained by
an employer that is not a Participating Company or an Affiliate or
an Employer (as defined in the Prior Plan) or other entity required
to be aggregated with the Employer (as defined in the Prior Plan)
under Section 414 of the Code, the Participant upon being rehired
shall not be credited with Net Credited Service or Vesting Service
Credit for periods of employment prior to being rehired except as
specifically provided by an amendment to the Plan. The Participant
shall be credited with Vesting Eligibility Years for periods of
employment that were credited under the Plan or Prior Plan prior to
the transfer of liabilities.
<PAGE>
5) Benefits for Grandfathered Participants and Grandfathered Disabled
Participants.
(a) General. Each Grandfathered Participant shall have benefits
under the Plan determined as provided in this Paragraph 5.
(b) Definitions. For purposes of this Paragraph 5: The term "Berry
Benefit" shall mean, with respect to a Grandfathered Participant, his
Accrued Retirement Benefit (as defined in the Prior Plan) determined under
the terms of the Prior Plan, including the modification to Section 1.01(s)
thereof set forth in the immediately following sentence, but not including
Section 5.05 and related provisions thereof, as of the earlier of December
31, 2007 or the first date on which the Grandfathered Participant is no
longer an Eligible Employee of L.M. Berry and Company, in the same manner
as if the Grandfathered Participant's employment with the Employer (as
defined in the Prior Plan) had terminated on such date. For purposes of
determining the Berry Benefit, Section 1.01(s) of Prior Plan shall be
modified effective for calendar years beginning after December 31, 1995 to
provide that "Annual Compensation" shall have the meaning set forth in
Paragraph 1.12 of the PRA except that for such purpose each reference to
"Plan Year" in Paragraph 1.31 of PRA shall be replaced by a reference to
"calendar year" and any provisions regarding periods prior to January 1,
1996 shall not apply. The term "PRA Benefit" shall mean a Grandfathered
Participant's accrued benefit as determined under Paragraph 6.01 and other
relevant provisions of PRA, all as modified by this Schedule. The term
?PRA? shall mean the provisions of the Plan (as modified by this
Schedule), other than the provisions of this Paragraph 5 excepting the
modifications to Section 8 of PRA in subparagraph (e) of this Paragraph 5.
(c) Berry Benefit Equals or Exceeds PRA Benefit. If the monthly
dollar amount of a Grandfathered Participant's Berry Benefit is equal to
or greater than the monthly dollar amount of the Grandfathered
Participant's PRA Benefit, such Grandfathered Participant shall receive
only the Berry Benefit with all optional forms of payment and rights
and/or features pertaining thereto as provided under the Prior Plan (not
including Section 5.05 and related provisions thereof), as his pension
benefit under the Plan.
(d) PRA Benefit Exceeds Berry Benefit. If the monthly dollar amount
of a Grandfathered Participant's PRA Benefit is greater than the monthly
dollar amount of the Grandfathered Participant's Berry Benefit, such
Grandfathered Participant's pension benefit under the Plan shall be: (1)
the Berry Benefit payable with all optional forms of payment and rights
and/or features pertaining thereto as provided under the Prior Plan (not
including Section 5.05 and related provisions thereof); and (2) the excess
of the monthly amount of the PRA Benefit over the monthly dollar amount of
the Berry Benefit payable with all optional forms of payment and rights
and/or features pertaining thereto as provided under PRA.
<PAGE>
(e) Pre-Commencement Death Benefits. If a Grandfathered Participant
whose pension benefit would be paid under subparagraph (c) of this
Paragraph 5 dies prior to payment or commencement of payment thereof,
pre-commencement death benefits (if any) under the Plan with respect to
such Participant shall be payable only under the terms of the Prior Plan
(not including Section 5.05 and related provisions thereof) with respect
to his Berry Benefit. If a Grandfathered Participant whose pension benefit
would be paid under subparagraph (d) of this Paragraph 5 dies prior to
payment or commencement of payment thereof, pre-commencement death
benefits (if any) under the Plan with respect to such Participant shall be
payable: (1) under the terms of the Prior Plan (not including Section 5.05
and related provisions thereof) with respect to his Berry Benefit only;
and (2) under the terms of PRA (as modified below) with respect to the
portion of his pension benefit described in clause (2) of subparagraph (d)
of this Paragraph 5 only, but for such purpose subparagraph 7.06(b) of PRA
shall not apply and Section 8 of PRA shall be modified to provide as
follows:
SECTION 8
PRE-COMMENCEMENT DEATH BENEFITS
8.01 Eligibility. Any Participant who dies after becoming vested but
before his Pension Commencement Date shall be eligible for a death benefit under
the Plan. Except as provided in this Section 8, no death benefits (other than
post-retirement death benefits payable because of the form of payment of
retirement benefits) are payable under the Plan.
8.02 Lump Sum Death Benefit. The death benefit payable pursuant to this
Paragraph 8.02 shall be a lump sum payment equal to the lump sum settlement the
deceased Participant would have received under Paragraph 7.08 as of the date as
of which the death benefit is paid. For purposes of computing such lump sum
settlement amount, the deceased Participant's Pension Commencement Date shall be
the earliest date as of which the Participant could have commenced an
immediately payable monthly pension (other than a disability pension) if the
Participant had remained alive and based on the deceased Participant's Net
Credited Service at his death, and present value shall be determined as of the
date as of which the death benefit is paid. Such lump sum death benefit shall be
payable as soon as practicable following proper application therefor by the
beneficiary. For purposes of this Paragraph 8.02, and subject to Paragraph 8.03,
a Participant's beneficiary shall be the person or persons properly designated
as such by the Participant in accordance with procedures prescribed by the Plan
Administrator. Notwithstanding any other provision of this Section 8, no death
benefit shall be payable pursuant to this Paragraph 8.02 if a Qualified
Preretirement Survivor Annuity is required to be paid to the former
Participant's Surviving Spouse pursuant to this Paragraph 8.03.
8.03 QPSA. Unless a Qualified Election is made within the Election Period,
if a Participant dies after becoming vested but before his Pension Commencement
Date, and if the
<PAGE>
Participant is survived by his Spouse, the Participant's Surviving spouse will
receive a benefit in the form of a life annuity for the Spouse's life in an
amount which is the actuarial equivalent of the lump sum death benefit that
would otherwise have been paid under Paragraph 8.02 ("Qualified Preretirement
Survivor Annuity"). For purposes of the immediately preceding sentence actuarial
equivalence shall be determined using the same actuarial assumptions used to
determine the lump sum death benefit under Paragraph 8.02. A Surviving Spouse
may elect to commence payment of the Qualified Preretirement Survivor Annuity as
of the first day of any month following proper application therefor and in the
absence of a proper election therefor, as required under Section 401(a)(9) of
the Code and applicable regulation thereunder. Notwithstanding the foregoing if
the lump sum actuarial equivalent value of the Qualified Preretirement Survivor
Annuity does not exceed $3,500 (as of the date of lump sum settlement described
in the following clause), a lump sum settlement thereof (in lieu of monthly
payments) to the Surviving Spouse in such amount shall be made as soon as
practicable following the Participant's death.
For purposes of this Paragraph 8.03:
"Election Period" means the period which begins on the first day of the
Plan Year in which the Participant attains age 35 and end on the date of
the Participant's death. If a Participant separates from service prior to
the first day of the Plan Year in which age 35 is attained, with respect
to his benefits accrued prior to the date of separation, the election
period shall begin on the date of separation.
"Qualified Election" means a waiver by a Participant of a Qualified
Preretirement Survivor Annuity. The waiver shall be in writing and be
consented to in writing by the Participant's Spouse. The Spouse's consent
to a waiver shall be witnessed by a Plan representative or notary public.
Notwithstanding this consent requirement, if it is established to the
satisfaction of a Plan representative that such written consent may not be
obtained because there is no spouse or the spouse cannot be located, a
waiver without the Spouse's consent shall be deemed a Qualified Election.
Any consent necessary under this provision shall be valid only with
respect to the Spouse who signs the consent (or in the event of a deemed
Qualified Election, the designated Spouse) and only with respect to the
specific non-spouse beneficiary(s) for whom such consent is given.
A revocation of a prior waiver may be made by a Participant without the
consent of the Spouse at any time before the commencement of benefits. The
number of revocations shall not be limited.
"Spouse (Surviving Spouse)" means the spouse or surviving spouse of the
Participant or former Participant, provided that a former spouse will be
treated as the spouse or surviving
<PAGE>
spouse to the extent provided under a qualified domestic relations order
as described in Internal Revenue Code Section 414(p).
The Plan shall provide each Participant to whom this Paragraph
8.03 applies within the applicable period a written explanation of the
Qualified Preretirement Survivor Annuity in such terms and in such manner
as would be comparable to the explanation provided for meeting the notice
requirements applicable to a qualified joint and survivor annuity. The
term "applicable period" means, with respect to a Participant (or former
Participant, whichever of the following periods ends last:
(i) The period beginning with the first day of the Plan Year
in which the Participant attained age 32 and ending with the close the
Plan Year preceding the Plan Year in which the Participant attains age 35.
(ii) A reasonable period after the individual becomes a
Participant.
(iii) A reasonable period ending after the immediately
following paragraph ceases to apply to the Participant.
(iv) A reasonable period after separation from service in case
of a Participant who separates before attaining age 35.
(f) Disability Benefits. No person other than a Grandfathered
Disabled Participant shall accrue any benefits under Section 5.05 and
related provisions of the Prior Plan after December 31, 1995. If a
Grandfathered Participant would otherwise be eligible to receive a
disability pension under Paragraph 4.02 of PRA, no disability pension
shall be payable to such Grandfathered Participant under Paragraph 4.02 of
PRA, and, instead such Grandfathered Participant shall be eligible for a
disability pension under this Paragraph 5 as follows: The disability
pension shall be determined and paid in the same manner as provided for
under Paragraph 4.02 and other provisions of PRA pertaining to disability
pension (and shall not be based on the Grandfathered Participant's benefit
under subparagraph (c) or subparagraph (d) of this Paragraph 5), and if
the Grandfathered Participant elects to commence or receive any other
pension for which he is eligible under the Plan such disability pension
shall terminate (notwithstanding the provisions of Paragraph 4.02 of PRA)
as of the month preceding the first month for which other pension
commences or is paid, which election shall be available to such
Grandfathered Participant in accordance with the Prior Plan or the Prior
Plan and PRA (other than Paragraph 4.02), as applicable. If a
Grandfathered Participant receiving a disability pension dies before
commencement or payment of any other pension to which he is entitled under
the Plan, subparagraph (e) of this Paragraph 5 shall apply.
<PAGE>
(g) Reemployed Former Employees. The benefit of a former Employee
(as defined in the Prior Plan) who is not an Employee on December 31, 1995
and who becomes an Eligible Employee of L.M. Berry and Company on or after
January 1, 1996 shall be determined as follows: Except as provided in the
immediately following sentence, if as of December 31, 1995 such person has
no accrued benefit under the Prior Plan, such person shall be treated as a
new employee for all purposes of the Plan, subject to any required
crediting of service for vesting purposes. If as of December 31, 1995,
such person previously had an accrued benefit under Prior Plan that had
been paid by the Prior Plan (not including any transferee plan from the
Prior Plan) in a lump sum or installments prior to such reemployment, such
person shall become a Grandfathered Participant as of the date of
reemployment and Section 2.02 of the Prior Plan shall apply with respect
to this Berry Benefit. If as of December 31, 1995, such person had an
accrued benefit under the Prior Plan that had not been paid or commenced
prior to such reemployment, such person shall become a Grandfathered
Participant as of the date of reemployment. Notwithstanding any other
provision of this Paragraph 5, the "Berry Benefit" of a Grandfathered
Participant described in either of the two immediately preceding sentences
shall be such Grandfathered Participant's Accrued Retirement Benefit (as
defined in the Prior Plan) determined as of the last date prior to January
1, 1996 on which he was an Employee (as defined in the Prior Plan) under
the terms of the Prior Plan and subject to Section 2.02 of the Prior Plan
if applicable. If as of December 31, 1995 such person had an accrued
benefit under the Prior Plan that is in annuity payment status as of the
date of reemployment, such person shall not become a Grandfathered
Participant as of the date of reemployment, such annuity payments shall
not be increased, reduced, or suspended by reason of such reemployment,
and such person shall otherwise be treated as a new employee for all
purposes of the Plan, subject to any required crediting of service for
vesting purposes.
(h) Reemployed Grandfathered Disabled Participants. If a
Grandfathered Disabled Participant is reemployed as an Eligible Employee
of L.M. Berry and Company on or after January 1, 1996, such person shall
be treated in accordance with subparagraph (g) of this Paragraph 5, and in
no event shall receive any further benefit accrual under Section 5.05 and
related provisions of the Prior Plan.
(i) No Duplication. Notwithstanding any other provision of the Plan
(including this Paragraph 5) or the Prior Plan to the contrary, in no
event shall there be any duplication of benefits between the Plan and the
Prior Plan, between the PRA and the Prior Plan, or otherwise.
6) Provisions for Rehired Ameritech Transferred Employees.
(a) Definition. For purposes of this Paragraph 6, a "Rehired
Ameritech Transferred Employee" means any person who was a Transferred
Employee under Article X of the Prior Plan and who becomes an Eligible
Employee of L.M. Berry and Company.
<PAGE>
(b) Service for Rehired Ameritech Transferred Employees. Net
Credited Service of a Rehired Ameritech Transferred Employee shall equal
the sum of (i) the Net Credited Service otherwise credited to the Rehired
Ameritech Transferred Employee under the Plan beginning with the date of
his reemployment and excluding any Net Credited Service restored under
Paragraph 10.05 and without regard to this paragraph and (ii) the number
of years of Credited Years of Service credited to the Rehired Ameritech
Transferred Employee as of the Transfer Date for purposes of determining
the Standard Retirement Benefit under the Prior Plan. Vesting Service
Credit of a Rehired Ameritech Transferred employee shall equal the sum of
(i) the Vesting Service Credit otherwise credited to the Rehired Ameritech
Transferred Employee under the Plan beginning with the date of his
reemployment and excluding any Vesting Service Credit under Paragraph
10.03 and without regard to this paragraph and (ii) the number of years of
Credited Years of Service credited to the Rehired Ameritech Transferred
Employee as of the Transfer Date for purposes of determining the Standard
Retirement Benefit under the Prior Plan. Credited Years of Service,
Standard Retirement Benefit, and Transfer Date shall have the meaning
given to such terms under the Prior Plan.
(c) No Duplication. Notwithstanding any other provision of the Plan
(including this Schedule or the Prior Plan to the contrary, in no event
shall there be any duplication of Net Credited Service or Vesting Credited
Service for the same period of employment. Notwithstanding anything in
this Paragraph 6 or any other provision of the Plan (including this
Schedule or the Prior Plan to the contrary, in no event shall this
Paragraph 6 alter the calculation of a Rehired Ameritech Transferred
Employee's opening account as determined under Appendix A as set forth on
Attachment I of this Schedule.
<PAGE>
Appendix 1
Factors for Special One-Time Increase to PRA account balances for
Participants described in subparagraphs 3.05(b)(i) and (ii), and Paragraph 3.08.
<TABLE>
<CAPTION>
Attained Age As of Factor for
January 1, 1998 One-Time Increase
--------------- -----------------
<S> <C>
45 1.424238
46 1.418191
47 1.412010
48 1.405696
49 1.399249
50 1.392670
51 1.385961
52 1.379123
53 1.372160
54 1.365075
55 1.357871
56 1.350554
57 1.343129
58 1.335602
59 1.327981
60 1.320276
61 1.312496
62 1.304653
63 1.296758
64 1.288822
65 * 1.280857
</TABLE>
* This factor is applicable to all Participants' accounts who were not
service pension eligible on January 1, 1998 (or such other date as an
account balance is established under Paragraph 3.08), regardless of
attained age.
<PAGE>
Appendix 2
Factors for Special One-Time Increase to PRA account balances as of date
of termination for Participants described in subparagraphs 3.05(b)(iii) and
(iv).
<TABLE>
<CAPTION>
Attained Age As of
Date of Termination Factor for
of Employment One-Time Increase
------------- -----------------
<S> <C>
45 1.373173
46 1.368043
47 1.362792
48 1.357420
49 1.351927
50 1.346313
51 1.340579
52 1.334727
53 1.328760
54 1.322679
55 1.316487
56 1.310189
57 1.303789
58 1.297292
59 1.290704
60 1.284035
61 1.277292
62 1.270485
63 1.253624
64 1.256719
65 * 1.249780
</TABLE>
* This factor is applicable to all Participants' accounts who
terminate prior to service pension eligibility, regardless of
attained age.
<PAGE>
APPENDIX 3 - 1999
CONVERSION FACTORS FOR PRA ACCOUNT BALANCE TO ANNUITY PAYABLE IMMEDIATELY
FOR PENSION COMMENCEMENT DATES DURING 1999
USED TO CONVERT PRA BALANCE TO AN IMMEDIATE ANNUITY FOR PCD'S IN 1999.
Use Age in completed years and months.
BASIS: GAM 83 BLENDED 50/50 MORTALITY TABLE AND 5.25% INTEREST
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------
Age Months
- - --------------
Years 0 1 2 3 4 5
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
20 18.358846 18.354271 18.349695 18.345120 18.340545 18.335970
21 18.303943 18.299148 18.294353 18.289558 18.284763 18.279968
22 18.246404 18.241376 18.236348 18.231320 18.226292 18.221264
23 18.186069 18.180798 18.175528 18.170258 18.164988 18.159717
24 18.122826 18.117302 18.111778 18.106254 18.100730 18.095206
25 18.056538 18.050750 18.044961 18.039173 18.033385 18.027597
26 17.987079 17.981014 17.974949 17.968884 17.962818 17.956753
27 17.914297 17.907942 17.901586 17.895231 17.888876 17.882520
28 17.838032 17.831377 17.824722 17.818067 17.811412 17.804756
29 17.758170 17.751199 17.744228 17.737256 17.730285 17.723314
30 17.674516 17.667219 17.659922 17.652626 17.645329 17.638032
31 17.586955 17.579317 17.571678 17.564040 17.556401 17.548763
32 17.495294 17.487299 17.479305 17.471311 17.463317 17.455322
33 17.399362 17.390997 17.382632 17.374267 17.365902 17.357537
34 17.298981 17.290231 17.281481 17.272730 17.263980 17.255230
35 17.193978 17.184841 17.175705 17.166569 17.157433 17.148297
36 17.084344 17.074775 17.065207 17.055638 17.046070 17.036502
37 16.969523 16.959512 16.949501 16.939490 16.929478 16.919467
38 16.849388 16.838922 16.828457 16.817991 16.807525 16.797059
39 16.723799 16.712870 16.701942 16.691013 16.680085 16.669156
40 16.592656 16.581255 16.569855 16.558454 16.547053 16.535652
41 16.455848 16.443965 16.432082 16.420199 16.408316 16.396433
42 16.313251 16.300881 16.288512 16.276142 16.263772 16.251402
43 16.164813 16.151954 16.139095 16.126235 16.113376 16.100517
44 16.010502 15.997152 15.983802 15.970452 15.957102 15.943752
45 15.850303 15.836463 15.822624 15.808784 15.794944 15.781104
</TABLE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------
Age Months
- - --------------
Years 6 7 8 9 10 11
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
20 18.331394 18.326819 18.322244 18.317669 18.313093 18.308518
21 18.275173 18.270378 18.265583 18.260788 18.255993 18.251199
22 18.216236 18.211208 18.206180 18.201152 18.196124 18.191097
23 18.154447 18.149177 18.143907 18.138636 18.133366 18.128096
24 18.089682 18.084158 18.078634 18.073110 18.067586 18.062062
25 18.021808 18.016020 18.010232 18.004444 17.998655 17.992867
26 17.950688 17.944623 17.938558 17.932493 17.926428 17.920362
27 17.876165 17.869809 17.863454 17.857099 17.850743 17.844388
28 17.798101 17.791446 17.784791 17.778136 17.771480 17.764825
29 17.716343 17.709372 17.702401 17.695429 17.688458 17.681487
30 17.630735 17.623439 17.616142 17.608845 17.601548 17.594252
31 17.541124 17.533486 17.525847 17.518209 17.510571 17.502932
32 17.447328 17.439334 17.431339 17.423345 17.415351 17.407357
33 17.349172 17.340807 17.332442 17.324077 17.315711 17.307346
34 17.246479 17.237729 17.228979 17.220229 17.211478 17.202728
35 17.139161 17.130024 17.120888 17.111752 17.102616 17.093480
36 17.026933 17.017365 17.007797 16.998228 16.988660 16.979092
37 16.909456 16.899444 16.889433 16.879422 16.869411 16.859399
38 16.786594 16.776128 16.765662 16.755196 16.744731 16.734265
39 16.658227 16.647299 16.636370 16.625442 16.614513 16.603584
40 16.524252 16.512851 16.501450 16.490050 16.478649 16.467248
41 16.384549 16.372666 16.360783 16.348900 16.337017 16.325134
42 16.239032 16.226662 16.214293 16.201923 16.189553 16.177183
43 16.087657 16.074798 16.061939 16.049079 16.036220 16.023361
44 15.930402 15.917053 15.903703 15.890353 15.877003 15.863653
45 15.767264 15.753424 15.739585 15.725745 15.711905 15.698065
</TABLE>
Page1
<PAGE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------
Age Months
- - --------------
Years 0 1 2 3 4 5
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
46 15.684225 15.669899 15.655572 15.641246 15.626919 15.612593
47 15.512308 15.497493 15.482678 15.467863 15.453048 15.438233
48 15.334529 15.319216 15.303902 15.288589 15.273276 15.257963
49 15.150771 15.134949 15.119128 15.103306 15.087485 15.071663
50 14.960912 14.944561 14.928209 14.911858 14.895507 14.879156
51 14.764698 14.747795 14.730891 14.713987 14.697083 14.680179
52 14.561852 14.544370 14.526888 14.509406 14.491924 14.474442
53 14.352067 14.333980 14.315894 14.297808 14.279722 14.261636
54 14.135032 14.116323 14.097614 14.078905 14.060196 14.041487
55 13.910523 13.891165 13.871808 13.852450 13.833093 13.813736
56 13.678234 13.658209 13.638184 13.618159 13.598134 13.578109
57 13.437934 13.417228 13.396522 13.375816 13.355109 13.334403
58 13.189460 13.168072 13.146685 13.125297 13.103909 13.082521
59 12.932806 12.910745 12.888684 12.866623 12.844562 12.822501
60 12.668073 12.645357 12.622640 12.599924 12.577207 12.554491
61 12.395476 12.372128 12.348781 12.325433 12.302086 12.278738
62 12.115306 12.091366 12.067427 12.043487 12.019548 11.995608
63 11.828032 11.803546 11.779060 11.754574 11.730088 11.705602
64 11.534200 11.509226 11.484252 11.459277 11.434303 11.409328
65 11.234507 11.209108 11.183709 11.158310 11.132911 11.107512
66 10.929719 10.903964 10.878209 10.852455 10.826700 10.800945
67 10.620662 10.594615 10.568568 10.542521 10.516474 10.490427
68 10.308097 10.281815 10.255534 10.229252 10.202971 10.176689
69 9.992718 9.966248 9.939777 9.913307 9.886836 9.860366
70 9.675072 9.648451 9.621831 9.595210 9.568590 9.541970
71 9.355627 9.328889 9.302151 9.275413 9.248675 9.221938
72 9.034773 9.007973 8.981173 8.954373 8.927573 8.900773
73 8.713173 8.686389 8.659605 8.632821 8.606037 8.579253
74 8.391765 8.365095 8.338426 8.311757 8.285087 8.258418
75 8.071731 8.045294 8.018857 7.992420 7.965982 7.939545
76 7.754485 7.728406 7.702327 7.676249 7.650170 7.624091
77 7.441541 7.415929 7.390318 7.364707 7.339096 7.313485
78 7.134208 7.109147 7.084087 7.059027 7.033967 7.008907
79 6.833486 6.809037 6.784588 6.760140 6.735691 6.711242
80 6.540102 5.995093 5.450085 4.905076 4.360068 3.815059
</TABLE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------
Age Months
- - --------------
Years 6 7 8 9 10 11
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
46 15.598266 15.583940 15.569613 15.555287 15.540960 15.526634
47 15.423418 15.408603 15.393788 15.378973 15.364159 15.349344
48 15.242650 15.227337 15.212024 15.196710 15.181397 15.166084
49 15.055841 15.040020 15.024198 15.008377 14.992555 14.976733
50 14.862805 14.846454 14.830103 14.813752 14.797401 14.781049
51 14.663275 14.646372 14.629468 14.612564 14.595660 14.578756
52 14.456959 14.439477 14.421995 14.404513 14.387031 14.369549
53 14.243549 14.225463 14.207377 14.189291 14.171205 14.153118
54 14.022777 14.004068 13.985359 13.966650 13.947941 13.929232
55 13.794378 13.775021 13.755663 13.736306 13.716949 13.697591
56 13.558084 13.538059 13.518034 13.498009 13.477984 13.457959
57 13.313697 13.292991 13.272285 13.251579 13.230873 13.210166
58 13.061133 13.039745 13.018357 12.996970 12.975582 12.954194
59 12.800439 12.778378 12.756317 12.734256 12.712195 12.690134
60 12.531774 12.509058 12.486341 12.463625 12.440909 12.418192
61 12.255391 12.232043 12.208696 12.185348 12.162001 12.138653
62 11.971669 11.947729 11.923790 11.899850 11.875911 11.851971
63 11.681116 11.656630 11.632144 11.607658 11.583172 11.558686
64 11.384354 11.359379 11.334405 11.309430 11.284456 11.259481
65 11.082113 11.056714 11.031315 11.005916 10.980517 10.955118
66 10.775190 10.749436 10.723681 10.697926 10.672172 10.646417
67 10.464380 10.438332 10.412285 10.386238 10.360191 10.334144
68 10.150408 10.124126 10.097845 10.071563 10.045281 10.019000
69 9.833895 9.807424 9.780954 9.754483 9.728013 9.701542
70 9.515349 9.488729 9.462108 9.435488 9.408868 9.382247
71 9.195200 9.168462 9.141724 9.114986 9.088248 9.061511
72 8.873973 8.847173 8.820373 8.793573 8.766773 8.739973
73 8.552469 8.525685 8.498901 8.472117 8.445333 8.418549
74 8.231748 8.205079 8.178409 8.151740 8.125070 8.098401
75 7.913108 7.886671 7.860234 7.833796 7.807359 7.780922
76 7.598013 7.571934 7.545855 7.519777 7.493698 7.467619
77 7.287874 7.262263 7.236652 7.211041 7.185430 7.159819
78 6.983847 6.958786 6.933726 6.908666 6.883606 6.858546
79 6.686794 6.662345 6.637896 6.613448 6.588999 6.564550
80 3.270051 2.725042 2.180034 1.635025 1.090017 0.545008
</TABLE>
Page2
<PAGE>
APPENDIX 3 - 1998
CONVERSION FACTORS FOR PRA ACCOUNT BALANCE TO ANNUITY PAYABLE IMMEDIATELY
FOR PENSION COMMENCEMENT DATES DURING 1998
USED TO CONVERT PRA BALANCE TO AN IMMEDIATE ANNUITY FOR PCD'S IN 1998.
Use Age in completed years and months.
