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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-8612
AMERITECH CORPORATION
A DELAWARE CORPORATION 36-3251481
I.R.S. EMPLOYER NO.
30 SOUTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
TELEPHONE NUMBER 1-800-257-0902
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
COMMON STOCK (PAR VALUE $1.00 PER SHARE)
PREFERENCE STOCK PURCHASE RIGHTS
EXCHANGES ON WHICH REGISTERED:
COMMON STOCK: NEW YORK, CHICAGO, BOSTON, PACIFIC AND PHILADELPHIA
PREFERENCE STOCK PURCHASE RIGHTS: NEW YORK
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Based on the average sales price on February 29, 1996, the aggregate market
value of the voting stock held by nonaffiliates was $31,804,315,603.
At February 29, 1996, 555,533,897 common shares and preference stock
purchase rights were outstanding.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark 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 a definitive proxy statement or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K [X].
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the registrant's annual report to security holders for the
year ended December 31, 1995 (Part II).
(2) Portions of the registrant's definitive proxy statement dated March 1,
1996 issued in connection with the annual meeting of shareowners (Part III).
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TABLE OF CONTENTS
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PART I
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ITEM PAGE
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1. Business........................................................... 1
2. Properties......................................................... 14
3. Legal Proceedings.................................................. 14
4. Submission of Matters to a Vote of Security Holders................ 15
Executive Officers................................................. 15
PART II
Market for Registrant's Common Equity and Related Stockholder
5. Matters............................................................ 16
6. Selected Financial and Operating Data.............................. 16
Management's Discussion and Analysis of Financial Condition and
7. Results of Operations.............................................. 16
8. Financial Statements and Supplementary Data........................ 16
Changes in and Disagreements with Accountants on Accounting and
9. Financial Disclosure............................................... 16
PART III
10. Directors and Executive Officers of the Registrant................. 17
11. Executive Compensation............................................. 17
12. Security Ownership of Certain Beneficial Owners and Management..... 17
13. Certain Relationships and Related Transactions..................... 17
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K... 17
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PART I
ITEM 1. BUSINESS.
THE COMPANY
Ameritech Corporation (Ameritech or the Company), a holding company
incorporated in 1983 under the laws of the State of Delaware, has its
principal executive offices at 30 South Wacker Drive, Chicago, Illinois 60606
(telephone number 1-800-257-0902). The Company is a leading supplier of full-
service communications and creator of advanced information, entertainment and
interactive services for homes, businesses and governments around the world.
Ameritech operates its business within the framework of customer-specific
business units delivering specialized services to various categories of
customers, each with unique requirements. The functions of the business units,
which include consumer, business, cellular, advertising and leasing services,
as well as services provided to other companies in the communications
industry, overlap the legal entities which form the infrastructure of the
Company. The products and services of all the companies are marketed under the
"Ameritech" brand identity, but the Company's five landline communications
subsidiaries remain responsible within their respective service areas for
providing telephone and other communications services, subject to regulation
by the Federal Communications Commission (FCC) and the respective public
service commissions in Illinois, Indiana, Michigan, Ohio and Wisconsin. In
1995, Ameritech further aligned its business unit and legal entity structure
into three sectors: communications and information products, consumer and
business services and worldwide network systems, to sharpen its strategic
focus and to better position the Company to serve customers and meet the
competition.
OPERATIONS UNDER LINE-OF-BUSINESS RESTRICTIONS
Until a new telecommunications law came into effect in February 1996, the
operations of Ameritech and its subsidiaries were subject to the requirements
of a consent decree entitled "Modification of Final Judgment" (Consent Decree)
approved by the United States District Court for the District of Columbia
(Court) in August 1982. The Consent Decree arose out of antitrust litigation
brought by the Department of Justice (DOJ) and required AT&T Corp. (AT&T),
formerly named American Telephone and Telegraph Company, to divest those
assets relating to exchange telecommunications, exchange access functions,
printed directories and cellular communications. The Consent Decree, together
with the Court-approved Plan of Reorganization (Plan), outlined the method of
divestiture and established restrictions on the post-divestiture activities of
the seven regional holding companies (RHCs), including Ameritech, formed to
receive AT&T's divested assets. Effective January 1, 1984, AT&T transferred to
Ameritech its 100% ownership of the exchange telecommunications, exchange
access and printed directory advertising portions of Illinois Bell Telephone
Company; Indiana Bell Telephone Company, Incorporated; Michigan Bell Telephone
Company; The Ohio Bell Telephone Company and Wisconsin Bell, Inc. (referred to
collectively as the "Ameritech landline communications subsidiaries"), as well
as a cellular communications company.
The Consent Decree, as originally approved, prohibited the RHCs from
providing long distance communications services or information services,
manufacturing telecommunications equipment, or providing any product or
service, except exchange telecommunications and exchange access service, that
is not a natural monopoly service actually regulated by tariff. The Consent
Decree allowed the RHCs to provide printed directory advertising and to
provide, but not manufacture, customer premises equipment.
Over time, the Court granted waivers to the RHCs to engage in otherwise
prohibited lines of business upon a showing to the Court that there was no
substantial possibility that the company could use its monopoly power to
impede competition in the market it sought to enter. In decisions handed down
in September 1987 and March 1988, the Court continued prohibitions relating to
equipment manufacturing and long distance services. The rulings allowed
limited provision of information services by transmission of information and
provision of information gateways, but excluded generation or manipulation of
information content. In addition, the rulings
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eliminated the need for a waiver for entry into non-telephone related
businesses. In July 1991, the Court lifted the information services ban, but
stayed the effect of the decision pending outcome of the appeals process. Soon
after, the stay was lifted on appeal and in July 1993, the U.S. Court of
Appeals unanimously upheld the Court's order allowing the RHCs to produce and
package information for sale across business and home phone lines. In November
1993, the U.S. Supreme Court declined to review the lower court ruling.
In April 1995, the Court opened the long distance market to the RHCs,
allowing them to offer long distance cellular and other wireless services on
the condition that they demonstrate measurable competition in their own
markets. The ruling allowed the RHCs to resell long distance services provided
by long distance carriers and handle all marketing, billing and discounts, but
imposed a number of conditions which were recently superseded by new
legislation.
On February 8, 1996, the first comprehensive overhaul of telecommunications
legislation in 62 years was signed into law, removing barriers that prevented
the phone, cable TV and broadcast industries from entering each others
businesses. The Telecommunications Act of 1996 addresses various aspects of
competition within, and regulation of, the communications industry. Among other
things, the new law defines the conditions under which Ameritech and the other
RHCs may offer long distance service and provides certain mechanisms intended
to facilitate local exchange competition. The new law removes the Consent
Decree, lifting many prohibitions imposed by the Court, and gives the FCC
responsibility for making new rules governing telephone service. One rule-
making function of the FCC is to determine when the local exchange carriers
have met a 14-step competition test that will allow them to offer long distance
service to their local customers. For the RHCs, immediate relief under the new
law includes permission to provide cellular long distance, in and out of
region, out of region landline long distance and certain other incidental long
distance services. The law eliminates any barriers to companies wishing to
compete against providers of local phone service.
AMERITECH'S FULL SERVICE COMMUNICATIONS BUSINESS
Landline Communications Services
Ameritech furnishes a wide variety of advanced communications services,
including local exchange and toll service, network access and communications
products, to approximately 13 million business, residential and communications
company customers in an operating area comprised of 37 Local Access and
Transport Areas (LATAs) in Illinois, Indiana, Michigan, Ohio and Wisconsin.
These LATAs are generally centered on a city or other identifiable community of
interest, and each LATA marks the boundary within which each Ameritech landline
communications company may provide telephone service. The companies provide two
basic types of communications services. First, they transport communications
traffic between a subscriber's equipment and the telephone exchange offices
located within the same LATA (intraLATA service). These services include local
exchange, private line and intraLATA toll services (including 800 and special
services for data, radio and video transport). Second, they provide exchange
access service, which links a subscriber's telephone or other equipment to the
network of transmission facilities of long distance carriers, which in turn
provide communications service between LATAs (interLATA, or long distance,
service). Some sizable areas within the states in which Ameritech operates are
served by nonaffiliated telephone companies. Ameritech does not furnish local
service in the areas served by such companies.
The Company provides directory assistance, local and toll operator services,
including collect calls, third number billing, person-to-person and calling
card calls, and offers such digital network services as voice-mail, on-line
database access and fax messaging, document sharing functions, and video-
conferencing for desktop computers.
Ameritech also provides billing and collection services for several
companies, including billing for long distance services offered by certain long
distance carriers, some of which began billing their own customers in 1996. It
is not possible for the Company to estimate the impact of this change on future
billing and collection revenues due to the uncertainty as to the number of
customers affected, the timing of the billing changeovers and the degree of
acceptance by customers.
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As of December 31, 1995, 81% of Ameritech's customer lines were served by
digital switches and virtually all its lines had been converted to equal
access. In addition, the Company had installed 1.1 million strand miles of
fiber-optic cable. The number of customer access lines in the Ameritech region
increased by a record 4.5%, from 18.2 million at December 31, 1994 to 19.1
million at December 31, 1995, primarily the result of second line additions as
residential customers installed fax machines, modems and other equipment.
Business lines grew 7.2% from 5.8 million to 6.2 million and residential lines
increased 3.1% from 11.9 million to 12.3 million. Productivity increased 10% to
373 access lines in service per landline communications company employee,
making Ameritech the most productive of the RHCs.
The following table sets forth the number of access lines served by Ameritech
at the end of each of the last five years:
ACCESS LINES IN SERVICE
(IN THOUSANDS)
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1995 1994 1993 1992 1991
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Illinois..................................... 6,258 5,983 5,763 5,586 5,460
Indiana...................................... 2,018 1,924 1,855 1,770 1,711
Michigan..................................... 4,979 4,747 4,563 4,431 4,314
Ohio......................................... 3,754 3,609 3,481 3,380 3,314
Wisconsin.................................... 2,048 1,976 1,898 1,834 1,785
Total lines.................................. 19,057 18,239 17,560 17,001 16,584
% increase over prior year................... 4.5 3.9 3.3 2.5 1.9
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CELLULAR AND OTHER WIRELESS SERVICES
Ameritech provides cellular and other wireless communications to nearly 1.9
million cellular subscribers in Illinois, Indiana, Michigan, Missouri, Ohio and
Wisconsin. Ameritech's cellular business is operated through wholly owned
subsidiaries which are either general or limited partners of partnerships
holding FCC licenses and providing cellular service in the licensed service
area. In 1995, the Company added about 600,000 cellular customers to its base,
a 46% increase over the prior year. In 1996, Ameritech plans to introduce
digital cellular service in the Chicago area. Upon passage of the new
telecommunications law in 1996, the Company began offering long distance
service to its cellular customers in Illinois, northwest Indiana, Michigan,
Ohio, Wisconsin and Missouri.
Subscribers to Ameritech's international wireless joint ventures increased in
1995 to 837,000, more than three times the customer base a year earlier.
Ameritech has formed strategic cellular partnerships in Poland, Norway and
China and has investments in other cellular providers, discussed in the section
on International Growth Opportunities.
The development of the information age has caused an explosion in the market
for managing, storing, processing and using information. Consequently, the
requirement of the network to transport data, in addition to voice messages, is
rapidly increasing. Ameritech's wireless data solutions help mobile workers
respond to their customers faster by enabling such workers to access computer
information at the office, send in information or check a database.
The Company was the first cellular carrier in the country to offer its
customers the ability to use cellular phones in both North America and Europe.
In North America, Ameritech provides national reach to cellular customers
through affiliation with MobileLink, a group of 15 leading cellular companies
serving nearly 85% of the U.S. and Canadian population. The Ameritech Cellular
International Network employs the Global System for Mobile Communications
(GSM), an accepted standard for digital cellular communication. A customer
traveling overseas can make and take calls on a cellular phone much the same as
he or she does domestically. The service can be used in Europe or anywhere GSM
technology is available.
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The Company currently provides local and nationwide paging services to
customers using approximately 750,000 paging units in Illinois, Indiana,
Michigan, Missouri, Minnesota, Ohio and Wisconsin, an 18% increase over 1994.
In 1994, Ameritech won the narrowband personal communications services (PCS)
regional license to offer two-way paging in the Midwest. The Company plans to
offer 2-way paging to customers regionwide beginning in 1997. The return
paging channel will allow users of two-way pagers to acknowledge a page and,
eventually, to provide a detailed response.
In 1995, Ameritech acquired broadband PCS licenses in the Cleveland and
Indianapolis major trading areas. These licenses cover almost 8 million
potential customers and will provide an effective complement to the Company's
existing cellular and landline networks. Ameritech is currently offering
wireless services to customers in Indianapolis and Cleveland through reselling
agreements and plans to provide facility-based services beginning in 1997.
Directories and Electronic Advertising Services
Ameritech provides directory and electronic advertising opportunities to
local, regional and national businesses throughout the Great Lakes region and
serves as an advertising and marketing consultant. The Company publishes more
than 430 Ameritech PagesPlus(R) white and yellow pages directories in Indiana,
Wisconsin, Ohio and Michigan and, in partnership with Donnelley Directory, in
Illinois and northwestern Indiana, with a total distribution of over 41
million. Utilizing audiotex technology, Custom Connect(TM) audiotex, available
24 hours a day, 7 days a week, provides consumers and advertisers with a wide
range of information opportunities accessible through special phone numbers.
Consumers can call for up-to-date information including news, sports and
weather, as well as information about specific products or services.
Advertisers can provide consumers with updated messages about their
businesses, such as sales, discounts and special hours.
Ameritech is assessing the role it will play in the emerging world of the
Internet and is currently developing products and services that will include
new content, add leverage to its present content investments and complement
Ameritech's existing product lines.
Leasing
Ameritech has provided competitive, value-added financing to approximately
5,000 customers in all 50 states, primarily large and medium-sized businesses
and governmental units. The Company has financed more than $1.3 billion worth
of equipment and services since 1984.
NEW SERVICES
Ameritech is developing other products and services to keep up with the
accelerating pace of fast-growing communications markets.
Cable TV
One year after receiving permission from the FCC to use video dialtone to
transport movies and other video programming to customers' homes, Ameritech
took alternate steps to provide that service. In the face of regulatory
uncertainty over interpretation of video dialtone rules, Ameritech became the
first RHC to enter the video business as a cable TV provider. Rather than
deploy integrated facilities, Ameritech created a separate subsidiary to build
a state-of-the-art two-way video system and develop content. The Company has
secured ten franchise agreements and has initiated discussions with more than
30 other communities in the Chicago, Detroit, Milwaukee, Cleveland and
Columbus areas.
Ameritech, GTE Corporation, The Walt Disney Company, BellSouth Corporation
and SBC Corporation are equal partners in a venture designed to develop,
acquire, package and market traditional and interactive video programming to
millions of consumers nationwide. The Los Angeles-based joint venture, called
Americast, is being funded collectively by the partners with $500 million over
a five-year period. Americast's combined reach
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encompasses some 68 million access lines in 33 states, including some of the
fastest growing regions of the nation. Key potential markets include Atlanta,
Chicago, Cleveland, Columbus, Dallas, Detroit, Houston, Los Angeles, Miami,
Raleigh/Durham, Seattle, St. Louis, Tampa/St. Petersburg and a large portion
of southern California. Initially, the americast(TM) package of programming
delivered by Ameritech will be a comprehensive offering of 80 to 90 channels
which could expand to include several hundred channels in the next few years.
The venture plans to develop a navigator, software that creates an on-screen
viewing environment, to allow customers to access these services with ease.
Ameritech plans to begin offering services to consumers in selected areas in
1996.
While Federal regulations initially prevented the Company from providing its
own programming, the U.S. Supreme Court heard the information age debate on
whether or not local exchange carriers have a free-speech right to offer cable
television programming in their own service areas. Congress decided the issue
first. The new telecommunications law reaffirmed Ameritech's authority to
enter the video marketplace as either a cable TV provider or as a common
carrier platform provider. As a result, the Company continues its aggressive
plans to bring consumers a choice in cable TV.
Security Monitoring
In 1995, Ameritech expanded its presence in the high-growth security
monitoring business by completing the acquisition of The National Guardian
Corporation, headquartered in Greenwich, Connecticut. This strategic move,
together with last year's purchase of SecurityLink, expanded Ameritech's
portfolio of interactive services and ranks the Company, with 340,000
customers coast to coast, as the second largest provider in the United States.
Under the new telecommunications law, Ameritech is prohibited from acquiring
additional equity in alarm monitoring firms for five years. Other RHCs are
barred from entry into the business for five years from the date of enactment
of the law.
Long Distance Services
When Ameritech first unveiled its Customers First plan in 1993, becoming the
first company in the U.S. communications industry to voluntarily offer to open
its local network to competitors, it sought regionwide freedom to compete in
both its existing businesses and long distance services. In exchange, to
facilitate competition in the local exchange business, the Company would allow
other service providers to purchase components of its network and to repackage
them with their own services for resale. Ameritech proposed to change the way
local communications services are provided and regulated and to furnish a
policy framework for advanced universal access to modern communications
services--voice, data and video information. Under the plan, customers would
be able to choose from competitive providers for local service as they now can
choose a provider for long distance service. In 1995, the Company sought
permission to enter the interLATA market on a trial basis in Chicago and Grand
Rapids, Michigan, in order to demonstrate conclusively the substantial
customer and economic benefits of full competition.
Much of the detailed language of the new telecommunications law was based on
Ameritech's plan. Under the law, Ameritech and the other RHCs must comply with
a checklist to ensure competition before they can offer long distance service
to their local landline customers. The FCC will determine whether or not an
RHC's entry into the long distance market serves the public interest. An RHC
is restricted from providing long distance service until a competitor provides
local phone service to its residential and business customers. The FCC will
have to give substantial weight to DOJ recommendations in reviewing RHC entry
into the market. In preparation, the Company has signed and is currently
negotiating local network resale agreements with companies planning to offer
local exchange service in 1996, giving Ameritech a lead in complying with the
competition checklist. The Company expects to offer landline long distance
service in its five-state region in early 1997 beginning in Illinois and
Michigan.
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Under the law, Ameritech and the other RHCs were allowed to provide long
distance service immediately to their cellular customers, regardless of
location. The Company is currently offering long distance service to its
cellular customers in Illinois, northwest Indiana, Michigan, Ohio, Wisconsin
and Missouri.
Electronic Commerce
Ameritech has invested $472.5 million in GE Information Services (GEIS), a
wholly owned subsidiary of General Electric Company (GE) and a leader in the
global electronic commerce market. Electronic commerce links companies and
internal organizations to each other and to customers, suppliers, banks,
financial services providers and distributors in virtual electronic trading
communities to simplify day-to-day transactions. Typical electronic commerce
applications involve order entry and processing, invoicing, electronic payment,
inventory management, cargo tracking, E-mail, electronic catalogs and point-of-
sale data gathering. Presently, GEIS serves 40,000 customers worldwide.
Ameritech's investment in GEIS is in the form of a four-year interest bearing
convertible debenture which, when certain legal restrictions are removed,
converts into a 30% equity interest in GEIS. The debenture has been guaranteed
as to repayment by GE. The debenture is due on May 2, 1998 and may be extended
by Ameritech by one year under certain circumstances. In 1995, GEIS agreed to
provide MATAV, the primary telecommunications provider in Hungary and in which
Ameritech owns an interest (see International Growth Opportunities), with
electric data interchange technology, thus enabling MATAV to offer its business
and government sector customers enhanced information management capabilities.
On-Line Services
Ameritech is pursuing alliances and partnerships that will position the
Company as a key participant in the emerging interactive video industry,
exploring a variety of services with many different suppliers of traditional
cable TV offerings, video-on-demand, home health care, interactive educational
courses, distance learning, interactive games and shopping and other
entertainment and information services.
Ameritech has invested in Peapod, an interactive home grocery shopping and
delivery service. Using a personal computer, more than 14,300 customers in the
Chicago and San Francisco areas can choose from thousands of grocery items and
schedule home delivery at their convenience. In 1995, Peapod expanded service
by 30%.
The Company has invested in two more companies planning to revolutionize the
way consumers select and purchase entertainment and educational products. The
Company holds an approximate 20% interest in MN Interactive, Inc. which uses
on-line links, CD-ROM, dial-up connections and voice mail to provide music
previewing, ordering and delivery of the latest music CDs from the libraries of
major and independent record producers. MusicNet(TM), MNI's flagship product,
is a personalized, interactive music previewing and shopping service available
on CD-ROM, telephone and, soon, through the Internet. The Company also has an
equity investment in KidSoft, LLC, the leading brand for quality educational
software for kids through on-line and retail channels. Ameritech plans to offer
specialized versions of MNI's and KidSoft's services through its future on-line
and broadband service offerings.
Random House and Ameritech each own more than 40% of Worldview Systems
Corporation, the leading supplier of electronic travel and entertainment
information, with the remainder held by the firm's management team. The
company's product, Fodor's Worldview Travel Update, offers customers, by fax,
on-line information services or mail, time-sensitive destination information
that complements Fodor's extensive catalogue of printed guidebooks. Through
Travelocity (SM), a new Internet service, customers can make reservations, buy
tickets, access entertainment information and buy travel guides on-line.
Over 2,000 doctors, hospitals, pharmacies, laboratories, employers and others
in the health care industry use Ameritech health information networks to share
clinical, demographic, financial and claims data. Patients and providers
benefit from timely and improved communication, less paperwork, reduced
administrative overhead and ease of access. In Wisconsin, in partnership with
Aurora Health Care of Milwaukee, Ameritech
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developed the Wisconsin Health Information Network, recognized by the industry
as the only proven, functional community network in the nation. The Company has
expanded into other U.S. markets with solutions that incorporate networking and
strategic applications.
CivicLink (SM), an innovative service that offers on-line access to publicly
available court records and legal documents, is a product introduced by a joint
venture between Ameritech and British Columbia Systems Corporation (BC
Systems), a Crown corporation of the Province of British Columbia, Canada.
Without replacing the usual method of accessing court information, CivicLink
streamlines the process assuring up-to-date information and saving the public
time and effort. CivicLink is currently in operation in Marion County, Indiana,
Prince George's County, Maryland and Los Angeles County, California. Service is
expected to be available in DuPage County, Illinois in April 1996, followed by
Kane, DeKalb and Kendall Counties, also in Illinois.
Distance Learning
Distance learning employs interactive video, fax machines, electronic
blackboards and other forms of information delivery to enable teachers and
students in a classroom to share lessons and discussions with students and
teachers in distant locations. Ameritech has built interactive distance
learning networks throughout the Midwest. The benefits extend far beyond
remedying the disadvantages of the rural classroom. Distance learning links
geographically dispersed university campuses and connects secondary schools
with institutions of higher learning, broadening the students' learning
experiences.
Library Services
Library automation is also breaking the constraints of time and space.
Ameritech Library Services offers access to the world's greatest research
collections through a full range of automated library management systems, as
well as products that provide access to information databases and networks,
creating virtual libraries which potentially can encompass huge bodies of
knowledge. Ameritech is the worldwide leader in this business, supporting over
3,700 libraries throughout the United States and in 31 other countries.
Customers include the New York Public Library, Microsoft Corporation, Yale and
Harvard universities, The Smithsonian Institute and The Library of Congress.
Managed Services
In 1995, Ameritech and IBM Corporation formed an alliance that establishes
the companies as leaders in the fast-growing $30 billion desktop computing and
communications market. The companies will jointly market integrated voice, data
and video managed desktop services for businesses, providing customers with a
single point of contact for managing every aspect of desktop-based
communications and computing systems, including personal computers, software,
telephones, videoconferencing, PBXs, local area networks and more. The venture
will establish a 24-hour customer service facility to provide technical and
consulting support for these services. The center, which will deliver single
help desk capability currently unavailable from any other provider, will be
built at a site within the Ameritech region.
Williams Telecommunications Systems, Inc. (WilTel) has entered into an
agreement with Ameritech under which the companies will provide managed
services for each others' business customers in certain markets across the
United States. WilTel's nationwide resources will provide additional assistance
to the Company in immediately meeting the growing managed services requirements
of Ameritech's customers on a consistent and efficient basis.
INTERNATIONAL GROWTH OPPORTUNITIES
Beginning in 1990, Ameritech has made international investments in such
markets as Germany, New Zealand, Hungary, Poland, and Norway, and has
established offices in China and Belgium. Foreign investments will grow to
nearly $4 billion in value in 1996, including a pending investment in Belgium.
The Company expects to continue to pursue opportunities for global expansion.
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The Company has invested in two of the world's largest privatizations, in New
Zealand and Hungary, and will invest in a third in Belgium in 1996. In 1990,
Ameritech and Bell Atlantic Corporation (Bell Atlantic) purchased Telecom
Corporation of New Zealand Limited (New Zealand Telecom), New Zealand's state-
owned principal supplier of domestic and international communications services,
including local, long distance, cellular, satellite TV and directory services,
serving 1.8 million customer lines and 344,000 cellular customers. After public
offerings and private sales of the stock of New Zealand Telecom required by the
government at the time of the acquisition, Ameritech and Bell Atlantic each
have a 24.8% interest in the company. During 1995, New Zealand Telecom boosted
its profits by 16%.
Since 1993, Ameritech and its German partner, Deutsche Telekom AG (Deutsche
Telekom), Europe's largest communications carrier, have had an investment in
MATAV, the Hungarian telecommunications company. In 1995, MagyarCom, the
alliance between Ameritech and Deutsche Telekom, increased its investment from
30% to 67% of the company. The Hungarian government owns most of the remaining
33%. MATAV is the principal provider of local, long distance and international
telephone service and the controlling shareowner in a cellular venture using
GSM digital technology. MATAV has approximately 1.8 million access lines in a
country of 10.5 million people. With hundreds of thousands of customers on the
waiting list, MATAV plans to increase the number of lines in service 15.5% in
1996 with a goal of 3 million lines in service by the year 2000.
In 1995, Ameritech and its consortium partners, Tele Danmark A/S and
Singapore Telecommunications Limited (Singapore Telecom) were selected as
strategic partner for Belgacom S.A., the national telecommunications operator
in Belgium. The consortium will pay approximately $2.5 billion for a 49.9%.
interest in Belgacom--Belgium's largest single investment by an American
company and its largest commercial transaction. Ameritech will have a 35%
consortium share, or about 17.5% of Belgacom. Closing with the Belgian
government is scheduled for the first quarter of 1996.
Since 1992, another Ameritech consortium has operated an analog cellular
system, Centertel, in Poland. Ameritech and France Telecom, in partnership with
Telekomunikacja Polska S.A., Poland's state-owned telephone company, created
the joint venture, Polska Telefonia Komorkowa (PTK), to build the nationwide
cellular system. Telekomunikacja Polska owns 51% of the joint venture, with
Ameritech and France Telecom holding equal shares of the remainder. Centertel
provides service to approximately 75,000 of the 36 million people in Poland, in
all major cities and along all major highways. The Company is currently
involved in arbitration with the government of Poland over the government's
failure to award a GSM digital cellular license to Ameritech as agreed in the
1992 contract.
Since 1993, Ameritech and its partners in NetCom GSM have provided digital
cellular service in Norway. In 1992, Ameritech and Singapore Telecom acquired
an equal interest in NetCom totaling an effective 49.9%. Their agreement with
NetCom includes a management service contract under which Ameritech and
Singapore Telecom provide their skills and expertise in operating the system.
In 1995, NetCom tripled its customer base to 235,000 customers. Nationwide
coverage by the NetCom system is expected within two years. Analysts estimate
that the usage of GSM service in Norway could be extended to 700,000 Norwegian
customers over the next decade. At 20%, Norway has the highest per capita use
of cellular telephones in the world.
As a result of a 1995 acquisition, "Wer liefert was?" (Who supplies what?),
Ameritech's business purchasing guide publisher in Europe, now produces and
distributes business-to-business directories to over 70,000 customers in
Germany, Austria, Switzerland, Belgium, Luxembourg, the Netherlands, the Czech
Republic, Croatia, Slovakia and Solenia. "Wer liefert was?" is a market leader
with the ability to provide current information on more than 200,000 companies
in printed book form, on CD-ROM and on-line. Ameritech owns 100% of "Wer
liefert was?," purchased by the Company in 1990.
In 1995, Ameritech opened an office in Beijing and announced a 25-year joint
venture with China Communications System Company Ltd. (Chinacom), a
communications systems and engineering company, to assist the People's Republic
of China in the development of its telecommunications sector. The joint
venture, Ameritech's first in China, and Chinacom's first with a U.S.
communications company, will provide funding, advanced communications
technology and management consulting to assist China in achieving its
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telecommunications development goals. The venture initially will build a GSM
cellular telephone and wireline switched telephone network for Taiyuan, the
capital of Shanxi province. Upon completion, China Unicom, an authorized
carrier, will operate the network. Chinese law officially prohibits foreign
entities from operating communications networks in China. However, there are
indications that the law may change in the future.
Other Business Interests
Ameritech, in an arrangement with Household International, Inc. (Household),
offers a no fee, dual-purpose credit card and calling card, the Ameritech
Complete (SM) Card. The Complete Card is offered as either a Visa or MasterCard.
Consumers may use the card to charge telephone calls as well as goods and
services. The Complete Card has no annual fee and competitive interest rates, a
10% cash back offer from Household for all calling card calls made by dialing
"0" plus the telephone number, and a second cash back feature on credit card
purchases of up to 1% with no limit on how much cash can be earned. Under the
arrangement between the companies, Household owns and finances the credit card
receivables and Ameritech funds certain marketing expenses. Since its
introduction in 1991, the Complete Card has attracted nearly one million
cardholders and membership has grown by 25% annually.
In April 1995, the RHCs announced plans to sell their jointly owned research
arm, Bell Communications Research, Inc. (Bellcore). Ameritech owns an equal
one-seventh interest in the company. Bellcore furnishes the RHCs with technical
support, such as applied research, network planning, engineering and software
development. Bellcore has served as a central point of contact for coordinating
the efforts of the RHCs in meeting national security and emergency preparedness
requirements of the Federal government. A final decision regarding disposition
of the RHC interests in Bellcore will be subject to unanimous agreement on the
structure of the transaction and obtaining necessary regulatory approvals.
Bellcore, based in Morristown, New Jersey, has about 6,100 employees and annual
revenue of about $1 billion.
REGULATORY ENVIRONMENT--FEDERAL
The Ameritech landline communications subsidiaries are subject to the
jurisdiction of the FCC with respect to interstate services. The FCC prescribes
for communications companies a uniform system of accounts, rules for
apportioning costs between regulated and nonregulated services, and the
principles and standard procedures (separations procedures) used to separate
regulated property, plant and equipment costs, revenues, expenses, taxes and
reserves between those applicable to interstate services under the jurisdiction
of the FCC and those applicable to intrastate services under the jurisdiction
of the respective state regulatory authorities.
Access Services
Ameritech provides access services that allow long distance carriers and
other companies to originate and terminate interstate and intrastate
communications services using the facilities of the Company. Access charges,
which recover the Company's costs associated with such facilities, consist
primarily of three types: common line, traffic sensitive and trunking.
Common line charges are recovered through separate charges applied to end
users (monthly subscriber line charges) and long distance carriers. The FCC has
authorized subscriber line charges of up to $3.50 per access line per month for
residential and single line business customers and up to $6.00 per access line
per month for multiple line business customers. The remaining portion of the
interstate common line revenue requirement is recovered by means of usage-based
long distance carrier common line charges.
Traffic sensitive charges are usage-based charges billed to long distance
carriers which are associated with central office switching facilities used in
the provision of access services and cable and wire facilities that connect
customers through common facilities from the Company's end office, where
switching occurs, to the serving wire center, where access is provided.
Trunking services consist of two types: those associated with the local
transport element of switched access and those associated with special access.
Trunking services associated with switched access handle the
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<PAGE>
transmission of traffic through dedicated facilities from the Company's end
office where switching occurs to the serving wire center (including the
entrance facilities to the long distance carrier) where access is provided.
Trunking services associated with special access handle the transmission of
interstate private line services using dedicated facilities between any two
customer-designated premises or between a customer-designated premise and an
Ameritech end office where multiplexing, the transmission of two or more
signals over a single channel, occurs. Trunking charges are fixed monthly
charges per access line which in certain cases involve a distance element
associated with the dedicated facilities used to provide the trunking service.
In 1994, the FCC initiated its review of interstate price cap regulation
initially adopted effective January 1, 1991. The FCC's price cap regulatory
scheme sets maximum limits on the prices that local exchange carriers can
charge for access services. The limits are adjusted each year to reflect
inflation, a productivity factor and certain other cost changes. Local
exchange carriers under price caps have increased flexibility to change prices
of existing services within the common line, traffic sensitive and trunking
access revenue categories, as well as for interexchange (interstate intraLATA)
and video dial tone service offerings. In March 1995, the FCC adopted changes
to its price cap plan to be effective August 1, 1995. The new rules include
changes to the measure of inflation, the introduction of new productivity
factor options and changes in the definition of other costs which may be
included in the price cap formula. Under the new rules, local exchange
carriers can annually elect one of three productivity factors: 4.0%, 4.7% or
5.3%. Ameritech's election of the 5.3% productivity factor allowed the Company
to retain all of its earnings, whereas election of a lower factor would
require earnings to be shared with customers. Concurrently, Ameritech filed a
waiver request with the FCC to make an additional downward adjustment of its
indices to apply the 5.3% productivity factor retroactively to January 1,
1995.
OTHER MATTERS
In 1995, the FCC set new rules for allowing foreign companies into the U.S.
communications market. U.S. companies' access to foreign markets will now be a
key factor in deciding whether firms from those countries can offer
international calls from the U.S. According to the FCC, approximately 91% of
foreign markets are currently closed to competition, about 7% have limited
competition and 2% are open to competition.
REGULATORY ENVIRONMENT--STATE
The Ameritech landline communications subsidiaries are also subject to
regulation by state commissions with respect to certain intrastate rates and
services and other matters.
Illinois
In May 1992, legislation permitting new forms of regulation was passed by
the Illinois General Assembly. The new law enabled the Illinois Commerce
Commission (ICC) to approve alternative regulation of any type, subject to
explicit policy goals.
In October 1994, the ICC largely approved Ameritech's Advantage Illinois
initiative. The ICC order called for an immediate rate reduction of $93.2
million on specified services and set a five-year cap at current levels on
basic residential service rates and residential usage rates. Under the plan,
noncompetitive services are assigned to one of four service categories and
price changes are based on a formula which considers inflation, a
service/quality factor, a productivity offset and a factor to allow for costs
which are outside the Company's control. Additional pricing flexibility
continues to be available for competitive services. The plan also ends the
ICC's oversight of the Company's intrastate depreciation rates. The Company
made a $3 billion infrastructure commitment over a five year period. Ameritech
has appealed this order on several bases, including implementation of $51
million in rate reductions based on revenues imputed for directory
publication. Other parties have also appealed the Commission's decision.
In May 1995, the Company filed tariffs with the ICC to implement the
Company's Customers First Plan to open its local network to competitors. In
August, the Company filed tariffs to allow customers beginning in April 1996
to choose an alternate long distance carrier for intraLATA toll calls by
dialing 1 before the regular phone number (1+ capability).
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Indiana
In 1994, the Indiana Utility Regulatory Commission (IURC) approved
Ameritech's Opportunity Indiana plan. Under the plan, market based pricing and
flexibility by means of pure price regulation has been instituted for
competitive services, including Centrex, dedicated communications services,
800 service, WATS, operator services and business intraLATA toll service.
Monthly rates for basic local residential service will decrease by more than
two dollars over two years and remain capped until 1998. IURC oversight of
depreciation was suspended for the term of the plan. In addition, Ameritech
will invest up to $120 million in infrastructure over six years to extend
advanced communications links to interested schools, hospitals and major
government centers. Indiana is a national leader in the use of distance
learning to enhance education.
Michigan
Under the Michigan Telecommunications Act of 1991, which expired December
31, 1995, there was no cap on earnings or regulatory oversight of depreciation
rates. The prices of basic services, defined as residence and business access
lines and local calling, were subject to a price cap formula. IntraLATA toll
prices were capped through December 31, 1995 at December 31, 1991 levels.
Beginning January 1, 1996, consumers in certain Ameritech exchange areas
were able to use 1+ capability for intraLATA toll calls. Under the Michigan
Telecommunications Act of 1995, Ameritech was required to designate 10% of its
exchanges for this capability. More customers will be given this capability as
the Company is permitted to offer interLATA long distance service. Further,
the Michigan Public Service Commission is directed to take steps toward
removing interLATA barriers.
Under the new law, the Company is authorized to restructure local exchange,
toll and access rates to address historical subsidies built into rates, ending
rate regulation of intraLATA toll and payphone services and streamlining the
procedures to obtain increases in local exchange rates.
Ohio
In January 1995, Ameritech implemented its Advantage Ohio price regulation
plan following approval by the Public Utility Commission of Ohio (PUCO). Under
the plan, future overall rate changes are subject to price ceilings based on
inflation, a productivity factor, a service/quality factor and significant tax
law or accounting rule changes. Rates for all services were capped in 1995 and
rates for basic access lines and usage were capped for an additional five
years. The plan provides for the ability to flexibly price competitive and
discretionary services. A series of rate reductions totaling $84.4 million
annually are being phased in over a six year period including reductions in
the rates for residential local usage and access lines, reductions in carrier
access charges and the deaveraging of access line rates. Under the plan, the
PUCO no longer oversees depreciation rates or practices. The Company has
committed to meeting certain benchmarks for the deployment of advanced
technology, including interoffice fiber optics and digital switching.
On March 5, 1996, the Ohio Supreme Court released an opinion reversing the
PUCO's order that approved the Advantage Ohio plan and remanding the matter to
the Commission. The court ruled that the Commission exceeded its statutory
authority when it used alternative rate-setting methods to establish
Ameritech's basic local exchange service rates because of the procedure
followed by the Company and the Commission. The outcome of the court's opinion
on alternative regulation and rates cannot be determined at this time.
Wisconsin
In June 1994, the Wisconsin legislature passed a new telecommunications bill
which established a pricing formula for regulated services, including
residential and small business access lines, local calls and basic intraLATA
calls. The formula considers inflation, service quality and infrastructure
investment, plus a productivity offset. Prices for other services are not
subject to Public Service Commission of Wisconsin (PSCW) approval.
Depreciation rates can be set by the Company within a range of rates
established by the PSCW. Ameritech filed tariffs to adopt pure price
regulation effective September 1, 1994. Prices were reduced by $35
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million on an annualized basis. An additional $10 million carrier common line
access charge reduction will be phased in over a two year period ending in
1996. Under the terms of the bill, Ameritech committed to at least $700 million
on new equipment and technology over five years extending fiber optics to
hundreds of secondary schools, technical colleges, universities, hospitals and
federated libraries in the region.
Effective January 1, 1996, 1+ capability began to be implemented in
approximately 10% of the Company's service areas in Wisconsin. Remaining areas
are scheduled for implementation throughout 1996. Ameritech has filed an appeal
of the PSCW 1+ decision, declaring it contrary to public interest and anti-
competitive in view of restrictions on the Company's ability to provide
interLATA service.
Other Matters
In addition, Ameritech is a party to various proceedings pending before the
state commissions which involve, among other things, the terms and conditions
of services provided by the Company, unbundling the local network, number
portability and 911 access.
In 1995, the state commissions in Illinois, Ohio, Michigan and Wisconsin
conducted investigations of the Company's service quality as a result of
Ameritech's failure to meet certain minimum service standards required under
state regulations. The Company's service problems in the summer of 1995
resulted from severe weather that caused service disruptions, as well as
manpower shortages because of an early retirement offer in 1994 and 1995 that
proved more popular than expected. The Company has paid fines to the
commissions and issued bill credits for lost service, and is taking steps
necessary to return service to a high standard, including the addition of 4,000
employees in customer service positions.
COMPETITION
The communications industry is undergoing significant changes. Local exchange
carriers and long distance service companies, cable TV companies, cellular
service providers, computer companies and the entertainment and information
services industries are converging, forming alliances and positioning to
provide a variety of services. Market convergence, already a reality,
intensified in 1995. Regulatory, legislative and judicial decisions, and
technological advances, as well as heightened customer interest in advanced
communications services, have expanded the types of available communications
services and products, as well as the number of companies offering such
services.
The primary competitors in Ameritech's core business (local landline
telephone service, wireless service and directories) historically have been
other access providers, other cellular service providers and other advertising
media. AT&T, MCI Communications Corp. and other long distance providers are
ready to offer local phone service in various parts of Ameritech's five-state
region. Companies, such as AT&T and McCaw Cellular Communications, Inc., have
allied to form expanded cellular markets, creating the possibility of a
wireless network with nationwide presence and brand-name recognition. Tele-
Communications, Inc., Comcast Corp. and Cox Cable Communications are part of a
cable company joint venture with Sprint Corporation that plans to offer
alternative wireless service. Various communications groups, including almost
all the nation's largest phone and cable companies, hold licenses to offer PCS
throughout the U.S. Competitors of the directory publishing business are
advertisers using traditional advertising media, such as television, radio,
direct mail, billboards, interactive on-line services, and magazine and
newspaper advertising. Today, many of the companies planning to provide local
telephone service also have directory operations. Increased competition in the
local exchange service business, as well as the technological innovations
rapidly spawned by that business, will further intensify competition.
As the Company expands and diversifies into other areas, including video,
home security, home shopping, the Internet, CD-ROM technology, on-line
services, phone cards and global long distance service, the number and variety
of competitors will grow dramatically. Much of the competition is from
companies with substantial capital, technological and marketing resources, many
of which do not face the same regulatory constraints as the
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Company. In pursuit of business opportunities outside of the United States,
Ameritech faces competition from other RHCs, long distance service providers
and a variety of foreign entities. Notwithstanding the potential for an
adverse effect on many revenue streams of the Company, Ameritech expects to
capture a major share of the expected growth in the communications
marketplace. Building on its strengths, the Company plans to branch into new
services that are a logical extension of its core business, exporting its
expertise to customers throughout the world.
Regulatory reform continues to be one of the most significant issues facing
the communications industry today. The Company believes that relief from
excessive regulation will benefit customers and ultimately shareowners by
enabling the Company to compete effectively and meet customers' expanding
needs. Ameritech is seeking relief before the regulatory agencies from the
restraints, laws and regulations that impose restrictions on its current
business and curtail its future business offerings.
Sweeping new federal legislation signed in February 1996, will radically
alter the U.S. communications business and enhance the Company's ability to
compete abroad in advanced communications services and equipment. Passage of
the new law broadly deregulates the communications industry and allows cable
TV, local phone companies and long distance carriers into each other's
businesses, removing the formal barriers between businesses and reshaping the
information industry.
The Company's competitive strategy includes positioning itself to take
advantage of future opportunities by streamlining its processes to continue to
be the most efficient of the RHCs.
PATENTS, TRADEMARKS AND LICENSES
Ameritech and its affiliates own, have licenses to use, and license others
to use various patents, copyrights, trademarks and other intellectual property
which are necessary for them to conduct their present business operations. It
is not anticipated that any such intellectual property will be subject to
expiration or nonrenewal of rights which would materially and adversely affect
Ameritech or its affiliates.
EMPLOYEE RELATIONS
As of December 31, 1995, the Ameritech companies employed 65,345 persons, an
increase from 63,594 at December 31, 1994. By year end 1995, approximately
11,500 nonmanagement employees had resigned or retired in response to an early
retirement offer announced in 1994 (2,400 of which left in 1995). Under terms
of agreements between Ameritech, the Communications Workers of America (CWA)
and the International Brotherhood of Electrical Workers (IBEW), Ameritech
implemented an enhancement to the Ameritech pension plan by adding three years
to the age and the net credited service of eligible nonmanagement employees
who left the business during a designated period ending with contract
expiration, a period extended during contract negotiations to the end of the
third quarter of 1995. In addition, certain of the Company's business units
offered financial incentives under terms of the prior contracts with the CWA
and IBEW to selected nonmanagement employees who left the business by contract
expiration. Staff additions offset these departures. New employees were added
to accommodate the Company's growth, to ensure high quality customer service
and to meet staffing requirements for new business opportunities. In 1996, as
a result of a planned consolidation of the Company's data centers and other
reductions, more employees will leave the Company.
In September 1995, members of the CWA and the IBEW ratified new three-year
contracts with Ameritech. The new contract wage increases were retroactive to
the expiration dates of the prior contracts, June 25 for the IBEW and August 6
for the CWA. Both contracts address wages, benefits, pensions, employment
security, child and family care, training and retraining and other conditions
of employment. Base wages were increased approximately 10.9% compounded at the
maximum wage rate over the next three years. In addition all eligible
employees received a lump sum bonus of $500. The new contracts will expire on
June 27, 1998, for the IBEW and August 8, 1998, for the CWA. The two unions
represent more than 40,000 of Ameritech's 65,000 employees. Of those so
represented, about 71% are represented by the CWA and about 29% are
represented by the IBEW, both of which are affiliated with the AFL-CIO.
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ITEM 2. PROPERTIES.
The properties of the Company do not lend themselves to description by
character and location of principal units. At December 31, 1995, the Company's
investment in property, plant and equipment consisted of the following:
<TABLE>
<S> <C>
Land and buildings................................................... 10%
Central office equipment............................................. 40
Cable, wiring and conduit............................................ 40
Other................................................................ 9
Under construction................................................... 1
---
100%
</TABLE>
Central office equipment includes analog and digital switching equipment,
transmission equipment and related facilities. Buildings are principally
central offices. Cable, wiring and conduit constitute outside plant, and
includes poles as well as cable, conduit and wiring primarily on or under
public roads, highways or streets or on or under private property.
Substantially all of the installations of central office equipment and
administrative offices are located in buildings owned by the Ameritech landline
communications subsidiaries and situated on property they own. Many garages and
business offices and some installations of central office equipment and
administrative offices are in leased quarters.
As a result of an ongoing review of Company assets and an assessment of
future needs, Ameritech sold, or will no longer use in the business, certain
real estate across the region and other assets, thereby reducing costs and
improving asset utilization.
Capital expenditures, the single largest use of Company funds, were as
follows for the last five years:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C>
1991................................................ $2,200
1992................................................ 2,267
1993................................................ 2,108
1994................................................ 1,955
1995................................................ 2,176
</TABLE>
Ameritech plans to maintain capital spending at about $2 billion per year,
which will include capital provided to its long distance, cable TV and security
monitoring businesses. The Company's capital expenditures for property, plant
and equipment for its landline communications company operations decreased
about $30 million in 1995 as capital was deployed more cost effectively and
with greater focus on the requirements of customers and the development of new
services, including cable TV, security monitoring and long distance. Rapid
modernization of the landline communications network continued through 1995.
ITEM 3. LEGAL PROCEEDINGS.
PRE-DIVESTITURE CONTINGENT LIABILITIES AGREEMENT
The Plan provides for the recognition and payment of liabilities that are
attributable to pre-divestiture events (including transactions to implement the
divestiture) but that do not become certain until after divestiture. These
contingent liabilities relate principally to litigation and other claims with
respect to the former Bell System's rates, taxes, contracts, equal employment
matters, environmental matters and torts (including business torts, such as
alleged violations of the antitrust laws).
With respect to such liabilities, under agreements entered into at
divestiture, AT&T and the former Bell operating companies of AT&T (Bell
Companies) will share the costs of any judgment or other determination of
liability entered by a court or administrative agency, the costs of defending
the claim (including attorneys' fees and court costs) and the cost of interest
or penalties with respect to any such judgment or determination. Except to the
extent that affected parties may otherwise agree, the general rule is that
responsibility for such contingent
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liabilities will be divided among AT&T and the Bell Companies on the basis of
their relative net investment (defined as total assets less reserves for
depreciation) as of the effective date of divestiture. Different allocation
rules apply to liabilities which relate exclusively to pre-divestiture
interstate or intrastate operations.
In January 1995, Ameritech and the other RHCs agreed to terminate the
sharing arrangement among the Bell Companies with respect to pre-divestiture
contingent liabilities for certain matters. AT&T did not enter into the
agreement and, accordingly, the sharing arrangement remains in effect with
respect to AT&T's pre-divestiture liabilities and AT&T's share of Bell Company
pre-divestiture liabilities.
Although complete assurance cannot be given as to the outcome of any
litigation, in the opinion of the Company's management, any monetary liability
or financial impact to which the Company would be subject after final
adjudication of all of the foregoing actions would not be material in amount
to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders in the fourth quarter
of the fiscal year covered by this report.
EXECUTIVE OFFICERS OF THE COMPANY (AS OF MARCH 1, 1996)
The following table sets forth, as to the executive officers of Ameritech,
their ages, their offices with Ameritech and the period during which they have
held such offices.
<TABLE>
<CAPTION>
HELD
NAME AGE OFFICER SINCE
- ---- --- ------- -----
<S> <C> <C> <C>
Richard C. Notebaert*........ 48 Chairman and Chief 1994
Executive Officer
W. Patrick Campbell.......... 49 Executive Vice President-- 1994
Corporate Strategy and
Business Development
Thomas P. Hester............. 58 Executive Vice President and 1991
General Counsel
Oren G. Shaffer.............. 53 Executive Vice President and 1994
Chief Financial Officer
Barry K. Allen............... 47 Senior Vice President-- 1995
Communications and Information Products
Timothy M. Connolly.......... 47 Senior Vice President-- 1995
Worldwide Network Systems
Walter M. Oliver............. 50 Senior Vice President-- 1994
Human Resources
Rita P. Wilson............... 49 Senior Vice President-- 1994
Corporate Communications
Walter S. Catlow............. 51 President--International Business 1995
Development and Operations
Thomas J. Reiman............. 46 President--Product Management 1996
Betty F. Elliott............. 51 Vice President and Comptroller 1991
Joel S. Engel................ 60 Vice President--Technology 1993
Gary R. Lytle................ 52 Vice President--Federal Relations 1994
Sari L. Macrie............... 39 Vice President--Investor Relations 1994
Richard W. Pehlke............ 42 Vice President and Treasurer 1994
Lawrence E. Strickling....... 44 Vice President--Public Policy 1993
Kelly R. Welsh............... 43 Vice President and Associate 1993
General Counsel
Bruce B. Howat............... 51 Secretary 1983
</TABLE>
- --------
*Member of the Board of Directors and Chairman of the Executive Committee
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Prior to the most recent election to office with Ameritech, the above
officers held high-level managerial positions within Ameritech for more than
the past five years, except for Mr. Welsh, Mr. Campbell, Mr. Shaffer, Ms.
Wilson, Mr. Oliver, Mr. Allen and Mr. Connolly. Before joining Ameritech, Mr.
Welsh was Corporation Counsel of the City of Chicago from 1989 to 1993 and,
prior to that, was an attorney with Mayer, Brown and Platt, a Chicago-based
law firm. Mr. Campbell was President and Chief Executive Officer of Columbia
TriStar Home Video, a Sony Pictures Entertainment Company, from 1989 to 1994.
Previously, Mr. Campbell held a variety of management positions at Norelco,
SCM Corporation and McGraw Edison. Mr. Shaffer served as Chief Financial
Officer and President of Virgo Cap Inc., a private investment firm, from 1992
to 1994. Previously, Mr. Shaffer was Chief Financial Officer, Executive Vice
President and a member of the Board of Directors of The Goodyear Tire & Rubber
Co., from 1968 to 1992. Ms. Wilson was Senior Vice President--Corporate
Communications and a member of the Board of Directors of Allstate Insurance
Company from 1990 to 1994 after serving in various operations positions at
Allstate beginning in 1974. Mr. Allen started his career with Ameritech in
1974, serving as President of Wisconsin Bell from 1987 and President of
Illinois Bell in 1993. He left Ameritech in 1993 to become President and Chief
Operating Officer of Marquette Electronics, Inc. and served in this capacity
until July 1995, when he rejoined Ameritech as President of Ameritech's
enhanced business services unit. Mr. Connolly previously was an executive with
Bell Atlantic Corporation where he served as President of Sorbus, Inc., a unit
that provides computer maintenance services in the United States and in
international markets. From 1985 to 1988, he headed Bell Atlantic's cellular
and paging subsidiaries. In 1989, he became Executive Vice President and Chief
Operating Officer of the Kansas City Chiefs professional football club.
Richard H. Brown, Vice Chairman, resigned effective August 4, 1995 to accept
the position of President and Chief Executive Officer of H&R Block, Inc.,
headquartered in Kansas City, Missouri.
Officers are elected annually but may be removed at any time at the
discretion of the Board of Directors.
PART II
ITEMS 5 THROUGH 8.
There were 877,937 owners of record of Ameritech Common Stock as of December
31, 1995. Ameritech Common Stock is listed on the New York, Boston, Chicago,
Pacific, Philadelphia, London, Tokyo, Amsterdam, Basel, Geneva and Zurich
stock exchanges. The rest of the information required by these items is
included in the Financial section on pages 22 through 31, pages 33 through 48,
and on page 53 of the Company's annual report to security holders for the year
ended December 31, 1995. Such information is incorporated by reference
pursuant to General Instruction G(2).
ITEMS 7 AND 8. SUBSEQUENT EVENTS.
