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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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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 1-8609
PACIFIC TELESIS GROUP
A Nevada Corporation I.R.S. Employer Number 94-2919931
130 Kearny Street, San Francisco, California 94108
Telephone - Area Code (415) 394-3000
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Securities registered pursuant to Section 12(b) of the Act:
(Title of Each Class) (Name of Each Exchange on which Registered)
Common Stock, $.10 Par Value with New York Stock Exchange
Preferred Stock Purchase Rights Pacific Stock Exchange
Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None.
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 definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. | |
Based on the composite closing sales price on February 29, 1996, the aggregate
market value of all voting stock held by nonaffiliates was $12,048,808,190.
At February 29, 1996, 428,434,672 common shares were outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of Pacific Telesis Group's 1996 Proxy Statement, including Pacific
Telesis Group's 1995 Consolidated Financial Statements, are incorporated by
reference in Parts I, II and III hereof.
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TABLE OF CONTENTS
Item Description Page
- - ---- ----------- ----
PART I
1. Business ..................................................... 1
2. Properties ................................................... 15
3. Legal Proceedings ............................................ 15
4. Submission of Matters to a Vote of Security Holders .......... 15
PART II
5. Market for Registrant's Common Equity and Related Stockholder
Matters ...................................................... 16
6. Selected Financial Data ...................................... 16
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations .................................... 17
8. Financial Statements and Supplementary Data .................. 17
9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure..................................... 17
PART III
10. Directors and Executive Officers of Registrant ............... 18
11. Executive Compensation ....................................... 18
12. Security Ownership of Certain Beneficial Owners
and Management................................................ 18
13. Certain Relationships and Related Transactions ............... 18
PART IV
14. Exhibits, Financial Statement Schedule and Reports
on Form 8-K .................................................. 19
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PART I
Item 1. Business.
Except for historical information contained herein, this Annual Report on Form
10-K contains forward-looking statements that involve potential risks and
uncertainties. Pacific Telesis Group's (the "Corporation") actual results
could differ materially from those discussed herein. Factors that could cause
or contribute to such differences include, but are not limited to, those
discussed herein and those discussed in the "Annual Financial Review" in the
Corporation's 1996 Proxy Statement. Readers are cautioned not to place undue
reliance on these forward-looking statements which speak only as of the date
hereof. The Corporation undertakes no obligation to revise or update these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
GENERAL
Pacific Telesis Group was incorporated in 1983 under the laws of the State of
Nevada and has its principal executive offices at 130 Kearny Street,
San Francisco, California 94108 (telephone number (415) 394-3000).
The Corporation is one of seven regional holding companies ("RHCs") formed in
connection with the 1984 divestiture by AT&T Corp. ("AT&T") of its 22 wholly
owned operating telephone companies ("BOCs") pursuant to a consent decree
settling antitrust litigation (the "Consent Decree") approved by the United
States District Court for the District of Columbia (the "Court").
The Corporation includes a holding company, Pacific Telesis; two BOCs,
Pacific Bell and Nevada Bell (the "Telephone Companies"); and certain
diversified subsidiaries, all described more fully below. The holding company
provides financial, strategic planning, and general administrative functions
on its own behalf and on behalf of its subsidiaries.
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THE TELEPHONE COMPANIES AND THEIR SUBSIDIARIES
Nevada Bell and Pacific Bell and its wholly owned subsidiaries, Pacific Bell
Directory, Pacific Bell Information Services, Pacific Bell Mobile Services,
Pacific Bell Internet Services, Pacific Bell Network Integration, and others,
provide a variety of communications and information services in California and
Nevada. These services include: (1) dialtone and usage services, including
local service (both exchange and private line), message toll services within a
service area, Wide Area Toll Service (WATS)/800 services within a service
area, Centrex service (a central office-based switching service) and various
special and custom calling services; (2) exchange access to interexchange
carriers and information service providers for the origination and termination
of switched and non-switched (private line) voice and data traffic;
(3) billing services for interexchange carriers and information service
providers; (4) various operator services; (5) installation and maintenance of
customer premises wiring; (6) public communications services; (7) directory
advertising; (8) selected information services, such as voice mail; (9)
Internet access; and (10) network integration services.
Pacific Bell Directory ("Directory") publishes the Pacific Bell SMART Yellow
Pages(R). It is the oldest and largest publisher of Yellow Pages in
California and is among the largest Yellow Pages publishers in the United
States. As part of its ongoing small business advocacy efforts, Directory
produces an award-winning publication in partnership with the U.S. Small
Business Administration. "Small Business Success," now in its ninth year,
addresses topics of importance to entrepreneurs.
Pacific Bell Information Services ("PBIS") provides business and residential
voice mail and other selected information services. Current products include
The Message Center for home use, Pacific Bell Voice Mail for businesses and
Pacific Bell Call Management, a service that handles incoming business calls
and connects computer databases to answer routine customer questions.
Pacific Bell Mobile Services ("PBMS") was formed in 1994 to pursue
opportunities in personal communications services ("PCS"), a new generation of
wireless services geared to the business and consumer markets. In 1995,
Pacific Telesis Mobile Services, a wholly owned subsidiary of the Corporation,
obtained two licenses to offer PCS services in California and Nevada from the
Federal Communications Commission ("FCC"). PBMS will design, construct,
manage, and market services for the network. Management expects a widespread
offering of PCS services by early 1997.
Pacific Bell Internet Services ("PBI") was formed in 1995 to provide Internet
access services to a broad range of customers in California. PBI began
providing Internet access to large businesses in the third quarter of 1995 and
plans to provide residential service in 1996.
Pacific Bell Network Integration ("PBNI") was formed in 1995 to pursue
opportunities in the network integration business. In 1995, PBNI began
offering network design, installation and maintenance, and network management
services for business data communication networks. PBNI will expand its
service offerings in 1996.
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OTHER SUBSIDIARIES AND TELESIS FOUNDATION
Pacific Bell Communications ("PBC") was formed in 1995 to compete in the long-
distance market under the Telecommunications Act of 1996 (the
"Telecommunications Act"). Although PBC must meet certain requirements before
it can offer long-distance service, management expects to fulfill those
requirements in the first part of 1997. In March 1996, PBC filed an
application for certification to provide local and long-distance services in
California with the California Public Utilities Commission ("CPUC").
Pacific Telesis Enterprises was formed to be the holding company for certain
other subsidiaries and work groups that are pursuing entry into competitive
and/or emerging markets such as wireless, traditional and interactive video,
and Internet information and shopping services.
Pacific Telesis Enhanced Services was formed to provide support functions to
certain other subsidiaries thereby allowing these subsidiaries to focus on
service and customer development.
Pacific Telesis Interactive Media ("PTIM") will be the successor company to
ESS Ventures, the joint venture with the Los Angeles Times. PTIM was formed
to develop and offer California specific information, activity, and shopping
opportunities on the Internet.
Pacific Telesis Video Services ("PTVS") was formed to provide video services.
In July 1995, the Corporation acquired Cross Country Wireless Inc. ("CCW").
CCW has existing wireless television operations with over 40,000 video
customers in and near Riverside, California and holds licenses and rights to
provide wireless television in Los Angeles, Orange County, and San Diego.
Pacific Telesis Wireless Broadband Services ("PTWBS") was granted licenses in
the 38 Ghz band from the FCC and has other applications pending. PTWBS is
currently evaluating its strategic options for the granted licenses.
PacTel Capital Resources ("PTCR") has issued commercial paper and medium-term
notes guaranteed by the Corporation from time to time since 1987. In the
future, PTCR may also provide funding and other forms of financial support for
its other affiliates.
PacTel Capital Funding may issue guarantees and other forms of financial
support for its affiliates and third parties.
PacTel Re Insurance Company, Inc. reinsures policies of outside insurance
companies covering workers' compensation, general liability, and auto
liability exposures of the Corporation and its subsidiaries and affiliates.
The subsidiary also issues policies of property insurance directly to the
Corporation's subsidiaries and engages in property reinsurance transactions in
insurance markets worldwide.
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Pacific Telesis Group - Washington represents the Corporation's interests in
Washington, D.C. before the three branches of the federal government. It also
acts as a liaison with other telecommunications companies, trade associations,
government agencies, and a wide variety of interest groups.
Telesis Foundation, a private foundation organized under section 501(c)(3) of
the Internal Revenue Code, makes grants in the areas of education, health and
welfare, cultural, community, and civic activities. As of December 31, 1995,
Telesis Foundation had total assets with an estimated market value of
$56 million.
RESEARCH AND DEVELOPMENT
Bell Communications Research, Inc. ("Bellcore") furnishes the BOCs, including
the Telephone Companies, with technical and consulting assistance to support
their provision of exchange telecommunications and exchange access services.
Each of the other six RHCs or their BOCs and Pacific Bell hold one-seventh of
the voting stock of Bellcore, which serves as a central point of contact for
coordinating the efforts of the RHCs in meeting the national security and
emergency preparedness requirements of the federal government. In April 1995,
Bellcore announced a decision by its owners to pursue the sale or other
disposition of Bellcore. The owners have retained two investment banking
firms in connection with the proposed sale or other disposition. A final
decision regarding the disposition of interests and the structure of such
transaction has yet to be determined. Any transaction will be subject to
necessary approvals.
In addition, the Corporation conducts research and development through
Pacific Bell and through Telesis Technologies Laboratory Inc., a wholly owned
subsidiary of the Corporation. The Corporation spent approximately $16
million, $52 million, and $30 million in 1995, 1994, and 1993, respectively,
on research and development activities.
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FINANCING ACTIVITIES OF THE CORPORATION
Short-term borrowings are available under a commercial paper program and
through uncommitted unused lines of credit. These lines of credit are subject
to continued review by the lending banks. At December 31, 1995, the unused
lines of credit available totaled approximately $2.7 billion.
For longer-term borrowings, as of December 31, 1995, Pacific Bell had
remaining authority from the CPUC to issue up to $1.25 billion of long- and
intermediate-term debt. The proceeds may be used only to redeem maturing debt
and to refinance other debt issues. As of December 31, 1995, Pacific Bell had
the ability to issue up to $650 million of long- and intermediate-term debt
through a shelf registration filed with the Securities and Exchange Commission
("SEC") in April 1993. In addition, PTCR may issue up to $192 million of
medium-term notes pursuant to a shelf registration on file with the SEC.
Pacific Bell and PTCR are the only subsidiaries of the Corporation with any
long- or intermediate-term publicly held debt issues outstanding as of
December 31, 1995. The holding company itself has no such publicly held debt
issues outstanding.
In February 1996, Pacific Bell issued $250 million of 5.875 percent debentures
due February 15, 2006. The debentures may not be redeemed prior to maturity.
The proceeds from the sale of the debentures were used to reduce short-term
debt incurred to retire Pacific Bell's debentures totaling approximately $500
million in December 1995. The remaining debentures retired in December 1995
were financed by commercial paper and may be refinanced under the current
remaining authorities of $1 billion and $400 million from the CPUC and SEC,
respectively, described above.
In October 1995, the Corporation and Pacific Telesis Financing I, II, and III
filed a shelf registration with the SEC to sell up to $1 billion of Trust
Originated Preferred Securities ("TOPrS") to the public. The TOPrS are
subject to a guarantee from the Corporation. An offering of $500 million in
TOPrS priced at 7.56 percent was sold in January 1996. The proceeds were used
to pay down commercial paper. Proposed changes in income tax regulations may
limit the attractiveness of future issuances.
In March 1996, Moody's Investors Services, Inc. ("Moody's") placed the senior
debt ratings of Pacific Bell (Aa3), PacTel Capital Resources (A1), and
Pacific Telesis Financing I, II, and III ((P)"al") under review for possible
downgrade. Moody's expressed concerns about external financing requirements
associated with the Corporation's Advanced Communications Network and wireless
initiatives.
See the 1996 Proxy Statement under the heading "Liquidity and Financial
Condition" on pages F-26 through F-32 and in Notes I and J to the 1995
Consolidated Financial Statements on pages F-64 through F-66 and Note N to the
1995 Consolidated Financial Statements on page F-70 for additional discussion
of the Corporation's financing activities, which is incorporated herein by
reference.
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PRINCIPAL SERVICES
The operations of the Corporation's domestic and international cellular,
paging, and other wireless operations, which were spun off effective April 1,
1994, have been classified separately within the Corporation's financial
statements as "spun-off operations" and are excluded from the amounts of
revenues, expenses, assets, and liabilities of the Corporation's "continuing
operations." The Telephone Companies accounted for almost all of the
Corporation's operating revenues in 1995, 1994, and 1993. For these reasons,
the following discussion focuses on selected operating information for the
Telephone Companies. Additional information regarding revenues, operating
profit or loss, and assets of the Corporation, relating primarily to the
Telephone Companies, is incorporated from the 1996 Proxy Statement by
reference in "Item 8. Financial Statements and Supplementary Data" below.
Significant components of the Corporation's operating revenues are depicted in
the chart below:
% of Total Operating Revenues*
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Revenues by Major Category 1995 1994 1993
- - ---------------------------------------------------------------------------
Local Service
Recurring .............................. 28% 22% 22%
Other Local ............................ 15% 15% 16%
Network Access
Carrier Access Charges ................. 20% 18% 18%
End User & Other ....................... 7% 7% 7%
Toll Service
Message Toll Service ................... 12% 21% 20%
Other .................................. 1% 1% 2%
Other Service Revenues
Directory Advertising .................. 11% 11% 11%
Other .................................. 6% 5% 4%
---- ---- ----
TOTAL ...................................... 100% 100% 100%
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The percentages of the Corporation's operating revenues attributable to
interstate and intrastate telephone operations are displayed below:
% of Total Operating Revenues*
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1995 1994 1993
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Interstate telephone operations ............ 20% 17% 18%
Intrastate telephone operations ............ 80% 83% 82%
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TOTAL ...................................... 100% 100% 100%
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* Excludes revenues of spun-off operations.
6
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CONSENT DECREE
Under the terms of the Consent Decree, all territory served by the BOCs was
divided into geographical areas called "Local Access and Transport Areas"
("LATAs," also referred to as "service areas"). The Consent Decree generally
prohibited BOCs and their affiliates* from providing communications services
that cross service area boundaries; however, the networks of the BOCs
interconnect with carriers that provide such services (commonly referred to as
"interexchange carriers").