BASIS: GAM 83 BLENDED 50/50 MORTALITY TABLE AND 6.11% INTEREST
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------
Age Months
- - --------------
Years 0 1 2 3 4 5
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
20 16.150844 16.147804 16.144763 16.141722 16.138682 16.135641
21 16.114357 16.111149 16.107941 16.104733 16.101525 16.098317
22 16.075861 16.072474 16.069087 16.065700 16.062313 16.058926
23 16.035216 16.031642 16.028067 16.024493 16.020918 16.017344
24 15.992322 15.988550 15.984778 15.981005 15.977233 15.973461
25 15.947055 15.943076 15.939096 15.935117 15.931137 15.927158
26 15.899302 15.895104 15.890905 15.886707 15.882509 15.878311
27 15.848923 15.844494 15.840065 15.835635 15.831206 15.826777
28 15.795772 15.791103 15.786433 15.781764 15.777095 15.772426
29 15.739741 15.734816 15.729892 15.724968 15.720044 15.715119
30 15.680649 15.675461 15.670272 15.665084 15.659895 15.654707
31 15.618387 15.612919 15.607451 15.601983 15.596515 15.591047
32 15.552771 15.547010 15.541249 15.535488 15.529727 15.523966
33 15.483639 15.477570 15.471501 15.465433 15.459364 15.453296
34 15.410815 15.404425 15.398035 15.391645 15.385254 15.378864
35 15.334132 15.327418 15.320704 15.313990 15.307276 15.300562
36 15.253565 15.246484 15.239403 15.232323 15.225242 15.218162
37 15.168597 15.161139 15.153680 15.146221 15.138762 15.131304
38 15.079092 15.071243 15.063393 15.055544 15.047694 15.039845
39 14.984899 14.976649 14.968399 14.960150 14.951900 14.943650
40 14.885902 14.877241 14.868580 14.859919 14.851258 14.842598
41 14.781972 14.772888 14.763805 14.754721 14.745638 14.736554
42 14.672969 14.663456 14.653943 14.644430 14.634917 14.625404
43 14.558813 14.548866 14.538918 14.528970 14.519023 14.509075
44 14.439442 14.429056 14.418670 14.408284 14.397898 14.387512
45 14.314811 14.303984 14.293157 14.282331 14.271504 14.260677
</TABLE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------
Age
- - --------------
Years 6 7 8 9 10 11
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
20 16.132600 16.129560 16.126519 16.123479 16.120438 16.117397
21 16.095109 16.091901 16.088693 16.085485 16.082277 16.079069
22 16.055539 16.052152 16.048764 16.045377 16.041990 16.038603
23 16.013769 16.010195 16.006620 16.003046 15.999471 15.995896
24 15.969689 15.965916 15.962144 15.958372 15.954600 15.950828
25 15.923179 15.919199 15.915220 15.911240 15.907261 15.903281
26 15.874112 15.869914 15.865716 15.861518 15.857320 15.853121
27 15.822347 15.817918 15.813489 15.809060 15.804630 15.800201
28 15.767756 15.763087 15.758418 15.753749 15.749079 15.744410
29 15.710195 15.705271 15.700347 15.695422 15.690498 15.685574
30 15.649518 15.644330 15.639141 15.633953 15.628764 15.623576
31 15.585579 15.580111 15.574643 15.569175 15.563707 15.558239
32 15.518205 15.512444 15.506683 15.500922 15.495161 15.489400
33 15.447227 15.441158 15.435090 15.429021 15.422953 15.416884
34 15.372474 15.366083 15.359693 15.353303 15.346913 15.340522
35 15.293848 15.287134 15.280420 15.273707 15.266993 15.260279
36 15.211081 15.204000 15.196920 15.189839 15.182759 15.175678
37 15.123845 15.116386 15.108927 15.101468 15.094010 15.086551
38 15.031996 15.024146 15.016297 15.008447 15.000598 14.992748
39 14.935400 14.927151 14.918901 14.910651 14.902401 14.894151
40 14.833937 14.825276 14.816615 14.807954 14.799294 14.790633
41 14.727471 14.718387 14.709303 14.700220 14.691136 14.682053
42 14.615891 14.606378 14.596865 14.587352 14.577839 14.568326
43 14.499128 14.489180 14.479233 14.469285 14.459337 14.449390
44 14.377126 14.366741 14.356355 14.345969 14.335583 14.325197
45 14.249850 14.239024 14.228197 14.217370 14.206543 14.195717
</TABLE>
Page 1
<PAGE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------
Age Months
- - --------------
Years 0 1 2 3 4 5
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
46 14.184890 14.173623 14.162355 14.151088 14.139820 14.128553
47 14.049681 14.037968 14.026256 14.014543 14.002830 13.991118
48 13.909129 13.896959 13.884789 13.872619 13.860449 13.848279
49 13.763089 13.750449 13.737809 13.725169 13.712529 13.699889
50 13.611410 13.598278 13.585146 13.572013 13.558881 13.545749
51 13.453822 13.440172 13.426523 13.412873 13.399223 13.385573
52 13.290025 13.275830 13.261636 13.247441 13.233246 13.219052
53 13.119689 13.104922 13.090154 13.075386 13.060619 13.045851
54 12.942478 12.927116 12.911753 12.896390 12.881028 12.865665
55 12.758127 12.742140 12.726154 12.710168 12.694182 12.678196
56 12.566293 12.549660 12.533027 12.516394 12.499761 12.483128
57 12.366697 12.349399 12.332100 12.314802 12.297504 12.280205
58 12.159117 12.141147 12.123177 12.105207 12.087236 12.069266
59 11.943474 11.924833 11.906193 11.887552 11.868911 11.850270
60 11.719785 11.700484 11.681182 11.661881 11.642580 11.623279
61 11.488171 11.468225 11.448280 11.428334 11.408389 11.388443
62 11.248825 11.228265 11.207705 11.187145 11.166586 11.146026
63 11.002108 10.980970 10.959832 10.938695 10.917557 10.896419
64 10.748456 10.726788 10.705121 10.683454 10.661786 10.640119
65 10.488448 10.466306 10.444163 10.422021 10.399879 10.377736
66 10.222740 10.200182 10.177625 10.155067 10.132509 10.109952
67 9.952048 9.929131 9.906213 9.883295 9.860378 9.837460
68 9.677037 9.653810 9.630583 9.607356 9.584130 9.560903
69 9.398315 9.374819 9.351322 9.327826 9.304330 9.280833
70 9.116359 9.092627 9.068896 9.045164 9.021432 8.997700
71 8.831578 8.807639 8.783700 8.759761 8.735822 8.711883
72 8.544309 8.520213 8.496116 8.472020 8.447923 8.423827
73 8.255152 8.230970 8.206789 8.182607 8.158426 8.134244
74 7.964974 7.940800 7.916626 7.892452 7.868279 7.844105
75 7.674887 7.650832 7.626778 7.602723 7.578669 7.554614
76 7.386233 7.362419 7.338606 7.314792 7.290979 7.267165
77 7.100471 7.077004 7.053538 7.030072 7.006606 6.983140
78 6.818877 6.795841 6.772805 6.749770 6.726734 6.703698
79 6.542448 6.519905 6.497362 6.474819 6.452275 6.429732
80 6.271930 5.749269 5.226608 4.703947 4.181286 3.658626
</TABLE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------
Age
- - --------------
Years 6 7 8 9 10 11
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
46 14.117286 14.106018 14.094751 14.083483 14.072216 14.060949
47 13.979405 13.967692 13.955979 13.944267 13.932554 13.920841
48 13.836109 13.823939 13.811769 13.799599 13.787429 13.775259
49 13.687249 13.674610 13.661970 13.649330 13.636690 13.624050
50 13.532616 13.519484 13.506352 13.493219 13.480087 13.466955
51 13.371924 13.358274 13.344624 13.330974 13.317325 13.303675
52 13.204857 13.190662 13.176468 13.162273 13.148078 13.133884
53 13.031084 13.016316 13.001548 12.986781 12.972013 12.957246
54 12.850302 12.834940 12.819577 12.804214 12.788852 12.773489
55 12.662210 12.646223 12.630237 12.614251 12.598265 12.582279
56 12.466495 12.449862 12.433229 12.416596 12.399963 12.383330
57 12.262907 12.245609 12.228311 12.211012 12.193714 12.176416
58 12.051296 12.033326 12.015355 11.997385 11.979415 11.961444
59 11.831629 11.812989 11.794348 11.775707 11.757066 11.738426
60 11.603978 11.584676 11.565375 11.546074 11.526773 11.507472
61 11.368498 11.348552 11.328607 11.308661 11.288716 11.268770
62 11.125466 11.104906 11.084347 11.063787 11.043227 11.022667
63 10.875282 10.854144 10.833006 10.811869 10.790731 10.769593
64 10.618452 10.596785 10.575117 10.553450 10.531783 10.510115
65 10.355594 10.333452 10.311309 10.289167 10.267025 10.244882
66 10.087394 10.064837 10.042279 10.019721 9.997164 9.974606
67 9.814543 9.791625 9.768707 9.745790 9.722872 9.699954
68 9.537676 9.514449 9.491222 9.467995 9.444769 9.421542
69 9.257337 9.233841 9.210344 9.186848 9.163352 9.139856
70 8.973969 8.950237 8.926505 8.902773 8.879042 8.855310
71 8.687944 8.664005 8.640066 8.616126 8.592187 8.568248
72 8.399730 8.375634 8.351538 8.327441 8.303345 8.279248
73 8.110063 8.085882 8.061700 8.037519 8.013337 7.989156
74 7.819931 7.795757 7.771583 7.747409 7.723235 7.699061
75 7.530560 7.506505 7.482451 7.458396 7.434342 7.410287
76 7.243352 7.219538 7.195725 7.171911 7.148098 7.124284
77 6.959674 6.936208 6.912741 6.889275 6.865809 6.842343
78 6.680663 6.657627 6.634591 6.611555 6.588520 6.565484
79 6.407189 6.384646 6.362102 6.339559 6.317016 6.294473
80 3.135965 2.613304 2.090643 1.567982 1.045322 0.522661
</TABLE>
Page 2
<PAGE>
Exhibit 10.(q)(1)
AMENDMENT TO THE
BELLSOUTH PERSONAL RETIREMENT ACCOUNT PENSION PLAN
This Amendment is made to the BellSouth Personal Retirement Account
Pension Plan (the "Plan"), which was amended and restated as of January 1, 1998.
The BellSouth Employees' Benefit Claim Review Committee, acting under authority
delegated by the Nominating and Compensation Committee of the Board of Directors
of BellSouth Corporation, hereby amends the Plan as follows:
1. Effective January 1, 1998, amend the Plan by adding a new Section 6.06
to the Plan, as follows:
6.06 1998 Special Increases
a. Effective January 1, 1998, all individuals (i) who have retired
from the service of a Participating Company on a service or disability
monthly pension benefit or are the surviving annuitant of such an
individual, (ii) who are currently receiving a service or disability
monthly pension benefit or a survivor annuity payable with respect to such
a pension, and (iii) whose pension effective date is prior to January 1,
1994 shall have their annual service or disability monthly pension
payments increased, for each calendar month, in accordance with the
schedule below. For these purposes, an employee's year of retirement shall
mean the Plan Year during which the employee's benefit commencement date
occurred. Such increase shall be based on the employee's year of
retirement, with no proration for retirement dates occurring between the
dates set forth below. In the case of a surviving annuitant, the year of
retirement shall mean (x) with respect to a qualified joint and survivor
annuitant, the year in which the employee's benefit commencement date
occurred, and (y) with respect to a preretirement survivor annuitant, the
year in which the surviving annuitant's benefit commencement date
occurred.
<TABLE>
<CAPTION>
Ad Hoc Cost of Living Increase,
Year of Retirement as Percentage of Gross Pension
-------------------------------------------------
<S> <C> <C>
Before 1980 12%
1980 - 1983 8%
1984 6%
1985 - 1987 4%
1988 - 1990 2%
1991 - 1993 2%
</TABLE>
b. In the case of an individual described in subparagraph (a) above,
whose pension has been suspended during a period of reemployment in
accordance with the Plan, the increase described in subparagraph (a) will
be
<PAGE>
effective at the time pension payments under the previous service pension
are resumed and shall be calculated from his original pension effective
date as if he had never returned to service; provided, however, that if
such individual's previous eligibility for a pension ceases, no increase
shall apply.
c. Notwithstanding the above, in no case shall the gross pension for
a service or disability pensioner be less than four thousand eight hundred
dollars ($4,800.00) annually except for those whose pensions have been
reduced for the costs of a survivor annuity. Where a service or disability
pension has been reduced for the cost of a survivor annuity, the minimum
gross pension shall be four thousand three hundred and twenty dollars
($4,320.00) annually. The minimum gross pension for a surviving annuitant
shall be two thousand one hundred and sixty dollars ($2,160.00) annually.
d. Effective January 1, 1998, the pension payment of an individual
described in subparagraph (a) or (b) above, whose pension payment has been
reduced under the provisions of the Plan to account for the joint and
survivor annuity option shall be increased by the same percentage as the
related nonreduced pension was or would have been increased.
e. Effective January 1, 1998, the survivor annuity paid to the
eligible surviving annuitant of a person who, prior to January 1, 1994,
retired on a service or disability pension or who died while in active
service shall be increased by the same percentage as a pension would have
been increased.
f. Except in the case of an increase payable as set forth in
subparagraph (c), in no case shall the increase in pension, joint and
survivor annuity or preretirement survivor annuity payment exceed the
applicable percentage as set forth in subparagraph (a). Such increased
pension or annuity amounts shall be applied to the first monthly pension,
joint and survivor annuity or survivor annuity payment made after January
1, 1998.
g. Notwithstanding the foregoing or any other provision of this Plan
to the contrary, no increase shall be applicable to amounts payable (i) as
to any active employee who continued in employment after age 70 1/2 and
whose pension commenced on account of the attainment of such age, (ii) as
to any deferred vested pension, (iii) as to any deferred vested pension
reduced to account for a joint and survivor annuity, (iv) as to any
survivor annuity related to a deferred vested pension, or (v) as to any
alternate payee under a qualified domestic relations order unless the
qualified domestic relations order specifically provides for such an award
and the participant subject to such qualified domestic relations order is
eligible for the increase.
h. For purposes of determining whether the amount of any pension
affected by this Amendment exceeds the "maximum permissible amount" (as
defined in Section 6.05), the applicable dollar limitation shall be the
adjusted dollar limitation in effect as of January 1, 1998; the
compensation limitation shall
<PAGE>
be adjusted by the "annual adjustment factor," which is defined as a
fraction, the numerator of which is the adjusted dollar limitation for
1998, and the denominator of which is the adjusted dollar limitation for
the limitation year in which the participant separated from service; and
the maximum permissible amount shall be calculated with reference to the
participant's age as of January 1, 1998.
2. Except as otherwise set forth herein, the Plan shall remain in full
force and effect.
APPROVED this _____ day of ___________________, 1998.
EMPLOYEES' BENEFIT CLAIM REVIEW COMMITTEE
By:
-------------------------------------
<PAGE>
Exhibit 10.(W)(4)
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 as of July 1, 1996. The
BellSouth Savings Plan Committee, under authority delegated by the Executive
Nominating and Compensation Committee to approve amendments to the Plan, hereby
amends the Plan as follows:
1. Amend Section 2.1 of the Plan by deleting in its entirety the
definition of "Eligibility Service" contained therein.
2. Amend Section 2.1 of the Plan by replacing clause (c) of the first
sentence in the definition of "Eligible Employee" contained therein with the
following:
(a) who has been employed for one full calendar month by one or more of
the following: (i) a Participating Company, Affiliate or Subsidiary
which has adopted the Plan; (ii) an Interchange Company (if the
applicable Interchange Agreement covers such Employee and provides
that this Plan shall recognize such Employee's service with that
Interchange Company); (iii) Houston Cellular Telephone Company
(after April 4, 1989); and (iv) Los Angeles Cellular Telephone
Company (after April 4, 1989).
3. Amend Section 2.1 of the Plan by replacing clause (A) of the third
sentence in the definition of "Eligible Employee" contained therein with the
following:
(A) any Non-Management Employee (including any Non-Management Employee
serving as an Acting Manager) employed by a Participating Company
who has adopted the Savings and Security Plan (except for
Non-Management Employees employed by BellSouth Advertising and
Publishing Corporation in the following job classifications: (i)
Directory Advertising Sales Representative, (ii) Major Accounts
Representatives and (iii) Premise Non-Ad Representatives shall not
be eligible to participate in this Plan.
-1-
<PAGE>
4. Amend Section 2.1 of the Plan by adding the following new definition to
the end thereto:
"Rehired Participating Employee" means an Employee who immediately becomes
an active Participating Employment upon his reemployment or change in employment
terms.
5. Amend Section 3.1(a) of the Plan by adding the following sentences to
the end thereto:
Within a reasonable period of time before an Eligible Employee's
initial Enrollment Date that occurs on or after January 1, 1999 (or, for a
Rehired Participating Employee, within a reasonable time after he
recommences participation), the Committee (or its designee) shall notify
such individual that, by becoming and remaining an Eligible Employee, he
automatically has elected, effective for the first paycheck after his
Enrollment Date (or, for a Rehired Participating Employee, for the first
paycheck on or after the 30th day following his reentry into the plan), to
make a Before-Tax Basic Contribution to the Plan at a rate equal to 3% of
his Eligible Compensation; provided, such Eligible Employee may, within a
reasonable time before his first paycheck due on or after his Enrollment
Date (or the 30-day anniversary of the reentry into the Plan, if
applicable) complete a new election to modify or revoke such passive
election, and such passive election shall not be effective. Once such
passive election becomes effective, it shall apply to each subsequent
paycheck until modified or revoked. Unless and until an Eligible Employee
who enrolls in the Plan through a passive election elects otherwise, his
contributions shall be invested in the Interest Income Fund.
6. Amend Section 4.2(a)(i)(B) of the Plan by replacing the first sentence
contained therein with the following:
(B) Match Percentage. The match percentage for each Participating
Company shall be that percentage, or combination of percentages, set
out on (I) Schedule B or, (ii) for any Participating Employee in any
of the following BellSouth Advertising and Publishing Company job
classifications (A) Directory Advertising Sales Representative, (B)
Major Account Representative, and (C) Premise Non-Ad
Representatives, the percentage, or combination of percentages, set
out on Schedule C.
-2-
<PAGE>
7. Amend Section 10.1(i) of the Plan by deleting the text thereof and
replacing it with the following:
(i) A Participant may have no more than two outstanding loans from the
Plan (including any loans granted pursuant to this Section and
Section 25) at any time.
8. Amend Section 25.1(b) of the Plan by deleting the first sentence
thereof in its entirety and replacing it with the following:
A Designated Participating Employee may request a withdrawal, a
hardship withdrawal, and/or a loan, as the case may be, in the manner
established for this purpose from time to time and communicated to
Designated Participating Employees; provided, a Designated Participating
Employee may have no more than two outstanding loans from the Plan at any
time, including any loan granted under this Section 25.
9. Amend Section 25.4 of the Plan by deleting the text of such Section in
its entirety.
10. Amend the Plan by adding the following new Schedule C to the end
thereto:
SCHEDULE C
SCHEDULE MATCH PERCENTAGE
EFFECTIVE JANUARY 1, 1999
FOR CERTAIN EMPLOYEES
For a Participating Employee in any of the following BellSouth Advertising
and Publishing Company job classifications: (i) Directory Advertising Sales
Representative, (ii) Major Account Representative, and (iii) Premise Non-Ad
Representative, the match percentage of his Before-Tax Basic Contribution and
After-Tax Basic Contribution made from the first 5 1/2 % of the Participating
Employee's Eligible Compensation from BellSouth Advertising and Publishing
Corporation for a month, shall equal the sum of (A) the BellSouth Advertising
and Publishing Corporation Financial Performance Percentage (based on the BAPCO
Management Bonus Plan for the preceding calendar year) and (B) the Additional
ESOP Percentage, all as computed as follows:
-3-
<PAGE>
(a) Financial Performance Percentage. The Financial Performance
Percentage for the Participating Employees shall be the percentage
determined below based upon the BAPCO Management Bonus Plan for the
previous calendar year, all as determined by the Committee:
<TABLE>
<CAPTION>
Financial Performance
(as a percentage of Matching
standard performance) Percentage
----------------------------------------------
<S> <C> <C>
less than 75% 45%
75% - 94% 50%
95% - 119% 55%
120% - 149% 60%
150% - 185% 65%
more than 185% 70%
</TABLE>
(b) Additional ESOP Percentage. The Additional ESOP Percentage shall be
determined by the Committee, for so long as ESOP Dividends are
deductible for federal income tax purposes under Code section
404(k), based upon increases in the per share average price of
BellSouth Shares, if any, for the preceding calendar year, as
follows:
<TABLE>
<CAPTION>
Annual Shares Points Added
Percentage to Matching
Price Increase Percentage
-------------------------------------------
<S> <C> <C>
2% or less 4%
3% 6%
4% 8%
5% 10%
6% 12%
7% 14%
8% or more 16%
</TABLE>
The per share average price change for each calendar year shall be
the average of the daily closing share price of BellSouth Shares traded on
the New York Stock Exchange for each trading day of the year compared to
such average of the daily closing share prices for the immediately
preceding year. The average share price may be adjusted administratively
by the Committee in its sole discretion to reflect changes in the
capitalization of BellSouth, including without limitation stock dividends,
stock splits, mergers, consolidation, reorganization, division and sales
of assets.
(c) The BellSouth Board of Directors, in its sole discretion, may
provide for an increase in the percentages otherwise determined
under Paragraph (a) and/or (b) above for BellSouth Advertising and
Publishing Company if the
-4-
<PAGE>
Board of Directors deems its advisable in light of participation
levels, the price of BellSouth Shares or other factors. The
Committee shall reflect any changes made, to this Schedule C hereto.
11. Any other provisions of the Plan not amended herein shall remain in
full force and effect.
This Amendment shall be effective as of January 1, 1999.
APPROVED this _____ day of _________________, 1999.
BELLSOUTH SAVINGS PLAN COMMITTEE
--------------------------------
By: Richard D. Sibbernsen
-5-
<PAGE>
Exhibit 10.(cc)
- - --------------------------------------------------------------------------------
BELLSOUTH SUPPLEMENTAL LIFE INSURANCE PLAN
- - --------------------------------------------------------------------------------
As Amended and Restated
Effective as of August 31, 1998
1. PURPOSE
The purpose of the BellSouth Supplemental Life Insurance Plan (the "Plan")
is to provide an insurance arrangement under which BellSouth Corporation
and its subsidiaries and affiliates can assist key employees in acquiring
and financing life insurance coverage.
2. DEFINITIONS
For purposes of this Plan, the following terms have the meanings set forth
below:
2.01 "Coverage Amount" means the Policy death benefit payable under the
Participant's Policy.
2.02 "Coverage Level" means the Single Life Coverage insurance death
benefit the Employee is eligible for under the Plan, determined
based on the Employee's job classification, in accordance with the
schedule of Coverage Levels maintained by the Plan Administrator.
Provided, however, that to determine the amount of insurance death
benefit for which an Employee is eligible, the applicable amount
from the schedule of Coverage Levels shall be reduced by one hundred
percent (100%) of the amount of any Single Life Coverage insurance
death benefit and by fifty percent (50%) of the amount of any
Survivorship Coverage insurance death benefit provided to the
Employee under the BellSouth Split-Dollar Life Insurance Plan, the
BellSouth Corporation Executive Life Insurance Plan, or the
BellSouth Corporation Senior Manager Life Insurance Plan.
2.03 "Disability" means that the Participant is receiving disability
benefits under any long-term disability plan sponsored by the
Employer or an affiliated entity.
2.04 "Effective Date" means the effective date of the Plan, which is
January 1, 1998.
2.05 "Employee" means an employee or former employee of the Employer who
is eligible to participate in the Plan.
1
<PAGE>
2.06 "Employer" means BellSouth Corporation and any subsidiary or
affiliate of BellSouth Corporation which is authorized by the Plan
Administrator to participate in this Plan.
2.07 "Employer Premium" means, with respect to a Participant's Policy,
the Total Policy Premium payable for the year, less the portion of
the premium to be paid by the Participant pursuant to Section 5.01
of the Plan.
2.08 "Enrollment Age" means the Participant's age at the time of
enrollment in the Plan as to the Participant's initial Coverage
Amount under the Plan, and it means the Participant's age at a
subsequent enrollment for an increased Coverage Amount as to the
increased Coverage Amount.
2.09 "Insurance Cost" means, with respect to a Participant, the annual
cost for the Participant's Coverage Amount determined pursuant to
the Insurance Cost schedule maintained by the Plan Administrator.
The Insurance Cost for a Participant shall be determined at the time
of the Participant's enrollment in the Plan, based on the
Participant's Coverage Amount and Enrollment Age, and shall not
change thereafter. A smoker rate shall be used to determine the
Insurance Cost for any Participant who is deemed a smoker by the
Insurer; a nonsmoker rate shall be used for all other Participants.
A change in the Insurance Cost schedule will be effective only as to
Plan enrollments occurring after the effective date of the change;
it shall not affect the Insurance Cost for a Participant with
respect to any Coverage Amount in effect for the Participant prior
to the effective date of the change.
If a Participant's coverage is in effect for a period of less than
twelve (12) months during any Policy Year, the Participant's
Insurance Cost for that year shall be determined by multiplying the
annual cost as determined from the Insurance Cost schedule by a
fraction, the numerator of which is the number of full months that
the coverage is in effect and the denominator of which is twelve
(12).
2.10 "Insurer" means, with respect to a Participant's Policy, the
insurance company issuing the insurance policy on the Participant's
life (or on the joint lives of the Participant and the Participant's
spouse, in the case of a Survivorship Policy) pursuant to the
provisions of the Plan.
2.11 "Participant" means an Employee who is participating in the Plan.
2.12 "Participant Premium" means, with respect to each Policy Year (or
portion thereof) for a Participant, the Participant's Insurance
Cost.
2
<PAGE>
2.13 "Permanent Policy" means a Participant's Policy having cash values
which are projected to be sufficient to continue to provide death
benefit coverage at least equal to the Participant's Coverage Amount
until the policy maturity date specified in the Participant's Policy
(determined without regard to any Policy rider which extends the
maturity date beyond the originally scheduled policy maturity date),
and which is projected to have a cash accumulation value equal to at
least ninety-five percent (95%) of the Policy Coverage Amount at the
maturity date specified in such Policy, with no further premium
payments. The determination of whether a Policy is at a given time a
Permanent Policy shall be made by the Plan Administrator, based on
Policy projections provided by the Insurer or its agent utilizing
the Policy's then current mortality rates and Policy expenses, and
the following Policy interest crediting rates. For the Policy Year
in which the determination is made and for all prior Policy Years,
if any, the Policy projection shall be based on the actual interest
crediting rates in effect for the Policy (or, if such rate is not
known when the determination is made, the actual rate in effect for
the preceding Policy Year). For each of the ten (10) succeeding
Policy Years, the projections shall reflect that rate decreased
ratably such that the rate for the tenth Policy Year following the
Policy Year in which the determination is made shall be five percent
(5%). For all successive Policy Years, the projection shall reflect
a five percent (5%) Policy interest crediting rate. Notwithstanding
the foregoing, if the interest crediting rate in effect for the
Policy Year in which the determination is made is less than five
percent (5%), the projections shall reflect such lower rate for all
Policy Years thereafter.
2.14 "Plan" means the BellSouth Supplemental Life Insurance Plan,
embodied herein.
2.15 "Plan Administrator" means the Chief Executive Officer of BellSouth
Corporation 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 of Directors of BellSouth Corporation
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.
2.16 "Policy" means the life insurance coverage acquired on the life of
the Participant (or on the joint lives of the Participant and the
Participant's spouse, in the case of a Survivorship Policy) by the
Participant or other Policy Owner issued pursuant to the terms of
this Plan. The Plan
3
<PAGE>
Administrator shall determine the specific policies which may be
acquired under the Plan, and shall maintain a list of approved
policies.
2.17 "Policy Owner" means the Participant or that person or entity to
whom the Participant has assigned his interest in the Policy.
2.18 "Policy Year" means the twelve month period (and each successive
twelve month period) beginning on the issue date of the Policy.
2.19 "Premium Payment Years" means, with respect to a Participant's
Policy, the number of consecutive Policy Years, beginning with the
first Policy Year, and continuing for the longer of: (1) all Policy
Years ending at the end of the Policy Year during which the
Participant attains age sixty-two (62) (or, if the Participant dies
before such time, the end of the Policy Year during which the
Participant would have attained such age); or (2) five (5) Policy
Years. Notwithstanding the foregoing, if prior to the end of such
period the Policy qualifies as a Permanent Policy, the Premium
Payment Years shall end at such earlier time.
2.20 "Retirement" means a termination of the Participant's employment
with the Employer under circumstances where the Participant is
immediately eligible to receive pension benefits under the
Supplemental Executive Retirement Plan (SERP) maintained by the
Employer or one of its subsidiaries.
2.21 "Single Life Coverage" means life insurance coverage on the life of
the Participant.
2.22 "Survivorship Coverage" means life insurance coverage on the lives
of the Participant and the Participant's spouse, with the life
insurance death benefit to be payable at the death of the last
survivor of the Participant and the Participant's spouse.
2.23 "Total Policy Premium" means the level annual premium amount for the
Participant's Single Life Coverage Policy that is projected to
result in the Policy qualifying as a Permanent Policy if the annual
premium amount is paid each year for all scheduled Premium Payment
Years, assuming the Participant qualifies for the Insurer's
guaranteed issue nonsmoker rates, or if the Participant is deemed by
the Insurer to be a smoker, the Insurer's guaranteed issue smoker
rates. The determination as to the amount of the Total Policy
Premium shall be based on Single Life Coverage even if the
Participant elects Survivorship Coverage. If more than one type of
Single Life Coverage Policy is available under the Plan, the Plan
Administrator shall determine the Single Life Coverage Policy to be
used
4
<PAGE>
to determine the Total Policy Premium. The Total Policy Premium for
a Participant shall be determined when the Participant enrolls for
coverage under the Plan, and shall not be changed thereafter; it
shall be based on the Participant's Coverage Level, or, if less, the
actual Coverage Amount elected by the Participant.
3. ELIGIBILITY
3.01 General. Each Employee who is designated by the Plan Administrator
as a member of the Employer's "executive compensation group" or as a
"senior manager" shall be eligible to participate in the Plan,
provided that the Employee (and any other appropriate party, such as
the Employee's spouse or a Policy Owner other than the Employee, as
determined by the Plan Administrator) relinquishes any rights to or
interests in any policies providing interim coverage during the
rehabilitation of Confederation Life Insurance Company under the
BellSouth Corporation Executive Life Insurance Plan or the BellSouth
Corporation Senior Manager Life Insurance Plan and completes such
other forms as the Plan Administrator may require, within the time
period prescribed by the Plan Administrator. Each such Employee on
the Effective Date shall be eligible to participate in the Plan as
of the Effective Date. Each Employee subsequently satisfying such
eligibility requirements shall be eligible to participate in the
Plan effective as of the first day of the calendar quarter (i.e.,
January 1, April 1, July 1, and October 1) following the date on
which such standards are satisfied. Provided, however, that any
coverage provided to an Employee under the Plan shall be effective
only when the Policy providing such coverage is issued by the
Insurer and a Policy premium is paid.
3.02 Type of Coverage. If an Employee is married at the time the Employee
enrolls in the Plan, the Employee can elect to participate in either
Single Life Coverage or Survivorship Coverage. An Employee who is
unmarried at the time the Employee enrolls in the Plan shall be
eligible for Single Life Coverage only. The election of one type of
coverage shall not preclude the Participant from electing the other
type of coverage as to any increased Coverage Level the Participant
becomes eligible for pursuant to Section 4.02 of the Plan.
3.03 Conversion of Coverage. Subject to any proof of insurability
required by the Insurer, a Participant (or other Policy Owner) can
elect to convert Survivorship Coverage to Single Life Coverage, and
with respect to a married Participant, the Participant (or other
Policy Owner) can elect to convert Single Life Coverage to
Survivorship Coverage. Provided, however, that the number of Premium
Payment Years for a Participant shall not be redetermined in
connection with a conversion from one type
5
<PAGE>
of coverage to another. Upon a conversion, the cash values of the
replaced Policy shall be transferred to the new Policy in accordance
with the Insurer's practices. Any Insurer charges or tax liability
resulting from a conversion shall be borne by the Participant or
other Policy Owner.