On March 5, 1996, the Ohio Supreme Court released an opinion reversing the
order of the Public Utilities Commission of Ohio (PUCO) that approved the
Advantage Ohio alternative regulation plan and remanding the matter to the
Commission. The court ruled that the Commission exceeded its statutory
authority when it used alternative rate-setting methods to establish
Ameritech's basic local exchange service rates because of the procedure
followed by the Company and the Commission. Advantage Ohio, originally adopted
by the PUCO in November 1994, granted the Company relief from rate-of-return
regulation in Ohio and replaced such regulation with a price cap formula. The
Company implemented certain rate reductions beginning January 9, 1995 as a
result of Advantage Ohio and began making agreed upon grants to public schools
and making Company infrastructure enhancements. The outcome of the court's
opinion on alternative regulation and rates, and other aspects of the
Advantage Ohio plan, cannot be determined at this time.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND ACCOUNTING AND
FINANCIAL DISCLOSURE.
No disagreements with accountants on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure
occurred during the period covered by this annual report.
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PART III
ITEMS 10 THROUGH 13.
Information regarding executive officers required by Item 401 of Regulation
S-K is furnished in a separate disclosure in Part I of this report since the
Company did not furnish such information in its definitive proxy statement
dated March 1, 1996, prepared in accordance with Schedule 14A.
The other information required by these items is included in the Company's
definitive proxy statement on pages 2 through 4, in the section on Officer and
Director Stock Ownership on pages 5 and 6, in the section on Compensation of
Directors on page 6, and in the section on Executive Compensation on pages 10
through 19, and is incorporated herein by reference pursuant to General
Instruction G(3).
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) Documents filed as a part of the report:
<TABLE>
<CAPTION>
PAGES
------
<S> <C>
(1) Financial Statements:
Selected Financial and Operating Data.................................. *22
Report of Independent Public Accountants............................... *33
Consolidated Statements of Income...................................... *34
Consolidated Balance Sheets............................................ *35
Consolidated Statements of Shareowners' Equity......................... *36
Consolidated Statements of Cash Flows.................................. *37
Notes to Consolidated Financial Statements............................. *38-48
(2) Financial Statement Schedule:
Report of Independent Public Accountants............................... 24
II--Valuation and Qualifying Accounts.................................. 25
</TABLE>
- --------
*Incorporated herein by reference to the appropriate portions of the
Company's annual report to security holders for the year ended December 31,
1995.
Financial statement schedules other than the one listed above have been
omitted because the required information is contained in the financial
statements and notes thereto, or because such schedules are not required or
applicable. Separate financial statements of subsidiaries not consolidated and
50% or less owned persons are omitted since no such entity constitutes a
"significant subsidiary" pursuant to the provisions of Regulation S-X, Article
3-09.
17
<PAGE>
Exhibits identified in parentheses below, on file with the SEC, are
incorporated herein by reference as exhibits hereto.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S> <C>
3a --Certificate of Incorporation of the Company as amended
on April 26, 1991 (Exhibit 3a to Form 10-K for 1991, File
No. 1-8612).
3b --By-Laws of the Company, as amended on April 15, 1992
(Exhibit 3b to Form 10-K for 1992, File No. 1-8612).
4b --No instrument which defines the rights of holders of
long and intermediate term debt of the Company and all of
its consolidated subsidiaries is filed herewith pursuant
to Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant to
this regulation, the Company hereby agrees to furnish a
copy of any such instrument to the SEC upon request.
10a --Reorganization and Divestiture Agreement between Ameri-
can Telephone and Telegraph Company and the Company and
Affiliates, dated as of November 1, 1983 (Exhibit 10a to
Form 10-K for 1983, File No. 1-8612).
10b --Agreement Concerning Contingent Liabilities, Tax Matters
and Termination of Certain Agreements, among American
Telephone and Telegraph Company, Bell System Operating
Companies, Regional Holding Companies and Affiliates
dated as of November 1, 1983 (Exhibit 10j to Form 10-K
for 1983, File No. 1-8612).
10c --Ameritech Senior Management Short Term Incentive Plan as
amended and restated effective as of January 1, 1992 (Ex-
hibit 10aa to Form 10-K for 1991, File No. 1-8612).
10d --Ameritech Long Term Incentive Plan as amended and re-
stated effective as of January 1, 1992 (Exhibit 10bb to
Form 10-K for 1991, File No. 1-8612).
10d-1 --First Amendment to Ameritech Long Term Incentive Plan
(Exhibit 10bb-1 to Form 10-K for 1993, File No. 1-8612).
10d-2 --Resolution concerning the exercisability of stock op-
tions granted under the Ameritech Long Term Incentive
Plan, approved on January 17, 1996.
10e --Ameritech Stock Retirement Plan for Non-Employee Direc-
tors (Exhibit 10ll to Form 10-K for 1986, File No. 1-
8612).
10e-1 --First Amendment of Ameritech Stock Retirement Plan for
Non-Employee Directors (Exhibit 10ll-1 to Form 10-K for
1988, File No. 1-8612).
10e-2 --Second Amendment of Amendment Ameritech Stock Retirement
Plan for Non-Employee Directors (Exhibit 10ll-2 to Form
10-K for 1989, File No. 1-8612).
10f --Ameritech Senior Management Life Insurance Plan Agree-
ments (Exhibit 10cc to Form 10-K for 1990, File No. 1-
8612).
10g --Ameritech Perquisite Program (Exhibit 10ff to Form 10-K
for 1991, File No. 1-8612).
10h --Ameritech Deferred Compensation Plan for Non-Employee
Directors (Exhibit 10gg to Form 10-K for 1985, File No.
1-8612).
10h-1 --First Amendment of Deferred Compensation Plan for Non-
Employee Directors (Exhibit 10gg-1 to Form 10-K for 1986,
File No. 1-8612).
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S> <C>
10h-2 --First Amendment of American Information Technologies
Corporation Deferred Compensation Plan for Non-Employee
Directors effective as of January 1, 1989 (Exhibit 10gg-2
to Form 10-K for 1988, File No. 1-8612).
10h-3 --Second Amendment of American Information Technologies
Corporation Deferred Compensation Plan for Non-Employee
Directors (Exhibit 10gg-3 to Form 10-K for 1990, File No.
1-8612).
10h-4 --Third Amendment of American Information Technologies
Corporation Deferred Compensation Plan for Non-Employee
Directors (Exhibit 10gg-4 to Form 10-K for 1990, File No.
1-8612).
10h-5 --Fourth Amendment of American Information Technologies
Corporation Deferred Compensation Plan for Non-Employee
Directors (Exhibit 10gg-5 to Form 10-K for 1992, File No.
1-8612).
10i --Ameritech Plan for Non-Employee Directors' Travel Acci-
dent Insurance (Exhibit 10hh to Registration Statement
No. 2-87838).
10j --Ameritech Management Supplemental Pension Plan as
amended through the Seventh Amendment (Exhibit 10ii to
Form 10-K for 1991, File No. 1-8612).
10j-1 --Eighth Amendment of Ameritech Management Supplemental
Pension Plan (Exhibit 10ii-1 to Form 10-K for 1991, File
No. 1-8612).
10j-2 --Ninth Amendment of Ameritech Management Supplemental
Pension Plan (Exhibit 10ii-2 to Form 10-K for 1991, File
No. 1-8612).
10j-3 --Tenth Amendment to Ameritech Management Supplemental
Pension Plan (Exhibit 10ii-3 to Form 10-K for 1993, File
No. 1-8612).
10j-4 --Eleventh Amendment to Ameritech Management Supplemental
Pension Plan (Exhibit 10ii-4 to Form 10-K for 1993, File
No. 1-8612).
10j-5 --Twelfth Amendment to Ameritech Management Supplemental
Pension Plan (Exhibit 10ii-5 to Form 10-K for 1993, File
No. 1-8612).
10j-6 --Thirteenth Amendment to Ameritech Management Supplemen-
tal Pension Plan (Exhibit 10j-6 to Form 10-K for 1994,
File No. 1-8612).
10k --Ameritech 1989 Long Term Incentive Plan as amended and
restated effective as of January 1, 1992 (Exhibit 10oo to
Form 10-K for 1991, File No. 1-8612).
10k-1 --First Amendment to 1989 Long Term Incentive Plan (Ex-
hibit 10oo-1 to Form 10-K for 1993, File No. 1-8612).
10k-2 --Resolution concerning the exercisability of stock op-
tions granted under the Ameritech 1989 Long Term Incen-
tive Plan, approved on January 17, 1996.
10l --Ameritech (Subsidiary) Senior Management Short Term In-
centive Plan as amended and restated effective January 1,
1992 (Exhibit 10pp to Form 10-K for 1991, File No. 1-
8612).
10m --Ameritech Management Employees Benefit Protection Trust
as amended through the First Amendment (Exhibit 10uu to
Form 10-K for 1991, File No. 1-8612).
10m-1 --Second Amendment to Ameritech Management Employees Bene-
fit Protection Trust (Exhibit 10uu-1 to Form 10-K for
1991, File No. 1-8612).
10n --Ameritech Senior Management Severance Pay Trust as
amended through the First Amendment (Exhibit 10tt to Form
10-K for 1991, File No. 1-8612).
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S> <C>
10n-1 --Second Amendment to Ameritech Senior Management Sever-
ance Pay Trust (Exhibit 10tt-1 to Form 10-K for 1991,
File No. 1-8612)
10o --Ameritech Mid-Career Pension Plan (Exhibit 10ff to Form
10-K for 1994, File No. 1-8612).
10o-1 --First Amendment to Ameritech Mid-Career Pension Plan
(Exhibit 10ff-1 to Form 10-K for 1994, File No. 1-8612).
10o-2 --Second Amendment to Ameritech Mid-Career Pension Plan
(Exhibit 10ff-2 to Form 10-K for 1994, File No. 1-8612).
10o-3 --Third Amendment to Ameritech Mid-Career Pension Plan
(Exhibit 10ff-3 to Form 10-K for 1994, File No. 1-8612).
10o-4 --Fourth Amendment to Ameritech Mid-Career Pension Plan
(Exhibit 10ff-4 to Form 10-K for 1994, File No. 1-8612).
10o-5 --Fifth Amendment to Ameritech Mid-Career Pension Plan
(Exhibit 10ff-5 to Form 10-K for 1994, File No. 1-8612).
10o-6 --Sixth Amendment to Ameritech Mid-Career Pension Plan
(Exhibit 10ff-6 to Form 10-K for 1994, File No. 1-8612).
10o-7 --Seventh Amendment to Ameritech Mid-Career Pension Plan
(Exhibit 10ff-7 to Form 10-K for 1994, File No. 1-8612).
10o-8 --Eighth Amendment to Ameritech Mid-Career Pension Plan
(Exhibit 10ff-8 to Form 10-K for 1994, File No. 1-8612).
10o-9 --Ninth Amendment to Ameritech Mid-Career Pension Plan.
10p --Agreement Regarding Change in Control dated as of Janu-
ary 19, 1994 between the Company and Richard C.
Notebaert, together with a schedule identifying other
documents (Exhibit 10mm to Form 10-K for 1993, File No.
1-8612).
10q --Agreement Regarding Change in Control dated as of Janu-
ary 19, 1994 between the Company and Thomas P. Hester
(Exhibit 10y to Form 10-K for 1994, File No 1-8612).
10r --Agreement Regarding Change in Control dated as of Sep-
tember 9, 1994 between the Company and W. Patrick Camp-
bell (Exhibit 10z to Form 10-K for 1994, File No. 1-
8612).
10s --Agreement Regarding Change in Control dated as of Sep-
tember 9, 1994 between the Company and Walter M. Oliver
(Exhibit 10aa to Form 10-K for 1994, File No. 1-8612).
10t --Agreement Regarding Change in Control dated as of Janu-
ary 1, 1995 between the Company and Oren G. Shaffer (Ex-
hibit 10bb to Form 10-K for 1994, File No. 1-8612).
10u --Agreement Regarding Change in Control dated as of Janu-
ary 1, 1995 between the Company and Rita P. Wilson (Ex-
hibit 10cc to Form 10-K for 1994, File No. 1-8612).
10v --Agreement Regarding Change in Control dated as of Decem-
ber 1, 1995 between the Company and Barry K. Allen.
10w --Agreement Regarding Change in Control dated as of Decem-
ber 1, 1995 between the Company and Timothy M. Connolly.
10x --Ameritech Key Management Life Insurance Plan as amended
and restated effective as of December 1, 1995.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S> <C>
10y --Ameritech Estate Preservation Plan as amended and re-
stated effective as of December 1, 1995.
10z --Ameritech Corporate Resource Long Term Disability Plan
as amended and restated effective as of December 1, 1995.
10aa --Ameritech Corporate Resource Transfer Program as amended
and restated effective as of December 1, 1995.
10bb --Ameritech Corporate Resource Supplemental Pension Plan
as amended and restated effective as of December 1, 1995.
10cc --Ameritech Corporate Resource Deferral Plan as amended
and restated effective as of December 1, 1995.
10dd --Ameritech Corporate Resource Severance Pay Plan as
amended and restated effective as of December 1, 1995.
10ee --Ameritech Management Committee Short Term Incentive
Plan.
10ff --Ameritech Senior Management Retirement and Survivor Pro-
tection Trust dated as of November 30, 1988.
10ff-1 --First Amendment to Ameritech Senior Management Retire-
ment and Survivor Protection Trust.
10ff-2 --Second Amendment to Ameritech Senior Management Retire-
ment and Survivor Protection Trust.
10ff-3 --Third Amendment to Ameritech Senior Management Retire-
ment and Survivor Protection Trust.
11a --Statement re: computation of primary earnings per share.
11b --Statement re: computation of fully diluted earnings per
share.
12 --Computation of ratio of earnings to fixed charges for
the five years ended December 31, 1995.
13 --Portions of Ameritech's annual report to security hold-
ers for the year ended December 31, 1995.
21 --Subsidiaries of the Company.
23 --Consent of Arthur Andersen LLP.
24 --Powers of Attorney.
27 --Financial Data Schedule for the year ended December 31,
1995.
99a --Form 11-K Annual Report for the fiscal year ended Decem-
ber 31, 1995 of the Ameritech Savings Plan for Salaried
Employees, to be filed by amendment.
99b --Form 11-K Annual Report for the fiscal year ended Decem-
ber 31, 1995 of the Ameritech Savings and Security Plan
(Non-Salaried Employees), to be filed by amendment.
99c --Form 11-K Annual Report for the fiscal year ended Decem-
ber 31, 1995 of the DonTech Profit Participation Plan, to
be filed by amendment.
</TABLE>
Ameritech will furnish, without charge, to a security holder upon request a
copy of the annual report to security holders and the proxy statement,
portions of which are incorporated by reference, and will furnish any other
exhibit at cost.
21
<PAGE>
(B) Reports on Form 8-K:
On December 26, 1995, Ameritech filed a Current Report on Form 8-K, dated
December 14, 1995 to report on Item 5, Other Events, the Company's pending
investment in Belgacom S.A. and its increased investment in MATAV, the Belgian
and Hungarian telecommunications companies, respectively.
On January 16, 1996, the Company filed another Current Report on Form 8-K,
dated January 16, 1996, to report on Item 7, Financial Statements and
Exhibits, Ameritech's earnings for the fourth quarter and year ended December
31, 1995.
22
<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.
Ameritech Corporation
/s/ Betty F. Elliott
By __________________________________
(Betty F. Elliott,
Vice President and Comptroller)
March 11, 1996
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES 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:
R. C. Notebaert*
- -------------------------------------
Chairman and Chief Executive Officer
Principal Financial Officer:
O. G. Shaffer*
- -------------------------------------
Executive Vice President
and Chief Financial Officer
Principal Accounting Officer: /s/ Betty F. Elliott
B. F. Elliott *By _________________________________
- ------------------------------------- (Betty F. Elliott,
Vice President and Comptroller for herself and as
Attorney-in-Fact)
March 11, 1996
Directors:
D. C. Clark*
M. R. Goodes*
H. H. Gray*
J. A. Henderson*
S. B. Lubar*
L. M. Martin*
A. C. Martinez*
J. B. McCoy*
R. C. Notebaert*
J. D. Ong*
A. B. Rand*
J. A. Unruh*
23
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors
Ameritech Corporation
We have audited in accordance with generally accepted auditing standards the
financial statements included in Ameritech Corporation's annual report to
shareowners incorporated by reference in this Form 10-K, and have issued our
report thereon dated January 17, 1996. Our audits were made for the purpose of
forming an opinion on those statements taken as a whole. The financial
statement schedule listed in Item 14(a)(2) is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Arthur Andersen LLP
Chicago, Illinois
January 17, 1996
24
<PAGE>
AMERITECH CORPORATION
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR UNCOLLECTIBLES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- ------ ---------- ------------------------ -------------- ---------
ADDITIONS
------------------------
BALANCE AT CHARGED CHARGED TO BALANCE
BEGINNING TO OTHER AT END OF
CLASSIFICATION OF PERIOD EXPENSE (A) ACCOUNTS (B) DEDUCTIONS (C) PERIOD
- -------------- ---------- ----------- ------------ -------------- ---------
<S> <C> <C> <C> <C> <C>
Year 1995......... $147.3 $205.2 $231.1 $417.4 $166.2
Year 1994......... 134.7 171.1 178.1 336.6 147.3
Year 1993......... 126.3 154.3 165.1 311.0 134.7
</TABLE>
- --------
(a) Excludes direct charges and credits to expense on the statements of income
and reinvested earnings related to interexchange carrier receivables.
(b) Includes principally amounts previously written off which were credited
directly to this account when recovered and amounts related to long
distance carrier receivables which are being billed by the Company.
(c) Amounts written off as uncollectible.
25
<PAGE>
Exercisability of Stock Options
-------------------------------
RESOLVED, that the first sentence of paragraph III-4 of the Ameritech Long
Term Incentive Plan is hereby amended to read in its entirety as follows: "Each
Non-Qualified Stock Option granted to a Participant shall terminate no later
than the day following the tenth anniversary of the Option Date or, subject to
the provisions of the following sentence, if earlier, 30 days after the date the
Participant's employment by the Company and its Subsidiaries is terminated for
any reason, except that, if the Participant is a member of the Company's
Management Committee at the time of termination of employment, such Non-
Qualified Stock Option shall terminate on the date on which the Participant's
employment is terminated."; and
RESOLVED FURTHER, that in addition to the current terms of stock options
heretofore granted under the Ameritech Long Term Incentive Plan or the Ameritech
1989 Long Term Incentive Plan (the "Plans") regarding exercise thereof after
termination of employment, each such stock option heretofore granted under the
Plans shall, to the extent the option is exercisable at the date of termination
of employment, remain exercisable for a period of 30 days after termination of a
Participant's employment for any reason other than cause or willful misconduct,
unless such option terminates earlier under its existing terms (other than terms
relating to termination of employment) and unless the Participant is at the time
of termination of employment a member of the Management Committee of the
Company.
<PAGE>
Exercisability of Stock Options
-------------------------------
RESOLVED, that the first sentence of paragraph III-4 of the Ameritech Long
Term Incentive Plan is hereby amended to read in its entirety as follows: "Each
Non-Qualified Stock Option granted to a Participant shall terminate no later
than the day following the tenth anniversary of the Option Date or, subject to
the provisions of the following sentence, if earlier, 30 days after the date the
Participant's employment by the Company and its Subsidiaries is terminated for
any reason, except that, if the Participant is a member of the Company's
Management Committee at the time of termination of employment, such Non-
Qualified Stock Option shall terminate on the date on which the Participant's
employment is terminated."; and
RESOLVED FURTHER, that in addition to the current terms of stock options
heretofore granted under the Ameritech Long Term Incentive Plan or the Ameritech
1989 Long Term Incentive Plan (the "Plans") regarding exercise thereof after
termination of employment, each such stock option heretofore granted under the
Plans shall, to the extent the option is exercisable at the date of termination
of employment, remain exercisable for a period of 30 days after termination of a
Participant's employment for any reason other than cause or willful misconduct,
unless such option terminates earlier under its existing terms (other than terms
relating to termination of employment) and unless the Participant is at the time
of termination of employment a member of the Management Committee of the
Company.
<PAGE>
NINTH AMENDMENT
TO
AMERITECH MID-CAREER PENSION PLAN
(As Amended and Restated Effective as of January 1, 1989)
Pursuant to authority reserved to Ameritech Corporation (the
"Corporation"), the following amendmenst to the Ameritech Mid-Career Pension
Plan (As Amended and Restated Effective as of January 1, 1989) (the "Plan") are
hereby adopted effective as of May 1, 1995 to implement Plan amendments adopted
by the Corporation's Board of Directors at its March 15, 1995 and June 21, 1995
meetings:
1. No additional employees shall become participants in the Plan after April 30,
1995;
2. Employees who were Plan participants and who had not retired or terminated
employment with the Participating Companies as of May 1, 1995 and who were
not as of March 15, 1995 or do not become on or before May 1, 2000 eligible
for a service pension under the Pension Plan shall no longer be considered
participants under the Plan, shall not be entitled to any benefit whatsoever
under the Plan and shall receive no benefit under the Plan upon their
retirement or termination of employment with the Participating Companies;
3. Employees who were Plan participants and who had not retired or terminated
employment with the Participating Companies as of May 1, 1995 and who were as
of March 15, 1995 or who become on or before May 1, 2000 eligible for a
service pension under the Pension Plan shall remain entitled to benefits
under the Plan and upon their retirement from the Participating Companies
with eligibility for a service pension shall receive benefits in accordance
with the Plan; and
<PAGE>
4. Employees who were Plan participants and who had retired or terminated
employment with the Participating Companies before May 1, 1995 shall continue
to receive such benefits under the Plan, if any, as they were entitled to
receive under the Plan upon such retirement or termination of employment.
Dated: March 6, 1996 AMERITECH CORPORATION
BY: /s/ Walter M. Oliver
-----------------------------
Senior Vice President-
Human Resources
Concur:
/s/ Thomas P. Hester
- ------------------------------
Executive Vice President
and General Counsel
<PAGE>
AGREEMENT REGARDING
CHANGE IN CONTROL
-------------------
This Agreement entered into as of the 1st day of November, 1995, by and
between Ameritech Corporation, a Delaware corporation (the "Company"), and Barry
K. Allen (the "Executive"),
WITNESSETH THAT:
---------------
WHEREAS, the Company wishes to induce the Executive to remain in its
employ, to provide fair and equitable treatment and a competitive compensation
package to the Executive, and to assure continued attention of the Executive to
his duties without any distraction arising out of uncertain personal
circumstances in a change in control environment; and
WHEREAS, the Company recognizes that in the event of a change in control of
the Company it is likely that the Executive's authorities, duties and
responsibilities would be substantially altered; and
WHEREAS, the Company and the Executive accordingly desire to enter into
this Agreement on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein, it is hereby agreed by and between the parties as follows:
1. Term of Agreement. The "Term" of this Agreement shall commence on the
date hereof and shall continue through December 31, 1996; provided, however,
that on such date and on each December 31 thereafter, the Term of this Agreement
shall automatically be extended for one additional year (but not beyond the
Executive's attainment of age 65) unless, not later than the preceding November
1 the Company shall have given notice that it does not wish to extend the Term;
and provided, further, that if a Change in Control (as defined in paragraph 2
below) shall have occurred during the original or any extended Term of this
Agreement, the Term of this Agreement shall continue for a period of twenty-four
months beyond the month in which such Change in Control occurs, but not beyond
the Executive's attainment of age 65.
2. Change in Control. For purposes of this Agreement, the term "Change in
Control" means a change in the beneficial ownership of the Company's voting
stock or a change in the composition of the Company's Board of Directors which
occurs as follows:
(a) any "person" (as such term is used in Section 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934) other than:
(i) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, or
(ii) the Executive or any person acting in concert with the Executive
is or becomes a beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of stock of
the Company representing 20% or more of the total voting power of the
Company's then outstanding stock; provided, however, that this
subparagraph (a) shall not apply to any tender offer made pursuant to
an agreement with the Company approved by the Company's Board of
Directors and entered into before the offeror has become a beneficial
owner of stock of the Company representing 5% or more of the combined
voting power of the Company's then outstanding stock;
(b) a tender offer is made for the stock of the Company, and the person
making the offer owns or has accepted for payment stock of the Company
representing 20% or more of the total voting
<PAGE>
power of the Company's then outstanding stock; provided, however, that
this subparagraph (b) shall not apply to any tender offer made
pursuant to an agreement with the Company approved by the Company's
Board of Directors and entered into before the offeror has become a
beneficial owner of stock of the Company representing 5% or more of
the combined voting power of the Company's then outstanding stock;
(c) during any period of 24 consecutive months there shall cease to be a
majority of the Board of Directors comprised as follows: individuals
who at the beginning of such period constitute the Board of Directors
and any new director(s) whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by
a vote of at least two-third (2/3) of the directors then still in
office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved;
or
(d) the stockholders of the Company approve a merger or consolidation of
the Company with any other company other than:
(i) a merger or consolidation which would result in the Company's
voting stock outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting stock of the surviving entity) more than 70% of the
combined voting power of the Company's or such surviving entity's
outstanding voting stock immediately after such merger or
consolidation; or
(ii) a merger or consolidation which would result in the directors of
the Company who were directors immediately prior thereto
continuing to constitute at least 50% of the directors of the
surviving entity immediately after such merger or consolidation.
For purposes of subparagraph (d) above, the phrase "surviving entity" shall mean
only an entity in which all of the Company's stockholders who are stockholders
immediately before the merger or consolidation (other than stockholders
exercising dissenter rights) become stockholders by the terms of the merger or
consolidation, and the phrase "directors of the Company who were directors
immediately prior thereto" shall not include (A) any director of the Company who
was designated by a person who has entered into an agreement with the Company to
effect a transaction described in subparagraph (a) or subparagraph (d) above, or
(B) any director who was not a director at the beginning of the 24-consecutive-
month period preceding the date of such merger or consolidation, unless his
election by the Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors who were directors before the beginning of such period.
3. Compensation After a Change in Control. During any period in which
the Executive is employed by the Company after a Change in Control, there shall
be no reduction in the base salary, long and short term incentives and bonuses,
employee benefits (including medical insurance, disability income protection,
and life insurance and death benefits), fringe benefits and perquisites to which
the Executive was entitled prior to the Change in Control.
4. Severance Payments. Subject to the provisions of paragraphs 5 and 6
below, in the event that (i) the Executive's employment with the Company is
involuntarily terminated by the Company for any reason other than death,
Disability (as defined below) or Just Cause (as defined below) during the
twenty-four month period following a Change in Control or (ii) the Executive's
employment with the Company is terminated by the Executive for any reason during
the thirty-day period beginning on the first anniversary of a Change in Control,
the Executive shall continue to receive all medical insurance, disability income
protection, life insurance coverage and death benefits, fringe benefits and
perquisites to which the Executive was entitled prior to the Change in Control
for a period of not less than the 24 consecutive months immediately following
the date of his termination of employment, and shall be entitled to a lump sum
payment in cash no later than ten business days and no earlier than two business
days after the date of termination equal to the sum of:
2
<PAGE>
(a) an amount equal to 2.99 (or, if less, the number of years remaining
until the Executive's attainment of age 65) times the Executive's
annual salary rate in effect immediately prior to the Change in
Control;
(b) an amount equal to 2.99 (or, if less, the number of years remaining
until the Executive's attainment of age 65) times the Executive's
short term incentive award and other bonuses payable for the calendar
year preceding the Change in Control; and
(c) the actuarial equivalent of the additional pension benefits which the
Executive would have accrued under the terms of the Ameritech
Management Pension Plan, the Ameritech Senior Management Retirement
and Survivor Protection Plan and each other tax-qualified or
nonqualified defined benefit pension plan maintained by the Company
(determined without regard to any termination or any amendment
adversely affecting the Executive which is adopted on or after a
Change in Control or in contemplation of a Change in Control) if, on
the date of Termination, the Executive had been credited with two
additional years of service and two additional years of compensation
at his annual base salary rate and target short term incentive award
in effect on the date of the Change in Control for benefit accrual
purposes and were two years older than his actual age on such date;
provided, however, that the additional service, compensation and age
credits under this paragraph (c) shall be proportionately reduced if
the Executive is at least age 63 on the date of termination and
eliminated if the Executive is age 65 or older on such date. For
purposes of this subparagraph (c), actuarial equivalence shall be
determined in accordance with the terms of the Ameritech Senior
Management Retirement and Survivor Protection Plan for purposes of
lump sum payments under that plan, but without regard to any amendment
of that plan adopted on or after a Change in Control or in
contemplation of a Change in Control which would reduce the amount of
such lump sum payment.
For purposes of this Agreement, the Executive's employment with the Company
shall be deemed to have been involuntarily terminated by the Company if the
Executive's duties and responsibilities are significantly diminished by the
Company without the Executive's consent. For purposes of this Agreement, the
term "Disability" means an incapacity, due to physical injury or illness or
mental illness, causing a Participant to be unable to perform his duties for the
Company on a full-time basis for a period of at least six consecutive months and
the term "Just Cause" means willful misconduct, dishonesty, conviction of a
felony or excessive absenteeism not related to illness or disability.
5. Tax Limitations. If any payments under this Agreement, after taking
in account all other payments to which the Executive is entitled from the
Company, or any affiliate thereof, are more likely than not to result in a loss
of a deduction to the Company by reason of section 280G of the Internal Revenue
Code of 1986 or any successor provision to that section, such payments shall be
reduced by the least amount required to avoid such loss of deduction. If the
Executive and the Company shall disagree as to whether a payment under this
Agreement is more likely than not to result in the loss of a deduction, the
matter shall be resolved by an opinion of tax counsel chosen by the Company's
independent auditors. The Company shall pay the fees and expenses of such
counsel, and shall make available such information as may be reasonably
requested by such counsel to prepare the opinion. If, by reason of the
limitations of this paragraph 5, the maximum amount payable to the Executive
under paragraph 4 above cannot be determined prior to the due date for such
payment, the Company shall pay on the due date the minimum amount which it in
good faith determines to be payable and shall pay the remaining amount, with
interest calculated at the rate prescribed by section 1274(b)(2)(B) of the
Internal Revenue Code of 1986, as soon as such remaining amount is determined in
accordance with this paragraph 5.
6. Source of Payments and Withholding. Any amount payable under the
terms of this Agreement shall be paid from the general assets of the Company or
from one or more trusts, the assets of which are subject to the claims of the
Company's general creditors. All payments to the Executive under this Agreement
will be subject to all applicable withholding of state and federal taxes.
7. Arbitration of All Disputes. Any controversy or claim arising out of
or relating to this Agreement or the breach thereof shall be settled by
arbitration in the City of Chicago, in accordance with the laws of the
3
<PAGE>
State of Illinois, by three arbitrators, one of whom shall be appointed by the
Company, one by the Executive and third of whom shall be appointed by the first
two arbitrators. If the first two arbitrators cannot agree on the appointment of
a third arbitrator, then the third arbitrator shall be appointed by the Chief
Judge of the United States Court of Appeals for the Seventh Circuit. The
arbitration shall be conducted in accordance with the rules of the American
Arbitration Association, except with respect to the selection of arbitrators
which shall be as provided in this paragraph 11. Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof. In the event that it shall be necessary or desirable for the Executive
to retain legal counsel or incur other costs and expenses in connection with
enforcement of his rights under this Agreement, the Company shall pay (or the
Executive shall be entitled to recover from the Company, as the case may be) his
reasonable attorneys' fees and costs and expenses in connection with enforcement
of his rights (including the enforcement of any arbitration award in court).
Payments shall be made to the Executive at the time such fees, costs and
expenses are incurred. If, however, the arbitrators shall determine that, under
the circumstances, payment by the Company of all or a part of any such fees and
costs and expenses would be unjust, the Executive shall repay such amounts to
the Company in accordance with the order of the arbitrators.
8. Mitigation and Set-Off. The Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise. The Company shall not be entitled to set off
against the amounts payable to the Executive under this Agreement any amounts
owed to the Company by the Executive, any amounts earned by the Executive in
other employment after termination of his employment with the Company, or any
amounts which might have been earned by the Executive in other employment had he
sought such other employment.
9. Severance Pay Plan. During the Term of this Agreement, the Executive
shall not participate in or have any rights under either the Ameritech Senior
Management Severance Pay Plan or the Ameritech Management Employees Severance
Pay Plan.
10. Non-Alienation. The Executive shall not have any right to pledge,
hypothecate, anticipate or in any way create a lien upon any amounts provided
under this Agreement; and no benefits payable hereunder shall be assignable in
anticipation of payment either by voluntary or involuntary acts, or by operation
of law. Nothing in this paragraph shall limit the Executive's rights or powers
to dispose of his property by will or limit any rights or powers which his
executor or administrator would otherwise have.
11. Governing Law. The provisions of this Agreement shall be construed in
accordance with the laws of the State of Illinois.
12. Amendment. This Agreement may be amended or canceled by mutual
agreement of the parties in writing without the consent of any other person and,
so long as the Executive lives, no person, other than the parties hereto, shall
have any rights under or interest in this Agreement or the subject matter
hereof.
13. Successors to the Company. This Agreement shall be binding upon and
inure to the benefit of the Company and any successor of the Company. The
Company will require any successor (whether director 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 would be
required to perform it if no succession had taken place.
14. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect.
15. Counterparts. This Agreement may be executed in two or more
counterparts, any one of which shall be deemed the original without reference to
the others.
4
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name and on its behalf, and its corporate seal to
be hereunto affixed and attested by its Secretary, all as of the date and year
first above written.
/s/ Barry K. Allen
Executive
Ameritech Corporation
By /s/ Bruce B. Howat
Its Secretary
ATTEST:
Marilyn S. Spracker
Assistant Secretary
5
<PAGE>
AGREEMENT REGARDING
CHANGE IN CONTROL
-----------------
This Agreement entered into as of the 1st day of November, 1995, by and
between Ameritech Corporation, a Delaware corporation (the "Company"), and
Timothy M. Connolly (the "Executive"),
WITNESSETH THAT:
---------------
WHEREAS, the Company wishes to induce the Executive to remain in its
employ, to provide fair and equitable treatment and a competitive compensation
package to the Executive, and to assure continued attention of the Executive to
his duties without any distraction arising out of uncertain personal
circumstances in a change in control environment; and
WHEREAS, the Company recognizes that in the event of a change in control of
the Company it is likely that the Executive's authorities, duties and
responsibilities would be substantially altered; and
WHEREAS, the Company and the Executive accordingly desire to enter into
this Agreement on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein, it is hereby agreed by and between the parties as follows:
1. Term of Agreement. The "Term" of this Agreement shall commence on the
date hereof and shall continue through December 31, 1996; provided, however,
that on such date and on each December 31 thereafter, the Term of this Agreement
shall automatically be extended for one additional year (but not beyond the
Executive's attainment of age 65) unless, not later than the preceding November
1 the Company shall have given notice that it does not wish to extend the Term;
and provided, further, that if a Change in Control (as defined in paragraph 2
below) shall have occurred during the original or any extended Term of this
Agreement, the Term of this Agreement shall continue for a period of twenty-four
months beyond the month in which such Change in Control occurs, but not beyond
the Executive's attainment of age 65.
2. Change in Control. For purposes of this Agreement, the term "Change in
Control" means a change in the beneficial ownership of the Company's voting
stock or a change in the composition of the Company's Board of Directors which
occurs as follows:
(a) any "person" (as such term is used in Section 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934) other than:
(i) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, or
(ii) the Executive or any person acting in concert with the Executive
is or becomes a beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of stock of
the Company representing 20% or more of the total voting power of the
Company's then outstanding stock; provided, however, that this
subparagraph (a) shall not apply to any tender offer made pursuant to
an agreement with the Company approved by the Company's Board of
Directors and entered into before the offeror has become a beneficial
owner of stock of the Company representing 5% or more of the combined
voting power of the Company's then outstanding stock;
<PAGE>
(b) a tender offer is made for the stock of the Company, and the person
making the offer owns or has accepted for payment stock of the Company
representing 20% or more of the total voting power of the Company's
then outstanding stock; provided, however, that this subparagraph (b)
shall not apply to any tender offer made pursuant to an agreement with
the Company approved by the Company's Board of Directors and entered
into before the offeror has become a beneficial owner of stock of the
Company representing 5% or more of the combined voting power of the
Company's then outstanding stock;
(c) during any period of 24 consecutive months there shall cease to be a
majority of the Board of Directors comprised as follows: individuals
who at the beginning of such period constitute the Board of Directors
and any new director(s) whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by
a vote of at least two-third (2/3) of the directors then still in
office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved;
or
(d) the stockholders of the Company approve a merger or consolidation of
the Company with any other company other than:
(i) a merger or consolidation which would result in the Company's
voting stock outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting stock of the surviving entity) more than 70% of the
combined voting power of the Company's or such surviving entity's
outstanding voting stock immediately after such merger or
consolidation; or
(ii) a merger or consolidation which would result in the directors of
the Company who were directors immediately prior thereto
continuing to constitute at least 50% of the directors of the
surviving entity immediately after such merger or consolidation.
For purposes of subparagraph (d) above, the phrase "surviving entity" shall mean
only an entity in which all of the Company's stockholders who are stockholders
immediately before the merger or consolidation (other than stockholders
exercising dissenter rights) become stockholders by the terms of the merger or
consolidation, and the phrase "directors of the Company who were directors
immediately prior thereto" shall not include (A) any director of the Company who
was designated by a person who has entered into an agreement with the Company to
effect a transaction described in subparagraph (a) or subparagraph (d) above, or
(B) any director who was not a director at the beginning of the 24-consecutive-
month period preceding the date of such merger or consolidation, unless his
election by the Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors who were directors before the beginning of such period.
3. Compensation After a Change in Control. During any period in which
the Executive is employed by the Company after a Change in Control, there shall
be no reduction in the base salary, long and short term incentives and bonuses,
employee benefits (including medical insurance, disability income protection,
and life insurance and death benefits), fringe benefits and perquisites to which
the Executive was entitled prior to the Change in Control.
4. Severance Payments. Subject to the provisions of paragraphs 5 and 6
below, in the event that (i) the Executive's employment with the Company is
involuntarily terminated by the Company for any reason other than death,
Disability (as defined below) or Just Cause (as defined below) during the
twenty-four month period following a Change in Control or (ii) the Executive's
employment with the Company is terminated by the Executive for any reason during
the thirty-day period beginning on the first anniversary of a Change in Control,
the Executive shall continue to receive all medical insurance, disability income
protection, life insurance coverage and death benefits, fringe benefits and
perquisites to which the Executive was entitled prior to the Change in Control
for a period of not less than the 24
2
<PAGE>
consecutive months immediately following the date of his termination of
employment, and shall be entitled to a lump sum payment in cash no later than
ten business days and no earlier than two business days after the date of
termination equal to the sum of:
(a) an amount equal to 2.99 (or, if less, the number of years remaining
until the Executive's attainment of age 65) times the Executive's
annual salary rate in effect immediately prior to the Change in
Control;
(b) an amount equal to 2.99 (or, if less, the number of years remaining
until the Executive's attainment of age 65) times the Executive's
short term incentive award and other bonuses payable for the calendar
year preceding the Change in Control; and
(c) the actuarial equivalent of the additional pension benefits which the
Executive would have accrued under the terms of the Ameritech
Management Pension Plan, the Ameritech Senior Management Retirement
and Survivor Protection Plan and each other tax-qualified or
nonqualified defined benefit pension plan maintained by the Company
(determined without regard to any termination or any amendment
adversely affecting the Executive which is adopted on or after a
Change in Control or in contemplation of a Change in Control) if, on
the date of Termination, the Executive had been credited with two
additional years of service and two additional years of compensation
at his annual base salary rate and target short term incentive award
in effect on the date of the Change in Control for benefit accrual
purposes and were two years older than his actual age on such date;
provided, however, that the additional service, compensation and age
credits under this paragraph (c) shall be proportionately reduced if
the Executive is at least age 63 on the date of termination and
eliminated if the Executive is age 65 or older on such date. For
purposes of this subparagraph (c), actuarial equivalence shall be
determined in accordance with the terms of the Ameritech Senior
Management Retirement and Survivor Protection Plan for purposes of
lump sum payments under that plan, but without regard to any amendment
of that plan adopted on or after a Change in Control or in
contemplation of a Change in Control which would reduce the amount of
such lump sum payment.
For purposes of this Agreement, the Executive's employment with the Company
shall be deemed to have been involuntarily terminated by the Company if the
Executive's duties and responsibilities are significantly diminished by the
Company without the Executive's consent. For purposes of this Agreement, the
term "Disability" means an incapacity, due to physical injury or illness or
mental illness, causing a Participant to be unable to perform his duties for the
Company on a full-time basis for a period of at least six consecutive months and
the term "Just Cause" means willful misconduct, dishonesty, conviction of a
felony or excessive absenteeism not related to illness or disability.
5. Tax Limitations. If any payments under this Agreement, after taking
in account all other payments to which the Executive is entitled from the
Company, or any affiliate thereof, are more likely than not to result in a loss
of a deduction to the Company by reason of section 280G of the Internal Revenue
Code of 1986 or any successor provision to that section, such payments shall be
reduced by the least amount required to avoid such loss of deduction. If the
Executive and the Company shall disagree as to whether a payment under this
Agreement is more likely than not to result in the loss of a deduction, the
matter shall be resolved by an opinion of tax counsel chosen by the Company's
independent auditors. The Company shall pay the fees and expenses of such
counsel, and shall make available such information as may be reasonably
requested by such counsel to prepare the opinion. If, by reason of the
limitations of this paragraph 5, the maximum amount payable to the Executive
under paragraph 4 above cannot be determined prior to the due date for such
payment, the Company shall pay on the due date the minimum amount which it in
good faith determines to be payable and shall pay the remaining amount, with
interest calculated at the rate prescribed by section 1274(b)(2)(B) of the
Internal Revenue Code of 1986, as soon as such remaining amount is determined in
accordance with this paragraph 5.
3
<PAGE>
6. Source of Payments and Withholding. Any amount payable under the
terms of this Agreement shall be paid from the general assets of the Company or
from one or more trusts, the assets of which are subject to the claims of the
Company's general creditors. All payments to the Executive under this Agreement
will be subject to all applicable withholding of state and federal taxes.
7. Arbitration of All Disputes. Any controversy or claim arising out of
or relating to this Agreement or the breach thereof shall be settled by
arbitration in the City of Chicago, in accordance with the laws of the State of
Illinois, by three arbitrators, one of whom shall be appointed by the Company,
one by the Executive and third of whom shall be appointed by the first two
arbitrators. If the first two arbitrators cannot agree on the appointment of a
third arbitrator, then the third arbitrator shall be appointed by the Chief
Judge of the United States Court of Appeals for the Seventh Circuit. The
arbitration shall be conducted in accordance with the rules of the American
Arbitration Association, except with respect to the selection of arbitrators
which shall be as provided in this paragraph 11. Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof. In the event that it shall be necessary or desirable for the Executive
to retain legal counsel or incur other costs and expenses in connection with
enforcement of his rights under this Agreement, the Company shall pay (or the
Executive shall be entitled to recover from the Company, as the case may be) his
reasonable attorneys' fees and costs and expenses in connection with enforcement
of his rights (including the enforcement of any arbitration award in court).
Payments shall be made to the Executive at the time such fees, costs and
expenses are incurred. If, however, the arbitrators shall determine that, under
the circumstances, payment by the Company of all or a part of any such fees and
costs and expenses would be unjust, the Executive shall repay such amounts to
the Company in accordance with the order of the arbitrators.
8. Mitigation and Set-Off. The Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise. The Company shall not be entitled to set off
against the amounts payable to the Executive under this Agreement any amounts
owed to the Company by the Executive, any amounts earned by the Executive in
other employment after termination of his employment with the Company, or any
amounts which might have been earned by the Executive in other employment had he
sought such other employment.
9. Severance Pay Plan. During the Term of this Agreement, the Executive
shall not participate in or have any rights under either the Ameritech Senior
Management Severance Pay Plan or the Ameritech Management Employees Severance
Pay Plan.
10. Non-Alienation. The Executive shall not have any right to pledge,
hypothecate, anticipate or in any way create a lien upon any amounts provided
under this Agreement; and no benefits payable hereunder shall be assignable in
anticipation of payment either by voluntary or involuntary acts, or by operation
of law. Nothing in this paragraph shall limit the Executive's rights or powers
to dispose of his property by will or limit any rights or powers which his
executor or administrator would otherwise have.
11. Governing Law. The provisions of this Agreement shall be construed in
accordance with the laws of the State of Illinois.
12. Amendment. This Agreement may be amended or canceled by mutual
agreement of the parties in writing without the consent of any other person and,
so long as the Executive lives, no person, other than the parties hereto, shall
have any rights under or interest in this Agreement or the subject matter
hereof.
13. Successors to the Company. This Agreement shall be binding upon and
inure to the benefit of the Company and any successor of the Company. The
Company will require any successor (whether director 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 would be
required to perform it if no succession had taken place.
4
<PAGE>
14. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect.
15. Counterparts. This Agreement may be executed in two or more
counterparts, any one of which shall be deemed the original without reference to
the others.
5
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name and on its behalf, and its corporate seal to
be hereunto affixed and attested by its Secretary, all as of the date and year
first above written.
/s/ Timothy M. Connolly
Executive
Ameritech Corporation
By /s/ Bruce B. Howat
Its Secretary
ATTEST:
/s/ Marilyn S. Spracker
Assistant Secretary
6
<PAGE>
AMERITECH KEY MANAGEMENT
LIFE INSURANCE PLAN
-------------------
(As Amended and Restated Effective as of December 1, 1995)
<PAGE>
AMERITECH KEY MANAGEMENT
LIFE INSURANCE PLAN
-------------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
SECTION PAGE
- ------- ----
<S> <C> <C>
1 General 1
History, Purpose and Effective Date 1
Governing Documents 1
Plan Administration 1
Non-Alienation 1
Source of Benefits 2
Plan Year 2
Policy Year 2
Notices 2
Applicable Laws 2
Gender and Number 2
2 Participation 2
Participation 2
Plan Not Contract of Employment 3
3 Benefits 3
Available Coverage 3
Automatic Increases in Policy Coverage 3
Elected Increases and Decreases in Coverage 3
Cost 3
Cash Value 4
Limitation on Benefits 4
4 Split-Dollar and Collateral Assignment Agreements 4
Introduction 4
Insurance Policy 4
Policy Ownership 4
Payment of Premiums 5
Collateral Assignment Agreement 6
Limitations on Participant's Rights under Policy 7
Collection and Payment of Death Benefit 7
Termination of Split-Dollar Agreement 8
Options on Termination of Split-Dollar Agreement 10
</TABLE>
i
<PAGE>
AMERITECH KEY MANAGEMENT
LIFE INSURANCE PLAN
-------------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
SECTION PAGE
- ------- ----
<S> <C> <C>
5 Plan Administration 11
Plan Administrator; Administration 11
Determination of Benefits 11
6 Miscellaneous 11
Amendment and Termination 11
Validity 12
Administrative Amendments 12
</TABLE>
ii
<PAGE>
AMERITECH KEY MANAGEMENT
LIFE INSURANCE PLAN
-------------------
(As Amended and Restated Effective as of December 1, 1995)
SECTION 1
---------
General
-------
1.1 History, Purpose and Effective Date. Effective July 1, 1990 (the
"Effective Date"), Ameritech Corporation, a Delaware corporation (the
"Company"), established the Ameritech Key Management Life Insurance Plan (the
"Plan"), as a substitute for the Ameritech Senior Management Life Insurance Plan
and for the regular death benefits provided under the Ameritech Group Life
Insurance Plan for electing, eligible employees. The purpose of the Plan is to
enable corporate resource managers of the Company and of any Subsidiary or
Affiliate of the Company which adopts the Plan (an "Employer") to purchase whole
life insurance coverage (a "Policy") from one or more insurance companies (the
"Insurer") designated by the Company, pursuant to a collateral assignment,
split-dollar arrangement with the Company. The term "Subsidiary" means any
corporation of which the Company owns at least 50% of the combined voting power
of all classes of stock entitled to vote. The term "Affiliate" means any
corporation other than a Subsidiary which would be a member of a controlled
group of corporations with the Company under section 1563(a) of the Internal
Revenue Code of 1986, as amended. The following provisions constitute an
amendment, restatement and continuation of the Plan, effective as of
December 1, 1995.
1.2 Governing Documents. In the event of any inconsistency between the
terms of the Plan as described herein and the terms of any Policy purchased by a
Participant (defined in subsection 2.1), or any related Split-Dollar Agreement
or Collateral Assignment Agreement (as described in Section 4) executed by a
Participant, the terms of such policy or agreement shall be controlling as to
that Participant, his assignee (if any), his successor-in-interest (if any) and
his beneficiary or beneficiaries.
1.3 Plan Administration. The authority to control and manage the day-to-
day operation and administration of the Plan is vested in the Company's Senior
Vice President-Human Resources (the "Plan Administrator") or such other officer
of the Company as its Board of Directors shall designate; provided, however,
that any action required or permitted to be taken by the Plan Administrator may
be taken by the Compensation Committee of the Company's Board of Directors (the
"Committee").
1.4 Non-Alienation. Except to the extent provided under subsection 4.5 and
under the terms of a Policy and the related Split-Dollar and Collateral
Assignment Agreements, no Participant's benefits under the Plan may be
voluntarily or involuntarily assigned or alienated.
1
<PAGE>
1.5 Source of Benefits. Any benefit payable to or on account of a
Participant under this Plan shall be paid by the Insurer.
1.6 Plan Year. The "Plan Year" shall be July 1, 1990 to December 31, 1990
and each calendar year thereafter.
1.7 Policy Year. The "Policy Year" shall mean the 12-consecutive month
period designated as such in a Policy. For Policies issued during the initial
enrollment period coinciding with the Effective Date, the Policy Year shall be
July 1, 1990 to June 30, 1991 and each subsequent 12-consecutive month period
beginning on July 1.
1.8 Notices. Any notice or document required to be given to or filed with
the Plan Administrator shall be considered to be given or filed if delivered to
the Administrator of the Plan or mailed by registered mail, postage prepaid to
the Administrator, in care of the Company, at 30 South Wacker Drive, Chicago,
Illinois 60606.
1.9 Applicable Laws. The Plan shall be construed and administered in
accordance with the internal laws of the State of Illinois, except to the extent
preempted by Federal law.
1.10 Gender and Number. Where the context admits, words in any gender shall
include any other gender, words in the singular shall include the plural and the
plural shall include the singular.
SECTION 2
---------
Participation
-------------
2.1 Participation. The following individuals shall be eligible to become
Participants in the Plan:
(a) Any member of the Company's Management Committee; and
(b) Any full time management employee on the active roll of the Company or
any Employer (i) who has attained any of salary grades CR 1 through 9,
or (ii) who is an attorney in either of salary grades IV or V.
Each eligible individual described in subparagraph (a) or (b) above
shall become a Participant in the Plan as of the date on or after the
Effective Date on which he purchases a Policy pursuant to the terms of
this Plan and executes a related "Split-Dollar Agreement" and
"Collateral Assignment Agreement" as set forth in Section 4 hereof.
Notwithstanding the foregoing provisions of this subsection 2.1, an
individual who would only qualify as a Participant because of a
temporary assignment to a position described in subparagraph (a) or
(b) above shall not be eligible to participate in this Plan, unless
the Plan Administrator, in his sole
2
<PAGE>
discretion, determines that participation in this Plan should be
extended to such individual as part of the benefit package offered to
him during his temporary assignment. The term Participant shall also
include individuals who would have been described in subparagraph (a)
or (b) of this subsection 2.1 had they not retired from the Company
between March 1, 1990 and the Effective Date. Any Participant who
elects to participate in this Plan by purchasing a Policy shall be
deemed by such election to have waived any rights such employee or his
beneficiary may have had to benefits under the Ameritech Senior
Management Life Insurance Plan and to regular death benefits under the
Ameritech Group Life Insurance Plan.
2.2 Plan Not Contract of Employment. The Plan does not constitute a
contract of employment, and nothing in the Plan will give any employee or
Participant the right to be retained in the employ of the Company or an
Employer, nor the right to any incentive award, nor any right or claim to any
benefit under the Plan, except to the extent specifically provided under the
terms of the Plan.
SECTION 3
---------
Benefits
--------
3.1 Available Coverage. Subject to satisfying any insurability
requirements of the Insurer, each Participant may purchase a Policy providing
whole life insurance coverage that will pay a death benefit equal to a multiple
of, but not to exceed five times, the sum of the Participant's then applicable
market rate and target bonus award, rounded to the next higher $1,000, prior to
adjustment under the terms of the Split-Dollar Agreement and Collateral
Assignment Agreement executed by such Participant in accordance with section 4.
3.2 Automatic Increases in Policy Coverage. The total amount described in
subsection 3.1 payable as a death benefit (based upon the Participant's market
rate and target bonus award at the time he purchases the Policy) under a Policy
shall be indexed at the rate of 7% for each Policy Year (following the initial
Policy Year) that begins while he remains employed by the Company or an
Employer, and rounded to the next higher $1,000.