The Consent Decree provided that the RHCs shall not engage in certain lines of
business. The Consent Decree provided that the Court might waive the line of
business restrictions (i.e., grant a "Waiver") upon a showing that there was
no substantial possibility that the RHCs could use monopoly power to impede
competition in the market they sought to enter. The Court placed certain
conditions on the Waivers it granted.
Under the Consent Decree, the principal restrictions initially prohibited the
provision of interexchange telecommunications, information services, and
telecommunications equipment and the manufacturing of telecommunications and
customer premises equipment ("CPE"). The telecommunications businesses
originally permitted by the Consent Decree included the provision of exchange
telecommunications** and exchange access services, CPE, and printed directory
advertising. The information services prohibition was lifted in 1991. On
December 3, 1987, the Court interpreted the manufacturing restriction to mean
that the RHCs were prohibited from designing and developing telecommunications
equipment and CPE as well as from fabricating them. In March 1995, the Court
granted a Waiver that allowed the RHCs to provide telecommunications equipment
to unaffiliated parties. In March 1995, the Court also granted a Waiver to
allow the Corporation to own and operate certain facilities to receive video
programming and to provide limited interexchange video services.
On February 8, 1996, President Clinton signed into law the Telecommunications
Act. The Telecommunications Act provides that any conduct or activity
previously subject to the Consent Decree that occurs after February 8, 1996
will be subject to the Communications Act of 1934 (the "Communications Act"),
not the Consent Decree. See discussion under "Telecommunications Act" below.
- - ------------------
* The terms of the Consent Decree, with certain exceptions, applied
generally to all BOCs and their affiliates.
** "Exchange Telecommunications" under the Consent Decree included toll
services within a service area as well as local service.
7
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STATE REGULATION
As a provider of telecommunications services in California, Pacific Bell is
subject to regulation by the CPUC with respect to intrastate prices and
services, intrastate depreciation rates, the issuance of securities, and other
matters. The Public Service Commission of Nevada ("PSCN") regulates Nevada
Bell on similar issues.
The CPUC adopted a new regulatory framework ("NRF"), which is a form of "price
cap" regulation, for Pacific Bell in October 1989. In June 1994, the CPUC
reduced Pacific Bell's benchmark rate of return from 13.0 percent to
11.5 percent. Earnings between 11.5 percent and 15.0 percent will be shared
equally between Pacific Bell and its customers. Earnings above 15.0 percent
will be shared 70.0 percent and 30.0 percent between Pacific Bell and its
customers, respectively.
Under "price cap" regulation, the CPUC requires Pacific Bell to submit an
annual price cap filing to determine prices for categories of services for
each new year. Price adjustments reflect the effects of any change in
inflation less a productivity factor as well as adjustments for certain
exogenous cost changes. In December 1995, the CPUC issued an order in Phase I
of its second review of the NRF. The order suspended use of the "inflation
minus productivity" component of the price cap formula for 1996 through 1998.
This action freezes the price caps on most of Pacific Bell's regulated
services for three years except for adjustments due to exogenous cost changes
or price changes approved through the CPUC's application process.
Phase II of the CPUC's second review was scheduled to begin in January 1996.
The review was to consider the continued applicability of earnings caps,
sharing, and other items. In February 1996, an Assigned Commissioner's Ruling
suggested that this phase be deferred until the next review scheduled for
1998. Comments on the ruling were filed in March 1996. Pacific Bell has
asked that certain of these issues be reviewed in 1996.
On April 24, 1995, the PSCN issued a rule redesigning telecommunications
regulation in the State of Nevada. This rule includes many reforms initiated
by an industry coalition which includes Nevada Bell, Nevada interexchange
carriers ("IECs"), and other Nevada local exchange carriers ("LECs"). The
rule includes compromises reached with other parties, including the cable
industry and the state Office of Consumer Advocate. The new rule will remove
barriers to toll and local competition in Nevada but will also allow Nevada
Bell to keep any productivity gains by eliminating the current customer
sharing provision. The new plan is optional and will require a rate case to
determine initial pricing. After adoption, pricing flexibility is based on
the nature and competitive environment of the service. Prices for basic
service are capped during a three- or five-year period at Nevada Bell's
election. The plan does not prohibit or require presubscription and allows
interconnection where technologically feasible. Management anticipates a
complete rate redesign as part of a rate case which was filed in March 1996
for rates effective January 1, 1997. Management cannot predict the outcome of
the proceeding but believes that competition and increased productivity will
result in price reductions for some customers.
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See the 1996 Proxy Statement under the headings "CPUC Revenue Rebalancing
Shortfall," "CPUC Regulatory Framework Review," "PSCN Regulatory Review,"
"Local Services Competition," and "Universal Service" on pages F-10 through F-
12 for additional information on the regulation of the Telephone Companies by
the CPUC and PSCN, which is incorporated herein by reference.
See the 1996 Proxy Statement under the headings "Uniform Systems of Account
("USOA") Turnaround Adjustment," "Revenues Subject to Refund," and "Property
Tax Investigation" on pages F-32 through F-33, "Change in Accounting for
Postretirement and Postemployment Costs" in Note A to the 1995 Consolidated
Financial Statements on page F-49 and "Revenues Subject to Refund" and
"Property Tax Investigation" in Note O to the 1995 Consolidated Financial
Statements on pages F-71 through F-72 for a discussion of other CPUC
proceedings, including the application of the USOA Turnaround Adjustment,
regulatory and ratemaking treatment for postretirement benefits in connection
with the adoption of Statement of Financial Accounting Standards No. 106, and
the regulatory and ratemaking treatment of certain property tax savings, which
is incorporated herein by reference.
FEDERAL REGULATION
The Telephone Companies are subject to the jurisdiction of the FCC with
respect to interstate access charges and other matters. The FCC prescribes a
Uniform System of Accounts and interstate depreciation rates for operating
telephone companies. The FCC also prescribes "separations procedures," which
are used to separate plant investment, expenses, taxes, and reserves between
interstate services under the jurisdiction of the FCC and intrastate services
under the jurisdiction of state regulatory authorities. The Telephone
Companies are also required to file tariffs with the FCC for the services they
provide. In addition, the FCC establishes procedures for allocating costs and
revenues between regulated and unregulated activities.
Beginning in 1991, the FCC adopted a price cap system of incentive-based
regulation for LECs. Pacific Bell's access rates were retargeted to a new
11.25 percent rate-of-return on rate base assets. The FCC's price cap system
provides a formula for adjusting rates annually for changes in inflation less
a productivity factor and changes in certain costs that are triggered by
administrative, legislative, or judicial action beyond the control of the
LECs.
In March 1995, the FCC adopted new interim price cap rules that govern the
prices that the larger LECs, including the Telephone Companies, charge IECs
for access to local telephone networks. The interim rules require LECs to
adjust their maximum prices for changes in inflation, productivity, and
certain costs beyond the control of the LEC. Under the interim plan, LECs may
choose from three productivity factors: 4.0, 4.7, or 5.3 percent. Election
of the 5.3 percent productivity factor permits the LEC to retain all of its
earnings, whereas election of the lower productivity factors requires earnings
above certain thresholds to be shared with customers. The Telephone Companies
have chosen the 5.3 percent productivity factor, which enables them to retain
all of their earnings after July 1, 1995.
See the 1996 Proxy Statement under the heading "FCC Regulatory Framework
Review" on page F-9 for additional information on the regulation of the
Telephone Companies by the FCC, which is incorporated herein by reference.
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TELECOMMUNICATIONS ACT
The Telecommunications Act became effective on February 8, 1996. The
Telecommunications Act is the broadest reform of the telecommunications
industry since the Communications Act. The Telecommunications Act essentially
opens all telecommunications markets and prohibits the states from continuing
or establishing any barriers to entry. Once the new law is fully implemented,
consumers will have many new options for their local telephone, long-distance,
and cable television services. The Telecommunications Act will affect the
Corporation as described below.
The Telephone Companies may provide out-of-region interLATA service and
certain incidental interLATA services immediately. Before they can provide
interLATA service that originates in California or Nevada, each Telephone
Company must open its local markets to competition, unbundle its network to
other competitors, and comply with the terms and conditions of a "competitive
checklist" specified in the Telecommunications Act. The Telephone Companies
must individually request authority to offer in-region interLATA service from
the FCC. This service must initially be offered through a separate affiliate.
The separate affiliate requirement expires three years after approval, unless
extended by the FCC.
The Telephone Companies may only engage in electronic publishing through a
separate affiliate, teaming arrangement, or joint venture. Joint marketing of
electronic publishing services by the electronic publishing affiliate and the
Telephone Company is prohibited, with the exception of nonexclusive inbound
telemarketing. The restrictions on electronic publishing expire in early
2000.
The Telecommunications Act allows for the continued provision by the Telephone
Companies of intraLATA information services, other than electronic publishing,
and intraLATA Internet access. The Telecommunications Act also allows for the
provision by the Telephone Companies of interLATA information storage and
retrieval services provided by a separate affiliate to and from the
Corporation's databases. Full interLATA information services and interLATA
Internet access may be provided through a separate affiliate once the
Telephone Companies obtain authority to provide interLATA services originating
in their states. Some Internet services are also electronic publishing
services and are subject to the electronic publishing restrictions.
The Telephone Companies may provide a variety of video programming services
directly to subscribers in their service areas under regulations that will
vary according to the type of services that are provided. The Telephone
Companies may provide video services over wireless cable, as a common carrier,
as a cable system operator, as "interactive on-demand services," or as an
"open video system." Interactive on-demand services would allow unscheduled,
point-to-point video programming over the Telephone Companies' switched
networks on an on-demand basis. An "open video system" would allow the
Telephone Companies to select programming for a certain number of channels if
demand exceeds capacity. An "open video system" approved by the FCC would be
subject to reduced regulatory burdens.
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The Telecommunications Act allows the Telephone Companies to collaborate with
manufacturers of telecommunications and customer premises equipment during the
design and development phases. The Telephone Companies may also engage in
research and enter into royalty agreements in connection with the
manufacturing of telecommunications and customer premises equipment. The
Telephone Companies may manufacture telecommunications and customer premises
equipment, subject to certain restrictions, once they have obtained authority
to provide interLATA services originating in their states.
CHANGING INDUSTRY ENVIRONMENT
With increasing competition for existing services and the introduction of
local services competition in California effective January 1, 1996, the
Telephone Companies face an increasingly competitive marketplace. In response
to the competitive challenge, management has developed three key strategies
intended to provide a consistent, integrated focus for management's decisions
and actions. These overarching strategies are to strengthen the Corporation's
core telecommunications business, develop new markets, and promote public
policy reform.
A strong core business provides the essential foundation to pursue future-
oriented opportunities. To strengthen the core telecommunications business,
management will continue to improve customer service and reduce costs, upgrade
network and systems capability, and retain and expand existing markets through
product and channel innovation. See the 1996 Proxy Statement under the
heading "Strengthen Core Business" on pages F-3 through F-7 for additional
information, which is incorporated herein by reference.
As competition becomes more fierce in its core telecommunications business,
the Corporation will rely increasingly on developing new markets to create new
revenue sources. Toward that end, the Corporation is actively pursuing
opportunities in long-distance, video services, PCS, wireless digital
television, Internet access, home entertainment, and other information
services. See the 1996 Proxy Statement under the heading "Develop New
Markets" on pages F-7 through F-8 for additional information, which is
incorporated herein by reference.
Telecommunications policy reform has been, and will continue to be, the
subject of much debate in Congress, the California Legislature, the courts,
the FCC, the CPUC, and the PSCN. Management supports public policy reform
that promotes fair competition and ensures that responsibility for universal
service is shared by all who seek to provide telecommunications services.
Competition will bring great benefits to customers by giving them the
opportunity to choose among service providers for their telecommunications
needs. See the 1996 Proxy Statement under the heading "Promote Public Policy
Reform" on pages F-9 through F-12 for additional information, which is
incorporated herein by reference.
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COMPETITION
Regulatory, legislative, and judicial actions, as well as advances in
technology, have expanded the types of available communications products and
services and the number of companies offering such services. Various forms of
competition, including price and service competition, are growing steadily and
are already having an effect on the Telephone Companies' earnings. An
increasing amount of this competition is from large companies with substantial
capital, technological, and marketing resources. Currently, competitors
primarily consist of interexchange carriers, competitive access providers, and
wireless companies. The Telephone Companies also face competition from cable
television companies and others. The Corporation will face significant
competition in its provision of telephone and new services. However,
management believes that the Corporation has a reputation for high quality
services.
Telephone Services Competition
See the 1996 Proxy Statement under the headings "Local Services Competition"
on page F-11 and "Competitive Risk" on pages F-12 through F-14 for information
on current developments in telephone services competition that the Telephone
Companies face, which is incorporated herein by reference.
Directory Advertising
Other producers of printed directories offer products that compete with
certain Pacific Bell Directory SMART Yellow Pages products. Competition is
not limited to other printed directories, but includes newspapers, radio,
television, and, increasingly, direct mail and directories offered over the
Internet. In addition, new advertising and information products may compete
directly or indirectly with the SMART Yellow Pages. With the introduction of
local exchange competition, Pacific Bell Directory will have to acquire
listings from other providers for its products, and competing directory
publishers may ally themselves with other telecommunications providers.
Video Services and Wireless Digital Television
The Corporation will face competition in the provision of video services and
wireless digital television from existing cable television and satellite
providers, and wireless, long-distance, and other telephone companies.
Internet Access
The Corporation faces competition in the provision of Internet access from
established Internet access providers, cable television, long-distance, and
other telephone companies.
Network Integration
The Corporation will face competition in the provision of network integration
services primarily from value added distributors with professional services
and network management capability, including large telecommunication services
providers.
12
<PAGE>
PCS
The Corporation will face significant competition in the provision of PCS
services from the holders of the other licenses in such areas. In addition,
the Corporation must compete with established providers of cellular service.
Long Distance
The Corporation will face competition in the long-distance market from
established long-distance service providers including AT&T, MCI Communications
Corporation, and Sprint Corporation. In addition, the Corporation will face
competition from competitive access providers, cable television, wireless,
long-distance, and other telephone companies.
EMPLOYEES
As of December 31, 1995, the Corporation and its subsidiaries employed
48,889 persons. About 66 percent of the employees of the Corporation are
represented by unions. In August 1995, the Telephone Companies reached a
tentative three year agreement with Communications Workers of America, which
represented about 32,000 employees at December 31, 1995. The agreement was
ratified by the union membership in September 1995. The agreement features a
10.5 percent wage increase over three years, a 14 percent pension increase, a
$16 million training and retraining program, a new voluntary early retirement
option, employment security, and improved health benefits. Agreements were
also reached with two other unions. Management estimates that the agreements
will result in increased costs of approximately $550 million over three years.