4. AMOUNT OF COVERAGE
4.01 General. An Employee who is eligible to participate in the Plan
under Section 3.01 of the Plan shall be eligible for the full
Coverage Level as specified in the Plan under Section 2.02. However,
within sixty (60) days of becoming eligible to participate, a
Participant can elect a Coverage Amount which is less than the
applicable Coverage Level; provided, however, that the Coverage
Amount elected must be an even multiple of $100,000. If a
Participant elects a Coverage Amount less than the Participant's
Coverage Level (or fails to elect any Coverage), the Participant
cannot later increase the Coverage Amount except in connection with
a promotion under Section 4.02 of the Plan.
4.02 Promotions. Employees promoted to a job classification or position
eligible for an increased Coverage Level shall be eligible for the
increased Coverage Level effective as of the first day of the
calendar quarter (i.e., January 1, April 1, July 1, and October 1)
following the promotion. The additional Coverage Amount available to
the Participant under this Section shall be equal to the applicable
Coverage Level after the promotion reduced by any Coverage Amounts
already in effect for a Participant. In order to be effective, any
election for an increase in the Coverage Amount must be made within
the time period prescribed by the Plan Administrator in enrollment
materials provided to the Employee.
4.03 Survivorship Coverage. If a Participant elects Survivorship
Coverage, the amount of Survivorship Coverage will be determined by
the Plan Administrator based on the Participant's age and smoker or
nonsmoker status, the age and insurability of the Participant's
spouse, and based on the Participant's Total Policy Premium. The
Coverage Amount shall be the highest amount such that the Policy
will qualify as a Permanent Policy if the Total Policy Premium is
paid for each year that is a scheduled Premium Payment Year.
5. PAYMENT OF PREMIUMS
5.01 Participant Premium Payments. A Participant shall pay the
Participant Premium for each Policy Year which is a Premium Payment
Year for the Participant. The amount shall be paid by the
Participant to the Employer by payroll (or retirement income)
deductions of equal installments during
6
<PAGE>
the Policy Year, or in such other manner as may be determined by the
Plan Administrator. The Employer shall pay the Participant Premium
amount to the Insurer, and can do so as collected from the
Participant or can advance payments to the Insurer for a Policy Year
at any time during the Policy Year or up to thirty (30) days in
advance of the Policy Year. If a Participant terminates employment
with the Employer, and the Employer has made such an advance payment
of the Participant Premium to the Insurer, the Employer may withhold
any uncollected portion of the advanced Participant Premium from any
amount payable to the Participant by the Employer to the extent
permitted by law. Notwithstanding the other provisions of this
paragraph, no Participant Premium shall be required with respect to
Survivorship Coverage after the death of the Participant.
5.02 Employer Premium Payments. The Employer shall pay the Employer
Premium for a Participant's Policy within thirty (30) days of the
beginning of each Policy Year which is a Premium Payment Year.
5.03 Additional Employer Premium Payments. For each of the last three (3)
scheduled Premium Payment Years for a Participant, the Plan
Administrator shall determine whether there will be any increased
Employer premium payment with respect to a Participant's Policy. The
Plan Administrator shall first determine whether the Participant's
Policy is then projected to qualify as a Permanent Policy if the
Total Policy Premium is paid each year for the remaining scheduled
Premium Payment Years. If the Policy is projected to qualify as a
Permanent Policy, no increased Employer Premium payment shall be
required for such Premium Payment Year. If the projections indicate
that the Policy will not qualify as a Permanent Policy, then the
amount payable by the Employer under Section 5.02 shall be increased
by an amount which will result in the Policy qualifying as a
Permanent Policy if such increased amount is paid for each remaining
Premium Payment Year, but any such increase in Employer Premium
shall be limited by the maximum premium amounts permissible for such
Policy under Internal Revenue Code Sections 7702 and 7702A (or
comparable successor sections) without forfeiting any of the
favorable tax attributes associated with life insurance policies.
The determination as to whether any increased amount is payable
shall be made separately for each of the last three (3) Premium
Payment Years. However, the Employer Premium payable under Section
5.02 shall not be reduced to an amount that is less than the amount
which would have been payable by the Employer for a Premium Payment
Year without regard to this Section 5.03. Regardless of the type of
coverage actually provided to a Participant, and notwithstanding any
changes in the
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type of coverage provided to the Participant under Section 3.03, the
increased Employer Premium payable under this Section 5.03 shall be
the amount that would be payable if the Participant had elected
Single Life Coverage and maintained such coverage for all Policy
Years; also, if more than one type of Single Life Coverage Policy is
available under the Plan, the Single Life Coverage Policy used to
determine Total Policy Premium under Section 2.23 shall be used to
make the determination under this Section 5.03. In the event tax law
limits preclude the Employer from qualifying a Policy as a Permanent
Policy by the end of the last scheduled Premium Payment Year, then
the Employer's obligation to pay premiums under Section 5.02 and
5.03 (and make additional Employer payments under Section 5.04)
shall be extended until projections indicate that the Policy
qualifies as a Permanent Policy.
5.04 Additional Employer Payments.
a. If the payment of an Employer Premium under Section 5.02 (or
any increased amount under Section 5.03) results in the
recognition of income for tax purposes by the Participant in
any year, the Employer shall pay to the Participant an amount
determined by the Plan Administrator which is designed to
approximate (1) the sum of the total federal and state income
taxes and additional payroll taxes which would be payable by
the Participant at the highest marginal rate provided for
under applicable federal income tax laws, and at the highest
marginal rate provided for under applicable state income tax
laws for the state of the Participant's tax domicile, on the
additional income so recognized for the year, plus (2) the
total federal and state income taxes and additional payroll
taxes which would be payable by the Participant on the payment
described in clause (1).
b. If the payment of any Employer Premium under Section 5.02 (or
any increased amount under Section 5.03) on Survivorship
Coverage after the death of the Employee results in the
recognition of income for tax purposes by the Participant's
spouse or other Policy Owner, the Employer shall pay to the
Participant's spouse or other Policy Owner an amount
determined by the Plan Administrator which is designed to
approximate the total federal and state income taxes which
would be payable by the Participant's spouse or other Policy
Owner at the highest marginal rate provided for under
applicable federal income tax laws, and at the highest
marginal rate provided for under applicable state income tax
laws for the state of the tax domicile of the Participant's
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<PAGE>
spouse or other Policy Owner, attributable to such premium
payment.
c. For purposes of this Section 5.04, a tax shall be deemed
payable or income shall be deemed recognized if either (i) it
is finally determined by the Internal Revenue Service, or (ii)
an opinion is given by the Employer's counsel, that the tax is
payable.
d. Any payment made to a Participant or a Participant's spouse
under this Section shall be made no later than April 1 of the
year following the year to which the payment relates.
e. Any amount to be paid to a Participant, a Participant's
spouse, or other Policy Owner under this Section, and the
amounts payable, shall be conclusively determined by the Plan
Administrator based on generally applicable tax rates and not
based upon the unique tax situation of each Participant,
Participant's spouse, or other Policy Owner.
5.05 Termination of Obligation to Pay Premiums. Notwithstanding anything
herein to the contrary, the Employer's obligation to pay premiums
(including any increased amounts under Section 5.03) with respect to
the Participant's Policy, shall terminate upon the first to occur of
any of the following events:
a. Termination of employment of the Participant with the Employer
prior to the Participant's death for reasons other than
Retirement or Disability; or upon termination of a disabled
Participant's Disability prior to the Participant's death for
reason other than Retirement or return to active status.
b. The written notice by the Employer to the Participant
following a resolution by the Board of Directors of BellSouth
Corporation to terminate this Plan.
c. As to Single Life Coverage only, the death of the Participant.
d. As to Survivorship Coverage only, the death of the last
survivor of the Participant and the Participant's spouse.
e. The surrender or cancellation of the Participant's Policy,
except that a Policy will not be considered surrendered or
canceled if the surrender or cancellation is in connection
with the replacement of the Policy with another Policy
pursuant to the provisions of the Plan.
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f. The withdrawal of any Policy cash values, or borrowing against
the Policy cash values, by the Participant or other Policy
Owner.
g. The reduction of the Participant's Policy death benefit to a
level that is less than the initial Policy Coverage Amount,
except that a conversion from Survivorship Coverage to Single
Life Coverage shall not be considered a reduction in Policy
death benefit for the purpose of this Section.
h. The determination by the Plan Administrator that the Policy
will qualify as a Permanent Policy with no further Employer
Premium payments.
6. POLICY OWNERSHIP
6.01 Ownership. The Policy Owner shall be the sole and exclusive owner of
a Participant's Policy and shall be entitled to exercise all of the
rights of ownership.
6.02 Possession of Policy. The Policy Owner shall keep possession of the
Policy.
7. GOVERNING LAWS & NOTICES
7.01 Governing Law. This Plan shall be governed by and construed in
accordance with the laws of the State of Georgia.
7.02 Notices. All notices hereunder shall be in writing and sent by first
class mail with postage prepaid. Any notice to the Employer shall be
addressed to BellSouth Corporation at its office at 1155 Peachtree
Street, N.E., Atlanta, GA 30367-6000, ATTENTION: Human Resources -
Director Executive Benefits. Any notice to the Employee shall be
addressed to the Employee at the address for the Employee maintained
in the Employer's records. Any party may change the address for such
party herein set forth by giving notice of such change to the other
parties pursuant to this Section.
8. NOT A CONTRACT OF EMPLOYMENT
This Plan shall not be deemed to constitute a contract of employment
between an Employee and the Employer or a Participant and the Employer,
nor shall any provision restrict the right of the Employer to discharge an
Employee or Participant, or restrict the right of an Employee or
Participant to terminate employment.
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9. AMENDMENT, TERMINATION, ADMINISTRATION, CONSTRUCTION AND SUCCESSORS
9.01 Amendment. The Board of Directors of BellSouth Corporation, or its
delegate, 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. Notwithstanding
the foregoing, no modification or amendment shall be effective so as
to decrease any benefits of a Participant unless the Participant
consents in writing to such modification or amendment. Written
notice of any material modification or amendment shall be given
promptly to each Participant.
9.02 Termination. The Board of Directors of BellSouth Corporation may
terminate the Plan without the consent of the Participants or
Employees.
9.03 Successors. The terms and conditions of this Plan shall enure to the
benefit of and bind the Employer, the Participant, their successors,
assignees, and representatives. If, subsequent to the Effective Date
of the Plan, substantially all of the stock or assets of the
Employer are acquired by another corporation or entity or if the
Employer is merged into, or consolidated with, another corporation
or entity, then the obligations created hereunder shall be
obligations of the acquirer or successor corporation or entity.
10. PLAN ADMINISTRATION
10.01 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 of Directors of
BellSouth Corporation or its delegate.
10.02 Administrative Committee. If the Plan Administrator is a committee,
or if any of the duties or responsibilities of the Plan
Administrator are vested in 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, he or she shall not participate in any
decision which solely affects his or her own benefit under the Plan.
For purposes of administering the Plan, the Plan Administrator shall
choose a secretary who shall keep minutes of the committee's
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proceedings and all records and documents pertaining to the
administration of the Plan. The secretary may execute any
certificate or other written direction on behalf of the Plan
Administrator.
10.03 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' benefits hereunder;
c. to compute and certify the amount and kinds of benefits
payable to Participants, and to determine the time and manner
in which such benefits are to be paid;
d. to authorize all disbursements 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 designate 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 benefits, and its decisions
on such matters shall be final and conclusive on all parties.
10.04 Bond; Compensation. The Plan Administrator and (if applicable) its
members shall serve as such without bond and without compensation
for services hereunder.
11. CLAIMS PROCEDURE
11.01 Named Fiduciary. The Plan Administrator is hereby designated as the
named fiduciary under this Plan.
11.02 Claims Procedures. Any controversy or claim arising out of or
relating to this Plan shall be filed with the Plan Administrator
which shall make all determinations concerning such claim. Any
decision by the Plan
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Administrator denying such claim shall be in writing and shall be
delivered to all parties in interest in accordance with the notice
provisions of Section 7.02 hereof. Such decision shall set forth the
reasons for denial in plain language. Pertinent provisions of the
Plan shall be cited and, where appropriate, an explanation as to how
the Employee can perfect the claim will be provided. This notice of
denial of benefits will be provided within 90 days of the Plan
Administrator's receipt of the Employee's claim for benefits. If the
Plan Administrator fails to notify the Employee of its decision
regarding the claim, the claim shall be considered denied, and the
Employee shall then be permitted to proceed with the appeal as
provided in this Section.
An Employee who has been completely or partially denied a benefit
shall be entitled to appeal this denial of his/her claim by filing a
written statement of his/her position with the Plan Administrator no
later than sixty (60) days after receipt of the written notification
of such claim denial. The Plan Administrator shall schedule an
opportunity for a full and fair review of the issue within thirty
(30) days of receipt of the appeal. The decision on review shall set
forth specific reasons for the decision, and shall cite specific
references to the pertinent Plan provisions on which the decision is
based.
Following the review of any additional information submitted by the
Employee, either through the hearing process or otherwise, the Plan
Administrator shall render a decision on the review of the denied
claim in the following manner:
a. The Plan Administrator shall make its decision regarding the
merits of the denied claim within sixty (60) days following
receipt of the request for review (or within 120 days after
such receipt, in a case where there are special circumstances
requiring extension of time for reviewing the appealed claim).
The Plan Administrator shall deliver the decision to the
claimant in writing. If an extension of time for reviewing the
appealed claim is required because of special circumstances,
written notice of the extension shall be furnished to the
Employee prior to the commencement of the extension. If the
decision on review is not furnished within the prescribed
time, the claim shall be deemed denied on review.
b. The decision on review shall set forth specific reasons for
the decision, and shall cite specific references to the
pertinent Plan provisions on which the decision is based.
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Exhibit 10.(dd)
AGREEMENT
THIS AGREEMENT is made and entered into as of the 23rd day of November,
1998, by and between BellSouth Corporation, a Georgia corporation ("Company"),
and Mr. F. D. Ackerman ("Executive"):
Reasons for this Agreement. Executive is currently employed by Company as
its Chairman of the Board, President and Chief Executive Officer. Executive has
been employed by Company and its Affiliated Companies since 1964 in a variety of
capacities, including as Vice Chairman of the Board Finance and Administration
from 1989 until 1991, as President and Chief Executive Officer of Company's
principal subsidiary, BellSouth Telecommunications, Inc., from 1992 until 1994,
and as Vice Chairman of the Board of Directors and Chief Operating Officer of
Company from 1995 until 1996. Executive has served as Company's President and
Chief Executive Officer since January 1, 1997 and, in addition, as Chairman of
the Board of Directors since December 31, 1997.
In connection with Company's executive succession planning, Executive and
Company entered into a separation agreement on February 23, 1989, which was
amended and restated on January 25, 1995 (the "Prior Separation
Agreement"),which contemplated Executive's retirement at age sixty (60).
Executive and Company now desire to replace the Prior Separation Agreement with
this Agreement to incent Executive's continued service beyond age sixty (60)
through staged vesting of equity-based awards and protections in the event of
Executive's preretirement death or disability. In addition, Executive possesses
Confidential Information which could be used by Executive to Company's or
Affiliated Companies' detriment and, in connection with his employment,
Executive has developed important relationships and contacts with customers and
employees valuable to Company and Affiliated Companies.
Agreement. In consideration of the covenants and agreements contained in
this Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Executive and Company agree as
follows:
1. Prior Separation Agreement. Executive and Company agree and acknowledge
that, upon execution of this Agreement, the Prior Separation Agreement is null
and void and of no further force or effect, except as otherwise provided in
Section 22 of this Agreement.
2. Definitions. For purposes of this Agreement, the following terms shall
have the meaning specified below:
(a) "Affiliated Companies" - BellSouth Corporation and its subsidiaries
and associated companies.
(b) "Base Salary" - the gross annual base salary payable to Executive
including the amount of any before-tax contributions made by Executive from such
salary to the BellSouth Retirement Savings Plan, any other qualified cash or
deferred arrangement sponsored by
<PAGE>
Company or an Affiliated Company, or a successor to any such plan, as the case
may be, and the amount of any other deferrals of such salary under any
nonqualified deferred compensation plans maintained by Company or an Affiliated
Company.
(c) "Cause" - Executive's willfully engaging in conduct that is
demonstrably and materially injurious to Company or Affiliated Companies. For
purposes of this subsection, no act, or failure to act, on the part of Executive
shall be deemed "willful" unless committed by Executive in bad faith and without
reasonable belief that such action or omission was in the best interest of
Company or Affiliated Companies. Notwithstanding the foregoing, Executive shall
not be deemed to have been terminated for Cause unless and until there shall
have been delivered to Executive a certificate of a resolution duly adopted by
the affirmative vote of not less than seventy-five percent (75%) of the entire
membership of the Board of Directors of Company, at a meeting of the Board
(after reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's legal counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, Executive has engaged in
the conduct set forth in this subsection and specifying the particulars thereof
in detail.
(d) "CIC Agreement" - the Executive Severance Agreement entered into by
and between Executive and Company on October 17, 1996, providing certain
benefits in the event of a change in corporate control of Company, attached
hereto as Exhibit "A" and incorporated by this reference herein.
(e) "Confidential Information" - information, whether generated internally
or externally, relating to Company's business or to Affiliated Companies'
businesses which derives economic value, actual or potential, from not being
generally known to other Persons and is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy or confidentiality,
including, but not limited to, economic studies and analyses, technical or
nontechnical data, programs, patterns, compilations, devices, methods, models
(including cost and/or pricing models and operating models), techniques,
drawings, processes, employee compensation data, financial data (including
marketing information and strategies and personnel data), lists of actual or
potential customers or suppliers, and information relating to regulatory and
business policies, plans, and strategies. For purposes of this Agreement,
Confidential Information does not include information which is not a trade
secret three (3) years after termination of Executive's employment with Company.
(f) "Customers" - customers, suppliers, and retailers of Company or
Affiliated Companies in the Territory (1) with whom Executive dealt on behalf of
Company or Affiliated Companies, (2) whose dealings with Company or Affiliated
Companies were coordinated or supervised directly or indirectly by Executive, or
(3) about whom Executive obtained Confidential Information during the two (2)
years immediately prior to the termination of Executive's services.
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<PAGE>
(g) "Disability" - an illness, injury or other incapacity which qualifies
Executive for long-term disability benefits under the principal management
long-term disability plan of Company.
(h) "Good Reason" - shall mean the occurrence, without Executive's express
written consent, of any of the following circumstances:
(i) the assignment to Executive of duties inconsistent with
Executive's status or responsibilities as in effect immediately prior to
such assignment, including imposition of business travel obligations which
differ materially from prior business travel obligations;
(ii) diminution in the status or responsibilities of Executive's
position from that which existed immediately prior to such change, whether
by reason of Company ceasing to be a public company, becoming a subsidiary
of a successor public company, or otherwise;
(iii) a reduction in Executive's annual base salary as in effect
immediately before such reduction or the failure to pay a bonus award to
which Executive is otherwise entitled under any of the short-term or
long-term incentive plans in which Executive participates (or any
successor incentive compensation plans) at the time such awards are
usually paid;
(iv) a change in the principal place of Executive's employment, as
in effect immediately prior to such change, to a location more than
thirty-five (35) miles distant from the location of such principal place
at such time;
(v) the failure by Company to continue in effect any bonus,
incentive compensation, or stock plan in which the Executive participates,
unless an equivalent alternative compensation arrangement (embodied in an
ongoing substitute or alternative plan) has been provided to Executive, or
the failure by Company to continue Executive's participation in any such
bonus, incentive compensation or stock plan on substantially the same
basis, both in terms of the amount of benefits provided and the level of
Executive's participation relative to other participants; and
(vi) (A) except as required by law, the failure by Company to
continue to provide to Executive benefits substantially equivalent, in the
aggregate, to those enjoyed by Executive under the qualified and
nonqualified employee pension and welfare benefit plans of Company,
including, without limitation, any pension, life insurance, medical,
dental, health and accident, disability, retirement or savings plans in
which Executive was eligible to participate immediately prior thereto; (B)
the taking of any action by Company which would directly or indirectly
materially reduce or deprive Executive of the perquisites enjoyed by
Executive immediately before such action (including Company-
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<PAGE>
paid and/or reimbursed club memberships, financial counseling fees and the
like); or (C) the failure by Company or a successor to provide Executive
with the number of paid vacation days (and the policies and practices for
taking such days) as was previously provided under the Company's vacation
policy or practice.
Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstances constituting Good Reason
hereunder.
(i) "Person" - any individual, corporation, bank, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
governmental or other legal or business entity.
(j) "Retirement Date" - the date on or after Executive's sixtieth (60th)
birthday on which Executive terminates employment with the consent of Company's
Board of Directors; provided, that no such consent of the Board of Directors
shall be required on or after Executive's sixty-fifth (65th) birthday.
(k) "SERP" - the BellSouth Corporation Supplemental Executive Retirement
Plan, as amended from time to time.
(l) "Stock Plan" - the BellSouth Corporation Stock Plan and related award
agreements, as amended from time to time.
3. Equity Awards. In connection with execution of this Agreement, Company
shall grant to Executive an award of 674,459 nonqualified stock options and an
award of 76,220 restricted shares (such awards collectively being sometimes
referred to in this Agreement as the "Equity Awards"). The Equity Awards shall
be granted pursuant to an agreement (the "Equity Award Agreement") substantially
identical to the BellSouth Corporation Equity Award Agreement attached hereto as
Exhibit "B" and incorporated by this reference herein. Share issuances in
connection with the Equity Awards shall be made pursuant to an effective
registration statement under the registration requirements of the Securities Act
of 1933, as amended, and in compliance with applicable state securities laws,
and listed on the New York Stock Exchange. In the event that the shares issued
to Executive upon exercise of nonqualified stock options or upon vesting of
restricted shares pursuant to the Equity Awards are not fully salable by him
under the Securities Act of 1933, as amended, Company will register such shares
thereunder.
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<PAGE>
4. Retirement. At the Retirement Date:
a. Equity Awards. The Equity Awards shall no longer be subject to
any restriction related to continued employment or continued performance
of services to Company or Affiliated Companies, and shall be fully vested
and exercisable (subject to the otherwise applicable terms of the Equity
Award Agreement).
b. Supplemental Executive Retirement Plan. Executive shall become
entitled to an aggregate annual benefit under the SERP based on seventy
percent (70%) of Included Earnings (as such term is defined in SERP)
instead of the formula described in section 4(a)(i) of the SERP.
c. Financial Counseling. Executive shall become entitled to benefits
described in the BellSouth Corporation Financial Counseling Plan, or any
successor plan, for the year of retirement and for seven (7) years
thereafter, such benefits to be provided by the Company as if eligibility
therefor extended to such date under the terms of such plan. Benefits
described in this subsection 4.c shall be subject to all otherwise
applicable terms and conditions of the Financial Counseling Plan.
d. Company Automobile. Executive may, at his election, purchase from
Company (or an Affiliated Company) any Company-owned automobile provided
to him for its wholesale price determined by Company as of the Retirement
Date, if Executive notifies the Company of his intention to do so within
thirty (30) days after his Retirement Date.
e. Office Space. Executive shall be provided appropriate office
space and secretarial assistance at Company's principal place of business
for remainder of Executive's life.
5. Death or Disability. If Executive's employment with Company is
terminated prior to the Retirement Date by reason of Executive's death or
Disability:
a. Death/Disability Benefit. Company shall pay to Executive, as soon
thereafter as is reasonably practicable, a single lump sum cash payment
equal to the sum of (1) twice Executive's Base Salary in effect at the
time of such termination, plus (2) twice the standard award amount
applicable to Executive under the BellSouth Corporation Officer Short Term
Incentive Award Plan, or any successor short term plan ("STIAP"), for the
year in which such termination occurs, less withholdings.
Any such payment made by reason of Executive's death shall be made
to Executive's surviving spouse or, if none, to Executive's estate;
provided, however, that such payment shall instead be made to such other
beneficiary or beneficiaries as may be designated by Executive in a form
reasonably acceptable to Company.
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<PAGE>
b. Long-Term Awards. All outstanding grants or awards to Executive
under any long-term incentive compensation plan or program of Company in
which Executive participates (including, without limitation, all grants
and awards under the Stock Plan) shall no longer be subject to any
restriction related to continued employment or continued performance of
services to Company or Affiliated Companies, and shall be fully vested and
exercisable (subject to the otherwise applicable terms of any such plan or
program). Notwithstanding the foregoing, if Executive's employment with
Company is so terminated prior to Executive's sixtieth (60th) birthday,
vesting of the Equity Awards described in Section 3 of this Agreement
shall not be accelerated pursuant to this subsection 5.b..
6. Other Terminations of Employment. If Executive's employment with
Company is terminated prior to the Retirement Date, other than for reasons of
death or Disability, and such termination is either (i) by Company, other than
for Cause, or (ii) by Executive for Good Reason:
a. Short-Term Incentive Award. Executive shall be entitled to an
award under the STIAP equal to the greater of (i) the amount to which
Executive would be entitled under STIAP without regard to this Agreement,
and (ii) the amount based on performance results for the year in which
such termination occurs, prorated to the date of termination. The payment
described in this subsection 6.a shall be subject to the otherwise
applicable terms and conditions of STIAP.
b. Separation Allowance. Company shall pay to Executive, as soon
thereafter as is reasonably practicable, as a separation allowance a
single lump-sum cash payment equal to the sum of (1) twice Executive's
Base Salary in effect on the date of termination, plus (2) twice the
standard award amount applicable to Executive under the STIAP for the year
in which his date of termination occurs, less withholdings.
c. Long-Term Awards. All outstanding grants or awards to Executive
under any long-term incentive compensation plan or program of Company in
which Executive participates (including, without limitation, all grants
and awards under the Stock Plan) shall no longer be subject to any
restriction related to continued employment or continued performance of
services to Company or Affiliated Companies, and shall be fully vested and
exercisable (subject to the otherwise applicable terms of any such plan or
program). Notwithstanding the foregoing, if Executive's employment with
Company is so terminated prior to Executive's sixtieth (60th) birthday,
vesting of the Equity Awards described in Section 3 of this Agreement
shall not be accelerated pursuant to this subsection 6.c..
7. Discharge and Waiver. Company's obligations under this Agreement, and
Executive's entitlement to the compensation and benefits described herein, are
expressly
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<PAGE>
conditioned upon execution by Executive of a waiver and release and agreement
not to sue, in form and substance reasonably acceptable to Company, pursuant to
which Executive fully releases and forever discharges Company and Affiliated
Companies, and any employee, officer, director, representative, agent, successor
or assign of Company and Affiliated Companies (both in their personal and
official capacities), and all persons acting by, through and under or in concert
with any of them, from any and all claims, demands, causes of action, remedies,
obligations, costs and expenses of whatever nature, whether under the common
law, state law, federal law (including but not limited to the Age Discrimination
in Employment Act of 1967) or otherwise, through the Retirement Date, including
those arising from or in connection with the terms and conditions of employment
with the Company and Affiliated Companies or the termination of that employment.
This paragraph is not intended to affect benefits to which Executive may be
entitled under the Consolidated Omnibus Budget Reconciliation Act (COBRA) or any
pension or benefit plan in which Executive is a participant.
8. Nondisparagement. Executive agrees that now and in the future he will
protect and preserve the Company's and Affiliated Companies' goodwill and
reputation in the industry and in the community, with customers and the public,
and will refrain from public or private comments or actions which are derogatory
or which may tend to disparage Company's or Affiliated Companies' reputations or
otherwise tend to injure Company or Affiliated Companies in their business or
public affairs. Company agrees that now and in the future it will protect and
preserve Executive's reputation in the industry and in the community, with
customers and the public, and will refrain from public or private comments or
actions which are derogatory or which may tend to disparage Executive's
reputation or otherwise tend to injure Executive in his private or public
affairs.
9. Confidential Information. Executive agrees to protect Confidential
Information. Executive will not use, except in connection with work for Company
or Affiliated Companies, threaten to use, disclose or threaten to disclose, give
or threaten to give to others any Confidential Information.
10. Employment with Competitors. Company's obligations to provide any of
the benefits, entitlements, interests or payments described in this Agreement or
in the Equity Award Agreement are expressly conditioned upon execution by
Executive of an agreement, in form and substance reasonably acceptable to
Company, pursuant to which during the period of two (2) years after the
Executive's employment with Company is terminated for any reason, Executive
agrees, to the extent permitted by applicable law, not to provide services to
any Person which provides products or services identical to or similar to
Company's or Affiliated Companies' products and services, whether as an
employee, consultant, independent contractor, or otherwise.
11. Hiring or Solicitation of Company Employees. During Executive's
employment through the Retirement Date and for a period of two (2) years after
the Retirement Date, Executive will not hire or induce or attempt to induce or
solicit to leave employment with Company or Affiliated Companies, for himself or
on behalf of any other Person, anyone who is
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or was, during Executive's employment with Company, an employee of Company or
Affiliated Companies. However, Executive may offer employment on behalf of
himself or on behalf of any company or entity to any such employee who
terminated his or her employment without any inducement or attempted inducement
or solicitation by Executive.
12. Solicitation of Customers. During the period of two (2) years after
the Retirement Date, Executive agrees not to solicit, induce, direct or take
away any Customers, for the purpose of providing products or services identical
to or substantially similar to Company's or Affiliated Companies' products and
services.
13. Interpretation; Severability of Invalid Provisions. Executive
acknowledges and agrees that the limitations described in this Agreement,
including specifically the limitations upon his activities, are reasonable in
scope, are necessary for the protection of Company's business, and form an
essential part of the consideration for which this Agreement has been entered
into. It is the intention of the parties that the provisions of this Agreement
be enforced to the fullest extent permissible under applicable laws and public
policies. Nonetheless, the rights and restrictions contained in this Agreement
may be exercised and shall be applicable and binding only to the extent they do
not violate any applicable laws and are intended to be limited to the extent
necessary so that they will not render this Agreement illegal, invalid or
unenforceable. If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable by a court of competent jurisdiction, the remaining
provisions shall remain in full force and effect. The provisions of this
Agreement do not in any way limit or abridge Company's rights under the laws of
unfair competition, trade secret, copyright, patent, trademark or any other
applicable law(s), all of which are in addition to and cumulative of Company's
rights under this Agreement. Executive agrees that the existence of any claim by
Executive against Company, whether predicated on this Agreement or otherwise,
shall not constitute a defense to enforcement by Company of any or all of such
provisions or covenants.