3.3 Elected Increases and Decreases in Coverage. In accordance with the
terms of the Plan, and subject to satisfying any insurability requirements of
the Insurer, the Participant, prior to his termination of employment with the
Company and the Employers, may elect to increase or decrease the amount payable
as a death benefit (within the limits set forth in subsection 3.1) in such form
and at such time as the Company and the Insurer may require.
3.4 Cost. The cost of providing the life insurance coverage under any
Policy purchased by a Participant shall be shared between the Participant (or
owner other than the Participant, if applicable) and the Company in accordance
with the terms of such policy and the
3
<PAGE>
related Split-Dollar Agreement and Collateral Assignment Agreement executed by
the Participant, as described in subsection 4.4.
3.5 Cash Value. Each Policy purchased by a Participant shall be designed
to have a cash value. In accordance with the specific terms of the Policy
purchased by a Participant and subject to the related Split-Dollar Agreement and
Collateral Assignment Agreement executed by that Participant, the Participant
may be entitled to withdraw his interest in such cash value, surrender it for a
lump sum cash payment or convert it to an annuity, with a corresponding
reduction in the death benefit payable under the Policy.
3.6 Limitation on Benefits. The amount of benefits payable to or on
account of a Participant pursuant to this Plan shall not exceed the total amount
of death proceeds and other benefits payable by the Insurer under any Policy
purchased by the Participant, reduced by the amount of such death proceeds to
which the Company is entitled pursuant to the Split-Dollar Agreement and
Collateral Assignment Agreement executed by the Participant.
SECTION 4
---------
Split-Dollar and Collateral Assignment Agreements
-------------------------------------------------
4.1 Introduction. The Split-Dollar Agreement and Collateral Assignment
Agreement executed by the Participant in conjunction with his purchase of a
Policy shall establish the rights of the Company to the proceeds of any such
Policy acquired by the Participant. The terms of the particular Split-Dollar
Agreement and Collateral Assignment Agreement executed by a Participant shall
apply solely to that Participant.
4.2 Insurance Policy. The Policy shall be purchased by the Participant.
The Company shall take all reasonable steps necessary to enable the Insurer to
issue the Policy, and to comply with any reasonable request to take any further
action which may be necessary to cause the Policy to conform to the provisions
of this Plan. The Participant's rights under any Policy purchased by such
Participant shall be subject to the terms and conditions of the related Split-
Dollar Agreement and Collateral Assignment Agreement executed by the
Participant.
4.3 Policy Ownership. Unless the Participant assigns the ownership of the
Policy to another person in accordance with the terms thereof and of the related
Split-Dollar and Collateral Assignment Agreements, the Participant shall be the
sole and absolute owner of any Policy purchased by him, and may exercise all
ownership rights granted to the owner thereof by the terms of the Policy, except
as may otherwise be provided in the related Split-Dollar and Collateral
Assignment Agreements executed by the Participant.
4
<PAGE>
4.4 Payment of Premiums. While the Split-Dollar Agreement remains in
effect:
(a) Except as otherwise provided in the Split-Dollar Agreement, the
premium to be paid to the Insurer for the Policy in each Policy Year
("Total Policy Year Premium") shall be set forth in an exhibit
("Exhibit") attached to the Split-Dollar Agreement.
(b) Except as otherwise provided in the Split-Dollar Agreement, on or
before the date of such Split-Dollar Agreement as to the first Policy
Year and on or before the first day of each next succeeding Policy
Year, or within the grace period provided in the Policy, the Company
shall pay to the Insurer the Total Policy Year Premium set forth in
the Exhibit for that Policy Year. However, for purposes of determining
the amount due the Company as a result of its payments toward the
premiums on the Policy, in each Policy Year the Company shall be
deemed to have paid only that portion of the premium (the "Company's
Policy Year Net Premium Payment") for which it has not received
payment from the Participant as the Participant's contribution to the
premium as provided for in paragraph (c) next below.
(c) Except as otherwise provided herein, as to each Plan Year, a certain
amount of contribution to the premium shall be due from the
Participant (the "Participant's Plan Year Contribution to Premium")
for such Plan Year, provided, however, that if the ownership of the
Policy has been assigned to another person pursuant to the terms of
such Policy and of the related Split-Dollar and Collateral Assignment
Agreements such assignee shall be responsible for meeting the premium
obligations set forth herein instead of the Participant. This amount
shall be based upon the annual cost of the current life insurance
coverage provided to the Participant for such Plan Year and shall be
equal to the "Economic Benefit" of such current life insurance
coverage for Federal income tax purposes, as provided in Revenue
Ruling 64-328 (or the corresponding applicable provisions of any
future Revenue Ruling) or as otherwise provided for Federal income tax
purposes. The Participant shall be required to pay the Participant's
Plan Year Contribution to Premium to the Company for each such Plan
Year, subject to any assignment of the Policy in accordance with the
terms thereof and of the related Split-Dollar and Collateral
Assignment Agreements. So long as the Participant's employment with
the Company or an Employer continues and unless the Company and the
Participant agree otherwise, the Company shall deduct the
Participant's Plan Year Contribution to Premium from the Participant's
normal salary payments on a level basis during the Plan Year, except
as to the first Plan Year, during which the Participant's Plan Year
Contribution to Premium shall be deducted on a level basis beginning
as of the date of enrollment, and except as to the last Plan Year,
during which the Participant's Plan Year Contribution to Premium shall
be deducted on a level basis ending as of the date of the termination
of the Split-Dollar Agreement. Upon the termination of the
Participant's employment with the Company or an Employer in any Plan
Year and continuing until the
5
<PAGE>
termination of the Split-Dollar Agreement, the Participant shall be
required to pay the balance of the Participant's Plan Year
Contribution to Premium for such Plan Year (which has not theretofore
been deducted from the Participant's salary) generally within ninety
(90) days of such termination of the Participant's employment with the
Company or an Employer, and the Participant shall be required to pay
the Participant's Plan Year Contribution to Premium for each
succeeding Plan Year generally within ninety (90) days of the premium
payment date for the Policy for each such Plan Year. In all events,
the Participant shall pay the Participant's Plan Year Contribution to
Premium prior to the end of each such Plan Year. For the Plan Year in
which the Participant dies, the Participant's employment with the
Company or an Employer is terminated, or the Split-Dollar Agreement is
otherwise terminated, an appropriate adjustment shall be made to the
Participant's Plan Year Contribution to Premium for such Plan Year to
reflect such event.
(d) If the Participant's employment with the Company or an Employer
terminates before the Participant attains age sixty-five (65) but the
Split-Dollar Agreement remains in effect (hereinafter referred to as
"Early Retirement"), then in the Policy Year in which the
Participant's employment with the Company or Employer terminates and
in each Policy Year thereafter until the termination of the Split-
Dollar Agreement, the Company shall pay to the Insurer (in lieu of the
amount set forth in the Exhibit to the Agreement) only such amount, if
any, as shall be necessary to ensure Adequate Policy Funding (as
defined below), or shall receive from the Insurer, out of partial
surrenders of Policy additions (or otherwise), any Policy cash values
in excess of that level of Policy cash value necessary to ensure
Adequate Policy Funding, but in no event shall the Company receive
more than the then cumulative total amount of the Company's Policy
Year Net Premium Payment amounts. "Adequate Policy Funding" shall mean
that level of Policy cash value on termination of the Split-Dollar
Agreement, assuming such termination occurs under paragraph 4.8(a)(v)
hereof, which would be sufficient to fund the reduced level of death
benefit provided hereunder in the event of such Participant's Early
Retirement (the "Participant's Death Benefit Upon Termination", as
hereinafter defined), after recovery of the Company Cumulative Net
Premium Payment at Termination (as defined in paragraph 4.9(a)), based
on the original policy configuration assumptions and the fact of such
Participant's Early Retirement. For purposes of this paragraph (d),
the Company may rely conclusively upon, and shall be held harmless in
relying upon, the determination of the Insurer as to any such further
premium obligation or any recovery of such excess Policy cash values.
4.5 Collateral Assignment Agreement. To secure the payment to the Company
of the amount due it hereunder as a result of its payments toward the premiums
on the Policy, the Participant shall contemporaneously with its purchase and the
execution of the Split-Dollar Agreement assign the Policy in favor of the
Company as collateral pursuant to a written agreement, which collateral
assignment shall specifically provide that the sole right of the
6
<PAGE>
Company thereunder is to be paid the amount due it under the Split-Dollar
Agreement as a result of its payments toward the premiums on the Policy. Such
payment shall be made from the cash value of the Policy (as defined therein) if
the Split-Dollar Agreement is terminated or if the Participant surrenders or
cancels the Policy while the related Split-Dollar Agreement remains in effect,
or from the death benefit provided under the Policy, if the Participant dies
while the Policy and the related Split-Dollar Agreement remain in effect. Except
as provided in paragraph 4.4(d), in no event shall the Company have any right to
borrow against or withdraw amounts from the Policy, to surrender or cancel the
Policy, or take any other action which would impair or defeat the rights of the
Participant as the owner of the Policy. The collateral assignment of the Policy
to the Company shall not be terminated, altered or amended by the Participant
while the Split-Dollar Agreement is in effect. The Participant and the Company
shall take all action necessary to cause such collateral assignment to conform
to the provisions of the Split-Dollar Agreement.
4.6 Limitations on Participant's Rights under Policy. Unless he has
assigned the ownership of the Policy pursuant to the terms of such Policy and of
the related Split-Dollar and Collateral Assignment Agreements, as the sole and
absolute owner of the Policy the Participant may exercise all of the rights,
options, privileges and other incidents of ownership granted to the owner
thereof by the terms of the Policy (including, without limitation, the unlimited
ability to borrow against or withdraw amounts from the cash value of the Policy
and to surrender or cancel the Policy). Notwithstanding the foregoing, so long
as the Split-Dollar Agreement remains in effect: (a) the Participant shall not
take any action with respect to the Policy which would have a direct or indirect
adverse effect on the Company's interests under the Split-Dollar Agreement in
the Policy without the Company's prior written consent; and (b) except with
respect to the Participant's right to change the beneficiaries of the
Participant's Death Benefit, as defined in subparagraph (iii) of paragraph
4.7(b), and to assign the Participant's interests in the Policy and under the
related Split-Dollar Agreement as may be provided therein, the Participant shall
not take any other action with respect to the Policy (regardless of whether it
would directly or indirectly adversely affect the Company's interests under the
Split-Dollar Agreement in the Policy) without the Company's prior written
consent. For purposes of this subsection 4.6, the Participant may borrow against
or withdraw from the cash value of the Policy any amounts which may be required
to be paid to the Company and which are due the Company under paragraph 4.4(c),
so long as the amount of any such loan or withdrawal is chargeable solely
against the Participant's Death Benefit and that portion of the cash value of
the Policy which is in excess of the cash value of the Policy due the Company
under the related Split-Dollar Agreement as a result of its payments toward the
premiums on the Policy pursuant to the Collateral Assignment Agreement.
4.7 Collection and Payment of Death Benefit.
(a) Upon the death of the Participant while the Split-Dollar Agreement
remains in effect, the Company and the Participant's beneficiary shall
promptly take all action necessary to obtain the death benefit
provided under the Policy and payable as a result of the maturity of
the Policy (the "Death Benefit").
7
<PAGE>
(b) The Death Benefit shall be paid as follows:
(i) The Company shall first be paid from the Death Benefit any
unpaid amount of the Participant's Plan Year Contribution to
Premium owed to it by the Participant under paragraph 4.4(c).
(ii) The Company shall next be paid from the Death Benefit the total
net amount of the payments made by it toward the premiums of
the Policy. Such amount shall be the sum of the Company's
Policy Year Net Premium Payment amounts under paragraph 4.4(b)
(the "Company's Cumulative Net Premium Payment"), less any
amounts received by the Company pursuant to paragraph 4.4(d).
(iii) The Participant's beneficiary under a Policy shall next be
paid, in the manner and in the amount or amounts provided in
the beneficiary designation provision of the Policy, from the
Death Benefit an amount equal to the Participant's Death
Benefit. For purposes of this subparagraph (iii), the
"Participant's Death Benefit" shall be an amount equal to the
least of (A) the maximum death benefit set forth in the Exhibit
to the Agreement (the "Participant's Maximum Death Benefit")
for the Policy Year in which the Participant shall have died,
(B) the Participant's Death Benefit Upon Termination, or (C)
that portion of the Death Benefit remaining after the payments
provided for in subparagraphs (i) and (ii) of this subparagraph
4.7(b), and then reduced by any loan chargeable against the
Participant's Death Benefit. For purposes of this subparagraph
(iii), the "Participant's Death Benefit Upon Termination" shall
be the amount set forth in the Exhibit for the Policy Year in
which the Participant's employment with the Company terminates.
(iv) The Company shall receive the balance, if any, of the Death
Benefit remaining after the payments provided for in
subparagraphs (i), (ii) and (iii) of this paragraph 4.7(b).
(c) The beneficiary designation provision of the Policy shall conform to
the provisions hereof.
4.8 Termination of Split-Dollar Agreement.
(a) The Split-Dollar Agreement shall terminate, without notice, on the
first day of the month following the month during which the first of
the following events occurs:
(i) the Participant (or the assignee of his Policy) fails to make
any premium payment required under paragraph 4.4(c) for any
Plan Year by the end of such Plan Year or the Participant (or
assignee) notifies the Company that the Participant (or
assignee) intends to surrender or cancel the Policy;
8
<PAGE>
(ii) the Participant's employment with the Company or an Employer
terminates before the date upon which the Participant becomes
retirement eligible, as defined in paragraph (c) below;
(iii) the Participant is demoted by the Company or an Employer to a
position below that of a management employee described in
subparagraphs 2.1(a) and (b), even if the demotion occurs on or
after the date upon which the Participant becomes retirement
eligible;
(iv) the Participant establishes a relationship with a competitor of
the Company or the Employers or engages in any activity which
is in conflict with or adverse to the interests of the Company
or an Employer, as determined by the Committee in its sole
discretion, whether before or after the Participant's
employment with the Company or an Employer has terminated and
whether before, on or after the date upon which the Participant
becomes retirement eligible; or
(v) the later of:
(A) the date the Participant's employment with the Company or
an Employer terminates on or after the date upon which the
Participant becomes retirement eligible, or
(B) the date immediately before the date fifteen (15) years
after the policy date of the Policy (as defined therein)
(ten (10) years in the case of a Senior Management
Employee, as defined in the Plan on the Effective Date,
with respect to a Policy purchased during the 60-day
period following the Effective Date).
For purposes of subparagraph (B) above, all years during which any Policy
is in effect with respect to a Participant, whether or not consecutive,
shall be aggregated.
(b) In addition, the Participant may terminate the Split-Dollar Agreement
at any time by written notice to the Company.
(c) For purposes of the Plan, the Participant shall be deemed to be
"retirement eligible" as of the date upon which (i) the Participant's
combined age plus years of service totals 75 or more, or (ii) the
Participant is eligible to receive a minimum retirement benefit or
disability pension allowance under the Ameritech Corporate Resource
Supplemental Pension Plan or (iii) the Participant has been disabled
for more than fifty-two (52) weeks and had at least six (6) months
credited service, as long as the Participant continues to be disabled,
in each case as defined in the Ameritech Corporate Resource Long Term
Disability Plan or the Ameritech Long Term Disability Plan for
Salaried Employees. Anything contained in this Plan to the contrary
notwithstanding, the Participant's employment with the Company or
9
<PAGE>
an Employer shall be deemed to continue for as long as the Participant
is eligible to receive sickness and accident disability benefits under
the Ameritech Sickness and Accident Disability Benefit Plan. For
purposes of this paragraph (c), each of the Company's plans identified
above shall also include any successor plan.
4.9 Options on Termination of Split-Dollar Agreement.
(a) Upon termination of a Split-Dollar Agreement, the Company shall be
entitled to receive from the cash value of the related Policy an
amount equal to the sum of (i) the Company's Cumulative Net Premium
Payment plus (ii) the amount owed to it by the Participant under
paragraph 4.4(c), if any. Such amount is hereinafter referred to as
the "Company's Cumulative Net Premium Payment at Termination".
(b) For thirty (30) days after the date of the termination of the Split-
Dollar Agreement, the Participant shall have the option of obtaining
the release of the collateral assignment of the Policy to the Company.
To obtain such release, the Participant shall pay to the Company an
amount equal to the Company's Cumulative Net Premium Payment at
Termination, and, notwithstanding any other provision hereof, the
Participant shall specifically be allowed to borrow against or
withdraw from the cash value of the Policy for this purpose. Upon
receipt of such amount, the Company shall release the collateral
assignment of the Policy by the execution and delivery of an
appropriate instrument of release.
(c) If the Participant fails to exercise such option within such thirty
(30) day period, then, at the request of the Company, the Participant
shall execute any document or documents required by the Insurer to
transfer the interest of the Participant in the Policy to the Company.
Alternatively, the Company may enforce its right to be paid an amount
equal to the Company's Cumulative Net Premium Payment at Termination
under the collateral assignment of the Policy. Thereafter, neither the
Participant, nor the Participant's heirs, assigns or beneficiaries
shall have any further interest in and to the Policy, either under the
terms thereof or under this Plan. However, in no event shall the
Participant be liable to the Company in the event the cash value of a
Policy at the time of the termination of the related Split-Dollar
Agreement is insufficient to pay the Company an amount equal to the
Company's Cumulative Net Premium Payment at Termination.
(d) Anything contained in this Plan to the contrary notwithstanding, if
the Split-Dollar Agreement terminates (other than as a result of the
death of the Participant) for any reason other than pursuant to
subparagraph 4.8(a)(v) of this Plan, the Company shall also be
entitled to recover, in addition to the Company's Cumulative Net
Premium Payment at Termination, an amount sufficient to pay all
federal, state and local income taxes, if any, imposed upon the
Company as a result of such early termination and attributable to the
Policy so that the Company will receive the Company's Cumulative Net
Premium Payment at Termination on
10
<PAGE>
an after-tax basis. The amount, if any, payable to the Company
pursuant to this paragraph 4.9(d) shall be determined by the Company's
independent certified public accountant which is responsible for
preparing the income tax returns for the Company for such Plan Year.
SECTION 5
---------
Plan Administration
-------------------
5.1 Plan Administrator; Administration. The Senior Vice President-Human
Resources of the Company or such other officer of the Company as its Board of
Directors shall designate shall be the Plan Administrator under this Plan.
Except as otherwise specifically provided herein, the Plan Administrator shall
have discretionary authority to control and manage the operation and
administration of this Plan. The Plan Administrator shall also have the power to
establish, adopt, or revise such rules and regulations as the Plan Administrator
may deem advisable for the administration of this Plan. The interpretation and
construction of this Plan by the Plan Administrator (or the Committee with
respect to subparagraph 4.8(a)(iv)) and any action taken thereunder, shall be
binding and conclusive upon all persons. The Plan Administrator shall not, in
any event, be liable to any person for any action taken or omitted to be taken
in connection with the interpretation, construction or administration of the
Plan, so long as such action or omission to act is made in good faith. The Plan
Administrator shall be eligible to participate in this Plan but shall not vote
or act upon any matter that relates solely to his interest in this Plan as a
Participant.
5.2 Determination of Benefits. Except as otherwise specifically provided
herein, the Plan Administrator shall make all determinations concerning rights
to benefits under this Plan. Any decision by the Plan Administrator denying a
claim by a Participant or his beneficiary for benefits under this Plan shall be
stated in writing and delivered or mailed to the Participant or such
beneficiary. Such decision shall set forth the specific reasons for the denial,
written to the best of the Plan Administrator's ability in a manner that may be
understood without legal or actuarial counsel. In addition, the Plan
Administrator shall afford a reasonable opportunity to the Participant or such
beneficiary for a full and fair review of the decision denying such claim.
SECTION 6
---------
Miscellaneous
-------------
6.1 Amendment and Termination. This Plan may be amended or terminated by
the Company or its successor, in its discretion, at any time and without the
consent or approval of any other person.
11
<PAGE>
6.2 Validity. In the event any provision of this Plan is held invalid,
void, or unenforceable, the same shall not affect, in any respect whatsoever,
the validity of any other provision of this Plan.
6.3 Administrative Amendments. The Company's Senior Vice President - Human
Resources, or such other officer of the Company as may from time to time be
primarily responsible for human resources matters, may, with the concurrence of
the Company's Executive Vice President and General Counsel, make minor or
administrative amendments to the Plan.
12
<PAGE>
AMERITECH
ESTATE PRESERVATION PLAN
------------------------
(As Amended and Restated Effective as of December 1, 1995)
<PAGE>
AMERITECH
ESTATE PRESERVATION PLAN
------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
1 General 1
History, Purpose and Effective Date 1
Governing Documents 1
Plan Administration 1
Non-Alienation 1
Source of Benefits 1
Plan Year 2
Policy Year 2
Notices 2
Applicable Laws 2
Gender and Number 2
2 Participation 2
Participation 2
Plan Not Contract of Employment 3
3 Benefits 3
Available Coverage 3
Elected Increases and Decreases in Coverage 3
Cost 3
Cash Value 3
Limitation on Benefits 4
4 Split-Dollar and Collateral Assignment Agreements 4
Introduction 4
Insurance Policy 4
Policy Ownership 4
Payment of Premiums 4
Collateral Assignment Agreement 6
Limitations on Participant's Rights under Policy 6
Collection and Payment of Death Benefit 7
Termination of Split-Dollar Agreement 8
Options on Termination of Split-Dollar Agreement 9
5 Plan Administration 10
Plan Administrator; Administration 10
Determination of Benefits 11
</TABLE>
i
<PAGE>
AMERITECH
ESTATE PRESERVATION PLAN
------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
6 Miscellaneous 11
Amendment and Termination 11
Validity 11
Administrative Amendments 11
</TABLE>
ii
<PAGE>
AMERITECH
---------
ESTATE PRESERVATION PLAN
------------------------
(As Amended and Restated Effective as of December 1, 1995)
SECTION 1
---------
General
-------
1.1 History, Purpose and Effective Date. Effective July 1, 1990 (the
"Effective Date"), Ameritech Corporation, a Delaware corporation (the
"Company"), established the Ameritech Estate Preservation Plan (the "Plan"). The
purpose of the Plan is to provide certain corporate resource managers of the
Company and any Subsidiary or Affiliate of the Company which adopts the Plan (an
"Employer") an opportunity to purchase a whole life insurance policy insuring
the lives of such employee and his spouse and providing a death benefit upon the
death of the later to die of either the employee or his spouse (an "Estate
Preservation Policy"). The term "Subsidiary" means any corporation of which the
Company owns at least 50% of the combined voting power of all classes of stock
entitled to vote. The term "Affiliate" means any corporation other than a
Subsidiary which would be a member of a controlled group of corporations with
the Company under section 1563(a) of the Internal Revenue Code of 1986, as
amended. The following provisions constitute an amendment, restatement and
continuation of the Plan, effective as of December 1, 1995.
1.2 Governing Documents. In the event of any inconsistency between the
terms of the Plan as described herein and the terms of any Estate Preservation
Policy purchased by a Participant (defined in subsection 2.1), or any related
Split-Dollar Agreement or Collateral Assignment Agreement (as described in
Section 4) executed by a Participant, the terms of such policy or agreement
shall be controlling as to that Participant, his spouse, his assignee (if any),
his successor-in-interest (if any) and his beneficiary or beneficiaries.
1.3 Plan Administration. The authority to control and manage the day-to-
day operation and administration of the Plan is vested in the Company's Senior
Vice President-Human Resources (the "Plan Administrator") or such other officer
of the Company as its Board of Directors shall designate; provided, however,
that any action required or permitted to be taken by the Plan Administrator may
be taken by the Compensation Committee of the Company's Board of Directors (the
"Committee").
1.4 Non-Alienation. Except to the extent provided under subsection 4.5 and
under the terms of an Estate Preservation Policy and the related Split-Dollar
and Collateral Assignment Agreements, no Participant's benefits under the Plan
may be voluntarily or involuntarily assigned or alienated.
1.5 Source of Benefits. Any benefit payable to or on account of a
Participant under this Plan shall be paid by the Insurer.
<PAGE>
1.6 Plan Year. The "Plan Year" shall be July 1, 1990 to December 31, 1990
and each calendar year thereafter.
1.7 Policy Year. The "Policy Year" shall mean the 12-consecutive month
period designated as such in an Estate Preservation Policy. For Estate
Preservation Policies issued during the initial enrollment period coinciding
with the Effective Date, the Policy Year shall be July 1, 1990 to June 30, 1991
and each subsequent 12-consecutive month period beginning on July 1.
1.8 Notices. Any notice or document required to be given to or filed with
the Plan Administrator shall be considered to be given or filed if delivered to
the Administrator of the Plan or mailed by registered mail, postage prepaid to
the Administrator, in care of the Company, at 30 South Wacker Drive, Chicago,
Illinois 60606.
1.9 Applicable Laws. The Plan shall be construed and administered in
accordance with the internal laws of the State of Illinois, except to the extent
preempted by Federal law.
1.10 Gender and Number. Where the context admits, words in any gender shall
include any other gender, words in the singular shall include the plural and the
plural shall include the singular.
SECTION 2
---------
Participation
-------------
2.1 Participation. Each Eligible Employee (as defined below) shall become
a Participant in the Plan as of the date on or after the Effective Date on which
he purchases an Estate Preservation Policy pursuant to the terms of this Plan
and executes a related "Split-Dollar Agreement" and "Collateral Assignment
Agreement" as set forth in Section 4 hereof. The term "Eligible Employee" means
a full-time employee who is on the active roll of the Company or any Employer
and who (i) on or before September 30, 1994 had attained a level higher than
Department Level or equivalent Fifth Level and held a position that the Board of
Directors of the Company designated to be within its Senior Management Group,
(ii) is Chairman of the Board, Chief Executive Officer, Vice Chairman or
President of the Company, (iii) is a member of the Company's Management
Committee, or (iv) is an elected Corporate Officer (as defined below) or
President of a Business Unit (as defined below) who had total annual cash
compensation (base salary plus the target award under the Short Term Incentive
Plan) of $300,000 or greater and whose participation in the Plan is approved by
the Chairman of the Board. The term "elected Corporate Officer" means an officer
elected by the Board of Directors of the Company or appointed by the Chairman of
the Board under the policy established by the Board of Directors of the Company.
The term "Business Unit" means the customer-specific business units (11 as of
September 30, 1994) as they exist from time to time, the Network Services Unit
and each of the five former Bell telephone companies in the states of Illinois,
Indiana, Michigan, Ohio and Wisconsin.
2
<PAGE>
2.2 Plan Not Contract of Employment. The Plan does not constitute a
contract of employment, and nothing in the Plan will give any employee or
Participant the right to be retained in the employ of the Company or an
Employer, nor the right to any incentive award, nor any right or claim to any
benefit under the Plan, except to the extent specifically provided under the
terms of the Plan.
SECTION 3
---------
Benefits
--------
3.1 Available Coverage. Subject to satisfying any insurability
requirements of the Insurer, an Eligible Employee may purchase an Estate
Preservation Policy on the joint lives of himself and his spouse. The death
benefit coverage that may be purchased under an Estate Preservation Policy may
not exceed (A) in the case of a Participant who was an Eligible Employee on or
before September 30, 1994, an amount, in $500,000 increments, up to ten times
the sum of the Participant's then applicable position rate and his target short
term award, rounded to the next higher $500,000, and (B) in the case of a
Participant who became an Eligible Employee on or after October 1, 1994, (i)
$4,000,000 for the Chairman of the Board, the Chief Executive Officer and any
other Participant who is or would be among the five most highly compensated
employees of the Company (based on current base salary plus the target award
under the Short Term Incentive Plan) ("Top 5"), and (ii) $3,000,000 for each
other Participant.
3.2 Elected Increases and Decreases in Coverage. In accordance with the
terms of the Plan, and subject to satisfying any insurability requirements of
the Insurer, the Participant, prior to his termination of employment with the
Company and the Employers, may elect to decrease the amount payable as a death
benefit (within the limits set forth in subsection 3.1) in such form and at such
time as the Company and the Insurer may require. No increases in coverage are
permitted, except that a Participant who becomes a member of the Top 5 may
increase his coverage up to a maximum of $4,000,000.
3.3 Cost. The cost of providing the life insurance coverage under any
Estate Preservation Policy purchased by a Participant shall be shared between
the Participant (or owner other than the Participant, if applicable) and the
Company in accordance with the terms of such policy and the related Split-Dollar
Agreement and Collateral Assignment Agreement executed by the Participant, as
described in subsection 4.4.
3.4 Cash Value. Each Estate Preservation Policy purchased by a Participant
shall be designed to have a cash value. In accordance with the specific terms of
the Estate Preservation Policy purchased by a Participant and subject to the
related Split-Dollar Agreement and Collateral Assignment Agreement executed by
that Participant, the Participant may be entitled to withdraw his interest in
such cash value, surrender it for a lump sum cash payment or convert it to an
annuity, with a corresponding reduction in the death benefit payable under the
Estate Preservation Policy.
3
<PAGE>
3.5 Limitation on Benefits. The amount of benefits payable to or on
account of a Participant pursuant to this Plan shall not exceed the total amount
of death proceeds and other benefits payable by the Insurer under any Estate
Preservation Policy purchased by the Participant, reduced by the amount of such
death proceeds to which the Company is entitled pursuant to the Split-Dollar
Agreement and Collateral Assignment Agreement executed by the Participant.
SECTION 4
---------
Split-Dollar and Collateral Assignment Agreements
-------------------------------------------------
4.1 Introduction. The Split-Dollar Agreement and Collateral Assignment
Agreement executed by the Participant in conjunction with his purchase of an
Estate Preservation Policy shall establish the rights of the Company to the
proceeds of any such Estate Preservation Policy acquired by the Participant. The
terms of the particular Split-Dollar Agreement and Collateral Assignment
Agreement executed by a Participant shall apply solely to that Participant.
4.2 Insurance Policy. The Estate Preservation Policy shall be purchased by
the Participant. The Company shall take all reasonable steps necessary to enable
the Insurer to issue the Estate Preservation Policy, and to comply with any
reasonable request to take any further action which may be necessary to cause
the Estate Preservation Policy to conform to the provisions of this Plan. The
Participant's rights under any Estate Preservation Policy purchased by such
Participant shall be subject to the terms and conditions of the related Split-
Dollar Agreement and Collateral Assignment Agreement executed by the
Participant.
4.3 Policy Ownership. Unless the Participant assigns the ownership of his
Estate Preservation Policy to another person in accordance with the terms
thereof and of the related Split-Dollar and Collateral Assignment Agreement, the
Participant shall be the sole and absolute owner of any Estate Preservation
Policy purchased by him, and may exercise all ownership rights granted to the
owner thereof by the terms of the Estate Preservation Policy, except as may
otherwise be provided in the related Split-Dollar and Collateral Assignment
Agreement executed by the Participant. For purposes of this subsection 4.3 the
reference to "Participant" shall mean, to the extent applicable, the Participant
and his spouse.
4.4 Payment of Premiums. While the Split-Dollar Agreement remains in
effect:
(a) Except as otherwise provided in the Split-Dollar Agreement, the
premium to be paid to the Insurer for the Estate Preservation Policy
in each Policy Year ("Total Policy Year Premium") shall be set forth
in an exhibit ("Exhibit") attached to the Split-Dollar Agreement.
(b) Except as otherwise provided in the Split-Dollar Agreement, on or
before the date of such Split-Dollar Agreement as to the first Policy
Year and on or before the
4
<PAGE>
first day of each next succeeding Policy Year, or within the grace
period provided in the Estate Preservation Policy, the Company shall
pay to the Insurer the Total Policy Year Premium set forth in the
Exhibit for that Policy Year. However, for purposes of determining the
amount due the Company as a result of its payments toward the premiums
on the Estate Preservation Policy, in each Policy Year the Company
shall be deemed to have paid only that portion of the premium (the
"Company's Policy Year Net Premium Payment") for which it has not
received payment from the Participant as the Participant's
contribution to the premium as provided for in paragraph (c) next
below.
(c) Except as otherwise provided herein, as to each Plan Year, a certain
amount of contribution to the premium shall be due from the
Participant (the "Participant's Plan Year Contribution to Premium")
for such Plan Year, provided, however, that if the Estate Preservation
Policy has been assigned to another person pursuant to the terms of
such Policy and of the related Split-Dollar and Collateral Assignment
Agreements such assignee shall be responsible for meeting the premium
obligations set forth herein instead of the Participant. This amount
shall be based upon the annual cost of the current life insurance
coverage provided to the Participant for such Plan Year and shall be
equal to the "economic benefit" of such current life insurance
coverage for Federal income tax purposes, as provided in Revenue
Ruling 64-328 (or the corresponding applicable provisions of any
future Revenue Ruling) or as otherwise provided for Federal income tax
purposes. The Participant shall be required to pay the Participant's
Plan Year Contribution to Premium to the Company for each such Plan
Year, subject to any assignment of the Estate Preservation Policy in
accordance with the terms thereof and of the related Split-Dollar and
Collateral Assignment Agreements. So long as the Participant's
employment with the Company or an Employer continues and unless the
Company and the Participant agree otherwise, the Company shall deduct
the Participant's Plan Year Contribution to Premium from the
Participant's normal salary payments on a level basis during the Plan
Year, except as to the first Plan Year, during which the Participant's
Plan Year Contribution to Premium shall be deducted on a level basis
beginning as of the date of enrollment, and except as to the last Plan
Year, during which the Participant's Plan Year Contribution to Premium
shall be deducted on a level basis ending as of the date of the
termination of the Split-Dollar Agreement. Upon the termination of the
Participant's employment with the Company or an Employer in any Plan
Year and continuing until the termination of the Split-Dollar
Agreement, the Participant shall be required to pay the balance of the
Participant's Plan Year Contribution to Premium for such Plan Year
(which has not theretofore been deducted from the Participant's
salary) generally within ninety (90) days of such termination of the
Participant's employment with the Company or an Employer, and the
Participant shall be required to pay the Participant's Plan Year
Contribution to Premium for each succeeding Plan Year generally within
ninety (90) days of the premium payment date for the Estate
Preservation Policy for each such Plan Year. In all events, the
Participant shall pay the Participant's Plan Year Contribution to
5
<PAGE>
Premium prior to the end of each such Plan Year. For the Plan Year in
which either the Participant or his spouse dies, the Participant's
employment with the Company or an Employer is terminated, or the Split
-Dollar Agreement is otherwise terminated, an appropriate adjustment
shall be made to the Participant's Plan Year Contribution to Premium
for such Plan Year (and any applicable Plan Year thereafter) to
reflect such event, including but not limited to adjustments based on
a change from the P.S. 38 (joint) tables to the P.S. 58 (single)
tables used to calculate the economic benefit of the life insurance
coverage.
4.5 Collateral Assignment Agreement. To secure the payment to the Company
of the amount due it hereunder as a result of its payments toward the premiums
on the Estate Preservation Policy, the Participant shall contemporaneously with
its purchase and the execution of the Split-Dollar Agreement assign the Estate
Preservation Policy in favor of the Company as collateral pursuant to a written
agreement, which collateral assignment shall specifically provide that the sole
right of the Company thereunder is to be paid the amount due it under the Split-
Dollar Agreement as a result of its payments toward the premiums on the Estate
Preservation Policy. Such payment shall be made from the cash value of the
Estate Preservation Policy (as defined therein) if the Split-Dollar Agreement is
terminated or if the Participant surrenders or cancels the Estate Preservation
Policy while the related Split-Dollar Agreement remains in effect, or from the
death benefit provided under the Estate Preservation Policy, if both the
Participant and his spouse die while the Estate Preservation Policy and the
related Split-Dollar Agreement remain in effect. In no event shall the Company
have any right to borrow against or withdraw amounts from the Estate
Preservation Policy, to surrender or cancel the Estate Preservation Policy, or
take any other action which would impair or defeat the rights of the Participant
as the owner of the Estate Preservation Policy. The collateral assignment of the
Estate Preservation Policy to the Company shall not be terminated, altered or
amended by the Participant while the Split-Dollar Agreement is in effect. The
Participant and the Company shall take all action necessary to cause such
collateral assignment to conform to the provisions of the Split-Dollar
Agreement.
4.6 Limitations on Participant's Rights under Policy. Unless he has
assigned the ownership of the Estate Preservation Policy pursuant to the terms
of such Policy and of the related Split-Dollar and Collateral Assignment
Agreements, as the sole and absolute owner of the Estate Preservation Policy the
Participant may exercise all of the rights, options, privileges and other
incidents of ownership granted to the owner thereof by the terms of the Estate
Preservation Policy (including, without limitation, the unlimited ability to
borrow against or withdraw amounts from the cash value of the Estate
Preservation Policy and to surrender or cancel the Estate Preservation Policy).
Notwithstanding the foregoing, so long as the Split-Dollar Agreement remains in
effect: (a) the Participant shall not take any action with respect to the Estate
Preservation Policy which would have a direct or indirect adverse effect on the
Company's interests under the Split-Dollar Agreement in the Estate Preservation
Policy without the Company's prior written consent; and (b) except with respect
to the Participant's right to change the beneficiaries of the Participant's
Death Benefit, as defined in subparagraph (iii) of paragraph 4.7(b), and to
assign the Participant's interests in the Estate Preservation Policy and under
the related Split-Dollar Agreement as may be provided therein, the Participant
shall not
6
<PAGE>
take any other action with respect to the Estate Preservation Policy (regardless
of whether it would directly or indirectly adversely affect the Company's
interests under the Split-Dollar Agreement in the Estate Preservation Policy)
without the Company's prior written consent. For purposes of this subsection
4.6, the Participant may borrow against or withdraw from the cash value of the
Estate Preservation Policy any amounts which may be required to be paid to the
Company and which are due the Company under paragraph 4.4(c), so long as the
amount of any such loan or withdrawal is chargeable solely against the
Participant's Death Benefit and that portion of the cash value of the Estate
Preservation Policy which is in excess of the cash value of the Estate
Preservation Policy due the Company under the related Split-Dollar Agreement as
a result of its payments toward the premiums on the Estate Preservation Policy
pursuant to the Collateral Assignment Agreement.
4.7 Collection and Payment of Death Benefit.
(a) Upon the death of the survivor of the Participant and his spouse while
the related Split-Dollar Agreement remains in effect, the Company and
the Participant's beneficiary shall promptly take all action necessary
to obtain the death benefit provided under the Estate Preservation
Policy and payable as a result of the maturity of the Estate
Preservation Policy (the "Death Benefit").
(b) The Death Benefit shall be paid as follows:
(i) The Company shall first be paid from the Death Benefit any
unpaid amount of the Participant's Plan Year Contribution to
Premium owed to it by the Participant under paragraph 4.4(c).
(ii) The Company shall next be paid from the Death Benefit the total
net amount of the payments made by it toward the premiums of
the Estate Preservation Policy. Such amount shall be the sum of
the Company's Policy Year Net Premium Payment amounts under
paragraph 4.4(b) (the "Company's Cumulative Net Premium
Payment").
(iii) The Participant's beneficiary under an Estate Preservation
Policy shall next be paid, in the manner and in the amount or
amounts provided in the beneficiary designation provision of
such Estate Preservation Policy, from the Death Benefit an
amount equal to the Participant's Death Benefit. For purposes
of this subparagraph (iii), the "Participant's Death Benefit"
shall be an amount equal to the lesser of (A) the maximum death
benefit set forth in the Exhibit (the "Participant's Maximum
Death Benefit") for the Policy Year in which the survivor of
the Participant or his spouse shall have died or (B) that
portion of the Death Benefit remaining after the payments
provided for in subparagraphs (i) and (ii) of this paragraph
4.7(b), and then reduced by any loan chargeable against the
Participant's Death Benefit.
7
<PAGE>
(iv) The Company shall receive the balance, if any, of the Death
Benefit remaining after the payments provided for in
subparagraphs (i), (ii) and (iii) of this paragraph 4.7(b).
(c) The beneficiary designation provision of the Estate Preservation
Policy shall conform to the provisions hereof.
4.8 Termination of Split-Dollar Agreement.
(a) The Split-Dollar Agreement shall terminate, without notice,
on the first day of the month following the month during
which the first of the following events occurs:
(i) The Participant (or the assignee of his Estate Preservation
Policy) fails to make any premium payment required under
paragraph 4.4(c) for any Plan Year by the end of such Plan
Year or the Participant (or assignee) notifies the Company
that the Participant (or assignee) intends to surrender or
cancel the Estate Preservation Policy;
(ii) The Participant's employment with the Company or an Employer
terminates before the date upon which the Participant
becomes retirement eligible, as defined in paragraph (c)
below;
(iii) The Participant is demoted or moved by the Company or an
Employer to a position that is no longer that of an Eligible
Employee, even if the change occurs on or after the date
upon which the Participant becomes retirement eligible,
unless the Senior Vice President - Human Resources makes a
determination based on all relevant facts and circumstances
that the Split-Dollar Agreement shall not terminate as a
result of the Participant's demotion and so notifies the
Participant;
(iv) The Participant establishes a relationship with a competitor
of the Company or the Employers or engages in any activity
which is in conflict with or adverse to the interests of the
Company or an Employer, as determined by the Committee in
its sole discretion, whether before or after the
Participant's employment with the Company or an Employer has
terminated and whether before, on or after the date upon
which the Participant becomes retirement eligible; or
(v) the latest of:
(A) the date the Participant's employment with the Company or
an Employer terminates after the Participant has reached
age 65 and on or after the date upon which the Participant
becomes retirement eligible, or
(B) the date the Participant reaches age 65 for any
Participant whose employment with the Company or an
Employer terminates on or after the
8
<PAGE>
date upon which the Participant becomes retirement
eligible but before the Participant has reached age 65, or
(C) the date immediately before the date fifteen (15) years
after the policy date of the Estate Preservation Policy
(as defined therein).
For purposes of subparagraph (C) above, all years during which any
Estate Preservation Policy is in effect with respect to a Participant,
whether or not consecutive, shall be aggregated.
(b) In addition, the Participant may terminate the Split-Dollar
Agreement at any time by written notice to the Company.
(c) For purposes of the Plan, the Participant shall be deemed to be
"retirement eligible" as of the date upon which (i) the Participant's
combined age plus years of service totals 75 or more, or (ii) the
Participant is eligible to receive a minimum retirement benefit or
disability pension allowance under the Ameritech Corporate Resource
Supplemental Pension Plan, or (iii) the Participant has been disabled
for more than fifty-two (52) weeks and had at least six (6) months
credited service, as long as the Participant continues to be disabled,
in each case as defined in the Ameritech Corporate Resource Long Term
Disability Plan or the Ameritech Long Term Disability Plan for
Salaried Employees. Anything contained in this Plan to the contrary
notwithstanding, the Participant's employment with the Company or an
Employer shall be deemed to continue for as long as the Participant is
eligible to receive sickness and accident disability benefits under
the Ameritech Sickness and Accident Disability Benefit Plan. For
purposes of this paragraph (c), each of the Company's plans identified
above shall also include any successor plan.
4.9 Options on Termination of Split-Dollar Agreement.
(a) Upon termination of a Split-Dollar Agreement, the Company shall be
entitled to receive from the cash value of the related Estate
Preservation Policy an amount equal to the sum of (i) the Company's
Cumulative Net Premium Payment plus (ii) the amount owed to it by the
Participant under paragraph 4.4(c), if any. Such amount is hereinafter
referred to as the "Company's Cumulative Net Premium Payment at
Termination".
(b) For thirty (30) days after the date of the termination of the Split-
Dollar Agreement, the Participant shall have the option of obtaining
the release of the collateral assignment of the Estate Preservation
Policy to the Company. To obtain such release, the Participant shall
pay to the Company an amount equal to the Company's Cumulative Net
Premium Payment at Termination, and, notwithstanding any other
provision hereof, the Participant shall specifically be allowed to
borrow against or withdraw from the cash value of the Estate
Preservation Policy for this purpose. Upon receipt of such amount, the
Company
9
<PAGE>
shall release the collateral assignment of the Estate
Preservation Policy by the execution and delivery of an appropriate
instrument of release.
(c) If the Participant fails to exercise such option within such thirty
(30) day period, then, at the request of the Company, the Participant
shall execute any document or documents required by the Insurer to
transfer the interest of the Participant in the Estate Preservation
Policy to the Company. Alternatively, the Company may enforce its
right to be paid an amount equal to the Company's Cumulative Net
Premium Payment at Termination under the collateral assignment of the
Estate Preservation Policy. Thereafter, neither the Participant, nor
the Participant's heirs, assigns or beneficiaries shall have any
further interest in and to the Estate Preservation Policy, either
under the terms thereof or under this Plan. However, in no event shall
the Participant be liable to the Company in the event the cash value
of an Estate Preservation Policy at the time of the termination of the
related Split-Dollar Agreement is insufficient to pay the Company an
amount equal to the Company's Cumulative Net Premium Payment at
Termination.
(d) Anything contained in this Plan to the contrary notwithstanding, if
the Split-Dollar Agreement terminates (other than as a result of the
death of the survivor of the Participant and his spouse) for any
reason other than pursuant to subparagraph 4.8(a)(v) of this Plan, the
Company shall also be entitled to recover, in addition to the
Company's Cumulative Net Premium Payment at Termination, an amount
sufficient to pay all federal, state and local income taxes, if any,
imposed upon the Company as a result of such early termination and
attributable to the Estate Preservation Policy so that the Company
will receive the Company's Cumulative Net Premium Payment at
Termination on an after-tax basis. The amount, if any, payable to the
Company pursuant to this paragraph 4.9(d) shall be determined by the
Company's independent certified public accountant which is responsible
for preparing the income tax returns for the Company for such Plan
Year.
SECTION 5
---------
Plan Administration
-------------------
5.1 Plan Administrator; Administration. The Senior Vice President - Human
Resources of the Company or such other officer of the Company as its Board of
Directors shall designate shall be the Plan Administrator under this Plan.
Except as otherwise specifically provided herein, the Plan Administrator shall
have discretionary authority to control and manage the operation and
administration of this Plan. The Plan Administrator shall also have the power to
establish, adopt, or revise such rules and regulations as the Plan Administrator
may deem advisable for the administration of this Plan. The interpretation and
construction of this Plan by the Plan Administrator (or the Committee with
respect to subparagraph 4.8(a)(iv)) and any action taken thereunder, shall be
binding and conclusive upon all persons. The Plan Administrator shall
10
<PAGE>
not, in any event, be liable to any person for any action taken or omitted to be
taken in connection with the interpretation, construction or administration of
the Plan, so long as such action or omission to act is made in good faith. The
Plan Administrator shall be eligible to participate in this Plan but shall not
vote or act upon any matter that relates solely to his interest in this Plan as
a Participant.
5.2 Determination of Benefits. Except as otherwise specifically provided
herein, the Plan Administrator shall make all determinations concerning rights
to benefits under this Plan. Any decision by the Plan Administrator denying a
claim by a Participant or his beneficiary for benefits under this Plan shall be
stated in writing and delivered or mailed to the Participant or such
beneficiary. Such decision shall set forth the specific reasons for the denial,
written to the best of the Plan Administrator's ability in a manner that may be
understood without legal or actuarial counsel. In addition, the Plan
Administrator shall afford a reasonable opportunity to the Participant or such
beneficiary for a full and fair review of the decision denying such claim.
SECTION 6
---------
Miscellaneous
-------------
6.1 Amendment and Termination. This Plan may be amended or terminated by
the Company or its successor, in its discretion, at any time and without the
consent or approval of any other person.
6.2 Validity. In the event any provision of this Plan is held invalid,
void, or unenforceable, the same shall not affect, in any respect whatsoever,
the validity of any other provision of this Plan.
6.3 Administrative Amendments. The Company's Senior Vice President - Human
Resources, or such other officer of the Company as may from time to time be
primarily responsible for human resources matters, may, with the concurrence of
the Company's Executive Vice President and General Counsel, make minor or
administrative amendments to the Plan.
11
<PAGE>
AMERITECH CORPORATE RESOURCE
LONG TERM DISABILITY PLAN
-------------------------
(As Amended and Restated Effective as of December 1, 1995)
<PAGE>
AMERITECH CORPORATE RESOURCE
LONG TERM DISABILITY PLAN
-------------------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
SECTION PAGE
- ------- ----
<S> <C> <C>
1 General 1
History and Purpose 1
Plan Administration 1
Non-Alienation 1
Source of Benefits 1
Notices 2
Applicable Laws 2
Gender and Number 2
2 Participation 2
Participation 2
Plan Not Contract of Employment 2
3 Disability 3
Disability During First Fifty-Two Weeks 3
Disability After Fifty-Two Weeks 3
Committee Determination 3
Measurement of Period of Disability 3
4 Disability Allowance 4
Disability Allowance For First Fifty-Two Weeks 4
Disability Allowance After Fifty-Two Weeks 4
Offsets 4
Medical Expense Benefits 4
5 Conditions of Payment 5
Distributions to Persons Under Legal Disability 5
Benefits May Not Be Assigned or Alienated 5
Forfeiture of Benefits 5
6 Amendment or Termination 5
Administrative Amendments 5
Amendments and Termination 6
Participant Rights 6
Successors 6
</TABLE>
<PAGE>
AMERITECH CORPORATE RESOURCE
LONG TERM DISABILITY PLAN
(As Amended and Restated Effective as of December 1, 1995)
SECTION 1
---------
General
-------
1.1. History and Purpose. Effective as of January 1, 1986 the Ameritech
Senior Management Long Term Disability Plan, now re-named the Ameritech
Corporate Resource Long Term Disability Plan (the "Plan") was established by
Ameritech Corporation, a Delaware corporation (the "Company"), as an amendment,
restatement and continuation of the long term disability provisions of the
Ameritech Senior Management Long Term Disability and Survivor Protection Plan
(the "Predecessor Plan"), as applied to employees of the Company and its
subsidiaries and affiliates. The purpose of the Plan is to provide long term
disability protection for corporate resource managers of the Company and of any
Subsidiary or Affiliate of the Company which adopts the Plan (an "Employer").
The term "Subsidiary" means any corporation of which the Company owns at least
50% of the combined voting power of all classes of stock entitled to vote. The
term "Affiliate" means any corporation other than a Subsidiary which would be a
member of a controlled group of corporations with the Company under Section
1563(a) of the Internal Revenue Code of 1986, as amended. The following
provisions constitute an amendment, restatement and continuation of the Plan,
effective as of December 1, 1995.
1.2. Plan Administration. The authority to control and manage the
operation and administration of the Plan as applied to the Company or any other
Employer shall be vested in the Benefit Plan Committee or its delegate which
administers the Ameritech Management Pension Plan (the "Pension Plan") with
respect to the Company or such Employer (the "Committee") and, in exercising
that authority, the Committee shall, to the extent necessary and appropriate,
have the same rights, powers and duties as those delegated to it under the
Pension Plan. The Committee has the exclusive right and discretion to interpret
the provisions of the Plan and the entitlement to benefits under the Plan. Any
decision made by the Committee on any matter within its discretion is
conclusive, final and binding on all persons, and not subject to further review.
The Committee (or its delegate) of the appropriate Employer shall grant or deny
claims for benefits under the Plan and authorize disbursements. Adequate notice,
pursuant to applicable law and prescribed Company practices, shall be provided
in writing to any Participant or beneficiary whose claim has been denied,
setting forth the specific reasons for such denial. The review and appeal
procedures for any Participant or beneficiary whose claim has been denied shall
be the same as those procedures set forth in the Pension Plan.
1.3. Non-Alienation. Benefits payable to any person under the Plan may not
be voluntarily or involuntarily assigned or alienated.
1.4. Source of Benefits. Subject to the terms and conditions of the Plan,
any amount payable to or on account of a Participant shall be paid from the
general assets of the Company or
<PAGE>
the other Employer which last employed the Participant. The obligations of the
Company and the other Employers under the Plan are solely contractual, and no
trust or other separate fund shall be established for purposes of paying any
benefits under the Plan.
1.5. Notices. Any notice or document required to be given to or filed with
the Committee shall be considered to be given or filed if delivered to the
Committee or mailed by registered mail, postage prepaid, to the Committee, in
care of the Company, at 30 South Wacker Drive, Chicago, Illinois 60606.
1.6. Applicable Laws. The Plan shall be construed and administered in
accordance with the laws of the State of Illinois, to the extent that such laws
are not preempted by the laws of the United States of America.
1.7. Gender and Number. Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
SECTION 2
---------
Participation
-------------
2.1. Participation. Each employee of the Company and the other Employers
shall become a Participant in the Plan on the first date after the Effective
Date on which he is employed as:
(a) a member of the Company's Management Committee; or
(b) a full-time management employee on the active roll of the Company or
any other Employer (i) who has attained any of salary grades CR 1
through 9 or equivalent, or (ii) who is an attorney in either of
salary grades IV or V.
An employee shall cease to be a Participant as of the date he ceases
to meet the requirements of subparagraph (a) or (b), even if he
continues to be employed by the Company or another Employer.
2.2. Plan Not Contract of Employment. The Plan does not constitute a
contract of employment, and nothing in the Plan will give any employee or
Participant the right to be retained in the employ of the Company or any other
Employer nor any right or claim to any benefit under the Plan, except to the
extent specifically provided under the terms of the Plan.