This estimate does not include savings which may result from the continued
force reduction programs. In October 1995, the Corporation began offering the
new voluntary early retirement option to certain non-management employees.
As a result of its efforts to restructure and reengineer its processes,
Pacific Bell, excluding subsidiaries, reduced net force by about 3,100
employees during 1995.
13
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The list below gives the names of executive officers as of February 29, 1996,
their present titles and the dates they were elected to these positions.
Name Age Title Since
P. J. Quigley.......... 53 Chairman of the Board, President and
Chief Executive Officer .......... 4/94
D. W. Dorman* ......... 42 Chairman of the Board, President
and Chief Executive Officer
- Pacific Bell ................... 2/96
W. E. Downing*......... 56 Executive Vice President, Chief
Financial Officer and Treasurer... 4/94
M. J. Fitzpatrick*..... 47 President and Chief Executive Officer
- Pacific Telesis Enterprises .... 7/94
J. R. Moberg* ......... 60 Executive Vice President, Human
Resources ........................ 9/87
R. W. Odgers* ......... 59 Executive Vice President, General
Counsel, External Affairs,
and Secretary..................... 3/88
R. L. Barada .......... 51 Vice President - Corporate Strategy
and Development.................... 1/95
Messrs. Quigley, Downing, Moberg, Odgers, and Barada have held responsible
managerial positions with the Corporation or one of its subsidiaries for at
least the past five years.
Mr. Dorman joined the Corporation as Group President and Pacific Bell as
President and Chief Executive Officer in July 1994. In February 1996,
Mr. Dorman was elected Chairman of the Board of Pacific Bell. Prior to
joining the Corporation, Mr. Dorman was employed at Sprint Corporation since
1981. Beginning in 1984, he held a series of leadership positions at Sprint
Corporation, culminating as President, Business Services from 1993 to 1994.
Mr. Fitzpatrick joined Pacific Bell as Executive Vice President in August
1993. In July 1994, Mr. Fitzpatrick became an Executive Vice President of the
Corporation. Prior to joining Pacific Bell, Mr. Fitzpatrick was at Network
Systems Corporation, a computer networking firm, where he became President in
October 1991 and Chief Executive Officer in April 1992.
Officers are not elected for a fixed term, but serve at the discretion of the
Corporation's Board of Directors.
- - ------------------
* Also executive officers of Pacific Bell. Messrs. Dorman and Fitzpatrick
are Group President and Executive Vice President, respectively, of the
Corporation.
14
<PAGE>
Item 2. Properties.
As of December 31, 1995, the properties of the Telephone Companies represented
substantially all plant, property, and equipment of the Corporation.
The properties of the Telephone Companies do not lend themselves to
description by character and location of principal units. At
December 31, 1995, the percentage distribution of total telephone plant by
major category for the Telephone Companies was as follows:
Pacific Nevada
Telecommunications Property, Plant and Equipment Bell Bell
- - ----------------------------------------------------------------------------
Land and buildings (occupied principally
by central offices) ............................... 10% 8%
Cable and conduit ................................... 41% 53%
Central office equipment ............................ 35% 33%
Other ............................................... 14% 6%
------- -------
Total ............................................... 100% 100%
============================================================================
At December 31, 1995, the percent utilization of central office equipment
capacity for Pacific Bell and Nevada Bell was approximately 93 percent and
95 percent, respectively.
Substantially all of the installations of central office equipment and
administrative offices are in buildings and on land owned by the Corporation.
Many garages, business offices, and telephone service centers are in rented
quarters.
As of December 31, 1995, about 25 percent of the network access lines of
Pacific Bell were in Los Angeles and vicinity and about 25 percent were in
San Francisco and vicinity. On that date, about 86 percent of Nevada Bell's
network access lines were in Reno and vicinity. The Telephone Companies
provided approximately 77 percent and 29 percent of the total access lines in
California and Nevada, respectively, on December 31, 1995. The Telephone
Companies do not furnish local service in certain sizeable areas of California
and Nevada which are served by nonaffiliated telephone companies.
Item 3. Legal Proceedings.
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted for a vote of security holders during the fourth
quarter of the year covered by this report.
15
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
DESCRIPTION OF COMMON STOCK, DIVIDEND AND MARKET INFORMATION
All shares of common stock, par value $0.10 per share ("Common Stock"), of the
Corporation are entitled to participate equally in dividends. Each shareowner
has one vote for each share registered in the shareowner's name. All shares of
Common Stock would rank equally on liquidation. Owners of shares of Common
Stock have no preemptive or cumulative voting rights.
At February 29, 1996, there were 718,202 holders of record of the
Corporation's Common Stock. At February 29, 1996, the high and low sales
price for the Corporation's Common Stock based on New York Stock Exchange
Composite Transactions was $28.625 and $28.125, respectively.
The markets for trading in the Common Stock are the New York, Pacific,
Chicago, Swiss, and London Stock Exchanges.
The Corporation from time to time purchases shares of its Common Stock on the
open market or through privately negotiated purchases and holds these shares
as treasury stock.
All shares of Common Stock are fully paid and nonassessable.
Information regarding dividends paid on the Common Stock for 1995 and 1994 and
the quarterly high and low sales prices of the Common Stock during 1995 and
1994 are included in the 1996 Proxy Statement under the heading "Stock Trading
Activity and Dividends Paid" on page F-1, which is incorporated herein by
reference pursuant to General Instruction G(2).
The declaration and timing of all dividends are at the discretion of the
Corporation's Board of Directors and are dependent upon the Corporation's
earnings and financial requirements, general business conditions, and other
factors; there can be no assurances as to the amount or frequency of any
future dividends on the Common Stock.
Item 6. Selected Financial Data.
The information required by this Item is included in the 1996 Proxy Statement
under the heading "Selected Financial and Operating Data" on pages F-34
through F-35, which is incorporated herein by reference pursuant to General
Instruction G(2).
16
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The information required by this Item is included in the 1996 Proxy Statement
under the heading "Management's Discussion and Analysis of Results of
Operations and Financial Condition" on pages F-3 through F-33, which is
incorporated herein by reference pursuant to General Instruction G(2).
Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT ACCOUNTANTS
Our report on the consolidated financial statements of Pacific Telesis Group
and Subsidiaries has been incorporated by reference in this Form 10-K from
page F-38 of the 1996 Proxy Statement of Pacific Telesis Group and
Subsidiaries. In connection with our audits of such financial statements, we
have also audited the related financial statement schedule listed in Item 14
on page 19 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ Coopers & Lybrand L.L.P.
San Francisco, California
February 22, 1996
All other information required by this Item is included in the 1996 Proxy
Statement on pages F-36 through F-37 (entire text under the heading "Report of
Management"), and on pages F-39 through F-76 (all text and data through Note Q
on such pages, comprising the Corporation's consolidated financial
statements), which is incorporated herein by reference pursuant to General
Instruction G(2).
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
No disagreements with the Corporation's independent accountants on any
accounting or financial disclosure occurred during the period covered by this
report.
17
<PAGE>
PART III
Item 10. Directors and Executive Officers of Registrant.
For information with respect to executive officers of the Corporation, see
"Executive Officers of the Registrant" at the end of Part I of this report,
which is incorporated herein by reference. For information with respect to
the directors of the Corporation, see "Election of Directors" on pages 4
through 6 of the 1996 Proxy Statement, which is incorporated herein by
reference pursuant to General Instruction G(3). For information with respect
to compliance with Section 16(a) of the Securities Exchange Act of 1934, as
amended, see "Section 16 Reporting" on page 10 of the 1996 Proxy Statement,
which is incorporated herein by reference pursuant to General Instruction
G(3).
Item 11. Executive Compensation.
For information with respect to executive compensation, see "Report of the
Compensation and Personnel Committee," "Compensation and Personnel Committee
Interlocks and Insider Participation," "Executive Compensation," "Pension
Plans," and "Employment Contracts and Termination of Employment or Change in
Control Arrangements" on pages 11 through 23 of the 1996 Proxy Statement,
which is incorporated herein by reference pursuant to General Instruction
G(3). For information with respect to director compensation, see "Director
Compensation and Related Transactions" on pages 7 through 9 of the 1996 Proxy
Statement, which is incorporated herein by reference pursuant to General
Instruction G(3).
Item 12. Security Ownership of Certain Beneficial Owners and Management.
For information with respect to the security ownership of the directors and
officers of the Corporation and beneficial owners of more than five percent of
the Corporation's Common Stock, see "Stock Ownership" on pages 9 through 10 of
the 1996 Proxy Statement, which is incorporated herein by reference pursuant
to General Instruction G(3).
Item 13. Certain Relationships and Related Transactions.
For information with respect to certain relationships and related
transactions, see "Director Compensation and Related Transactions" on pages 7
through 9 and "Compensation and Personnel Committee Interlocks and Insider
Participation" on page 13 of the 1996 Proxy Statement, which is incorporated
herein by reference pursuant to General Instruction G(3).
18
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Documents filed as part of the report:
(1) Financial Statements: Page
Report of Management ............................... *
Report of Independent Accountants .................. *
Financial Statements:
Consolidated Statements of Income ............. *
Consolidated Balance Sheets ................... *
Consolidated Statements of Shareowners'
Equity ...................................... *
Consolidated Statements of Cash Flows ......... *
Notes to Consolidated Financial
Statements .................................. *
Quarterly Financial Data ...................... *
(2) Financial Statement Schedule:
II - Valuation and Qualifying Accounts ............ 26
Financial statement schedules other than listed above have been
omitted either because the required information is contained in
the Consolidated Financial Statements and the notes thereto or
because such schedules are not required or applicable.
* Incorporated herein by reference to the appropriate portions of the 1996
Proxy Statement (File No. 1-8609). (See Part II.)
19
<PAGE>
(3) Exhibits:
Exhibits identified in parentheses below as on file with the
SEC are incorporated herein by reference as exhibits hereto.
Unless otherwise indicated, all exhibits so incorporated are
from File No. 1-8609. All management contracts or compensatory
plans or arrangements required to be filed as exhibits to this
Form 10-K pursuant to Item 14(c) are filed as Exhibits 10aa
through 10vv.
Exhibit
Number Description
------- -----------
3a Articles of Incorporation of Pacific Telesis
Group, as amended to June 17, 1988 (Exhibit 3a
to Registration Statement No. 33-24765).
3b By-Laws of Pacific Telesis Group, as amended to
September 24, 1993 (Exhibit 3b to Registration
Statement No. 33-50897, filed November 2, 1993).
4a Rights Agreement, dated as of September 22,
1989, between Pacific Telesis Group and The
First National Bank of Boston, as successor
Rights Agent, which includes as Exhibit B
thereto the form of Rights Certificate
(Exhibits 1 and 2 to Form SE filed September 25,
1989 as part of Form 8-A).
4b No instrument which defines the rights of
holders of long- and intermediate-term debt of
Pacific Telesis Group and its subsidiaries is
filed herewith pursuant to Regulation S-K, Item
601(b)(4)(iii)(A). Pursuant to this regulation,
Pacific Telesis Group hereby agrees to furnish a
copy of any such instrument to the SEC upon
request.
10e Separation Agreement by and between the
Corporation and PacTel Corporation dated as of
October 7, 1993, and amended November 2, 1993
and March 25, 1994 (Exhibit 10e to Form 10-K for
1993).
10e(i) Amendment No. 3 to Separation
Agreement effective as of April 1,
1994 (Exhibit 10e(i) to Form 10-K for
1994).
10aa Pacific Telesis Group Senior Management Short
Term Incentive Plan (Attachment A to Pacific
Telesis Group's 1995 Proxy Statement, including
Pacific Telesis Group's 1994 Consolidated
Financial Statements filed March 13, 1995).
20
<PAGE>
10bb Pacific Telesis Group Senior Management Long
Term Incentive Plan (Attachment A to Pacific
Telesis Group's 1995 Proxy Statement, including
Pacific Telesis Group's 1994 Consolidated
Financial Statements filed March 13, 1995).
10cc Pacific Telesis Group Executive Life Insurance
Plan (Exhibit 10cc to Form SE filed March 27,
1987 in connection with the Corporation's Form
10-K for 1986).
10cc(i) Resolutions amending the Plan,
effective April 1, 1994 (Exhibit
10cc(i) to Form 10-K for 1993).
10dd Pacific Telesis Group Executive Disability and
Survivor Protection Plan, as amended and
restated effective July 1, 1995.
10ee Pacific Telesis Group Senior Management Transfer
Program (Exhibit 10ee to Registration Statement
No. 2-87852).
10ff Pacific Telesis Group Senior Management
Financial Counseling Program (Exhibit 10ff to
Registration Statement No. 2-87852).
10gg Pacific Telesis Group Deferred Compensation Plan
for Nonemployee Directors (Exhibit 10gg to Form
SE filed April 1, 1991 in connection with the
Corporation's Form 10-K for 1990).
10gg(i) Resolutions amending the Plan
effective December 21, 1990, November
20, 1992 and December 18, 1992
(Exhibit 10gg(i) to Form SE filed
March 26, 1993 in connection with the
Corporation's Form 10-K for 1992).
10gg(ii) Resolutions amending the Plan,
effective April 1, 1994 (Exhibit
10gg(ii) to Form 10-K for 1993).
10hh Description of Pacific Telesis Group Directors'
and Officers' Liability Insurance Program
(Exhibit 10hh to Form 10-K for 1993).
10ii Description of Pacific Telesis Group Plan for
Nonemployee Directors' Travel Accident Insurance
(Exhibit 10ii to Form SE filed March 26, 1990 in
connection with the Corporation's Form 10-K for
1989).
21
<PAGE>
10jj Pacific Telesis Group 1994 Stock Incentive Plan
(Attachment A to Pacific Telesis Group's 1994
Proxy Statement, including Pacific Telesis
Group's 1993 Consolidated Financial Statements
filed March 11, 1994, and amended March 14 and
March 25, 1994).
10jj(i) Resolutions amending the Plan,
effective January 1, 1995 (Attachment
A to Pacific Telesis Group's 1995
Proxy Statement including Pacific
Telesis Group 1994 Consolidated
Financial Statements filed March 13,
1995).
10kk Pacific Telesis Group Executive Supplemental
Pension Plan.