14. Employment Rights. This Agreement does not constitute, and should not
be construed as, an employment contract. Employee acknowledges that he is and
shall remain an employee at will who may be terminated by Company or any
Affiliated Company by whom he may be employed or to whom he may be assigned from
time to time, for any reason and at any time. Similarly, Employee may resign for
any reason at any time, subject to forfeiting the compensation and benefits
described in this Agreement. Employee understands that he, like any other
employee, has been and will be subject to his employer's performance standards
and disciplinary rules.
15. Relief. The parties acknowledge that a breach or threatened breach by
Executive of any of the terms of this Agreement would result in material and
irreparable damage and injury to Company, and that it would be difficult or
impossible to establish the full monetary value of such damage. Therefore,
Company shall be entitled to injunctive relief by a court of appropriate
jurisdiction in the event of Executive's breach or threatened breach of any of
the terms contained in this Agreement.
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16. Legal Fees and Expenses. Company shall pay to Executive the amount of
all legal fees and expenses as and when incurred by Executive in contesting or
disputing any termination of employment or in seeking to obtain or enforce any
right or benefit provided by this Agreement, regardless of the outcome, unless
in the case of a legal action brought by or in the name of Executive, a final
determination is made by a court of competent jurisdiction that such action was
not brought by Executive in good faith.
17. Tolling Provision. The duration of any post-termination obligation
contained in this Agreement shall be extended by the length of time during which
Executive is in breach of the provision, not to exceed three (3) years from the
Retirement Date.
18. Agreement Binding. This Agreement shall inure to the benefit of
Company and its successors, assignees, and designees and shall be binding upon
Executive and Executive's heirs, executors, administrators and personal
representatives.
19. Entire Agreement; Previous Agreement. Except as otherwise specifically
provided herein, this Agreement contains the entire agreement between the
parties and no statements, promises or inducements made by any party hereto, or
agent of either party, which are not contained in this Agreement shall be valid
or binding; provided, however, that the matters dealt with herein supersede
previous written agreements between the parties on the same subject matters only
to the extent such previous provisions are inconsistent with this Agreement and
other provisions in written agreements between the parties not inconsistent with
this Agreement are not affected. This Agreement may not be enlarged, modified or
altered except in writing signed by the parties.
20. Nonwaiver. The failure of Company to insist upon strict performance of
the terms of this Agreement, or to exercise any option herein, shall not be
construed as a waiver or a relinquishment for the future of such term or option,
but rather the same shall continue in full force and effect.
21. Notices. All notices, requests, demands and other communications
required or permitted by this Agreement or by any statute relating to this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered or mailed, first-class, certified mail, postage prepaid, addressed as
follows:
To Company: BellSouth Corporation
Office of the General Counsel
Suite 2002
1155 Peachtree Street, N.E.
Atlanta, Georgia 30309-3610
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To Executive: F. D. Ackerman
22. Pooling of Interests Accounting Treatment. Notwithstanding anything to
the contrary in this Agreement, if the application of any provision(s) of this
Agreement, including without limitation the grant of Equity Awards described in
Section 3, or of the Agreement in its entirety, would preclude the use of
pooling of interests accounting treatment with respect to a transaction for
which such treatment otherwise is available and to be adopted by Company, this
Agreement shall be modified as it applies to such transaction, to the minimum
extent necessary to prevent such impact, including if necessary the invalidation
of such provisions (or the entire Agreement, as the case may be). If the pooling
of interests accounting rules require modification or invalidation of one or
more provisions of this Agreement as it applies to such transaction, the adverse
impact on Executive shall, to the extent reasonably possible, be proportionate
to the adverse impact on other similarly situated employees of Company. The
Board of Directors of Company shall, in its sole and absolute discretion, make
all determinations necessary under this subsection; provided, that
determinations regarding the application of the pooling of interests accounting
rules for these purposes shall be made by Company with the concurrence of
Company's independent auditors at the time such determination is to be made. If
the Equity Awards as described in Section 3 of this Agreement are invalidated by
operation of this Section 22, all provisions of this Agreement (including
without limitation the restrictive covenants described in Sections 8, 9, 10, 11
and 12 of this Agreement), other than the provisions of Section 5 regarding
death or Disability, shall likewise be invalidated, and the Prior Separation
Agreement shall be reinstated with full force and effect as if this Agreement
had never been executed. If all of the benefits to Executive described in
Sections 3, 4, 5, and 6 of this Agreement are invalidated by operation of this
Section 22, the entire Agreement (including without limitation the restrictive
covenants described in Sections 8, 9, 10, 11 and 12 of this Agreement) shall
likewise be invalidated. If this entire Agreement is invalidated by operation of
this Section 22, the Prior Separation Agreement shall be reinstated with full
force and effect as if this Agreement had never been executed.
23. Nonduplication. Notwithstanding any other provisions of this
Agreement, if Executive becomes entitled to severance benefits under Article III
of the CIC Agreement, such severance benefits shall be in lieu of any benefits
to which Executive is otherwise entitled under this Agreement, other than the
Equity Awards. Except as otherwise specifically provided in this Section 23,
both this Agreement and the CIC Agreement shall continue in full force and
effect, and Article X(e) of the CIC Agreement shall be interpreted consistently
herewith.
24. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
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25. Governing Law; Consultation with Counsel. This Agreement shall be
construed under and governed by the laws of the State of Georgia. Executive has
been advised to consult with an attorney, acknowledges having had ample
opportunity to do so and fully understands the binding effect of this Agreement.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized representative, and Executive has executed this
Agreement, as of the date written above.
<TABLE>
<CAPTION>
EXECUTIVE: BELLSOUTH CORPORATION:
<S> <C>
By:
- - ---------------------------- -----------------------------------------
F. D. Ackerman Title: Vice President - Human Resources
</TABLE>
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Exhibit A
EXECUTIVE SEVERANCE AGREEMENT
THIS AGREEMENT is made and entered into as of the ____ day of
______________, 19__, by and between BellSouth Corporation, a Georgia
corporation (the "Company"), and ____________________ (the "Executive").
Reasons for This Agreement. The Company recognizes the valuable services
that the Executive has rendered and continues to render to the Company and its
Affiliated Companies. On behalf of itself, its Affiliated Companies and its
shareholders, the Company desires to encourage the Executive's continued service
and dedication in the performance of the Executive's duties, and attention to
the business and affairs of the Company and its Affiliated Companies,
notwithstanding the possibility, threat or occurrence of a change in control.
The Company believes that it is in the best interests of the Company and its
shareholders to minimize the distractions, risks and uncertainties for the
Executive which may be expected to arise in connection with a change in control
by providing assurances to the Executive that the Executive will not be
materially disadvantaged by a change in control.
Agreement. In consideration of the Executive's continued service to the
Company, the covenants and agreements contained in this Agreement, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Executive and the Company agree as follows:
I. Definitions.
For purposes of this Agreement, the following terms shall have the
meanings specified below:
(a) "Affiliated Companies" shall mean all of the Company's subsidiaries,
divisions, and other affiliated companies or entities.
(b) "Cause" shall mean the Executive's willfully engaging in conduct that
is demonstrably and materially injurious to the Company. For purposes of this
subsection I(b), no act, or failure to act, on the part of the Executive shall
be deemed "willful" unless committed by the Executive in bad faith and without
reasonable belief that such action or omission was in the best interest of the
Company. Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for Cause unless and until there shall have been delivered
to the Executive a certificate of a resolution duly adopted by the affirmative
vote of not less than
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seventy-five percent (75%) of the entire membership of the Board of Directors of
the Company, at a meeting of the Board (after reasonable notice to the Executive
and an opportunity for the Executive, together with the Executive's legal
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board, the Executive has engaged in the conduct set forth in this
subsection I(b) and specifying the particulars thereof in detail.
(c) "Change in Control" shall mean:
(i) any "person" (as such term is defined in the Securities Exchange
Act of 1934, as amended), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company (or of another
entity owned directly or indirectly by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the
Company), becomes the "beneficial owner" (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of the Company
representing 20% or more of the total voting power represented by the
Company's then outstanding voting securities;
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of the
Company and any new director whose election by the Board of Directors or
nomination for election by the Company's shareholders was approved by a
vote of at least two-thirds of the directors who either were directors at
the beginning of the two year period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof;
(iii) the consummation of a merger, plan of reorganization,
consolidation, share exchange, or other transaction, in one or a series of
related transactions, involving the Company, if immediately following such
merger, plan of reorganization, consolidation, share exchange, or other
transaction or transactions the holders of the voting securities of the
Company outstanding immediately prior thereto hold securities representing
seventy percent (70%) or less of the combined voting power represented by
the voting securities of the Company or such surviving entity outstanding
immediately after such merger, plan of reorganization, consolidation,
share exchange, or other transaction or transactions;
(iv) the consummation of a transaction involving the sale or other
disposition by the Company or one or more of its Subsidiaries, in one or a
series of related transactions, of interests in an entity or entities, or
of assets, which for the most recent audited twelve-month period produced
total operating revenues or net income aggregating more than thirty
percent (30%) of the total operating revenues or net income of the Company
and its Subsidiaries (taken as a whole), if following such transaction or
transactions, any such entity is no longer a Subsidiary or such assets are
no longer held by a Subsidiary;
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<PAGE>
(v) the complete liquidation or dissolution of the Company or the
sale of all or substantially all of the assets of the Company; or
(vi) the consummation of any other transaction which a majority of
the Board of Directors of the Company, in its sole and absolute
discretion, shall determine constitutes a Change in Control.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Confidential Information" shall mean information, whether generated
internally or externally, relating to the Company's business or to the
Affiliated Companies' businesses which derives economic value, actual or
potential, from not being generally known to other persons and is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy or
confidentiality, including, but not limited to, studies and analyses, technical
or nontechnical data, programs, patterns, compilations, devices, methods, models
(including cost and /or pricing models and operating models), techniques,
drawings, processes, employee compensation data, financial data (including
marketing information and strategies and personnel data), lists of actual or
potential customers or suppliers, and information relating to regulatory and
business policies, plans, and strategies. For purposes of this Agreement,
Confidential Information does not include information which is not a trade
secret three (3) years after termination of Executive's employment with Company.
(f) "Disability" shall mean an illness, injury or other incapacity which
qualifies the Executive for long-term disability benefits under the principal
management long-term disability plan of the Executive's employer.
(g) "Excise Tax" shall have the meaning ascribed to such term in
subsection VII(a) of this Agreement.
(h) "Good Reason" shall mean the occurrence after a Change in Control,
without the Executive's express written consent, of any of the following
circumstances:
(i) the assignment to the Executive of duties inconsistent with the
Executive's status or responsibilities as in effect immediately prior to a
Change in Control, including imposition of business travel obligations
which differ materially from business travel obligations immediately prior
to the Change in Control;
(ii) diminution in the status or responsibilities of the Executive's
position from that which existed immediately prior to the Change in
Control, whether by reason of the Company ceasing to be a public company,
becoming a subsidiary of a successor public company, or otherwise;
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<PAGE>
(iii) a reduction in the Executive's annual base salary as in effect
immediately before the Change in Control or the failure to pay a bonus
award to which the Executive is otherwise entitled under any of the
short-term or long-term incentive plans in which the Executive
participates (or any successor incentive compensation plans) at the time
such awards are usually paid;
(iv) a change in the principal place of the Executive's employment,
as in effect immediately prior to the Change in Control, to a location
more than thirty-five (35) miles distant from the location of such
principal place at such time;
(v) the failure by the Company to continue in effect any bonus,
incentive compensation, or stock option plan in which the Executive
participates immediately prior to the Change in Control, unless an
equivalent alternative compensation arrangement (embodied in an ongoing
substitute or alternative plan) has been provided to the Executive, or the
failure by the Company to continue the Executive's participation in any
such bonus, incentive compensation or stock option plan on substantially
the same basis, both in terms of the amount of benefits provided and the
level of the Executive's participation relative to other participants, as
existed immediately prior to the time of the Change in Control;
(vi) (A) except as required by law, the failure by the Company to
continue to provide to the Executive benefits substantially equivalent, in
the aggregate, to those enjoyed by the Executive under the qualified and
nonqualified employee pension and welfare benefit plans of the Company,
including, without limitation, any pension, life insurance, medical,
dental, health and accident, disability, retirement or savings plans in
which the Executive was eligible to participate immediately prior to the
Change in Control; (B) the taking of any action by the Company which would
directly or indirectly materially reduce or deprive the Executive of the
perquisites enjoyed by the Executive immediately prior to the Change in
Control (including Company-paid and/or reimbursed club memberships,
financial counseling fees and the like); or (C) the failure by the Company
or a successor to provide the Executive with the number of paid vacation
days (and the policies and practices for taking such days) as was provided
under the Company's vacation policy or practice as was in effect
immediately prior to the Change in Control;
(vii) the failure of the Company or any successor to obtain a
satisfactory written agreement from any successor to assume and agree to
perform this Agreement, as contemplated in subsection IX(a); or
(viii) any purported termination of the Executive's employment that
is not effected pursuant to a Notice of Termination satisfying the
requirements of subsection II(b). For purposes of this Agreement, no such
purported termination shall be effective except as constituting Good
Reason.
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The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstances constituting Good Reason
hereunder.
(i) "Gross-Up Payment" shall have the meaning ascribed to such term in
subsection VII(a) of this Agreement.
(j) "Notice of Termination" shall have the meaning ascribed to such term
in subsection II(b) of this Agreement.
(k) "Payments" shall have the meaning ascribed to such term in subsection
VII(a) of this Agreement.
(l) "Potential Change in Control" shall mean:
(i) the Company (or an Affiliated Company) enters into an agreement,
the consummation of which would result in the occurrence of a Change in
Control;
(ii) an individual or entity, or a group or groups of individuals or
entities, acquires rights, whether pursuant to an agreement with the
Company (or an Affiliated Company) or otherwise, the exercise of which
would result in the occurrence of a Change in Control;
(iii) an individual or entity (including the Company), or a group or
groups of individuals or entities, publicly announces an intention to take
or to consider taking action(s) which, if taken, would result in the
occurrence of a Change in Control; or
(iv) the Board of Directors of the Company adopts a resolution to
the effect that, for purposes of this Agreement, a Potential Change in
Control has occurred.
(m) "Retirement" shall mean the Executive's voluntary termination of
employment with the Company, other than for Good Reason, and in accordance with
the Company's retirement policy generally applicable to its employees or in
accordance with any outstanding or contemporaneous retirement arrangement
established with respect to the Executive.
(n) "Subsidiary" shall mean any corporation of which fifty percent (50%)
or more of the total combined voting power of all classes of stock is owned
directly or indirectly by the Company and any joint venture, partnership or
limited liability company (or other similar entity) of which fifty percent (50%)
or more of the capital or profits interest is owned directly or indirectly by
the Company.
(o) "Tax Counsel" shall have the meaning ascribed to such term in
subsection VII(b) of this Agreement.
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(p) "Termination" shall have the meaning ascribed to such term in
subsection II(a) of this Agreement.
(q) "Termination Date" shall mean:
(i) if the Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided that the
Executive shall not have returned to the full-time performance of his
duties during such thirty (30) day period); and
(ii) if the Executive's employment is terminated for Cause or Good
Reason or for any reason other than death or Disability, the date
specified in the Notice of Termination (which in the case of a termination
for Cause shall not be less than thirty (30) days and in the case of a
termination for Good Reason shall not be less than thirty (30) days nor
more than sixty (60) days, respectively, from the date such Notice of
Termination is given).
(r) "Tier I Officer" shall mean the chief executive officer of the
Company, the Company's senior strategic planning officer, the Company's senior
mergers and acquisitions officer, the chief financial officer of the Company,
the chief legal officer of the Company, and any other officer of the Company or
of a Subsidiary, elected by the Company's Board of Directors, who is assigned to
the Company's officer compensation Band A (or successor compensation level).
(s) "Tier II Officer" shall mean any officer of the Company or of a
Subsidiary, elected by the Company's Board of Directors, who is assigned to the
Company's officer compensation Band B (or successor compensation level) and who
is not described in subsection I(r).
(t) "Tier IIA Officer" shall mean any officer of the Company or of a
Subsidiary, elected by the Company's Board of Directors, who is assigned to the
Company's officer compensation Band BB (or successor compensation level) and who
is not described in subsection I (r).
II. Termination of Employment Following Change in Control.
(a) Entitlement to Benefits. If at the time a Change in Control occurs the
Executive is either a Tier I Officer or a Tier II Officer or a Tier IIA Officer,
the Executive shall be entitled to the benefits provided in Section III hereof
upon the subsequent termination of his employment with the Company (or its
successor) within two (2) years after the occurrence of the Change in Control,
unless such termination is (i) a result of the Executive's death or Retirement,
(ii) for Cause, (iii) a result of the Executive's Disability, or (iv) by the
Executive other than for Good Reason. Such termination of the Executive's
employment which is not as a result of the
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<PAGE>
Executive's death, Retirement or Disability and (x) if by the Company, is not
for Cause, or (y) if by the Executive, is for Good Reason, shall be referred to
hereinafter as a "Termination."
If, within two (2) years after the occurrence of a Change in Control, such
Executive's employment shall be terminated for Cause or by the Executive for
other than Good Reason, the Company shall pay the Executive his full base salary
through the Termination Date at the rate in effect at the time Notice of
Termination is given and shall pay any amounts to be paid to the Executive
pursuant to any other compensation plans, programs or employment agreements then
in effect, and the Company shall have no further obligations to the Executive
under this Agreement.
(b) Notice of Termination. Any termination of the Executive's employment,
within two (2) years after the occurrence of a Change in Control, by the Company
or by the Executive, shall be communicated by written Notice of Termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific provision of
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
(c) Potential Change in Control. If, after a Potential Change in Control
has occurred, the Executive's employment with the Company or a Subsidiary
employing the Executive is terminated under circumstances which would constitute
a Termination if a Change in Control had occurred, and such termination was at
the request of a party who has taken steps to effect a Change in Control or who
is otherwise involved in the Potential Change in Control, or was otherwise
caused by the Potential Change in Control, then for all purposes of this
Agreement, (i) a Change in Control shall be deemed to have occurred at the time
such Potential Change in Control occurred, and (ii) such termination shall be
deemed to have been a Termination (if such termination would have constituted a
Termination had it followed an actual Change in Control). Notwithstanding the
foregoing, the two (2) year period described in the first sentence of subsection
II(a) of the Agreement shall not commence upon any such deemed Change in
Control.
III. Compensation Upon Termination of Employment Following Change in Control.
Upon a Termination of the Executive's employment, the Executive shall be
entitled to the following benefits:
(a) Severance Payment. The Company shall pay to the Executive as a
severance allowance, no later than the seventh (7th) day following the
Termination Date, a lump sum cash payment equal to the applicable percentage of
the sum of (1) the Executive's Base Salary in effect immediately before the
Change in Control plus (2) the amount of the Standard Award applicable to the
Executive under the BellSouth Corporation Short Term Incentive Plan, or
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successor plan ("STIP"), for the Award Year in which the Change in Control
occurs. The "applicable percentage" as used in the preceding sentence shall be
(i) 300%, if immediately before the Change in Control the Executive was a Tier I
Officer, (ii) 200%, if immediately before the Change in Control the Executive
was a Tier II Officer and (iii) 250%, if immediately before the Change in
Control the Executive was a Tier IIA Officer.
For purposes of this Section III, (A) the term "Base Salary" shall
refer to the gross annual base salary payable to the Executive including the
amount of any before-tax and after-tax contributions made by the Executive from
such salary to or under any Code Section 125 plan, to or under any Code Section
401(k) plan, such as the BellSouth Retirement Savings Plan or other plan(s)
sponsored by the Company or an Affiliated Company, or a successor to any such
plan, and the amount of any other deferrals of such salary under any
nonqualified deferred compensation plans or arrangements maintained by the
Company or an Affiliated Company, and (B) the terms "Standard Award" and "Award
Year" shall have the meanings ascribed to such terms under STIP, or comparable
terms used in any successor plan.
(b) Short Term Award. The Company shall pay the Executive, no later than
the seventh (7th) day following the Termination Date, a lump sum cash payment
equal to the amount of the Standard Award applicable to the Executive under STIP
for the Award Year in which the Termination occurs, multiplied by the greater of
(i) one hundred percent (100%), or (ii) the percentage which would be payable
under STIP based on actual performance results as of the most recently completed
calendar quarter, in either case pro rated to the Termination Date. Such amount
shall offset (dollar for dollar) any obligation the Company or any Affiliated
Company may have under STIP to the Executive, but the Executive shall in no
event be required to repay any such amount should, for example, it exceed the
amount to which the Executive would otherwise have become entitled under STIP.
(c) Long Term Award. The Company shall pay to the Executive, no later than
the seventh (7th) day following the Termination Date, a lump sum cash payment
equal to the amount determined by multiplying the number of units outstanding
for the Executive for all performance periods under the BellSouth Corporation
Shareholder Return Cash Plan, or successor plan ("SRCP"), by the value of all
dividends accrued under SRCP to such date and by multiplying such amount by the
greater of (i) one hundred percent (100%), or (ii) the percentage which would be
payable under SRCP based on actual performance results as of the most recently
completed calendar quarter. Such amount shall offset (dollar for dollar) any
obligation the Company or any Affiliated Company may have under SRCP to the
Executive, but the Executive shall in no event be required to repay any such
amount should, for example, it exceed the amount to which the Executive would
otherwise have become entitled under SRCP.
(d) Vesting of Executive Benefits. All benefits of the Executive under
nonqualified deferred compensation plans and agreements (including without
limitation the BellSouth Corporation Deferred Compensation Plan, the BellSouth
Corporation Deferred Income Plan, the BellSouth Corporation Compensation
Deferral Plan, and the successors(s) to any such plan(s)),
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nonqualified supplemental retirement and excess benefit plans (including without
limitation the BellSouth Corporation Supplemental Executive Retirement Plan and
the nonqualified excess benefit plan described in the BellSouth Personal
Retirement Account Pension Plan, and the successor(s) to any such plan(s)), and
life insurance plans or arrangements available only to executives or senior
management (including without limitation the BellSouth Corporation Executive
Life Insurance Plan and the BellSouth Corporation Senior Manager Life Insurance
Plan, and the successor(s) to any such plan(s)), in which the Executive is a
participant or to which the Executive is a party, shall be immediately vested
and all benefits and rights earned or accrued under such plans and agreements
through the Termination Date shall thereafter be nonforfeitable. Without
limiting the generality of the foregoing, all such benefits shall no longer be
subject to any reduction or forfeiture under, for example, any requirement,
provision or restriction in any plan or agreement regarding competition with
BellSouth or any Affiliated Company, recalculation of benefits as a result of
changes in the law (or interpretations thereof), or the continued performance of
services to the Company or Affiliated Companies. If the Executive is described
in Section 4.4 (a)(i)(B)(4) of the BellSouth Corporation Supplemental Executive
Retirement Plan, which provides service credit under that plan for service with
a former affiliate of the Company, or comparable provision of any successor
plan, the Executive's benefit under such plan shall be calculated as if his
credit for service with a former affiliate has been fully earned under such
provision prior to the Termination.
(e) Outplacement Services. The Company shall make available to the
Executive, at the Company's expense, outplacement services, the scope and
provider of which shall be selected by the Executive. The maximum amount for
which the Company shall be responsible under this subsection III (e) shall be
(i) $30,000, if immediately before the Change in Control the Executive was a
Tier I Officer, (ii) $20,000, if immediately before the Change in Control the
Executive was a Tier II Officer, and (iii) $25,000, if immediately before the
Change in Control the Executive was a Tier IIA Officer.
(f) No Mitigation. The Executive shall not be required to mitigate the
amount of any payment provided for in this Section III, nor shall the amount of
any payment or benefit provided for in this Section III be reduced by any
compensation earned by the Executive as the result of employment by another
employer or by retirement or other benefits received after the Termination Date
or otherwise. The Company's obligation to make payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company or any Affiliated Company may have against the
Executive or other parties.
IV. Stock Options.
Upon a Change in Control, all nonqualified stock options, incentive stock
options, and stock appreciation rights previously granted to the Executive under
the BellSouth Corporation Stock Option Plan and the BellSouth Corporation Stock
Plan, and any successor plan(s), which
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are not already vested, shall be vested and immediately exercisable (subject to
the otherwise applicable terms of such plans and related option agreements).
V. Legal Fees and Expenses.
The Company shall pay to the Executive all legal fees and expenses as and
when incurred by the Executive in contesting or disputing any termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement,
regardless of the outcome, unless in the case of a legal action brought by or in
the name of the Executive, a final determination is made by a court of competent
jurisdiction that such action was not brought by the Executive in good faith.
VI. Interest.
If the Company fails to make, or cause to be made, any payment provided
for herein by the date on which the payment is due, the Company shall make such
payment together with interest thereon. The interest shall accrue and be
compounded monthly. The interest rate shall be a per annum rate equal to 120
percent of the prime rate as reported by The Wall Street Journal for the first
business day of each month, effective for the ensuing month. The interest rate
shall be adjusted at the beginning of each month.
VII. Gross-Up For Excise Taxes.
(a) Gross-Up Payments. In the event that any payment or the value of any
benefit received or to be received by the Executive in connection with the
Executive's Termination or contingent upon a Change in Control, whether received
or to be received pursuant to the terms of this Agreement or of any other plan,
arrangement or agreement (the "Payments"), would be subject to the excise tax
imposed by Code Section 4999 or any comparable federal, state or local excise
tax (such excise taxes, together with any interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), as determined as
provided below, the Company shall pay to or for the benefit of the Executive an
additional amount (the "Gross-Up Payment") such that the net amount retained by
the Executive, after deduction of the Excise Tax on the Payments and any
federal, state and local income tax and Excise Tax upon the payment provided for
by this Section VII, and any interest, penalties or additions to tax payable by
the Executive with respect thereto, shall be equal to the total value of the
Payments. The intent of the parties is that the Company shall be solely
responsible for and shall pay any Excise Tax on any Payments and the Gross-Up
Payment and any income and employment taxes (including, without limitation,
penalties and interest) imposed on any Gross-Up Payments as well as any loss of
deduction caused by the Gross-Up Payment.
(b) Determinations Regarding Gross-Up Payments. All determinations
required to be made under this Section VII, including without limitation whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determinations, shall be
made by tax counsel selected by the
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Company and reasonably acceptable to the Executive ("Tax Counsel"). The Company
shall instruct the Tax Counsel to timely provide the data required by this
Section VII to the Executive. All fees and expenses of the Tax Counsel shall be
paid solely by the Company. Any Excise Tax as determined pursuant to this
subsection VII(b) shall be paid by the Company to the Internal Revenue Service
or other appropriate taxing authority on the Executive's behalf promptly after
receipt of the Tax Counsel's determination. If the Tax Counsel determines that
there is substantial authority, within the meaning of Section 6662 of the Code
(or appropriate authority under any successor provisions), that no Excise Tax is
payable by the Executive, the Tax Counsel shall furnish the Executive with a
written opinion that failure to disclose or report the Excise Tax on the
Executive's federal income tax return will not constitute a substantial
understatement of tax or be reasonably likely to result in the imposition of a
negligence or similar penalty. Any determination by the Tax Counsel shall be
binding upon the Company, absent manifest error.
(c) Overpayments, Underpayments. As a result of the uncertainty in the
application of Section 4999 of the Code, at the time of the initial
determination by the Tax Counsel hereunder it is possible that Gross-Up Payments
not made by the Company should have been made ("underpayments"), or that
Gross-Up Payments will have been made by the Company which should not have been
made ("overpayments"). In either such event, the Tax Counsel shall determine the
amount of the underpayment or overpayment that has occurred. In the case of an
underpayment, the amount of such underpayment shall be promptly paid by the
Company to or for the benefit of the Executive. In the case of an overpayment,
the Executive shall, at the direction and expense of the Company, take such
steps as are reasonably necessary (including the filing of returns and claims
for refund), follow reasonable instructions from, and procedures established by,
the Company, and otherwise reasonably cooperate with the Company to correct such
overpayment; provided, however, that (i) the Executive shall not in any event be
obligated to return to the Company an amount greater than the net after-tax
portion of the overpayment that he has retained or has recovered as a refund
from the applicable taxing authorities and (ii) this provision shall be
interpreted in a manner consistent with the intent of this Section VII, which is
to make the Executive whole, on an after-tax basis, from the application of the
Excise Tax, it being understood that the correction of an overpayment may result
in the Executive repaying to the Company an amount which is less than the
overpayment.
VIII. Confidential Information.
Executive agrees to protect all Confidential Information. Executive will
not use, except in connection with work for Company or Affiliated Companies,
threaten to use, disclose or threaten to disclose, give or threaten to give to
others any Confidential Information.
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IX. Successors; Enforcement; Dispute Resolution.
(a) Obligations of Successors. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company is required to perform it. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on the same
terms as the Executive would be entitled hereunder if the Executive had
terminated employment for Good Reason following a Change in Control of the
Company, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Termination
Date. As used in this Agreement, the "Company" shall mean the Company as
hereinabove defined and any successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by operation of law, or
otherwise.
(b) Enforceable by Beneficiaries. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees (the "Beneficiaries"). In the event of the death of the
Executive while any amount would still be payable hereunder if such death had
not occurred, all such amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to the Executive's Beneficiaries.