2
<PAGE>
SECTION 3
---------
Disability
----------
3.1. Disability During First Fifty-Two Weeks. A Participant shall be
considered to be "disabled" at any time during the first fifty-two week period
following the onset of a physical or mental impairment, if such impairment
prevents the Participant from meeting the performance requirements of the
position held immediately preceding the onset of the physical or mental
impairment.
3.2. Disability After Fifty-Two Weeks. A Participant shall be considered
to be "disabled" after the first fifty-two week period following the onset of a
physical or mental impairment, if such impairment prevents the Participant from
meeting the performance requirements of (1) the position held immediately
preceding the onset of the physical or mental impairment, (2) a similar
position, or (3) any appropriate position within the Company or another Employer
which the Participant would otherwise be capable of performing by reason of the
Participant's background and experience.
3.3. Committee Determination. The Committee shall make the determination
of whether a Participant is disabled within the meaning of subsections 3.1 and
3.2 when the onset of the physical or mental impairment occurs. In making such
determinations, the Committee may rely on the opinion of a qualified physician
selected by the Committee to examine the Participant. The Committee may at any
reasonable time require reasonable proof of the continuing nature of the
Participant's disability.
3.4. Measurement of Period of Disability. For purposes of subsections 3.1
and 3.2, the measurement of time following the onset of a physical or mental
impairment shall coincide with the measurement of time used to calculate periods
of sickness and accident disability benefits under the provisions of the
Sickness and Accident Disability Benefit Plan maintained by the Company or
applicable Employer. Successive periods of physical or mental impairment shall
be counted together in computing the periods during which the Participant shall
be entitled to the benefits provided under subsections 4.1 and 4.2, except that
any disability absence after the Participant has been continuously engaged in
the performance of duty for thirteen weeks shall be considered to commence a new
period of physical or mental impairment under subsection 3.1, so that
Participant shall be entitled during such new period to the benefits provided
under subsection 4.1.
3
<PAGE>
SECTION 4
---------
Disability Allowance
--------------------
4.1. Disability Allowance For First Fifty-Two Weeks. A Participant who is
disabled during a period described in subsection 3.1 shall be eligible to
receive a monthly Disability Allowance for such period of disability equal to
100 percent of the Participant's monthly base salary rate on the last day the
Participant was on the active payroll, reduced by any amounts described in
subsection 4.3 which are attributable to the period for which benefits are
provided under this subsection.
4.2. Disability Allowance After Fifty-Two Weeks. A Participant who is
disabled during a period described in subsection 3.2 shall, prior to his sixty-
fifth birthday, be eligible to receive a monthly Disability Allowance for such
period of disability equal to 60 percent of the Participant's monthly base
salary rate on the last day the Participant was on the active payroll, reduced
by any amounts described in subsection 4.3 which are attributable to the period
for which benefits are provided under this subsection.
4.3. Offsets. A Participant's Disability Allowance under the Plan for any
period shall be reduced by the sum of the following benefits received (or which,
at the election of the Participant, could be received) by the Participant which
are attributable to such period: an accident disability benefit (and, in the
case of the Disability Allowance under subsection 4.1, a sickness disability
benefit) under the Sickness and Accident Disability Benefit Plan maintained by
the Company or applicable Employer; any other retirement income payments, other
than pension benefits received under the Ameritech Management Pension Plan
and/or the Ameritech Corporate Resource Supplemental Pension Plan; any Worker's
Compensation Benefit; and, in the case of a Disability Allowance under
subsection 3.2, any Social Security Insurance Benefit. However, no reduction
shall be made on account of any Social Security Benefit at a rate greater than
the rate which the Participant would have first been eligible to receive after
his disability and as if no other member of his family were eligible for any
Social Security Benefit. Furthermore, the Board of Directors of the Company, in
its discretion, may reduce the Disability Allowance by all or any portion of the
amount of outside compensation or earnings of the Participant for work performed
by the Participant during the period for which such Disability Allowance is
provided.
4.4. Medical Expense Benefits. A Participant who is entitled to a benefit
under subsection 4.1 or 4.2 whose combined age plus years of service at
retirement is less than 75 shall be entitled to the same rights and benefits
under the Company's or other Employer's Comprehensive Health Care Plan and
Dental Expense Plan as if he had retired with age plus service totalling 75.
4
<PAGE>
SECTION 5
---------
Conditions of Payment
---------------------
5.1. Distributions to Persons Under Legal Disability. In the event an
individual is declared incompetent and a conservator or other person legally
charged with the care of the individual's person or estate is appointed, any
benefits to which such individual is entitled under the Plan shall be paid to
such conservator or other person.
5.2. Benefits May Not Be Assigned or Alienated. Benefits payable to, or on
account of, any individual under the Plan may not be voluntarily or
involuntarily assigned or alienated.
5.3. Forfeiture of Benefits. All benefits under the Plan shall be
forfeited at the discretion of the Company's Board of Directors under the
following circumstances:
(a) The Participant is discharged by the Company or another Employer for
cause;
(b) The Board of Directors of the Company or another Employer determines
that the Participant engaged in misconduct in connection with his
employment with the Company or Employer; or
(c) The Participant, without the consent of the Company or his employing
Employer or the Employer paying him a benefit hereunder, at any time
is employed by, becomes associated with, renders service to, or owns
an interest in any business that is competitive with the Company, any
other Employer or with any business in which the Company or any other
Employer has a substantial interest (other than as a shareholder with
a nonsubstantial interest in such business) as determined by the Board
of the Company or such other Employer (or, if such other Employer does
not have a Board of Directors and is managed by its shareholder or
shareholders, by such shareholder or shareholders).
SECTION 6
---------
Amendment or Termination
------------------------
6.1. Administrative Amendments. Subject to the provisions of subsection
6.3, the Company's Senior Vice President - Human Resources, or such other
officer of the Company as may from time be primarily responsible for human
resource matters, may, with the concurrence of the Company's Executive Vice
President and General Counsel, make minor or administrative amendments to the
Plan.
5
<PAGE>
6.2. Amendments and Termination. Subject to the provisions of subsection
6.3, the Company's Board of Directors may amend or terminate the Plan at any
time and any other Employer may, by action of its Board of Directors, terminate
its participation in the Plan at any time.
6.3. Participant Rights. No action under this Section 6 shall, without the
consent of the affected Participant, adversely affect the rights of any
Participant with respect to any amount payable under the Plan to which the
Participant previously became eligible to receive by reason of a disability
which occurred prior to such action.
6.4. Successors. The obligations of the Company and each other Employer
under the Plan shall be binding upon any assignee or successor in interest
thereto. Neither the Company nor any other Employer shall merge or consolidate
with any other corporation, or liquidate or dissolve, without making suitable
arrangement for the payment of any benefits payable under the Plan.
6
<PAGE>
AMERITECH CORPORATE RESOURCE
TRANSFER PROGRAM
----------------
(As Amended and Restated Effective as of December 1, 1995)
<PAGE>
AMERITECH CORPORATE RESOURCE
TRANSFER PROGRAM
----------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
SECTION PAGE
- ------- ----
<S> <C> <C>
1 Definitions 1
2 Residence Relocation Differential 1
3 Home Purchase Differential 3
4 General Provisions 4
Appendix I
</TABLE>
<PAGE>
AMERITECH CORPORATE RESOURCE
TRANSFER PROGRAM
----------------
(As Amended and Restated Effective as of December 1, 1995)
Section 1. Definitions
-----------
1. The word "Program" shall mean the Ameritech Corporate Resource
Transfer Program.
2. The word "Company" shall mean Ameritech Corporation, or its
successors.
3. The word "Employer" shall mean the Company and each Subsidiary or
Affiliate of the Company which, with the consent of the Company,
adopts the Program. The word "Subsidiary" means any corporation of
which the Company owns at least 50% of the combined voting power of
all classes of stock entitled to vote. The word "Affiliate" means
any corporation other than a Subsidiary which would be a member of a
controlled group of corporations with the Company under Section
1563(a) of the Internal Revenue Code of 1986, as amended.
4. The term "eligible employee" shall mean a management employee on the
active roll of the Company who (a) is a member of the Company's
Management Committee or (b) has attained any of salary grades CR 5
through 9.
Section 2. Residence Relocation Differential
---------------------------------
1. An eligible employee shall be entitled to receive a
Residence Relocation Differential if:
(a) the employee's primary work location within an Employer has
been changed at the direction of the Employer or the employee's
primary work location has changed because of a transfer to one
Employer from another Employer.
(b) the employee is eligible for reimbursement for moving expenses
under the Ameritech Relocation Plan for Management Employees,
as applied at the new work location (unless a waiver of this
condition because of unusual circumstances is approved by the
employee's supervisor and the Company's Senior Vice President -
Human Resources), and
(c) the employee moves to a new residence, within a 12-month period
of the employee's transfer to the new work location.
<PAGE>
For the purpose of Paragraph l(c), an employee is considered to move
to a new residence on the date of the closing in the case of a
residence which is purchased, or in the case of a residence which is
rented, on the earliest date in the rental period for which no
reimbursement with respect to rent is made from an Employer to the
employee. Also, in the case of rented premises, the suitability of
such premises for use as a residence must be approved by the Company's
Senior Vice President - Human Resources.
2. (a) Except as provided in Paragraph 2(c) and (d) of this Section 2,
a Residence Relocation Differential shall be paid with respect
to the 36-month period which begins with the first day of the
month which contains the effective date of the employee's
transfer to the new work location. The Residence Relocation
Differential with respect to the first 12 months of the 36-
month period shall equal 10% of the employee's base salary on
the effective date of transfer to the new work location, or 8%
of the employee's position rate on such effective date of
transfer, whichever is higher. The Residence Relocation
Differential with respect to the next 12-month period shall
equal 80% of the Residence Relocation Differential during the
first 12-month period. The Residence Relocation Differential
with respect to the final 12-month period shall equal 60% of
the Residence Relocation Differential during the first 12-month
period.
(b) The amount of Residence Relocation Differential payable with
respect to each 12-month period shall be paid to an employee in
equal monthly installments except that the amount payable with
respect to any month preceding the month in which the employee
moves to a new residence shall be accumulated and paid to such
employee only after he has moved to a new residence. The
Company's Senior Vice President - Human Resources shall have
the authority to approve payment of any accumulated amounts in
a lump sum or in a series of equal monthly installments not
exceeding 12.
(c) If an employee becomes an eligible employee after the employee
has transferred to a new work location, the payment of a
Residence Relocation Differential shall not be made with
respect to any month (in the 36-month period referred to in
Paragraph 2(a)) prior to the month in which the employee
becomes an eligible employee. Furthermore, the Residence
Relocation Differential for any such employee may be determined
by substituting the words "the date the employee became an
eligible employee" for "the effective date of transfer to the
new work location" and for "such effective date of transfer" in
the second sentence of Paragraph 2(a) of this Section 2.
2
<PAGE>
(d) The payment of a Residence Relocation Differential with respect
to an employee's transfer to a new work location shall not be
made with respect to any month after the month in which:
(i) the employee, who has rented a residence near the new
work location, ceases to occupy such residence and
returns to his former residence, or
(ii) the employee becomes entitled to a Residence
Relocation Differential with respect to a subsequent
change to another new work location, or
(iii) the employee retires, dies or terminates employment
with the Employers, or
(iv) the employee commences a leave of absence, or
(v) the employee ceases to be an eligible employee, and
it shall be the responsibility of the employee to
repay the Residence Relocation Differential paid in
error with respect to any such month.
Notwithstanding the provisions of this Paragraph 2(d)(iv) or (v),
the Company's Senior Vice President - Human Resources shall have the
authority to approve the continuation of payment of all or part of
the Residence Relocation Differential with respect to an employee,
or to approve the payment in a lump sum of all or part of the
Residence Relocation Differential which would otherwise be payable
on a monthly basis.
(e) If an eligible employee transfers from one Employer to another
Employer without changing his primary work location while such
employee is receiving a Residence Relocation Differential under
the Program, then the Employer to which such employee transfers
shall continue to pay to such employee the amount of Residence
Relocation Differential for the remainder of the 36-month
period which would have been payable under the Program had the
employee not transferred to such Employer.
Section 3. Home Purchase Differential
--------------------------
1. Effective as of January 1, 1987, an eligible employee shall be
entitled to receive a Home Purchase Differential if:
3
<PAGE>
(a) the employee's primary work location has been changed at the
direction of an Employer or the employee's primary work
location has changed because of a transfer to one Employer from
another Employer,
(b) the employee purchases a residence within twelve months from
the date of transfer, and
(c) the new work location is in one of the Company's regional
headquarters cities.
2. The amount of an eligible employee's Home Purchase Differential
shall be determined in accordance with Appendix I, attached hereto,
as it may be amended from time to time. An eligible employee's Home
Purchase Differential shall be paid in a lump sum as soon as
practicable following his purchase of a residence in the new
location. An employee is considered to have purchased a new
residence on the date of the closing for such residence.
3. The Employer shall pay the Federal, state and local income taxes
associated with the Home Purchase Differential. This payment shall
be made at the same time the Home Purchase Differential is made and
shall be calculated at the maximum tax rate, as of the closing date
for the residence.
Section 4. General Provisions
------------------
1. The Residence Relocation Differential component of the Program
became effective on January 1, 1984 and the Home Purchase
Differential component of the Program became effective as of January
1, 1987.
2. The Company's Senior Vice President - Human Resources shall have the
exclusive right and discretion to administer and interpret the
Program and the entitlement to benefits under the Program. Any
decision made by the Senior Vice President - Human Resources on any
matter within the Senior Vice President - Human Resources'
discretion is conclusive, final and binding on all persons.
The Company's Senior Vice President - Human Resources shall grant or
deny claims for benefits under the Plan and authorize disbursements.
Adequate notice, pursuant to applicable law and prescribed Company
practices, shall be provided in writing to any employee whose claim
has been denied, setting forth the specific reasons for such denial.
The review and appeal procedures for an employee whose claim has
been denied shall be the responsibility of the Human Resources
Committee of the Company's Board of Directors.
4
<PAGE>
3. The Company's Senior Vice President - Human Resources or his
delegate shall approve payments under the Program to eligible
employees.
4. The rights of an employee to benefits under the Program shall not be
subject to assignment or alienation.
5. Benefits under the Program shall be excluded in determining benefits
under any pension, retirement, disability, death, savings or other
benefit plans of the Employers.
6. All costs of providing the benefits under the Program shall be
charged to the operating expense accounts of the Employer when and
as paid.
7. The Company may from time to time make changes in the Program and
the Company may terminate the Program, but such changes or
termination shall not adversely affect the rights of any employee,
without his consent, to any benefit under the Program to which such
employee may have previously become entitled prior to the effective
date of such change or termination. The Company's Senior Vice
President - Human Resources with the approval of the Company's
Executive Vice President and General Counsel shall be authorized to
make minor or administrative changes to the Program.
5
<PAGE>
APPENDIX I
CORPORATE RESOURCE
HOME PURCHASE DIFFERENTIAL AMOUNTS
EFFECTIVE 1-1-91
<TABLE>
<CAPTION>
CHICAGO TO: Amount
------
<S> <C>
Detroit 0
Milwaukee 0
Cleveland 0
Indianapolis 0
DETROIT TO:
Chicago 48,000
Milwaukee 0
Cleveland 0
Indianapolis 0
MILWAUKEE TO:
Chicago 43,000
Detroit 0
Cleveland 0
Indianapolis 0
CLEVELAND TO:
Chicago 49,400
Detroit 10,000
Milwaukee 0
Indianapolis 0
INDIANAPOLIS TO:
Chicago 37,700
Detroit 23,500
Milwaukee 10,000
Cleveland 0
</TABLE>
<PAGE>
AMERITECH CORPORATE RESOURCE
SUPPLEMENTAL PENSION PLAN
-------------------------
(As Amended and Restated Effective as of December 1, 1995)
<PAGE>
AMERITECH CORPORATE RESOURCE
SUPPLEMENTAL PENSION PLAN
-------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
1 General 1
History and Purpose 1
Subsidiaries 1
Definitions 1
Plan Administration 1
Source of Benefits 2
Notices 2
Applicable Laws 2
Gender and Number 2
Benefits Under Predecessor Plan 2
2 Participation and Retirement 2
Participation 2
Participation in Predecessor Plans 3
Plan Not Contract of Employment 3
Mandatory Retirement 3
3 Amount and Payment of Supplemental
Pension and Death Benefits 4
Amount of Supplemental Pension and Death Benefits 4
Payment of Supplemental Pension and Death Benefits 4
Lump Sum Distributions 4
Lump Sum Death Benefit 5
4 Minimum Benefits - Disability Survivor and Retirement 5
Disability 5
Disability Pension Allowance 6
Reduction of Disability Pension Allowance 6
Minimum Retirement Benefit 6
Surviving Spouse Benefit 6
Medical Expense Benefits 7
Annual Basic Pay 7
Pre-1987 Benefit Formula 7
</TABLE>
i
<PAGE>
AMERITECH CORPORATE RESOURCE
SUPPLEMENTAL PENSION PLAN
-------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
5 Conditions of Payment 8
Distributions to Persons Under Legal Disability 8
Benefits May Not Be Assigned or Alienated 8
Forfeiture of Benefits 8
Suspension on Re-employment 9
Lump Sum Settlement 9
Change in Control 10
6 Amendment or Termination 12
Administrative Amendments 12
Amendments and Termination 12
Participation Rights 12
Successor 12
</TABLE>
ii
<PAGE>
AMERITECH CORPORATE RESOURCE
SUPPLEMENTAL PENSION PLAN
-------------------------
(As Amended and Restated Effective as of December 1, 1995)
SECTION 1
---------
General
-------
1.1. History and Purpose. The Ameritech Senior Management Retirement
and Survivor Protection Plan, now renamed the Ameritech Corporate Resource
Supplemental Pension Plan (the "Plan") was established by Ameritech Corporation,
a Delaware corporation (the "Company"), effective as of January 1, 1986 (the
"Effective Date"), as an amendment, restatement and continuation of the
following Predecessor Plans as they applied to employees eligible to participate
under subsection 2.1.: Ameritech Management Supplemental Pension Plan (the
"Supplemental Plan"), Ameritech Senior Management Non-Qualified Pension Plan
(the "Non-Qualified Plan"), Ameritech Mid-Career Pension Plan (the "Mid-Career
Plan"), and the retirement and survivor benefit provisions of Ameritech Senior
Management Long Term Disability and Survivor Protection Plan (the "Survivor
Protection Plan"). The primary purpose of the Plan is to provide deferred
compensation for a select group of management and highly compensated employees
in the form of retirement and survivor benefits which are in addition to those
provided under Ameritech Management Pension Plan (the "Pension Plan"). The
following provisions constitute an amendment, restatement and continuation of
the Plan, effective as of December 1, 1995.
1.2. Subsidiaries and Affiliates. The term "Subsidiary" means any
corporation of which the Company owns at least 50% of the combined voting power
of all classes of stock entitled to vote and which has previously adopted any
one or more of the Predecessor Plans or which previously adopted or hereafter
adopts the Plan. The term "Affiliate" means any corporation other than a
Subsidiary which would be a member of a controlled group of corporations with
the Company under Section 1563(a) of the Internal Revenue Code of 1986, as
amended (the "Code") which previously adopted any one or more of the Predecessor
Plans or which previously adopted or hereafter adopts the Plan. Subsidiaries
and Affiliates may also be referred to individually as an "Employer" and
collectively as "Employers."
1.3. Definitions. Unless the context clearly requires otherwise, any
word, term or phrase used in the Plan shall have the same meaning as is assigned
to it under the terms of the Pension Plan.
1.4. Plan Administration. The authority to control and manage the
operation and administration of the Plan as applied to the Company or any
Employer shall be vested in the Benefit Plan Committee which administers the
Pension Plan with respect to the Company or such Employer (the "Committee") and,
in exercising that authority, the Committee shall, to the extent necessary and
appropriate, have the same rights, powers and duties as those delegated to it
under the Pension Plan. The Committee has the exclusive right and discretion to
interpret the
<PAGE>
provisions of the Plan and the entitlement to benefits under the Plan. Any
decision made by the Committee on any matter within its discretion is
conclusive, final and binding on all persons, and not subject to further review.
The Committee of the Company or of the appropriate Employer shall grant or deny
claims for benefits under the Plan and authorize disbursements. Adequate notice,
pursuant to applicable law and prescribed Company practices, shall be provided
in writing to any Participant or beneficiary whose claim has been denied,
setting forth the specific reasons for such denial. The review and appeal
procedures for any Participant or beneficiary whose claim has been denied shall
be the same as those procedures set forth in the Pension Plan.
1.5. Source of Benefits. The obligations of the Company and the
Employers under the Plan are solely contractual. Any amount payable under the
terms of the Plan shall be paid from the general assets of the Company and the
Employers or from one or more trusts, the assets of which will be subject to the
claims of the general creditors of the Company and the Employers. If a
Participant's term of employment includes service by two Employers or by the
Company and one or more Employers, the Company or Employer which last employed
the Participant shall be solely responsible for the entire benefit payable under
Sections 3 and 5 of the Plan.
1.6. Notices. Any notice or document required to be given to or
filed with the Plan Administrator shall be considered to be given or filed if
delivered to the Administrator of the Plan or mailed by registered mail, postage
prepaid, to the Administrator, in care of the Company, Compensation Group at 30
South Wacker Drive, 35th Floor, Chicago, Illinois 60606.
1.7. Applicable Laws. The Plan shall be construed and administered
in accordance with the laws of the State of Illinois, to the extent that such
laws are not preempted by the laws of the United States of America.
1.8. Gender and Number. Where the context admits, words in any gender shall
include any other gender, words in the singular shall include the plural and the
plural shall include the singular.
1.9. Benefits Under Predecessor Plans. Except as otherwise specifically
provided in the Plan, the right to benefits under the Plan and the amount of
benefits of a Participant who has terminated or terminates employment with the
Company and the Employers shall be determined in accordance with the provisions
of the Plan as in effect immediately prior to that termination.
SECTION 2
---------
Participation and Retirement
----------------------------
2.1. Participation. Each Senior Management Employee (as defined
below) of the Company and the Employers who was a participant in any of the
Predecessor Plans on December 31, 1985 became a Participant in the Plan on
January 1, 1986. Any employee who was a Participant as of June 30, 1995 shall
remain a Participant as long as he remains a Senior Management Employee or meets
the requirements to be an Eligible Employee (as defined
2
<PAGE>
below). Each other Eligible Employee shall become a Participant in the Plan as
of the earliest date after June 30, 1995 on which:
(a) such employee's accrued benefit under the Pension Plan is limited by
reason of the application of either section 401(a)(17) or 415 of the
Internal Revenue Code of 1986, as amended (the "Code");
(b) such employee is entitled to an award under the Company's or
Employer's Senior Management Short-Term Incentive Plan or the
Company's Management Committee Short Term Incentive Plan (collectively
the "Incentive Plans" and individually an "Incentive Plan"); or
(c) such employee has made a salary deferral under the Company's Corporate
Resource Deferral Plan.
In addition, solely with respect to the Surviving Spouse Benefit described in
subsection 4.5, a Participant shall include an individual who is entitled to a
Disability Pension under the Pension Plan, and who prior to commencement of such
Disability Pension was a Senior Management Employee or an Eligible Employee.
The term "Senior Management Employee" means an employee on the active payroll of
the Company or any Employer who has attained a level higher than Department
Level or equivalent Fifth Level, and who holds a position that the Board of
Directors of the Company has designated to be within its Senior Management
Group.
The term "Eligible Employee" means (a) a member of the Company's Management
Committee or (b) a full-time management employee on the active payroll of the
Company or any Employer (i) who has attained any of salary grades CR1 through 9
or equivalent, or (ii) who is an attorney in either of salary grades IV or V.
An individual who on or after April 1, 1993 ceases to be a Senior Management
Employee or an Eligible Employee shall cease to be a Plan Participant for all
purposes under the Plan effective as of the date such individual ceases to be a
Senior Management Employee or an Eligible Employee.
2.2. Participation in Predecessor Plans. If a Participant participated in
one or more Predecessor Plans prior to his becoming a Participant under this
Plan, his applicable benefits under this Plan shall be no less than the benefits
accrued by him under the Predecessor Plans and the benefits under this Plan
shall be in lieu of all benefits otherwise payable to him under the Predecessor
Plans.
2.3. Plan Not Contract of Employment. The Plan does not constitute a
contract of employment, and nothing in the Plan will give any employee or
Participant the right to be retained in the employ of the Company or an
Employer, nor the right to any award or other benefit pursuant to an Incentive
Plan or the Pension Plan, nor any right or claim to any benefit under the Plan,
except to the extent specifically provided under the terms of the Plan.
2.4. Mandatory Retirement. Each Participant who is within the category of
employees referred to in (a) Section 12(c)(1) of The Age Discrimination in
Employment Act of 1967, as
3
<PAGE>
amended ("ADEA"), shall retire no later than the first day of the month after
attainment of age 65, or at such later age, only as otherwise agreed to by the
Company or applicable Employer, or (b) Section 4(f)(1) of ADEA, shall retire at
such age as may be applicable under ADEA, with respect to those employees for
whom age is a bona fide occupational qualification within the meaning of such
section.
SECTION 3
---------
Amount and Payment of Supplemental
Pension and Death Benefits
--------------------------
3.1. Amount of Supplemental Pension and Death Benefits. Subject to the
terms and conditions of the Plan, the supplemental pension and death benefits
payable to, or on account of, a Participant under the Plan as of any date shall
be an amount equal to:
(a) the amount of the benefit payment (expressed in the form of the
benefit payable to or on account of the Participant under the Pension
Plan) that would have been payable to or on account of the Participant
under the Pension Plan as of that date, determined without regard to
the limitations imposed by either section 401(a)(17) or 415 of the
Code, and determined as if his compensation under the Pension Plan
were equal to his Modified Compensation (as defined below);
REDUCED BY
----------
(b) the amount of the actual benefit payment under the Pension Plan as of
that date to or on account of the Participant.
A Participant's Modified Compensation as of any date shall be equal to the
amount that would be his compensation as of that date under the Pension Plan if
it included the amount of any salary deferrals, the amount of any awards
deferred under the annual bonus plans of the Company or an Employer and the
amount of his actual awards under the Incentive Plans (without regard to any
deferral of such salary or awards under the Ameritech Corporate Resource
Deferral Plan and without regard to the limitations imposed by section
401(a)(17) of the Code).
3.2. Payment of Supplemental Pension and Death Benefits. Subject to the
provisions of subsections 3.3, 3.4, 5.5 and 5.6, the supplemental pension and
death benefits payable to or on account of a Participant under subsection 3.1
shall be paid to him, or on his account, at the times and for the periods that
benefits are payable to the Participant, or on his account, under the Pension
Plan and such supplemental pension benefits shall be subject to any post-
retirement increase pursuant to the same terms and conditions as benefits
payable under the Pension Plan.
3.3. Lump Sum Distributions. Regardless of the form of payment under the
Pension Plan, a Participant may elect to have his supplemental pension benefits
under this Plan paid in a lump sum in accordance with the provisions of
subsection 5.5. If a Participant's pension is paid
4
<PAGE>
in a lump sum under the Pension Plan and he does not elect a lump sum under
subsection 5.5 of this Plan, his supplemental pension benefits under this Plan
shall be paid in a single life annuity form with no survivor benefits or in a
survivor annuity form, whichever he shall elect, in an amount determined as if
the amount paid to him in a lump sum under the Pension Plan had been paid in a
single life annuity or survivor annuity form, as the case may be.
3.4. Lump Sum Death Benefit. If a Participant dies on or after May 1, 1995
and prior to the date as of which his supplemental pension benefits commence
under the Plan, in lieu of the death benefit which would otherwise be payable
under the Plan on account of the Participant in accordance with the provisions
of subsections 3.1 and 3.2, the Participant's Beneficiary (as defined in the
Pension Plan, and which may be, if applicable, a Qualified Spouse, as provided
under the Pension Plan) shall be entitled to receive a lump sum death benefit,
subject to the following:
(a) Such lump sum payment shall be paid as soon as possible after the
Participant's death and shall be in an amount equal to the present
value of the vested supplemental pension benefits accrued by the
Participant under the Plan as of the date of his death determined on
the basis of the actuarial rates, tables and factors then in effect
under the Pension Plan. This provision is intended to provide the
Beneficiary with a lump sum payment equal to the amount the
Participant would have received under the Plan had he retired as of
the date of his death (or termination of employment if earlier) and
elected to receive benefits in the form of a lump sum from both the
Pension Plan and the Plan. Accordingly, such lump sum payment from the
Plan shall be calculated without regard to the amount of any survivor
benefit which any Qualified Spouse actually receives from the Pension
Plan on account of the Participant's death.
(b) If the Participant does not have a Qualified Spouse and fails to
designate a Beneficiary under the Pension Plan, the lump sum payment
described in subsection 3.4(a) above shall be paid to the
Participant's estate.
SECTION 4
---------
Minimum Benefits - Disability
Survivor and Retirement
-----------------------
4.1. Disability. A Participant shall be considered to be "disabled" after
the first fifty-two week period following the onset of a physical or mental
impairment, if such impairment prevents the Participant from meeting the
performance requirements of (1) the position held immediately preceding the
onset of the physical or mental impairment, (2) a similar position, or (3) any
appropriate position within the Company or applicable Employer which the
Participant would otherwise be capable of performing by reason of the
Participant's background and experience.
5
<PAGE>
4.2. Disability Pension Allowance. Subject to the provisions of subsection
5.6, a Participant who is disabled during a period described in subsection 4.1
and continuously thereafter through age 65 shall, commencing with his sixty-
fifth birthday or the start of the period described in subsection 4.1, if later,
be eligible to receive a monthly Disability Pension Allowance equal to the
greater of:
(a) one and one-quarter percent of the Participant's Annual Basic Pay (as
defined in subsection 4.7) on the last day the Participant was on the
active payroll; or
(b) if the Participant's term of employment has been five years or more,
ninety percent of the monthly pension the Participant would have been
entitled to receive commencing at age sixty-five under the Pension
Plan and Section 3 of this Plan as in effect on the last day the
Participant was on the active payroll, but ignoring any minimum
service requirements for eligibility to a pension, if the period after
the last day the Participant was on the active payroll and prior to
the Participant's sixty-fifth birthday had been included in the
Participant's term of employment.
4.3. Reduction of Disability Pension Allowance. The Disability Pension
Allowance determined for any period under subsection 4.2 shall be reduced by the
sum of the following benefits received (or which, at the election of the
Participant, could be received) by the Participant which are attributable to the
period for which such Disability Pension Allowance is provided: a pension under
the Pension Plan or Section 3 of this Plan; any other retirement income payments
from the Company or any Employer; and any Worker's Compensation Benefit.
However, no reduction shall be made on account of any pension under the Pension
Plan or Section 3 of this Plan at a rate greater than the rate of such pension
on the date the Participant first received such pension after his disability.
4.4. Minimum Retirement Benefit. Subject to the provisions of subsection
5.5, a monthly Minimum Retirement Benefit shall be payable to any Participant
who was a Participant in the Plan as of June 30, 1995 and (i) whose combined age
and service upon leaving the Company and the Employers equals 75 or more ("Rule
of 75") or (ii) whose term of employment is at least five years and whose
employment terminates on or after his sixty-second birthday for reasons other
than disability. The amount of the monthly Minimum Retirement Benefit shall be
equal to one and one-quarter percent of the Participant's Annual Basic Pay on
the last day the Participant was on the active payroll, reduced by the sum of
the following benefits received by the Participant which are attributable to the
period for which benefits are provided under this subsection: a pension under
the Pension Plan and Section 3 of this Plan (or the monthly amount of any such
pension which was paid to the Participant in a lump sum), and any other
retirement income payments received by the Participant from the Company and the
Employers. However, no reduction shall be made on account of any pension under
the Pension Plan or Section 3 of this Plan at a rate greater than the rate of
such pension on the date the Participant first received such pension after his
retirement or other termination of employment.
4.5. Surviving Spouse Benefit. Subject to the provisions of subsection
5.6, in the event of the death of a Participant who was a Participant in the
Plan as of June 30, 1995,
6
<PAGE>
including such a Participant who is entitled to a benefit under subsection 4.2
or 4.4, the surviving spouse ("Surviving Spouse") of such Participant shall be
eligible to receive a monthly benefit equal to one and one-quarter percent of
the Participant's Annual Basic Pay, on the last day the Participant was on the
active payroll prior to his death, reduced by the sum of the following benefits
received by the Participant's Surviving Spouse on account of the death of the
Participant and which are attributable to the period for which benefits are
provided under this Section: an annuitant's pension under the Pension Plan and
Section 3 of this Plan (or the monthly equivalent of any amount which is paid to
the Surviving Spouse under subsection 3.4); and any other lifetime payments to
such Surviving Spouse from the Company or any Employer. However, no reduction
shall be made on account of an annuitant's pension benefit under the Pension
Plan or Section 3 of this Plan at a rate greater than (i) the rate such pension
or annuity was first payable, in the case of the death of a Participant who is
on the active payroll, or (ii) the rate such pension or annuity first would have
been payable had the Participant died on the day after the last day the
Participant was on the active payroll, in the case of the death of a Participant
who is not on the active payroll. Notwithstanding the foregoing provisions of
this subsection, the Surviving Spouse of a Participant shall not be eligible to
receive benefits under this Section if, prior to the Participant's death, he
could have elected under the Pension Plan to receive a reduced pension for his
life in order to provide thereafter an annuity for the life of his spouse, but
he did not make such an election.
4.6. Medical Expense Benefits. A Participant who is entitled to a benefit
under subsection 4.2 or 4.4 whose combined age plus years of service upon
retirement is less than 75 shall be entitled to the same rights and benefits
under the Company's or Employer's Comprehensive Health Care Plan and Dental
Expense Plan (as those Plans have been combined to create the Management
Umbrella Welfare Benefit Plan) as if he had retired with age plus years of
service totalling 75.
4.7. Annual Basic Pay. A Participant's "Annual Basic Pay" means his annual
base salary rate on the last day on which he is on the active payroll of the
Company or Employer plus the applicable standard short-term award in effect on
such date.
4.8. Pre-1987 Benefit Formula. Subject to the provisions of Section 5, if
a Participant's employment terminates on or after December 31, 1986, his
benefits under the Plan shall not be less than the benefits to which he would
have been entitled if the terms of the Plan and the terms of the Pension Plan as
in effect on December 30, 1986 had continued in effect through December 31,
1988.
7
<PAGE>
SECTION 5
---------
Conditions of Payment
---------------------
5.1. Distributions to Persons Under Legal Disability. In the event an
individual is declared incompetent and a conservator or other person legally
charged with the care of the individual's person or estate is appointed, any
benefits to which such individual is entitled under the Plan shall be paid to
such conservator or other person.
5.2. Benefits May Not Be Assigned or Alienated. Benefits payable to, or on
account of, any individual under the Plan may not be voluntarily or
involuntarily assigned or alienated. Prior to the death of any Participant, no
other person shall have any rights under the Plan with respect to that
Participant.
5.3. Forfeiture of Benefits.
(a) All or a portion of the benefits under Sections 3 and 4 of the Plan
other than benefits which would have been payable under the Pension
Plan but for the limitations imposed by sections 401(a)(17) and 415 of
the Code may be forfeited at the discretion of the Compensation
Committee of the Company's Board of Directors under the following
circumstances:
(i) The Participant is discharged by the Company or an
Employer for cause;
(ii) The Compensation Committee of the Board of Directors of the
Company determines that the Participant engaged in misconduct
in connection with his employment with the Company or Employer;
or
(iii) The Participant, without the consent of the Company or his
employing Employer or the Employer paying him a benefit
hereunder, at any time is employed by, becomes associated with,
renders service to, or owns an interest in any business that is
competitive with the Company, any Employer or with any business
in which the Company or any Employer has a substantial interest
(other than as a shareholder with a nonsubstantial interest in
such business) as determined by the Compensation Committee of
the Board of the Company.
(b) The portion of the benefit subject to forfeiture under the conditions
described in this subsection 5.3(a) above, is as follows:
(i) The total benefit is subject to forfeiture if the Participant's
retirement or termination of employment, or employment or
association with a competing business as specified in
subsection 5.3(a) occurred before age 65.
8
<PAGE>
(ii) If an individual terminates employment on or after attainment
of age 65, the total benefit is subject to forfeiture if the
Participant's pension under the Pension Plan exceeds $44,000.
(iii) If an individual terminates employment on or after attainment
of age 65, and the annual pension benefit under the Pension
Plan is less than $44,000 but the combined pension thereunder
and the benefits under this Plan attributable to the minimum
retirement benefit and the portion of the supplemental pension
benefit which results from the limitations imposed by either
section 401(a)(17) or 415 of the Code exceeds $44,000, the
benefit hereunder above the $44,000 combination is subject to
forfeiture.
5.4. Suspension on Re-employment. Employment with the Company, any
Employer or any Interchange Company subsequent to retirement or termination of
employment with entitlement to any benefits under the Plan shall result in the
permanent suspension of the benefit for the period of such employment or
reemployment.
5.5. Lump Sum Settlement. In lieu of the supplemental pension benefit
and minimum retirement benefit, if any, payable under Section 3 and subsection
4.4, respectively, a Participant whose employment with the Company and the
Employers terminates on or after October 1, 1986, for reasons other than death
or transfer to an Interchange Company, may elect to receive a lump sum payment
of the present value of the aggregate amount of all such benefits to which he
would otherwise be entitled, subject to the following:
(a) An election of a lump sum payment must be filed with the Committee by
the later of (i) sixty (60) days after the date on which the
Participant terminates employment with the Company and the Employers
or (ii) sixty (60) days after the date on which the Participant is
notified of his right to elect a lump sum under the Plan. A lump sum
payment timely elected by a Participant shall be paid to him no
earlier than ninety (90) days after the date on which the Participant
terminates employment with the Company and the Employers.
If a Participant fails to make a timely election of a lump sum
payment, his benefits shall be paid to him, in a single life annuity
form with no survivor benefits if he is not then married, or in a
survivor annuity form if he is then married, beginning no earlier than
ninety (90) days after the later of (i) the date on which the
Participant terminates employment with the Company and the Employers,
or (ii) the date on which the Participant is notified of his right to
elect a lump sum under the Plan.
(b) The amount of a Participant's lump sum payment under the Plan shall be
determined on the basis of the rates, tables and factors which would
be utilized to determine the Participant's lump sum payments under the
Pension Plan as of the date of the Participant's termination of
employment.
9
<PAGE>
(c) A Participant may rescind the election of a lump sum distribution at
any time up to and including the date as of which the Participant
could have elected a lump sum payment under paragraph (a) of this
subsection 5.5.
(d) If a Participant who has filed a lump sum election dies prior to his
retirement or other termination of employment, such election shall be
void. If a Participant who has filed a lump sum election dies after
his retirement or other termination of employment but prior to receipt
of such payment, the lump sum shall be paid to his estate as soon as
practicable thereafter.
(e) A lump sum payment under this subsection 5.5 shall be in lieu of all
other benefits (including postretirement ad hoc pension increases)
otherwise payable to or on account of the Participant under the Plan,
other than the medical expense benefits set forth in subsection 4.6.
(f) Any election under this subsection 5.5 shall be in such form as the
Committee may require from time to time.
5.6. Change in Control. Notwithstanding any other provisions of the Plan,
if a Change in Control (as defined below) occurs, then each Participant's
benefits hereunder shall be fully vested. For purposes of the Plan, as applied
to any Participant, the term "Change in Control" means a change in the
beneficial ownership of the Company's voting stock or a change in the
composition of the Company's Board of Directors which occurs as follows:
(a) any "person" (as such term is used in Section 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934) other than:
(i) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company; or
(ii) the Participant or any person acting in concert with the
Participant;
is or becomes a beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934), directly or
indirectly, of stock of the Company representing 20% or more of
the total voting power of the Company's then outstanding stock;
provided, however, that this paragraph (a) shall not apply to
any tender offer made pursuant to an agreement with the Company
approved by the Company's Board of Directors and entered into
before the offeror has become a beneficial owner of stock of
the Company representing 5% or more of the combined voting
power of the Company's then outstanding stock;
(b) a tender offer is made for the stock of the Company, and the person
making the offer owns or has accepted for payment stock of the Company
representing 20% or more of the total voting power of the Company's
then outstanding stock;
10
<PAGE>
provided, however, that this paragraph (b) shall not apply to any
tender offer made pursuant to an agreement with the Company approved
by the Company's Board of Directors and entered into before the
offeror has become a beneficial owner of stock of the Company
representing 5% or more of the combined voting power of the Company's
then outstanding stock;
(c) during any period of 24 consecutive months there shall cease to be a
majority of the Board of Directors comprised as follows: individuals
who at the beginning of such period constitute the Board of Directors
and any new director(s) whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by
a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved;
or
(d) the stockholders of the Company approve a merger or consolidation of
the Company with any other company other than:
(i) a merger or consolidation which would result in the Company'
voting stock outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being
converted into voting stock of the surviving entity) more than
70% of the combined voting power of the Company's or such
surviving entity's outstanding voting stock immediately after
such merger or consolidation; or
(ii) a merger or consolidation which would result in the directors
of the Company who were directors immediately prior thereto
continuing to constitute at least 50% of the directors of the
surviving entity immediately after such merger or
consolidation.
For purposes of paragraph (d) above, the phrase "surviving entity" shall mean
only an entity in which all of the Company's stockholders who are stockholders
immediately before the merger or consolidation (other than stockholders
exercising dissenter rights) become stockholders by the terms of the merger or
consolidation, and the phrase "directors of the Company who were directors
immediately prior thereto: shall not include (A) any director of the Company who
was designated by a person who has entered into an agreement with the Company to
effect a transaction described in paragraph (a) or paragraph (d) above, or (B)
any director who was not a director at the beginning of the 24-consecutive-month
period preceding the date of such merger or consolidation, unless his election
by the Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors who were directors before the beginning of such period.
11
<PAGE>
SECTION 6
---------
Amendment or Termination
------------------------
6.1. Administrative Amendments. Subject to the provisions of subsection
6.3, the Company's Senior Vice President - Human Resources, or such other
officer of the Company as may from time to time be primarily responsible for
human resources matters, may, with the concurrence of the Company's Executive
Vice President and General Counsel, make minor or administrative amendments to
the Plan.
6.2. Amendments and Termination. Subject to the provisions of subsection
6.3, the Company's Board of Directors may amend or terminate the Plan at any
time and any Employer may, by action of its Board of Directors (or, if such
Employer does not have a Board of Directors and is managed by its shareholder or
shareholders, by action of such shareholder or shareholders), terminate its
participation in the Plan at any time.
6.3. Participation Rights. No action under this Section 6 shall reduce or
impair the interests of individuals in benefits being paid under the Plan at the
date of amendment or termination, as the case may be.
6.4. Successor. The obligations of the Company and each Employer under the
Plan shall be binding upon any assignee or successor in interest thereto.
Neither the Company nor any Employer shall merge or consolidate with any other
corporation, or liquidate or dissolve, without making suitable arrangements for
the payment of any benefits payable under the Plan.
12
<PAGE>
SUPPLEMENT A
TO
AMERITECH CORPORATE RESOURCE
SUPPLEMENTAL PENSION PLAN
(DECEMBER 31, 1992 LUMP SUM PAYMENTS)
For purposes of this Supplement A, the terms "Participant and "Affiliated
Participants" shall not include former Senior Management Employee who no longer
holds a position at a level higher than Department Level or equivalent Fifth
Level which the Company has designated to be within its Senior Management Group,
and no such individual shall receive any payment under this Supplement A.
<TABLE>
<CAPTION>
<S> <C> <C>
Application A-1. This Supplement A to the Ameritech Senior
Management Retirement and Survivor
Protection Plan, now renamed the Ameritech
Corporate Resource Supplemental Pension Plan
(the "Plan") is applicable to each
Participant in the Plan who would be
eligible for a service pension under the
terms of the Pension Plan if the Participant
retired from the employ of the Company and
its subsidiaries on December 31, 1992 (an
"Affected Participant") but who does not
retire from such employ on or before
December 31, 1992.
Definitions A-2. Unless the context clearly implies or
indicates to the contrary, a word, term or
phrase used or defined in the Plan is
similarly used or defined for purposes of
this Supplement A.
December 31, 1992 A-3. Subject to the following provisions of this
Lump Sum Payments Supplement A, each Affected Participant
shall receive a lump sum payment of his
interest under the Plan on or before
December 31, 1992. Such lump sum payment
shall be determined as follows: (i) the
monthly benefit to which the Affected
Participant would be entitled under the Plan
in the form of a single life annuity if he
retired on December 31, 1992 shall be
determined without regard to any enhanced
benefits that would be payable by reason of
Paragraph 2(m) of Section 4 of the Pension
Plan; and (ii) a lump sum payment of the
present value of all such benefits shall be
determined by using an interest assumption
of 5.75% per annum and such other rater,
tables and factors as are utilized to
determine lump sum payments made under the
Pension Plan in December 1992.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Election to A-4. By writing filed with the Company prior to
Defer Receipt December 11, 1992, an Affected Participant
may irrevocably elect to defer receipt of
the payment described in section A-3 of this
Supplement, in which case, his benefits
under the Plan will be determined and paid
under the terms of the Plan without regard
to the provisions of this Supplement A.
Contribution A-5. By writing filed with the Company prior to
to Trust December 11, 1992, an Affected Participant
may irrevocably elect to have the amount to
which he is entitled under section A-3 of
this Supplement A transferred on his behalf
to a grantor trust established by the
Affected Participant in a form approved by
the Company's Senior Vice President - Human
Resources. Any such grantor trust shall
provide that, except for that portion of
annual trust earnings which is not in excess
of the Federal, state and local income taxes
and any other applicable taxes estimated to
be payable by the Affected Participant on
such earnings, no portion of the trust shall
be distributed to or on behalf of the
Affected Participant prior to his
termination of employment with the Company
and its subsidiaries due to the Affected
Participant's retirement, disability or
death.
Source of Payment A-6. The payment to which an Affected Participant
and Tax Withholding is entitled under section A-3 or A-5 of this
Supplement A shall be paid by the Company or
subsidiary employing the Affected
Participant on or before December 31, 1992,
and shall be subject to all applicable
withholding of taxes.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Offset of A-7. The benefits to which an Affected
Plan Benefits Participant or his surviving spouse is
otherwise entitled under the Plan in the
form of a lump sum shall be reduced by an
amount based upon the amount paid to the
Affected Participant or to the grantor trust
established by the Affected Participant in
accordance with section A-3 or A-5 of this
Supplement A, and the amount withheld
therefrom for the payment of taxes, but
calculated using the interest assumption
then being used to calculate lump sum
payments under the Pension Plan. No
adjustment shall be made to the amount of
the reduction to reflect earnings or losses
on amounts previously paid. If an Affected
Participant's or surviving spouse's benefits
under the Plan are not paid in the form of a
lump sum, the amount of such benefits shall
be determined by converting the net lump sum
that would be payable in accordance with the
first sentence of this section A-7 (after
reduction by the amount specified above) to
an actuarially equivalent amount based upon
the rates, tables and factors then utilized
under the Plan to determine lump sum
amounts. If the amount of the reduction
exceeds the benefits to which the Affected
Participant or his surviving spouse would
otherwise be entitled under the Plan, no
benefits shall be paid to such Affected
Participant or surviving spouse under the
Plan and no amount shall be owed from the
Affected Participant or surviving spouse to
the Plan or the Company.
</TABLE>
3
<PAGE>
AMERITECH CORPORATE RESOURCE
DEFERRAL PLAN
-------------
(As Amended and Restated Effective as of December 1, 1995)
<PAGE>
AMERITECH CORPORATE RESOURCE
DEFERRAL PLAN
-------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
1 General 1
History, Purpose and Effective Date 1
Plan Administration 1
Non-Alienation 2
Source of Benefits 2
Notices 2
Applicable Laws 2
Gender and Number 2
2 Participation 2
Participation 2
Plan Not Contract of Employment 3
3 Deferral of Compensation and Excess Savings Plan Credit 3
Deferral Requests 3
Supplemental Deferrals and Excess Savings Plan Credit 3
Deferred Amounts - Interest 5
Deferred Amounts - Stock Units 5
Deferred Amount 5
4 Payment of Deferred Amounts 5
Distribution 5
Termination of Employment Prior to Retirement Age 6
Death 6
Committee Discretion 7
Form of Payment 8
Change in Control 8
5 Amendment or Termination 10
Administrative Amendments 10
Amendments and Termination 10
Participation Rights 10
Successors 10
</TABLE>
i
<PAGE>
AMERITECH CORPORATE RESOURCE
DEFERRAL PLAN
-------------
(As Amended and Restated Effective as of December 1, 1995)
SECTION 1
---------
General
-------
1.1 History, Purpose and Effective Date. Effective January 1, 1984,
Ameritech Corporation, a Delaware corporation (the "Company"), established the
Ameritech Senior Management Supplemental Savings and Deferral Plan (the "Plan"),
which was then known as the "Ameritech Senior Management Incentive Award
Deferral Plan", now re-named the Ameritech Corporate Resource Deferral Plan.
The Plan has two primary purposes. The first is to enable senior management and
certain management employees of the Company and of any Subsidiary or Affiliate
of the Company which adopts the Plan (an "Employer") to defer the receipt of
salary and incentive compensation awards. The second purpose is to provide such
senior management and certain management employees an opportunity to receive the
full Employer Matching Contribution and make the full level of contributions
permitted under the Ameritech Savings Plan for Salaried Employees ("Savings
Plan"), both of which might otherwise be limited by certain sections of the
Internal Revenue Code of 1986, as amended (the "Code"). The following
provisions constitute an amendment, restatement and continuation of the Plan,
effective as of December 1, 1995 (the "Effective Date"). For purposes of the
Plan, the term "Subsidiary" means any corporation of which the Company owns at
least 50% of the combined voting power of all classes of stock entitled to vote.
The term "Affiliate" means any corporation other than a Subsidiary which would
be a member of a controlled group of corporations with the Company under Section
1563(a) of the Code.
1.2. Plan Administration. The authority to control and manage the
day-to-day operation and administration of the Plan is vested in the Company's
Senior Vice President - Human Resources or such other officer of the Company as
may from time to time be primarily responsible for human resource matters (the
"Plan Administrator"), subject to the direction of the Compensation Committee of
the Company's Board of Directors (the "Committee"). The Plan Administrator and
the Committee shall each have the exclusive right and discretion to interpret
the provisions of the Plan and the entitlement to benefits under the Plan with
respect to the duties allocated to each of the Plan Administrator and the
Committee. Any decision made by the Plan Administrator or the Committee on any
matter within the Plan Administrator's or the Committee's discretion is
conclusive, final and binding on all persons.
The Plan Administrator shall grant or deny claims for benefits under the Plan
and authorize disbursements. Adequate notice, pursuant to applicable law and
prescribed Company practices, shall be provided in writing to any Participant or
beneficiary whose claim has been denied, setting forth the specific reasons for
such denial. The review and appeal procedures for a Participant or beneficiary
whose claim has been denied shall be the responsibility of the
<PAGE>
Committee and shall be consistent with review and appeal procedures set forth in
the Savings Plan.
1.3. Non-Alienation. Benefits payable to any person under the Plan
may not be voluntarily or involuntarily assigned or alienated.
1.4. Source of Benefits. Subject to the terms and conditions of the
Plan, any amount payable to or on account of a Participant under this Plan shall
be paid from the general assets of the Company or applicable Employer or from
one or more trusts, the assets of which are subject to the claims of the
Company's or applicable Employer's general creditors.
1.5. Notices. Any notice or document required to be given to or
filed with the Plan Administrator shall be considered to be given or filed if
delivered to the Administrator of the Plan or mailed by registered mail, postage
prepaid to the Administrator, in care of the Company, at 30 South Wacker Drive,
Chicago, Illinois 60606.
1.6 Applicable Laws. The Plan shall be construed and administered in
accordance with the laws of the State of Illinois, to the extent that such laws
are not preempted by the laws of the United States of America.
1.7. Gender and Number. Where the context admits, words in any
gender shall include any other gender, words in the singular shall include the
plural and the plural shall include the singular.
SECTION 2
---------
Participation
-------------
2.1. Participation. Each Management Employee (as defined below) and
each Senior Management Employee (as defined below) shall become a Participant in
the Plan as of the earliest date on which he requests a deferral under
subsection 3.1 or 3.2 or is entitled to an Excess Savings Plan Credit under
subsection 3.2. The term "Management Employee" means a full-time employee on
the active roll of the Company or any Employer who has attained any of salary
grades CR 1 through 4 or, if an attorney, either of salary grades IV or V. The
term "Senior Management Employee" means an employee on the active roll of the
Company or an Employer who has attained any of salary grades CR 5 through 9 or
who is a member of the Company's Management Committee. The terms "Management
Employee" and "Senior Management Employee" also include any individual who was a
Participant in the Plan as of December 31, 1994 as long as such individual
continues to meet the requirements to be a Management Employee or a Senior
Management Employee under the Plan as it existed as of December 31, 1994 or
meets such requirements under the Plan as it exists from time to time after that
date. The term "Senior Management Employee" also includes a former Senior
Management Employee who no longer meets the requirements to be a Senior
Management Employee, but who has been authorized to retain part or all of the
rights of a Senior Management Employee under the Plan
2
<PAGE>
pursuant to an agreement in writing executed by the Senior Management Employee
and the Senior Vice President - Human Resources.