10kk(i) Trust Agreement No. 3 between Pacific
Telesis Group and Bankers Trust
Company in connection with the
Corporation's executive supplemental
pension benefits (Exhibit 10kk(iv) to
Form 10-K for 1993).
10ll Pacific Telesis Group Executive Deferral Plan
(Exhibit 10ll to Form 10-K for 1994).
10mm Description of Pacific Telesis Group Personal
Umbrella Liability Insurance (Exhibit 10mm to
Form 10-K for 1994).
10nn Pacific Telesis Group Mid-Career Pension Plan,
as amended and restated effective July 1, 1995.
10nn(i) Trust Agreement No. 3 between Pacific
Telesis Group and Bankers Trust
Company in connection with the
Corporation's executive supplemental
pension benefits (Exhibit 10kk(iv) to
Form 10-K for 1993).
10oo Pacific Telesis Group Outside Directors'
Deferred Stock Unit Plan.
10pp Employment Contracts for Certain Senior Officers
of Pacific Telesis Group (Exhibit 10pp to Form
SE filed March 23, 1989 in connection with the
Corporation's Form 10-K for 1988).
10pp(i) Schedule to Exhibit 10pp (Exhibit
10pp(i) to Form 10-K for 1993).
22
<PAGE>
10pp(ii) Employment contracts for certain
senior officers of Pacific Telesis
Group (Exhibit 10pp(ii) to Form 10-K
for 1993).
10pp(iii) Employment contract for senior officer
of Pacific Telesis Group (Exhibit
10pp(iii) to Form 10-Q for the quarter
ended September 30, 1994).
10pp(iv) Employment contract for certain senior
officers of Pacific Telesis Group
(Exhibit 10pp(iv) to Form 10-K for
1994).
10pp(v) Supplemental Benefit Agreement for
senior officer of Pacific Telesis
Group.
10rr Executive supplemental benefit agreement
(Exhibit 10rr to Form 10-K for 1993).
10ss Pacific Telesis Group Outside Directors'
Retirement Plan, as amended and restated
effective January 26, 1996.
10tt Representative Indemnity Agreement between
Pacific Telesis Group and certain of its
officers and each of its directors (Exhibit 10tt
to Form SE filed March 29, 1988 in connection
with the Corporation's Form 10-K for 1987).
10uu Trust Agreement between Pacific Telesis Group
and Bankers Trust Company, as successor Trustee,
in connection with the Pacific Telesis Group
Executive Deferral Plan (Exhibit 10uu to Form SE
filed March 23, 1989 in connection with the
Corporation's Form 10-K for 1988).
10uu(i) Amendment to Trust Agreement No. 1
effective December 11, 1992 (Exhibit
10uu(i) to Form SE filed March 26,
1993 in connection with the
Corporation's Form 10-K for 1992).
10uu(ii) Amendment to Trust Agreement No. 1,
effective May 28, 1993 (Exhibit
10uu(ii) to Form 10-K for 1993).
10uu(iii) Amendment to Trust Agreement No. 1,
effective November 15, 1993 (Exhibit
10uu(iii) to Form 10-K for 1993).
23
<PAGE>
10vv Trust Agreement between Pacific Telesis Group
and Bankers Trust Company, as successor Trustee,
in connection with the Pacific Telesis Group
Deferred Compensation Plan for the Nonemployee
Directors (Exhibit 10vv to Form SE filed
March 23, 1989 in connection with the
Corporation's Form 10-K for 1988).
10vv(i) Amendment to Trust Agreement No. 2
effective December 11, 1992 (Exhibit
10vv(i) to Form SE filed March 26,
1993 in connection with the
Corporation's Form 10-K for 1992).
10vv(ii) Amendment to Trust Agreement No. 2,
effective May 28, 1993 (Exhibit
10vv(ii) to Form 10-K for 1993).
11 Computation of Earnings per Common Share.
12 Computation of Ratio of Earnings to Fixed
Charges.
21 Subsidiaries of Pacific Telesis Group.
23 Consent of Coopers & Lybrand L.L.P.
24 Powers of Attorney executed by Directors and
Officers who signed this Form 10-K.
27 Financial Data Schedule.
99a Pacific Telesis Group's 1996 Proxy Statement,
including Pacific Telesis Group's 1995
Consolidated Financial Statements (Filed March
4, 1996).
99b Annual Report on Form 11-K for the Pacific
Telesis Group Supplemental Retirement and
Savings Plan for Salaried Employees for the year
1995 (To be filed as an amendment within 180
days).
99c Annual Report on Form 11-K for the Pacific
Telesis Group Supplemental Retirement and
Savings Plan for Nonsalaried Employees for the
year 1995 (To be filed as an amendment within
180 days).
24
<PAGE>
The Corporation will furnish to a security holder upon request a copy of
any exhibit at cost.
(b) Reports on Form 8-K:
Form 8-K, Date of Report November 17, 1995, was filed with the SEC
under Item 5 describing a class action complaint.
25
<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.
PACIFIC TELESIS GROUP
BY /s/ William E. Downing
-------------------------
William E. Downing,
Executive Vice President,
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
DATE: March 22, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Philip J. Quigley,* Chairman of the Board, President and
Chief Executive Officer
/s/ William E. Downing, Executive Vice President,
Chief Financial Officer and Treasurer
Gilbert F. Amelio,* Director Lewis E. Platt,* Director
William P. Clark,* Director Toni Rembe,* Director
Herman E. Gallegos,* Director S. Donley Ritchey,* Director
Frank C. Herringer,* Director Richard M. Rosenberg,* Director
Mary S. Metz,* Director
*BY /s/ William E. Downing
------------------------------------
William E. Downing, attorney-in-fact
DATE: March 22, 1996
26
<PAGE>
Sheet 1 of 3
PACIFIC TELESIS GROUP AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in millions)
- - ---------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- - ---------------------------------------------------------------------------
Allowance for Doubtful Accounts
- - -------------------------------
Additions
--------------------
(1) (2)
Charged to Charged
Balance at Costs and to Other Balance at
End of Prior Expenses Accounts Deductions End of
Period (a) (b) (c) Period
- - ---------------------------------------------------------------------------
Year 1995 $134 $167 $147 $316 $132
Year 1994 $138 $151 $143 $298 $134
Year 1993 $130 $163 $140 $295 $138
===========================================================================
Reserve for Discontinuing Real Estate Operations
- - ------------------------------------------------
Additions
--------------------
(1) (2)
Charged to Charged
Balance at Costs and to Other Balance at
End of Prior Expenses Accounts Deductions End of
Period (d) Period
- - ---------------------------------------------------------------------------
Year 1995 $ 51 $ 0 $0 $ 19 $ 32
Year 1994 $338 $ 0 $0 $287 $ 51
Year 1993 $ 33 $347 $0 $ 42 $338
===========================================================================
See accompanying notes on Sheet 3 of 3.
27
<PAGE>
Sheet 2 of 3
PACIFIC TELESIS GROUP AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in millions)
- - ---------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- - ---------------------------------------------------------------------------
Reserve for Restructuring
- - -------------------------
Additions
--------------------
(1) (2)
Charged to Charged
Balance at Costs and to Other Balance at
End of Prior Expenses Accounts Deductions End of
Period (e) (f) (g) Period
- - ---------------------------------------------------------------------------
Year 1995 $ 819 $ 0 $ 0 $591 $ 228
Year 1994 $1,097 $ 0 $ 0 $278 $ 819
Year 1993 $ 101 $977 $43 $ 24 $1,097
===========================================================================
Various Other Reserves
- - ----------------------
Additions
---------------------
(1) (2)
Balance at Charged to Charged Balance at
End of Prior Costs and to Other End of
Period Expenses Accounts Deductions Period
- - ---------------------------------------------------------------------------
Year 1995 $68 $ 0 $0 $ 2 $66
Year 1994 $90 $ 0 $0 $22 $68
Year 1993 $27 $107 $0 $44 $90
===========================================================================
See accompanying notes on Sheet 3 of 3.
28
<PAGE>
Sheet 3 of 3
PACIFIC TELESIS GROUP AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
- - --------------------
(a) Provision for uncollectibles includes certain direct write-off items
which are not reflected in this account.
(b) Amounts in this column reflect items of uncollectible interstate and
intrastate accounts receivable purchased from and billed for AT&T and
other interexchange carriers under contract arrangements.
(c) Amounts in this column reflect items written off, net of amounts
previously written off but subsequently recovered.
(d) Costs and expenses for 1993 reflect an additional pre-tax loss reserve
of $347 million to cover potential future losses on real estate sales
and estimated operating losses of the Corporation's wholly owned real
estate subsidiary during the planned sales period.
(e) Pacific Bell recorded pre-tax restructuring charges to recognize the
incremental cost of force reductions.
(f) Amounts in this column reflect items capitalized to construction.
(g) The 1995 and 1994 amounts reflect $219 and $62 million of costs,
respectively, for enhanced retirement benefits paid from pension fund
assets which do not require current outlays of the Corporation's funds.
- - --------------------
29
<PAGE>
TELESIS(R) is a registered trademark of Pacific Telesis Group.
30
<PAGE>
EXHIBIT INDEX
Exhibits identified in parentheses below as on file with the SEC are
incorporated herein by reference as exhibits hereto. Unless otherwise
indicated, all exhibits so incorporated are from File No. 1-8609. All
management contracts or compensatory plans or arrangements required to be
filed as exhibits to this Form 10-K pursuant to Item 14(c) are filed as
Exhibits 10aa through 10vv.
Exhibit
Number Description
- - ------- -----------
3a Articles of Incorporation of Pacific Telesis Group, as
amended to June 17, 1988 (Exhibit 3a to Registration
Statement No. 33-24765).
3b By-Laws of Pacific Telesis Group, as amended to September 24,
1993 (Exhibit 3b to Registration Statement No. 33-50897,
filed November 2, 1993).
4a Rights Agreement, dated as of September 22, 1989, between
Pacific Telesis Group and The First National Bank of Boston,
as successor Rights Agent, which includes as Exhibit B
thereto the form of Rights Certificate (Exhibits 1 and 2 to
Form SE filed September 25, 1989 as part of Form 8-A).
4b No instrument which defines the rights of holders of long-
and intermediate-term debt of Pacific Telesis Group and its
subsidiaries is filed herewith pursuant to Regulation S-K,
Item 601(b)(4)(iii)(A). Pursuant to this regulation, Pacific
Telesis Group hereby agrees to furnish a copy of any such
instrument to the SEC upon request.
10e Separation Agreement by and between the Corporation and
PacTel Corporation dated as of October 7, 1993, and amended
November 2, 1993 and March 25, 1994 (Exhibit 10e to Form 10-K
for 1993).
10e(i) Amendment No. 3 to Separation Agreement effective as
of April 1, 1994 (Exhibit 10e(i) to Form 10-K for
1994).
10aa Pacific Telesis Group Senior Management Short Term Incentive
Plan (Attachment A to Pacific Telesis Group's 1995 Proxy
Statement, including Pacific Telesis Group's 1994
Consolidated Financial Statements filed March 13, 1995).
10bb Pacific Telesis Group Senior Management Long Term Incentive
Plan (Attachment A to Pacific Telesis Group's 1995 Proxy
Statement, including Pacific Telesis Group's 1994
Consolidated Financial Statements filed March 13, 1995).
31
<PAGE>
10cc Pacific Telesis Group Executive Life Insurance Plan (Exhibit
10cc to Form SE filed March 27, 1987 in connection with the
Corporation's Form 10-K for 1986).
10cc(i) Resolutions amending the Plan, effective April 1,
1994 (Exhibit 10cc(i) to Form 10-K for 1993).
10dd Pacific Telesis Group Executive Disability and Survivor
Protection Plan, as amended and restated effective July 1,
1995.
10ee Pacific Telesis Group Senior Management Transfer Program
(Exhibit 10ee to Registration Statement No. 2-87852).
10ff Pacific Telesis Group Senior Management Financial Counseling
Program (Exhibit 10ff to Registration Statement No. 2-87852).
10gg Pacific Telesis Group Deferred Compensation Plan for
Nonemployee Directors (Exhibit 10gg to Form SE filed April 1,
1991 in connection with the Corporation's Form 10-K for
1990).
10gg(i) Resolutions amending the Plan effective
December 21, 1990, November 20, 1992 and
December 18, 1992 (Exhibit 10gg(i) to Form SE filed
March 26, 1993 in connection with the Corporation's
Form 10-K for 1992).
10gg(ii) Resolutions amending the Plan, effective April 1,
1994 (Exhibit 10gg(ii) to Form 10-K for 1993).
10hh Description of Pacific Telesis Group Directors' and Officers'
Liability Insurance Program (Exhibit 10hh to Form 10-K for
1993).
10ii Description of Pacific Telesis Group Plan for Nonemployee
Directors' Travel Accident Insurance (Exhibit 10ii to Form SE
filed March 26, 1990 in connection with the Corporation's
Form 10-K for 1989).
10jj Pacific Telesis Group 1994 Stock Incentive Plan (Attachment A
to Pacific Telesis Group's 1994 Proxy Statement, including
Pacific Telesis Group's 1993 Consolidated Financial
Statements filed March 11, 1994, and amended March 14 and
March 25, 1994).
10jj(i) Resolutions amending the Plan, effective January 1,
1995 (Attachment A to Pacific Telesis Group's 1995
Proxy Statement including Pacific Telesis Group
1994 Consolidated Financial Statements filed
March 13, 1995).
32
<PAGE>
10kk Pacific Telesis Group Executive Supplemental Pension Plan.
10kk(i) Trust Agreement No. 3 between Pacific Telesis Group
and Bankers Trust Company in connection with the
Corporation's executive supplemental pension
benefits (Exhibit 10kk(iv) to Form 10-K for 1993).
10ll Pacific Telesis Group Executive Deferral Plan (Exhibit 10ll
to Form 10-K for 1994).
10mm Description of Pacific Telesis Group Personal Umbrella
Liability Insurance (Exhibit 10mm to Form 10-K for 1994).
10nn Pacific Telesis Group Mid-Career Pension Plan, as amended and
restated effective July 1, 1995.
10nn(i) Trust Agreement No. 3 between Pacific Telesis Group
and Bankers Trust Company in connection with the
Corporation's executive supplemental pension
benefits (Exhibit 10kk(iv) to Form 10-K for 1993).
10oo Pacific Telesis Group Outside Directors' Deferred Stock Unit
Plan.