(c) Pooling of Interests Accounting Treatment. Notwithstanding anything to
the contrary in this Agreement, if the application of any provision(s) of this
Agreement, or of the Agreement in its entirety, would preclude the use of
pooling of interests accounting treatment with respect to a transaction for
which such treatment otherwise is available and to be adopted by the Company,
this Agreement shall be modified as it applies to such transaction, to the
minimum extent necessary to prevent such impact, including if necessary the
invalidation of such provisions (or the entire Agreement, as the case may be) to
the extent they otherwise would have been triggered by such transaction. If the
pooling of interests accounting rules require modification or invalidation of
one or more provisions of this Agreement as it applies to such transaction, the
adverse impact on the Executive shall, to the extent reasonably possible, be
proportionate to the adverse impact on other similarly situated employees of the
Company. The Board of Directors of the Company shall, in its sole and absolute
discretion, make all determinations necessary under this subsection; provided,
that determinations regarding the application of the pooling of interests
accounting rules for these purposes shall be made by the Company with the
concurrence of the Company's independent auditors at the time such determination
is to be made.
(d) Governing Law. Except as otherwise expressly provided herein, this
Agreement and the rights and obligations hereunder shall be construed and
enforced in accordance with the laws of the State of Georgia.
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(e) Dispute Resolution. The parties agree to attempt in good faith to
resolve any controversy or claim arising out of or relating to this Agreement by
mediation in accordance with the Center for Public Resources Model Procedure for
Mediation of Business Disputes. If the matter has not been resolved pursuant to
the aforesaid mediation procedure within 60 days of the commencement of such
procedure (which period may be extended by mutual agreement), or if either party
will not participate in a mediation, the controversy shall be settled by
arbitration in accordance with the Center for Public Resources Rules for
Non-Administered Arbitration of Business Disputes, by a sole arbitrator. The
arbitration shall be governed by the United States Arbitration Act, 9 U.S.C.
Sections 1-16, and judgment upon the award rendered by the arbitrator may be
entered by any court having jurisdiction thereof. The place of arbitration shall
be Atlanta, Georgia, unless otherwise agreed upon. The arbitrator is not
empowered to award punitive or other damages that are in excess of actual,
contractual damages.
X. General Provisions.
(a) Term of Agreement. This Agreement shall become effective on the date
hereof and shall continue in effect until the earliest of (a) January 1, 2000,
if no Change in Control or Potential Change in Control has occurred before that
date or, if as of such date a Potential Change in Control shall have occurred,
the earliest date thereafter on which the threat of such Potential Change in
Control becoming a Change in Control is eliminated; (b) the termination of the
Executive's employment with the Company for any reason prior to a Potential
Change in Control; (c) the termination of the Executive's employment with the
Company, other than as described in subsection II(c), prior to a Change in
Control; (d) the Company's termination of the Executive's employment for Cause,
or the Executive's resignation for other than Good Reason, following a Change in
Control. Notwithstanding the foregoing, commencing on January 1, 2000 (or such
later expiration date prescribed by clause (a) of the preceding sentence), and
on the third anniversary of such date, and successive third anniversaries
thereafter, the expiration date prescribed by clause (a) of the preceding
sentence shall automatically be extended for an additional three (3) years
unless, not later than one hundred eighty (180) days prior to the date on which
this Agreement would otherwise automatically be extended, one of the parties
hereto shall have given notice to the other party that it (or he or she) does
not wish to extend the term of this Agreement. Notwithstanding anything to the
contrary in this Agreement, this Agreement shall in no event terminate before
both the Company and the Executive have fulfilled, or have had satisfied, all of
their rights, obligations and liabilities under this Agreement.
(b) Amendment. No amendment or modification to this Agreement shall be
effective unless in writing and signed by both the Company and the Executive.
(c) Disposition of Employer. In the event the Executive is employed by a
Subsidiary, the terms of this Agreement shall expire if such Subsidiary is sold
or otherwise disposed of prior to a Change in Control (and in a transaction
which is not a Change in Control)
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unless the Executive continues in employment with the Company or a Subsidiary
after such sale or other disposition. If the Company or Subsidiary employing the
Executive is sold or disposed of following a Change in Control, this Agreement
shall continue through its original term or any extended term then in effect.
(d) Withholding. All payments made hereunder shall be reduced by any
applicable federal, state, or local withholding or other taxes or charges as may
be required by applicable law.
(e) Nonduplication. If an Executive who becomes entitled to the benefits
described in Section III shall also be entitled to severance pay or enhanced
benefits, or both, under the terms of a contract or arrangement (other than a
benefit plan or arrangement generally applicable to executives), including
without limitation agreements entered into by the Executive and the Company or a
Participating Company in connection with executive succession planning, the
Executive shall be entitled to the benefits under Section III only if the
Executive waives and relinquishes all rights to all such payments and benefits
under such other contract or arrangement.
(f) Notices. All notices provided for in this Agreement shall be in
writing. Notices to the Company shall be deemed given when personally delivered
or sent by certified or registered mail or overnight delivery service to Room
19A01, 1155 Peachtree Street, N.E., Atlanta, Georgia 30309-3610, Attention:
Corporate Secretary. Notices to the Executive shall be deemed given when
personally delivered or sent by certified or registered mail or overnight
delivery service to the last address for the Executive shown on the records of
the Company. Either the Company or the Executive may, by notice to the other,
designate an address other than the foregoing for the receipt of subsequent
notices.
(g) Waivers. No waiver of any provision of this Agreement shall be valid
unless approved in writing by the party giving such waiver. No waiver of a
breach under any provision of this Agreement shall be deemed to be a waiver of
such provision or any other provision of this Agreement or any subsequent
breach. No failure on the part of either the Company or the Executive to
exercise, and no delay in exercising, any right or remedy conferred by law or
this Agreement shall operate as a waiver of such right or remedy, and no
exercise or waiver, in whole or in part, of any right or remedy conferred by law
or herein shall operate as a waiver of any other right or remedy.
(h) Severability. If any provision of this Agreement shall be held
unlawful or otherwise invalid or unenforceable in whole or in part, such
unlawfulness, invalidity or unenforceability shall not affect any other
provision of this Agreement or part thereof, each of which shall remain in full
force and effect. If the making of any payment or the provision of any other
benefit required under this Agreement shall be held unlawful or otherwise
invalid or unenforceable, such unlawfulness, invalidity or unenforceability
shall not prevent any other payment or benefit from being made or provided under
this Agreement, and if the making of any
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payment in full or the provision of any other benefit required under this
Agreement in full would be unlawful or otherwise invalid or unenforceable, then
such unlawfulness, invalidity or unenforceability shall not prevent such payment
or benefit from being made or provided in part, to the extent that it would not
be unlawful, invalid or unenforceable, and the maximum payment or benefit that
would not be unlawful, invalid or unenforceable shall be made or provided under
this Agreement.
(i) Agents. The Company may make arrangements to cause any agent or other
party, including an Affiliated Company, to make any payment or to provide any
benefit that the Company is required to make or to provide hereunder; provided,
that no such arrangement shall relieve or discharge the Company of its
obligations hereunder except to the extent that such payments or benefits are
actually made or provided.
(j) Headings. The headings of the various sections and subsections of this
Agreement are solely for convenience and shall not be relied upon in construing
the provisions of the Agreement. Any reference to a section or subsection shall
refer to a section or subsection of the Agreement unless specified otherwise.
(k) Gender and Number. Any use of gender in this Agreement 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.
(l) Entire Agreement. This Agreement contains the entire agreement between
the parties and no statements, promises or inducements made by any party hereto,
or agents of either party, which are not contained in this Agreement shall be
valid or binding; provided, however, that except as expressly provided herein
the matters dealt with herein supersede previous written agreements between the
parties on the same subject matters only to the extent such previous provisions
are inconsistent with this Agreement and other provisions in written agreements
between the parties not inconsistent with this Agreement are not affected.
(m) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute a single instrument.
(n) Employment. Except in the event of a Change in Control and,
thereafter, only as specifically set forth in this Agreement, nothing in this
Agreement shall be construed to (i) limit in any way the right of the Company or
a Subsidiary to terminate the Executive's employment at any time for any reason
or for no reason; or (ii) be evidence of any agreement or understanding,
expressed or implied, that the Company or a Subsidiary will employ the Executive
in any particular position, on any particular terms or at any particular rate
remuneration.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
<TABLE>
<CAPTION>
EXECUTIVE: BELLSOUTH CORPORATION
<S> <C>
By:
- - ---------------------------- -----------------------------------------
Title:
--------------------------------------
</TABLE>
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Exhibit B
BELLSOUTH CORPORATION
EQUITY AWARD AGREEMENT
THIS AGREEMENT is made and entered into as of the 23rd day of November,
1998, by and between BellSouth Corporation, a Georgia corporation (the
"Company") and Mr. F. D. Ackerman (the "Executive"):
In consideration of the mutual covenants, terms and conditions set forth
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Company, pursuant to action of its Board of
Directors (the "Board") approving the agreement between the parties hereto of
even date herewith and this Agreement, the Company and the Executive, hereby
agree to the terms of this Equity Award Agreement (the "Agreement"):
1. Equity Awards.
(a) Non-qualified Stock Option. The Company hereby grants a Non-qualified
Stock Option (the "NQSO") to the Executive to purchase from the Company Six
Hundred Seventy-Four Thousand Four Hundred Fifty-Nine (674,459) shares of the
Company's common stock, $1.00 par value (the "Stock"), at an option price per
share of $82.00 (the "Option Price"), effective as of the date set forth above.
(b) Restricted Stock. The Company hereby grants to the Executive
Seventy-Six Thousand Two Hundred Twenty (76,220) restricted shares of the
Company's Stock (the "Restricted Stock"), effective as of the date set forth
above.
2. Vesting of Equity Awards. Subject to the following provisions of this
Agreement (i) twenty percent (20%) of the NQSO shall become exercisable each
year on the date of the Executive's birthday, with the first 20% becoming
exercisable on the Executive's sixtieth (60th) birthday, and with each
additional 20% becoming exercisable on each subsequent birthday, provided that
at each such date the Executive remains employed by the Company, and (ii) twenty
percent (20%) of the Restricted Stock shall become vested each year on the date
of the Executive's birthday, with the first 20% vesting on the Executive's
sixtieth (60th) birthday, and with each additional 20% vesting on each
subsequent birthday, provided that at each such date the Executive remains
employed by the Company. In the event that the Executive's employment terminates
between the Executive's birthdays, there will be no pro rata vesting of
Restricted Stock, or additional options becoming exercisable under the NQSO, for
the portion of the year the Executive is employed between the last birthday and
the date of termination.
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3. Definitions. For purposes of this Agreement, the following terms shall have
the meaning as specified below:
(a) "Cause" - Executive's willfully engaging in conduct that is
demonstrably and materially injurious to the Company. For purposes of this
subsection, no act, or failure to act, on the part of the Executive shall be
deemed "willful" unless committed by the Executive in bad faith and without
reasonable belief that such action or omission was in the best interest of the
Company. Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for Cause unless and until there shall have been delivered
to the Executive a certificate of a resolution duly adopted by the affirmative
vote of not less than seventy-five percent (75%) of the entire membership of the
Board at a meeting of the Board (after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's legal counsel, to
be heard before the Board), finding that in the good faith opinion of the Board,
the Executive has engaged in the conduct set forth in this subsection and
specifying the particulars thereof in detail.
(b) "CIC Agreement" - the Executive Severance Agreement entered into by
and between the Executive and the Company on October 17, 1996, providing certain
benefits in the event of a change in corporate control of the Company, attached
hereto as Exhibit "A" and incorporated by this reference herein.
(c) "Disability" - an illness, injury or other incapacity which qualifies
the Executive for long-term disability benefits under the principal management
long-term disability plan of the Company.
(d) "Equity Awards" - the NQSO and the Restricted Stock granted pursuant
to this Agreement.
(e) "Executive's Beneficiary" - the beneficiary or beneficiaries named
from time to time by the Executive as his beneficiary for purpose of the Equity
Awards. Each designation shall be on a form, as prescribed by the Company, will
be effective only when received by the Company, and will revoke all prior
designations by the Executive. If the Executive dies with no such beneficiary
designation in effect, his beneficiary shall be his estate, and his Equity
Awards will pass under the terms of his will or pursuant to the laws of descent
and distribution applicable to the Executive, as the case may be.
(f) "Good Reason" - the occurrence, without the Executive's express
written consent, of any of the following circumstances:
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(1) the assignment to the Executive of duties inconsistent with the
Executive's status or responsibilities as in effect immediately prior to such
assignment, including imposition of business travel obligations which differ
materially from prior business travel obligations;
(2) diminution in the status or responsibilities of the Executive's
position from that which existed immediately prior to such change, whether by
reason of the Company ceasing to be a public company, becoming a subsidiary of a
successor public company, or otherwise;
(3) a reduction in the Executive's annual base salary as in effect
immediately before such reduction or the failure to pay a bonus award to which
the Executive is otherwise entitled under any of the short-term or long-term
incentive plans in which the Executive participates (or any successor incentive
compensation plans) at the time such awards are usually paid;
(4) a change in the principal place of the Executive's employment,
as in effect immediately prior to such change, to a location more than
thirty-five (35) miles distant from the location of such principal place at such
time;
(5) the failure by the Company to continue in effect any bonus,
incentive compensation, or stock plan in which the Executive participates,
unless an equivalent alternative compensation arrangement (embodied in an
ongoing substitute or alternative plan) has been provided to the Executive, or
the failure by the Company to continue the Executive's participation in any such
bonus, incentive compensation or stock plan on substantially the same basis,
both in terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants; and
(6) (A) except as required by law, the failure by the Company to
continue to provide to the Executive benefits substantially equivalent, in the
aggregate, to those enjoyed by the Executive under the qualified and
nonqualified employee pension and welfare benefit plans of the Company,
including, without limitation, any pension, life insurance, medical, dental,
health and accident, disability, retirement or savings plans in which the
Executive was eligible to participate immediately prior thereto; (B) the taking
of any action by the Company which would directly or indirectly materially
reduce or deprive the Executive of the perquisites enjoyed by the Executive
immediately before such action (including the Company-paid and/or reimbursed
club memberships, financial counseling fees and the like); or (C) the failure by
the Company or a successor to provide the Executive with the number of paid
vacation days (and the policies and practices for taking such days) as was
previously provided under the Company's vacation policy or practice.
The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstances constituting Good Reason
hereunder.
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(g) "Person" - any individual, corporation, bank, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
governmental or other legal or business entity.
4. Retirement. If the Executive's employment with the Company is terminated due
to retirement at or after age 65, or with the consent of the Board at or after
age 60, the NQSO shall be fully exercisable and the Restricted Stock shall be
fully vested.
5. Death or Disability. If the Executive's employment with the Company is
terminated by reason of the Executive's death or Disability, at or after age 60,
the NQSO shall be fully exercisable and the Restricted Stock shall be fully
vested.
6. Other Terminations of Employment. If the Executive's employment with the
Company is terminated, at or after age 60, either (i) by the Company other than
for Cause, or (ii) by the Executive for Good Reason, the NQSO shall be fully
exercisable and the Restricted Stock shall be fully vested.
7. Change in Control.
(a) NQSO. If prior to the Executive's termination of employment, a Change
in Control of the Company occurs, as that term is defined in the CIC Agreement,
the NQSO shall be fully exercisable.
(b) Restricted Stock. If prior to the Executive's termination of
employment, a Change in Control of the Company occurs, as that term is defined
in the CIC Agreement, and within two (2) years after the occurrence of the
Change in Control the Executive's employment is terminated by reason of the
Executive's death or Disability, by the Company other than for Cause, or by the
Executive for Good Reason, the Restricted Stock shall be fully vested.
8. Pooling of Interests Accounting Treatment. Notwithstanding anything to the
contrary in this Agreement, if the application of any provision(s) of this
Agreement, or of the Agreement in its entirety, would preclude the use of
pooling of interests accounting treatment with respect to a transaction for
which such treatment otherwise is available and to be adopted by the Company,
this Agreement shall be modified as it applies to such transaction, to the
minimum extent necessary to prevent such impact, including if necessary the
invalidation of such provisions (or the entire Agreement, as the case may be).
The Board shall, in its sole and absolute discretion, make all determinations
necessary under this paragraph; provided, that determinations regarding the
application of the pooling of interests accounting rules for these purposes
shall be made by the Company with the concurrence of the Company's independent
auditors at the time such determination is to be made.
9. NQSO. Only with respect to the grant of the NQSO, the following provisions
apply:
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(a) Expiration. The NQSO shall expire, and the Executive shall have no
further rights with respect to the NQSO under the terms of this Agreement, on
the earlier of:
(1) the date the NQSO has been exercised in full under this
Agreement; or
(2) the twelfth anniversary of the date of this Agreement.
(b) Forfeiture. In the event of the Executive's termination of employment,
any portion of the NQSO that has not become exercisable in accordance with the
provisions of this Agreement shall be forfeited, and shall no longer be
exercisable. The portion of the NQSO that is not so forfeited, by reason of
being exercisable prior to or upon termination of employment, shall remain
exercisable until it would otherwise expire under the foregoing provisions of
this Agreement.
(c) Method of Exercise. This NQSO may be exercised by properly completing
and actually delivering the applicable Notice of Exercise Form, in whole or in
part (but if in part, in an amount equal to at least 100 shares or, if less, the
number of shares remaining to be exercised under the NQSO), on any business day
of the Company after the NQSO (or such portion thereof) has become exercisable
and has not expired or been forfeited, to the Company, together with payment in
full of the Option Price for the shares of Stock the Executive desires to
purchase through such exercise in the manner specified in the Notice of Exercise
Form. As provided in the Notice of Exercise Form, payment may be made in the
form of cash or shares of Stock, or a combination of cash and shares of Stock.
(d) Effective Date of Exercise. An exercise under paragraph 9(c) shall be
effective on the date a properly completed Notice of Exercise Form, together
with full payment of the Option Price, actually is delivered to and accepted by
the executive compensation group at the Company headquarters, or as otherwise
specified in an applicable Notice of Exercise Form.
(e) Value of Stock. Any shares of Stock which are tendered to the Company
as payment and any shares of Stock which are transferred by the Company shall be
valued at their fair market value on the date as of which the exercise is
effective or, if the exercise is effective on a date other than a business day
for the New York Stock Exchange, on the immediately preceding business day. For
purposes of this Agreement, fair market value shall equal, for any day, the
average of the high and the low daily sales prices of a share of Stock on the
New York Stock Exchange for that day or, if there are no sales on such day, for
the most recent prior day on which a share of Stock was sold on the New York
Stock Exchange.
(f) Transferability. The Executive may transfer his rights under the NQSO
by properly completing and delivering to the executive compensation group at the
Company headquarters a Non-qualified Stock Option Assignment Form and satisfying
such other conditions as the Company may impose, provided that such transfer is
without consideration and to (i) one or more of the Executive's spouse, parents,
spouse's parents, siblings, siblings' lineal
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descendents, children, children's lineal descendents, children's spouses and
children's spouses' lineal descendents, including in all cases legally adopted
individuals, or (ii) a trust, partnership or similar entity for the benefit
solely of one or more of the family members described above. The rights of any
such transferee thereafter shall be non-transferable except that such
transferee, where applicable under the terms of the transfer by the Executive,
shall have the right previously held by the Executive to designate a
Beneficiary. The Executive may make such a transfer of his rights with respect
to less than all of the total number of shares of Stock subject to the NQSO
provided that each such transfer shall apply to at least twenty percent (20%) of
the total number of shares of Stock initially subject to the Agreement.
(g) Stockholder Status. The Executive shall have no rights as a
stockholder with respect to any shares of Stock under the NQSO under this
Agreement before the date such shares have been duly issued to the Executive,
and no adjustment shall be made for dividends of any kind or description
whatsoever or for distributions of other rights of any kind or description
whatsoever respecting such Stock.
(h) Exercise Restrictions. The Company shall have the right to restrict or
otherwise delay the issuance of any shares of Stock purchased or paid under this
Agreement until the requirements of any applicable laws or regulations and any
stock exchange requirements have been in the Company's judgment satisfied in
full. Furthermore, any shares of Stock which are issued as a result of purchases
or payments made under this Agreement shall be issued subject to such
restrictions and conditions on any resale and on any other disposition as the
Company shall deem necessary or desirable under any applicable laws or
regulations or in light of any stock exchange requirements.
10. Restricted Stock. Only with respect to the grant of the Restricted Stock,
the following provisions apply:
(a) Stock Certificates. The certificates for the Stock (the
"Certificates") shall be registered in the name of the Executive. The Executive,
immediately upon receipt of the Certificates, shall execute with the Company an
escrow agreement provided by the Company for this purpose substantially in the
form attached hereto as Exhibit "B" (the "Escrow Agreement") and deposit the
Certificates with the escrow agent under such agreement (the "Escrow Agent")
together with stock powers appropriately endorsed in blank. After the Executive
becomes vested in the Restricted Stock in accordance with the foregoing
provisions of this Agreement, the Escrow Agent shall release the applicable
Certificate representing the number of vested Stock shares to the Executive (or
to his Beneficiary or his legal representative, if appropriate). In the event of
the Executive's termination of employment, any shares of Restricted Stock that
are not vested in accordance with the foregoing provisions of this Agreement
shall be forfeited, and the Escrow Agent shall transfer the applicable
Certificate representing the number of forfeited shares of Stock to the Company.
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(b) Stockholder Status. The Executive shall have all of the rights of a
stockholder with respect to the Restricted Stock prior to any forfeiture,
including the right to vote the Stock and to receive all regular cash dividends
paid with respect to the Stock, subject to terms of this Agreement and the
Escrow Agreement. Notwithstanding the above, the Executive shall have no right
to sell, assign, transfer, exchange or encumber or make subject to any
creditor's process, whether voluntary or involuntary or by operation of law, any
of his interest in Stock to the extent not then vested under the foregoing
provisions, and any attempt to do so shall be of no effect. In addition, all
shares of capital stock or other securities issued with respect to or in
substitution of any Stock not then vested under the foregoing provisions,
whether by the Company or by another issuer, any cash or other property received
on account of a redemption of such Stock or with respect to such Stock upon the
liquidation, sale or merger of the Company, and any other distributions with
respect to such Stock with the exception of regular cash dividends, shall remain
subject to the terms and conditions of this Agreement.
11. Entire Agreement. Unless specifically provided herein, this Agreement
contains the entire agreement between the parties with respect to the matters
dealt with herein, and shall supersede previous written agreements between the
parties on the same subject matters only to the extent such prior agreements are
inconsistent with this Agreement and other provisions in written agreements
between the parties not inconsistent with this Agreement are not affected. The
parties hereto acknowledge that this Equity Award is not made pursuant to, or
subject to, any stock plan currently administered by the Company, as of the date
of signing.
12. Employment and Termination. This Agreement shall not give the Executive the
right to continued employment by the Company shall not adversely affect the
right of the Company to terminate the Executive's employment with or without
cause at any time.
13. Securities Law Restrictions. The Executive acknowledges that the Stock
issued pursuant to the Equity Awards shall be subject to such restrictions and
conditions on any resale and on any other disposition as the Company shall deem
necessary or desirable under any applicable laws or regulations or in light of
any stock exchange requirements and that the Certificates shall bear legends as
determined to be appropriate by the Company.
14. Tax Withholding. The Company shall have the right to withhold from any
payment to the Executive, require payment from the Executive, or take such other
action which the Company deems necessary to satisfy any income or other tax
withholding or reporting requirements arising from the Equity Awards, and the
Executive shall provide to the Company such information, and pay to it upon
request such amounts, as it determines are required to comply with such
requirements. With respect to exercises by a transferee or a transferee's
Beneficiary, the Company shall not withhold any amount attributable to the
Executive's tax liability from any payment of cash or shares of Stock to a
transferee or a transferee's Beneficiary upon exercise of a transferred NQSO by
such person, but may require the payment of an amount equal to the
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Company's or any subsidiary's withholding tax obligation as a condition to such
exercise or as a condition to the release of cash or shares of Stock upon such
exercise.
15. Jurisdiction and Venue. The Executive consents to the jurisdiction and venue
of the Superior Court of Fulton County, Georgia, and the United States District
Court for the Northern District of Georgia for all purposes in connection with
any suit, action, or other proceeding relating to this Agreement or the Escrow
Agreement, including the enforcement of any rights under this Agreement or the
Escrow Agreement and any process or notice of motion in connection with such
situation or other proceeding may be serviced by certified or registered mail or
personal service within or without the State of Georgia, provided a reasonable
time for appearance is allowed.
16. Modification of Agreement. The Executive's rights under this Agreement can
be modified, suspended or canceled only in accordance with a written agreement
between, and signed by, the parties hereto.
17. Adjustments. Notwithstanding paragraph 16, in the event that the Board shall
determine that any dividend or other distribution (whether in the form of cash,
Stock, or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, or
share exchange or other similar corporate transaction or event, affects Stock
such that an adjustment is appropriate in order to prevent dilution or
enlargement of the rights of the Executive under this Agreement, then the Board,
in such manner as it may deem equitable, shall adjust any or all of (i) the
number of shares or kind of Stock which may thereafter be delivered in
connection with Equity Awards, (ii) the number and kind of Stock that may be
delivered or deliverable in respect of outstanding Equity Awards, and (iii) the
exercise price, grant price, or purchase price relating to any Equity Award, or,
if deemed appropriate, make provision for a cash payment with respect to any
outstanding Equity Award.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BELLSOUTH CORPORATION:
By:
-------------------------------------
Title: Vice President - Human Resources
F. D. ACKERMAN:
----------------------------------------
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BELLSOUTH CORPORATION
EQUITY AWARD AGREEMENT
THIS AGREEMENT is made and entered into as of the 23rd day of November,
1998, by and between BellSouth Corporation, a Georgia corporation (the
"Company") and Mr. F. D. Ackerman (the "Executive"):
In consideration of the mutual covenants, terms and conditions set forth
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Company, pursuant to action of its Board of
Directors (the "Board") approving the agreement between the parties hereto of
even date herewith and this Agreement, the Company and the Executive, hereby
agree to the terms of this Equity Award Agreement (the "Agreement"):
1. Equity Awards.
(a) Non-qualified Stock Option. The Company hereby grants a Non-qualified
Stock Option (the "NQSO") to the Executive to purchase from the Company Six
Hundred Seventy-Four Thousand Four Hundred Fifty-Nine (674,459) shares of the
Company's common stock, $1.00 par value (the "Stock"), at an option price per
share of $82.00 (the "Option Price"), effective as of the date set forth above.
(b) Restricted Stock. The Company hereby grants to the Executive
Seventy-Six Thousand Two Hundred Twenty (76,220) restricted shares of the
Company's Stock (the "Restricted Stock"), effective as of the date set forth
above.
2. Vesting of Equity Awards. Subject to the following provisions of this
Agreement (i) twenty percent (20%) of the NQSO shall become exercisable each
year on the date of the Executive's birthday, with the first 20% becoming
exercisable on the Executive's sixtieth (60th) birthday, and with each
additional 20% becoming exercisable on each subsequent birthday, provided that
at each such date the Executive remains employed by the Company, and (ii) twenty
percent (20%) of the Restricted Stock shall become vested each year on the date
of the Executive's birthday, with the first 20% vesting on the Executive's
sixtieth (60th) birthday, and with each additional 20% vesting on each
subsequent birthday, provided that at each such date the Executive remains
employed by the Company. In the event that the Executive's employment terminates
between the Executive's birthdays, there will be no pro rata vesting of
Restricted Stock, or additional options becoming exercisable under the NQSO, for
the portion of the year the Executive is employed between the last birthday and
the date of termination.
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3. Definitions. For purposes of this Agreement, the following terms shall have
the meaning as specified below:
(a) "Cause" - Executive's willfully engaging in conduct that is
demonstrably and materially injurious to the Company. For purposes of this
subsection, no act, or failure to act, on the part of the Executive shall be
deemed "willful" unless committed by the Executive in bad faith and without
reasonable belief that such action or omission was in the best interest of the
Company. Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for Cause unless and until there shall have been delivered
to the Executive a certificate of a resolution duly adopted by the affirmative
vote of not less than seventy-five percent (75%) of the entire membership of the
Board at a meeting of the Board (after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's legal counsel, to
be heard before the Board), finding that in the good faith opinion of the Board,
the Executive has engaged in the conduct set forth in this subsection and
specifying the particulars thereof in detail.
(b) "CIC Agreement" - the Executive Severance Agreement entered into by
and between the Executive and the Company on October 17, 1996, providing certain
benefits in the event of a change in corporate control of the Company, attached
hereto as Exhibit "A" and incorporated by this reference herein.
(c) "Disability" - an illness, injury or other incapacity which qualifies
the Executive for long-term disability benefits under the principal management
long-term disability plan of the Company.
(d) "Equity Awards" - the NQSO and the Restricted Stock granted pursuant
to this Agreement.
(e) "Executive's Beneficiary" - the beneficiary or beneficiaries named
from time to time by the Executive as his beneficiary for purpose of the Equity
Awards. Each designation shall be on a form, as prescribed by the Company, will
be effective only when received by the Company, and will revoke all prior
designations by the Executive. If the Executive dies with no such beneficiary
designation in effect, his beneficiary shall be his estate, and his Equity
Awards will pass under the terms of his will or pursuant to the laws of descent
and distribution applicable to the Executive, as the case may be.