2.2. Plan Not Contract of Employment. The Plan does not constitute a
contract of employment, and nothing in the Plan will give any employee or
Participant the right to be retained in the employ of the Company or an
Employer, nor the right to any incentive award, nor any right or claim to any
benefit under the Plan, except to the extent specifically provided under the
terms of the Plan.
SECTION 3
---------
Deferral of Compensation and
Excess Savings Plan Credit
--------------------------
3.1. Deferral Requests. Any Management Employee of the Company or
any Employer may elect to defer all or any portion (but not less than $1,000) of
an award to which he may be entitled under the Company's long-term incentive
plans or under an annual bonus plan of the Company or an Employer and shall
receive an Excess Savings Plan Credit in accordance with subsection 3.2(c) with
respect to such deferral but only if and to the extent he would have received an
Employer Matching Contribution under the Savings Plan had no deferral election
been made. Any Senior Management Employee of the Company or any Employer may
elect to defer:
(a) subject to applicable law, all or any portion (but not less than
$1,000) of an award to which he may be entitled under the Ameritech
Long Term Incentive Plan or the Company's or Employer's Senior
Management Short Term Incentive Plan or the Company's Management
Committee Short Term Incentive Plan (collectively the "Incentive
Plans" and individually an "Incentive Plan"); and
(b) for any payroll period ending on or after December 31, 1987, all or
any portion, up to 25% of his Base Salary for such period
by filing a written request with the Plan Administrator at such time and in such
form as the Plan Administrator may determine. "Base Salary" shall have the
meaning assigned to the term "Salary" under the Savings Plan determined without
regard to salary deferrals under this Plan and without regard to the limitations
imposed by section 401(a)(17) of the Code. Any Senior Management Employee who
elects to make a deferral under subsection 3.1(b) above shall receive an Excess
Savings Plan Credit in accordance with subsection 3.2(b) with respect to such
deferral.
3.2. Supplemental Deferrals and Excess Savings Plan Credit. For any
payroll period ending after January 1, 1988, each Senior Management Employee,
and, for any payroll period ending after January 1, 1990, each Management
Employee of the Company and the Employers
3
<PAGE>
who is eligible to participate in the Savings Plan, shall be entitled to make a
Supplemental Deferral and receive Excess Savings Plan Credit, in accordance with
the following:
(a) Supplemental Deferrals. Each Senior Management Employee who is
prevented from making a salary allotment under the Savings Plan due to
the limitations imposed by any of sections 401(a)(17), 401(k), 401(m),
402(g), or 415 of the Code, and, with respect to each Management
Employee, sections 401(a)(17), 401(m) and 415 of the Code, may elect,
at such time and in such manner as the Plan Administrator may
determine, to make a supplemental salary deferral in an amount equal
to the allotments which he is prevented from making under the Savings
Plan for such period; provided that no Senior Management Employee
shall be permitted to make any supplemental salary deferral in any
payroll period which would cause the aggregate of his supplemental
salary deferrals and Base Salary deferrals for such payroll period to
exceed the 25% limitation prescribed in subsection 3.1(b) above.
(b) Senior Management Excess Savings Plan Credit. For each payroll
period, each Senior Management Employee shall be credited with an
"Excess Savings Plan Credit" in an amount equal to the lesser of:
(i) 4-1/2% of his Base Salary for that period; or
(ii) 75% of his aggregate salary allotments under the Savings Plan
and base and supplemental salary deferrals under the Plan
during that period;
reduced by the amount of Employer Matching Contributions that he
actually receives under the Savings Plan for that period.
(c) Management Excess Savings Plan Credit. Subject to subsection 3.1, for
each payroll period, each Management Employee shall be credited with
an "Excess Savings Plan Credit" in an amount equal to the lesser of:
(i) 4-1/2% of his aggregate Base Salary and annual bonus for that
period; or
(ii) 75% of (A) supplemental salary deferrals under the Plan during
that period and (B) the aggregate salary allotments (including
annual bonuses) which would have been made under the Savings
Plan during that period had no deferral election been made;
reduced by the amount of Employer Matching Contributions that
he actually receives under the Savings Plan for that period.
A Participant shall be fully vested in all Excess Savings Plan Credits
regardless of the extent to which he is vested under the Savings Plan.
4
<PAGE>
3.3. Deferred Amounts - Interest. Subject to the provisions of the Plan,
any amounts deferred under subsection 3.1 (other than amounts which would
otherwise have been distributed under an Incentive Plan in the form of the
Company's common shares) or deferred or credited under subsection 3.2 shall be
credited with interest from the date as of which the amount would otherwise have
been paid to the Participant or credited to his account under the Savings Plan
to the date as of which it is paid under the Plan. Such interest shall be
compounded as of the last day of each calendar quarter and from the end of the
preceding calendar quarter to the distribution date and shall be credited at
such rate as the Committee may establish from time to time.
3.4. Deferred Amounts - Stock Units. Subject to the provisions of the
Plan, for that portion, if any of any amount deferred under subsection 3.1 which
would otherwise have been distributed under an Incentive Plan in the form of the
Company's common shares, the Participant shall be credited with an equivalent
number of "Stock Units" under the Plan. As of each dividend payment date for
the Company's common shares, each Participant shall be credited with an
additional number of Stock Units which is equal to: (i) the dividend which would
have been paid on such date on that number of Ameritech common shares which is
equal to the number of Stock Units credited to the Participant under the Plan on
the record date for such dividend, divided by (ii) the Fair Market Value (as
defined below) of an Ameritech common share on such dividend payment date. For
purposes of the Plan, the Fair Market Value of Ameritech common shares on any
dividend payment date shall be the average of the average daily high and low
sale prices of Ameritech common shares as quoted on the New York Stock Exchange
- -- Composite Transactions or other principal market quotation selected by the
Committee for the calendar month next preceding the dividend payment date. In
the event of any changes in outstanding Ameritech common shares by reason of any
stock dividend or split, recapitalization, merger, consolidation, combination or
exchange of shares or other similar corporate change, the Company's Board of
Directors shall make such adjustments, if any, that it deems appropriate in the
number of Stock Units then credited to Participant accounts. Any and all such
adjustments shall be conclusive and binding upon all parties concerned.
3.5 Deferred Amount. A Participant's "Deferred Amount" under the Plan as
of any date shall mean the amount deferred by him under subsection 3.1 or
deferred or credited to him under subsection 3.2, each adjusted in accordance
with subsections 3.3 and 3.4.
SECTION 4
---------
Payment of Deferred Amounts
---------------------------
4.1. Distribution. Any deferral made in accordance with subsections 3.1 or
3.2 shall include an election of a distribution commencement date and an
election of a payment form either in a lump sum or in annual installments over a
period of 2, 3, 4, 5, 10, 15 or 20 years; provided, however, that a) incentive
awards payable pursuant to the Ameritech Management Committee Short Term
Incentive Plan that are deferred by members of the Company's Management
Committee may not be distributed to any such Participant until such
Participant's
5
<PAGE>
normal retirement or approved early retirement as defined in subsection 4.2 or
termination of employment, and b) any Deferred Amount which, at the time of
distribution, is less than or equal to $3,500.00 shall be paid in a lump sum,
regardless of the Participant's election. Subject to the above conditions and
the following provisions of the Plan, the distribution commencement date and
form of payment of any Deferred Amount shall be as designated by the Participant
in his deferral request, or in any comparable election under the Plan as in
effect from time to time prior to the Effective Date. A Participant may, with
the consent of the Committee, defer the commencement date or extend the
distribution period for any Deferred Amount, within the guidelines set forth
above, by filing a written request with the Plan Administrator, in such form as
the Administrator may require; provided that any such request must be filed no
later than one year prior to the earlier of the date distribution would
otherwise commence or the date of the Participant's termination of employment.
Any election under the preceding sentence shall be irrevocable by the
Participant. Excess Savings Plan Credits associated with amounts deferred for
any period will be paid at the same time and in the same form as provided in the
deferral request for such deferred amount; provided, however, that if no
deferral election is in place for such period, the deferral account including
the Excess Savings Plan Credits for such period shall be paid in a lump sum on
the Participant's termination of employment.
4.2. Termination of Employment Prior to Retirement Age. If a Participant's
employment with the Company, its Subsidiaries and Affiliates terminates prior to
the Participant's attaining eligibility for normal or approved early retirement
as defined below, then, unless such termination is by reason of disability
entitling the Participant to a benefit under the Company's or an Employer's
long-term disability plan or unless a different form or time of distribution is
authorized by the Plan Administrator pursuant to Committee direction, his entire
benefit under the Plan shall be distributed to him in a lump sum as soon as
practicable after such termination of employment. For all purposes under the
Plan, the term "normal retirement" shall mean retirement on or after the date on
which the Participant reaches age 65 (or, if later, the fourth anniversary of
the date the Participant commenced participation in the Ameritech Management
Pension Plan), and the term "approved early retirement" shall mean retirement on
or after the date on which the Participant's combined age and years of service
equals 75, subject to Committee authorization. Anything in the Plan to the
contrary notwithstanding and regardless of the Participant's election of a
particular form of distribution, if, before a Participant receives full payment
of all amounts credited to him under the Plan, the Participant without the
consent of the Company, at any time is employed by, becomes associated with,
renders service to, or owns an interest in any business that is competitive with
the Company, with any Employer or with any business in which the Company or any
Employer has a substantial interest (other than as a shareholder with a
nonsubstantial interest in such business) or engages in any activity which is in
conflict with or adverse to the interests of the Company or any Employer, then
the Committee in its discretion may authorize the accelerated distribution of
the balance of the Participant's Deferred Amount and may require that such
Deferred Amount be paid to the Participant in a lump sum as soon as practicable
after such authorization.
4.3. Death. A Participant may elect that, in the event the Participant
should die before full payment of all amounts credited to him under this Plan,
the balance of the Deferred Amount shall be distributed in one payment or in
some other number of approximately equal annual
6
<PAGE>
installments (not exceeding 10) to the beneficiary or beneficiaries designated
in writing by the Participant, or if no designation has been made, to the estate
of the Participant. The first installment (or the single payment if the
Participant has so elected) shall be paid as soon as practicable after the last
day of the calendar quarter during which the Participant's death occurs. The
Participant may change the beneficiary designation and the form of distribution
of deferred funds to the beneficiary at any time.
4.4. Committee Discretion. The Committee, in its sole discretion, may
alter the commencement date and period of distribution of any Deferred Amount as
follows:
(a) Hardship. At the request of a Participant or a Participant's
beneficiary, the Committee may accelerate distribution to the extent
necessary to meet any unanticipated financial need that is caused by
an event beyond the control of the Participant or beneficiary and that
would result in severe financial hardship to the individual if early
withdrawal were not permitted.
(b) Changed Circumstances. The Committee may accelerate distribution of
any Deferred Amount to the extent that it determines such acceleration
to be in the best interests of the Company or an Employer because of
changes in tax or accounting principles or any other reason which
negates or diminishes the continued value of the Deferred Amount to
the Company, Employer or Participant.
(c) Involuntary or Force Reduction Termination. At the request of a
Participant, the Committee may extend the period of distribution for
any Deferred Amount as the Committee determines to be necessary or
appropriate if a Participant terminates employment (i) involuntarily,
(ii) voluntarily or involuntarily under a limited program of
terminations of employment initiated by the Company or an Employer to
achieve a specific force reduction or (iii) by mutual agreement under
an individual separation arrangement; provided, that such an extension
may be authorized only if the Participant's request and the
Committee's approval of that request occur prior to the earlier of (A)
the Participant's termination of employment or (B) the date of
distribution would otherwise have commenced.
(d) Accelerated Distribution. Anything in the Plan to the contrary
notwithstanding, at the request of a Participant, the Committee may
accelerate distribution of the Participant's entire Deferred Amount;
provided, that (i) the Deferred Amount to be distributed shall be paid
in a lump sum and reduced by six percent (6%), as an early withdrawal
penalty, (ii) such early withdrawal penalty shall be retained by the
Company and never distributed to the Participant, (iii) the valuation
date used to determine the amount of the reduction to the
Participant's Deferred Amount shall be the most recent valuation date
preceding the Committee's approval of the accelerated distribution,
and (iv) the Participant shall be prohibited from participating in the
Plan for a period of twelve (12) consecutive months following the date
of the Participant's accelerated distribution. In no event shall the
7
<PAGE>
Committee approve such requests after having been notified of Company
insolvency or bankruptcy.
4.5. Form of Payment. Deferred Amounts credited to a Participant in the
form of Stock Units shall be distributed to the Participant or his beneficiary
in shares of Ameritech common stock except as otherwise determined by the
Committee. All other Deferred Amounts credited to a Participant shall be paid to
him or his beneficiary in the form of cash. Any amount to be distributed in
accordance with the foregoing provisions of this Section 4 shall be calculated
as of the last day of a calendar quarter in the case of distributions pursuant
to Sections 4.2, 4.3 or 4.4(d) and as of the distribution date for all other
distributions and shall be distributed as soon as practicable thereafter.
4.6. Change in Control. Notwithstanding any other provisions of the Plan,
if a Change in Control (as defined below) occurs, then the entire amount
credited to each Participant under the Plan, including any benefit in pay
status, shall be distributed to him in a lump sum cash payment as soon as
practicable. At any time prior to a Change in Control, a Participant may
irrevocably waive such lump sum payment by filing a written waiver with the Plan
Administrator in a form acceptable to the Plan Administrator, in which case the
Participant's benefit under the Plan shall be determined without regard to this
subsection 4.6. If a Participant waives payment, the amount credited to the
Participant shall be determined as of the date of the Change in Control with
Stock Units being converted to cash amounts based on the highest fair market
value of Common Stock on any date occurring during the period beginning thirty
days prior to the Change in Control and ending thirty days after the Change in
Control, and such amount shall be credited with interest which shall accrue for
a period of five years from the date of a Change in Control, or until the
distribution date designated by the Participant, if earlier, at a rate no less
than the rate in effect under the Plan on the date of a Change in Control. For
purposes of the Plan, the term "Change in Control" means a change in the
beneficial ownership of the Company's voting stock or a change in the
composition of the Company's Board of Directors which occurs as follows:
(a) any "person" (as such term is used in Section 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934) other than:
(i) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company; or
(ii) the Participant or any person acting in concert with the
Participant;
is or becomes a beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934), directly or
indirectly, of stock of the Company representing 20% or more of
the total voting power of the Company's then outstanding stock;
provided, however, that this paragraph (a) shall not apply to
any tender offer made pursuant to an agreement with the Company
approved by the Company's Board of Directors and entered into
before the offeror has become
8
<PAGE>
a beneficial owner of stock of the Company representing 5% or
more of the combined voting power of the Company's then
outstanding stock;
(b) a tender offer is made for the stock of the Company, and the person
making the offer owns or has accepted for payment stock of the Company
representing 20% or more of the total voting power of the Company's
then outstanding stock; provided, however, that this paragraph (b)
shall not apply to any tender offer made pursuant to an agreement with
the Company approved by the Company's Board of Directors and entered
into before the offeror has become a beneficial owner of stock of the
Company representing 5% or more of the combined voting power of the
Company's then outstanding stock;
(c) during any period of 24 consecutive months there shall cease to be a
majority of the Board of Directors comprised as follows: individuals
who at the beginning of such period constitute the Board of Directors
and any new director(s) whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by
a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved;
or
(d) the stockholders of the Company approve a merger or consolidation of
the Company with any other company other than:
(i) a merger or consolidation which would result in the Company's
voting stock outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being
converted into voting stock of the surviving entity) more than
70% of the combined voting power of the Company's or such
surviving entity's outstanding voting stock immediately after
such merger or consolidation; or
(ii) a merger or consolidation which would result in the directors
of the Company who were directors immediately prior thereto
continuing to constitute at least 50% of the directors of the
surviving entity immediately after such merger or
consolidation.
For purposes of paragraph (d) above, the phrase "surviving entity" shall mean
only an entity in which all of the Company's stockholders who are stockholders
immediately before the merger or consolidation (other than stockholders
exercising dissenter rights) become stockholders by the terms of the merger or
consolidation, and the phrase "directors of the Company who were directors
immediately prior thereto" shall not include (A) any director of the Company who
was designated by a person who has entered into an agreement with the Company to
effect a transaction described in paragraph (a) or paragraph (d) above, or (B)
any director who was not a director at the beginning of the 24-consecutive month
period preceding the date of such merger or consolidation, unless his election
by the Board of Directors or nomination for election by the
9
<PAGE>
Company's stockholders was approved by a vote of at least two-thirds (2/3) of
the directors who were directors before the beginning of such period.
SECTION 5
---------
Amendment or Termination
------------------------
5.1. Administrative Amendments. Subject to the provisions of subsection
5.3, the Company's Senior Vice President-Human Resources, or such other officer
of the Company as may from time to time be primarily responsible for human
resource matters, may, with the concurrence of the Company's Executive Vice
President and General Counsel, make minor or administrative amendments to the
Plan.
5.2. Amendments and Termination. Subject to the provisions of subsection
5.3, the Company's Board of Directors may amend or terminate the Plan at any
time and any Employer may, by action of its Board of Directors (or, if such
Employer does not have a Board of Directors and is managed by its shareholder or
shareholders, by action of such shareholder or shareholders), terminate its
participation in the Plan at any time.
5.3. Participation Rights. No action under this Section 5 shall, without
consent of the affected Participant or, in the event of his death, his
beneficiary, adversely affect the rights of any Participant with respect to any
Deferred Amount which was credited to him under the Plan prior to the date of
such action.
5.4. Successors. The obligations of the Company and each Employer under
the Plan shall be binding upon any assignee or successor in interest thereto.
Neither the Company nor any Employer shall merge or consolidate with any other
corporation, or liquidate or dissolve, without making suitable arrangement for
the payment of any benefits payable under the Plan.
10
<PAGE>
AMERITECH CORPORATE RESOURCE
SEVERANCE PAY PLAN
------------------
(As Amended and Restated Effective as of December 1, 1995)
<PAGE>
AMERITECH CORPORATE RESOURCE
SEVERANCE PAY PLAN
------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
1 General
History and Purpose 1
Subsidiaries, Affiliates and Employers 1
Plan Administration 1
Source of Payments 1
Notices 2
Gender and Number 2
Action by Employers 2
2 Participation 2
Participation 2
Cessation of Participation 2
3 Employment After a Change in Control 2
Change in Control 2
Employment After Change in Control 4
4 Severance Benefits 5
Entitlement to Severance Benefits 5
Cause 5
Disability 5
Termination for Good Reason 5
Severance Benefits 6
Reduction for Other Severance Payments 7
Tax Limitations 7
Mitigation and Set-Off 7
Non-Alienation 7
Withholding 8
5 Enforcement 8
Governing Laws 8
Arbitration of All Disputes 8
Reimbursement of Costs and Expenses 8
6 Amendment or Termination 8
Amendments and Terminations 8
Participant Rights 9
Successors 9
</TABLE>
<PAGE>
AMERITECH CORPORATE RESOURCE
SEVERANCE PAY PLAN
------------------
(As Amended and Restated Effective as of December 1, 1995)
SECTION 1
---------
General
-------
1.1. History and Purpose. The Ameritech Corporate Resource Severance
Pay Plan (the "Plan") was established by Ameritech Corporation, a Delaware
corporation (the "Company"), effective as of January 1, 1989 to promote the
long-term financial interests of the Company and its shareholders by (i)
providing the executives of the Company and its Subsidiaries and Affiliates with
assurances of fair and equitable treatment as well as severance benefits
consistent with competitive practices in the event of a Change in Control of the
Company and (ii) reducing the risk of departures and distractions of key
executives in a Change in Control situation which would be detrimental to the
Company and its shareholders. The following provisions constitute an amendment,
restatement and continuation of the Plan, effective as of December 1, 1995.
1.2. Subsidiaries, Affiliates and Employers. The term "Subsidiary"
means any corporation of which the Company directly or indirectly owns at least
50% of the combined voting power of all classes of stock entitled to vote. The
term "Affiliate" means any corporation other than a Subsidary, which would be a
member of a controlled group of corporations with the Company under Section
1563(a) of the Internal Revenue Code of 1986, as amended (the "Code"). The
Company and each Subsidiary and Affiliate which, with the consent of the
Company, adopts the Plan, are referred to below, collectively, as the
"Employers" and individually as an "Employer."
1.3. Plan Administration. The authority to control and manage the
operation and administration of the Plan shall be vested in the Ameritech
Severance Pay Plan Committee, the members of which shall be appointed by, and
may be removed by, the Chairman of the Company (the "Committee"). The Committee
shall have the power to adopt rules and regulations and prescribe forms for
carrying out the purposes and provisions of the Plan. The Committee has the
exclusive right and discretion to interpret the provisions of the Plan and the
entitlement to benefits under the Plan. Any decision made by the Committee on
any matter within its discretion is conclusive, final and binding on all
persons, and not subject to further review. The Committee shall grant or deny
claims for benefits under the Plan and authorize disbursements. Adequate
notice, pursuant to applicable law and prescribed Company practices, shall be
provided in writing to any Participant whose claim has been denied, setting
forth the specific reasons for such denial. The review and appeal procedures
for any Participant whose claim has been denied shall also be the responsibility
of the Committee.
1.4. Source of Payments. The obligations of the Employers under the
Plan are solely contractual, and any amount payable under the terms of the Plan
shall be paid from the general
1
<PAGE>
assets of the Employers or from one or more trusts, the assets of which are
subject to the claims of the Employers' general creditors.
1.5. Notices. Any notice or document required to be given under the
Plan shall be considered to be given if delivered or mailed by registered mail,
postage prepaid, if to an Employer, to the Secretary of such Employer at the
Employer's principal business address or, if to a Participant, at the last
address of such Participant filed with the Employer.
1.6. Gender and Number. Where the context admits, words in any
gender shall include any other gender, words in the singular shall include the
plural and the plural shall include the singular.
1.7. Action by Employers. Any action required or permitted to be
taken by any Employer under the Plan shall be by resolution of its Board of
Directors (or, if such Employer does not have a Board of Directors and is
managed by its shareholder or shareholders, of such shareholder or shareholders)
or by writing of a duly authorized officer of the Employer.
SECTION 2
---------
Participation
-------------
2.1. Participation. The following individuals shall be
Participants in the Plan:
(a) Any management employee on the active roll of an Employer
who has attained any of salary grades CR 1 through 9; and
(b) Any management employee on the active roll of an Employer who is an
attorney who has attained either of salary grades IV or V.
2.2. Cessation of Participation. An employee shall cease to be a
Participant in, or have any rights under, the Plan as of the date, if any, prior
to a Change in Control on which he ceases to be a member of a class of employees
designated as Participants in accordance with subsection 2.1. All employees of
an Employer other than the Company shall cease to be Participants in, or have
any rights under, the Plan as of the date, if any, on which the Employer ceases
to be a Subsidiary or Affiliate prior to a Change in Control.
SECTION 3
---------
Employment After a Change in Control
------------------------------------
3.1. Change in Control. For purposes of determining the rights of any
Participant under the Plan, the term "Change in Control" means a change in the
beneficial ownership of the
2
<PAGE>
Company's voting stock or a change in the composition of the Company's Board of
Directors which occurs as follows:
(a) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) other than:
(i) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company; or
(ii) the Participant or any person acting in concert with the
Participant;
is or becomes a beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of stock of
the Company representing 20% or more of the total voting power of the
Company's then outstanding stock; provided, however, that this
paragraph (a) shall not apply to any tender offer made pursuant to an
agreement with the Company approved by the Company's Board of
Directors and entered into before the offeror has become a beneficial
owner of stock of the Company representing 5% or more of the combined
voting power of the Company's then outstanding stock;
(b) a tender offer is made for the stock of the Company, and the person
making the offer owns or has accepted for payment stock of the Company
representing 20% or more of the total voting power of the Company's
then outstanding stock; provided, however, that this paragraph (b)
shall not apply to any tender offer made pursuant to an agreement with
the Company approved by the Company's Board of Directors and entered
into before the offeror has become a beneficial owner of stock of the
Company representing 5% or more of the combined voting power of the
Company's then outstanding stock;
(c) during any period of 24 consecutive months there shall cease to be a
majority of the Board of Directors comprised as follows: individuals
who at the beginning of such period constitute the Board of Directors
and any new director(s) whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by
a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved;
or
(d) the stockholders of the Company approve a merger or consolidation of
the Company with any other company other than:
(i) a merger or consolidation which would result in the Company's
voting stock outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being
converted into voting stock of the surviving entity) more than
70% of the combined voting power of the
3
<PAGE>
Company's or such surviving entity's outstanding voting stock
immediately after such merger or consolidation; or
(ii) a merger or consolidation which would result in the directors
of the Company who were directors immediately prior thereto
continuing to constitute at least 50% of the directors of the
surviving entity immediately after such merger or
consolidation.
For purposes of paragraph (d) above, the phrase "surviving entity" shall mean
only an entity in which all of the Company's stockholders who are stockholders
immediately before the merger or consolidation (other than stockholders
exercising dissenter rights) become stockholders by the terms of the merger or
consolidation, and the phrase "directors of the Company who were directors
immediately thereto" shall not include (A) any director of the Company who was
designated by a person who has entered into an agreement with the Company to
effect a transaction described in paragraph (a) or paragraph (d) above, or (B)
any director who was not a director at the beginning of the 24 consecutive-month
period preceding the date of such merger or consolidation, unless his election
by the Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors who were directors before the beginning of such period.
3.2. Employment After Change in Control. During such period of time as a
Participant is actually employed by an Employer during the 24-consecutive-month
period immediately following a Change in Control, the Participant's duties,
responsibilities and authorities shall not be materially diminished by the
Employer and the Participant shall be compensated by such Employer as follows:
(a) he shall receive a base annual salary at a rate which is not less than
his base annual salary rate in effect immediately prior to the Change
in Control;
(b) he shall be entitled to participate in short-term and long-term cash-
based incentive compensation plans which, in the aggregate, provide
bonus opportunities which are not materially less favorable than the
opportunities provided to the Participant under all such plans in
which he was participating prior to the Change in Control;
(c) he shall be eligible to participate in stock option, stock
appreciation rights, performance awards, restricted stock and other
equity-based incentive compensation plans on a basis not materially
less favorable than that applicable to him immediately prior to the
Change in Control; and
(d) he shall be entitled to receive employee benefits (including, but not
limited to, tax-qualified and non-qualified pension and savings plan
benefits, medical insurance, disability income protection, life
insurance coverage and death benefits) and perquisites which are not
materially less favorable than the employee benefits and perquisites
to which the Participant would be entitled
4
<PAGE>
under the Employer's employee benefit plans and perquisites as in
effect immediately prior to the Change in Control.
SECTION 4
---------
Severance Benefits
------------------
4.1. Entitlement to Severance Benefits. Subject to the following
provisions of this Section 4, a Participant shall be entitled to receive
severance benefits determined in accordance with subsection 4.5 if the
Participant's employment with an Employer is terminated:
(a) during the 24-consecutive-month period immediately following a Change
in Control either by his Employer for reasons other than Cause (as
defined in subsection 4.2) or Disability (as defined in subsection
4.3) or by the Participant because of Good Reason (as defined in
subsection 4.4); or
(b) by the Participant for any reason during the thirty-day period
beginning on the first anniversary of a Change in Control.
4.2. Cause. For purposes of this Plan, the term "Cause" means a
Participant willfully engaging in conduct materially injurious to an Employer or
the willful and continual failure by a Participant to substantially perform the
duties assigned to him in accordance with subsection 3.2 (other than any failure
resulting from the Participant's incapacity due to physical injury or illness or
mental illness), which failure has not been corrected by the Participant within
30 days after receipt of a written notice from the Chief Executive Officer or
Board of Directors of the Employer (or, if the Employer does not have a Board of
Directors and is managed by its shareholder or shareholders, then from such
shareholder or shareholders owning a majority of the voting stock of the
Employer) specifying the manner in which the Participant has failed to perform
such duties. No act, or failure to act, by a Participant shall be deemed
"willful" unless done, or omitted to be done, not in good faith and without
reasonable belief that such action or omission was in the best interest of the
Employer.
4.3. Disability. For purposes of this Plan, the term "Disability" means
an incapacity, due to physical injury or illness or mental illness, causing a
Participant to be unable to perform his duties for an Employer on a full-time
basis for a period of at least six consecutive months.
4.4. Termination for Good Reason. For purposes of this Plan, a
termination because of "Good Reason" means a resignation by a Participant
following the occurrence of:
(a) a material diminishment in the duties, responsibilities or
authorities of the Participant;
(b) a failure by the Participant's Employer to compensate the Participant
in accordance with the provisions of subsection 3.2;
5
<PAGE>
(c) the relocation of the Participant's office to a location more than
fifty miles from the location of his office immediately prior to the
Change in Control;
(d) a reasonable determination by the Participant that, as a result of a
Change in Control and a change in circumstances thereafter
significantly affecting his position, he is unable to exercise the
authorities, powers, functions or duties attached to his position and
contemplated by subsection 3.2; or
(e) the failure of the Company to obtain a satisfactory agreement from any
successor to assume and agree to perform this Plan as contemplated by
subsection 6.3.
4.5. Severance Benefits. If a Participant becomes entitled to severance
benefits in accordance with the provisions of subsection 4.1 he shall continue
to receive medical insurance, disability income protection, life insurance
protection and death benefits, and perquisites (all as described in paragraph
3.2(d)) for a period of not less than the 24 consecutive months immediately
following the date of his termination of employment. If at the time of such a
Participant's termination of employment, he is a Participant in the Ameritech
Key Management Life Insurance Plan ("KMLIP") and/or the Ameritech Estate
Preservation Plan ("EPP") and is not then "retirement eligible" as defined in
the KMLIP and the EPP, the Company shall contribute on the Participant's behalf,
for a period of not less than the 24 consecutive months immediately following
the date of his termination of employment, such amount as the Company in its
sole discretion shall determine to be needed to maintain the Participant's death
benefit under the KMLIP and/or the EPP for that period. Any Participant
described in the first sentence of this subsection 4.5 shall be further entitled
to a lump sum payment in cash no later than ten business days after the date of
termination equal to the sum of:
(a) an amount equal to two times the Participant's base annual rate of
salary as of the date of the Change in Control;
(b) an amount equal to two times the Participant's target short-term
incentive amount and other bonuses payable for the calendar year
immediately preceding the date of the Change in Control;
(c) the actuarial equivalent of the additional pension benefits which the
Participant would have accrued under the terms of the Ameritech
Management Pension Plan, the Ameritech Corporate Resource Supplemental
Pension Plan and each other tax-qualified or non-qualified defined
benefit pension plan maintained by the Employer (determined without
regard to any termination or any amendment adversely affecting the
Participant which is adopted on or after a Change in Control or in
contemplation of a Change in Control) if, on the date of termination,
the Participant (i) was credited for benefit accrual purposes with two
additional years of service and two additional years of compensation
at his annual base salary rate and target short-term incentive award
in effect on the date of the Change in Control and (ii) was two years
older than his actual age on such date;
6
<PAGE>
provided, however, that the additional service, compensation and age
credits under this paragraph (c) shall, to the extent permitted by
law, be proportionately reduced for any Participant who, on the date
of termination, is at least age 63 and eliminated for any Participant
who, on the date of termination, is at least age 65. For purposes of
this subparagraph (c), actuarial equivalence shall be determined in
accordance with the terms of the Ameritech Corporate Resource
Supplemental Pension Plan for purposes of lump sum payments under that
plan, but without regard to any amendment of that plan, adopted on or
after a Change in Control or in contemplation of a Change in Control
which would reduce the amount of such lump sum payment.
4.6. Reduction for Other Severance Payments. The amount of Severance
Benefits to which a Participant is otherwise entitled upon a termination of
employment under the foregoing provisions of this Section 4 shall be reduced by
the amount, if any, of any other severance payments actually paid by reason of
such termination to the Participant by an Employer under a plan which provides
severance benefits only.
4.7. Tax Limitations. If any payments under this Plan, after taking into
account all other payments to which a Participant is entitled from any Employer
or Affiliate thereof, are more likely than not to result in a loss of a
deduction to the Employer by reason of section 280G of the Code, or any
successor provision to that section, such payments shall be reduced by the least
amount required to avoid such loss of deduction. If the Participant and the
Employer shall disagree as to whether a payment under this Section 4 is more
likely than not to result in the loss of a deduction, the matter shall be
resolved by an opinion of tax counsel chosen by the Company's independent
auditors. The Employer shall pay the fees and expenses of such counsel, and
shall make available such information as may be reasonably requested by such
counsel to prepare the opinion. If, by reason of limitations of this subsection
4.7, the maximum amount payable to the Participant under this Section 4 cannot
be determined prior to the due date for such payment, the Employer shall pay on
the due date the minimum amount which it in good faith determines to be payable
and shall pay the remaining amount, with interest calculated at the rate
prescribed by section 1274 (b) (2) (B) of the Code, as soon as such remaining
amount is determined in accordance with this subsection 4.7. Tax counsel
selected in accordance with this subsection shall have no liability to the
Employers, or Participants or any other person for any action taken in good
faith.
4.8. Mitigation and Set-Off. No Participant shall be required to mitigate
the amount of any payment provided for in this Plan by seeking other employment
or otherwise. The Employers shall not be entitled to set off against the
amounts payable to any Participant under this Plan any amounts owed to the
Employers by the Participant, any amounts earned by the Participant in other
employment after termination of his employment with the Employer, or any amount
which might have been earned by the Participant in other employment had he
sought such other employment.
4.9. Non-Alienation. Participants shall not have any right to pledge,
hypothecate, anticipate or in any way create a lien upon any amounts provided
under this Plan; and no benefits
7
<PAGE>
payable hereunder shall be assignable in anticipation of payment either by
voluntary or involuntary acts or by operation of law. Nothing in this subsection
shall limit a Participant's rights or powers to dispose of his property by will
or limit any rights or powers which his executor or administrator would
otherwise have.
4.10. Withholding. All payments to a Participant under this Plan will be
subject to all applicable withholding of state and federal taxes.
SECTION 5
---------
Enforcement
-----------
5.1. Governing Laws. The Plan shall be construed and administered in
accordance with the internal laws of the State of Illinois to the extent that
such laws are not preempted by the laws of the United States.
5.2. Arbitration of All Disputes. Any controversy or claim arising out of
or relating to this Plan shall be settled by arbitration in the city in which
the principal executive offices of his Employer are located (disregarding any
transfer of such offices after a Change in Control), by three arbitrators, one
of whom shall be appointed by the Company, one by the Participant and the third
of whom shall be appointed by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the Chief Judge of the United States
Court of Appeals for such location. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
subsection 5.2. Judgment upon the awarded rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
5.3. Reimbursement of Costs and Expenses. In the event that it shall be
necessary or desirable for a Participant to retain legal counsel or incur other
costs and expenses in connection with enforcement of his rights under the Plan,
his Employer shall pay (or the Participant shall be entitled to recover from the
Employer, as the case may be) his reasonable attorneys' fees and costs and
expenses in connection with enforcement of his rights (including the enforcement
of any arbitration award in court). Payments shall be made to the Participant
at the time such fees, costs and expenses are incurred. If, however, the
arbitrators shall determine that, under the circumstances, payment by the
Employer of all or a part of any such fees, costs and expenses would be unjust,
the Participant shall repay such amounts to the Employer in accordance with the
order of the arbitrators.
8
<PAGE>
SECTION 6
---------
Amendment or Termination
------------------------
6.1. Amendments and Terminations. Subject to the provisions of subsection
6.2:
(a) the Company's Senior Vice President - Human Resources, or such other
officer of the Company as may from time to time be primarily
responsible for human resource matters, may, with the concurrence of
the Company's Executive Vice President and General Counsel, make minor
or administrative amendments to the Plan;
(b) the Board of Directors of any Employer (or, if such Employer does not
have a Board of Directors and is managed by its shareholder or
shareholders, then such shareholder or shareholders) may terminate or,
with the consent of the Company's Board of Directors, amend the Plan
as applied to it at any time; and
(c) the Company's Board of Directors may terminate the Plan as applied to
it or as applied to each Employer at any time.
6.2. Participant Rights. No amendment or termination of the Plan which
would directly or indirectly adversely affect any Participant shall be effective
if adopted after a Change in Control or during the one-year period immediately
preceding a Change in Control.
6.3. Successors. The obligations of each Employer under the Plan shall be
binding upon any assignee or successor in interest thereto. No Employer shall
merge or consolidate with any other corporation, or liquidate or dissolve,
without making suitable arrangements for the payment of any benefits which are
or may become payable under the Plan.
9
<PAGE>
AMERITECH MANAGEMENT COMMITTEE
SHORT TERM INCENTIVE PLAN
1. Purpose. The purpose of the Ameritech Corporation Management Committee
Short Term Incentive Plan (the "Plan") is to provide key executives of Ameritech
Corporation (the "Company") with incentive compensation based upon the
achievement of established annual performance goals.
2. Eligibility. The individuals eligible to participate in the Plan (the
"Participants") are the Chief Executive Officer of the Company and each other
executive officer who is for all or any part of a Performance Period (as
hereinafter defined) a member of the Management Committee of the Company. If a
Participant is a member of the Management Committee for less than a full
Performance Period, his or her payout under the Plan for such Performance Period
shall be prorated based on the portion of the Performance Period he or she
served as a member of the Management Committee.
3. Performance Periods. Each performance period for purposes of the Plan
shall have a duration of one calendar year, commencing January 1 and ending
December 31.
4. Administration. The Compensation Committee of the Board of Directors of
the Company (the "Committee") shall have the full power and authority to
administer and interpret the Plan and to establish rules for its administration.
Such power and authority shall include proration or adjustment of awards in the
case of retirement, termination, changes in base salary, dismissal, death and
other conditions as appropriate.
5. Performance Goals. On or before the 90th day of each Performance
Period, the Committee shall establish in writing one or more performance
criteria for the Performance Period, the weighting of the performance criteria
if more than one. The performance criteria shall be quantifiable financial
measures for the Company as a whole and may include net income, earnings per
share, cash flow, revenues, or total shareowner return. To the extent net income
is used alone or as a component of another performance criteria, it shall mean
net income as reported to shareowners, but before losses resulting from
discontinued operations, extraordinary losses (in accordance with generally
accepted accounting principles, as currently in effect), the cumulative effect
of changes in accounting principles and other unusual, non-recurring items of
loss that are separately identified and quantified in the Company's audited
financial statements.
6. Target Incentives and Payout Schedule. On or before the 90th day of
each Performance Period, the Committee shall establish in writing a target
incentive
<PAGE>
award for each Participant and a payout schedule specifying the percentages,
ranging from 0% to 150%, of the target awards to be paid for varying levels of
attainment of the financial performance criteria established pursuant to Section
5.
7. Incentive Payout Calculation. As soon as practicable after release of
the Company's financial results for the Performance Period, the Committee will
certify the Company's attainment of the financial performance criteria
established for such Performance Period pursuant to Section 5 and will calculate
the possible payout of incentive awards for each Participant under the payout
schedule established pursuant to Section 6.
8. Reduction of Calculated Payouts. The Committee shall have the power and
authority to reduce or eliminate for any reason the payout calculated pursuant
to Section 7 that would otherwise be payable to a Participant based on the
established target award and payout schedule.
9. Payouts. After calculation of incentive payouts pursuant to Section 7
and any reduction or elimination thereof pursuant to Section 8, the Committee
shall certify the amount of the payout to each Participant under the Plan for
the Performance Period. In no event shall the payout under the Plan to any
Participant for any Performance Period exceed $4.5 million. Payment of the
incentive award determined in accordance with the Plan for each Performance
Period shall be made to a Participant in cash. Awards payable pursuant to the
Plan may be deferred by a Participant under the terms of the Ameritech Senior
Management Supplemental Savings and Deferral Plan in effect from time to time,
provided that awards under the Plan so deferred may not be distributed to the
Participant until the Participant's retirement with a service pension under the
Company's Management Pension Plan or termination of employment.
10. Change in Control. If a Change in Control (as defined below) occurs,
then each Participant who is actively employed by the Company on the date of the
Change in Control shall receive, as soon as practicable following the earlier of
his termination of employment or the end of the calendar year in which such
Change in Control occurs, not less than 100% of the target award established for
the Participant pursuant to Section 6 for the Performance Period in which the
Change in Control occurs, subject to upward adjustment based on the criteria
established by the Committee prior to the Change in Control. For purposes of the
Plan, the term "Change in Control" means a change in the beneficial ownership of
the Company's voting stock or a change in the composition of the Company's Board
of Directors which as follows:
(i) any "person" (as such terms is used in Section 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934) other than:
(A) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company; or
2
<PAGE>
(B) the Participant or any other person acting in concert with the
Participant;
is or becomes a beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of stock
of the Company representing 20% or more of the total voting power of
the Company's then outstanding stock; provided, however, that this
paragraph (i) shall not apply to any tender offer made pursuant to
an agreement with the Company approved by the Company's Board of
Directors and entered into before the offeror has become a
beneficial owner of stock of the Company representing 5% or more of
the combined voting power of the Company's then outstanding stock;
(ii) a tender offer is made for the stock of the Company, and the person
making the offer owns or has accepted for payment stock of the
Company representing 20% or more of the total voting power of the
Company's then outstanding stock; provided, however, that this
paragraph (ii) shall not apply to any tender offer made pursuant to
an agreement with the Company approved by the Company's Board of
Directors and entered into before the offeror has become a
beneficial owner of stock of the Company representing 5% or more of
the combined voting power of the Company's then outstanding stock;
(iii) during any period of 24 consecutive months there shall cease to be a
majority of the Board of Directors comprised as follows: individuals
who at the beginning of such period constitute the Board of
Directors and any new director(s) whose election by the Board of
Directors or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors at the beginning of
the period or whose election or nomination for election was
previously so approved; or
(iv) the stockholders of the Company approve a merger or consolidation of
the Company with any other company other than:
(A) a merger or consolidation which would result in the Company's
voting stock outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being
converted into voting stock of the surviving entity) more than
70% of the combined voting power of the Company's or such
surviving entity's
3
<PAGE>
outstanding voting stock immediately after such merger or
consolidation; or
(B) a merger or consolidation which would result in the directors
of the Company who were directors of the Company who were
directors immediately prior thereto continuing to constitute at
least 50% of the directors of the surviving entity immediately
after such merger or consolidation.
For purposes of paragraph (iv) above, the phrase "surviving entity" shall mean
only an entity in which all of the Company's stockholders who are stockholders
immediately before the merger or consolidation (other than stockholders
exercising dissenter rights) become stockholders by the terms of the merger or
consolidation, and the phrase "directors of the Company who were directors
immediately prior thereto" shall not include (1) any director of the Company who
was designated by a period who has entered into an agreement with the Company to
effect a transaction described in paragraph (i) or paragraph (iv) above, or (2)
any director who was not a director at the beginning of the 24-consecutive-month
period preceding the date of such merger or consolidation, unless his election
by the Company's stockholders was approved by a vote of at least two-third (2/3)
of the directors who were directors before the beginning of such period.
11. Miscellaneous Provisions.
(a) The Board of Directors shall have the right to suspend or
terminate this Plan at any time and may amend or modify the Plan with
respect to future Performance Periods prior to the beginning of any
Performance Period, provided that no such amendment or modification shall
materially increase benefits payable to Participants under the Plan unless
such amendment or modification shall have been approved by the shareowners
of the Company.
(b) Nothing contained in the Plan or any agreement related hereto
shall affect or be construed as affecting the terms of employment of any
Participant except as specifically provided herein or therein. Nothing
contained in the Plan or any agreement related hereto shall impose or be
construed as imposing any obligation on (i) the Company to continue the
employment of any Participant or (ii) any Participant to remain in the
employ of the Company.
12. Adoption and Duration. The Plan shall become effective as of the first
day of the year in which it is approved by the shareowners of the Company and
the Plan shall remain in effect for a period of five (5) calendar years.
4
<PAGE>
AMERITECH SENIOR MANAGEMENT
RETIREMENT AND SURVIVOR PROTECTION TRUST
----------------------------------------
Mayer, Brown & Platt
Chicago
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<C> <S> <C>
I The Trust and the Plan........................ 1
Name...................................... 1
Definitions............................... 1
Plan...................................... 1
Plan Administration and Asset
Management Committee.................... 2
II Management and Control of Trust Fund Assets... 2
The Trust Fund............................ 2
Trust Contributions....................... 2
Investment Guidelines and
Investment Funds........................ 2
Exercise of Trustee's Duties.............. 3
General Powers............................ 3
Common Fund............................... 5
III Accounting and Distribution of Trust Assets... 6
Employer Accounts......................... 6
Participant Accounts...................... 6
Statement of Accounts..................... 8
Benefit Payments.......................... 8
Change in Control......................... 9
IV Compensation, Expenses and Liability.......... 10
Compensation and Expenses................. 10
Liability of Trustee...................... 11
V Trust Fund Assets............................. 11
Reversion to Company...................... 11
Claims of Creditors....................... 11
Claims of Participants.................... 12
VI Adoption by Subsidiaries...................... 12
VII Tax Matters................................... 12
Nature of Trust........................... 12
Federal and State Reporting
Requirement............................. 13
Tax Matters............................... 13
VIII Miscellaneous................................. 13
Disagreement as to Acts................... 13
Persons Dealing With Trustee.............. 13
</TABLE>
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<PAGE>
<TABLE>
<C> <S> <C>
Benefits May Not Be Assigned
or Alienated............................ 13
Evidence.................................. 13
Waiver of Notice.......................... 14
Counterparts.............................. 14
Governing Laws............................ 14
Successors, Etc........................... 14
Service of Legal Process.................. 14
Action by Company and Subsidiaries........ 14
IX Changes of Trustee............................ 14
Resignation............................... 14
Removal of Trustee........................ 14
Duties of Resigned or Removed
Trustee and of Successor
Trustee................................. 15
X Amendment, Revocation and Termination......... 15
Amendment and Revocation.................. 15
Termination............................... 16
</TABLE>
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<PAGE>
AMERITECH SENIOR MANAGEMENT
RETIREMENT AND SURVIVOR PROTECTION TRUST
----------------------------------------
THIS AGREEMENT, made and entered into at Chicago, Illinois, this 30th
day of December, 1988, by American Information Technologies Corporation, a
Delaware corporation (the "Company"), and each of its subsidiaries which becomes
a party to this Agreement (a "Subsidiary"), and Harris Trust and Savings Bank,
as trustee (the "Trustee"),
WITNESSETH THAT:
---------------
WHEREAS, the Company and the Subsidiaries maintain Ameritech Senior
Management Retirement and Survivor Protection Plan (the "Plan") to provide
retirement and survivor benefits to or on account of certain current and former
employees; and
WHEREAS, the Company and the Subsidiaries desire to establish a
grantor trust (as described in section 671 of the Internal Revenue Code of 1986,
as amended (the "Code")) to provide for the payment of benefits under the Plan;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, IT IS AGREED that the Trustee hereby accepts its appointment
as such, effective as of the day and year first above written.
IT IS FURTHER AGREED, by and between the parties hereto, as
follows:
ARTICLE I
---------
The Trust and the Plan
----------------------
I-1. Name. This Trust Agreement and Trust hereby evidenced shall be
known as Ameritech Senior Management Retirement and Survivor Protection Trust.
I-2. Definitions. Unless the context clearly requires otherwise, any
word, term or phrase used in the Trust shall have the same meaning as is
assigned to it under the terms of the Plan.
I-3. Plan. The Trust has been established, subject to the provisions
of Article V, to provide benefits to the Participants under the terms of the
Plan. The Secretary of the Company shall
<PAGE>
deliver to the Trustee a certified copy of the Plan document and a copy of any
amendments thereto for convenience of reference, but the rights, powers and
duties of the Trustee shall be governed solely by the terms of this Agreement
without reference to the provisions of the Plan. A payment under the Trust to a
Participant shall, for purposes of the Plan, be deemed a payment under the Plan
by the Company or the Subsidiary to whose account such payment is charged under
paragraph III-1.
I-4. Plan Administration and Asset Management Committee. The authority to
control and manage the operation of the Plan, as applied to the Company or any
Subsidiary, is vested in a committee (the "Plan Committee") appointed by the
Company or such Subsidiary; however, all directions to the Trustee under this
Agreement shall be made by the Asset Management Committee appointed by the
Company's Board of Directors, and all notices from the Trustee shall be made to
the Asset Management Committee. The Secretary of the Company will certify the
names of the members and provide the Trustee with a specimen signature of each
member of the Asset Management Committee. The Trustee may rely on the latest
certificate without further inquiry or verification. The Committee shall act by
a majority of its then members, by meeting or by writing (either a single
document or concurrent documents) signed without meeting. The certificate of a
majority of the members of the Committee that it has taken or authorized any
action shall be conclusive in favor of any person relying on the certificate. A
Committee member may delegate any of his rights, powers or duties with respect
to the Trust to any other Committee member who accepts such delegation, provided
that written evidence of the delegation and acceptance are filed with the
Trustee.
ARTICLE II
----------
Management and Control of Trust Fund Assets
-------------------------------------------
II-1. The Trust Fund. The term "Trust Fund" means all property of every
kind held by the Trustee.
II-2. Trust Contributions. The Company and the Subsidiaries may, from
time to time, contribute amounts to the Trustee to be held, invested and
distributed in accordance with the provisions of this Agreement.
II-3. Investment Guidelines and Investment Funds. The Asset Management
Committee shall have the power to direct the Trustee with respect to the
investment, retention, disposition and reinvestment of the assets of the Trust
Fund by writing filed with the Trustee. The Asset Management Committee shall
exercise
-2-
<PAGE>
such discretion with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims. Unless directed by the Asset Management Committee
in accordance with the foregoing sentence, the Trustee shall invest the assets
of the Trust Fund, directly or through a common trust fund described in
paragraph II-5(c), in short-term fixed income investments including, but not
limited to, United States Treasury Bills, commercial paper, banker's acceptances
and certificates of deposit.
II-4. Exercise of Trustee's Duties. Subject to the provisions of
paragraph II-3 and Article V, the Trustee shall discharge the duties hereunder
solely in the interest of Participants under the Plan, and:
(a) for the exclusive purpose of:
(i) providing benefits to or on account of the Participants; and
(ii) defraying the reasonable expenses of administering the Trust;
(b) with the care, skill, prudence and diligence under the circumstances
then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise
of a like character and with like aims.
II-5. General Powers. Subject to the provisions of paragraphs II-3 and
II-4, with respect to the Trust Fund, the Trustee shall have the following
powers, rights and duties in addition to those provided elsewhere in this Trust
Agreement or by law:
(a) to receive and hold all contributions paid to it by the Company or any
Subsidiary; provided, however, that the Trustee shall have no duty to
require any contributions to be made, or to determine that any of the
contributions received comply with the conditions and limitations of
the Plan;
(b) to apply for, pay premiums on and maintain in force on the lives of
Participants individual or group ordinary, term or universal life
insurance policies for the benefit of the Participants on whose lives
the policies are issued; to acquire such a policy from the Company or
a Subsidiary or from the Participant on whose life
-3-
<PAGE>
the policy is issued, but only if the Trustee pays, transfers or
otherwise exchanges for the policy no more than the cash surrender
value of the policy and the policy is not subject to a mortgage or
similar lien which the Trustee would be required to assume; subject to
the provisions of paragraph II-6, to dispose of any such policy
including a disposition to the Company or a Subsidiary or Participant,
provided that, upon such disposition, the Trustee receives an amount
which is not less than the cash surrender value of the policy; and to
have with respect to such policies all of the rights, powers, options,
privileges and benefits usually comprised in the term "incidents of
ownership" and normally vested in an insured or owner of such
policies; except that the Trustee shall exercise the powers provided
in this subparagraph (b) only as directed by the Asset Management
Committee;
(c) to deposit any part or all of the cash and other property of this
Trust in any common trust fund, pooled fund or other commingled
investment fund maintained by the Trustee for trust investment
purposes;
(d) except as otherwise specifically provided, to have the exclusive
authority and discretion to invest and reinvest the Trust Fund in
property of any kind, real or personal, other than securities of the
Company or any subsidiary or affiliate thereof;
(e) to manage, operate, sell, contract to sell, convey, exchange,
partition, transfer, abandon, and otherwise deal with all property,
real or personal, in such manner, for such consideration, and on such
terms and conditions as the Trustee shall decide;
(f) to retain in cash (pending investment, reinvestment or payment of
benefits) any reasonable portion of the Trust Fund and to deposit cash
in any depository selected by the Trustee including the banking
department of any bank acting as Trustee;
(g) to make payments from the Trust Fund in accordance with paragraph
III-4;
(h) to compromise, contest, arbitrate, settle or abandon claims and
demands;
(i) to begin, maintain or defend any litigation necessary in connection
with the administration of the Trust;
-4-
<PAGE>
(j) to have all rights of an individual owner, including the power to give
proxies, to vote stocks, to join in or oppose (alone or jointly with
others) voting trusts, mergers, consolidations, foreclosures,
reorganizations, recapitalizations or liquidations, and to exercise or
sell stock subscription or conversion rights;
(k) to hold securities or other property in the name of the Trustee or any
nominee or nominees of the Trustee, or in such other form as the
Trustee shall determine, with or without disclosing the Trust
relationship, provided that the records of the Trustee shall indicate
the actual ownership of such securities or other property;
(l) to deposit securities with a corporate depository, in which event, the
certificates representing securities, including those in bearer form,
may be held in bulk form with, and may be merged into, certificates of
the same class of the same issuer which constitute assets of other
accounts or owners, without certification as to the ownership attached
and to participate in and use a bookentry system for the transfer or
pledge of securities held by the Trustee or by a corporate depository;
provided, however, that the Trustee shall at all times maintain a
separate and distinct record of the securities owned by the Trust
Fund;
(m) to retain any funds or property subject to any dispute without
liability for the payment of interest, or to decline to make payment
or delivery thereof until final adjudication is made by a court of
competent jurisdiction;
(n) to employ agents, attorneys, investment counsel, accountants or other
persons (who also may be employed by or represent the Company or any
Subsidiary) for such purposes as the Trustee considers desirable;
(o) to furnish the Company with such information in the Trustee's
possession as the Company or any Subsidiary may need for tax or other
purposes;
(p) to perform any and all other acts which are, in the Trustee's
judgment, necessary or appropriate for the proper and advantageous
management, investment and distribution of the Trust Fund.