10pp Employment Contracts for Certain Senior Officers of Pacific
Telesis Group (Exhibit 10pp to Form SE filed March 23, 1989
in connection with the Corporation's Form 10-K for 1988).
10pp(i) Schedule to Exhibit 10pp (Exhibit 10pp(i) to Form
10-K for 1993).
10pp(ii) Employment contracts for certain senior officers of
Pacific Telesis Group (Exhibit 10pp(ii) to Form
10-K for 1993).
10pp(iii) Employment contract for senior officer of Pacific
Telesis Group (Exhibit 10pp(iii) to Form 10-Q for
the quarter ended September 30, 1994).
10pp(iv) Employment contract for certain senior officers of
Pacific Telesis Group (Exhibit 10pp(iv) to Form
10-K for 1994).
10pp(v) Supplemental Benefit Agreement for senior officer
of Pacific Telesis Group.
10rr Executive supplemental benefit agreement (Exhibit 10rr to
Form 10-K for 1993).
10ss Pacific Telesis Group Outside Directors' Retirement Plan, as
amended and restated effective January 26, 1996.
33
<PAGE>
10tt Representative Indemnity Agreement between Pacific Telesis
Group and certain of its officers and each of its directors
(Exhibit 10tt to Form SE filed March 29, 1988 in connection
with the Corporation's Form 10-K for 1987).
10uu Trust Agreement between Pacific Telesis Group and Bankers
Trust Company, as successor Trustee, in connection with the
Pacific Telesis Group Executive Deferral Plan (Exhibit 10uu
to Form SE filed March 23, 1989 in connection with the
Corporation's Form 10-K for 1988).
10uu(i) Amendment to Trust Agreement No. 1 effective
December 11, 1992 (Exhibit 10uu(i) to Form SE filed
March 26, 1993 in connection with the Corporation's
Form 10-K for 1992).
10uu(ii) Amendment to Trust Agreement No. 1, effective
May 28, 1993 (Exhibit 10uu(ii) to Form 10-K for
1993).
10uu(iii) Amendment to Trust Agreement No. 1, effective
November 15, 1993 (Exhibit 10uu(iii) to Form 10-K
for 1993).
10vv Trust Agreement between Pacific Telesis Group and Bankers
Trust Company, as successor Trustee, in connection with the
Pacific Telesis Group Deferred Compensation Plan for the
Nonemployee Directors (Exhibit 10vv to Form SE filed
March 23, 1989 in connection with the Corporation's Form 10-K
for 1988).
10vv(i) Amendment to Trust Agreement No. 2 effective
December 11, 1992 (Exhibit 10vv(i) to Form SE filed
March 26, 1993 in connection with the Corporation's
Form 10-K for 1992).
10vv(ii) Amendment to Trust Agreement No. 2, effective
May 28, 1993 (Exhibit 10vv(ii) to Form 10-K for
1993).
11 Computation of Earnings per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges.
21 Subsidiaries of Pacific Telesis Group.
23 Consent of Coopers & Lybrand L.L.P.
24 Powers of Attorney executed by Directors and Officers who
signed this Form 10-K.
27 Financial Data Schedule.
34
<PAGE>
99a Pacific Telesis Group's 1996 Proxy Statement, including
Pacific Telesis Group's 1995 Consolidated Financial
Statements (Filed March 4, 1996).
99b Annual Report on Form 11-K for the Pacific Telesis Group
Supplemental Retirement and Savings Plan for Salaried
Employees for the year 1995 (To be filed as an amendment
within 180 days).
99c Annual Report on Form 11-K for the Pacific Telesis Group
Supplemental Retirement and Savings Plan for Nonsalaried
Employees for the year 1995 (To be filed as an amendment
within 180 days).
35
<PAGE>
Exhibit 10dd
------------
PACIFIC TELESIS GROUP
EXECUTIVE DISABILITY AND SURVIVOR PROTECTION PLAN
(formerly Pacific Telesis Group Senior Management
Long Term Disability and Survivor Protection Plan)
(Amended and Restated as of July 1, 1995)
TABLE OF CONTENTS
Page
SECTION 1. INTRODUCTION AND PURPOSE................................... 1
1.1 Introduction............................................... 1
1.2 Purpose.................................................... 1
SECTION 2. ELIGIBILITY ............................................... 1
SECTION 3. DISABILITY BENEFITS........................................ 1
3.1 First Fifty Two Weeks......... ............................ 1
3.2 Subsequent to First Fifty Two Weeks........................ 2
3.3 Integrated Benefits........................................ 3
3.4 Cessation of Benefits...................................... 3
3.5 Relapse Rule - Different Periods of Disability............. 3
3.6 Employees Not Subject to Mandatory Retirement.............. 4
SECTION 4. SURVIVING SPOUSE BENEFITS.................................. 4
4.1 Eligibility for Benefit.................................... 4
4.2 Amount of Benefit.......................................... 4
4.3 Form and Timing of Payment................................. 5
SECTION 5. WELFARE BENEFITS........................................... 5
SECTION 6. RIGHTS TO BENEFITS......................................... 5
6.1 Entitlement to Benefits.................................... 5
6.2 Claim for Plant Benefits Due to Accident................... 5
6.3 Forfeiture Due to Other Claims for Injury or Death......... 6
6.4 Forfeiture for Misconduct.................................. 6
SECTION 7. SOURCE OF BENEFIT PAYMENTS .............................. 7
7.1 Participating Company Liability ........................... 7
7.2 All Benefits Unfunded ..................................... 7
7.3 No Right to Company Assets ................................ 7
<PAGE>
PACIFIC TELESIS GROUP
MID-CAREER PENSION PLAN
(Amended and Restated as of July 1, 1995)
TABLE OF CONTENTS
Page
SECTION 8. ADMINISTRATION ............................................ 7
8.1 Plan Sponsor .............................................. 7
8.2 Plan Administrator ........................................ 7
8.3 Procedure to Approve and Deny Claims ...................... 7
8.4 Review Procedure .......................................... 8
8.5 Further ERISA Rights ...................................... 8
8.6 Named Fiduciaries ......................................... 8
8.7 Allocation of Responsibilities ............................ 8
8.8 Administrative Expenses ................................... 9
SECTION 9. AMENDMENT AND TERMINATION ................................. 9
9.1 Plan Amendment............................................. 9
9.2 Plan Termination .......................................... 9
SECTION 10. DEFINITIONS .............................................. 9
<PAGE>
PACIFIC TELESIS GROUP
EXECUTIVE DISABILITY AND SURVIVOR PROTECTION PLAN
(Amended and restated as of July 1, 1995)
SECTION 1. INTRODUCTION AND PURPOSE
1.1 Introduction. The Pacific Telesis Group Executive Disability and
Survivor Protection Plan (the "Plan"), formerly known as the Pacific Telesis
Group Senior Management Long Term Disability and Survivor Protection Plan,
was originally adopted effective January 1, 1984, and has been amended and
restated effective July 1, 1995. Prior to July 1, 1995, the Plan provided a
minimum pension benefit to certain Executives who were not disabled. This
minimum pension benefit, and the survivor and welfare benefits associated
with it, are now provided by the Pacific Telesis Group Executive
Supplemental Pension Plan (the "Executive Pension Plan") in substantially
the same form previously provided by this Plan. Capitalized terms are
defined in Section 10 of the Plan.
1.2 Purpose. The purpose of the Plan is to assist Participating Companies
in attracting and retaining highly competent senior managers by providing
short term and long term Disability Benefits to Executives of the
Participating Companies. The Plan also provides life insurance and medical
and dental coverage to former Executives of Participating Companies who
become disabled as Executives and who are not eligible for continued
coverages under the Participating Companies' welfare benefit plans as
retirees or disabled former employees. In addition, the Plan provides
survivor annuities to the surviving spouses of Executives and former
Executives who became disabled as Executives.
SECTION 2. ELIGIBILITY TO PARTICIPATE
An Employee shall become a Participant in the Plan immediately upon becoming
an Executive. Participation shall cease when the Participant is no longer
an Executive, unless the Executive then meets and continues to meet the
conditions for receiving a Disability Benefit under Section 3 of the Plan.
A former Executive is not precluded from remaining a Participant by the fact
that he or she receives offsetting Integrated Benefits which reduce to zero
his or her actual benefits under Section 3.
SECTION 3. DISABILITY BENEFITS
3.1 First Fifty Two Weeks. For the first fifty-two week period following
the onset of a physical or mental impairment which renders a Participant
disabled, as defined below, the Participant shall be eligible to receive a
monthly Disability Benefit which is equal to:
(a) One hundred percent (100%) of the Participant's monthly rate of
base pay on the last day the Participant was on the active payroll; less
(b) The sum of the Integrated Benefits set forth in Section 3.3 below.
1
<PAGE>
For this purpose, a Participant shall be considered "disabled" if the
Committee determines that a physical or mental impairment prevents the
Participant from meeting the performance requirements of the position held
immediately preceding the onset of the impairment.
3.2 Subsequent to First Fifty Two Weeks. After the first fifty-two week
period following the onset of a physical or mental impairment for which a
Participant was eligible to receive benefits under Section 3.1 above, a
Participant who is disabled within the meaning of this Section 3.2, as
defined below, shall be eligible to receive a monthly Disability Benefit
which is equal to:
(a) For the period prior to the Participant's sixty-fifth
birthday:
(i) Sixty percent (60%) of his or her monthly rate of base pay on
the last day the Participant was on the active payroll; less
(ii) The Integrated Benefits set forth in Section 3.3 below; and
(b) For the period on and after the Participant's sixty-fifth
birthday:
(i) The greater of:
(A) One and one-quarter percent (1 %) of the Participant's
Final Annual Pay; or
(B) If the Participant's Term of Employment has been five
years or more, ninety percent (90%) of the sum of the combined monthly
pensions payable to the Participant at age sixty-five under both the
Qualified Pension Plan and the Executive Pension Plan, as those plans
were in effect on the last day the Participant was on the active
payroll, 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 period of service for benefit
accrual purposes, and without regard to any minimum service
requirements for eligibility for a pension under those plans;
(ii) Less the Integrated Benefits set forth in Section 3.3 below.
For this purpose, a Participant shall be considered "disabled" if the
Committee determines that his or her impairment prevents the Participant
from meeting the performance requirements of all of the following: the
position held immediately preceding the onset of the physical or mental
impairment; a similar position; and any appropriate position within a
Participating Company which the Participant would otherwise be capable of
performing by reason of the Participant's background and experience.
2
<PAGE>
3.3 Integrated Benefits. For each month the Participant receives the
following benefits, they shall be considered Integrated Benefits for
purposes of Sections 3.1 and 3.2 above:
(a) The Participant's pensions under the Qualified Pension Plan, the
Executive Pension Plan and the Mid-Career Plan, in the amounts that those
benefits would be payable as monthly benefits for life (or during
disability) as of the first day they actually are paid (regardless of other
forms of payment available or elected and regardless of any later ad hoc or
other increases to such pensions);
(b) The monthly amount (or equivalent) of any other retirement income
payments to the Participant from the Company;
(c) The Participant's monthly disability benefit under the Disability
Benefits Plan;
(d) The monthly amount of all worker's compensation and Social
Security benefits taken as an offset in determining the amount of a
disability benefit under the Disability Benefits Plan during the month for
which the disability benefit is being determined;
(e) The monthly amount (or equivalent) of any other benefit payments
required by law on account of the Participant's disability; and
(f) At the discretion of the Committee, the amount of outside
compensation or earnings of the Participant for work performed by the
Participant during the period of disability.
In the event that an Integrated Benefit for a month is not used to offset a
Disability Benefit payable for that month, the Integrated Benefit shall be
used to offset future Disability Benefits.
3.4 Cessation of Benefits. A Participant's Disability Benefits under
Sections 3.1 or 3.2 above shall cease when the Participant is no longer
disabled, as provided in those Sections.
3.5 Relapse Rule--Different Periods of Disability. In the event that an
Executive returns to active employment after receiving Disability Benefits
under this Section 3 during a period that the Executive remained an Employee
and then the Executive again becomes disabled under this Section 3, the
Executive shall be eligible for Disability Benefits under Section 3.1
pursuant to these rules:
(a) If the period of active employment between the two periods of
disability lasted at least 13 weeks, the disabled Executive shall be
entitled to a new 52-week period of Disability Benefits under Section 3.1
for the second period of disability.
3
<PAGE>
(b) If the period of active employment between the two periods of
disability lasted less than 13 weeks, the two periods of disability are
aggregated and the disabled Executive shall be entitled to Disability
Benefits under Section 3.1 for the number of weeks remaining in the 52-week
period, if any, at the end of the prior period of disability.
If a former Executive is rehired as an Executive and later becomes eligible
for Disability Benefits under this Section 3, any periods of disability
occurring before the date of rehire shall be disregarded for the purpose of
determining the length of time that Disability Benefits are payable under
Section 3.1.
3.6 Employees Not Subject to Mandatory Retirement. With respect to a
Participant not subject to mandatory retirement at age 65 under Section
12(b) of the Age Discrimination in Employment Act (29 U.S.C. 621 et. seq.)
or Sections 12941 and 12942 of the California Government Code, the periods
of eligibility for the Disability Benefits provided in Section 3.2 shall be
the periods described in those sections or such other periods as are
required under the Age Discrimination in Employment Act, the California
Government Code, or any applicable governing regulations or interpretations
thereunder.
SECTION 4. SURVIVING SPOUSE BENEFITS
4.1 Eligibility for Benefit. The surviving spouse of a Participant who is
a former Executive eligible for a Disability Benefit under Section 3 is
eligible for the Surviving Spouse Benefit under this section unless, prior
to death, the Participant could have elected under the Qualified Pension
Plan to receive a joint and survivor annuity, but declined to make that
election.
4.2 Amount of Benefit. In the event of the death of a Participant, the
Surviving Spouse Benefit shall be a monthly benefit equal to:
(a) One and one-quarter percent (1 %) of the Participant's Final
Annual Pay; reduced by:
(b) The sum of the monthly survivor annuities payable to the surviving
spouse under the Qualified Pension Plan, the Executive Pension Plan and the
Mid-Career Plan, in the amounts that those benefits would be payable as
monthly benefits for life as of the first day they actually are paid
(regardless of other forms of payment available or elected and regardless of
any later ad hoc or other increases to such annuities); plus the monthly
amount (or equivalent) of any other lifetime payments to the surviving
spouse from the Company.