(f) "Good Reason" - the occurrence, without the Executive's express
written consent, of any of the following circumstances:
(1) the assignment to the Executive of duties inconsistent with the
Executive's status or responsibilities as in effect immediately prior to such
assignment, including imposition of business travel obligations which differ
materially from prior business travel obligations;
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(2) diminution in the status or responsibilities of the Executive's
position from that which existed immediately prior to such change, whether by
reason of the Company ceasing to be a public company, becoming a subsidiary of a
successor public company, or otherwise;
(3) a reduction in the Executive's annual base salary as in effect
immediately before such reduction or the failure to pay a bonus award to which
the Executive is otherwise entitled under any of the short-term or long-term
incentive plans in which the Executive participates (or any successor incentive
compensation plans) at the time such awards are usually paid;
(4) a change in the principal place of the Executive's employment,
as in effect immediately prior to such change, to a location more than
thirty-five (35) miles distant from the location of such principal place at such
time;
(5) the failure by the Company to continue in effect any bonus,
incentive compensation, or stock plan in which the Executive participates,
unless an equivalent alternative compensation arrangement (embodied in an
ongoing substitute or alternative plan) has been provided to the Executive, or
the failure by the Company to continue the Executive's participation in any such
bonus, incentive compensation or stock plan on substantially the same basis,
both in terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants; and
(6) (A) except as required by law, the failure by the Company to
continue to provide to the Executive benefits substantially equivalent, in the
aggregate, to those enjoyed by the Executive under the qualified and
nonqualified employee pension and welfare benefit plans of the Company,
including, without limitation, any pension, life insurance, medical, dental,
health and accident, disability, retirement or savings plans in which the
Executive was eligible to participate immediately prior thereto; (B) the taking
of any action by the Company which would directly or indirectly materially
reduce or deprive the Executive of the perquisites enjoyed by the Executive
immediately before such action (including the Company-paid and/or reimbursed
club memberships, financial counseling fees and the like); or (C) the failure by
the Company or a successor to provide the Executive with the number of paid
vacation days (and the policies and practices for taking such days) as was
previously provided under the Company's vacation policy or practice.
The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstances constituting Good Reason
hereunder.
(g) "Person" - any individual, corporation, bank, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
governmental or other legal or business entity.
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4. Retirement. If the Executive's employment with the Company is terminated due
to retirement at or after age 65, or with the consent of the Board at or after
age 60, the NQSO shall be fully exercisable and the Restricted Stock shall be
fully vested.
5. Death or Disability. If the Executive's employment with the Company is
terminated by reason of the Executive's death or Disability, at or after age 60,
the NQSO shall be fully exercisable and the Restricted Stock shall be fully
vested.
6. Other Terminations of Employment. If the Executive's employment with the
Company is terminated, at or after age 60, either (i) by the Company other than
for Cause, or (ii) by the Executive for Good Reason, the NQSO shall be fully
exercisable and the Restricted Stock shall be fully vested.
7. Change in Control.
(a) NQSO. If prior to the Executive's termination of employment, a Change
in Control of the Company occurs, as that term is defined in the CIC Agreement,
the NQSO shall be fully exercisable.
(b) Restricted Stock. If prior to the Executive's termination of
employment, a Change in Control of the Company occurs, as that term is defined
in the CIC Agreement, and within two (2) years after the occurrence of the
Change in Control the Executive's employment is terminated by reason of the
Executive's death or Disability, by the Company other than for Cause, or by the
Executive for Good Reason, the Restricted Stock shall be fully vested.
8. Pooling of Interests Accounting Treatment. Notwithstanding anything to the
contrary in this Agreement, if the application of any provision(s) of this
Agreement, or of the Agreement in its entirety, would preclude the use of
pooling of interests accounting treatment with respect to a transaction for
which such treatment otherwise is available and to be adopted by the Company,
this Agreement shall be modified as it applies to such transaction, to the
minimum extent necessary to prevent such impact, including if necessary the
invalidation of such provisions (or the entire Agreement, as the case may be).
The Board shall, in its sole and absolute discretion, make all determinations
necessary under this paragraph; provided, that determinations regarding the
application of the pooling of interests accounting rules for these purposes
shall be made by the Company with the concurrence of the Company's independent
auditors at the time such determination is to be made.
9. NQSO. Only with respect to the grant of the NQSO, the following provisions
apply:
(a) Expiration. The NQSO shall expire, and the Executive shall have no
further rights with respect to the NQSO under the terms of this Agreement, on
the earlier of:
(1) the date the NQSO has been exercised in full under this
Agreement; or
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(2) the twelfth anniversary of the date of this Agreement.
(b) Forfeiture. In the event of the Executive's termination of employment,
any portion of the NQSO that has not become exercisable in accordance with the
provisions of this Agreement shall be forfeited, and shall no longer be
exercisable. The portion of the NQSO that is not so forfeited, by reason of
being exercisable prior to or upon termination of employment, shall remain
exercisable until it would otherwise expire under the foregoing provisions of
this Agreement.
(c) Method of Exercise. This NQSO may be exercised by properly completing
and actually delivering the applicable Notice of Exercise Form, in whole or in
part (but if in part, in an amount equal to at least 100 shares or, if less, the
number of shares remaining to be exercised under the NQSO), on any business day
of the Company after the NQSO (or such portion thereof) has become exercisable
and has not expired or been forfeited, to the Company, together with payment in
full of the Option Price for the shares of Stock the Executive desires to
purchase through such exercise in the manner specified in the Notice of Exercise
Form. As provided in the Notice of Exercise Form, payment may be made in the
form of cash or shares of Stock, or a combination of cash and shares of Stock.
(d) Effective Date of Exercise. An exercise under paragraph 9(c) shall be
effective on the date a properly completed Notice of Exercise Form, together
with full payment of the Option Price, actually is delivered to and accepted by
the executive compensation group at the Company headquarters, or as otherwise
specified in an applicable Notice of Exercise Form.
(e) Value of Stock. Any shares of Stock which are tendered to the Company
as payment and any shares of Stock which are transferred by the Company shall be
valued at their fair market value on the date as of which the exercise is
effective or, if the exercise is effective on a date other than a business day
for the New York Stock Exchange, on the immediately preceding business day. For
purposes of this Agreement, fair market value shall equal, for any day, the
average of the high and the low daily sales prices of a share of Stock on the
New York Stock Exchange for that day or, if there are no sales on such day, for
the most recent prior day on which a share of Stock was sold on the New York
Stock Exchange.
(f) Transferability. The Executive may transfer his rights under the NQSO
by properly completing and delivering to the executive compensation group at the
Company headquarters a Non-qualified Stock Option Assignment Form and satisfying
such other conditions as the Company may impose, provided that such transfer is
without consideration and to (i) one or more of the Executive's spouse, parents,
spouse's parents, siblings, siblings' lineal descendents, children, children's
lineal descendents, children's spouses and children's spouses' lineal
descendents, including in all cases legally adopted individuals, or (ii) a
trust, partnership or similar entity for the benefit solely of one or more of
the family members described above. The rights of any such transferee thereafter
shall be non-transferable except that such transferee,
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where applicable under the terms of the transfer by the Executive, shall have
the right previously held by the Executive to designate a Beneficiary. The
Executive may make such a transfer of his rights with respect to less than all
of the total number of shares of Stock subject to the NQSO provided that each
such transfer shall apply to at least twenty percent (20%) of the total number
of shares of Stock initially subject to the Agreement.
(g) Stockholder Status. The Executive shall have no rights as a
stockholder with respect to any shares of Stock under the NQSO under this
Agreement before the date such shares have been duly issued to the Executive,
and no adjustment shall be made for dividends of any kind or description
whatsoever or for distributions of other rights of any kind or description
whatsoever respecting such Stock.
(h) Exercise Restrictions. The Company shall have the right to restrict or
otherwise delay the issuance of any shares of Stock purchased or paid under this
Agreement until the requirements of any applicable laws or regulations and any
stock exchange requirements have been in the Company's judgment satisfied in
full. Furthermore, any shares of Stock which are issued as a result of purchases
or payments made under this Agreement shall be issued subject to such
restrictions and conditions on any resale and on any other disposition as the
Company shall deem necessary or desirable under any applicable laws or
regulations or in light of any stock exchange requirements.
10. Restricted Stock. Only with respect to the grant of the Restricted Stock,
the following provisions apply:
(a) Stock Certificates. The certificates for the Stock (the
"Certificates") shall be registered in the name of the Executive. The Executive,
immediately upon receipt of the Certificates, shall execute with the Company an
escrow agreement provided by the Company for this purpose substantially in the
form attached hereto as Exhibit "B" (the "Escrow Agreement") and deposit the
Certificates with the escrow agent under such agreement (the "Escrow Agent")
together with stock powers appropriately endorsed in blank. After the Executive
becomes vested in the Restricted Stock in accordance with the foregoing
provisions of this Agreement, the Escrow Agent shall release the applicable
Certificate representing the number of vested Stock shares to the Executive (or
to his Beneficiary or his legal representative, if appropriate). In the event of
the Executive's termination of employment, any shares of Restricted Stock that
are not vested in accordance with the foregoing provisions of this Agreement
shall be forfeited, and the Escrow Agent shall transfer the applicable
Certificate representing the number of forfeited shares of Stock to the Company.
(b) Stockholder Status. The Executive shall have all of the rights of a
stockholder with respect to the Restricted Stock prior to any forfeiture,
including the right to vote the Stock and to receive all regular cash dividends
paid with respect to the Stock, subject to terms of this
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Agreement and the Escrow Agreement. Notwithstanding the above, the Executive
shall have no right to sell, assign, transfer, exchange or encumber or make
subject to any creditor's process, whether voluntary or involuntary or by
operation of law, any of his interest in Stock to the extent not then vested
under the foregoing provisions, and any attempt to do so shall be of no effect.
In addition, all shares of capital stock or other securities issued with respect
to or in substitution of any Stock not then vested under the foregoing
provisions, whether by the Company or by another issuer, any cash or other
property received on account of a redemption of such Stock or with respect to
such Stock upon the liquidation, sale or merger of the Company, and any other
distributions with respect to such Stock with the exception of regular cash
dividends, shall remain subject to the terms and conditions of this Agreement.
11. Entire Agreement. Unless specifically provided herein, this Agreement
contains the entire agreement between the parties with respect to the matters
dealt with herein, and shall supersede previous written agreements between the
parties on the same subject matters only to the extent such prior agreements are
inconsistent with this Agreement and other provisions in written agreements
between the parties not inconsistent with this Agreement are not affected. The
parties hereto acknowledge that this Equity Award is not made pursuant to, or
subject to, any stock plan currently administered by the Company, as of the date
of signing.
12. Employment and Termination. This Agreement shall not give the Executive the
right to continued employment by the Company shall not adversely affect the
right of the Company to terminate the Executive's employment with or without
cause at any time.
13. Securities Law Restrictions. The Executive acknowledges that the Stock
issued pursuant to the Equity Awards shall be subject to such restrictions and
conditions on any resale and on any other disposition as the Company shall deem
necessary or desirable under any applicable laws or regulations or in light of
any stock exchange requirements and that the Certificates shall bear legends as
determined to be appropriate by the Company.
14. Tax Withholding. The Company shall have the right to withhold from any
payment to the Executive, require payment from the Executive, or take such other
action which the Company deems necessary to satisfy any income or other tax
withholding or reporting requirements arising from the Equity Awards, and the
Executive shall provide to the Company such information, and pay to it upon
request such amounts, as it determines are required to comply with such
requirements. With respect to exercises by a transferee or a transferee's
Beneficiary, the Company shall not withhold any amount attributable to the
Executive's tax liability from any payment of cash or shares of Stock to a
transferee or a transferee's Beneficiary upon exercise of a transferred NQSO by
such person, but may require the payment of an amount equal to the Company's or
any subsidiary's withholding tax obligation as a condition to such exercise or
as a condition to the release of cash or shares of Stock upon such exercise.
15. Jurisdiction and Venue. The Executive consents to the jurisdiction and venue
of the Superior Court of Fulton County, Georgia, and the United States District
Court for the Northern
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District of Georgia for all purposes in connection with any suit, action, or
other proceeding relating to this Agreement or the Escrow Agreement, including
the enforcement of any rights under this Agreement or the Escrow Agreement and
any process or notice of motion in connection with such situation or other
proceeding may be serviced by certified or registered mail or personal service
within or without the State of Georgia, provided a reasonable time for
appearance is allowed.
16. Modification of Agreement. The Executive's rights under this Agreement can
be modified, suspended or canceled only in accordance with a written agreement
between, and signed by, the parties hereto.
17. Adjustments. Notwithstanding paragraph 16, in the event that the Board shall
determine that any dividend or other distribution (whether in the form of cash,
Stock, or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, or
share exchange or other similar corporate transaction or event, affects Stock
such that an adjustment is appropriate in order to prevent dilution or
enlargement of the rights of the Executive under this Agreement, then the Board,
in such manner as it may deem equitable, shall adjust any or all of (i) the
number of shares or kind of Stock which may thereafter be delivered in
connection with Equity Awards, (ii) the number and kind of Stock that may be
delivered or deliverable in respect of outstanding Equity Awards, and (iii) the
exercise price, grant price, or purchase price relating to any Equity Award, or,
if deemed appropriate, make provision for a cash payment with respect to any
outstanding Equity Award.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BELLSOUTH CORPORATION:
By:
-------------------------------------
Title: Vice President - Human Resources
F. D. ACKERMAN:
----------------------------------------
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Exhibit A
EXECUTIVE SEVERANCE AGREEMENT
THIS AGREEMENT is made and entered into as of the ____ day of
______________, 19__, by and between BellSouth Corporation, a Georgia
corporation (the "Company"), and ____________________ (the "Executive").
Reasons for This Agreement. The Company recognizes the valuable services
that the Executive has rendered and continues to render to the Company and its
Affiliated Companies. On behalf of itself, its Affiliated Companies and its
shareholders, the Company desires to encourage the Executive's continued service
and dedication in the performance of the Executive's duties, and attention to
the business and affairs of the Company and its Affiliated Companies,
notwithstanding the possibility, threat or occurrence of a change in control.
The Company believes that it is in the best interests of the Company and its
shareholders to minimize the distractions, risks and uncertainties for the
Executive which may be expected to arise in connection with a change in control
by providing assurances to the Executive that the Executive will not be
materially disadvantaged by a change in control.
Agreement. In consideration of the Executive's continued service to the
Company, the covenants and agreements contained in this Agreement, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Executive and the Company agree as follows:
I. Definitions.
For purposes of this Agreement, the following terms shall have the
meanings specified below:
(a) "Affiliated Companies" shall mean all of the Company's subsidiaries,
divisions, and other affiliated companies or entities.
(b) "Cause" shall mean the Executive's willfully engaging in conduct that
is demonstrably and materially injurious to the Company. For purposes of this
subsection I(b), no act, or failure to act, on the part of the Executive shall
be deemed "willful" unless committed by the Executive in bad faith and without
reasonable belief that such action or omission was in the best interest of the
Company. Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for Cause unless and until there shall have been delivered
to the
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Executive a certificate of a resolution duly adopted by the affirmative vote of
not less than seventy-five percent (75%) of the entire membership of the Board
of Directors of the Company, at a meeting of the Board (after reasonable notice
to the Executive and an opportunity for the Executive, together with the
Executive's legal counsel, to be heard before the Board), finding that in the
good faith opinion of the Board, the Executive has engaged in the conduct set
forth in this subsection I(b) and specifying the particulars thereof in detail.
(c) "Change in Control" shall mean:
(i) any "person" (as such term is defined in the Securities Exchange
Act of 1934, as amended), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company (or of another
entity owned directly or indirectly by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the
Company), becomes the "beneficial owner" (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of the Company
representing 20% or more of the total voting power represented by the
Company's then outstanding voting securities;
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of the
Company and any new director whose election by the Board of Directors or
nomination for election by the Company's shareholders was approved by a
vote of at least two-thirds of the directors who either were directors at
the beginning of the two year period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof;
(iii) the consummation of a merger, plan of reorganization,
consolidation, share exchange, or other transaction, in one or a series of
related transactions, involving the Company, if immediately following such
merger, plan of reorganization, consolidation, share exchange, or other
transaction or transactions the holders of the voting securities of the
Company outstanding immediately prior thereto hold securities representing
seventy percent (70%) or less of the combined voting power represented by
the voting securities of the Company or such surviving entity outstanding
immediately after such merger, plan of reorganization, consolidation,
share exchange, or other transaction or transactions;
(iv) the consummation of a transaction involving the sale or other
disposition by the Company or one or more of its Subsidiaries, in one or a
series of related transactions, of interests in an entity or entities, or
of assets, which for the most recent audited twelve-month period produced
total operating revenues or net income aggregating more than thirty
percent (30%) of the total operating revenues or net income of the Company
and its Subsidiaries (taken as a whole), if following such transaction or
transactions, any such entity is no longer a Subsidiary or such assets are
no longer held by a Subsidiary;
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(v) the complete liquidation or dissolution of the Company or the
sale of all or substantially all of the assets of the Company; or
(vi) the consummation of any other transaction which a majority of
the Board of Directors of the Company, in its sole and absolute
discretion, shall determine constitutes a Change in Control.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Confidential Information" shall mean information, whether generated
internally or externally, relating to the Company's business or to the
Affiliated Companies' businesses which derives economic value, actual or
potential, from not being generally known to other persons and is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy or
confidentiality, including, but not limited to, studies and analyses, technical
or nontechnical data, programs, patterns, compilations, devices, methods, models
(including cost and /or pricing models and operating models), techniques,
drawings, processes, employee compensation data, financial data (including
marketing information and strategies and personnel data), lists of actual or
potential customers or suppliers, and information relating to regulatory and
business policies, plans, and strategies. For purposes of this Agreement,
Confidential Information does not include information which is not a trade
secret three (3) years after termination of Executive's employment with Company.
(f) "Disability" shall mean an illness, injury or other incapacity which
qualifies the Executive for long-term disability benefits under the principal
management long-term disability plan of the Executive's employer.
(g) "Excise Tax" shall have the meaning ascribed to such term in
subsection VII(a) of this Agreement.
(h) "Good Reason" shall mean the occurrence after a Change in Control,
without the Executive's express written consent, of any of the following
circumstances:
(i) the assignment to the Executive of duties inconsistent with the
Executive's status or responsibilities as in effect immediately prior to a
Change in Control, including imposition of business travel obligations
which differ materially from business travel obligations immediately prior
to the Change in Control;
(ii) diminution in the status or responsibilities of the Executive's
position from that which existed immediately prior to the Change in
Control, whether by reason of the Company ceasing to be a public company,
becoming a subsidiary of a successor public company, or otherwise;
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(iii) a reduction in the Executive's annual base salary as in effect
immediately before the Change in Control or the failure to pay a bonus
award to which the Executive is otherwise entitled under any of the
short-term or long-term incentive plans in which the Executive
participates (or any successor incentive compensation plans) at the time
such awards are usually paid;
(iv) a change in the principal place of the Executive's employment,
as in effect immediately prior to the Change in Control, to a location
more than thirty-five (35) miles distant from the location of such
principal place at such time;
(v) the failure by the Company to continue in effect any bonus,
incentive compensation, or stock option plan in which the Executive
participates immediately prior to the Change in Control, unless an
equivalent alternative compensation arrangement (embodied in an ongoing
substitute or alternative plan) has been provided to the Executive, or the
failure by the Company to continue the Executive's participation in any
such bonus, incentive compensation or stock option plan on substantially
the same basis, both in terms of the amount of benefits provided and the
level of the Executive's participation relative to other participants, as
existed immediately prior to the time of the Change in Control;
(vi) (A) except as required by law, the failure by the Company to
continue to provide to the Executive benefits substantially equivalent, in
the aggregate, to those enjoyed by the Executive under the qualified and
nonqualified employee pension and welfare benefit plans of the Company,
including, without limitation, any pension, life insurance, medical,
dental, health and accident, disability, retirement or savings plans in
which the Executive was eligible to participate immediately prior to the
Change in Control; (B) the taking of any action by the Company which would
directly or indirectly materially reduce or deprive the Executive of the
perquisites enjoyed by the Executive immediately prior to the Change in
Control (including Company-paid and/or reimbursed club memberships,
financial counseling fees and the like); or (C) the failure by the Company
or a successor to provide the Executive with the number of paid vacation
days (and the policies and practices for taking such days) as was provided
under the Company's vacation policy or practice as was in effect
immediately prior to the Change in Control;
(vii) the failure of the Company or any successor to obtain a
satisfactory written agreement from any successor to assume and agree to
perform this Agreement, as contemplated in subsection IX(a); or
(viii) any purported termination of the Executive's employment that
is not effected pursuant to a Notice of Termination satisfying the
requirements of subsection II(b). For purposes of this Agreement, no such
purported termination shall be effective except as constituting Good
Reason.
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The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstances constituting Good Reason
hereunder.
(i) "Gross-Up Payment" shall have the meaning ascribed to such term in
subsection VII(a) of this Agreement.
(j) "Notice of Termination" shall have the meaning ascribed to such term
in subsection II(b) of this Agreement.
(k) "Payments" shall have the meaning ascribed to such term in subsection
VII(a) of this Agreement.
(l) "Potential Change in Control" shall mean:
(i) the Company (or an Affiliated Company) enters into an agreement,
the consummation of which would result in the occurrence of a Change in
Control;
(ii) an individual or entity, or a group or groups of individuals or
entities, acquires rights, whether pursuant to an agreement with the
Company (or an Affiliated Company) or otherwise, the exercise of which
would result in the occurrence of a Change in Control;
(iii) an individual or entity (including the Company), or a group or
groups of individuals or entities, publicly announces an intention to take
or to consider taking action(s) which, if taken, would result in the
occurrence of a Change in Control; or
(iv) the Board of Directors of the Company adopts a resolution to
the effect that, for purposes of this Agreement, a Potential Change in
Control has occurred.
(m) "Retirement" shall mean the Executive's voluntary termination of
employment with the Company, other than for Good Reason, and in accordance with
the Company's retirement policy generally applicable to its employees or in
accordance with any outstanding or contemporaneous retirement arrangement
established with respect to the Executive.
(n) "Subsidiary" shall mean any corporation of which fifty percent (50%)
or more of the total combined voting power of all classes of stock is owned
directly or indirectly by the Company and any joint venture, partnership or
limited liability company (or other similar entity) of which fifty percent (50%)
or more of the capital or profits interest is owned directly or indirectly by
the Company.
(o) "Tax Counsel" shall have the meaning ascribed to such term in
subsection VII(b) of this Agreement.
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(p) "Termination" shall have the meaning ascribed to such term in
subsection II(a) of this Agreement.
(q) "Termination Date" shall mean:
(i) if the Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided that the
Executive shall not have returned to the full-time performance of his
duties during such thirty (30) day period); and
(ii) if the Executive's employment is terminated for Cause or Good
Reason or for any reason other than death or Disability, the date
specified in the Notice of Termination (which in the case of a termination
for Cause shall not be less than thirty (30) days and in the case of a
termination for Good Reason shall not be less than thirty (30) days nor
more than sixty (60) days, respectively, from the date such Notice of
Termination is given).
(r) "Tier I Officer" shall mean the chief executive officer of the
Company, the Company's senior strategic planning officer, the Company's senior
mergers and acquisitions officer, the chief financial officer of the Company,
the chief legal officer of the Company, and any other officer of the Company or
of a Subsidiary, elected by the Company's Board of Directors, who is assigned to
the Company's officer compensation Band A (or successor compensation level).
(s) "Tier II Officer" shall mean any officer of the Company or of a
Subsidiary, elected by the Company's Board of Directors, who is assigned to the
Company's officer compensation Band B (or successor compensation level) and who
is not described in subsection I(r).
(t) "Tier IIA Officer" shall mean any officer of the Company or of a
Subsidiary, elected by the Company's Board of Directors, who is assigned to the
Company's officer compensation Band BB (or successor compensation level) and who
is not described in subsection I (r).
II. Termination of Employment Following Change in Control.
(a) Entitlement to Benefits. If at the time a Change in Control occurs the
Executive is either a Tier I Officer or a Tier II Officer or a Tier IIA Officer,
the Executive shall be entitled to the benefits provided in Section III hereof
upon the subsequent termination of his employment with the Company (or its
successor) within two (2) years after the occurrence of the Change in Control,
unless such termination is (i) a result of the Executive's death or Retirement,
(ii) for Cause, (iii) a result of the Executive's Disability, or (iv) by the
Executive other than for Good Reason. Such termination of the Executive's
employment which is not as a result of the
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Executive's death, Retirement or Disability and (x) if by the Company, is not
for Cause, or (y) if by the Executive, is for Good Reason, shall be referred to
hereinafter as a "Termination."
If, within two (2) years after the occurrence of a Change in Control, such
Executive's employment shall be terminated for Cause or by the Executive for
other than Good Reason, the Company shall pay the Executive his full base salary
through the Termination Date at the rate in effect at the time Notice of
Termination is given and shall pay any amounts to be paid to the Executive
pursuant to any other compensation plans, programs or employment agreements then
in effect, and the Company shall have no further obligations to the Executive
under this Agreement.
(b) Notice of Termination. Any termination of the Executive's employment,
within two (2) years after the occurrence of a Change in Control, by the Company
or by the Executive, shall be communicated by written Notice of Termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific provision of
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
(c) Potential Change in Control. If, after a Potential Change in Control
has occurred, the Executive's employment with the Company or a Subsidiary
employing the Executive is terminated under circumstances which would constitute
a Termination if a Change in Control had occurred, and such termination was at
the request of a party who has taken steps to effect a Change in Control or who
is otherwise involved in the Potential Change in Control, or was otherwise
caused by the Potential Change in Control, then for all purposes of this
Agreement, (i) a Change in Control shall be deemed to have occurred at the time
such Potential Change in Control occurred, and (ii) such termination shall be
deemed to have been a Termination (if such termination would have constituted a
Termination had it followed an actual Change in Control). Notwithstanding the
foregoing, the two (2) year period described in the first sentence of subsection
II(a) of the Agreement shall not commence upon any such deemed Change in
Control.
III. Compensation Upon Termination of Employment Following Change in Control.
Upon a Termination of the Executive's employment, the Executive shall be
entitled to the following benefits:
(a) Severance Payment. The Company shall pay to the Executive as a
severance allowance, no later than the seventh (7th) day following the
Termination Date, a lump sum cash payment equal to the applicable percentage of
the sum of (1) the Executive's Base Salary in effect immediately before the
Change in Control plus (2) the amount of the Standard Award applicable to the
Executive under the BellSouth Corporation Short Term Incentive Plan, or
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successor plan ("STIP"), for the Award Year in which the Change in Control
occurs. The "applicable percentage" as used in the preceding sentence shall be
(i) 300%, if immediately before the Change in Control the Executive was a Tier I
Officer, (ii) 200%, if immediately before the Change in Control the Executive
was a Tier II Officer and (iii) 250%, if immediately before the Change in
Control the Executive was a Tier IIA Officer.
For purposes of this Section III, (A) the term "Base Salary" shall
refer to the gross annual base salary payable to the Executive including the
amount of any before-tax and after-tax contributions made by the Executive from
such salary to or under any Code Section 125 plan, to or under any Code Section
401(k) plan, such as the BellSouth Retirement Savings Plan or other plan(s)
sponsored by the Company or an Affiliated Company, or a successor to any such
plan, and the amount of any other deferrals of such salary under any
nonqualified deferred compensation plans or arrangements maintained by the
Company or an Affiliated Company, and (B) the terms "Standard Award" and "Award
Year" shall have the meanings ascribed to such terms under STIP, or comparable
terms used in any successor plan.
(b) Short Term Award. The Company shall pay the Executive, no later than
the seventh (7th) day following the Termination Date, a lump sum cash payment
equal to the amount of the Standard Award applicable to the Executive under STIP
for the Award Year in which the Termination occurs, multiplied by the greater of
(i) one hundred percent (100%), or (ii) the percentage which would be payable
under STIP based on actual performance results as of the most recently completed
calendar quarter, in either case pro rated to the Termination Date. Such amount
shall offset (dollar for dollar) any obligation the Company or any Affiliated
Company may have under STIP to the Executive, but the Executive shall in no
event be required to repay any such amount should, for example, it exceed the
amount to which the Executive would otherwise have become entitled under STIP.
(c) Long Term Award. The Company shall pay to the Executive, no later than
the seventh (7th) day following the Termination Date, a lump sum cash payment
equal to the amount determined by multiplying the number of units outstanding
for the Executive for all performance periods under the BellSouth Corporation
Shareholder Return Cash Plan, or successor plan ("SRCP"), by the value of all
dividends accrued under SRCP to such date and by multiplying such amount by the
greater of (i) one hundred percent (100%), or (ii) the percentage which would be
payable under SRCP based on actual performance results as of the most recently
completed calendar quarter. Such amount shall offset (dollar for dollar) any
obligation the Company or any Affiliated Company may have under SRCP to the
Executive, but the Executive shall in no event be required to repay any such
amount should, for example, it exceed the amount to which the Executive would
otherwise have become entitled under SRCP.
(d) Vesting of Executive Benefits. All benefits of the Executive under
nonqualified deferred compensation plans and agreements (including without
limitation the BellSouth Corporation Deferred Compensation Plan, the BellSouth
Corporation Deferred Income Plan, the BellSouth Corporation Compensation
Deferral Plan, and the successors(s) to any such plan(s)),
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nonqualified supplemental retirement and excess benefit plans (including without
limitation the BellSouth Corporation Supplemental Executive Retirement Plan and
the nonqualified excess benefit plan described in the BellSouth Personal
Retirement Account Pension Plan, and the successor(s) to any such plan(s)), and
life insurance plans or arrangements available only to executives or senior
management (including without limitation the BellSouth Corporation Executive
Life Insurance Plan and the BellSouth Corporation Senior Manager Life Insurance
Plan, and the successor(s) to any such plan(s)), in which the Executive is a
participant or to which the Executive is a party, shall be immediately vested
and all benefits and rights earned or accrued under such plans and agreements
through the Termination Date shall thereafter be nonforfeitable. Without
limiting the generality of the foregoing, all such benefits shall no longer be
subject to any reduction or forfeiture under, for example, any requirement,
provision or restriction in any plan or agreement regarding competition with
BellSouth or any Affiliated Company, recalculation of benefits as a result of
changes in the law (or interpretations thereof), or the continued performance of
services to the Company or Affiliated Companies. If the Executive is described
in Section 4.4 (a)(i)(B)(4) of the BellSouth Corporation Supplemental Executive
Retirement Plan, which provides service credit under that plan for service with
a former affiliate of the Company, or comparable provision of any successor
plan, the Executive's benefit under such plan shall be calculated as if his
credit for service with a former affiliate has been fully earned under such
provision prior to the Termination.