II-6. Common Fund. Subject to the following provisions of this paragraph
II-6 and the provisions of paragraph V-2, the Trustee shall not be required to
make any separate investment of
-5-
<PAGE>
the Trust Fund for the account of the Plan as applied to the Company or any
Subsidiary and may administer and invest all contributions made to the Trustee
as one Trust Fund. The Trustee shall not be required to make any separate
investment of the Trust Fund for the account of any creditor of the Company or
any Subsidiary prior to receipt of directions to make payments to such creditor
in accordance with paragraph V-2. If the Trust acquires any policy of insurance
on the life of a Participant, such policy, so long as it is held by the Trust,
shall be allocated to an Account maintained in the name of the Participant.
ARTICLE III
-----------
Accounting and Distribution of Trust Assets
-------------------------------------------
III-1. Employer Accounts. The Trustee shall maintain a bookkeeping Account
in the name of the Company and each Subsidiary which will reflect:
(a) the contributions made by it to the Trust Fund;
(b) the income, losses and appreciation or depreciation in the value of
Trust assets resulting from investment of the Trust Fund to the extent
such items are attributable to such contributions;
(c) payments made from the Trust Fund to Participants employed or formerly
employed by it;
(d) payments made from the Trust Fund to its creditors; and
(e) any other amounts charged to its Account, including its share of
compensation and expenses described in paragraph IV-1.
As of the last day of each calendar year and such other times as the Asset
Management Committee shall direct, such Accounts shall be appropriately adjusted
in accordance with uniform rules established by the Trustee to reflect the then
net worth of the Trust Fund, as determined as of that date by the Trustee. The
Trustee may rely on any certificate by the Asset Management Committee with
respect to the portion of each contribution to the Trust and each payment from
the Trust which is attributable to the Company and each Subsidiary.
III-2. Participant Accounts. The Trustee shall maintain a bookkeeping
Account in the name of each Participant to reflect the benefit to which a
Participant shall be entitled under the
-6-
<PAGE>
Plan (determined in accordance with the following provisions of this paragraph)
and the cash value of any policy of insurance allocated to the Participant's
Account in accordance with paragraph II-6. Each such Account shall be adjusted
solely in accordance with the following provisions of this paragraph III-2 and
the Trustee shall have no other obligation to adjust such Account. Within the
first ten days of each calendar year, and at such additional times as it shall
from time to time determine, the Asset Management Committee shall furnish the
Trustee with a written benefit statement with respect to each Participant
reflecting:
(a) the aggregate monthly benefit payable to the Participant under the
Plan and the Ameritech Management Pension Plan (the Pension Plan") as
of the earliest date on which the Participant could commence receiving
such a monthly benefit if he ceased to be an employee of the Company
and the Subsidiaries as of the first day of that year (or if he has
already ceased to be an employee or is a survivor or beneficiary of a
former employee, the aggregate monthly amount to which he is actually
entitled);
(b) the portion of the amount set forth in subparagraph (a) which is
attributable to the Plan and the portion which is attributable to the
Pension Plan; and
(c) the lump sum payment that would be payable to the Participant under
the Plan if a Change in Control occurred as of the first day of that
year.
Upon receipt of any such benefit statement, the Trustee shall adjust each
Participant's Account accordingly; provided, however, that, except to the extent
provided in the following sentence, (i) any reduction in the amount described
under subparagraph (a) above with respect to any Participant shall be
disregarded, and (ii) any reduction in the amount described under subparagraphs
(b) or (c) above shall be disregarded except to the extent that such reduction
is certified by the independent actuary of the Pension Plan to be attributable
to an increase in the maximum benefit permitted under law to be paid to the
Participant under the Pension Plan. Notwithstanding the preceding sentence, the
Trustee shall adjust a Participant's Account to reflect any reduction
attributable to a payment to the Participant or his beneficiary on account of
the Participant which has been verified to the Trustee by the Asset Management
Committee or any forfeiture under the terms of the Plan which has been verified
to the Trustee by the Asset Management Committee prior to the occurrence of a
Change in Control, as defined in paragraph III-5.
-7-
<PAGE>
III-3. Statement of Accounts. Within 60 days after the last day of each
calendar year, the Trustee shall furnish to the Company and each Subsidiary a
written report showing the fair market value of the Trust Fund as of that date,
and all investments of the Trust Fund, and receipts and disbursements and other
transactions made by the Trustee during that calendar year, with respect to the
Trust Fund and all adjustments made to the Accounts of the Company and each
Subsidiary and each Participant with respect to which an Account has been
established. The records of the Trust as applied to the Company or any
Subsidiary may be audited at any time and from time to time by the Company or
such Subsidiary. At the request of the Company, the Trustee shall furnish to the
Company or any Subsidiary or Committee such other information which it possesses
and which the Committee reasonably requires for the administration of the Plan.
III-4. Benefit Payments. Subject to the provisions of paragraph V-2, the
Trustee shall make payments to Participants in such amounts and at such times as
the Asset Management Committee may certify to the Trustee, subject to the
following:
(a) The Trustee shall have no responsibility to inquire as to whether a
payee is entitled to the payment, or as to whether a payment is
proper, and shall have no liability for a payment made in good faith
without actual notice or knowledge of the changed condition or status
of the payee.
(b) If any check for any payment directed to be made from the Trust Fund
has been mailed by the Trustee, by regular United States mail, to the
last address of the payee furnished to the Trustee and is returned
unclaimed, the Trustee shall notify the Asset Management Committee.
(c) The Trustee may reserve such reasonable amount from any payment as it
shall deem necessary to pay any estate, inheritance, income or other
tax, charge or assessment attributable to any payment or may require
such release or other document from any taxing authority and such
indemnity from the intended payee as the Trustee shall deem necessary
for its protection.
(d) Subject to the provisions of paragraph V-2, upon receipt of a notice
of a Change in Control in accordance with paragraph III-5, the Trustee
shall make a lump sum payment to each Participant equal to his then
Account balance within 15 days thereafter, except to the extent that
the Asset Management Committee provides the Trustee with (i)
satisfactory evidence of
-8-
<PAGE>
a payment to such Participant from the other general assets of the
Company and the Subsidiaries or (ii) a copy of a currently effective
written election of the Participant not to receive a lump sum payment
of his Plan benefits upon a Change in Control. If the assets of the
Trust Fund are not sufficient to pay all such lump sum amounts, the
policies, if any, held by the Trustee on the life of each Participant
shall be distributed to such Participant, and the assets of the Trust
Fund other than policies of insurance shall be distributed to such
Participants, pro rata, according to their Account balances after
reduction thereof by the cash value of such policies.
(e) If a monthly benefit payment or a lump sum payment required under the
terms of the Plan has not been made to a Participant (whether due to
the failure of the Asset Management Committee to notify the Trustee as
required by this paragraph or otherwise), then the Participant may
notify the Trustee thereof and request payment in writing. The Trustee
shall notify the Asset Management Committee within 15 days of the
receipt of such payment request. If the Asset Management Committee
does not provide the Trustee with satisfactory evidence of the payment
of any amount to which the Participant is entitled within 15 days of
the date the Trustee notifies the Asset Management Committee of the
payment request, subject to the provisions of paragraph V-2 the
Trustee shall make such monthly or lump sum payment to the Participant
to the extent of his Account balance, and shall notify the Asset
Management Committee thereof.
(f) Any payment under the Trust may be made in cash or in kind in the
discretion of the Trustee; provided, however that after a Change in
Control a Participant may elect to have payment of any policy of
insurance on his life paid by distribution in kind or by surrender of
the policy to the insurance company and payment of the cash proceeds
to the Participant.
III-5. Change in Control. For purposes of the Trust, the term "Change in
Control" means a change in the beneficial ownership of the Company's voting
stock or a change in the composition of the Company's Board of Directors which
occurs as follows:
(a) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934) is or becomes a beneficial owner,
directly or indirectly,
-9-
<PAGE>
of stock of the Company representing twenty percent or more of the
total voting power of the Company's then outstanding stock;
(b) a tender offer is made for the stock of the Company, which has not
been negotiated and approved by the Board of Directors of the Company,
and one of the following occurs:
(i) the person making the offer owns or has accepted for payment
stock of the Company representing twenty percent or more of the
total voting power of the Company's stock; or
(ii) three business days before the offer is to terminate (unless the
offer is withdrawn first) such person could own, by the terms of
the offer plus any shares owned by such person, stock
representing fifty percent or more of the total voting power of
the Company's outstanding stock when the offer terminates; or
(c) during any period of twenty four consecutive months there shall cease
to be a majority of the Board of Directors comprised as follows:
individuals who at the beginning of such period constitute the Board
of Directors and any new Director(s) whose election by the Board of
Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the Directors then
still in office who either were Directors at the beginning of the
period or whose election or nomination for election was previously so
approved.
The Secretary of the Company and the Asset Management Committee shall each
promptly notify the Trustee of the occurrence of a Change in Control.
ARTICLE IV
----------
Compensation, Expenses and Liability
------------------------------------
IV-1. Compensation and Expenses. The Company agrees to pay the Trustee
reasonable compensation in accordance with the Trustee's customary fee schedule
as in effect from time to time and to pay all of the Trustee's expenses, taxes
and charges (including fees of persons employed by it in accordance with
subparagraph II-5(n)) incurred in connection with the collection,
administration, management, investment, protection and distribution of the Trust
Fund.
-10-
<PAGE>
IV-2. Liability of Trustee. The Trustee shall not be liable for any act or
failure to act in the performance of duties under this Agreement, unless such
action or failure to act was dishonest, constituted gross negligence or was in
willful violation of the law. The Trustee shall not be liable for following in
good faith any direction of the Asset Management Committee given in accordance
with the terms of this Agreement.
ARTICLE V
---------
Trust Fund Assets
-----------------
V-1. Reversion to Company. Subject to the provisions of paragraph V-2, on
and after the date on which the Trust becomes irrevocable under paragraph X-1,
no part of the corpus or income of the Trust Fund shall revert to the Company or
any Subsidiary or be used for, or diverted to, purposes other than the exclusive
benefit of the Participants; provided, however, that if any portion of an
Account maintained in the name of the Company or any Subsidiary remains after
the satisfaction of all liabilities of the Trust with respect to all
Participants who were previously employed by, or are entitled to benefits by
reason of being a survivor or beneficiary of an employee of, the Company or such
Subsidiary such amounts shall be returned to the Company or such Subsidiary.
V-2. Claims of Creditors. Notwithstanding any provision of this Trust
Agreement, any property held in the Trust Fund shall be treated as an asset of
the Company and the Subsidiaries and shall be subject to the claims of the
general creditors of the Company and each Subsidiary to the extent of their
respective Accounts under the Trust if such claims are not satisfied by payment
from the other general assets of the Company or the Subsidiary, as the case may
be, because of the Company's or Subsidiary's Insolvency (as described below).
The Chairman of the Board of Directors and the Chief Executive Officer of the
Company and each Subsidiary shall notify the Trustee of the Insolvency of the
Company or such Subsidiary within 3 days of receipt of knowledge of such
Insolvency. Upon receipt, and only upon receipt, of such notice or an applicable
court order, the Trustee shall hold assets of the Trust Fund equal to the
Company's or Subsidiary's Account for the benefit of its general creditors, and
shall suspend payment of benefits under the Trust which would be charged to such
Account until the Trustee has determined that the Company or Subsidiary is no
longer Insolvent or pursuant to a court order. The Trustee shall have no duty to
inquire whether the Company or any Subsidiary is Insolvent. The Trustee may rely
on such evidence concerning the Company's or any Subsidiary's insolvency as may
be furnished to the Trustee by the
-11-
<PAGE>
Company or Subsidiary. The Company or any Subsidiary shall be considered as
"Insolvent" for purposes of this Trust Agreement it is (i) unable to pay its
debts generally as they become due (ii) engaged as a debtor in a proceeding
under the Bankruptcy Code (11 U.S.C. (S) 101 et. seq.).
V-3. Claims of Participants. Neither the Participants nor the Plan shall
have any preferred claim on, or any beneficial ownership in, any assets of the
Trust, or be entitled to any payment from the Trust, except to the extent that
payment is due and unpaid, and all rights of a Participant created under the
Plan and this Trust shall constitute unsecured contractual rights of the
Participant. It is intended that neither the Plan nor the Trust be subject to
the provisions of part 4 of title I of the Employee Retirement Income Security
Act of 1974, as amended, and neither the Participants nor the Plan shall have
any right to require the Company or any Subsidiary to make any contribution to
the Trust. To the extent the assets of the Trust are insufficient to pay all
benefits of a Participant when due, the Company and the Subsidiaries shall
continue to be liable to the Participant for such benefit payments in accordance
with the terms of the Plan.
ARTICLE VI
----------
Adoption by Subsidiaries
------------------------
Any subsidiary of the Company which is at least 80% owned directly
or indirectly by the Company may become a party of this Trust Agreement by:
(a) filing with the Asset Management Committee and the Trustee a certified
copy of a resolution of its Board of Directors to that effect; and
(b) filing with the Trustee a writing of the Asset Management Committee
consenting thereto.
ARTICLE VII
-----------
Tax Matters
-----------
VII-1. Nature of Trust. This Trust Agreement is intended to constitute a
grantor trust, as described in section 671 of the Code. The Company and the
Subsidiaries agree that all income of the Trust is attributable to them as
owners of the Trust assets for income tax purposes and will be income to the
Company and the Subsidiaries.
-12-
<PAGE>
VII-2. Federal and State Reporting Requirements. The Trustee shall
withhold Federal, state and local taxes which are assessable on amounts paid to
the Participants at such rate, if any, as may be certified by the Company as the
appropriate rate under applicable laws, or such larger amounts as may be
requested by the Participant, and shall transmit the amount withheld either (i)
to the Company which shall deposit and report such amounts to the applicable
taxing authority or (ii) to the applicable taxing authority at the direction of
the Company. The Company and the Trustee shall furnish to the Participants all
withholding and benefit payment information with respect to amounts transmitted
by them to the applicable taxing authorities as soon as practicable after the
end of each calendar year.
VII-3. Tax Matters. If the Internal Revenue Service determines that a
Participant is subject to Federal income taxation on any amounts held in the
Trust for his benefit in a calendar year prior to the calendar year in which he
would otherwise receive such benefits in accordance with the terms of his
benefit statement, the Trustee shall distribute the amount of the benefits
determined to be taxable to the Participant as soon as practicable.
ARTICLE VIII
------------
Miscellaneous
-------------
VIII-1. Disagreement as to Acts. If there is a disagreement between the
Trustee and anyone as to any act or transaction reported in any accounting, the
Trustee shall have the right to have its account settled by a court of competent
jurisdiction.
VIII-2. Persons Dealing With Trustee. No person dealing with the Trustee
shall be required to see to the application of all money paid or property
delivered to the Trustee, or to determine whether or not the Trustee is acting
pursuant to any authority granted under this Trust Agreement.
VIII-3. Benefits May Not Be Assigned or Alienated. The interests of any
Participant under the Trust may not be voluntarily or involuntarily assigned or
alienated or encumbered.
VIII-4. Evidence. Evidence required of anyone under this Trust Agreement
may be by certificate, affidavit, document or other instrument which the person
acting in reliance thereon considers pertinent and reliable, and signed, made or
presented by the proper party.
-13-
<PAGE>
VIII-5. Waiver of Notice. Any notice required under this Trust Agreement
may be waived by the person entitled thereto.
VIII-6. Counterparts. This Trust Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, and no other
counterpart need be produced.
VIII-7. Governing Laws. This Trust Agreement shall be construed and
administered according to the laws of the State of Illinois.
VIII-8. Successors. Etc.. The provisions of this Trust Agreement shall be
binding on the Company, the Subsidiaries and the Trustee and their successors
and the Participants and their respective heirs and legal representatives.
Neither the Company nor any Subsidiary will merge or consolidate with any other
corporation or liquidate or dissolve without making suitable arrangements for
the fulfillment of all of its obligations under this Trust Agreement and the
Plan.
VIII-9. Service of Legal Process. If the Trustee receives service of
summons, subpoena or other legal process of any court with respect to any action
relating to the Plan or this Trust Agreement, it shall, as soon as practicable,
inform the Company and the Subsidiaries of such service and the Trustee shall
promptly provide the Company and the Subsidiaries with a copy of the document
served.
VIII-10. Action by Company and Subsidiaries. Any action required or
permitted by the Company or any .Subsidiary under this Trust Agreement shall be
by resolution or its Board or Directors or by a person or persons designated by
resolution of its Board of Directors.
ARTICLE IX
----------
Changes of Trustee
------------------
IX-1. Resignation. A Trustee may resign at any time by giving ninety days'
advance written notice to the Company and the Participants. Prior to the
effective date of any such resignation, the Company shall appoint a successor
trustee which is a corporation with not less than $1 billion in trust assets.
IX-2. Removal of Trustee. With the consent of all of the Participants, the
Company, by action of its Board of Directors or of a person designated by
resolutions of its Board of Directors, may remove any Trustee by giving thirty
days' advance written notice to the Trustee, subject to providing the removed
Trustee
-14-
<PAGE>
with satisfactory written evidence of the appointment of a successor Trustee
with not less than $1 billion in trust assets and of the successor Trustee's
acceptance of the trusteeship.
IX-3. Duties of Resigned or Removed Trustee and of Successor Trustee. If
the Trustee resigns or is removed, such resigned or removed Trustee shall
promptly transfer and deliver the assets of the Trust Fund to the successor
Trustee, after reserving such reasonable amount as it shall deem necessary to
provide for expenses and any sums chargeable against the Trust Fund for which it
may be liable. Within 120 days, the resigned or removed Trustee shall furnish to
the Company and the successor Trustee an account of the administration of the
Trust from the date of the last account. Each successor Trustee shall succeed to
the title to the Trust Fund vested in his predecessor without the signing or
filing of any further instrument, but any resigned or removed Trustee shall
execute all documents and do all acts necessary to vest such title of record in
any successor Trustee. Each successor Trustee shall have all the powers, rights
and duties conferred by this agreement as if originally named as Trustee. No
successor Trustee shall be personally liable for any act or failure to act of a
predecessor Trustee.
ARTICLE X
---------
Amendment, Revocation and Termination
-------------------------------------
X-1. Amendment and Revocation. This Trust Agreement and the Trust created
hereby may be revoked by the Company at any time prior to receipt of either a
private letter ruling from the Internal Revenue Service or an opinion of counsel
as to the tax effects of the Trust which is, in either case, satisfactory to the
Company. The Asset Management Committee shall advise the Trustee in writing of
the Company's receipt of such a letter ruling or opinion of counsel. Thereafter,
this Trust Agreement and the Trust created hereby may not be revoked by the
Company. The Company may amend this Trust Agreement from time to time provided
that no amendment shall materially change the rights, duties and
responsibilities of the Trustee without its consent; and provided, further, that
on and after the date on which the Trust becomes irrevocable under the foregoing
provisions of this paragraph X-1, no amendment shall:
(a) permit any assets of the Trust Fund to be used for any purpose other
than the payment of plan benefits to Participants except as provided
in Article V;
(b) reduce or impair the right of any Participant to receive any amount
credited to his Account or any
-15-
<PAGE>
amount to which he may otherwise become entitled under this Trust
Agreement; or
(c) modify the terms of this Article X.
X-2. Termination. Unless otherwise revoked in accordance with the
provisions of Article X-1, this Trust Agreement shall continue in effect until
such time as all of the assets of the Trust Fund have been distributed to the
Participants or all liabilities with respect to the Participants under the Plan
have been satisfied.
IN WITNESS WHEREOF, the Company and the Trustee have caused these presents
to be signed and their corporate seals to be hereunto affixed the day and year
first above written.
AMERICAN INFORMATION
TECHNOLOGIES CORPORATION
By
------------------------------
Its
---------------------------
ATTEST:
- --------------------------------
Its
-----------------------------
HARRIS TRUST AND SAVINGS BANK
By
------------------------------
Its Vice President
---------------------------
ATTEST:
- --------------------------------
Its
-----------------------------
-16-
<PAGE>
FIRST AMENDMENT
TO
AMERITECH SENIOR MANAGEMENT
RETIREMENT AND SURVIVOR PROTECTION TRUST
----------------------------------------
RESOLVED, that pursuant to the authority reserved to American Information
Technologies Corporation by the provisions of the Ameritech Senior Management
Retirement and Survivor Protection Trust (the "Trust"), the Trust is hereby
amended effective January 17, 1990 by substituting the following for paragraph
III-5:
"III-5. Change in Control. For purposes of the Trust, the term 'Change in
Control' means a change in the beneficial ownership of the Company's voting
stock or a change in the composition of the Company's Board of Directors which
occurs as follows:
(a) any 'person' (as such term is used in Section 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934) is or becomes a beneficial owner
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934),
directly or indirectly, of stock of the Company representing 20% or
more of the total voting power of the Company's then outstanding
stock; provided, however, that this subparagraph (a) shall not apply
to any tender offer made pursuant to an agreement with the Company
approved by the Company's Board of Directors and entered into before
the offeror has become a beneficial owner of stock of the Company
representing 5% or more of the combined voting power of the Company's
then outstanding stock;
(b) a tender offer is made for the stock of the Company, and the person
making the offer owns or has accepted for payment stock of the Company
representing 20% or more of the total voting power of the Company's
then outstanding stock; provided, however, that this subparagraph (b)
shall not apply to any tender offer made pursuant to an agreement with
the Company approved by the Company's Board of Directors and entered
into before the offeror has become a beneficial owner of stock of the
Company representing 5% or more of the combined voting power of the
Company's then outstanding stock;
(c) during any period of 24 consecutive months there shall cease to be a
majority of the Board of Directors comprised as follows: individuals
who at the beginning
<PAGE>
of such period constitute the Board of Directors and any new
Director(s) whose election by the Board of Directors or nomination for
election by the Board of Directors or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds
(2/3) of the Directors then still in office who either were Directors
at the beginning of the period or whose election or nomination for
election was previously so approved; or
(d) the stockholders of the Company approve a merger or consolidation of
the Company with any other company other than:
(i) a merger or consolidation which would result in the Company's
voting stock outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into 70% of the combined voting power of the Company's or such
surviving entity's outstanding voting stock immediately after
such merger or consolidation; or
(ii) a merger or consolidation which would result in the directors of
the Company who were directors immediately prior thereto
continuing to constitute at least 50% of the directors of the
surviving entity immediately after such merger or consolidation.
For purposes of subparagraph (d) above, the phrase 'surviving entity' shall mean
only an entity in which all of the Company's stockholders who are stockholders
immediately before the merger or consolidation (other than stockholders
exercising dissenter rights) become stockholders by the terms of the merger or
consolidation, and the phrase 'directors of the Company who were directors
immediately prior thereto' shall not include (A) any director of the Company who
was designated by a person who has entered into an agreement with the Company to
effect a transaction described in subparagraph (a) or subparagraph (d) above, or
(B) any director who was not a director at the beginning of the 24-consecutive-
month period preceding the date of such merger of consolidation, unless his
election by the Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) who were
directors before the beginning of such period. The Secretary of the Company and
the Asset Management Committee shall each promptly notify the Trustee of the
occurrence of a Change in Control."
-2-
<PAGE>
SECOND AMENDMENT
TO
AMERITECH SENIOR MANAGEMENT
RETIREMENT AND SURVIVOR PROTECTION TRUST
----------------------------------------
RESOLVED, that pursuant to the authority reserved to Ameritech Corporation
by the provisions of the Ameritech Senior Management Retirement and Survivor
Protection Trust (the "Trust"), the Trust is hereby amended effective October
16, 1991, as follows:
1. By adding the following as the second and third sentences in
paragraph I-2. Definitions:
"As used in the Trust, the term Committee shall mean the
Ameritech Salary Policy Committee. The Committee shall have the
powers allocated to it in the Trust;" and
2. By substituting the term "Committee" for the term "Asset Management
Committee" wherever that term appears in the Trust, including, but not
limited to, paragraphs I-4, II-3, II-5(b), III-1, III-2, III-4, III-4
(b), (d) and (e), III-5, IV-2, and VI.
I, Bruce B. Howat, Secretary of Ameritech Corporation, hereby certify that
the foregoing is a correct copy of a resolution adopted by the Ameritech Human
Resources Committee on October 16, 1991, and that the resolution has not been
changed or repealed.
Dated: October 29, 1991 /s/ Bruce B. Howat
-------------------------------
Secretary
<PAGE>
THIRD AMENDMENT
TO
AMERITECH SENIOR MANAGEMENT
RETIREMENT AND SURVIVOR PROTECTION TRUST
RESOLVED, that pursuant to the authority reserved to Ameritech Corporation,
the Ameritech Senior Management Retirement and Survivor Protection Trust (the
"Trust") is hereby amended effective as of the dates provided, as follows:
1. Effective as of December 1, 1995, to rename the Trust the "Ameritech
Corporate Resource Supplemental Pension Trust" and to substitute the
name "Ameritech Corporate Resource Supplemental Pension Plan" for the
"Ameritech Senior Management Retirement and Survivor Protection Plan"
wherever the latter name appears in the Trust;
2. Effective as of January 1, 1996 to delete paragraph IX-2 in its
entirety and to substitute the following therefor:
"IX-2 Removal of Trustee.
(a) Except as provided in subparagraph (b) of the paragraph IX-2
below, the Company by action of its Board of Directors or of a person
or persons designated by its Board of Directors may remove any Trustee
by giving thirty days' advance written notice to the Trustee, subject
to providing the removed Trustee with satisfactory written evidence of
the appointment of a successor Trustee with not less than $1 billion
in trust assets and of the successor Trustee's acceptance of the
trusteeship;
(b) Anything in this Trust to the contrary notwithstanding, in the
event of a Change in Control as defined in the Plan, the Company, by
action of its Board of Directors or of a person or persons designated
by its Board of Directors, may remove any Trustee only with the
consent of all of the Participants, by giving thirty days' advance
written notice to the Trustee, subject to providing the removed
Trustee with satisfactory written evidence of the appointment of a
successor Trustee with not less than $1 billion in trust assets and of
the successor Trustee's acceptance of the trusteeship;" and
<PAGE>
3. Effective as of January 1, 1996, to add the following as the last
sentence of paragraph X-1: "Subject to the foregoing provisions of the
paragraph X-1 the Company's Senior Vice President - Human Resources,
or such other officer of the Company as may from time to time be
primarily responsible for human resources matters, may, with the
concurrence of the Company's Executive Vice President and General
Counsel, or such other officer of the Company as may from time to time
by primarily responsible for legal matters, make minor or
administrative amendments to the Trust Agreement."
Dated: January 22, 1996 AMERITECH CORPORATION
By: /s/ Walter M. Oliver
------------------------------------
Senior Vice President -
Human Resources
Concur:
/s/ Thomas P. Hester
- ------------------------------
Executive Vice President
and General Counsel
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11a
AMERITECH CORPORATION
COMPUTATION OF PRIMARY EARNINGS PER SHARE
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net Income (Loss) after
extraordinary item $2,007,635,000 ($1,063,613,000) $1,512,798,000
============== =============== ==============
Weighted average number of
shares outstanding 553,621,693 549,238,304 544,076,354
Additional dilutive effect of
outstanding options (as determined
by the application of the treasury
stock method) 8,058,284 1,518,175 1,503,542
-------------- --------------- --------------
Weighted average shares outstanding
on which primary earnings per share
are based 561,679,977 550,756,479 545,579,896
Primary earnings per share $3.57 ($1.93) $2.77
============== =============== ==============
</TABLE>
This calculation is submitted in accordance with Regulation S-K, Item 601 (b)11,
although not required by footnote 2 to paragraph 14 of Accounting Principles
Board opinion No. 15 because it results in dilution of less than three percent.
Note: All share amounts have been restated for two-for-one stock split
effective December 31, 1993.
<PAGE>
Exhibit 11a
<TABLE>
<CAPTION>
Ameritech Corporation
Computation of Primary Earnings Per Share
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income before extraordinary item $2,007,635,000 $1,170,426,000 $1,512,798,000
============== ============== ==============
Weighted average number of
shares outstanding 553,621,693 549,238,304 544,076,354
Additional dilutive effect of
outstanding options (as determined
by the application of the treasury
stock method) 8,058,284 1,518,175 1,503,542
-------------- -------------- --------------
Weighted average shares outstanding
on which primary earnings per share
are based 561,679,977 550,756,479 545,579,896
Primary earnings per share $3.57 $2.13 $2.77
============== ============== ==============
</TABLE>
This calculation is submitted in accordance with Regulation S-K, Item 601 (b)11,
although not required by footnote 2 to paragraph 14 of Accounting Principles
Board opinion No. 15 because it results in dilution of less than three percent.
Accordingly, reported EPS does not consider dilutive securities.
Note: All share amounts have been restated for two-for-one stock split
effective December 31, 1993.
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11b
AMERITECH CORPORATION
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net Income (Loss) after
extraordinary item $2,007,635,000 ($1,063,613,000) $1,512,798,000
============== =============== ==============
Weighted average number of 553,621,693 549,238,304 544,076,354
shares outstanding
Additional dilutive effect of
outstanding options (as determined
by the application of the treasury
stock method) 9,204,776 1,606,099 1,503,542
-------------- --------------- --------------
Weighted average shares outstanding
on which fully diluted earnings
per share are based 562,826,469 550,844,403 545,579,896
Fully diluted earnings per share $3.57 ($1.93) $2.77
============== =============== ==============
</TABLE>
This calculation is submitted in accordance with Regulation S-K, Item 601 (b)11,
although not required by footnote 2 to paragraph 14 of Accounting Principles
Board opinion No. 15 because it results in dilution of less than three percent.
Note: All share amounts have been restated for two-for-one stock split
effective December 31, 1993.
<PAGE>
Exhibit 11b
<TABLE>
<CAPTION>
Ameritech Corporation
Computation of Fully Diluted Earnings Per Share
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income before extraordinary item $2,007,635,000 $1,170,426,000 $1,512,798,000
============== ============== ==============
Weighted average number of
shares outstanding 553,621,693 549,238,304 544,076,354
Additional dilutive effect of
outstanding options (as determined
by the application of the treasury
stock method) 9,204,776 1,606,099 1,503,542
-------------- -------------- --------------
Weighted average shares outstanding
on which fully diluted earnings
per share are based 562,826,469 550,844,403 545,579,896
Fully diluted earnings per share $3.57 $2.12 $2.77
============== ============== ==============
</TABLE>
This calculation is submitted in accordance with Regulation S-K, Item 601 (b)11,
although not required by footnote 2 to paragraph 14 of Accounting Principles
Board opinion No. 15 because it results in dilution of less than three percent.
Accordingly, reported EPS does not consider dilutive securities.
Note: All share amounts have been restated for two-for-one stock split
effective December 31, 1993.
<PAGE>
Exhibit 12
AMERITECH CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
FOR THE FIVE YEARS ENDING DECEMBER 31, 1995
(Dollars in Millions)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
EARNINGS
Income before interest, income
taxes, extraordinary item and
cumulative effect of change in
accounting principles................ $3,582.7 $2,189.5 $2,686.8 $2,476.9 $2,224.3
Preferred dividends(4)............... 9.5 2.3 -- -- --
Portion of rent expense representing
interest............................. 66.7 63.9 65.4 65.4 71.0
Michigan Single Business Tax......... 33.7 32.9 27.6 25.2 25.6
-------- -------- -------- -------- --------
Total Earnings(1)(2)(3)............ $3,692.6 $2,288.6 $2,779.8 $2,567.5 $2,320.9
======== ======== ======== ======== ========
FIXED CHARGES
Interest cost........................ $ 488.6 $ 448.0 $ 464.3 $ 503.2 $ 567.9
Preferred dividends(4)............... 9.5 2.3 -- -- --
Portion of rent expense representing
interest............................. 66.7 63.9 65.4 65.4 71.0
-------- -------- -------- -------- --------
Total Fixed Charges................ $ 564.8 $ 514.2 $ 529.7 $ 568.6 $ 638.9
======== ======== ======== ======== ========
RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED DIVIDENDS.................. 6.54 4.45 5.25 4.52 3.63
======== ======== ======== ======== ========
</TABLE>
(1) The results for 1995 reflect a $134.5 pretax credit primarily from
settlement gains resulting from lump sum pension payments from the pension
plan to former employees who left the business in the nonmanagement work
force restructuring, partially offset by $73.7 associated with increased
force costs related to the restructuring started in 1994, as well as a
$58.1 charge recorded to write down certain data processing equipment to
net realizable value. Results for 1994 reflect a $728.1 pretax charge
associated with the nonmanagement work force restructuring. Costs of the
work force restructuring program have largely been funded from the
Ameritech Pension Plan.
(2) Earnings are income before income taxes and fixed charges. Since the
Michigan Single Business Tax ("the Tax") and rental expense have been
deducted, the Tax and the one-third portion of rental expense considered to
be fixed charges are added back.
(3) Earnings have not been adjusted to reflect the timing of dividends received
and equity in earnings of unconsolidated affiliates as the effect on an
annual basis has been insignificant.
(4) For purposes of above computation, the preferred stock dividend requirement
is increased to an amount representing the pretax earnings which would be
required to cover the dividend requirements.
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
AT DECEMBER 31 OR FOR THE YEAR ENDED
Ameritech Corporation and Subsidiaries
1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Local service $ 5,586 $ 5,337 $ 5,065 $ 5,012
Interstate network access 2,254 2,218 2,118 2,041
Intrastate network access 562 612 623 613
Long distance 1,457 1,456 1,401 1,252
Directory, cellular and other 3,569 2,946 2,658 2,367
-------------------------------------------------
TOTAL 13,428 12,569 11,865 11,285
=================================================
OPERATING EXPENSES/1/ 10,125 10,540 9,307 8,941
-------------------------------------------------
OPERATING INCOME 3,303 2,029 2,558 2,344
Interest expense 469 435 453 495
Other income (expense), net 260 147 117 125
Income taxes 1,086 571 709 628
-------------------------------------------------
Income before
special accounting items/2/ 2,008 1,170 1,513 1,346
Special accounting items/2/ - (2,234) - (1,746)
-------------------------------------------------
NET INCOME (LOSS) $ 2,008 $(1,064) $ 1,513 $ (400)
=================================================
EARNINGS (LOSS) PER SHARE/3/
Income before special
accounting items/2/ $ 3.63 $ 2.13 $ 2.78 $ 2.51
Special accounting items/2/ - (4.07) - (3.26)
-------------------------------------------------
NET INCOME (LOSS) $ 3.63 $ (1.94) $ 2.78 $ (0.75)
=================================================
Dividends declared
per share/3/ $ 2.03 $ 1.94 $ 1.86 $ 1.78
Average common shares
outstanding (millions)/3/ 553.6 549.2 544.1 536.6
Total assets/4/ $21,943 $19,947 $23,428 $22,818
Property, plant and
equipment, net/4/ $13,457 $13,455 $17,366 $17,335
Capital expenditures $ 2,176 $ 1,955 $ 2,108 $ 2,267
Long-term debt $ 4,513 $ 4,448 $ 4,090 $ 4,586
Total debt $ 6,651 $ 6,346 $ 6,692 $ 6,704
Debt ratio 48.7% 51.2 % 46.0% 48.9%
Return on average equity/5/ 29.5% (13.6)% 20.1% (5.9)%
Return on average
total capital/5/ 18.2% (4.6)% 13.1% 0.2%
Market price per
common share/3/ $ 58.88 $ 40.38 $ 38.38 $ 35.63
Access lines (000) 19,057 18,239 17,560 17,001
Cellular subscribers (000) 1,891 1,299 860 586
Employees 65,345 63,594 67,192 71,300
==============================================================================================
</TABLE>
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987 1986 1985
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Local service $ 4,886 $ 4,789 $ 4,679 $ 4,521 $ 4,494 $ 4,491 $ 4,365
Interstate network access 1,993 2,009 1,942 1,958 1,798 1,881 1,791
Intrastate network access 556 559 541 583 573 606 628
Long distance 1,294 1,336 1,259 1,240 1,149 1,093 1,062
Directory, cellular and other 2,254 2,080 1,895 1,712 1,609 1,394 1,289
----------------------------------------------------------------------
TOTAL 10,983 10,773 10,316 10,014 9,623 9,465 9,135
======================================================================
OPERATING EXPENSES/1/ 9,001 8,584 8,161 7,882 7,358 7,047 6,856
----------------------------------------------------------------------
OPERATING INCOME 1,982 2,189 2,155 2,132 2,265 2,418 2,279
Interest expense 545 454 384 366 351 361 386
Other income (expense), net 219 76 14 52 (8) 10 4
Income taxes 491 557 547 581 718 929 819
----------------------------------------------------------------------
Income before
special accounting items/2/ 1,165 1,254 1,238 1,237 1,188 1,138 1,078
Special accounting items/2/ - - - - - - -
----------------------------------------------------------------------
NET INCOME (LOSS) $ 1,165 $ 1,254 $ 1,238 $ 1,237 $ 1,188 $ 1,138 $ 1,078
======================================================================
EARNINGS (LOSS) PER SHARE/3/
Income before special
accounting items/2/ $ 2.19 $ 2.37 $ 2.30 $ 2.27 $ 2.12 $ 1.97 $ 1.84
Special accounting items/2/ - - - - - - -
----------------------------------------------------------------------
NET INCOME (LOSS) $ 2.19 $ 2.37 $ 2.30 $ 2.27 $ 2.12 $ 1.97 $ 1.84
======================================================================
Dividends declared
per share/3/ $ 1.72 $ 1.61 $ 1.49 $ 1.38 $ 1.28 $ 1.20 $ 1.10
Average common shares
outstanding (millions)/3/ 531.0 530.6 539.5 544.4 561.1 578.6 586.6
Total assets/4/ $22,290 $21,715 $19,833 $19,163 $18,780 $18,739 $18,149
Property, plant and
equipment, net/4/ $16,986 $16,652 $16,296 $16,078 $15,962 $15,822 $15,401
Capital expenditures $ 2,200 $ 2,154 $ 2,015 $ 1,895 $ 1,956 $ 2,076 $ 1,991
Long-term debt $ 4,964 $ 5,074 $ 5,069 $ 4,487 $ 4,388 $ 4,497 $ 4,518
Total debt $ 6,938 $ 6,769 $ 5,582 $ 4,942 $ 4,843 $ 4,724 $ 4,745
Debt ratio 46.1% 46.7% 42.1% 38.7% 38.9 % 38.3% 38.9%
Return on average equity/5/ 14.5% 16.3% 15.8% 15.8% 15.5 % 14.9% 14.7%
Return on average
total capital/5/ 10.6% 11.8% 11.9% 12.0% 11.7 % 11.4% 11.4%
Market price per
common share/3/ $ 31.75 $ 33.38 $ 34.00 $ 23.88 $ 21.13 $ 22.00 $ 17.75
Access lines (000) 16,584 16,278 15,899 15,469 15,094 14,755 14,555
Cellular subscribers (000) 483 326 242 146 87 57 37
Employees 73,967 75,780 77,326 77,334 78,510 77,538 74,883
================================================================================================================
</TABLE>
/1/ Substantial increase in operating expenses in 1994 is due to nonmanagement
work force restructuring charges of $728 million, while operating expenses
in 1995 decreased due to a restructuring credit of $135 million.
/2/ Special accounting items represent an extraordinary item for the
discontinuation of FAS 71 in 1994 and the cumulative effect of a change in
accounting principles in 1992 for FAS 106 ($1.644 billion) and FAS 112 ($102
million).
/3/ Gives retroactive effect to all stock splits.
/4/ Substantial reduction in total assets and property, plant and equipment, net
in 1994 is due principally to the discontinuance of FAS 71.
/5/ Return on average equity and return on average total capital are calculated
using weighted average monthly amounts.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(dollars in millions, except per share amounts)
IN 1995, AMERITECH SUCCESSFULLY IMPLEMENTED SEVERAL KEY INITIATIVES THAT BETTER
POSITION THE COMPANY FOR COMPETITION AND FUTURE GROWTH IN THE COMMUNICATIONS
BUSINESS.
These include achievement of pure price regulation for landline communications
revenues, substantial completion of a work force restructuring, expansion into
the security monitoring and cable TV markets and additional strategic alliances
and investments, both domestic and international.
During 1995, Ameritech received approval from the Federal Communications
Commission (FCC) to implement pure price regulation without sharing of earnings,
effective January 1, 1995. Under price regulation, regulators place limits on
prices, not on profits as they once did under rate-of-return regulation. As a
result, no limits exist on Ameritech's earnings in any federal or state
regulatory jurisdiction.
Ameritech also completed the work force restructuring announced in March
1994. The company's nonmanagement work force was reduced by approximately
11,500 employees (2,400 of whom left in 1995), although new employees have been
added to accommodate growth, ensure high quality customer service and meet
staffing requirements for new business opportunities. Results in 1995 include a
$134.5 million pretax work force restructuring credit ($78.7 million after-tax
or $.14 per share), which reflects both charges and pension settlement gains
associated with lump-sum payments from the nonmanagement pension plan to former
employees. The charges also include costs associated with data center
consolidations and information technology restructuring, including $58.1 million
to write-down certain data processing equipment.
The company was successful in its bid for and subsequent investment in
broadband personal communications services (PCS) licenses in Indianapolis and
Cleveland. As a result, the company was required to dispose of its cellular
interests in these markets. 1995 results include a $41.3 million after-tax gain
resulting from the exchange of minority interests in cellular partnerships in
Indianapolis, Cleveland and Rockford for a combination of cash and additional
interests in the Ameritech Detroit/Flint cellular partnership.
In October 1995, the company acquired The National Guardian Corporation,
significantly expanding the company's security monitoring customer base to
340,000 throughout the United States and Canada and providing an additional
source of revenues. This acquisition complements the December 1994 acquisition
of SecurityLink and makes Ameritech the second largest provider of security
monitoring services in the United States in a market growing 12% per year.
Facing regulatory uncertainty over the FCC's video dialtone rules, Ameritech
created a separate subsidiary in early 1995, Ameritech New Media, Inc., to build
and operate stand-alone cable TV systems. Initially, New Media plans to offer
80 to 90 channels in several communities in 1996 and expand the channel
offerings over the next few years. New Media has secured franchise agreements
in ten communities and is in discussion with more than thirty additional
communities across the Midwest.
Ameritech is an equal partner in a venture with The Walt Disney Company,
BellSouth Corporation, SBC Communications Inc. and GTE Corporation that is
designed to develop, acquire, package and market traditional and interactive
video programming. The joint venture, called Americast, is being funded by the
partners with a $500 million investment over five years. Ameritech plans to
offer its americast(TM) package of video programming beginning in 1996.
Total market
capitalization
of Ameritech
rose 46% in
1995 to $32.6
billion from
$22.3 billion
in 1994.
[+46% is featured in the accompanying graphic with the caption,
INCREASE IN MARKET CAPITALIZATION]
- --------------------------------------------------------------
In the international arena, it was announced in December 1995 that Ameritech
and its consortium partners, Tele Danmark A/S and Singapore Communications
Limited, were chosen by the Belgian government as the successful bidders for a
49.9% interest in the privatization of the Belgian state-owned
telecommunications company, Belgacom S.A. The transaction is planned to be
completed by June 30, 1996. This investment will increase the company's
presence in Europe, where Ameritech already has a significant interest in the
Hungarian telecommunications company, MATAV, as well as interests in cellular
ventures in Norway and Poland. In December 1995, Ameritech, through a holding
company, MagyarCom, owned equally with Deutsche Telekom AG,
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
(dollars in millions, except per share amounts)
more than doubled its investment in MATAV. In addition, the company opened an
office in Beijing in 1995 and announced a 25-year joint venture with China
Communications System Company Ltd. (Chinacom) to assist the People's Republic
of China in the development of its telecommunications and cellular
infrastructure in Taiyuan, the capital of Shanxi province. These international
investments represent significant opportunities for future growth.
International investments, primarily in New Zealand and Hungary (accounted
for using the equity method), represent 6.3% of the company's assets as of
December 31, 1995. Where less than a controlling interest is owned, the company
records its allocable share of the operating results from international
investments. Such results are included in other income, net in the consolidated
statements of income on page 34. The company has followed a strategy of teaming
with partners and forming alliances to develop synergies, share expertise and
mitigate risk. The company estimates its pro rata share of revenues in 1995
from its international investments at approximately $700 million.
Reported income in 1995 was $2,007.6 million, or $3.63 per share. Reported
1994 earnings were a loss of $1,063.6 million, or $1.94 per share. 1995
earnings, when normalized for the net restructuring credits and the gain
resulting from the exchange of minority cellular interests mentioned above, were
$1,887.6 million or $3.41 per share. This represents an increase of $200.1
million, or 11.9% over normalized 1994 earnings, and an increase in earnings per
share of $0.34, or 11.1%. Normalized items in 1994 include an extraordinary
after-tax noncash charge of $2.2 billion, or $4.07 per share, due to the
discontinuation of accounting rules for regulated companies, an after-tax
restructuring charge of $455.8 million and a $61.3 million after-tax charge for
the write-down of certain real estate assets.
REVENUE GROWTH (in percent)
- -------------------------------------------------------------
90 --------------------------- 4.4
91 ---------- 1.9
92 ----------------- 2.7
93 --------------------------------- 5.1
94 ----------------------------------------- 5.9
95 ----------------------------------------------------- 6.8
=============================================================
Revenues grew 6.8% to a record $13,428 million in 1995, up from
$12,569 million in 1994.
In December 1995, Ameritech's Board of Directors approved a 6.0% increase in
the quarterly dividend, demonstrating the company's confidence in its ability to
generate sustainable growth in the future. Over the past 12 years, the company
has produced a total return on shareowners' investment of 965%, more than double
that of the S&P 500. Long-term, above-average shareowner return remains a key
financial goal.
The following sections provide a more detailed discussion of Ameritech's
results of operations and financial condition over the past three years.
RESULTS OF OPERATIONS
REVENUES Total revenues increased by 6.8% to $13.4 billion in 1995. This
increase was primarily attributable to higher communications network usage
resulting from access line and cellular subscriber growth, managed network
services and increases in new products and services, including call management
services, customer premises equipment (CPE), and security monitoring. Net rate
reductions implemented as a result of federal and various state regulatory
agreements for landline communications services, in the local service and
network access revenue categories, partially offset these increases.
In 1994, total revenues increased 5.9% to $12.6 billion due to higher network
usage, as well as increases in cellular volume related to subscriber growth.
Increase Percent
1995 1994 (Decrease) Change
- --------------------------------------------------------------------------------
Local service $ 5,586.1 $ 5,337.0 $ 249.1 4.7
================================================================================
LOCAL SERVICE Local service revenues include basic monthly service fees and
usage charges, fees for call management services, public phone revenues and
installation and connection charges. Local service rates generally have been
regulated by the state public service commissions. Through regulatory
proceedings in Illinois, Indiana and Ohio and legislation in Wisconsin, price
regulation was achieved in 1994. Price regulation was previously achieved in
Michigan. In exchange for certain regulatory freedoms, the company agreed to
certain rate reductions and moratoriums on price increases for two to six years,
beginning in 1994 and fully reflected in 1995 revenues. All intrastate limits
on earnings were removed. Scheduled rate reductions will affect 1996 local
service revenues by about $35 million.
- --------------------------------------------------------------
Revenues from
local telephone
service increased
4.7% to $5,586
million in 1995.
[+4.7% appears in the accompanying graphic with the caption,
LOCAL SERVICE]
- --------------------------------------------------------------
Higher network usage increased local service revenues by $323.6 million
during 1995. The increase in calling volumes principally resulted from growth
in the number of access lines, which increased 4.5% or 818,000 lines to
19,057,000 from 18,239,000 as of December 31, 1994, fueled primarily by second
line additions. Greater sales of call management
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
(dollars in millions, except per share amounts)
features also contributed to the increase, as did the impact of $6.2 million
from the new Extended Community Calling plan (ECC) in Wisconsin, which
reclassified portions of long distance usage to local service usage. These
increases were partially offset by net rate reductions of $75.7 million, largely
resulting from regulatory proceedings or legislation in four states as discussed
above.
ACCESS LINE GROWTH (in percent)
- -------------------------------------------------------------
90 ------------------------------------- 2.4
91 ----------------------------- 1.9
92 --------------------------------------- 2.5
93 -------------------------------------------- 3.3
94 ------------------------------------------------ 3.9
95 ----------------------------------------------------- 4.5
=============================================================
Access lines grew a record 4.5% in 1995, up by 818,000 lines
to 19.1 million lines.
In 1994, local service revenues increased $271.7 million or 5.4%. Higher
network usage, which increased local service revenues by $252.4 million,
resulted principally from access line growth of 3.9%. Also contributing to the
increase was a change in the method in which independent company settlements
were recorded in Illinois, which accounted for $20.9 million of the increase,
and $11.3 million related to the ECC impact discussed above. Net rate
reductions of $8.3 million partially offset these increases.
<TABLE>
<CAPTION>
Increase Percent
1995 1994 (Decrease) Change
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------
Network access
Interstate access $2,254.3 $2,217.7 $ 36.6 1.7
Intrastate access $ 561.5 $ 612.4 $(50.9) (8.3)
- ---------------------------------------------------------------
</TABLE>
NETWORK ACCESS Network access revenues are fees charged to interexchange
carriers, such as AT&T and MCI, that use the company's local landline
communications network to connect customers to the long distance network. In
addition, end users pay flat rate access fees to connect to the long distance
network. These revenues are generated from both interstate and intrastate
services.
The increase in interstate network access revenues was due primarily to
higher network usage, which resulted in additional revenues of $144.5 million,
as well as reductions in National Exchange Carrier Association (NECA) common
line support payments of $24.1 million. The increase was partially offset by
rate reductions of $128.4 million. Minutes of use related to interstate calls
increased by 7.1% in 1995.
As a result of the FCC's approval of the company's request for price
regulation without sharing of earnings, as previously discussed, Ameritech was
required to reduce its annual access charges to long distance companies for
local network connections by $100.4 million effective August 1, 1995. The
impact in 1995 was a reduction in interstate access revenues of $42.7 million.
Interstate network access revenues increased $99.5 million or 4.7% in 1994
primarily due to increased network usage, which produced additional revenues of
$149.0 million, as well as reduced NECA common line support payments of $44.8
million and lower revenue sharing accruals of $8.5 million, partially offset by
rate reductions. Minutes of use related to interstate calls increased by 6.4%
in 1994.
The decrease in intrastate network access revenues in 1995 was primarily
attributable to rate reductions of $91.0 million, largely resulting from
regulatory proceedings and legislation in four states, as previously discussed,
and certain one-time billing adjustments. The decrease was partially offset by
volume increases of $64.0 million. Minutes of use related to intrastate calls
increased by 11.3%. Scheduled rate reductions will affect 1996 revenues by
about $25 million.
In 1994 intrastate network access revenues decreased $10.1 million or 1.6%,
primarily due to net rate reductions of $69.8 million, partially offset by
increased revenues of $59.3 million, primarily from higher network usage.
Minutes of use related to intrastate calls increased 12.7% in 1994.
Increase Percent
1995 1994 (Decrease) Change
- -------------------------------------------------------------------------
Long distance $ 1,456.5 $ 1,456.0 $ 0.5 -
=========================================================================
LONG DISTANCE Long distance revenues are derived from customer calls to
locations outside of their local calling areas. The change in long distance
service revenues for 1995 was primarily attributable to rate increases of $15.2
million. These increases were partially offset by net volume decreases of $6.5
million and the impact of the ECC plan in Wisconsin previously discussed, which
reclassified portions of long distance usage to local service usage and
effectively lowered long distance service revenues by $17.8 million.