4.3 Form and Timing of Payment. Subject to the Committee's discretion to
determine another time and form of payment, a surviving spouse benefit shall
be payable as a monthly annuity for the life of the surviving spouse,
commencing the day after the Participant's death. It shall be paid at the
same time and in the same form as the surviving spouse benefit, if any,
under the Executive Pension Plan.
4
<PAGE>
SECTION 5. WELFARE BENEFITS
A Participant who is a former Executive eligible for a Disability Benefit
under Section 3 and who is not eligible for retiree welfare benefit coverage
under the Company's group welfare benefit plans shall be entitled to
medical, dental and life insurance coverages and benefits which are
equivalent to the benefits which would have been provided to the Participant
under the Company's group welfare benefit plans if he or she had been
eligible for a service pension under the Qualified Pension Plan.
SECTION 6. RIGHTS TO BENEFITS
6.1 Entitlement to Benefits. Entitlement to benefits under the Plan shall
accrue on the date they become payable.
(a) Assignment or Alienation. Assignment or alienation of benefits
under this Plan will not be permitted or recognized except as required by
law.
(b) Payments to Others. Benefits payable to an individual who is
unable to execute a proper receipt may be paid to another person in
accordance with the standards and procedures set forth in the Qualified
Pension Plan.
6.2 Claim for Plan Benefits Due to Accident.
(a) Release Required. In case of an accident resulting in death or
injury to a Participant which otherwise entitles the Participant or his or
her surviving spouse to any benefits under the Plan, the Participant or his
or her surviving spouse may elect to accept benefits under the Plan or to
prosecute such claims at law as the Participant or the surviving spouse may
have relating to the accident. If election is made to accept the benefits
under the Plan, the election shall be in writing and shall release the
Company and the Participant's Participating Company from all claims and
demands which the Participant and his or her surviving spouse may have
against it on account of the accident, other than claims for benefits under
this Plan or under any other plan maintained by the Company or a
Participating Company. If any persons other than the Participant and his or
her surviving spouse might legally assert claims against a Participating
Company on account of the death or injury of the Participant, no benefits
shall be due or payable until there have also been delivered to the
Committee good and sufficient releases of all claims, arising from or
growing out of the accident, which such other persons might legally assert
against the Participating Company. The Committee, in its discretion, may
require that the releases described above also release any other company
connected with the accident, including any company participating in this
plan or the Qualified Pension Plan, and any company with which arrangements
have been made, directly or indirectly, for the interchange of benefit
obligations as described in the Qualified Pension Plan.
5
<PAGE>
(b) Time Limit for Release. The right of the Participant to a
Disability Benefit under Section 3 of the Plan shall lapse if election to
accept such benefits, as provided in Section 6.2(a) above, is not made
within sixty days after injury or within such greater time as the Committee
shall provide, in writing, for the making of the election.
(c) Determination of Accident. The determination of whether or not an
injury or death is due to accident for purposes of this Section 7.2 shall be
made by the Committee in the manner provided in the Qualified Pension Plan.
6.3 Forfeiture Due To Other Claims for Injury or Death.
(a) Except as provided in Section 6.3(b) or (c) below, nothing shall
be payable under this Plan on account of the injury or death of a
Participant if, other than under this Plan or any other plan maintained by
the Company, any claim is made or suit is brought for damages on account of
such injury or death against the Company, against any other company
participating in this Plan or the Qualified Pension Plan or against any
other company with which arrangements have been made, directly or
indirectly, for the interchange of benefit obligations as described in the
Qualified Pension Plan.
(b) The Committee may, in its discretion and upon such terms as it may
prescribe, waive this provision if the claim is withdrawn or if the suit is
discontinued.
(c) If a judgment is recovered or a settlement is made of any claim or
suit on account of the injury or death of a Participant, and the total
amount which would otherwise have been payable under this Plan and any other
plan maintained by the Company is greater than the amount paid on account of
such judgment or settlement, then the Committee in its discretion may
authorize the distribution, to the Participant or surviving spouse who would
otherwise have received benefits under this Plan, of the lesser of (i) the
difference between the two amounts or (ii) the amount which would otherwise
have been payable under this Plan.
6.4 Forfeiture for Misconduct. Notwithstanding any other provision of the
Plan, all or a portion of the benefits that a Participant or his or her
surviving spouse would otherwise be eligible to receive under this Plan may
be forfeited, in the sole discretion of the Company's Board of Directors,
under the following circumstances:
(a) The Participant is discharged by a Participating Company for
cause; or
(b) A determination is made by the board of directors of a Participat-
ing Company that the Participant engaged in misconduct in connection with
his or her employment with such Participating Company.
6
<PAGE>
SECTION 7. SOURCE OF BENEFIT PAYMENTS
7.1 Participating Company Liability. The last Participating Company to
employ a Participant prior to his or her entitlement to a benefit under this
Plan shall be primarily liable for all benefits due under the Plan.
However, if for any reason the primarily liable Participating Company fails
to make timely payment of an amount due under the Plan, the Company shall be
secondarily liable for the amount due.
7.2 All Benefits Unfunded. When and as paid, all costs of providing
benefits under the Plan shall be charged to the operating expense of the
Participating Company responsible for making payment.
7.3 No Right to Company Assets. Neither an Executive nor any other person
shall acquire by reason of the Plan any right in or title to any assets,
funds or property of the Company or any other Participating Company,
including, without limiting the generality of the foregoing, any specific
funds, trust accounts or assets which any Participating Company, in its sole
discretion, may earmark or set aside in anticipation of a liability under
the Plan. A Participating Company's obligation to pay any amounts under the
Plan shall be unfunded as to the Executive, whose rights shall be those of a
general unsecured creditor.
SECTION 8. ADMINISTRATION
8.1 Plan Sponsor. The Company shall be the sponsor of the Plan as that
term is defined in ERISA.
8.2 Plan Administrator. The Executive Vice President-Human Resources of
the Company shall be the Plan Administrator as that term is defined in
ERISA. The Plan Administrator shall have the specific powers granted to him
elsewhere in the Plan and shall also have such other powers as may be
necessary in order to administer the Plan in his sole discretion, except for
those powers granted or provided to be granted to others by the Plan. The
Plan Administrator shall determine conclusively for all parties all
questions arising in the administration of the Plan and, insofar as
permitted by applicable law, any decision of the Plan Administrator shall
not be subject to further review.
7
<PAGE>
8.3 Procedure to Approve and Deny Claims. The Committee shall have sole
discretion to determine the rights of a Participant or surviving spouse to
benefits under the Plan, and to authorize disbursements under the Plan. In
all questions relating to age and service for eligibility for any benefit
under the Plan, or relating to service and rates of pay for determining
benefits payable under the Plan, the decisions of the Committee, based upon
this Plan and upon the records of the Participating Companies employing the
individual, shall be final insofar as permitted by applicable law. The
Committee may adopt such rules of procedure as it may find appropriate. A
claim for benefits under the Plan shall be deemed denied unless the decision
of the Committee is sent within 90 days of its receipt of the claim (or
within 180 days, if the Committee extends the time by notifying the claimant
in writing of the special circumstances requiring an extension and the date
by which the decision is expected). If a claim is denied in whole or part
by the Committee, it shall send a written decision stating (a) the specific
reasons for the denial, making specific reference to pertinent provisions of
the Plan; (b) what additional information, if any, would help perfect the
claim for benefits; and (c) what steps the claimant must take to submit the
claim for review.
8.4 Review Procedure. The Board of Directors of the Company shall serve as
the final review committee, under the Plan and ERISA, for the review of all
claims appealed by Participants or surviving spouses whose initial claims
for benefits have been denied, in whole or in part, by the Committee.
Within 60 days after the date of a denial by the Committee, a Participant or
surviving spouse may file a written request for the Board of Directors of
the Company to review the denial. Such request for review must be made in a
timely manner for the purpose of seeking any further review of a decision or
determining any entitlement to a benefit under the Plan. In such a case,
the Board of Directors of the Company shall conduct a full and fair review
of the Committee's decision and notify the claimant in writing of the review
decision, specifying the reasons for the decision and the Plan provisions on
which it is based. A claim shall be deemed denied unless the decision on
appeal is sent within 60 days (or within 120 days, if the Board extends the
time to respond by notifying the claimant in writing of the special
circumstances requiring an extension of time).
8.5 Further ERISA Rights. Any Participant or surviving spouse whose claim
for benefits has been denied upon review shall have such further rights as
are provided in section 503 of ERISA and the regulations thereunder. The
Company, the Board of Directors of the Company, the Committee and the
Executive Vice President-Human Resources of the Company shall retain such
rights, authority and discretion as are provided or not expressly limited by
section 503 of ERISA and the regulations thereunder.
8.6 Named Fiduciaries. The Company, each Participating Company, the Board
of Directors of the Company, the Committee and the Executive Vice President-
Human Resources of the Company are each a named fiduciary as that term is
used in ERISA with respect to the particular duties and responsibilities
allocated to each of them. Any person or group of persons may serve in more
than one fiduciary capacity with respect to the Plan.
8
<PAGE>
8.7 Allocation of Responsibilities. The Company, the Committee, the
Executive Vice President-Human Resources of the Company and each
Participating Company may designate in writing other persons to carry out
their respective responsibilities under the Plan and may employ persons to
advise them with regard to any such responsibilities.
8.8 Administrative Expenses. Expenses of administering the Plan shall be
apportioned among the Participating Companies, as determined by the Plan
Administrator.
SECTION 9. AMENDMENT AND TERMINATION.
9.1 Plan Amendment. The Company may from time to time make any changes in
the Plan which it deems appropriate, with or without notice to Participants,
by appropriate action of its Board of Directors. In addition, the Plan
Administrator, with the approval of the Executive Vice President and General
Counsel of the Company, shall be authorized to make minor or administrative
changes to the Plan, as well as changes dictated by the requirements of
federal or state statues applicable to the Company or authorized or made
desirable by such statues. Such changes shall not affect the right of any
Participant or surviving spouse, without his or her consent, to any benefit
under the Plan to which he or she may have previously become entitled as a
result of a disability, death or termination of employment which occurred
prior to the effective date of the change.
9.2 Plan Termination. At any time, for any reason, and with or without
notice to Participants, the Company retains the right to terminate the Plan
in whole or in part by appropriate action of its Board of Directors, and
each Participating Company retains the right to withdraw from the Plan.
Neither termination of the Plan nor withdrawal by a Participating Company
shall result in the cessation or reduction of benefits to any Participant or
surviving spouse who has previously become entitled to receive benefits
under the Plan. A Participating Company's withdrawal from participation
shall not affect its liability to continue providing benefits to any
Participant or surviving spouse who has previously become entitled to
receive benefits under the Plan.
SECTION 10. DEFINITIONS
"Committee" means the Compensation and Personnel Committee of the Board
of Directors of the Company.
"Company" means Pacific Telesis Group, a Nevada corporation, or its
successors.
"Disability Benefit" means the benefit provided pursuant to Section 3
of this Plan.
"Disability Benefits Plan" means the Pacific Telesis Group
Comprehensive Disability Benefits Plan.
"Employee" means a common law employee of the Company or any other
Participating Company.
9
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974
(ERISA), as it may be amended from time to time.
"Executive" means an Officer of any Participating Company or any other
Employee who has been designated by the Committee to be within a
Participating Company's executive group for purposes of the Plan.
"Executive Pension Plan" means the Pacific Telesis Group Executive
Supplemental Pension Plan.
"Final Annual Pay" means the Participant's annual rate of base pay
(whether or not deferred) on the last day he or she was on the active
payroll of a Participating Company plus the annual standard award as
determined under the Pacific Telesis Group Short Term Incentive Plan on the
last day he or she was on the active payroll.
"Integrated Benefits" are benefits that are used in the determination
of the amount of the Disability Benefit, as set forth in Section 3.3.
"Mid-Career Plan" means the Pacific Telesis Group Mid-Career Pension
Plan.
"Officer" means an individual elected or appointed to, and serving in,
one or more of the following positions:
(i) A position with the Company described in the bylaws of the
Company as that of an officer, other than an assistant officer
position; or
(ii) A position with Pacific Bell described in the bylaws of
Pacific Bell as that of an officer, other than an assistant officer
position; or
(iii) A position with any Participating Company for which there is
in effect a specific designation by the Committee that the position
shall be considered to be that of an Officer for purposes of the
benefit and retirement plans.
An "Officer" also means a named Employee of any Participating Company for
which there is in effect a specific designation by the Committee that the
named Employee shall be included in the definition of "Officer" for purposes
of the benefit and retirement plans.
"Participant" means an Executive or former Executive who meets the
eligibility requirements of Section 2 of the Plan.
"Participating Companies" mean the Company and each other corporation
or partnership that both (a) participates in the Qualified Pension Plan; and
(b) has determined, with the concurrence of the Company's Board of
Directors, to participate in this Plan.
10
<PAGE>
"Plan" means this Pacific Telesis Group Executive Disability and
Survivor Protection Plan, formerly known as the Pacific Telesis Group Senior
Management Long Term Disability and Survivor Protection Plan.
"Plan Administrator" means the Executive Vice President-Human Resources
of the Company, as set forth in Section 8.2 of the Plan.
"Qualified Pension Plan" means the Pacific Telesis Group Pension Plan
for Salaried Employees.
"Term of Employment" means the number of years credited to the
Participant for purposes of determining eligibility for a service pension
and the early payment discount under the Qualified Pension Plan. As
provided under the Qualified Pension Plan, a Participant's Term of
Employment (a) includes all periods that the Participant was employed by the
Company, other companies participating in the Qualified Pension Plan,
certain joint venture employers, and certain predecessor employers; (b) does
not include service before a break in service until such service is
"bridged" as provided in the Qualified Pension Plan; and (c) excludes any
period of employment which was transferred from the Qualified Pension Plan
to the PacTel Corporation Employees Pension Plan effective before April 1,
1994, and was included in the Participant's service recognized by that plan
as of April 1, 1994 (the date as of which occurred the total and complete
separation of the ownership of PacTel Corporation from the Company).