(e) Outplacement Services. The Company shall make available to the
Executive, at the Company's expense, outplacement services, the scope and
provider of which shall be selected by the Executive. The maximum amount for
which the Company shall be responsible under this subsection III (e) shall be
(i) $30,000, if immediately before the Change in Control the Executive was a
Tier I Officer, (ii) $20,000, if immediately before the Change in Control the
Executive was a Tier II Officer, and (iii) $25,000, if immediately before the
Change in Control the Executive was a Tier IIA Officer.
(f) No Mitigation. The Executive shall not be required to mitigate the
amount of any payment provided for in this Section III, nor shall the amount of
any payment or benefit provided for in this Section III be reduced by any
compensation earned by the Executive as the result of employment by another
employer or by retirement or other benefits received after the Termination Date
or otherwise. The Company's obligation to make payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company or any Affiliated Company may have against the
Executive or other parties.
IV. Stock Options.
Upon a Change in Control, all nonqualified stock options, incentive stock
options, and stock appreciation rights previously granted to the Executive under
the BellSouth Corporation Stock Option Plan and the BellSouth Corporation Stock
Plan, and any successor plan(s), which
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are not already vested, shall be vested and immediately exercisable (subject to
the otherwise applicable terms of such plans and related option agreements).
V. Legal Fees and Expenses.
The Company shall pay to the Executive all legal fees and expenses as and
when incurred by the Executive in contesting or disputing any termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement,
regardless of the outcome, unless in the case of a legal action brought by or in
the name of the Executive, a final determination is made by a court of competent
jurisdiction that such action was not brought by the Executive in good faith.
VI. Interest.
If the Company fails to make, or cause to be made, any payment provided
for herein by the date on which the payment is due, the Company shall make such
payment together with interest thereon. The interest shall accrue and be
compounded monthly. The interest rate shall be a per annum rate equal to 120
percent of the prime rate as reported by The Wall Street Journal for the first
business day of each month, effective for the ensuing month. The interest rate
shall be adjusted at the beginning of each month.
VII. Gross-Up For Excise Taxes.
(a) Gross-Up Payments. In the event that any payment or the value of any
benefit received or to be received by the Executive in connection with the
Executive's Termination or contingent upon a Change in Control, whether received
or to be received pursuant to the terms of this Agreement or of any other plan,
arrangement or agreement (the "Payments"), would be subject to the excise tax
imposed by Code Section 4999 or any comparable federal, state or local excise
tax (such excise taxes, together with any interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), as determined as
provided below, the Company shall pay to or for the benefit of the Executive an
additional amount (the "Gross-Up Payment") such that the net amount retained by
the Executive, after deduction of the Excise Tax on the Payments and any
federal, state and local income tax and Excise Tax upon the payment provided for
by this Section VII, and any interest, penalties or additions to tax payable by
the Executive with respect thereto, shall be equal to the total value of the
Payments. The intent of the parties is that the Company shall be solely
responsible for and shall pay any Excise Tax on any Payments and the Gross-Up
Payment and any income and employment taxes (including, without limitation,
penalties and interest) imposed on any Gross-Up Payments as well as any loss of
deduction caused by the Gross-Up Payment.
(b) Determinations Regarding Gross-Up Payments. All determinations
required to be made under this Section VII, including without limitation whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determinations, shall be
made by tax counsel selected by the
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Company and reasonably acceptable to the Executive ("Tax Counsel"). The Company
shall instruct the Tax Counsel to timely provide the data required by this
Section VII to the Executive. All fees and expenses of the Tax Counsel shall be
paid solely by the Company. Any Excise Tax as determined pursuant to this
subsection VII(b) shall be paid by the Company to the Internal Revenue Service
or other appropriate taxing authority on the Executive's behalf promptly after
receipt of the Tax Counsel's determination. If the Tax Counsel determines that
there is substantial authority, within the meaning of Section 6662 of the Code
(or appropriate authority under any successor provisions), that no Excise Tax is
payable by the Executive, the Tax Counsel shall furnish the Executive with a
written opinion that failure to disclose or report the Excise Tax on the
Executive's federal income tax return will not constitute a substantial
understatement of tax or be reasonably likely to result in the imposition of a
negligence or similar penalty. Any determination by the Tax Counsel shall be
binding upon the Company, absent manifest error.
(c) Overpayments, Underpayments. As a result of the uncertainty in the
application of Section 4999 of the Code, at the time of the initial
determination by the Tax Counsel hereunder it is possible that Gross-Up Payments
not made by the Company should have been made ("underpayments"), or that
Gross-Up Payments will have been made by the Company which should not have been
made ("overpayments"). In either such event, the Tax Counsel shall determine the
amount of the underpayment or overpayment that has occurred. In the case of an
underpayment, the amount of such underpayment shall be promptly paid by the
Company to or for the benefit of the Executive. In the case of an overpayment,
the Executive shall, at the direction and expense of the Company, take such
steps as are reasonably necessary (including the filing of returns and claims
for refund), follow reasonable instructions from, and procedures established by,
the Company, and otherwise reasonably cooperate with the Company to correct such
overpayment; provided, however, that (i) the Executive shall not in any event be
obligated to return to the Company an amount greater than the net after-tax
portion of the overpayment that he has retained or has recovered as a refund
from the applicable taxing authorities and (ii) this provision shall be
interpreted in a manner consistent with the intent of this Section VII, which is
to make the Executive whole, on an after-tax basis, from the application of the
Excise Tax, it being understood that the correction of an overpayment may result
in the Executive repaying to the Company an amount which is less than the
overpayment.
VIII. Confidential Information.
Executive agrees to protect all Confidential Information. Executive will
not use, except in connection with work for Company or Affiliated Companies,
threaten to use, disclose or threaten to disclose, give or threaten to give to
others any Confidential Information.
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IX. Successors; Enforcement; Dispute Resolution.
(a) Obligations of Successors. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company is required to perform it. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on the same
terms as the Executive would be entitled hereunder if the Executive had
terminated employment for Good Reason following a Change in Control of the
Company, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Termination
Date. As used in this Agreement, the "Company" shall mean the Company as
hereinabove defined and any successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by operation of law, or
otherwise.
(b) Enforceable by Beneficiaries. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees (the "Beneficiaries"). In the event of the death of the
Executive while any amount would still be payable hereunder if such death had
not occurred, all such amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to the Executive's Beneficiaries.
(c) Pooling of Interests Accounting Treatment. Notwithstanding anything to
the contrary in this Agreement, if the application of any provision(s) of this
Agreement, or of the Agreement in its entirety, would preclude the use of
pooling of interests accounting treatment with respect to a transaction for
which such treatment otherwise is available and to be adopted by the Company,
this Agreement shall be modified as it applies to such transaction, to the
minimum extent necessary to prevent such impact, including if necessary the
invalidation of such provisions (or the entire Agreement, as the case may be) to
the extent they otherwise would have been triggered by such transaction. If the
pooling of interests accounting rules require modification or invalidation of
one or more provisions of this Agreement as it applies to such transaction, the
adverse impact on the Executive shall, to the extent reasonably possible, be
proportionate to the adverse impact on other similarly situated employees of the
Company. The Board of Directors of the Company shall, in its sole and absolute
discretion, make all determinations necessary under this subsection; provided,
that determinations regarding the application of the pooling of interests
accounting rules for these purposes shall be made by the Company with the
concurrence of the Company's independent auditors at the time such determination
is to be made.
(d) Governing Law. Except as otherwise expressly provided herein, this
Agreement and the rights and obligations hereunder shall be construed and
enforced in accordance with the laws of the State of Georgia.
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(e) Dispute Resolution. The parties agree to attempt in good faith to
resolve any controversy or claim arising out of or relating to this Agreement by
mediation in accordance with the Center for Public Resources Model Procedure for
Mediation of Business Disputes. If the matter has not been resolved pursuant to
the aforesaid mediation procedure within 60 days of the commencement of such
procedure (which period may be extended by mutual agreement), or if either party
will not participate in a mediation, the controversy shall be settled by
arbitration in accordance with the Center for Public Resources Rules for
Non-Administered Arbitration of Business Disputes, by a sole arbitrator. The
arbitration shall be governed by the United States Arbitration Act, 9 U.S.C.
Sections 1-16, and judgment upon the award rendered by the arbitrator may be
entered by any court having jurisdiction thereof. The place of arbitration shall
be Atlanta, Georgia, unless otherwise agreed upon. The arbitrator is not
empowered to award punitive or other damages that are in excess of actual,
contractual damages.
X. General Provisions.
(a) Term of Agreement. This Agreement shall become effective on the date
hereof and shall continue in effect until the earliest of (a) January 1, 2000,
if no Change in Control or Potential Change in Control has occurred before that
date or, if as of such date a Potential Change in Control shall have occurred,
the earliest date thereafter on which the threat of such Potential Change in
Control becoming a Change in Control is eliminated; (b) the termination of the
Executive's employment with the Company for any reason prior to a Potential
Change in Control; (c) the termination of the Executive's employment with the
Company, other than as described in subsection II(c), prior to a Change in
Control; (d) the Company's termination of the Executive's employment for Cause,
or the Executive's resignation for other than Good Reason, following a Change in
Control. Notwithstanding the foregoing, commencing on January 1, 2000 (or such
later expiration date prescribed by clause (a) of the preceding sentence), and
on the third anniversary of such date, and successive third anniversaries
thereafter, the expiration date prescribed by clause (a) of the preceding
sentence shall automatically be extended for an additional three (3) years
unless, not later than one hundred eighty (180) days prior to the date on which
this Agreement would otherwise automatically be extended, one of the parties
hereto shall have given notice to the other party that it (or he or she) does
not wish to extend the term of this Agreement. Notwithstanding anything to the
contrary in this Agreement, this Agreement shall in no event terminate before
both the Company and the Executive have fulfilled, or have had satisfied, all of
their rights, obligations and liabilities under this Agreement.
(b) Amendment. No amendment or modification to this Agreement shall be
effective unless in writing and signed by both the Company and the Executive.
(c) Disposition of Employer. In the event the Executive is employed by a
Subsidiary, the terms of this Agreement shall expire if such Subsidiary is sold
or otherwise disposed of prior to a Change in Control (and in a transaction
which is not a Change in Control)
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unless the Executive continues in employment with the Company or a Subsidiary
after such sale or other disposition. If the Company or Subsidiary employing the
Executive is sold or disposed of following a Change in Control, this Agreement
shall continue through its original term or any extended term then in effect.
(d) Withholding. All payments made hereunder shall be reduced by any
applicable federal, state, or local withholding or other taxes or charges as may
be required by applicable law.
(e) Nonduplication. If an Executive who becomes entitled to the benefits
described in Section III shall also be entitled to severance pay or enhanced
benefits, or both, under the terms of a contract or arrangement (other than a
benefit plan or arrangement generally applicable to executives), including
without limitation agreements entered into by the Executive and the Company or a
Participating Company in connection with executive succession planning, the
Executive shall be entitled to the benefits under Section III only if the
Executive waives and relinquishes all rights to all such payments and benefits
under such other contract or arrangement.
(f) Notices. All notices provided for in this Agreement shall be in
writing. Notices to the Company shall be deemed given when personally delivered
or sent by certified or registered mail or overnight delivery service to Room
19A01, 1155 Peachtree Street, N.E., Atlanta, Georgia 30309-3610, Attention:
Corporate Secretary. Notices to the Executive shall be deemed given when
personally delivered or sent by certified or registered mail or overnight
delivery service to the last address for the Executive shown on the records of
the Company. Either the Company or the Executive may, by notice to the other,
designate an address other than the foregoing for the receipt of subsequent
notices.
(g) Waivers. No waiver of any provision of this Agreement shall be valid
unless approved in writing by the party giving such waiver. No waiver of a
breach under any provision of this Agreement shall be deemed to be a waiver of
such provision or any other provision of this Agreement or any subsequent
breach. No failure on the part of either the Company or the Executive to
exercise, and no delay in exercising, any right or remedy conferred by law or
this Agreement shall operate as a waiver of such right or remedy, and no
exercise or waiver, in whole or in part, of any right or remedy conferred by law
or herein shall operate as a waiver of any other right or remedy.
(h) Severability. If any provision of this Agreement shall be held
unlawful or otherwise invalid or unenforceable in whole or in part, such
unlawfulness, invalidity or unenforceability shall not affect any other
provision of this Agreement or part thereof, each of which shall remain in full
force and effect. If the making of any payment or the provision of any other
benefit required under this Agreement shall be held unlawful or otherwise
invalid or unenforceable, such unlawfulness, invalidity or unenforceability
shall not prevent any other payment or benefit from being made or provided under
this Agreement, and if the making of any
58
<PAGE>
payment in full or the provision of any other benefit required under this
Agreement in full would be unlawful or otherwise invalid or unenforceable, then
such unlawfulness, invalidity or unenforceability shall not prevent such payment
or benefit from being made or provided in part, to the extent that it would not
be unlawful, invalid or unenforceable, and the maximum payment or benefit that
would not be unlawful, invalid or unenforceable shall be made or provided under
this Agreement.
(i) Agents. The Company may make arrangements to cause any agent or other
party, including an Affiliated Company, to make any payment or to provide any
benefit that the Company is required to make or to provide hereunder; provided,
that no such arrangement shall relieve or discharge the Company of its
obligations hereunder except to the extent that such payments or benefits are
actually made or provided.
(j) Headings. The headings of the various sections and subsections of this
Agreement are solely for convenience and shall not be relied upon in construing
the provisions of the Agreement. Any reference to a section or subsection shall
refer to a section or subsection of the Agreement unless specified otherwise.
(k) Gender and Number. Any use of gender in this Agreement 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.
(l) Entire Agreement. This Agreement contains the entire agreement between
the parties and no statements, promises or inducements made by any party hereto,
or agents of either party, which are not contained in this Agreement shall be
valid or binding; provided, however, that except as expressly provided herein
the matters dealt with herein supersede previous written agreements between the
parties on the same subject matters only to the extent such previous provisions
are inconsistent with this Agreement and other provisions in written agreements
between the parties not inconsistent with this Agreement are not affected.
(m) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute a single instrument.
(n) Employment. Except in the event of a Change in Control and,
thereafter, only as specifically set forth in this Agreement, nothing in this
Agreement shall be construed to (i) limit in any way the right of the Company or
a Subsidiary to terminate the Executive's employment at any time for any reason
or for no reason; or (ii) be evidence of any agreement or understanding,
expressed or implied, that the Company or a Subsidiary will employ the Executive
in any particular position, on any particular terms or at any particular rate
remuneration.
59
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
<TABLE>
<CAPTION>
EXECUTIVE: BELLSOUTH CORPORATION
<S> <C>
By:
- - ---------------------------- -----------------------------------------
Title:
--------------------------------------
</TABLE>
60
<PAGE>
Exhibit B
BELLSOUTH CORPORATION
EQUITY AWARD AGREEMENT
ESCROW AGREEMENT
This Escrow Agreement, effective November 23, 1998 by and among BellSouth
Corporation (the "Corporation"), F. D. Ackerman (the "Executive") and The Chase
Manhattan Bank, as escrow agent (the "Escrow Agent").
WITNESSETH THAT:
WHEREAS, the Corporation has, pursuant to a BellSouth Corporation Equity
Award Agreement dated the date hereof between the Corporation and the Executive
(the "Award Agreement"), made an award of restricted shares of common stock of
the Corporation to the Executive in recognition of the Executive's anticipated
service to be rendered to the Corporation; and
WHEREAS, in order to record the delivery of the certificates for such
shares and to enforce the restrictions, the certificates are being deposited
together with stock powers appropriately endorsed in blank with the Escrow Agent
hereunder; and
WHEREAS, the Corporation and the Executive desire to execute this Escrow
Agreement with the Escrow Agent in order to record the terms and conditions
under which such certificates have been delivered to the Escrow Agent and under
which the certificates will either be delivered to Executive or delivered to the
Corporation;
NOW THEREFORE, the Corporation, Executive and the Escrow Agent agree as
follow:
1. Receipt by Executive. Executive acknowledges receipt from the
Corporation of certificates for shares (the "Shares") of its common stock as
follows:
<TABLE>
<CAPTION>
Certificate Number Number of Shares
------------------ ----------------
<S> <C> <C>
BLS475619 15,244
BLS475620 15,244
BLS475621 15,244
BLS475622 15,244
BLS475623 15,244
</TABLE>
2. Investment Representation and Certificate Legend. Executive, by the
Executive's execution of this Agreement, certifies to the Corporation that (a)
the Shares received by the Executive have been received for the Executive's own
account, and the Executive has no present
61
<PAGE>
intention to sell or otherwise dispose of any of the Shares and (b) the
Executive is aware that the transfer of the Shares is restricted.
3. Delivery to and Receipt by the Escrow Agent. The Executive hereby
delivers to the Escrow Agent, and the Escrow Agent hereby acknowledges receipt
from the Executive, of such certificates for the Shares, registered in the name
of Executive, in each case accompanied by stock powers executed in blank by
Executive covering all of the Shares.
4. Delivery by the Escrow Agent. Subject to the other terms of the Award
Agreement and this Escrow Agreement, the Executive shall become entitled to
redelivery of the Shares in accordance with the following schedule:
<TABLE>
<CAPTION>
The Executive Shall be
On or After Entitled to the Following
This Date Number of Shares
--------- ----------------
<S> <C>
May 30, 2002 15,244
May 30, 2003 15,244
May 30, 2004 15,244
May 30, 2005 15,244
May 30, 2006 15,244
</TABLE>
Executive acknowledges and agrees that if the Executive forfeits any shares
under the Award Agreement), then all such Shares shall be returned to the
Corporation and all rights of the Executive with respect to those Shares shall
cease.
The Escrow Agent shall deliver the certificates for the Shares to the
Executive or to the Corporation in accordance with the written instructions of
the officer of the Corporation responsible for human resources matters (but in
no event the Executive). Such instructions shall be issued in accordance with
the provisions of the Award Agreement and this Agreement. The Escrow Agent shall
not be responsible for the propriety of any such instruction and will be fully
protected in making or omitting to make any delivery in accordance with such
instructions.
5. Distributions; Release; Voting. Executive shall be entitled to receive
all regular cash dividends paid upon and voting rights with respect to all of
the Shares held hereunder from time to time. All shares of capital stock or
other securities issued with respect to or in substitution of any of the Shares
not yet vested and held hereunder from time to time, whether by the Corporation
or by another issuer, any cash or other property received on account of a
redemption of such Shares or with respect to such Shares upon the liquidation,
sale or merger of the Corporation, and any other distributions with respect to
such Shares with the exception of regular cash dividends, shall remain subject
to all of the terms and conditions of this Escrow Agreement and shall be
redelivered to Executive or delivered to the Corporation under the same
circumstances as the portion of the Shares with respect to, or in substitution
for, which they were
62
<PAGE>
issued. Any such cash received shall be invested in the Escrow Agent's Money
Management Account.
6. Reliance by the Escrow Agent. The Escrow Agent will be under no duties
whatsoever, except such duties as are specifically set forth as such in this
Escrow Agreement, and no implied covenant or obligation contrary to the terms of
this Agreement will be read into this Escrow Agreement against the Escrow Agent.
The Escrow Agent will be under no liability or obligation to anyone with respect
to any failure on the part of the Corporation or the Executive to perform any of
their respective obligations under the Award Agreement, or under the terms of
this Agreement, or for any error or omission whatsoever on the part of the
Corporation or the Executive. The Escrow Agent shall have no liability for
acting in reliance upon any instructions delivered to it and believed in good
faith by it to be from the Corporation with respect to matters for which it is
responsible under this Agreement. The Escrow Agent will be under no obligation
to interpret Award Agreement provisions, but may rely entirely upon the
interpretation of the Award Agreement by the Corporation.
7. Resignation. The Escrow Agent may resign and be discharged from its
duties or obligations hereunder by giving notice in writing of such resignation
to the Corporation 180 days in advance of the date when such resignation shall
take effect. The Corporation shall have the right to appoint a new escrow agent
hereunder.
8. Compensation. The Corporation hereby agrees to pay or reimburse the
Escrow Agent upon request for all expenses, disbursements and advances,
including reasonable attorneys' fees, incurred or made by it in connection with
carrying out its duties hereunder.
9. Indemnification. The Corporation hereby agrees to indemnify the Escrow
Agent for, and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on the part of the Escrow Agent,
arising out of or in connection with its entering into this Agreement and
carrying out its duties hereunder, including the costs and expenses of defending
itself against any claim of liability.
10. Notices. All notices and communications hereunder shall be in writing
and shall be deemed to be duly given if sent by registered mail, return receipt
requested, as follows:
The Chase Manhattan Bank
Corporate Trust Department
450 West 33rd Street, 15th Floor
New York, New York 10001
BellSouth Corporation
1155 Peachtree Street, N.E., Suite 1800
Atlanta, Georgia 30309-3610
63
<PAGE>
To the Executive at address as shown below or at such other address as any
of the above may have furnished to the other parties in writing by registered
mail, return receipt requested.
11. Binding Effect. This Escrow Agreement shall be binding upon and inure
to the benefit of the Corporation, the Executive and the Escrow Agent and their
respective heirs, representatives, successors and assigns.
Executive Signature:
----------------------------------------
Mailing Address:
Social Security No.:
BellSouth Corporation
By:
----------------------------------------
Representative
Attest:
----------------------------------------
Assistant Secretary
The Chase Manhattan Bank
By: ----------------------------------------
Attest: ----------------------------------------
BELLSOUTH CORPORATION
EQUITY AWARD AGREEMENT
ESCROW AGREEMENT
64
<PAGE>
This Escrow Agreement, effective November 23, 1998 by and among BellSouth
Corporation (the "Corporation"), F. D. Ackerman (the "Executive") and The Chase
Manhattan Bank, as escrow agent (the "Escrow Agent").
WITNESSETH THAT:
WHEREAS, the Corporation has, pursuant to a BellSouth Corporation Equity
Award Agreement dated the date hereof between the Corporation and the Executive
(the "Award Agreement"), made an award of restricted shares of common stock of
the Corporation to the Executive in recognition of the Executive's anticipated
service to be rendered to the Corporation; and
WHEREAS, in order to record the delivery of the certificates for such
shares and to enforce the restrictions, the certificates are being deposited
together with stock powers appropriately endorsed in blank with the Escrow Agent
hereunder; and
WHEREAS, the Corporation and the Executive desire to execute this Escrow
Agreement with the Escrow Agent in order to record the terms and conditions
under which such certificates have been delivered to the Escrow Agent and under
which the certificates will either be delivered to Executive or delivered to the
Corporation;
NOW THEREFORE, the Corporation, Executive and the Escrow Agent agree as
follow:
1. Receipt by Executive. Executive acknowledges receipt from the
Corporation of certificates for shares (the "Shares") of its common stock as
follows:
<TABLE>
<CAPTION>
Certificate Number Number of Shares
------------------ ----------------
<S> <C>
BLS475619 15,244
BLS475620 15,244
BLS475621 15,244
BLS475622 15,244
BLS475623 15,244
</TABLE>
2. Investment Representation and Certificate Legend. Executive, by the
Executive's execution of this Agreement, certifies to the Corporation that (a)
the Shares received by the Executive have been received for the Executive's own
account, and the Executive has no present intention to sell or otherwise dispose
of any of the Shares and (b) the Executive is aware that the transfer of the
Shares is restricted.
3. Delivery to and Receipt by the Escrow Agent. The Executive hereby
delivers to the Escrow Agent, and the Escrow Agent hereby acknowledges receipt
from the Executive, of
65
<PAGE>
such certificates for the Shares, registered in the name of Executive, in each
case accompanied by stock powers executed in blank by Executive covering all of
the Shares.
4. Delivery by the Escrow Agent. Subject to the other terms of the Award
Agreement and this Escrow Agreement, the Executive shall become entitled to
redelivery of the Shares in accordance with the following schedule:
<TABLE>
<CAPTION>
The Executive Shall be
On or After Entitled to the Following
This Date Number of Shares
--------- ----------------
<S> <C>
May 30, 2002 15,244
May 30, 2003 15,244
May 30, 2004 15,244
May 30, 2005 15,244
May 30, 2006 15,244
</TABLE>
Executive acknowledges and agrees that if the Executive forfeits any shares
under the Award Agreement), then all such Shares shall be returned to the
Corporation and all rights of the Executive with respect to those Shares shall
cease.
The Escrow Agent shall deliver the certificates for the Shares to the
Executive or to the Corporation in accordance with the written instructions of
the officer of the Corporation responsible for human resources matters (but in
no event the Executive). Such instructions shall be issued in accordance with
the provisions of the Award Agreement and this Agreement. The Escrow Agent shall
not be responsible for the propriety of any such instruction and will be fully
protected in making or omitting to make any delivery in accordance with such
instructions.
5. Distributions; Release; Voting. Executive shall be entitled to receive
all regular cash dividends paid upon and voting rights with respect to all of
the Shares held hereunder from time to time. All shares of capital stock or
other securities issued with respect to or in substitution of any of the Shares
not yet vested and held hereunder from time to time, whether by the Corporation
or by another issuer, any cash or other property received on account of a
redemption of such Shares or with respect to such Shares upon the liquidation,
sale or merger of the Corporation, and any other distributions with respect to
such Shares with the exception of regular cash dividends, shall remain subject
to all of the terms and conditions of this Escrow Agreement and shall be
redelivered to Executive or delivered to the Corporation under the same
circumstances as the portion of the Shares with respect to, or in substitution
for, which they were issued. Any such cash received shall be invested in the
Escrow Agent's Money Management Account.
6. Reliance by the Escrow Agent. The Escrow Agent will be under no duties
whatsoever, except such duties as are specifically set forth as such in this
Escrow Agreement,
66
<PAGE>
and no implied covenant or obligation contrary to the terms of this Agreement
will be read into this Escrow Agreement against the Escrow Agent. The Escrow
Agent will be under no liability or obligation to anyone with respect to any
failure on the part of the Corporation or the Executive to perform any of their
respective obligations under the Award Agreement, or under the terms of this
Agreement, or for any error or omission whatsoever on the part of the
Corporation or the Executive. The Escrow Agent shall have no liability for
acting in reliance upon any instructions delivered to it and believed in good
faith by it to be from the Corporation with respect to matters for which it is
responsible under this Agreement. The Escrow Agent will be under no obligation
to interpret Award Agreement provisions, but may rely entirely upon the
interpretation of the Award Agreement by the Corporation.
7. Resignation. The Escrow Agent may resign and be discharged from its
duties or obligations hereunder by giving notice in writing of such resignation
to the Corporation 180 days in advance of the date when such resignation shall
take effect. The Corporation shall have the right to appoint a new escrow agent
hereunder.
8. Compensation. The Corporation hereby agrees to pay or reimburse the
Escrow Agent upon request for all expenses, disbursements and advances,
including reasonable attorneys' fees, incurred or made by it in connection with
carrying out its duties hereunder.
9. Indemnification. The Corporation hereby agrees to indemnify the Escrow
Agent for, and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on the part of the Escrow Agent,
arising out of or in connection with its entering into this Agreement and
carrying out its duties hereunder, including the costs and expenses of defending
itself against any claim of liability.
10. Notices. All notices and communications hereunder shall be in writing
and shall be deemed to be duly given if sent by registered mail, return receipt
requested, as follows:
The Chase Manhattan Bank
Corporate Trust Department
450 West 33rd Street, 15th Floor
New York, New York 10001
BellSouth Corporation
1155 Peachtree Street, N.E., Suite 1800
Atlanta, Georgia 30309-3610
To the Executive at address as shown below or at such other address as any
of the above may have furnished to the other parties in writing by registered
mail, return receipt requested.
67
<PAGE>
11. Binding Effect. This Escrow Agreement shall be binding upon and inure
to the benefit of the Corporation, the Executive and the Escrow Agent and their
respective heirs, representatives, successors and assigns.
Executive Signature:
----------------------------------------
Mailing Address:
Social Security No.:
BellSouth Corporation
By:
----------------------------------------
Representative
Attest:
----------------------------------------
Assistant Secretary
The Chase Manhattan Bank
By: ----------------------------------------
Attest: ----------------------------------------
68
<PAGE>
EXHIBIT 11
BellSouth Corporation
Computation of Earnings Per Share
<TABLE>
<CAPTION>
For the Years Ended December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Earnings Per Share - Basic:
Income Before Extraordinary
Losses $ 3,527 $ 3,270 $ 2,863
Extraordinary Loss on Early
Extinguishment of Debt, net
of tax -- (9) --
------- ------- -------
Net Income $ 3,527 $ 3,261 $ 2,863
------- ------- -------
Weighted average shares
outstanding 1,970 1,984 1,987
------- ------- -------
------- ------- -------
Earnings Per Common Share Before
Extraordinary Losses $ 1.79 $ 1.65 $ 1.44
Extraordinary Loss on Early
Extinguishment of Debt, net of tax -- -- --
------- ------- -------
Earnings Per Share (a) $ 1.79 $ 1.64 $ 1.44
------- ------- -------
------- ------- -------
</TABLE>
(a) Basic Earnings Per Share amounts for 1997 do not sum due to rounding
of the extraordinary loss on early extinguishment of debt of $9.