In 1994, long distance revenues increased $55.5 million or 4.0%. The
increase was due to a change in the method in which independent company
settlements were recorded in Illinois, which accounted for $57.1 million of the
increase, and volume-related increases of $29.7 million, partially offset by the
ECC plan impact in Wisconsin of $31.0 million.
Increase Percent
1995 1994 (Decrease) Change
- -----------------------------------------------------------------------
Directory, cellular
and other $ 3,569.4 $ 2,946.4 $623.0 21.1
=======================================================================
DIRECTORY, CELLULAR AND OTHER Directory, cellular and other revenues include
revenues derived from telephone directory publishing, cellular communications,
paging services, lease financing, billing and collection services, telephone
equipment sales and installation and security monitoring services.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
(dollars in millions, except per share amounts)
1995 revenue growth was primarily attributable to cellular and paging
subscriber growth of 45.6% and 17.9%, respectively. Also contributing to the
increase were demand growth and price increases in other nonregulated services,
such as inside wire installation and maintenance at the landline communications
subsidiaries. Revenue growth in the security monitoring business, coupled with
increased sales of CPE, also contributed to the increase.
In 1994, directory, cellular and other revenues increased $288.2 million or
10.8%. This increase was primarily attributable to cellular and paging
subscriber growth of 51.0% and 24.0%, respectively, and increased revenues from
other nonregulated services.
CELLULAR CUSTOMERS (in thousands)
- --------------------------------------------------------------
90 -------------- 326
91 ------------------ 483
92 ----------------------- 586
93 ----------------------------- 860
94 --------------------------------- 1,299
95 -----------------------------------------------------1,891
=============================================================
During 1995, Ameritech achieved record growth in the number
of cellular customers, which rose 45.6% to almost 1.9 million.
OPERATING EXPENSES Total operating expenses decreased $415.4 million or 3.9% in
1995. The decrease was largely attributable to the work force restructuring
which resulted in a net credit of $134.5 million ($78.7 million after-tax) in
1995, primarily due to settlement gains from lump-sum pension payments to former
employees, partially offset by fourth quarter charges for planned work force
reductions due to data center consolidations, increased force costs related to
the work force restructuring started in 1994 and a charge of $58.1 million to
write-down certain data processing equipment in connection with information
technology restructuring. This compares with the 1994 charge of $728.1 million
($455.8 million after-tax) for work force restructuring. 1994 results also
included a charge of $69.3 million ($61.3 million after-tax) for certain real
estate and other assets that the company sold or no longer plans to use in the
business.
REVENUES PER EMPLOYEE (in thousands of dollars)
- --------------------------------------------------------------
90 ----------------------------------- 142
91 --------------------------------------- 148
92 ------------------------------------------- 158
93 ----------------------------------------------- 177
94 --------------------------------------------------- 198
95 ------------------------------------------------------- 205
=============================================================
Revenues per employee increased 3.5% to a record $205,000
in 1995.
Total operating expenses increased $1,233.7 million or 13.3% in 1994. The
increase was largely attributable to the $728.1 million restructuring charge and
the $69.3 million real estate charge discussed above. Also contributing to the
increase were higher advertising expenses, access charges and contract and
professional services.
Increase Percent
1995 1994 (Decrease) Change
- --------------------------------------------------------------------------------
Employee-related
expenses $ 3,623.3 $ 3,612.3 $11.0 0.3
================================================================================
EMPLOYEE-RELATED EXPENSES The increase in employee-related expenses in 1995 was
primarily attributable to salaries and wages and other benefits and expenses of
$84.8 million for new employees in new businesses, such as security monitoring
and cable TV, as well as a decrease in pension credits of $65.5 million. Also
contributing to the increase were the effects of higher salaries and wages and
increased overtime payments of $39.9 million at the landline communications
subsidiaries. These increases were largely offset by productivity improvements
from work force reductions of $178.3 million at the landline communications
subsidiaries.
During September 1995, union agreements were ratified by the International
Brotherhood of Electrical Workers (IBEW) and the Communications Workers of
America (CWA). The new contracts and wage increases were retroactive to June
25, 1995 for the IBEW and August 6, 1995 for the CWA. The contracts include
basic wage increases of 10.9% (compounded) over three years and signing bonuses
of $500 to eligible employees upon ratification. Both contracts address wages,
benefits, employment security, training and retraining and other conditions of
employment. In addition, union employees will receive their annual bonuses in
the form of Ameritech stock instead of cash, beginning with the bonus for 1995
and continuing for the remaining three years of the labor contracts. Most of
the company's nonmanagement work force (about 70% of all employees) are
represented by the two unions. The new contracts accounted for about $55
million in additional costs in 1995 for wage increases, signing bonuses and
pension and benefit enhancements.
The increase in employee-related expenses in 1994 of $52.0 million or 1.5%
was primarily attributable to the effects of higher wage rates, increased
overtime payments, higher incentive accruals and postretirement benefits.
Partially offsetting the increases were the effects of work force reductions and
increased pension credits of $99.2 million.
There were 65,345 employees at December 31, 1995, compared with 63,594 at
December 31, 1994. This increase is largely due to new employees in the
cellular, security monitoring and other operating units. This increase was
partially offset by a decrease of about 2,400 employees at the landline
communications subsidiaries resulting from work force restructuring started in
1994. See also the discussion of restructuring (credits) charges below.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Increase Percent
1995 1994 (Decrease) Change
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Depreciation and
amortization $ 2,177.1 $ 2,204.7 $ (27.6) (1.3)
================================================================================
</TABLE>
DEPRECIATION AND AMORTIZATION The decrease in depreciation and amortization
expense in 1995 was primarily due to the cessation, in the fourth quarter of
1994, of depreciation of analog switches at the landline communications
subsidiaries in connection with the discontinuation of Statement of Financial
Accounting Standard No. 71 (FAS 71), "Accounting for the Effects of Certain
Types of Regulation" (see Note 4 on page 41). This decrease was partially offset
by the effects of shortened landline plant lives, as well as increased
depreciation and amortization at other operating units.
The increase in depreciation and amortization expense in 1994 of $42.6
million or 2.0% resulted from continued expansion of the communications plant
investment base, growth-related increases in the company's cellular business,
and increased depreciation in Illinois.
<TABLE>
<CAPTION>
Increase Percent
1995 1994 (Decrease) Change
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Other operating
expenses $ 3,911.1 $ 3,418.2 $ 492.9 14.4
================================================================================
</TABLE>
OTHER OPERATING EXPENSES The increase in other operating expenses was largely
attributable to expenses, including cost of sales, of $149.3 million related to
new businesses, such as security monitoring and cable TV. Growth-related cost of
sales increases at the cellular operation, as well as cost of sales increases
related to increased CPE, PBX and other system sales, also contributed $130.8
million to the increase. Contract and professional services increased $102.7
million, primarily for systems development and process reengineering projects.
Advertising and uncollectibles increased $71.4 million, reflecting expanded
marketing efforts and revenues, respectively. Promotional expenses and
commission payments to authorized distributors also increased reflecting
marketing and sales efforts in 1995. Also contributing $18.1 million to the
increase is a reduced net credit of $37.4 million from a management separation
program, when compared with the prior year. The increases were partially offset
by a nonrecurring 1994 charge of $69.3 million for the reduction in certain
asset values, primarily real estate, previously discussed. These increases were
also partially offset by reductions in access charges, primarily due to
renegotiated contracts, and switching system software expenses of $68.3 million.
The increase in other operating expenses in 1994 of $412.2 million or 13.7%
was primarily attributable to increased contract and professional services, a
change in the method of recording access expenses with independent telephone
companies in Illinois, increased advertising at the cellular and landline
communications subsidiaries and growth-related cost of sales in the cellular and
information systems sales operations. Increased uncollectibles resulted from
higher revenues. In addition, this cost category included the $69.3 million
charge for the reduction in certain asset values, primarily real estate,
previously discussed. The increase was moderated by a net credit of $55.5
million from a management separation program. The credit results from pension
settlement and curtailment gains exceeding severance costs.
<TABLE>
<CAPTION>
Percent
1995 1994 Change Change
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Restructuring
(credits) charges $ (134.5) $ 728.1 $ (862.6) n/a
================================================================================
</TABLE>
RESTRUCTURING (CREDITS) CHARGES As announced in March 1994, the company
significantly reduced its nonmanagement work force by the end of 1995. Reduction
of the work force resulted from the implementation of technology improvements,
consolidations and initiatives to balance the cost structure in the core
business with emerging competition. The nonmanagement work force was reduced by
11,500 employees, although new employees with different skills were added during
these periods to accommodate growth, ensure high quality customer service and
meet staffing requirements for new business opportunities. Pretax charges
totaling $728.1 million ($455.8 million after-tax) related to the work force
reductions were recorded in 1994. Noncash settlement gains of $302.5 million
were recorded in 1995, associated primarily with lump-sum pension payments to
former employees partially offset by $109.9 million in increased force costs
related to the restructuring started in 1994 and estimated work force reductions
due to information technology restructuring. In connection with this
restructuring, $58.1 million was recorded to write-down certain data processing
equipment to net realizable value.
The restructuring program was recorded by quarter as follows:
<TABLE>
<CAPTION>
Net
Gross Program Cost
Program Settlement ---------------------
1995 Cost Gains Pretax After-tax
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter $ 10.0 $266.3 $(256.3) $(160.1)
Second Quarter -- -- -- --
Third Quarter 21.2 31.2 (10.0) (6.9)
Fourth Quarter 136.8 5.0 131.8 88.3
---------------------------------------------
Totals $ 168.0 $302.5 $(134.5) $ (78.7)
===========================================================================
1994
- ---------------------------------------------------------------------------
First Quarter $ 530.0 $ -- $ 530.0 $ 332.8
Second Quarter -- -- -- --
Third Quarter 392.0 121.9 270.1 168.2
Fourth Quarter 148.1 220.1 (72.0) (45.2)
---------------------------------------------
Totals $1,070.1 $342.0 $ 728.1 $ 455.8
=============================================
Program Totals $1,238.1 $644.5 $ 593.6 $ 377.1
===========================================================================
</TABLE>
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
(dollars in millions, except per share amounts)
Actual employee reductions by quarter in 1994 were: 1,595 in the second
quarter, 2,281 in the third quarter and 5,239 in the fourth quarter or 9,115 in
total. Employee reductions in 1995 totaled 2,385 as follows: 313 in the first
quarter, 870 in the second quarter and 1,202 in the third quarter. See also the
discussion of employee-related expenses above. Additional employees are expected
to leave the company in 1996 as a result of the consolidation of data centers
previously discussed. Cash requirements to fund the financial incentives
(principally contractual termination payments totaling approximately $227.8
million) were met as prescribed by the applicable collective bargaining
agreements. Certain of these collective bargaining agreements required
contractual termination payments to be paid in a manner other than lump-sum,
thus requiring cash payments beyond an employee's termination date.
The work force restructuring program reduced annual employee-related costs by
approximately $50,000 per departing employee. The projected savings are being
partially offset by the hiring of new employees as discussed above.
Increase Percent
1995 1994 (Decrease) Change
- ----------------------------------------------------------------
Taxes other than
income taxes $ 547.8 $ 576.9 $ (29.1) (5.0)
================================================================
TAXES OTHER THAN INCOME TAXES The decrease in taxes other than income taxes in
1995 was attributable to lower property taxes primarily as a result of favorable
legislation involving property tax reforms. In addition, capital stock taxes
decreased in Illinois due to a smaller tax base.
In 1994, taxes other than income taxes decreased $1.2 million or 0.2%
primarily attributable to decreased property taxes in Michigan as a result of
state legislation enacted in December 1993, which reduced the property valuation
upon which the company is taxed. Gross receipts and capital stock taxes also
decreased. These decreases were offset by property tax increases in other
states.
OTHER INCOME AND EXPENSES
Increase Percent
1995 1994 (Decrease) Change
- ----------------------------------------------------------------
Interest expense $ 468.9 $ 434.8 $ 34.1 7.8
================================================================
INTEREST EXPENSE The increase in interest expense in 1995 was attributable to an
increase of $20.5 million in interest related to long-term debt reflecting
higher long-term debt levels, as well as a net increase of $8.0 million in
short-term interest expense reflecting higher average interest rates, partially
offset by lower average short-term debt levels.
- --------------------------------------------------------------
Long-term
debt of $4,513 [+6.9% is featured in the accompanying
million has a graphic with the caption, WEIGHTED AVERAGE
weighted average INTEREST RATE ON LONG-TERM DEBT]
interest rate
of only 6.9%.
- --------------------------------------------------------------
During 1994 interest expense decreased $18.2 million or 4.0% due largely to
the calling of certain long-term debt in 1993 to take advantage of lower
interest rates. 1994 interest expense was also impacted by the interest costs
related to the funding of the company's investment of $437.5 million in the
Hungarian telecommunications company, MATAV, in December 1993 and the company's
May 1994 convertible debt investment of $472.5 million in GE Information
Services, Inc. (GEIS).
Increase Percent
1995 1994 (Decrease) Change
- ----------------------------------------------------------------
Other income, net $ 260.0 $ 146.9 $ 113.1 77.0
================================================================
OTHER INCOME, NET Other income, net includes earnings related to Ameritech's
investments (when the equity method of accounting is followed), interest income
and other nonoperating items.
Other income, net increased in 1995 primarily due to a gain of $65.8 million
($41.3 million after-tax) from the exchange of minority interests in certain
cellular partnerships, as well as higher equity earnings from investments,
principally New Zealand Telecom.
Other income, net increased $29.6 million or 25.2% in 1994 as a result of
certain nonrecurring transactions reflected in 1993, including $66.3 million in
costs incurred in connection with the early extinguishment of debt and lower
equity earnings of $42.0 million resulting from a restructuring at New Zealand
Telecom, partially offset by an $85.7 million gain ($61.7 million after-tax) on
the sale of New Zealand Telecom shares.
Increase Percent
1995 1994 (Decrease) Change
- ----------------------------------------------------------------
Income taxes $1,086.5 $ 571.0 $ 515.5 90.3
================================================================
INCOME TAXES The increase in income taxes in 1995 was directly attributable to
the increased pretax earnings and the 1994 discontinuance of FAS 71 accounting
discussed below.
The decrease in income taxes in 1994 of $138.7 million or 19.5% was due
primarily to lower pretax income as a result of work force restructuring charges
of $728.1 million.
EXTRAORDINARY ITEM - FAS 71 As described in Note 4 to the consolidated financial
statements, the company discontinued
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
(dollars in millions, except per share amounts)
applying FAS 71 in the fourth quarter of 1994. The company determined that it no
longer met the criteria for following FAS 71 due to changes in the manner in
which the company is regulated and the heightened competitive environment. The
accounting impact was an extraordinary noncash after-tax charge of $2.2 billion.
Although depreciation expense was slightly lower in 1995 due to the
discontinuation of applying FAS 71, depreciation expense in 1996 and beyond will
likely be higher as the effects of shorter lives intensifies in the landline
communications subsidiaries, coupled with continuing expansion in cellular and
other business units.
Additional financial statement impacts occurred as a result of no longer
following FAS 71. Specifically, the effective income tax rate increased in 1995
as a result of the elimination of excess deferred tax balances previously
amortized as a reduction of tax expense over the lives of the related assets.
LIQUIDITY AND CAPITAL RESOURCES Management believes that the company has
adequate internal and external resources available to finance its business
development, network expansion, dividends, acquisitions and investments.
CASH FLOWS FROM OPERATING ACTIVITIES Cash flow from operations was $3,556.6
million in 1995, an increase of $126.8 million from 1994, primarily reflecting
strong revenue gains, partially offset by increases in receivables and other
noncurrent assets. Receivables increased primarily due to revenue increases and
the effect of receivables associated with the security monitoring business
acquired in October 1995.
CASH FLOW FROM OPERATIONS (in millions of dollars)
- -------------------------------------------------------
90--------2,886
91----2,804
92----------------3,288
93------------3,189
94--------------------3,430
95------------------------3,557
=======================================================
1995 cash flow from operations increased 3.7% to $3,557
million, an all-time high.
CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures continue to represent
the single largest use of company funds. Management believes that investment in
the communications core business will facilitate introduction of new products
and services, enhance responsiveness to ever-increasing competitive challenges
and increase the operating efficiency and productivity of the network.
Capital spending is being deployed based on customer needs and the company's
business plans. Investments in technologies that will enable the company to
provide customers with new products and services represent a high priority.
Capital spending in the core landline communications business declined by $100
million in 1994 and further declined by $30 million in 1995 as capital was
deployed more cost effectively and with greater focus on the requirements of
customers and new services, such as cable TV, long distance and security
monitoring.
Rapid modernization of the landline communications network continued
throughout 1995, as demonstrated by the following year-end information.
<TABLE>
<CAPTION>
1995 1994
- ---------------------------------------------------------
<S> <C> <C>
Lines served by digital switching......... 81% 74%
Lines with potential access to ISDN....... 70% 68%
Lines served by advanced signaling (SS7).. 97% 89%
Fiber-optic strand miles (000s)........... 1,096 919
=========================================================
</TABLE>
Investing activities in 1995 included additional investments of $895.1
million represented by cash to acquire additional MATAV shares ($405.3 million),
newly issued licenses, principally for PCS ($160.9 million) and all other
investments ($328.9 million), including The National Guardian Corporation.
Proceeds of $60.7 million were received in connection with the exchange of
certain cellular minority interests.
Cash flows from investing activities in 1994 included a $472.5 million
investment in GEIS and a return of capital from New Zealand Telecom of $67.1
million.
CASH FLOWS FROM FINANCING AND OTHER ACTIVITIES In April 1995, the company,
through Ameritech Capital Funding Corporation (ACF), issued $192.2 million of
long-term debentures due April 1, 2005. The debentures are noncallable and have
a coupon rate of 7.5%. The proceeds from the issuance were used to reduce short-
term debt.
In early 1994, Illinois Bell Telephone Company issued $200 million of long-
term debt to take advantage of lower interest rates. The 1994 GEIS investment
was funded principally by issuing $450 million of new debt by ACF.
The company's debt ratio decreased to 48.7% as of December 31, 1995, compared
with 51.2% as of December 31, 1994, primarily as a result of increased
reinvested earnings.
DIVIDENDS The company paid dividends of $1.11 billion in 1995. This was an
increase of $53.6 million or 5.1% over 1994. The dividend policy is consistent
with the need to balance returns to shareowners and still provide the necessary
capital to invest in a competitive environment.
FINANCING OPTIONS As of December 31, 1995, the company maintained available
lines of credit totaling $1.2 billion, a committed credit facility of $1.0
billion and shelf registrations for issuance of up to $2.2 billion in unsecured
debt securities.
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
(dollars in millions, except per share amounts)
INVESTMENT COMMITMENTS The company is committed to invest 25.6 billion Belgian
francs (about $875 million) in a consortium that will purchase 49.9% of Belgacom
S.A., the principal telecommunications company in Belgium. Closing of this
transaction is anticipated to be completed by June 30, 1996. The company intends
to fund its commitment with cash and debt and is purchasing forward contracts to
acquire Belgian francs in order to manage its foreign currency risk. At December
31, 1995, about 35% of the commitment had been purchased with forward contracts.
Ameritech participates in the Americast joint venture, as previously
discussed. The investment will be funded by the partners with $500 million over
a five-year period. Video services will ultimately include movies-on-demand,
interactive home shopping, educational programs, games and more. The company has
not invested significant funds in Americast as of December 31, 1995.
HEDGING Ameritech on occasion will use hedging transactions to manage the
foreign currency risk resulting from the cash flows of the company's
international investments or its investment commitments. There were no material
hedging transactions in 1995 or 1994, other than purchasing forward contracts
for Belgian francs in late 1995 as discussed above, as well as forwards
purchased with respect to the August and December 1995 New Zealand Telecom
dividends. In 1993, the company purchased currency forward contracts on the New
Zealand currency in order to eliminate currency risk on anticipated proceeds
from the required sell-down of shares of New Zealand Telecom.
- --------------------------------------------------------------
[6.0% is featured in the accompanying Ameritech declared a
graphic with the caption, DIVIDENDS] 6.0% dividend increase
in December 1995, the
largest increase since
1991.
- --------------------------------------------------------------
STOCK REPURCHASE PROGRAM The company's Board of Directors has periodically
authorized management to repurchase shares of Ameritech common stock in the open
market or through private transactions. During 1995, pursuant to this
authorization, the company repurchased, in the open market, 3 million shares of
common stock aggregating $154.8 million. No shares were repurchased in 1994 or
1993. Management has the authority to repurchase 17 million additional shares
through December 1997.
NEW ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board issued
FAS 123, "Accounting for Stock-Based Compensation," in October 1995. The new
accounting standard will require the company to value all stock-based
compensation based on the estimated fair market value at the grant date and
spread the deemed cost over the vesting period. The standard permits a choice of
whether to charge operations or disclose the calculated cost as pro forma
information. The new standard requires disclosure, beginning in 1996, of the
deemed cost effective with 1995 grants. The company has not yet quantified its
cost or determined its method of compliance with the new standard.
Effective January 1, 1995, the company adopted FAS 116, "Accounting for
Contributions Received and Contributions Made." The effect of implementing FAS
116 was insignificant. Ameritech has established and funded a charitable
foundation through which charitable contributions are made.
Effective January 1, 1994, the company adopted FAS 115, "Accounting for
Certain Investments in Debt and Equity Securities." At December 31, 1995 and
1994, the company had recorded its debt and equity investments classified as
"available for sale" at fair value under the provisions of FAS 115 and recorded
an unrealized holding gain as a separate component of shareowners' equity. The
effect of implementing FAS 115 was not material.
OTHER MATTERS
COMPETITION The communications industry is undergoing significant changes. Local
exchange carriers and long distance service companies, cable TV companies,
cellular service providers, computer companies and the entertainment and
information services industries are converging, forming alliances and
positioning to provide a variety of services. Market convergence, already a
reality, intensified in 1995. Regulatory, legislative and judicial decisions,
and technological advances, as well as heightened customer interest in advanced
communications, have expanded the types of available communications services and
products, as well as the number of companies offering such services.
The primary competitors in Ameritech's core business (local landline
telephone service, wireless service and directories) historically have been
other access providers, other wireless service providers and other advertising
media. AT&T Corp., MCI Communications Corp. and other long distance providers
are ready to offer local phone service in various parts of Ameritech's five-
state region. Companies, such as AT&T Corp., with its acquisition of McCaw
Cellular, have allied to form expanded cellular markets, creating the
possibility of a wireless network with nationwide presence and brand-name
recognition. Tele-Communications, Inc., Comcast Corp. and Cox Cable
Communications are part of a cable company joint venture with Sprint that plans
to offer alternative wireless and landline local service. Competitors of the
directory publishing business are advertisers using traditional advertising
media, such as television, radio, direct mail, billboards, interactive on-line
services, and magazine and newspaper advertising. Today, many of the companies
planning to provide local telephone service also have directory operations.
Increased competition in the local exchange service
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
(dollars in millions, except per share amounts)
business, as well as the technological innovations rapidly spawned by that
business, will further intensify competition in the directory business.
As the company expands and diversifies into other areas, including video,
home security, home shopping, the Internet, CD-ROM technology, on-line services,
phone cards and global long distance service, the number and variety of
competitors will grow dramatically. Much of the competition is from companies
with substantial capital, technological and marketing resources, many of which
do not face the same regulatory constraints as Ameritech. In pursuit of business
opportunities outside of the U.S., Ameritech faces competition from other
regional holding companies (RHCs), long distance service providers and a variety
of foreign entities. Notwithstanding the potential for an adverse effect on many
revenue streams of the company, Ameritech expects to capture a major share of
the expected growth in the communications marketplace. Building on its
strengths, the company plans to branch into new services that are logical
extensions of its core business, exporting its expertise to customers around the
world.
As the communications industry expands and converges, Ameritech is positioned
to compete aggressively in new and existing markets, all of which are expanding
at rates far in excess of historical levels.
Regulatory reform continues to be one of the most significant issues facing
the communications industry today. The company believes that relief from
excessive regulation will benefit customers and ultimately shareowners by
enabling the company to compete effectively and meet customers' expanding needs.
Aggressively promoting its Customers First plan to open its network to
competitors, the company is preparing to enter the interLATA long distance
market. Ameritech is seeking relief before regulatory agencies from the
restraints, laws and regulations that impose restrictions on its current
business and curtail its future business offerings.
The company's competitive strategy includes positioning itself to take
advantage of future opportunities by streamlining its processes, reducing staff
and cutting costs to continue to be the most efficient of the RHCs.
On the national level, the Telecommunications Act of 1996 was signed into law
by the President on February 8, 1996. This legislation defines the conditions
under which Ameritech will be permitted to offer interLATA long distance service
and provides certain mechanisms intended to facilitate local exchange
competition. This legislation, in addition to allowing Ameritech to offer
interLATA long distance services, will allow competitors into the company's
traditional local exchange markets. Management believes the legislation gives
the company an opportunity to expand its revenue base by providing long distance
services, while retaining lower-margin access revenues as other local service
providers, acting as resellers, continue to use Ameritech's network facilities.
Ameritech has negotiated local network resale agreements with MFS Intelenet
and U.S. Network Corp. These companies plan to begin providing local exchange
service in Chicago in 1996. Negotiations with AT&T Corp. and other companies for
similar local resale agreements continue.
In FCC auctions held earlier in 1995, the company was the successful bidder
for two broadband PCS licenses in Cleveland and Indianapolis. These licenses
cover an area of almost 8 million potential customers and will provide an
effective complement to the company's existing cellular and landline networks.
Ameritech plans to offer PCS service to customers in these markets in 1997. In
1994, the company won the narrowband PCS license to provide two-way paging in
the Midwest. These licenses will provide new revenue opportunities for the
company. However, new competitors will be entering wireless markets currently
served by Ameritech on a duopoly basis.
In the face of regulatory uncertainty over the video dialtone rules,
Ameritech became the first RHC to enter the video business as a cable TV
provider. A separate subsidiary was created to build stand-alone cable systems
and purchase and develop programming content. This subsidiary will compete
directly with current cable television enterprises. Initially, the company plans
to offer 80 to 90 channels. In the future, services will be expanded to include
home shopping, games and interactive services.
YEAR-END STOCK PRICE (in dollars, adjusted for stock splits)
- -------------------------------------------------------------
85----17.75
86------------22.00
87--------21.13
88----------------23.88
89----------------------------34.00
90------------------------33.38
91--------------------31.75
92--------------------------------35.63
93------------------------------------38.38
94----------------------------------------40.38
95--------------------------------------------58.88
=============================================================
Ameritech's stock price rose 45.8% in 1995 to $58.88.
BUSINESS UNITS Although the company continues to operate solely in the
communications industry, it has restructured its business into separate units.
Each company customer is assigned to a business unit based on the type of
revenue generated. Revenues by business unit are as follows:
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------
<S> <C> <C>
Consumer..................... 32% 33%
Custom, enhanced and small
business.................... 27 28
Long distance*............... 14 16
Advertising.................. 8 8
Cellular, including paging... 8 7
All other.................... 11 8
Total..................... 100% 100%
==========================================
</TABLE>
*Long distance relates closely to the revenue intrastate network access,
excluding end-user categories of interstate and charges.
31
<PAGE>
Report of Management
Shareowners
Ameritech Corporation
The consolidated financial statements were prepared in accordance with generally
accepted accounting principles that required the use of estimates and judgment.
Management prepared these statements and other information in the annual report
and is responsible for their integrity and objectivity.
The company's consolidated financial statements have been audited by Arthur
Andersen LLP. Management has made available to Arthur Andersen LLP all the
company's financial records and related data, as well as the minutes of meetings
of shareowners and directors. Management believes that all representations made
to Arthur Andersen LLP were valid and appropriate.
Management maintains a system of internal control over the preparation of its
published financial statements, which provides reasonable assurance as to the
integrity and reliability of the consolidated financial statements, the
protection of assets from unauthorized use or disposition, and the prevention
and detection of fraudulent financial reporting. The internal control system
provides appropriate division of responsibility and written policies and
procedures are communicated to employees and updated as necessary. Management is
responsible for proactively fostering a strong ethical climate so that the
company's affairs are conducted according to the highest standards of personal
and corporate conduct.
The company maintains a strong internal auditing program to assess the
effectiveness of internal controls and recommend possible improvements. As part
of their audit of the consolidated financial statements, Arthur Andersen LLP
considered the internal control system to determine the nature, timing and
extent of necessary audit tests. Management has considered the recommendations
of its internal auditors and Arthur Andersen LLP concerning the company's system
of internal control, and has responded appropriately.
Management assessed the company's internal control system in relation to
criteria for effective internal control. These criteria consist of five
interrelated components, which are: control environment, risk assessment,
control activities, information and communication, and monitoring. Based on its
assessment, management believes that, as of December 31, 1995, its system of
internal control has met these criteria.
The Board of Directors, through its audit committee which is composed solely
of outside directors, serves in an oversight capacity to assure the integrity
and objectivity of the company's financial reporting process. The roles of the
committee include monitoring the company's accounting and financial controls and
assuring the independence of Arthur Andersen LLP. Both the internal auditors and
the independent public accountants have complete access to the committee and
periodically meet with the committee, with and without management present.
Sincerely,
/s/ Richard C. Notebaert /s/ Betty F. Elliott
Richard C. Notebaert Betty F. Elliott
Chairman and Chief Executive Officer Vice President and Comptroller
January 17, 1996
32
<PAGE>
Report of Independent Public Accountants
Board of Directors
Ameritech Corporation
We have audited the accompanying consolidated balance sheets of Ameritech
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of income, shareowners' equity
and cash flows for each of the three years in the period ended December 31,
1995. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Ameritech
Corporation and subsidiaries as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note 4 to the consolidated financial statements, the company
discontinued applying the provisions of Statement of Financial Accounting
Standards No. 71, "Accounting for the Effects of Certain Types of Regulation,"
in 1994.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Chicago, Illinois
January 17, 1996
33
<PAGE>
<TABLE>
<CAPTION>
Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF INCOME
Ameritech Corporation and Subsidiaries
Year ended December 31
-------------------------------------
(dollars in millions, except per share amounts) 1995 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues............................................ $13,427.8 $12,569.5 $11,864.7
=====================================
Operating expenses
Employee-related expenses......................... 3,623.3 3,612.3 3,560.3
Depreciation and amortization..................... 2,177.1 2,204.7 2,162.1
Other operating expenses.......................... 3,911.1 3,418.2 3,006.0
Restructuring (credits) charges................... (134.5) 728.1 --
Taxes other than income taxes..................... 547.8 576.9 578.1
-------------------------------------
10,124.8 10,540.2 9,306.5
-------------------------------------
Operating income.................................... 3,303.0 2,029.3 2,558.2
Interest expense.................................... 468.9 434.8 453.0
Other income, net................................... 260.0 146.9 117.3
-------------------------------------
Income before income taxes and extraordinary item... 3,094.1 1,741.4 2,222.5
Income taxes........................................ 1,086.5 571.0 709.7
-------------------------------------
Income before extraordinary item.................... 2,007.6 1,170.4 1,512.8
Extraordinary item.................................. -- (2,234.0) --
-------------------------------------
Net income (loss)................................... $ 2,007.6 $(1,063.6) $ 1,512.8
=====================================
Earnings (loss) per common share
Income before extraordinary item.................. $ 3.63 $ 2.13 $ 2.78
Extraordinary item................................ -- (4.07) --
-------------------------------------
Net income (loss)................................. $ 3.63 $ (1.94) $ 2.78
=====================================
Average common shares outstanding (millions)........ 553.6 549.2 544.1
============================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
Consolidated Financial Statements
CONSOLIDATED BALANCE SHEETS
Ameritech Corporation and Subsidiaries
<TABLE>
<CAPTION>
As of December 31
-----------------------
(dollars in millions) 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and temporary cash investments................................................ $ 131.3 $ 73.7
Receivables, less allowance for uncollectibles of $166.2 and $147.3, respectively.. 2,774.3 2,300.0
Material and supplies.............................................................. 204.9 203.7
Prepaid and other.................................................................. 341.9 313.2
-----------------------
3,452.4 2,890.6
-----------------------
Property, plant and equipment
In service......................................................................... 30,477.6 29,200.4
Under construction................................................................. 396.1 345.3
-----------------------
30,873.7 29,545.7
Less, accumulated depreciation..................................................... 17,416.9 16,091.2
-----------------------
13,456.8 13,454.5
-----------------------
Investments, primarily international................................................. 1,497.0 1,197.0
-----------------------
Other assets and deferred charges.................................................... 3,536.4 2,404.7
-----------------------
Total assets......................................................................... $21,942.6 $19,946.8
=======================
Liabilities and Shareowners' Equity
Current liabilities
Debt maturing within one year...................................................... $ 2,137.9 $ 1,898.3
Accounts payable................................................................... 1,792.3 1,546.3
Other.............................................................................. 1,831.7 1,711.5
-----------------------
5,761.9 5,156.1
-----------------------
Long-term debt....................................................................... 4,513.2 4,447.9
-----------------------
Deferred credits and other long-term liabilities
Accumulated deferred income taxes.................................................. 782.4 611.0
Unamortized investment tax credits................................................. 207.9 255.8
Postretirement benefits other than pensions........................................ 2,966.9 2,915.0
Other.............................................................................. 695.8 505.9
-----------------------
4,653.0 4,287.7
-----------------------
Shareowners' equity
Common stock, par value $1; 1.2 billion shares authorized, 587,612,000 issued...... 587.6 587.6
Proceeds in excess of par value.................................................... 5,613.9 5,520.9
Reinvested earnings................................................................ 2,208.8 1,325.3
Treasury stock, at cost (33,773,000 shares in 1995 and 36,150,000 in 1994)......... (986.6) (977.0)
Deferred compensation.............................................................. (329.2) (396.0)
Currency translation adjustments................................................... (85.4) (15.9)
Other, net......................................................................... 5.4 10.2
-----------------------
7,014.5 6,055.1
-----------------------
Total liabilities and shareowners' equity............................................ $21,942.6 $19,946.8
================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
<TABLE>
<CAPTION>
Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY
Ameritech Corporation and Subsidiaries
Shareowners' Equity
--------------------------------------------------------------------------------
Proceeds Common Treasury
in excess Currency Shares Common
Common of Reinvested Treasury Deferred Translation Other, Issued Shares
(dollars in millions) Total Stock Par Value Earnings Stock Compensation Adjustments net (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1992... $ 6,992.2 $587.6 $5,378.0 $ 2,955.7 $(1,272.8) $(507.7) $(137.8) $(10.8) 587,612 47,268
Net income.................... 1,512.8 1,512.8
Dividends declared
($1.86 per share)........... (1,013.2) (1,013.2)
Treasury stock activity
Purchases................... (1.9) (1.9) 53
Issuances
Employee benefit plans.... 109.5 23.9 85.6 (3,230)
Dividend reinvestment and
stock purchase plan..... 122.2 38.2 84.0 (3,118)
Other..................... 0.1 0.1 (4)
Reduction of LESOP debt....... 39.2 39.2
Other......................... 22.2 14.7 7.5
Translation adjustments....... 61.5 61.5
---------------------------------------------------------------------------------------------------
Balances, December 31, 1993... 7,844.6 587.6 5,454.8 3,455.3 (1,105.0) (468.5) (76.3) (3.3) 587,612 40,969
Net loss...................... (1,063.6) (1,063.6)
Dividends declared
($1.94 per share)........... (1,066.4) (1,066.4)
Treasury stock activity
Purchases................... (3.6) (3.6) 88
Issuances
Employee benefit plans.... 36.0 5.0 31.0 (1,179)
Dividend reinvestment and
stock purchase plan..... 149.9 49.6 100.3 (3,715)
Other..................... (0.7) (1.0) 0.3 (13)
Reduction of LESOP debt....... 72.5 72.5
Other......................... 26.0 12.5 13.5
Translation adjustments....... 60.4 60.4
---------------------------------------------------------------------------------------------------
Balances, December 31, 1994... 6,055.1 587.6 5,520.9 1,325.3 (977.0) (396.0) (15.9) 10.2 587,612 36,150
Net income.................... 2,007.6 2,007.6
Dividends declared
($2.03 per share)........... (1,124.1) (1,124.1)
Treasury stock activity
Purchases................... (161.9) (161.9) 3,196
Issuances
Employee benefit plans.... 81.6 12.9 68.7 (2,530)
Dividend reinvestment and
stock purchase plan..... 144.7 61.1 83.6 (3,043)
Reduction of LESOP debt....... 66.8 66.8
Other......................... 14.2 19.0 (4.8)
Translation adjustments....... (69.5) (69.5)
---------------------------------------------------------------------------------------------------
Balances, December 31, 1995... $ 7,014.5 $587.6 $5,613.9 $ 2,208.8 $ (986.6) $(329.2) $ (85.4) $ 5.4 587,612 33,773
==================================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
<TABLE>
<CAPTION>
Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
Ameritech Corporation and Subsidiaries
Year ended December 31
---------------------------------
(dollars in millions) 1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).............................................. $ 2,007.6 $(1,063.6) $ 1,512.8
Adjustments to net income (loss)
Extraordinary item............................................ -- 2,234.0 --
Restructuring (credits) charges, net of tax................... (78.7) 455.8 --
Depreciation and amortization................................. 2,177.1 2,204.7 2,162.1
Deferred income taxes, net.................................... 149.0 69.6 (9.6)
Investment tax credits, net................................... (47.9) (52.2) (74.4)
Capitalized interest.......................................... (19.7) (13.3) (11.3)
Provision for uncollectibles.................................. 209.5 183.1 154.3
Change in accounts receivable................................. (683.8) (407.4) (227.8)
Change in material and supplies............................... (14.8) (76.3) 17.3
Change in other current assets................................ (7.8) (30.2) (25.0)
Change in accounts payable.................................... 246.0 331.8 (114.5)
Change in certain other current liabilities................... (118.6) (159.4) 139.3
Change in certain noncurrent assets and liabilities........... (154.3) (276.8) (333.1)
Gain on exchange of cellular minority interests............... (65.8) -- --
Gain from sale of shares in Telecom
Corporation of New Zealand Limited........................... -- -- (85.7)
Other......................................................... (41.2) 30.0 84.2
---------------------------------
NET CASH FROM OPERATING ACTIVITIES.............................. 3,556.6 3,429.8 3,188.6
---------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures, net...................................... (2,120.1) (1,876.6) (2,092.4)
Additional investments including acquisition of new companies.. (895.1) (589.6) (471.2)
Net proceeds from exchange of cellular minority interests...... 60.7 -- --
Proceeds from sale of shares in
Telecom Corporation of New Zealand Limited.................... -- -- 280.6
Other investing activities, net................................ 72.5 74.0 3.2
---------------------------------
NET CASH FROM INVESTING ACTIVITIES.............................. (2,882.0) (2,392.2) (2,279.8)
---------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in short-term debt.................................. 217.2 (416.2) 493.4
Issuance of long-term debt..................................... 194.5 645.3 925.1
Retirement of long-term debt................................... (84.1) (568.7) (1,458.4)
Dividend payments.............................................. (1,106.7) (1,053.1) (999.4)
Repurchase of common stock..................................... (161.9) (3.6) (0.4)
Proceeds from reissuance of treasury stock..................... 226.3 187.7 226.4
Issuance of preferred stock in subsidiary...................... 60.0 85.0 --
Other financing activities, net................................ 37.7 3.8 (32.0)
---------------------------------
NET CASH FROM FINANCING ACTIVITIES.............................. (617.0) (1,119.8) (845.3)
---------------------------------
Net increase (decrease) in cash and temporary cash investments.. 57.6 (82.2) 63.5
Cash and temporary cash investments, beginning of year.......... 73.7 155.9 92.4
---------------------------------
Cash and temporary cash investments, end of year................ $ 131.3 $ 73.7 $ 155.9
==================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
Notes to Consolidated Financial Statements
(dollars in millions, except per share amounts)
1. SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS Ameritech Corporation (Ameritech or the company), one of
the world's largest communications companies, provides a wide array of local
phone, data and other services to over 13 million customers (primarily in
Illinois, Indiana, Michigan, Ohio and Wisconsin). The company also owns
interests in telecommunications companies in Europe and the Pacific Rim.
Ameritech serves almost 1.9 million cellular and 745,000 paging customers,
and has cellular interests in China, Norway and Poland. Ameritech also owns
interests in telecommunications companies in New Zealand and Hungary and in
business directories in Germany and other countries.
See discussion of competition in Other Matters in Management's Discussion and
Analysis of Financial Condition and Results of Operations on pages 30 and 31.
CONSOLIDATION The consolidated financial statements include the accounts of
Ameritech and all of its majority-owned subsidiaries. All significant
intercompany transactions have been eliminated.
BASIS OF ACCOUNTING The consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP). In 1994,
Ameritech discontinued accounting for its landline communications subsidiaries
under Statement of Financial Accounting Standards No. 71 (FAS 71), "Accounting
for the Effects of Certain Types of Regulation" (see Note 4). The Ameritech
landline communications subsidiaries are Illinois Bell Telephone Company;
Indiana Bell Telephone Company, Incorporated; Michigan Bell Telephone Company;
The Ohio Bell Telephone Company; and Wisconsin Bell, Inc.
USE OF ESTIMATES The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
MATERIAL AND SUPPLIES Inventories of new and reusable material and supplies are
stated at the lower of cost or market, with cost generally determined on an
average-cost basis.
INCOME TAXES Ameritech and its subsidiaries file a consolidated federal income
tax return. In 1993, the company adopted FAS 109, "Accounting for Income Taxes."
The new accounting method is essentially a refinement of the liability method
previously followed by the company and, accordingly, did not have a significant
impact on the company's financial statements upon adoption.
Deferred tax assets and liabilities are determined at the end of each period,
based on differences between the financial statement bases of assets and
liabilities and the tax bases of those same assets and liabilities, using the
currently enacted statutory tax rates. Deferred income tax expense is measured
by the change in the net deferred income tax asset or liability during the year.
The company also provides deferred income taxes on undistributed equity earnings
from foreign investments where it does not control the dividend flow back to the
United States.
At December 31, 1995 the company had recorded deferred tax assets of $81.9
million, reflecting the benefit of certain tax attributes such as acquired net
operating loss carryforwards and excess foreign tax credits. These tax
attributes expire between 1996 and 2005. Realization of these benefits is
dependent upon certain types of income being generated. Due to the uncertainty
of realization of a portion of these assets, management has established a
valuation allowance of $65.2 million.
The Ameritech landline communications subsidiaries use the deferral method of
accounting for investment tax credits whereby credits realized are being
amortized as reductions in tax expense over the life of the asset that gave rise
to the credits.
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated
principally at original cost. The provision for depreciation is based
principally on straight-line remaining life and straight-line equal life group
methods of depreciation applied to individual categories of plant with similar
characteristics. As a result of discontinuing the application of FAS 71 in 1994,
the company recognized shorter, more economically realistic lives and increased
its accumulated depreciation balance by $3.7 billion (see Note 4).
The following is a summary of average lives (in years) before and after the
discontinuation of FAS 71.
Asset Category Before After
- ------------------------------------------------------------------
Central office equipment
Digital switching......................... 17 7
Analog switching.......................... up to 4 obsolete
Circuit accounts.......................... 8-12 7
Copper and fiber cable and wire facilities. 20-32 15
All other.................................. various various
==================================================================
Generally, when depreciable plant is retired, the amount at which such plant has
been carried in property, plant and equipment is charged to accumulated
depreciation. The cost of maintenance and repair of plant is charged to expense.
Property, plant and equipment is used predominantly in Illinois, Indiana,
Michigan, Ohio and Wisconsin.
TEMPORARY CASH INVESTMENTS Temporary cash investments are stated at cost, which
approximates market. All highly
38
<PAGE>
Notes to Consolidated Financial Statements
(dollars in millions, except per share amounts)
liquid, short-term investments with an original maturity of three months or less
are considered to be cash equivalents.
ADVERTISING COSTS Advertising costs are charged to operations as incurred.
REVENUE RECOGNITION The company recognizes revenue as earned. The company
primarily accounts for its directory advertising revenues as billed over the
term of the related directory (usually one year) and amortizes production costs,
which are deferred when incurred, to match the related revenues.
INTANGIBLES Intangibles, including goodwill, arising from the acquisition of
companies are amortized over the anticipated period of benefit, not to exceed 40
years.
TRANSLATION ADJUSTMENTS The assets and liabilities relating to the company's
share of significant foreign operations are translated to U.S. dollars at year-
end exchange rates. Revenues and expenses are translated to U.S. dollars using
average rates for the year. Translation adjustments are accumulated and recorded
as a separate component of shareowners' equity.
RECLASSIFICATIONS In 1994, the company made certain reclassifications, which
were applied retroactively to its financial statements to correspond to
financial reporting for unregulated enterprises.
- -------------------------------------------------------------
[+51.9% is featured in the 1995 total
accompanying graphic with return to Ameritech
the caption, TOTAL RETURN] shareowners, including
price appreciation
plus reinvested dividends,
was 51.9%.
- --------------------------------------------------------------
2. INVESTMENTS
TELECOM CORPORATION OF NEW ZEALAND LIMITED In September 1990, Ameritech and Bell
Atlantic Corporation purchased all of the shares of Telecom Corporation of New
Zealand Limited (New Zealand Telecom), the state-owned telephone company in New
Zealand. The company's share of the purchase price was about $1.2 billion.
After stock sales required by the New Zealand government in the purchase
agreement, which were completed in September 1993, the company's share of
ownership is 24.8%. Such sales resulted in gains with cash proceeds to the
company of $676.1 million.
The investment in New Zealand Telecom is accounted for under the equity
method. Goodwill of approximately $290 million associated with this investment
is being amortized on a straight-line basis over a period of 40 years.
The company owned 469,060,000 shares of New Zealand Telecom at December 31,
1995. Shares of New Zealand Telecom are publicly traded. Based on the year-end
1995 closing price of individual New Zealand Telecom shares, the aggregate value
of the company's shares was about US $2.0 billion. However, New Zealand Telecom
shares are thinly traded with approximately 50% of the company owned by
Ameritech and Bell Atlantic Corporation.
During the first quarter of 1994 the company received a cash distribution
totaling $67.1 million from New Zealand Telecom as a result of a capital
restructuring.
MATAV INVESTMENTS In December 1993, a holding company (MagyarCom), owned equally
by Ameritech and Deutsche Telekom AG, purchased a 30% share in the Hungarian
telecommunications company, MATAV. Ameritech's purchase price for its 15% share
of MATAV was $437.5 million. A significant portion of the purchase price was for
a capital infusion into MATAV and receipt of a concession license from the
Hungarian government. On December 22, 1995, Ameritech, through MagyarCom,
purchased an additional 18.5% share of MATAV from the Hungarian government for
$405.3 million. Ameritech accounts for its effective 33.5% share of MATAV using
the equity method. Goodwill from these transactions approximates $410 million
and is being amortized over 40 years.
SUMMARY OF NONCONSOLIDATED INVESTMENTS A summary of the company's investments,
which have not been consolidated, follows:
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------
<S> <C> <C>
New Zealand Telecom................ $ 643.6 $ 629.5
MATAV.............................. 722.8 409.4
Other international investments.... 20.3 31.3
-------- --------
Total international investments... 1,386.7 1,070.2
Domestic investments............... 110.3 126.8
-------- --------
Total investments................. $1,497.0 $1,197.0
========================================================
</TABLE>
The following unaudited summary presents Ameritech's proportional (pro rata)
interest in the summarized financial information of investments accounted for
under the equity method:
<TABLE>
<CAPTION>
Year Ended December 31, 1995 1994 1993
- --------------------------------------------------------
<S> <C> <C> <C>
Revenues.................. $ 745.7 $ 592.6 $371.9
Costs and expenses........ 641.3 502.9 348.1
-------- -------- ------
Net income................ $ 104.4 $ 89.7 $ 23.8
-------- -------- ------
As of December 31, 1995 1994
- -----------------------------------------------
Assets*.................. $2,414.9 $1,743.1
Liabilities.............. 1,026.5 669.9
-------- --------
Net equity............... $1,388.4 $1,073.2
========================================================
</TABLE>
*Includes goodwill associated with Ameritech's investments.
39
<PAGE>
Notes to Consolidated Financial Statements
(dollars in millions, except per share amounts)
OTHER INVESTMENTS In October 1995 and December 1994, the company purchased two
security monitoring businesses. These businesses have been consolidated in the
accompanying financial statements from the date of acquisition using the
purchase method of accounting. The combined historical annual revenues of the
acquired security monitoring businesses are about $250 million. The company
offers its security monitoring services through subsidiaries doing business as
SecurityLink(SM) from Ameritech. These wholly owned subsidiaries design,
install, monitor and maintain security systems for approximately 340,000
customers throughout the United States and Canada.
OTHER TRANSACTIONS In 1995, the company purchased in the Federal Communications
Commission's auction, for $158.1 million, broadband personal communications
services (PCS) licenses in the Indianapolis and Cleveland markets. This is in
addition to the narrowband licenses obtained in 1994 to offer two-way paging in
the Midwest. These licenses will complement the company's wireless strategy and
have been classified as other assets and deferred charges in the accompanying
consolidated balance sheets. Amortization of these licenses has not yet begun as
the related operations have not yet commenced.
In May 1994, Ameritech invested $472.5 million in a newly formed subsidiary
of General Electric Company (GE). The new subsidiary (GEIS) provides electronic
data interchange and electronic commerce. Ameritech's investment is in the form
of a four-year interest bearing convertible debenture, which, if legal
restrictions are removed, converts into a 30% equity interest in GEIS. The
debenture has been guaranteed as to repayment by GE. Ameritech may extend the
term of the debenture by one year under certain circumstances. The debenture has
been classified as other assets and deferred charges in the accompanying
consolidated balance sheets.
See also Note 15 for a discussion of the company's pending investment in
Belgacom S.A.
3. INCOME TAXES
The components of income tax expense follow:
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal
Current.................................. $ 821.2 $ 733.4 $713.7
Deferred, net............................ 181.0 (196.3) (24.4)
Investment tax credits, net.............. (47.9) (52.2) (74.4)
----------------------------
Total.................................... 954.3 484.9 614.9
----------------------------
State, local and foreign
Current.................................. 108.4 92.6 80.0
Deferred, net............................ 23.8 (6.5) 14.8
----------------------------
Total.................................... 132.2 86.1 94.8
----------------------------
Total income tax expense.................. $1,086.5 $ 571.0 $709.7
=============================================================================
</TABLE>
Total income taxes paid were $890.4 million, $903.6 million and $774.4 million
in 1995, 1994 and 1993, respectively.
The following is a reconciliation between the statutory federal income tax
rate for each of the past three years and the company's effective tax rate:
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------
<S> <C> <C> <C>
Statutory tax rate................. 35.0% 35.0% 35.0%
State income taxes,
net of federal benefit............ 2.8 3.2 2.8
Reduction in tax expense
due to amortization of
investment tax credits........... (1.0) (2.8) (3.3)
Effect of adjusting deferred
income tax balances due
to tax law changes................ -- -- (1.1)
Benefit of tax rate differential
under FAS 71 applied
to reversing temporary
differences....................... -- (3.0) (2.2)
Other.............................. (1.7) 0.4 0.7
------------------
Effective tax rate................. 35.1% 32.8% 31.9%
======================================================
</TABLE>
The statutory federal income tax rate was increased to 35% in 1993. Deferred
income tax balances were adjusted to reflect the enacted tax rate.
Income tax expense in 1995 was reduced by $15.9 million as a result of a
portion of the beginning of year valuation allowances no longer being required.
As of December 31, 1995 and 1994, the components of long-term accumulated
deferred income taxes were as follows:
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------
<S> <C> <C>
Deferred tax assets
Postretirement and
postemployment benefits..... $1,171.8 $1,148.6
Other........................ 240.7 141.2
-------------------
1,412.5 1,289.8
-------------------
Deferred tax liabilities
Accelerated depreciation..... 1,540.4 1,488.2
Prepaid pension cost......... 368.4 170.7
Other........................ 286.1 241.9
-------------------
2,194.9 1,900.8
-------------------
Net deferred tax liability.... $ 782.4 $ 611.0
==================================================
</TABLE>
Deferred income taxes in current assets and liabilities are not shown as they
are not significant. The company has valuation allowances against certain
deferred tax assets aggregating $65.2 million and $65.0 million at December 31,
1995 and 1994, respectively.
40
<PAGE>
Notes to Consolidated Financial Statements
(dollars in millions, except per share amounts)
4. DISCONTINUATION OF REGULATORY ACCOUNTING - FAS 71
In the fourth quarter of 1994, having achieved price regulation in all five
states in which it operates and recognizing increased competition, the company
concluded that GAAP prescribed by FAS 71 was no longer appropriate.
As a result of discontinuing the application of FAS 71, the company recorded
an extraordinary noncash after-tax charge of $2.2 billion in 1994. The following
table is a summary of the extraordinary charge.