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Exhibit 10kk
------------
PACIFIC TELESIS GROUP
EXECUTIVE SUPPLEMENTAL PENSION PLAN
(Adopted as of July 1, 1995)
TABLE OF CONTENTS
Page
SECTION 1. INTRODUCTION AND PURPOSE................................... 1
1.1 Introduction............................................... 1
1.2 Purpose.................................................... 1
SECTION 2. ELIGIBILITY ............................................... 1
2.1 Eligibility To Participate................................. 1
2.2 Mandatory Retirement....................................... 1
2.3 Eligibility For Executive Pension.......................... 2
SECTION 3. AMOUNT OF EXECUTIVE PENSION................................ 3
3.1 Formula for Executive Pension.............................. 3
3.2 Basic Benefit.............................................. 4
3.3 Officer Minimum Benefit.................................... 5
3.4 Special Minimum Benefit.................................... 6
3.5 Special Increases.......................................... 6
SECTION 4. PAYMENT OF EXECUTIVE PENSION............................... 7
4.1 Service and Vested Pensions................................ 7
4.2 Disability Pensions......................................... 7
4.3 Notification of and Application for Benefits............... 8
4.4 Actual Payment Date Following Pension Effective Date....... 8
4.5 Death Following Pension Effective Date..................... 8
SECTION 5. WELFARE BENEFITS FOR CERTAIN PARTICIPANTS.................. 8
5.1 Eligibility................................................ 8
5.2 Benefits................................................... 9
SECTION 6. SURVIVING SPOUSE BENEFITS.................................. 9
6.1 Amount..................................................... 9
6.2 Regular Surviving Spouse Benefit........................... 10
6.3 Special Surviving Spouse Benefit........................... 10
6.4 Form and Time of Payment................................... 10
SECTION 7. DEATH BENEFITS............................................. 11
7.1 Eligibility and Waiver..................................... 11
7.2 Benefits................................................... 11
7.3 No Right to Company Assets ................................ 7
<PAGE>
PACIFIC TELESIS GROUP
MID-CAREER PENSION PLAN
(Amended and Restated as of July 1, 1995)
TABLE OF CONTENTS
Page
SECTION 8. RIGHTS TO BENEFITS......................................... 11
8.1 Entitlement to Benefits.................................... 11
8.2 Effect of Reemployment..................................... 11
8.3 Forfeiture for Misconduct.................................. 12
8.4 Waiver in Absence of Claims Release........................ 12
8.5 Waiver by Damage Claims or Suits........................... 13
8.6 Offset for Judgment or Settlement.......................... 13
8.7 Offset for Payments Under Law.............................. 13
SECTION 9. SOURCE OF BENEFIT PAYMENTS................................. 13
9.1 Participating Company Liability............................ 13
9.2 All Benefits Unfunded...................................... 14
9.3 No Right to Company Assets................................. 14
SECTION 10. ADMINISTRATION ............................................ 14
10.1 Plan Sponsor .............................................. 14
10.2 Plan Administrator ........................................ 14
10.3 Procedure to Approve and Deny Claims ...................... 15
10.4 Review Procedure .......................................... 15
10.5 Further ERISA Rights ...................................... 15
10.6 Named Fiduciaries ......................................... 15
10.7 Allocation of Responsibilities ............................ 16
10.8 Administrative Expenses ................................... 16
SECTION II. AMENDMENT AND TERMINATION.................................. 16
11.1 Plan Amendment............................................. 16
11.2 Plan Termination........................................... 16
SECTION 12. DEFINITIONS .............................................. 16
<PAGE>
PACIFIC TELESIS GROUP
EXECUTIVE SUPPLEMENTAL PENSION PLAN
(Adopted as of July 1, 1995)
SECTION 1. INTRODUCTION AND PURPOSE
1.1 Introduction. The Pacific Telesis Group Executive Supplemental Pension
Plan (the "Plan") was adopted as of July 1, 1995 (the "Effective Date"), to
merge the Pacific Telesis Group Executive Non-Qualified Pension Plan (a
"Predecessor Plan") and the Pacific Telesis Group Supplemental Executive
Retirement Plan (a "Predecessor Plan") into a single plan and to include the
minimum pension and related welfare and surviving spouse benefits previously
provided by the Pacific Telesis Group Senior Management Long Term Disability
and Survivor Protection Plan (a "Predecessor Plan"). The benefits provided
by this Plan are substantially similar to the benefits provided by the
Predecessor Plans. Capitalized terms are defined in Section 12 of the Plan.
1.2 Purpose. The purpose of the Plan is to assist Participating Companies
in attracting and retaining highly competent senior managers by providing
certain unfunded pension benefits to eligible Executives. Together with the
benefits provided by the Qualified Pension Plan, the benefits provided by
the Plan are intended to provide the Executive with approximately the same
benefit that the Executive would have been entitled to receive under the
Qualified Pension Plan if the Qualified Pension Plan (a) recognized total
base pay (whether or not deferred) and short term incentive awards as
compensation for purposes of benefit calculation and (b) were not subject to
any legal limitations on the amount of benefits that could be paid. In
addition, the Plan provides minimum pensions and welfare benefits to certain
eligible Executives.
SECTION 2. ELIGIBILITY
2.1 Eligibility To Participate. An Executive or a former Executive who was
a participant in a Predecessor Plan immediately before the Effective Date
shall be a Participant in this Plan. Any other Employee shall become a
Participant in the Plan immediately upon becoming an Executive.
Participation shall cease upon Termination of Employment unless the
Participant is then eligible for benefits under the Plan.
2.2 Mandatory Retirement. Each Participant shall cease to be eligible for
continued employment by a Participating Company no later than the last day
of the month in which the Participant attains the Mandatory Retirement Age.
2.3 Eligibility For Executive Pension.
(a) Qualified Pension Benefit or Minimum Benefit Required. A
Participant shall be eligible for an Executive Pension:
(i) Upon Termination of Employment, if the Participant is
eligible for a pension under the Qualified Pension Plan without regard
to any minimum benefits or early retirement window benefits which
change the usual eligibility requirements for pensions under the
Qualified Pension Plan; or
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(ii) Upon Termination of Employment, if the Participant is
eligible for an Officer Minimum Benefit under Section 3.3 or a Special
Minimum Benefit under Section 3.4 (even though he or she may not be
eligible for a pension under the Qualified Pension Plan); or
(iii) Before Termination of Employment, only if the Participant
is not subject to the Mandatory Retirement Age requirements and
therefore becomes eligible for an in-service pension under the
Qualified Pension Plan. In such a case, the Participant's Executive
Pension shall be redetermined upon Termination of Employment, as
provided under the Qualified Pension Plan.
(b) Type of Pension. The Executive Pension shall be paid:
(i) As a service pension, if the Participant's pension
under the Qualified Pension Plan is payable as a service pension; or
(ii) As a service pension, if the Participant's pension under
the Qualified Pension Plan is payable as an in-service pension; or
(iii) As a service pension, if the Executive Pension is based
on an Officer Minimum Benefit under Section 3.3 or a Special Minimum
Benefit under Section 3.4 (even if the Participant is not eligible for
a service pension under the Qualified Pension Plan); or
(iv) As a vested pension, if the Participant's Executive
Pension is not paid as a service pension and if the Participant's
pension under the Qualified Pension Plan is payable as a vested
pension; or
(v) As a disability pension, if the Participant's Executive
Pension is not paid as a service pension and if the Participant is
eligible for a disability pension under the Qualified Pension Plan.
(c) Continuation of Pensions Commenced Under Predecessor Plans.
All Participants who were retired or terminated former Executives as of the
Effective Date of this Plan shall continue to be entitled to receive the
benefits they were receiving or entitled to receive under the terms of the
Predecessor Plans.
SECTION 3. AMOUNT OF EXECUTIVE PENSION
3.1 Formula for Executive Pension.
(a) Participants Who Are Executives at Retirement. If a
Participant is an Executive at the time of his or her Termination of
Employment, the Participant's Executive Pension, expressed as a monthly
pension commencing on his or her Pension Effective Date, shall equal:
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(i) The greatest of the:
(A) Basic Benefit under Section 3.2, if eligible
therefor; or
(B) Officer Minimum Benefit under Section 3.3, if
eligible therefor; or
(C) Special Minimum Benefit under Section 3.4, if
eligible therefor;
(ii) Reduced by the Qualified Pension Benefit.
If any benefit under Clause (i) above is subject to reduction for early
payment, the reduction shall be made as provided in Sections 3.2, 3.3 and
3.4, as applicable. The Participant's Qualified Pension Benefit under
Clause (ii) above shall include a reduction for early payment, if
appropriate. A Participant's Executive Pension shall be paid at the time
and in the form provided in Section 4 and may be subject to special
increases as provided in Section 3.5.
(b) Participants Who Are Not Executives At Retirement. If a
Participant is not an Executive at the time of the Participant's Termination
of Employment, but was an Executive during some previous period, the
Participant's Executive Pension shall be determined in the same manner as
set forth in Section 3.1(a) above, except that (i) the Years of Credited
Service under the Basic Benefit shall be determined as though the
Participant's Termination of Employment occurred on the date that he or she
ceased serving as an Executive, (ii) the Participant shall not be eligible
for either the Special Minimum Benefit or the Officer Minimum Benefit, and
(iii) the Executive Pension shall not be subject to special increases under
Section 3.5 below. The Participant's actual service and age shall be used
under Section 3.2(a)(iii) to determine the appropriate early payment
discount for the Regular Basic Benefit.
3.2 Basic Benefit. The Basic Benefit is the sum of the Participant's
Regular Basic Benefit and his or her Imputed Basic Benefit, as described in
Sections 3.2 (a) and (b) below. (The Basic Benefit was formerly provided by
(i) the restoration benefits and the short term award benefit available
under the Pacific Telesis Group Executive Non-Qualified Pension Plan, and
(ii) the excess benefits under sections 415 and 401(a)(17) of the Internal
Revenue Code, available under the Pacific Telesis Group Supplemental
Executive Retirement Plan.)
(a) Eligibility for and Amount of Regular Basic Benefit. A
Participant who is or was an Executive shall be eligible for a Regular Basic
Benefit if the Participant is eligible for a Qualified Pension Benefit. A
Participant's Regular Basic Benefit shall be a monthly pension equal to:
(i) 1.45% of the sum of the Participant's Final Average
Monthly Base Pay and his or her Final Average Monthly STIP Award;
multiplied by
(ii) The Participant's Years of Credited Service;
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(iii) Adjusted for early payment as follows:
(A) No adjustment shall be made if the Participant's
Executive Pension is paid either as a disability pension or as a
service pension which is payable on account of total disability (as
provided under the Qualified Pension Plan);
(B) No adjustment shall be made if the Participant has
at least ten (10) Years of Officer Service and if, at the time of his
or her Termination of Employment, the Participant is at least 55 years
of age and is an Officer;
(C) No adjustment shall be made if the Participant's
Executive Pension is paid as a service pension and if, at the time of
his or her Termination of Employment, the Participant either has a Term
of Employment of at least 30 years or is at least 55 years of age;
(D) If the Participant's Executive Pension is paid as
a service pension in any other case, the Regular Basic Benefit shall be
reduced by one-half percent (0.5%) for each month or portion thereof
that the Participant's age is less than 55 on his or her Pension
Effective Date; or
(E) If the Participant's Executive Pension is paid as
a vested pension and if the Participant is less than 65 years of age on
the Pension Effective Date, the Regular Basic Benefit shall be reduced
in accordance with the early payment factor table for vested pensions
under the Qualified Pension Plan.
A Participant's Regular Basic Benefit shall not be increased for any minimum
or early retirement window benefit that may be available under the Qualified
Pension Plan, unless this Plan is amended accordingly. But in no event
shall a Participant's Regular Basic Benefit at his or her Pension Effective
Date be less than the Regular Basic Benefit accrued under the Plan at any
earlier time, determined as though the Participant had terminated employment
at that time and as though the Plan had always been in existence.
(b) Eligibility for and Amount of Imputed Basic Benefit. A
Participant who was a PacTel Employee before the Separation Date shall be
eligible for an Imputed Basic Benefit if he or she received allocations of
basic, variable or transition contributions under the PacTel Retirement Plan
while deferring compensation under the Pacific Telesis Group Executive
Deferral Plan. A Participant's Imputed Basic Benefit shall equal a monthly
life annuity whose Present Value on the Pension Effective Date is equal to:
(i) The sum of the amounts actually deferred under the
Pacific Telesis Group Executive Deferral Plan attributable to base
salary and Short Term Incentive Plan awards for each year between
January 1, 1987, and the Separation Date multiplied by the sum of the
basic, variable and transition contribution rates in effect under the
PacTel Retirement Plan for each of those years;
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(ii) Plus Interest on such contributions to the Pension
Effective Date.
3.3 Officer Minimum Benefit. The Officer Minimum Benefit provides a
monthly pension to certain Executives who serve as Officers. (The Officer
Minimum Benefit was formerly provided under the Pacific Telesis Group
Executive Non-Qualified Pension Plan.)
(a) Eligibility for Officer Minimum Benefit. A Participant is
eligible for an Officer Minimum Benefit if:
(i) He or she became an Officer on or before January 24,
1992;
(ii) He or she completes at least 10 Years of Officer
Service;
(iii) At the time of his or her Termination of Employment, the
Participant is at least 55 years of age and is an Officer; and
(iv) In the case of Participants whose Years of Officer
Service were interrupted for any period of longer than six (6) months,
the Participant thereafter completed at least five (5) Years of Officer
Service.
(b) Amount of Officer Minimum Benefit. An eligible Participant's
Officer Minimum Benefit is a monthly pension equal to:
(i) 45% of the sum of the Officer's Final Average Monthly
Base Pay and Final Average Monthly STIP Award; reduced by
(ii) The sum of the Officer's:
(A) Mid-Career Benefit, if any;
(B) PacTel Account Benefit, if any; and
(C) PacTel Pension Benefit, if any.
If an Officer completes more than ten (10) Years of Officer Service, the
percentage in Clause (i) above shall be increased one percent (1%) for each
whole Year of Officer Service beyond ten years, up to a maximum of 50% for
15 or more Years of Officer Service. The benefit in Clause (i) above shall
not be adjusted for early payment.
3.4 Special Minimum Benefit. The Special Minimum Benefit provides a
monthly pension payable to eligible Executives for life. (The Special
Minimum Benefit was formerly provided by the minimum retirement benefit
provisions of the Pacific Telesis Group Senior Management Long Term
Disability and Survivor Protection Plan.)
(a) Eligibility for Special Minimum Benefit. A Participant shall
be eligible for a Special Minimum Benefit if, at his or her Termination of
Employment, the Participant is an Executive and either:
5
<PAGE>
(i) Is eligible for a service pension under the Qualified
Pension Plan; or
(ii) Has reached his or her 62nd birthday and has a Term of
Employment of at least five years.