<PAGE>
EXHIBIT 11
BellSouth Corporation
Computation of Earnings Per Share (continued)
<TABLE>
<CAPTION>
For the Years Ended December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Earnings Per Share - Diluted:
Income Before Extraordinary
Losses $ 3,527 $ 3,270 $ 2,863
Extraordinary Loss on Early
Extinguishment of Debt, net
of tax -- (9) --
------- ------- -------
Net Income $ 3,527 $ 3,261 $ 2,863
------- ------- -------
------- ------- -------
Weighted average shares
outstanding 1,970 1,984 1,987
Incremental shares from assumed
exercise of stock options and
payment of performance share awards 14 5 5
------- ------- -------
Total Shares 1,984 1,989 1,992
------- ------- -------
------- ------- -------
Earnings Per Common Share Before
Extraordinary Losses $ 1.78 $ 1.64 $ 1.44
Extraordinary Loss on Early
Extinguishment of Debt, net of tax -- -- --
------- ------- -------
Earnings Per Share $ 1.78 $ 1.64 $ 1.44
------- ------- -------
------- ------- -------
</TABLE>
<PAGE>
EXHIBIT 12
BellSouth Corporation
Computation Of Earnings To Fixed Charges
(Dollars In Millions)
<TABLE>
<CAPTION>
For the Year Ended December 31,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
1. Earnings
(a) Income from continuing operations before deductions for
taxes and interest $ 6,588 $ 6,182 $ 5,329 $ 3,312 $ 4,069
(b) Portion of rental expense representative of interest factor 80 91 90 84 100
(c) Equity in losses from less-than-50% owned investments
(accounted for under the equity method of accounting) 97 78 68 163 79
(d) Excess of earnings over distributions of less-than-50%-owned
investments (accounted for under the equity method of accounting) (46) (85) (53) (45) (53)
------- ------- ------- ------- -------
TOTAL $ 6,719 $ 6,266 $ 5,434 $ 3,514 $ 4,195
------- ------- ------- ------- -------
------- ------- ------- ------- -------
2. Fixed Charges
(a) Interest $ 867 $ 783 $ 739 $ 745 $ 686
(b) Portion of rental expense representative of interest factor 81 91 90 84 100
------- ------- ------- ------- -------
TOTAL $ 948 $ 874 $ 829 $ 829 $ 786
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratio (1 divided by 2) 7.09 7.17 6.55 4.24 5.34
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
<PAGE>
Exhibit 21
BELLSOUTH ORGANIZATION OF COMPANIES
(AS OF DECEMBER 31, 1998)
ATTACHMENT TO 10-K
<TABLE>
<CAPTION>
Jurisdiction
------------
<S> <C>
1155 Peachtree Associates................................................Georgia
AB Cellular Holding, LLC................................................Delaware
Abiatar S.A..............................................................Uruguay
Acadiana Cellular General Partnership (RSA's No. 5 & 6).................Delaware
ACCC of Los Angeles, Inc..............................................California
Alabama Cellular Service, Inc............................................Georgia
ALLTEL Cellular Associates of South Carolina Limited
Partnership...........................................................Delaware
American Cellular Communications Corporation............................Delaware
Anniston-Westel Company, Inc.............................................Florida
Arlax S.A...................................................................Peru
Astros S.A..................................................................Peru
Atlanta Multichannel Television, Inc.....................................Georgia
Atlanta-Athens MSA Limited Partnership..................................Delaware
B.A. Celular Inversora S.A.............................................Argentina
Bakersfield Cellular Telephone Company................................California
Bakersfield Cellular, L.L.C.............................................Delaware
Bakersfield Holdings, Inc................................................Georgia
BBS Holdings, Inc. ......................................................Georgia
BCP S.A...................................................................Brazil
BCP SP Ltd................................................................Brazil
Beijing Ji Tong - BellSouth Communication & Information
Engineering Co., Ltd.....................................................China
Belgium New System L.P..................................................Delaware
Bell IP Holding L.L.C...................................................Delaware
BellSouth Advertising & Publishing Corporation ..........................Georgia
BellSouth Applied Technologies, Inc......................................Georgia
BellSouth Billing, Inc...................................................Georgia
BellSouth Brazil, Inc....................................................Georgia
BellSouth BSE Holdings, Inc.............................................Delaware
BellSouth BSE of Virginia, Inc..........................................Virginia
BellSouth BSE, Inc......................................................Delaware
BellSouth Business Systems, Inc. ........................................Georgia
BellSouth Capital Funding Corporation....................................Georgia
BellSouth Carolinas PCS, L.L.C..........................................Delaware
BellSouth Carolinas PCS, L.P. (d/b/a BellSouth Mobility
DCS)..................................................................Delaware
BellSouth Cellular Corp..................................................Georgia
BellSouth Cellular National Marketing, Inc. .............................Georgia
BellSouth Cellular Systems, Inc.........................................Delaware
BellSouth Chile Holdings, Inc............................................Georgia
BellSouth Chile S.A........................................................Chile
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction
------------
<S> <C>
BellSouth Chile, Inc.....................................................Georgia
BellSouth China Holdings, Inc. .........................................Delaware
BellSouth China, Inc....................................................Delaware
BellSouth Colombia, Inc.................................................Delaware
BellSouth Communication Systems, Inc.....................................Georgia
BellSouth Comunicaciones S.A...............................................Chile
BellSouth Corporate Aviation and Travel Services, Inc....................Georgia
BellSouth Corporation ...................................................Georgia
BellSouth Credit Card Services, Inc......................................Georgia
BellSouth D. C., Inc. ...................................................Georgia
BellSouth Denmark Capital Finance Limited.................British Virgin Islands
BellSouth Direct Marketing, Inc. ........................................Georgia
BellSouth EC Holdings, Inc. ............................................Delaware
BellSouth Ecuador Holdings (BVI) I Limited................British Virgin Islands
BellSouth Ecuador Holdings (BVI) II Limited...............British Virgin Islands
BellSouth Ecuador Holdings Partnership...................................Ecuador
BellSouth Ecuador Holdings, Inc.........................................Delaware
BellSouth Enterprises, Inc...............................................Georgia
BellSouth Entertainment, Inc.............................................Georgia
BellSouth Foundation, Inc................................................Georgia
BellSouth Guatemala Holdings, Inc.......................................Delaware
BellSouth Holding GmbH...................................................Germany
BellSouth Holdings B.V...........................................The Netherlands
BellSouth Holdings, Inc.................................................Delaware
BellSouth Information Systems, Inc. (BIS)................................Georgia
BellSouth Interactive Media Services, Inc................................Georgia
BellSouth International (Asia/Pacific), Inc.............................Delaware
BellSouth International ACCESS, Inc......................................Georgia
BellSouth International Capital Finance Limited...................Cayman Islands
BellSouth International Network Holdings, Inc...........................Delaware
BellSouth International Wireless Services, Inc..........................Delaware
BellSouth International, Inc.............................................Georgia
BellSouth Inversiones S.A..................................................Chile
BellSouth Inversora S.A................................................Argentina
BellSouth IP Holdings, Inc..............................................Delaware
BellSouth Israel, Inc....................................................Georgia
BellSouth Latin American Holdings I, Ltd..................British Virgin Islands
BellSouth Latin American Holdings II, Ltd.................British Virgin Islands
BellSouth Latin American Investments I, Ltd...............British Virgin Islands
BellSouth Latin American Investments II, Ltd..............British Virgin Islands
BellSouth Limited.................................................United Kingdom
BellSouth Long Distance Holdings, Inc...................................Delaware
BellSouth Long Distance, Inc............................................Delaware
BellSouth Marketing Services, Inc........................................Georgia
BellSouth Mexico, Inc...................................................Delaware
BellSouth MNS Holdings, Inc.............................................Delaware
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction
------------
<S> <C>
BellSouth MNS, Inc......................................................Delaware
BellSouth Mobile Data Services, Inc......................................Georgia
BellSouth Mobile Data, Inc...............................................Georgia
BellSouth Mobile Systems, Inc...........................................Delaware
BellSouth Mobility Communications, Inc...................................Georgia
BellSouth Mobility Inc...................................................Georgia
BellSouth Nicaragua (BVI) Limited.........................British Virgin Islands
BellSouth Nicaragua Holdings, Inc.......................................Delaware
BellSouth Panama Holdings, Inc..........................................Delaware
BellSouth Panama Limited..........................................Cayman Islands
BellSouth Personal Communications, Inc. (d/b/a BellSouth
Mobility DCS).........................................................Delaware
BellSouth Peru BVI Limited................................British Virgin Islands
BellSouth Peru Holdings, Inc............................................Delaware
BellSouth Products, Inc..................................................Georgia
BellSouth Properties (U.K.).......................................United Kingdom
BellSouth Public Communications, Inc.....................................Georgia
BellSouth Resources, Inc.................................................Georgia
BellSouth Shanghai Centre, Ltd...........................................Georgia
BellSouth Telecommunications, Inc........................................Georgia
BellSouth Venezuela (BVI) Limited.........................British Virgin Islands
BellSouth Venezuela Holdings, Inc.......................................Delaware
BellSouth Venezuela, S.A...............................................Venezuela
BellSouth Ventures Corporation...........................................Georgia
BellSouth Wireless Cable, Inc...........................................Delaware
BellSouth Wireless Data, L.P............................................Delaware
BellSouth Wireless, Inc..................................................Georgia
BellSouth Worldwide Holdings B.V.................................The Netherlands
BellSouth.net Inc.......................................................Delaware
Berry Network, Inc.......................................................Georgia
Billing & Management Systems S.A............................................Peru
Binford Investments Ltd...................................British Virgin Islands
Bloomington Cellular Telephone Company..................................Delaware
Bombshell Comercio e Participacoes Ltda...................................Brazil
Bombshell Holdings (B.V.I.) Ltd...........................British Virgin Islands
BSB S.A...................................................................Brazil
BSC Cayman General Partnership....................................Cayman Islands
BSC de Panama S.A.........................................................Panama
BSC Guatemala, Sociedad Anonima........................................Guatemala
BSCC Cellular of Texas, L.P................................................Texas
BSCC of Houston, Inc.......................................................Texas
BSD Cellular Communications...............................................Israel
BSE NE Ltd................................................................Brazil
BSE S.A...................................................................Brazil
B-Side Carriers L.P.....................................................Delaware
B-Side L.L.C............................................................Delaware
BSIT International Communications.........................................Israel
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction
------------
<S> <C>
BSNZ Wireless Holdings, Inc.............................................Delaware
Cable Sistemas S.A..........................................................Peru
Capco.............................................................Cayman Islands
CellCom Israel Ltd........................................................Israel
Cellemetry LLC..........................................................Delaware
Cellular Credit Corporation.............................................Delaware
Cellular Holdings of Texas, Inc.........................................Delaware
Cellular Radio of Chattanooga............................................Georgia
Cellular Vision Peru S.A....................................................Peru
Celular Catarinense S.A...................................................Brazil
Centweight B.V...................................................The Netherlands
Chattanooga CGSA, Inc....................................................Georgia
Chattanooga MSA Limited Partnership.....................................Delaware
Compania de Radiocomunicaciones Moviles S.A............................Argentina
Compania de Telecomunicaciones Comtal Limitada.............................Chile
Comtel Comunicaciones Telefonicas, S.A.................................Venezuela
Connector Comercio e Participacoes Ltda...................................Brazil
Controling S.A............................................................Brazil
Corporate Media Partners (d/b/a Americast)..............................Delaware
CSL Associates...........................................................Georgia
CSL Chastain Associates..................................................Georgia
CSL Exchange South Associates............................................Georgia
CSL Twelfth Street Associates............................................Georgia
CSL Western Way Associates...............................................Georgia
CTM S.A................................................................Argentina
Decatur RSA Limited Partnership.........................................Delaware
Denmark Alliance, Inc...................................................Delaware
Empresa Difusora Radio Tele S.A.............................................Peru
E-Plus Mobilfunk GmbH....................................................Germany
E-Plus Service GmbH......................................................Germany
Florida 511..............................................................Florida
Florida Cellular Service, Inc............................................Georgia
Florida RSA #2B (Indian River) Limited Partnership......................Delaware
Galveston Cellular Partnership.............................................Texas
Galveston Cellular Telephone Company.......................................Texas
Galveston Mobile Corporation............................................Delaware
Gary Cellular Corporation...............................................Delaware
Gary Cellular Telephone Company.........................................New York
Georgia Cellular Corporation............................................Delaware
Georgia Cellular Holdings, Inc...........................................Georgia
Georgia RSA No. 1 Limited Partnership...................................Delaware
Georgia RSA No. 2 Limited Partnership...................................Delaware
Georgia RSA No. 3 Limited Partnership...................................Delaware
German Mobilfunk Investments, Inc.......................................Delaware
Global Leasing Company...................................................Georgia
Gulf Coast Cellular Telephone Company....................................Alabama
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction
------------
<S> <C>
Harley S.A..................................................................Peru
Hawaii Cellular Corporation...............................................Hawaii
Honolulu Cellular Telephone Company.....................................New York
Houston Cellular Holding Company (Tex), LLC................................Texas
Houston Cellular Telephone Company, L.P....................................Texas
Huntsville Cellular Telephone Corp., Inc.................................Alabama
Huntsville MSA Limited Partnership......................................Delaware
Indiana 8, L.L.C........................................................Delaware
Indiana Cellular Corporation ...........................................Delaware
InfoVentures.............................................................Georgia
InfoVentures of Atlanta..................................................Georgia
Inmuebles Aries S.A.........................................................Peru
Intelligent Media Ventures, Inc. (d/b/a IntelliVentures).................Georgia
International Card Systems S.A..............................................Peru
Jackson Acquisitions Corp................................................Georgia
Jackson Cellular Corporation.........................................Mississippi
Jackson Holdings, Inc....................................................Georgia
Jacksonville MSA Limited Partnership....................................Delaware
Kentucky CGSA, Inc.......................................................Georgia
L. M. Berry and Company (d/b/a The Berry Company)........................Georgia
Lafayette MSA Limited Partnership.......................................Delaware
Los Angeles RCCs, Inc.................................................California
Louisiana CGSA, Inc......................................................Georgia
Louisiana RSA No. 7 Cellular General Partnership........................Delaware
Louisiana RSA No. 8 Limited Partnership.................................Delaware
Madison Merger Subsidiary, Inc..........................................Delaware
MCTA.................................................................Mississippi
Memphis CGSA, Inc........................................................Georgia
Memphis SMSA Limited Partnership........................................Delaware
Movicel S.A.............................................................Colombia
Movicom Colombia S.A....................................................Colombia
Movicom S.A...............................................................Brazil
M-T Cellular, Inc......................................................Tennessee
Muncie Cellular Telephone Company, Inc..................................Delaware
National Telecommunications Alliance, Inc...............................Delaware
Netherlands New System L.P..............................................Delaware
Nicacel Nicaragua (BVI) Limited...........................British Virgin Islands
North American GSM Alliance, LLC........................................Delaware
Northeast Mississippi Cellular, Inc..................................Mississippi
Northeastern Georgia RSA Limited Partnership............................Delaware
Orlando CGSA, Inc........................................................Georgia
Orlando SMSA Limited Partnership........................................Delaware
Otecel S.A...............................................................Ecuador
Peck Holdings Corp........................................British Virgin Islands
Polisistemas S.A.........................................................Ecuador
Prime Enterprises II, L.P...............................................Delaware
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction
------------
<S> <C>
R.A. Celular Inversora S.A.............................................Argentina
RAM Broadcasting Corporation............................................New York
RAM Communications Group, Inc...........................................New York
RAM Mobile Data (Netherlands) B. V...............................The Netherlands
RAM Mobile Data Belgium SC...............................................Belgium
RAM Mobile Data Belgium, S.C.S...........................................Belgium
RAM Mobile Data C.V..............................................The Netherlands
RAM Mobile Data Limited...........................................United Kingdom
RAM/BSE Communications L.P..............................................Delaware
RCTC Wholesale Corporation..............................................Virginia
Recep Comercio e Participacoes Ltda.......................................Brazil
Redanil S.A..............................................................Uruguay
Richmond Cellular Telephone Company.....................................Virginia
ROU Celular Inversora S.A.................................................Panama
Santabel Comercio e Participacoes Ltda....................................Brazil
Santabel Holdings (B.V.I.) Ltd............................British Virgin Islands
Skycell Communications Limited.............................................India
Skytel Del Peru S.A.........................................................Peru
Sonofon Holding A/S......................................................Denmark
South Carolina Cellular Service, Inc.....................................Georgia
South Florida Television Inc............................................Delaware
Spectrum Telecomunicaciones, S.A. de C.V..................................Mexico
ST Mobile Data Pte. Ltd................................................Singapore
Stevens Graphics, Inc....................................................Georgia
Sunlink Corporation......................................................Georgia
T.V. Cable Del Peru S.A.....................................................Peru
TCIL BellSouth Limited.....................................................India
Telcel Celular, C.A....................................................Venezuela
Telcell S.A...............................................................Brazil
Tele 2000 S.A...............................................................Peru
Tele Cable S.A..............................................................Peru
Tele Editores S.A...........................................................Peru
Telecom BBS (B.V.I.) Limited..............................British Virgin Islands
Telecomunicaciones BBS, C.A............................................Venezuela
Telefonia Celular de Nicaragua, S.A....................................Nicaragua
Telefonia Movel do Sul S.A................................................Brazil
Tele-Man Netherlands Ltd.........................................The Netherlands
Tennessee RSA Limited Partnership.......................................Delaware
Terre-Haute Cellular Telephone Company, Inc.............................Delaware
Vencorp...........................................................Cayman Islands
Vidcomm, Inc.............................................................Georgia
Waivetel S.A..............................................................Brazil
Westel Richmond, Inc....................................................Virginia
Westel-Indianapolis Company..............................................Florida
Westel-Los Angeles Company...............................................Florida
Westel-Milwaukee Company, Inc..........................................Wisconsin
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction
------------
<S> <C>
Wireless Cable of Atlanta, Inc...........................................Georgia
Wireless Telecommunications Investment Company LLC......................Delaware
</TABLE>
7
<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1998.
NOW THEREFORE, each of the undersigned hereby constitutes and appoints
F. Duane Ackerman, Ronald M. Dykes, W. Patrick Shannon and Carl E. Swearingen,
and each of them, as attorneys for him in his name, place and stead in his
capacities in the Company to execute and cause to be filed the said Annual
Report and to execute and cause to be filed any amendment or supplement thereto
(including any Form 11-K) deemed by them to be necessary or desirable, hereby
giving and granting to said attorneys full power and authority (including
substitution and revocation) to do and perform all and every act and thing
whatsoever requisite and necessary to be done in and about the premises as
fully, to all intents and purposes, as he might or could do if personally
present at the doing thereof, hereby ratifying and confirming all that said
attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand on the
date indicated.
/s/F. Duane Ackerman 2/22/99
- - ------------------------------------- ----------------------------------
F. Duane Ackerman Date
Chairman of the Board, President and
Chief Executive Officer
Director
(Principal Executive Officer)
/s/Ronald M. Dykes 2/22/99
- - ------------------------------------- ----------------------------------
Ronald M. Dykes Date
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/W. Patrick Shannon 2/22/99
- - ------------------------------------- ----------------------------------
W. Patrick Shannon Date
Vice President and Controller
(Principal Accounting Officer)
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1998.
NOW THEREFORE, the undersigned hereby constitutes and appoints F. Duane
Ackerman, Ronald M. Dykes, W. Patrick Shannon and Carl E. Swearingen, and each
of them, as attorneys for him in his name, place and stead in his capacity as a
Director of the Company to execute and cause to be filed the said Annual Report
and to execute and cause to be filed any amendment or supplement thereto
(including any Form 11-K) deemed by them to be necessary or desirable, hereby
giving and granting to said attorneys full power and authority (including
substitution and revocation) to do and perform all and every act and thing
whatsoever requisite and necessary to be done in and about the premises as
fully, to all intents and purposes, as he might or could do if personally
present at the doing thereof, hereby ratifying and confirming all that said
attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/Reuben V. Anderson
- - ----------------------------------
Reuben V. Anderson
Director
2/23/99
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1998.
NOW THEREFORE, the undersigned hereby constitutes and appoints F. Duane
Ackerman, Ronald M. Dykes, W. Patrick Shannon and Carl E. Swearingen, and each
of them, as attorneys for him in his name, place and stead in his capacity as a
Director of the Company to execute and cause to be filed the said Annual Report
and to execute and cause to be filed any amendment or supplement thereto
(including any Form 11-K) deemed by them to be necessary or desirable, hereby
giving and granting to said attorneys full power and authority (including
substitution and revocation) to do and perform all and every act and thing
whatsoever requisite and necessary to be done in and about the premises as
fully, to all intents and purposes, as he might or could do if personally
present at the doing thereof, hereby ratifying and confirming all that said
attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/James H. Blanchard
- - ----------------------------------
James H. Blanchard
Director
2/22/99
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1998.
NOW THEREFORE, the undersigned hereby constitutes and appoints F. Duane
Ackerman, Ronald M. Dykes, W. Patrick Shannon and Carl E. Swearingen, and each
of them, as attorneys for him in his name, place and stead in his capacity as a
Director of the Company to execute and cause to be filed the said Annual Report
and to execute and cause to be filed any amendment or supplement thereto
(including any Form 11-K) deemed by them to be necessary or desirable, hereby
giving and granting to said attorneys full power and authority (including
substitution and revocation) to do and perform all and every act and thing
whatsoever requisite and necessary to be done in and about the premises as
fully, to all intents and purposes, as he might or could do if personally
present at the doing thereof, hereby ratifying and confirming all that said
attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/J. Hyatt Brown
- - ----------------------------------
J. Hyatt Brown
Director
2/22/99
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1998.
NOW THEREFORE, the undersigned hereby constitutes and appoints F. Duane
Ackerman, Ronald M. Dykes, W. Patrick Shannon and Carl E. Swearingen, and each
of them, as attorneys for him in his name, place and stead in his capacity as a
Director of the Company to execute and cause to be filed the said Annual Report
and to execute and cause to be filed any amendment or supplement thereto
(including any Form 11-K) deemed by them to be necessary or desirable, hereby
giving and granting to said attorneys full power and authority (including
substitution and revocation) to do and perform all and every act and thing
whatsoever requisite and necessary to be done in and about the premises as
fully, to all intents and purposes, as he might or could do if personally
present at the doing thereof, hereby ratifying and confirming all that said
attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/Armando M. Codina
- - ----------------------------------
Armando M. Codina
Director
2/22/99
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1998.
NOW THEREFORE, the undersigned hereby constitutes and appoints F. Duane
Ackerman, Ronald M. Dykes, W. Patrick Shannon and Carl E. Swearingen, and each
of them, as attorneys for her in her name, place and stead in her capacity as a
Director of the Company to execute and cause to be filed the said Annual Report
and to execute and cause to be filed any amendment or supplement thereto
(including any Form 11-K) deemed by them to be necessary or desirable, hereby
giving and granting to said attorneys full power and authority (including
substitution and revocation) to do and perform all and every act and thing
whatsoever requisite and necessary to be done in and about the premises as
fully, to all intents and purposes, as she might or could do if personally
present at the doing thereof, hereby ratifying and confirming all that said
attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand on the date
indicated.
/s/Phyllis Burke Davis
- - ----------------------------------
Phyllis Burke Davis
Director
2/22/99
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1998.
NOW THEREFORE, the undersigned hereby constitutes and appoints F. Duane
Ackerman, Ronald M. Dykes, W. Patrick Shannon and Carl E. Swearingen, and each
of them, as attorneys for her in her name, place and stead in her capacity as a
Director of the Company to execute and cause to be filed the said Annual Report
and to execute and cause to be filed any amendment or supplement thereto
(including any Form 11-K) deemed by them to be necessary or desirable, hereby
giving and granting to said attorneys full power and authority (including
substitution and revocation) to do and perform all and every act and thing
whatsoever requisite and necessary to be done in and about the premises as
fully, to all intents and purposes, as she might or could do if personally
present at the doing thereof, hereby ratifying and confirming all that said
attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand on the date
indicated.
/s/Kathleen F. Feldstein
- - ----------------------------------
Kathleen F. Feldstein
Director
2/22/99
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1998.
NOW THEREFORE, the undersigned hereby constitutes and appoints F. Duane
Ackerman, Ronald M. Dykes, W. Patrick Shannon and Carl E. Swearingen, and each
of them, as attorneys for him in his name, place and stead in his capacity as a
Director of the Company to execute and cause to be filed the said Annual Report
and to execute and cause to be filed any amendment or supplement thereto
(including any Form 11-K) deemed by them to be necessary or desirable, hereby
giving and granting to said attorneys full power and authority (including
substitution and revocation) to do and perform all and every act and thing
whatsoever requisite and necessary to be done in and about the premises as
fully, to all intents and purposes, as he might or could do if personally
present at the doing thereof, hereby ratifying and confirming all that said
attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/John G. Medlin, Jr.
- - ----------------------------------
John G. Medlin, Jr.
Director
2/22/99
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1998.
NOW THEREFORE, the undersigned hereby constitutes and appoints F. Duane
Ackerman, Ronald M. Dykes, W. Patrick Shannon and Carl E. Swearingen, and each
of them, as attorneys for him in his name, place and stead in his capacity as a
Director of the Company to execute and cause to be filed the said Annual Report
and to execute and cause to be filed any amendment or supplement thereto
(including any Form 11-K) deemed by them to be necessary or desirable, hereby
giving and granting to said attorneys full power and authority (including
substitution and revocation) to do and perform all and every act and thing
whatsoever requisite and necessary to be done in and about the premises as
fully, to all intents and purposes, as he might or could do if personally
present at the doing thereof, hereby ratifying and confirming all that said
attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/Leo F. Mullin
- - ----------------------------------
Leo F. Mullin
Director
2/22/99
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1998.
NOW THEREFORE, the undersigned hereby constitutes and appoints F. Duane
Ackerman, Ronald M. Dykes, W. Patrick Shannon and Carl E. Swearingen, and each
of them, as attorneys for her in her name, place and stead in her capacity as a
Director of the Company to execute and cause to be filed the said Annual Report
and to execute and cause to be filed any amendment or supplement thereto
(including any Form 11-K) deemed by them to be necessary or desirable, hereby
giving and granting to said attorneys full power and authority (including
substitution and revocation) to do and perform all and every act and thing
whatsoever requisite and necessary to be done in and about the premises as
fully, to all intents and purposes, as she might or could do if personally
present at the doing thereof, hereby ratifying and confirming all that said
attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand on the date
indicated.
/s/Robin B. Smith
- - ----------------------------------
Robin B. Smith
Director
2/24/99
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1998.
NOW THEREFORE, the undersigned hereby constitutes and appoints F. Duane
Ackerman, Ronald M. Dykes, W. Patrick Shannon and Carl E. Swearingen, and each
of them, as attorneys for him in his name, place and stead in his capacity as a
Director of the Company to execute and cause to be filed the said Annual Report
and to execute and cause to be filed any amendment or supplement thereto
(including any Form 11-K) deemed by them to be necessary or desirable, hereby
giving and granting to said attorneys full power and authority (including
substitution and revocation) to do and perform all and every act and thing
whatsoever requisite and necessary to be done in and about the premises as
fully, to all intents and purposes, as he might or could do if personally
present at the doing thereof, hereby ratifying and confirming all that said
attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/C. Dixon Spangler, Jr.
- - ----------------------------------
C. Dixon Spangler, Jr.
Director
2/22/99
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1998.
NOW THEREFORE, the undersigned hereby constitutes and appoints F. Duane
Ackerman, Ronald M. Dykes, W. Patrick Shannon and Carl E. Swearingen, and each
of them, as attorneys for him in his name, place and stead in his capacity as a
Director of the Company to execute and cause to be filed the said Annual Report
and to execute and cause to be filed any amendment or supplement thereto
(including any Form 11-K) deemed by them to be necessary or desirable, hereby
giving and granting to said attorneys full power and authority (including
substitution and revocation) to do and perform all and every act and thing
whatsoever requisite and necessary to be done in and about the premises as
fully, to all intents and purposes, as he might or could do if personally
present at the doing thereof, hereby ratifying and confirming all that said
attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/William S. Stavropoulos
- - ----------------------------------
William S. Stavropoulos
Director
2/22/99
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1998.
NOW THEREFORE, the undersigned hereby constitutes and appoints F. Duane
Ackerman, Ronald M. Dykes, W. Patrick Shannon and Carl E. Swearingen, and each
of them, as attorneys for him in his name, place and stead in his capacity as a
Director of the Company to execute and cause to be filed the said Annual Report
and to execute and cause to be filed any amendment or supplement thereto
(including any Form 11-K) deemed by them to be necessary or desirable, hereby
giving and granting to said attorneys full power and authority (including
substitution and revocation) to do and perform all and every act and thing
whatsoever requisite and necessary to be done in and about the premises as
fully, to all intents and purposes, as he might or could do if personally
present at the doing thereof, hereby ratifying and confirming all that said
attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/Ronald A. Terry
- - ----------------------------------
Ronald A. Terry
Director
2/22/99
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1998.
NOW THEREFORE, the undersigned hereby constitutes and appoints F. Duane
Ackerman, Ronald M. Dykes, W. Patrick Shannon and Carl E. Swearingen, and each
of them, as attorneys for him in his name, place and stead in his capacity as a
Director of the Company to execute and cause to be filed the said Annual Report
and to execute and cause to be filed any amendment or supplement thereto
(including any Form 11-K) deemed by them to be necessary or desirable, hereby
giving and granting to said attorneys full power and authority (including
substitution and revocation) to do and perform all and every act and thing
whatsoever requisite and necessary to be done in and about the premises as
fully, to all intents and purposes, as he might or could do if personally
present at the doing thereof, hereby ratifying and confirming all that said
attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/J. Tylee Wilson
- - ----------------------------------
J. Tylee Wilson
Director
2/23/99
Date
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,003
<SECURITIES> 184
<RECEIVABLES> 4,880
<ALLOWANCES> 251
<INVENTORY> 431
<CURRENT-ASSETS> 8,706
<PP&E> 57,974
<DEPRECIATION> 34,034
<TOTAL-ASSETS> 39,410
<CURRENT-LIABILITIES> 9,150
<BONDS> 8,743
0
0
<COMMON> 2,020
<OTHER-SE> 14,090
<TOTAL-LIABILITY-AND-EQUITY> 39,410
<SALES> 423
<TOTAL-REVENUES> 23,123
<CGS> 717
<TOTAL-COSTS> 11,437
<OTHER-EXPENSES> 5,782
<LOSS-PROVISION> 334
<INTEREST-EXPENSE> 837
<INCOME-PRETAX> 5,751
<INCOME-TAX> 2,224
<INCOME-CONTINUING> 3,527
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,527
<EPS-PRIMARY> 1.79
<EPS-DILUTED> 1.78
</TABLE>