<TABLE>
<CAPTION>
Pretax After-tax
- ----------------------------------------------------------------
<S> <C> <C>
Increase to the accumulated
depreciation balance...................... $3,658.5 $2,288.5
Elimination of other net
regulatory assets......................... 126.2 77.9
Tax-related net regulatory liabilities..... -- (86.1)
Accelerated amortization of tax credits.... -- (46.3)
-------------------
$3,784.7 $2,234.0
===============================================================
</TABLE>
The adjustment of $3.7 billion to net communications plant was necessary
because estimated useful lives and depreciation methods historically prescribed
by regulators did not keep pace with rapid technological changes and differed
significantly from those used by unregulated enterprises. Plant balances were
adjusted by increasing the accumulated depreciation balance. The necessary
adjustment was determined by a discounted cash flow analysis which considered
technological changes, capital requirements and estimated impacts of future
competition. To corroborate this study, a depreciation reserve study was also
performed that identified inadequate accumulated depreciation levels by
individual asset categories. The company believes these levels developed over
the years as a result of the systematic underdepreciation of assets resulting
from the regulatory process.
When adjusting its net communications plant, the company gave effect to
shorter, more economically realistic lives, as previously outlined in Note 1.
The discontinuance of FAS 71 also required the company to eliminate from its
consolidated balance sheet the effects of any actions of regulators that had
been recognized as assets and liabilities pursuant to FAS 71, but would not have
been recognized as assets and liabilities by enterprises in general.
The elimination of other net regulatory assets primarily related to certain
deferred vacation pay, debt financing costs, and certain deferred assets.
Additionally, at the time the company discontinued the application of FAS 71,
the income tax-related regulatory assets and liabilities were eliminated and
deferred tax balances adjusted to reflect application of FAS 109 consistent with
other unregulated enterprises. As asset lives were shortened, the related
unamortized investment tax credits deemed already earned were credited to
income.
The effects on the company's consolidated financial statements going forward
without FAS 71 are discussed on pages 28 and 29.
5. PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------
<S> <C> <C>
Land............................. $ 139.6 $ 140.0
Buildings........................ 2,991.6 2,993.1
Central office equipment......... 12,108.3 11,490.5
Cable, wiring and conduit........ 12,371.6 11,954.8
Other............................ 2,866.5 2,622.0
---------------------
30,477.6 29,200.4
Under construction............... 396.1 345.3
---------------------
30,873.7 29,545.7
Less, accumulated depreciation... 17,416.9 16,091.2
---------------------
$13,456.8 $13,454.5
========================================================
</TABLE>
Depreciation expense on property, plant and equipment was $2,089.5 million,
$2,104.2 million and $2,073.8 million in 1995, 1994 and 1993, respectively.
- --------------------------------------------------
Ameritech's [$3.63 is featured in the
reported earnings accompanying graphic with
per share rose to the caption, EARNINGS PER
$3.63 in 1995. SHARE]
- --------------------------------------------------
6. EMPLOYEE BENEFIT PLANS
PENSION PLANS The company maintains noncontributory defined benefit pension
plans covering substantially all employees and death benefit plans for
nonmanagement employees. The management plan was amended effective May 1, 1995.
The pension benefit formula now used in the determination of pension cost is
based on the highest consecutive 36 months (3 year) average pay out of the last
60 consecutive months to which pension credits earned for each year of service
are applied to determine an individual's lump-sum pension benefit. (Management
employees who were within five years of reaching service pension eligibility as
of May 1, 1995, are entitled to the higher of the new plan formula or the prior
plan formula.) Pension cost under the nonmanagement plan is determined using a
flat dollar amount per year of service. The nonmanagement plan was amended
effective October 1, 1995, to provide for improved benefits following union
contract ratification.
41
<PAGE>
Notes to Consolidated Financial Statements
(dollars in millions, except per share amounts)
The company's funding policy is to contribute an amount up to the maximum
that can be deducted for federal income tax purposes. However, due to the funded
status of the plans, no contributions have been made for the years reported
below.
Pension expense was determined using the projected unit credit actuarial
method. The resulting pension credits are primarily attributable to past
favorable investment performance and the funded status of the plans.
The components of pension cost (credits) follow:
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------
<S> <C> <C> <C>
Benefits earned during
the year........................ $ 138.7 $ 214.6 $ 221.4
Interest cost on projected
benefit obligation.............. 494.1 524.2 585.0
Actual return on plan assets..... (1,797.4) 73.0 (1,426.1)
Net amortization and deferral.... 1,023.8 (1,018.1) 512.6
--------- --------- ---------
Net pension credits.............. $ (140.8) $ (206.3) $ (107.1)
====================================================================
</TABLE>
The funded status of the plans follows:
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
accumulated plan benefits
Vested................................... $ 6,180.6 $ 6,076.0
Nonvested................................ 828.5 869.3
----------------------
Total.................................... $ 7,009.1 $ 6,945.3
======================
Fair value of plan assets................. $10,974.4 $10,867.9
Actuarial present value of
projected benefit obligation............. (7,620.5) (7,540.4)
Unrecognized net asset resulting
from initial adoption of FAS 87.......... (892.1) (1,173.8)
Unrecognized net gains.................... (1,860.0) (1,945.4)
Unrecognized prior service cost........... 331.2 270.8
----------------------
Prepaid pension cost...................... $ 933.0 $ 479.1
===================================================================
</TABLE>
The assets of the pension plans consist principally of debt and equity
securities, fixed income instruments and real estate. The assumed long-term rate
of return on plan assets used in determining pension cost was 7.25% for 1995,
1994 and 1993. The assumed discount rate used to determine the projected benefit
obligation was 6.9% as of December 31, 1995, and 7.2% as of December 31, 1994,
while the assumed rate of increase in future compensation levels, also used in
the determination of the projected benefit obligation, was 4.5% in 1995 and
1994.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS The company sponsors health care and
life insurance plans which provide noncontributory postretirement benefits to
substantially all of its retirees and their dependents. The company accrues the
cost of postretirement benefits granted to employees as expense over the period
in which the employee renders service and becomes eligible to receive benefits.
The cost of postretirement health care and life insurance benefits for current
and future retirees was recognized as determined under the projected unit credit
actuarial method.
The company has provided for part of the cost of these plans by making
contributions for health care benefits to voluntary employee benefit association
trust funds (VEBAs) and maintains retirement funding accounts (RFAs) to provide
life insurance benefits. The company intends to continue to fund the
nonmanagement VEBA. During 1993 the company utilized approximately $90 million
in excess pension plan assets to help pay the nonmanagement retiree health care
obligation. Funding of the management VEBA was suspended effective in 1994,
primarily due to a tax rate increase from 31.0% to 39.6% on its investment
income. The nonmanagement VEBA and the RFAs earn income without tax. Plan assets
consist principally of corporate securities and bonds.
- --------------------------------------------------
Dividends [$2.03 is featured in the
declared per accompanying graphic with
share rose to the caption, DIVIDENDS PER
$2.03 in 1995, SHARE]
up 4.6% from
$1.94 in 1994.
- --------------------------------------------------
The components of postretirement benefit cost follow:
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------
<S> <C> <C> <C>
Retiree health care plans
Benefits earned during the year... $ 49.0 $ 75.5 $ 62.8
Interest cost on accumulated
postretirement benefit
obligation (APBO)................ 306.8 258.2 252.3
Actual return on plan assets...... (112.9) 10.9 (43.3)
Net amortization and deferral..... 57.1 (53.1) 4.1
---------------------------
300.0 291.5 275.9
---------------------------
Retiree life plans
Benefits earned during the year... 4.9 8.0 6.6
Interest cost on APBO............. 32.6 30.6 29.8
Actual return on plan assets...... (27.3) (21.2) (20.2)
Net amortization and deferral..... (7.7) (13.1) (15.8)
---------------------------
2.5 4.3 0.4
---------------------------
Total postretirement
benefit cost.................... $ 302.5 $295.8 $276.3
===============================================================
</TABLE>
42
<PAGE>
Notes to Consolidated Financial Statements
(dollars in millions, except per share amounts)
The APBO of the plans as of December 31, 1995 and 1994, follows:
<TABLE>
<CAPTION>
1995 1994
- -----------------------------------------------------------------
<S> <C> <C>
Retiree health care plans
Retirees and dependents................... $3,084.1 $2,303.9
Fully eligible active plan participants... 285.8 270.0
Other active plan participants............ 1,269.0 1,081.6
--------------------
Total APBO................................ 4,638.9 3,655.5
Fair value of plan assets................. 916.3 764.0
--------------------
APBO in excess of plan assets............. 3,722.6 2,891.5
Unrecognized net gain (loss).............. (706.8) 74.4
--------------------
Accrued postretirement health
care benefit obligation.................. 3,015.8 2,965.9
--------------------
Retiree life plans
Retirees and dependents................... 370.4 258.5
Fully eligible active plan participants... 0.6 1.0
Other active plan participants............ 140.1 115.5
--------------------
Total APBO................................ 511.1 375.0
Fair value of plan assets................. 452.5 450.0
--------------------
APBO in excess of
(less than) plan assets.................. 58.6 (75.0)
Unrecognized net gain (loss).............. (107.5) 24.1
--------------------
Prepaid postretirement
life benefit obligation.................. (48.9) (50.9)
--------------------
Total accrued postretirement
benefit obligation, net................... $2,966.9 $2,915.0
=================================================================
</TABLE>
The assumed discount rate used to measure the accumulated postretirement benefit
obligation as of December 31, 1995, was 6.9% and 8.5% in 1994. The assumed rate
of increase in future compensation levels was 4.5% in 1995 and 1994. The
expected long-term rate of return on plan assets was 7.25% in 1995, 1994 and
1993 for the VEBAs and 8.0% in 1995, 1994 and 1993 for the RFAs. The assumed
health care cost trend rate in 1995 was 8.8% and 9.2% in 1994 and is assumed to
decrease gradually to 4.0% in 2007 and remain at that level. The assumed health
care cost trend rate is 8.4% for 1996.
- -------------------------------------------------
[+3.7% is featured in the Ameritech
accompanying graphic with cash flow
the caption, CASH FLOW from operations
FROM OPERATIONS] increased 3.7%
to $3,557
million in 1995.
- -------------------------------------------------
The health care cost trend rate has a significant effect on the amounts
reported for costs each year as well as on the accumulated postretirement
benefit obligation. Specifically, increasing the assumed health care cost trend
rate by one percentage point in each year would increase the aggregate of the
service and interest cost components for 1995 by $45.7 million, and would have
increased the accumulated postretirement benefit obligation as of December 31,
1995, by $509.5 million.
As of December 31, 1995, the company had approximately 55,500 retirees
eligible to receive health care and group life insurance benefits.
LEVERAGED EMPLOYEE STOCK OWNERSHIP PLANS In 1989, the company created leveraged
employee stock ownership plans (LESOPs) within its existing employee savings
plans. To fund the LESOPs, the Trustee for the savings plans issued $665.0
million of debt, at 8.03% interest, payable in semiannual installments through
2001, which the company guaranteed. The Trustee used the proceeds to purchase at
fair market value 22,566,276 shares of the company's common stock from the
company's treasury. These shares are considered to be outstanding for earnings
per share purposes. The Trustee repays the notes, including interest, with funds
from the company's contributions to the savings plans, from dividends paid on
the shares of company common stock held by the Trustee and with new loans from
the company.
As a result of the company's unconditional guarantee, the notes of the trusts
are recorded as long-term debt and as deferred compensation in the consolidated
balance sheets. Deferred compensation represents a reduction of shareowners'
equity. Debt and deferred compensation are reduced as the Trustee makes
principal payments. As of December 31, 1995, the company had $265.7 million in
long-term debt and $63.5 million included in long-term debt maturing within one
year with respect to the LESOP.
The company maintains savings plans that cover substantially all of its
employees. Under these plans, the company matches a certain percentage of
eligible contributions made by the employees. The LESOP provisions of the
savings plans became effective January 1, 1990. Under these provisions, company
matching contributions are allocated to employees in company stock from the
LESOP trusts. Employees are not allowed to switch the company matching
contributions from company stock to alternative investments for the life of the
LESOPs except under certain circumstances. Company stock is released for
allocation to employees in the proportion that principal and interest paid in a
year bears to the total principal and interest due over the life of LESOP debt.
Company matching contributions to the plans are recorded as compensation
expense. Any change in the required contribution as a result of leveraging this
obligation is recorded as a gain or loss in other income. The amount expensed
and contributed to the LESOPs for 1995, 1994 and 1993 totaled $37.9 million,
$56.0 million and $50.8
43
<PAGE>
Notes to Consolidated Financial Statements
(dollars in millions, except per share amounts)
million, respectively. Interest expense incurred by the savings plans for 1995,
1994 and 1993 was $28.5 million, $33.3 million and $39.2 million, respectively.
Dividends paid on shares of stock held by the Trustee used to partially satisfy
debt repayment requirements were $42.0 million, $41.4 million and $40.1 million
for 1995, 1994 and 1993, respectively. As of December 31, 1995, 12,984,497
shares have been allocated or been committed to employee accounts, leaving
9,581,779 shares unallocated. At December 31, 1994, 11,231,943 shares were
allocated or committed to employee accounts, leaving 11,334,333 shares
unallocated.
In 1994, the company entered into an agreement to lend up to $99.0 million to
one of the trusts through December 1, 2004. The Trustee borrowed $11.0 million
at 7.8% from the company under this agreement in 1994, $17.9 million at 8.4% in
1995, and $17.1 million at 6.1% in 1996.
WORK FORCE AND OTHER RESTRUCTURING During March 1994, Ameritech announced a plan
to reduce its existing nonmanagement work force. As of December 31, 1995, 11,500
employees have left the company as a result of this restructuring. See
additional discussion in Management's Discussion and Analysis of Financial
Condition and Results of Operations on pages 27 and 28.
As a result of this restructuring, a pretax charge of $728.1 million, or
$455.8 million after-tax, was recorded in 1994. In 1995, a credit of $134.5
million, or $78.7 million after-tax, was recorded resulting primarily from
settlement gains from lump-sum pension payments to former employees, net of
additional restructuring charges of $131.8 million recorded in the fourth
quarter of 1995. The fourth quarter restructuring charges include $73.7 million
associated with increased force costs related to the restructuring started in
1994, as well as planned work force reductions due to consolidation of the
company's data centers. In connection with this consolidation, an additional
$58.1 million was recorded to write-down certain data processing equipment to
estimated net realizable value. The cumulative gross program cost through
December 31, 1995 totaled $1,238.1 million, partially offset by settlement gains
of $644.5 million for an aggregate pretax net program cost of $593.6 million, or
$377.1 million after-tax.
MANAGEMENT WORK FORCE REDUCTIONS Effective January 1, 1995, management employees
who are asked to leave the company will receive a severance payment under the
Management Separation Benefit Program. The company accounts for this benefit in
accordance with FAS 112, "Employers' Accounting for Postemployment Benefits,"
accruing the separation cost when incurred. 1995 activity under this program
included 450 employees.
During 1994, 1,200 management employees left the company involuntarily. The
net cost of these reductions, including termination benefits, settlement and
curtailment gains from the pension plan, was a net credit to other operating
expense of $37.4 million in 1995 and $55.5 million in 1994. The 1995 credit
resulted from settlement gains from lump-sum pension payments to former
employees.
During 1993, about 1,200 management employees left the company involuntarily
and another 500 employees left voluntarily. The net cost of these reductions,
including termination benefits, settlement and curtailment gains from the
pension plan, was a credit to other operating expense of $33.3 million.
The involuntary plans are funded from company operations and required cash
payments of $9.6 million, $41.2 million and $38.3 million in 1995, 1994 and
1993, respectively.
7. FINANCIAL INSTRUMENTS AND DERIVATIVES
The following table presents the estimated fair value of the company's financial
instruments as of December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
--------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and temporary
cash investments $ 131.3 $ 131.3 $ 73.7 $ 73.7
Debt 6,670.5 6,878.5 6,360.2 5,898.5
Other assets 905.3 908.9 833.6 846.8
Other liabilities 190.8 193.0 176.2 165.6
============================================================
</TABLE>
The following methods and assumptions were used to estimate the fair value of
financial instruments:
CASH AND TEMPORARY CASH INVESTMENTS The carrying value approximates fair value
because of the short-term maturity of these instruments.
DEBT The carrying amount (including accrued interest) of the company's debt
maturing within one year approximates fair value because of the short-term
maturities involved. The fair value of the company's long-term debt was
estimated based on the year-end quoted market price for the same or similar
issues. Fair value includes the effect of interest rate swaps discussed below.
OTHER ASSETS AND LIABILITIES These financial instruments consist primarily of
long-term receivables, other investments, financial contracts, customer
deposits, and preferred stock of a subsidiary. The fair values of these items
were based on expected cash flows, available market prices or market
comparables.
FINANCIAL CONTRACTS, INCLUDING DERIVATIVES The company occasionally enters into
foreign currency forward contracts to hedge exposure to adverse exchange risk.
Also, interest
44
<PAGE>
Notes to Consolidated Financial Statements
(dollars in millions, except per share amounts)
rate swaps are used to manage interest rate exposure and better match debt
obligations of the company with receivables from its leasing business as a
lessor. Related gains and losses are reflected in net income. At December 31,
1995 and 1994, the company had contracts giving it the right to deliver foreign
currency valued at $300.0 million and $9.0 million, respectively. At December
31, 1995 and 1994, the company had also entered into interest rate swap
agreements to change the interest rate on notional amounts of $401.1 million and
$253.0 million, respectively. Interest expense is adjusted to give effect to
obligations under the swaps. The company is exposed to credit risk in the
unlikely event of nonperformance by counterparties. At December 31, 1995, the
fair value of these interest rate swaps was a loss of $16.9 million. At December
31, 1994, the fair value of the interest rate swaps was a gain of $7.2 million.
The company uses derivatives in a limited way as a tool to manage the
company's financial risk. Their use is restricted primarily to hedging assets
and obligations already held by the company. Derivatives are used to protect the
cash flow of the company rather than generate income or engage in speculative
activity. Leveraged derivatives are strictly prohibited.
8. DEBT MATURING WITHIN ONE YEAR
Debt maturing within one year is included as debt in the computation of debt
ratios and consists of the following as of December 31:
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------
<S> <C> <C>
Notes payable
Bank loans...................... $ 3.5 $ 116.5
Commercial paper................ 1,969.2 1,630.6
Other........................... 11.3 19.7
Long-term debt maturing
within one year................. 153.9 131.5
--------------------
Total............................ $2,137.9 $1,898.3
--------------------
Weighted average interest rate
on notes payable, year-end....... 6.0% 5.7%
=======================================================
</TABLE>
The company has a committed revolving credit facility of $1.0 billion. The
fee for this facility is 0.05% per annum. This facility was not used during the
three years ended December 31, 1995. In addition, Ameritech has entered into
uncommitted agreements with a number of banks for lines of credit totaling $1.2
billion. The interest rates on these lines are negotiable at the time of
borrowing. No amounts were outstanding under these agreements as of December 31,
1995. There are no significant commitment fees or material compensating balance
requirements associated with any of these lines of credit. These lines, as well
as the revolving credit facility, are available for support of commercial paper
borrowing and to meet short-term cash needs.
9. LONG-TERM FINANCING
Long-term debt consists principally of debentures issued by the Ameritech
landline communications subsidiaries. The following table sets forth interest
rates and other information on long-term debt outstanding at December 31:
<TABLE>
<CAPTION>
Interest Rates Maturities 1995 1994
- --------------------------------------------------------------
<S> <C> <C> <C>
4. 375%-6.0%*.............. 1997-2007 $1,140.0 $1,175.0
6. 125%-8.0%............... 2002-2024 2,537.2 2,345.0
8. 125%-9.0%............... 1997-2026 333.7 333.7
9. 1%-10.0%................ 1997-2016 198.6 205.8
--------------------
4,209.5 4,059.5
LESOP (Note 6)......................... 265.7 341.2
Capital lease obligations.............. 73.4 85.6
Other.................................. 1.2 1.5
Unamortized discount, net.............. (36.6) (39.9)
--------------------
Total.................................. $4,513.2 $4,447.9
==============================================================
</TABLE>
*Includes $450.0 million issued in 1994, tied to floating LIBOR rate.
Scheduled maturities of long-term debt (including principal payments on LESOP
debt) are $357.1 million due in 1997, $405.3 million due in 1998, $232.4 million
due in 1999 and $147.2 million due in 2000.
Assets of Illinois Bell, comprising approximately $8,444.7 million of total
gross property, plant and equipment, are subject to lien under mortgage bonds
with outstanding balances of $300.0 million.
In April 1995, a wholly owned subsidiary, Ameritech Capital Funding
Corporation (ACF), issued debentures totaling $192.2 million due April 1, 2005.
The debentures are noncallable and have a coupon rate of 7.5 percent. Proceeds
from the issuance were used to reduce short-term debt. This issuance utilized
the remaining capacity under the "shelf" registration statement ACF had on file
with the Securities and Exchange Commission (SEC).
The company, through ACF, filed a registration statement with the SEC for the
issuance of up to $1.0 billion in unsecured debt securities for general
corporate purposes. The company, through its landline communications
subsidiaries, has registered with the SEC for the issuance of up to $1.4 billion
in unsecured debt securities for corporate purposes. As of December 31, 1995,
$200 million had been issued.
PREFERRED STOCK ISSUANCES BY SUBSIDIARY Ameritech New Zealand Funding
Corporation, a wholly owned subsidiary, issued through a private placement $85.0
million of Series A Preferred Stock in 1994 (7.04%, subject to mandatory
redemption in 2001), and $60.0 million of Series B Preferred Stock in 1995
(variable rate, 4.415% at December 31, 1995, not subject to mandatory
redemption). Both preferred stock issues are included in other long-term
liabilities.
45
<PAGE>
Notes to Consolidated Financial Statements
(dollars in millions, except per share amounts)
10. LEASE COMMITMENTS
The company leases certain facilities and equipment used in its operations under
both operating and capital leases. Rental expense under operating leases was
$200.0 million, $181.6 million and $196.2 million for 1995, 1994 and 1993,
respectively. As of December 31, 1995, the aggregate minimum rental commitments
under noncancelable leases were approximately as follows:
<TABLE>
<CAPTION>
Years Operating Capital
- -----------------------------------------------------------------
<S> <C> <C>
1996.................................... $104.2 $ 54.7
1997.................................... 85.9 52.1
1998.................................... 66.1 20.7
1999.................................... 56.9 1.7
2000.................................... 44.8 1.5
Thereafter.............................. 245.0 5.4
-------------------
Total minimum rental commitments........ $602.9 136.1
======
Less: executory costs.................. 2.5
interest costs................... 12.3
------
Present value of minimum lease payments. $121.3
=================================================================
</TABLE>
11. OTHER INCOME, NET
The components of other income are as follows:
<TABLE>
<CAPTION>
Income (expense)
-------------------------
1995 1994 1993
- ---------------------------------------------------------------
<S> <C> <C> <C>
Equity earnings of affiliates,
primarily New Zealand
Telecom*......................... $104.4 $ 89.7 $ 23.8
Gain from sale of shares
in New Zealand Telecom............ -- -- 85.7
Early extinguishment of
debt costs........................ -- -- (66.3)
Interest on company-owned
life insurance and
related programs.................. 51.6 54.2 54.6
Gain on exchange of
cellular minority interests....... 65.8 -- --
Gain on LESOP...................... 27.0 15.0 18.8
Other, net......................... 11.2 (12.0) 0.7
-------------------------
Total.............................. $260.0 $146.9 $117.3
===============================================================
</TABLE>
*Includes the company's share ($42.0 million) of a restructuring charge at New
Zealand Telecom in 1993.
12. SHAREOWNERS' EQUITY
SHAREOWNERS' RIGHTS The certificate of incorporation of Ameritech authorizes the
issuance of 1.2 billion shares of common stock, 30 million shares of preferred
stock (par value $1 per share) and 30 million shares of preference stock (par
value $1 per share).
One preference stock purchase right is attached to each share of the
company's common stock. Under certain circumstances, each right may be exercised
to purchase one one-hundredth of a share of Series A Junior Participating
Preference Stock, $1 par value, at a price of $125. If a person acquires, or
announces a tender offer for, 20% or more of the company's common stock, the
rights become exercisable for common stock of the company having a market value
of two times the exercise price. If the company is acquired in a merger or
similar transaction, the rights may be exercised to purchase common stock of the
surviving company having a market value of two times the exercise price. The
rights, which are nonvoting, are redeemable by the company for $.01 per right
and expire on December 31, 1998, or upon consummation of certain merger
transactions. Until the occurrence of certain events, the rights are attached to
and trade with shares of the company's common stock. As of December 31, 1995,
553,838,100 rights were outstanding.
- --------------------------------------------------------
Total shareowners' [+15.8% is featured in the
equity rose 15.8% accompanying graphic with the
to $7,015 million caption, TOTAL SHAREOWNERS'
in 1995, up from EQUITY]
$6,055 million
in 1994.
- --------------------------------------------------------
STOCK PLANS The company, through its 1989 Long Term Incentive Plan (the plan),
grants incentive compensation to its officers and other employees in the form of
stock options, stock appreciation rights, restricted stock and performance
awards. The incentives granted are based upon terms and conditions, subject to
certain limitations, determined by a committee of the Board of Directors, which
administers the plan. The plan authorizes the issuance of up to 40,000,000
shares of common stock over a 10-year period.
Stock options may be granted under the plan as either incentive stock options
or nonqualified stock options. Options have not been granted at less than fair
market value as of the date of grant (however, under the plan, nonqualified
options may be granted at not less than 50% of fair market value under the plan)
and have a maximum life of 10 years and one day from the date of grant. Stock
appreciation rights may be granted independently or in tandem with stock options
and permit the optionee to receive stock, cash or a combination thereof equal to
the amount by which the fair market value on the exercise date exceeds the
option price. Substantially all stock options granted on or following December
16, 1987, are exercisable after one year, in equal increments over the following
three years. Beginning in 1994, the company awarded
46
<PAGE>
Notes to Consolidated Financial Statements
(dollars in millions, except per share amounts)
grants of nonqualified stock options with dividend equivalents to certain
employees.
Information regarding options granted under the Long Term Incentive Plan,
which expired in 1994, and the plan is as follows:
<TABLE>
<CAPTION>
Incentive Nonqualified
Stock Options Stock Options
-------------------------------------------
Shares Price Shares Price
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding,
December 31, 1992 26,788 $20.59 9,754,018 $30.59
Granted -- -- 359,904 $41.35
Exercised 11,520 $20.59 2,487,098 $30.28
Canceled or expired -- -- 293,236 $29.00
Outstanding, ------ ----------
December 31, 1993 15,268 $20.59 7,333,588 $31.21
Granted -- -- 5,798,530 $38.54
Exercised 4,200 $20.59 1,196,462 $30.93
Canceled or expired -- -- 717,151 $38.26
Outstanding, ------ ----------
December 31, 1994 11,068 $20.59 11,218,505 $34.65
Granted -- -- 6,436,980 $41.84
Exercised 5,400 $20.59 2,553,592 $32.09
Canceled or expired -- -- 1,190,176 $39.97
Outstanding, ------ ----------
December 31, 1995 5,668 $20.59 13,911,717 $37.99
==================================================================
</TABLE>
As of December 31, 1995, incentive stock options for 5,668 shares and
nonqualified stock options for 5,157,344 shares were exercisable at average
prices of $20.59 and $33.30, respectively. As of December 31, 1995, 174,796
additional shares were available related to dividend equivalents. All stock
appreciation rights granted under the plans have been issued in tandem with
nonqualified stock options. Stock appreciation rights granted prior to 1987 have
been capped at $29.938. The exercise of a nonqualified option or a stock
appreciation right cancels the related right or option. No stock appreciation
rights have been issued after December 31, 1990.
During 1991, the company issued, to certain key employees, performance-based
restricted stock under the plan. The employees earn, without cost to them,
Ameritech stock over three years, although restrictions generally continue for
two additional years. As of December 31, 1995, 163,418 shares were outstanding
under the plan. Under the Long Term Incentive Plan, which expired in 1994,
28,776 shares of nonperformance based restricted stock remained outstanding as
of December 31, 1995. Shareowners' equity reflects deferred compensation for the
unvested stock awarded. This amount is reduced and charged against operations
(together with any change in market price) as the employees vest in the stock.
13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Net Earnings
Operating Income (Loss)
Calendar Revenues Income (Loss) Per Share
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
1st Quarter $ 3,145.7 $ 989.0 $ 578.9 $ 1.05
2nd Quarter 3,368.9 859.6 503.5 0.91
3rd Quarter 3,381.4 802.7 512.5 0.92
4th Quarter 3,531.8 651.7 412.7 0.74
------------------------------------
Total $13,427.8 $3,303.0 $ 2,007.6 $ 3.63
==========================================================================
1994
1st Quarter $ 3,033.9 $ 140.9 $ 43.8 $ 0.08
2nd Quarter 3,184.4 745.6 446.6 0.81
3rd Quarter 3,170.0 432.4 250.9 0.46
4th Quarter 3,181.2 710.4 (1,804.9) (3.28)
------------------------------------
Total $12,569.5 $2,029.3 $(1,063.6) $(1.94)
==========================================================================
</TABLE>
Total nonmanagement work force restructuring credits in 1995 were $134.5 million
or $78.7 million after-tax as follows: $256.3 million or $160.1 million after-
tax in the first quarter, $10.0 million or $6.9 million after-tax in the third
quarter and a net charge of $131.8 million or $88.3 million after-tax in the
fourth quarter. The fourth quarter restructuring charge includes costs related
to the restructuring started in 1994, and charges relating to the consolidation
of the company's data centers, as discussed more fully in Note 6.
Total nonmanagement work force restructuring charges in 1994 were $728.1
million or $455.8 million after-tax as follows: $530.0 million or $332.8 million
after-tax in the first quarter, $270.1 million or $168.2 million after-tax in
the third quarter, and a net credit of $72.0 million or $45.2 million after-tax
in the fourth quarter. The credit in the fourth quarter resulted from pension
settlement gains. The fourth quarter of 1994 also includes a $2.2 billion after-
tax extraordinary charge related to the discontinuance of applying FAS 71 or
$4.06 per share ($4.07 per share when calculated on average common shares
outstanding for all of 1994), as discussed in Note 4 above. Earnings for the
fourth quarter of 1994 before the extraordinary charge were $429.1 million or
$0.78 per share.
The third quarter of 1995 includes a gain of $65.8 million ($41.8 million
after-tax) on the exchange of cellular minority interests.
Several other significant income and expense items were reported in the
fourth quarter of both years. However, the net result was not material to the
respective quarters or years except that the fourth quarter of 1994 includes a
$69.3 million ($61.3 million after-tax) charge related to the reduction of
certain asset values, primarily real estate.
47
<PAGE>
Notes to Consolidated Financial Statements
(dollars in millions, except per share amounts)
All adjustments necessary for a fair statement of results for each period
have been included.
14. ADDITIONAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
December 31
--------------------
1995 1994
- ----------------------------------------------------------------
<S> <C> <C>
Consolidated balance sheets
Other current liabilities
Accrued payroll.......................... $ 241.3 $ 193.5
Accrued taxes............................ 407.1 373.5
Advance billings and customer deposits... 321.9 397.4
Dividends payable........................ 294.7 277.3
Accrued interest......................... 133.0 109.4
Other.................................... 433.7 360.4
--------------------
Total..................................... $1,831.7 $1,711.5
================================================================
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
- ----------------------------------------------------------------
<S> <C> <C> <C>
Consolidated statements
of income
Capitalized interest............ $(19.7) $ (13.3) $ (11.3)
Provision for uncollectibles. 209.5 183.1 154.3
Advertising.................. 235.9 190.9 166.8
================================================================
</TABLE>
Interest paid, net of amounts capitalized, was $445.3 million, $433.3 million
and $456.1 million in 1995, 1994 and 1993, respectively.
Revenues from AT&T Corp., principally for interstate network access and
billing and collection service, comprised approximately 8%, 9% and 10% of
consolidated revenues in 1995, 1994 and 1993, respectively. No other customer
accounted for more than 10% of revenues.
15. PENDING INVESTMENT IN BELGACOM
In December 1995, a consortium led by Ameritech was advised by the Belgian
government that it was the successful bidder to purchase 49.9% of Belgacom S.A.,
the principal telecommunciations company in Belgium. The purchase price is 73.3
billion Belgian francs or about US $2.5 billion. Belgacom S.A. is the national
provider of landline telephone service in Belgium and has controlling interests
in a cellular venture and a new directory publishing operation.
Closing with the Belgian government is scheduled to be completed by June 30,
1996. Ameritech intends to fund its 35% allocable consortium share, or about
17.5% of Belgacom S.A., with $875 million of cash and newly issued debt.
48
<PAGE>
[The following information appears on page 53 of Ameritech's 1995 Annual Report
to shareowners and is supplied in response to Part II, Item 5, of the 10-K.]
<TABLE>
<CAPTION>
TRADING AND DIVIDEND INFORMATION
Dividends
High Low Close Declared
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
1st Quarter $44.38 $39.88 $41.25 $.50
2nd Quarter 47.25 41.25 44.00 .50
3rd Quarter 52.75 44.00 52.13 .50
4th Quarter 59.38 50.38 58.88 .53
--------------------------------------
1994
1st Quarter $42.25 $36.38 $38.13 $.48
2nd Quarter 43.13 36.25 38.13 .48
3rd Quarter 43.00 38.00 40.25 .48
4th Quarter 42.75 38.00 40.38 .50
- ------------------------------------------------------------------
</TABLE>
STOCK TRADING INFORMATION Ameritech stock is traded in the United States on the
New York, Boston, Chicago, Pacific and Philadelphia stock exchanges. Overseas,
it is listed on the London, Tokyo and Amsterdam stock exchanges, and on the
Swiss stock exchanges of Basel, Geneva and Zurich.
<PAGE>
Exhibit 21
<TABLE>
<CAPTION>
AMERITECH CORPORATION
SUBSIDIARIES
as of March 1, 1996
<S> <C>
AMERITECH CORPORATION Delaware
Illinois Bell Telephone Company (d/b/a Ameritech Illinois) Illinois
Indiana Bell Telephone Company, Incorporated (d/b/a Ameritech Indiana) Indiana
Michigan Bell Telephone Company (d/b/a Ameritech Michigan) Michigan
The Ohio Bell Telephone Company (d/b/a Ameritech Ohio) Ohio
Wisconsin Bell, Inc. (d/b/a Ameritech Wisconsin) Wisconsin
Ameritech Services, Inc. (Jointly owned by the AOCs) Delaware
Ameritech Center Phase I, Inc. (Jointly owned by AIT and ASI) Delaware
Ameritech Advanced Data Services of Illinois, Inc. Delaware
Ameritech Advanced Data Services of Indiana, Inc. Delaware
Ameritech Advanced Data Services of Michigan, Inc. Delaware
Ameritech Advanced Data Services of Ohio, Inc. Delaware
Ameritech Advanced Data Services of Wisconsin, Inc. Delaware
Ameritech Capital Funding Corporation Delaware
Ameritech Communications, Inc. (formerly Global Link, Inc.) Delaware
Ameritech Credit Corporation Delaware
Ameritech Development Corporation Delaware
World View Systems Corp. Delaware
Ameritech Information Industries Services, Inc. Delaware
Ameritech Information Systems, Inc. Delaware
Ameritech EGA, Inc. Delaware
Ameritech Health Connections, Inc. Delaware
Ameritech Health Information Management Corporation of Ohio Delaware
Ameritech Health Information Management Corporation of Tennessee Delaware
Dynix Corporation Utah
Dynix, Incorporated Utah
Dynix Chrysallis, Ltd. (Canada) Canada
Dynix Marquis, Inc. Utah
Retro Link Associates, Inc. Utah
DMI Promark, Inc. Utah
Dynix Library Systems, Inc. (Canada) Canada
Dynix Library Systems (UK), Ltd. U.K.
Dynix Library Systems (Ireland), Ltd. Ireland
Dynix (France), S.A. France
Dynix (Deuschland), GmbH Germany
Dynix (Nederland), B.V. Netherlands
Dynix (Chile), Limitada Chile
Health Network Ventures, Inc. Delaware
NOTIS Systems, Inc. Delaware
Wisconsin Health Information Network, Inc. Delaware
Ameritech International, Inc. Delaware
Wer Liefert Was? Germany
Wer liefert was AG Germany
Wer liefert Was? Ges.m.b.H. Germany
Ameritech Australia PTY Limited Australia
Ameritech International Holdings Company Delaware
Ameritech International Business Development Corporation Delaware
Ameritech Kidsoft Holdings, Inc. Delaware
Ameritech Knowledge Data, Inc. Delaware
Ameritech Long Distance Industry Services, Inc. Delaware
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Ameritech Media Ventures, Inc. Delaware
Ameritech Mobile Communications, Inc. Delaware
Ameritech Mobile Communications of Wisconsin, Inc. Wisconsin
Ameritech Mobile Phone Service of Chicago, Inc. Illinois
Ameritech Mobile Phone Service of Cincinnati, Inc. Delaware
Ameritech Mobile Phone Service of Detroit, Inc. Delaware
Ameritech Mobile Phone Service of Illinois, Inc. Illinois
Ameritech Mobile Services, Inc. Delaware
Ameritech Mobile Services of Wisconsin, Inc. Delaware
Metrocom Communications, Inc. Delaware
AMCI Partnership Holdings, Inc. Delaware
Ameritech Mobile Data, Inc. Delaware
AMC Mexican Holdings, Inc. Delaware
CyberTel Financial Corporation Delaware
CyberTel Corporation Delaware
CyberTel Cellular Management Company Delaware
Cyber Tel Cellular Telephone Company (with Gensub, Inc.) Delaware
CyberTel Minneapolis Paging Corporation Delaware
CyberTel St. Louis Paging Corporation Delaware
GSAA, Inc. Delaware
Gensub, Inc. Delaware
Hawaiian Cellular Properties, Inc. Delaware
Ohio Paging Units, Inc. Delaware
Ameritech Monitoring Services, Inc. Delaware
Ameritech New Media, Inc. Delaware
Ameritech New Zealand Funding Corporation Delaware
Ameritech New Zealand Investments, Inc. Delaware
Ameritech Holdings Limited New Zealand
HKP Partners of New Zealand New Zealand
Sky Network Television Limited New Zealand
Telecom Corporation of New Zealand Limited New Zealand
Ameritech New Zealand Limited Delaware/New Zealand
Ameritech Payphone Services, Inc. Delaware
Ameritech Payphone Services of Illinois, Inc. Illinois
Ameritech Payphone Services of Indiana, Inc. Indiana
Ameritech Payphone Services of Ohio, Inc. Ohio
Ameritech Payphone Services of Michigan, Inc. Michigan
Ameritech Payphone Services of Wisconsin, Inc. Wisconsin
Ameritech Properties Corporation Delaware
Ameritech Publishing, Inc. Delaware
Ameritech Industrial Infosource, Inc. Delaware
Ameritech Publishing of Illinois, Inc. Illinois
Consumer Direct Access, Inc. California
Ameritech Security Link, Inc. Delaware
Ameritech Telecommunications Services Company Delaware
Ameritech Wireless Communications, Inc. Delaware
American Information Technologies Corporation Nevada
Ameritech Communications, Inc. Nevada
Ameritech Corporation Nevada
Ameritech Credit Corporation Nevada
National Guardian Security Services Corporation Delaware
Polska Telefonia Komorkowa Poland
Starline Insurance Company Vermont
</TABLE>
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors
Ameritech Corporation
As independent public accountants, we hereby consent to the incorporation by
reference of our reports dated January 17, 1996 included (or incorporated by
reference) in this Form 10-K for the year ended December 31, 1995, into
Ameritech Corporation's previously filed Registration Statement File Nos.
33-26366, 2-97037, 33-30593, 33-32705, 33-34006, 33-36790, 33-47608, 33-49036,
33-51771, 33-51773 and 33-00897.
Arthur Andersen LLP
Chicago, Illinois
March 11, 1996
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred
to as the "Company"), proposes to file shortly with the Securities and Exchange
Commission, under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1995 (the "Annual Report"); and
WHEREAS, the undersigned is an Officer and Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS O. G. SHAFFER,
B. F. ELLIOTT AND R.W. PEHLKE and each of them, as attorneys for the
undersigned and in the undersigned's name, place and stead as an Officer and a
Director of the Company, to execute and file the Annual Report, and thereafter
to execute and file any amendment or amendments thereto on Form 8, hereby giving
and granting to said attorneys full power and authority 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 the undersigned
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 this 4th day of
March, 1996.
/s/ Richard C. Notebaert
Richard C. Notebaert
Chairman and Chief Executive Officer
STATE OF ILLINOIS )
COUNTY OF COOK )
On the 4th day of March, 1996, personally appeared before me Richard C
Notebaert to me known and known to be the person described in and who executed
the foregoing instrument and such person duly acknowledged that such person
executed and delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 4th day of March, 1996.
/s/ Judy L. Anker
Notary Public
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred
to as the "Company"), proposes to file shortly with the Securities and Exchange
Commission, under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1995 (the "Annual Report"); and
WHEREAS, the undersigned is an Officer of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS R.C.
NOTEBAERT, B. F. ELLIOTT AND R. W. PEHLKE, and each of them, as attorneys for
the undersigned and in the undersigned's name, place and stead as an Officer of
the Company, to execute and file the Annual Report, and thereafter to execute
and file any amendment or amendments thereto on Form 8, hereby giving and
granting to said attorneys full power and authority 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 the undersigned 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 this 8th day of
March, 1996.
/s/ Oren G. Shaffer
Oren G. Shaffer
Executive Vice President and
Chief Financial Officer
STATE OF ILLINOIS )
COUNTY OF COOK )
On the 8th day of March, 1996, personally appeared before me Oren G. Shaffer
to me known and known to be the person described in and who executed the
foregoing instrument and such person duly acknowledged that such person executed
and delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 8th day of March, 1996.
/s/ Judy L. Anker
Notary Public
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred
to as the "Company"), proposes to file shortly with the Securities and Exchange
Commission, under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1995 (the "Annual Report"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS O.G. SHAFFER,
B. F. ELLIOTT AND R.W. PEHLKE, and each of them, as attorneys for the
undersigned and in the undersigned's name, place and stead as a Director of the
Company, to execute and file the Annual Report, and thereafter to execute and
file any amendment or amendments thereto on Form 8, hereby giving and granting
to said attorneys full power and authority 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 the undersigned 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 this 1st day of
March, 1996.
/s/ Donald C. Clark
Donald C. Clark
STATE OF ILLINOIS )
COUNTY OF COOK )
On the 1st day of March, 1996, personally appeared before me Donald C. Clark
to me known and known to be the person described in and who executed the
foregoing instrument and such person duly acknowledged that such person executed
and delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 1st day of March, 1996.
/s/ Mary L. Hicks
Notary Public
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred
to as the "Company"), proposes to file shortly with the Securities and Exchange
Commission, under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1995 (the "Annual Report"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS O.G. SHAFFER,
B. F. ELLIOTT AND R.W. PEHLKE, and each of them, as attorneys for the
undersigned and in the undersigned's name, place and stead as a Director of the
Company, to execute and file the Annual Report, and thereafter to execute and
file any amendment or amendments thereto on Form 8, hereby giving and granting
to said attorneys full power and authority 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 the undersigned 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 this 8th day of
March, 1996.
/s/ Melvin R. Goodes
Melvin R. Goodes
STATE OF ILLINOIS )
COUNTY OF COOK )
On the 8th day of March, 1996, personally appeared before me Melvin R. Goodes
to me known and known to be the person described in and who executed the
foregoing instrument and such person duly acknowledged that such person executed
and delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 8th day of March, 1996.
/s/ Judy L. Anker
Notary Public
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred
to as the "Company"), proposes to file shortly with the Securities and Exchange
Commission, under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1995 (the "Annual Report"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS O.G. SHAFFER,
B.F. ELLIOTT AND R.W. PEHLKE, and each of them, as attorneys for the undersigned
and in the undersigned's name, place and stead as a Director of the Company, to
execute and file the Annual Report, and thereafter to execute and file any
amendment or amendments thereto on Form 8, hereby giving and granting to said
attorneys full power and authority 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 the undersigned 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 this 8th day of
March, 1996.
/s/ Hanna Holborn Gray
Hanna Holborn Gray
STATE OF ILLINOIS )
COUNTY OF COOK )
On the 8th day of March, 1996, personally appeared before me Hanna Holborn
Gray to me known and known to be the person described in and who executed the
foregoing instrument and such person duly acknowledged that such person executed
and delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 8th day of March, 1996.
/s/ Judy L. Anker
Notary Public
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred
to as the "Company"), proposes to file shortly with the Securities and Exchange
Commission, under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1995 (the "Annual Report"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS O.G. SHAFFER,
B. F. ELLIOTT AND R.W. PEHLKE, and each of them, as attorneys for the
undersigned and in the undersigned's name, place and stead as a Director of the
Company, to execute and file the Annual Report, and thereafter to execute and
file any amendment or amendments thereto on Form 8, hereby giving and granting
to said attorneys full power and authority 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 the undersigned 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 this 8th day of
March, 1996.
/s/ James A. Henderson
James A. Henderson
STATE OF ILLINOIS )
COUNTY OF COOK )
On the 8th day of March, 1996, personally appeared before me James A.
Henderson to me known and known to be the person described in and who executed
the foregoing instrument and such person duly acknowledged that such person
executed and delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 8th day of March, 1996.
/s/ Judy L. Anker
Notary Public
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred
to as the "Company"), proposes to file shortly with the Securities and Exchange
Commission, under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1995 (the "Annual Report"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS O.G. SHAFFER,
B.F. ELLIOTT AND R.W. PEHLKE, and each of them, as attorneys for the undersigned
and in the undersigned's name, place and stead as a Director of the Company, to
execute and file the Annual Report, and thereafter to execute and file any
amendment or amendments thereto on Form 8, hereby giving and granting to said
attorneys full power and authority 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 the undersigned 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 this 1st day of
March, 1996.
/s/ Sheldon B. Lubar
Sheldon B. Lubar
STATE OF WISCONSIN )
COUNTY OF MILWAUKEE )
On the 1st day of March, 1996, personally appeared before me Sheldon B. Lubar
to me known and known to be the person described in and who executed the
foregoing instrument and such person duly acknowledged that such person executed
and delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 1st day of March, 1996.
/s/ Mary Beth Wisniewski
Notary Public
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred
to as the "Company"), proposes to file shortly with the Securities and Exchange
Commission, under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1995 (the "Annual Report"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS O.G. SHAFFER,
B.F. ELLIOTT AND R.W.PEHLKE, and each of them, as attorneys for the undersigned
and in the undersigned's name, place and stead as a Director of the Company, to
execute and file the Annual Report, and thereafter to execute and file any
amendment or amendments thereto on Form 8, hereby giving and granting to said
attorneys full power and authority 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 the undersigned 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 this 5th day of
March, 1996.
/s/ Lynn M. Martin
Lynn M. Martin
STATE OF ILLINOIS )
COUNTY OF COOK )
On the 5th day of March, 1996, personally appeared before me Lynn M. Martin to
me known and known to be the person described in and who executed the foregoing
instrument and such person duly acknowledged that such person executed and
delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 5th day of March, 1996.
/s/ Janet G. Sanders
Notary Public
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred
to as the "Company"), proposes to file shortly with the Securities and Exchange
Commission, under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1995 (the "Annual Report"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS O.G. SHAFFER,
B. F. ELLIOTT AND R.W.PEHLKE, and each of them, as attorneys for the undersigned
and in the undersigned's name, place and stead as a Director of the Company, to
execute and file the Annual Report, and thereafter to execute and file any
amendment or amendments thereto on Form 8, hereby giving and granting to said
attorneys full power and authority 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 the undersigned 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 this 8th day of
March, 1996.
/s/ Arthur C. Martinez
Arthur C. Martinez
STATE OF ILLINOIS )
COUNTY OF COOK )
On the 8th day of March, 1996, personally appeared before me Arthur C.
Martinez to me known and known to be the person described in and who executed
the foregoing instrument and such person duly acknowledged that such person
executed and delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 8th day of March, 1996.
/s/ Judy L. Anker
Notary Public
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred
to as the "Company"), proposes to file shortly with the Securities and Exchange
Commission, under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1995 (the "Annual Report"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS O.G. SHAFFER,
B. F. ELLIOTT AND R.W. PEHLKE, and each of them, as attorneys for the
undersigned and in the undersigned's name, place and stead as a Director of the
Company, to execute and file the Annual Report, and thereafter to execute and
file any amendment or amendments thereto on Form 8, hereby giving and granting
to said attorneys full power and authority 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 the undersigned 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 this 4th day of
March, 1996.
/s/ John B. McCoy
John B. McCoy
STATE OF OHIO )
COUNTY OF FRANKLIN )
On the 4th day of March, 1996, personally appeared before me John B. McCoy to
me known and known to be the person described in and who executed the foregoing
instrument and such person duly acknowledged that such person executed and
delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 4th day of March, 1996.
Mary E. Jones
Notary Public
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred
to as the "Company"), proposes to file shortly with the Securities and Exchange
Commission, under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1995 (the "Annual Report"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS O.G. SHAFFER,
B. F. ELLIOTT AND R.W.PEHLKE, and each of them, as attorneys for the undersigned
and in the undersigned's name, place and stead as a Director of the Company, to
execute and file the Annual Report, and thereafter to execute and file any
amendment or amendments thereto on Form 8, hereby giving and granting to said
attorneys full power and authority 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 the undersigned 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 this 8th of
March, 1996.
/s/ John D. Ong
John D. Ong
STATE OF ILLINOIS )
COUNTY OF COOK )
On the 8th of March, 1996, personally appeared before me John D. Ong to me
known and known to be the person described in and who executed the foregoing
instrument and such person duly acknowledged that such person executed and
delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 8th of March, 1996.
/s/ Judy L. Anker
Notary Public
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred
to as the "Company"), proposes to file shortly with the Securities and Exchange
Commission, under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1995 (the "Annual Report"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS O.G. SHAFFER,
B. F. ELLIOTT AND R.W.PEHLKE, and each of them, as attorneys for the undersigned
and in the undersigned's name, place and stead as a Director of the Company, to
execute and file the Annual Report, and thereafter to execute and file any
amendment or amendments thereto on Form 8, hereby giving and granting to said
attorneys full power and authority 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 the undersigned 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 this 8th day of
March, 1996.
/s/ A. Barry Rand
A. Barry Rand
STATE OF ILLINOIS )
COUNTY OF COOK )
On the 8th day of March, 1996, personally appeared before me A. Barry Rand to
me known and known to be the person described in and who executed the foregoing
instrument and such person duly acknowledged that such person executed and
delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 8th day of March, 1996.
/s/ Judy L. Anker
Notary Public
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred
to as the "Company"), proposes to file shortly with the Securities and Exchange
Commission, under the provisions of the Securities Exchange Act of 1934, as
amended, an Annual Report on Form 10-K for the fiscal year ended December 31,
1995 (the "Annual Report"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS O.G. SHAFFER,
B. F. ELLIOTT AND R.W.PEHLKE, and each of them, as attorneys for the undersigned
and in the undersigned's name, place and stead as a Director of the Company, to
execute and file the Annual Report, and thereafter to execute and file any
amendment or amendments thereto on Form 8, hereby giving and granting to said
attorneys full power and authority 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 the undersigned 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 this 4th day of
March, 1996.
/s/ James A. Unruh
James A. Unruh
STATE OF OHIO )
COUNTY OF MONTGOMERY)
On the 4th day of March, 1996, personally appeared before me James A. Unruh to
me known and known to be the person described in and who executed the foregoing
instrument and such person duly acknowledged that such person executed and
delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 4th day of March, 1996.
/s/ Susan H. Sowers
Notary Public
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
Ameritech Corporation's December 31, 1995 Consolidated Financial Statements and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 131,300
<SECURITIES> 0<F1>
<RECEIVABLES> 2,940,500
<ALLOWANCES> 166,200
<INVENTORY> 204,900
<CURRENT-ASSETS> 3,452,400
<PP&E> 30,873,700
<DEPRECIATION> 17,416,900
<TOTAL-ASSETS> 21,942,600
<CURRENT-LIABILITIES> 5,761,900
<BONDS> 4,513,200
<COMMON> 587,600
0
0
<OTHER-SE> 6,426,900
<TOTAL-LIABILITY-AND-EQUITY> 21,942,600
<SALES> 0<F2>
<TOTAL-REVENUES> 13,427,800
<CGS> 0<F3>
<TOTAL-COSTS> 10,124,800
<OTHER-EXPENSES> (260,000)
<LOSS-PROVISION> 209,500
<INTEREST-EXPENSE> 468,900
<INCOME-PRETAX> 3,094,100
<INCOME-TAX> 1,086,500
<INCOME-CONTINUING> 2,007,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,007,600
<EPS-PRIMARY> 3.63
<EPS-DILUTED> 3.63
<FN>
<F1> Securities are not material and therefore have not been stated separately
in the financial statements. This amount is included in the Cash tag.
<F2> Net sales of tangible products is not more than 10% of total operating
revenues and therefore has not been stated separately in the financial
statements pursuant to Regulation S-X, Rule 5-03(b). This amount is
included in the "Total Revenues" tag.
<F3> Cost of tangible goods sold is included in cost of service and products in
the financial statements and the "Total Cost" tag, pursuant to Regulation
S-X, Rule 5-03(b).
</FN>
</TABLE>