(b) Amount of Special Minimum Benefit. A Participant's Special
Minimum Benefit is a monthly pension equal to:
(i) One and one-quarter percent (1.25%) of the Participant's
Final Annual Pay; reduced by
(ii) The sum of the Participant's:
(A) Mid-Career Benefit, if any;
(B) PacTel Account Benefit, if any; and
(C) PacTel Pension Benefit, if any.
The benefit in Clause (i) above shall not be adjusted for early payment.
3.5 Special Increases. Unless the Committee determines otherwise,
Executive Pensions payable as monthly service or disability (but not vested)
pensions to retired Participants who were Executives at the time of their
Termination of Employment, or to their joint annuitants, shall be increased
by the same percentage and pursuant to the same terms and conditions set
forth in the Qualified Pension Plan for ad hoc increases to retired
participants or their joint annuitants.
SECTION 4. PAYMENT OF EXECUTIVE PENSION
4.1 Service and Vested Pensions.
(a) Time of Payment. A Participant's Executive Pension paid as a
service or vested pension shall commence on the date that the Participant's
benefits under the Qualified Pension Plan are paid or commence, subject to
the Committee's discretion to determine another time or times of payment.
(b) Form of Payment. Subject to the Committee's discretion to
determine another form of payment, a Participant may elect, before the date
of his or her Termination of Employment, one of the following forms of
payment for his or her Executive Pension paid as a service or vested
pension:
(i) Life Annuity. An annuity payable monthly for the life
of the Participant only, in the amount determined under Section 3
above, including any adjustment for early payment; or
6
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(ii) Joint and Survivor Annuity. A reduced annuity payable
monthly for the life of the Participant and, upon the Participant's
death, 50% of such annuity payable for the life of the Participant's
surviving spouse to whom he or she was married at the Pension Effective
Date. The reduced annuity payable during the life of the Participant
shall be 90% of the amount of the life annuity determined in Clause (i)
above, except that it shall be increased to 100% of the life annuity if
the spouse dies before the Participant.
If the Participant does not elect one of these alternative forms of payment
before his or her Termination of Employment, or if the Committee does not
consent to the form of payment elected by the Participant, then the
Committee shall determine, in its sole discretion, the form of payment for
the Participant's Executive Pension and the appropriate adjustment to its
amount.
(c) Coordination With Mid-Career Pension. The foregoing
notwithstanding, a Participant's Executive Pension payable as a service or
vested pension shall be paid at the same time and in the same form as his or
her pension, if any, under the Pacific Telesis Group Mid-Career Pension
Plan.
4.2 Disability Pensions. If the Participant's Executive Pension is payable
as a disability pension as provided under Section 2.3(b), it shall be paid
monthly commencing as of the day following the Participant's Termination of
Employment and continuing until the Participant is no longer eligible for a
disability pension under the Qualified Pension Plan.
(a) Cessation Before Age 65. If the Participant's disability
pension ends prior to attaining age 65 and the Participant is not reemployed
by a Participating Company, he or she shall then be eligible to receive an
Executive Pension payable as a vested pension. The Participant may elect a
form of payment for the vested pension in the manner provided in Section
4.1(b) above, except that the election must be made before the termination
date for the disability pension or such other date as may be specified by
the Plan Administrator.
(b) Conversion at Age 65. If the Participant is receiving his or
her Executive Pension as a disability pension immediately before attaining
age 65, the disability pension shall then cease and the Participant shall
thereafter be eligible to receive the Executive Pension, in the same amount,
as a service pension. The Participant shall be entitled to elect a form of
payment for the service pension in the manner provided in Section 4.1(b)
above, except that the election must be made before the Participant's 65th
birthday.
4.3 Notification of and Application for Benefits. The Plan Administrator
may notify the Participant of the amount of his or her Executive Pension and
may require the Participant to apply for benefits under the Plan.
7
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4.4 Actual Payment Date Following Pension Effective Date. If a
Participant's service pension under the Qualified Pension Plan does not
commence on the Pension Effective Date and thus the commencement of his or
her Executive Pension also is delayed, then the unpaid monthly benefits
under this Plan from the Pension Effective Date to the date that the
Executive Pension actually starts shall be paid to the Participant in a
single sum without interest.
4.5 Death Following Pension Effective Date. If a Participant dies before
the Executive Pension commences but after his or her Pension Effective Date
(so that a Surviving Spouse Benefit is not payable under Section 6.1), the
Participant's Executive Pension shall be paid in the form previously elected
under Section 4.1(b), as soon as practicable after the Participant's death,
unless the Committee determines another time and form of payment. If the
Participant had elected a life annuity, unpaid monthly benefits from the
Participant's Pension Effective Date to the date of death shall be payable
to the Participant's estate or to such other person or persons as are
entitled to the Participant's property under applicable law. If the
Participant had elected a Joint and Survivor Annuity, unpaid monthly
benefits from the Participant's Pension Effective Date to the date of death
shall be payable to the Participant's joint annuitant and the survivor
portion of such annuity shall be payable to the joint annuitant as of the
date of the Participant's death.
SECTION 5. WELFARE BENEFITS FOR CERTAIN PARTICIPANTS
5.1 Eligibility. A Participant is eligible for benefits under this Section
after his or her Termination of Employment if he or she is not eligible for
retiree welfare benefit coverage under the Company's group welfare benefit
plans but is:
(a) At least 62 years of age at Termination of Employment and has a
Term of Employment of at least five (5) years; or
(b) At least 55 years of age and an Officer at Termination of
Employment and has at least ten (10) Years of Officer Service.
5.2 Benefits. An eligible Participant under Section 5.1 above shall be
entitled to life insurance benefits which are equivalent to the benefits
which would have been provided to the Participant under the Company's group
life insurance plans if he or she had been eligible for a service pension
under the Qualified Pension Plan. In addition, an eligible participant
under Section 5.1(b) above shall be entitled to medical and dental benefits
which are equivalent to the benefits which would have been provided to the
Participant under the Company's group medical and dental benefit plans if he
or she had been eligible for a service pension under the Qualified Pension
Plan. (Welfare benefits were formerly provided to Executives eligible for
the minimum pension under the Pacific Telesis Group Long Term Disability and
Survivor Protection Plan and to certain Officers under the Pacific Telesis
Group Executive Non-Qualified Pension Plan and the Pacific Telesis Group
Mid-Career Pension Plan.)
8
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SECTION 6. SURVIVING SPOUSE BENEFITS
6.1 Amount. The amount of the monthly Surviving Spouse Benefit payable for
the life of the surviving spouse shall be equal to the greater of the:
(a) Regular Surviving Spouse Benefit under Section 6.3, if eligible
therefor; or
(b) Special Surviving Spouse Benefit under Section 6.4, if eligible
therefor.
6.2 Regular Surviving Spouse Benefit.
(a) Eligibility. The surviving spouse of a Participant shall be
entitled to receive a Regular Surviving Spouse Benefit if the Participant
dies either before the Pension Effective Date or while receiving a
disability pension, and if the Participant's surviving spouse is eligible
for an automatic survivor annuity or other survivor annuity under the
Qualified Pension Plan. (The Regular Surviving Spouse Benefit was formerly
provided under the Pacific Telesis Group Supplemental Executive Retirement
Plan and the Pacific Telesis Group Executive Non-Qualified Pension Plan.)
(b) Amount. The monthly amount of the Regular Surviving Spouse
Benefit payable for the life of the surviving spouse shall be equal to the
survivor's portion of the Joint and Survivor Annuity that would have been
payable under this Plan if the Participant had commenced receiving an
Executive Pension as a service or vested pension in the form of a Joint and
Survivor Annuity under Section 4.1(b)(ii) on the day before his or her
death, including any adjustment for early payment, except that the Regular
Basic Benefit shall be determined without an adjustment for early payment if
the Participant then was then eligible for a service pension under Section
2.3(b) of the Plan or if the Participant's Term of Employment at the date of
death was at least 15 years.
(c) Special Increases. Unless the Committee determines otherwise,
Regular Surviving Spouse Benefits payable as monthly benefits to surviving
spouses who are eligible for automatic survivor annuities under the
Qualified Pension Plan shall be increased by the same percentage and
pursuant to the same terms and conditions set forth in the Qualified Pension
Plan for ad hoc increases to surviving spouses.
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6.3 Special Surviving Spouse Benefit.
(a) Eligibility. The surviving spouse of a Participant shall be
entitled to receive a Special Surviving Spouse Benefit if, at the date of
the Participant's death:
(i) The Participant is an Executive; or
(ii) The Participant is a former Executive who, at his or her
Termination of Employment, was an Executive, either was eligible for a
service pension under the Qualified Pension Plan or had reached his or
her 62nd birthday and had a Term of Employment of at least five years,
and did not decline to elect a joint and survivor annuity form of
payment under the Qualified Pension Plan.
(The Special Surviving Spouse Benefit was formerly provided under the
Pacific Telesis Group Senior Management Long Term Disability and Survivor
Protection Plan.)
(b) Amount. The monthly amount of the Special Surviving Spouse
Benefit payable for the life of the surviving spouse shall be equal to:
(i) One and one-quarter percent (1 %) of the Participant's
Final Annual Pay; reduced by:
(ii) The sum of the monthly survivor annuities payable to the
surviving spouse under the Qualified Pension Plan and the Pacific
Telesis Group Mid-Career Plan, in the amounts that those benefits would
be payable as monthly benefits for life as of the first day they
actually are paid (regardless of other forms of payment available or
elected); plus the monthly amount (or equivalent) of any other lifetime
payments to the surviving spouse from the Company.
6.4 Form and Time of Payment. Subject to the Committee's discretion to
determine another time and form of payment, a Surviving Spouse Benefit shall
be payable as a monthly annuity for the life of the surviving spouse,
commencing as of the date that the surviving spouse's benefits under the
Qualified Pension Plan commence. Notwithstanding the foregoing, the
Surviving Spouse Benefit under this Plan shall be paid at the same time and
in the same form as the Surviving Spouse Benefit, if any, under the Pacific
Telesis Group Mid-Career Pension Plan.
SECTION 7. DEATH BENEFITS
7.1 Eligibility and Waiver. The beneficiary of a Participant who dies as
an Executive, or who dies after Termination of Employment if the Participant
was an Executive at the time of his or her Termination of Employment, shall
be eligible for a Death Benefit under this Plan if the beneficiary is
eligible for death benefits under the Qualified Pension Plan. If a
Participant is deemed to have waived a sickness or pensioner death benefit
under the Qualified Pension Plan, then the associated Death Benefit under
this Plan shall also be deemed to have been waived.
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7.2 Benefits. Except as otherwise provided in this Section (or elsewhere
in this Plan), the Death Benefits provided by the Plan shall be determined
and administered in the same manner and are subject to the same terms and
conditions as the accident, sickness and pensioner death benefits provided
under the Qualified Pension Plan.
(a) Determination of Amount. The amount of a sickness, accident or
pensioner Death Benefit provided by this Plan shall be equal to:
(i) One times the Participant's Final Annual Pay;
(ii) Reduced by the sickness, accident or pensioner death
benefit payable with respect to the Participant under the Qualified
Pension Plan, as applicable.
In the case of a pensioner Death Benefit, the amount determined in clause
(i) above shall be subject to the same reductions, if any, which are applied
to the Participant's pensioner death benefit under the Qualified Pension
Plan.
(b) Form and Time of Payment. The Committee shall determine, in
its sole discretion, the time and form of payment for any Death Benefit paid
under this Plan.
(c) Beneficiary. The Participant's beneficiary for purposes of
this Section 7 shall be the beneficiary under the Qualified Pension Plan.
SECTION 8. RIGHTS TO BENEFITS
8.1 Entitlement to Benefits. A Participant's Executive Pension shall be
based on the terms of the Plan in effect at the Participant's Termination of
Employment. Entitlement to a Surviving Spouse Benefit or a Death Benefit
shall accrue on the date such benefit becomes payable. Except as otherwise
provided in the Plan, entitlement to other benefits described in the Plan
shall accrue on the date of the Participant's Termination of Employment.
(a) Assignment or Alienation. Assignment or alienation of pensions
or other benefits under this Plan will not be permitted or recognized except
as required by law.
(b) Payments to Others. Benefits payable to an individual unable
to execute a proper receipt may be paid to another person in accordance with
the standards and procedures established under the Qualified Pension Plan.
8.2 Effect of Reemployment. If a former Executive who is receiving an
Executive Pension again becomes an Employee of any Participating Company,
the monthly pension benefits otherwise payable under this Plan during the
period of reemployment shall be suspended and forfeited. At the Executive's
subsequent Termination of Employment, his or her Executive Pension shall be
recalculated, as determined by the Committee, in the manner prescribed under
the Qualified Pension Plan for redetermining pensions following reemployment
and for adjusting such pensions for prior Plan payments.
11
<PAGE>
8.3 Forfeiture for Misconduct. Notwithstanding any other provision of the
Plan, all or a portion of the benefits that a Participant or his or her
surviving spouse, joint annuitant or beneficiaries would otherwise be
eligible to receive under this Plan may be forfeited, in the sole discretion
of the Company's Board of Directors, under the following circumstances:
(a) The Participant is discharged by a Participating Company for
cause; or
(b) A determination is made by the board of directors of a Partici-
pating Company that the Participant engaged in misconduct in connection with
his or her employment by that Participating Company.
8.4 Waiver in Absence of Claims Release. In case of an accident resulting
in the death of a Participant which entitles his or her beneficiaries to
Death Benefits under this Plan, the beneficiaries shall, prior to the
payment of any Death Benefits, sign a release releasing the Company or other
Participating Company, as applicable, from all claims and demands which the
Participant and the beneficiaries had or may have against it on account of
the accident, other than claims for benefits under this Plan or under any
other plan maintained by the Company or a Participating Company. If any
persons other than the beneficiaries under this Plan might legally assert
claims against a Participating Company on account of the death of the
Participant, no Death Benefit shall be due or payable until there have also
been delivered to the Committee good and sufficient releases of all claims,
arising from or growing out of the death of the Participant, which such
other persons might legally assert against the Participating Company. The
Committee, in its discretion, may require that the releases described above
also release any other company connected with the accident, including any
company participating in this Plan or the Qualified Pension Plan, and any
company with which arrangements have been made, directly or indirectly, for
the interchange of benefit obligations as described in the Qualified Pension
Plan. The determination of whether or not a death is due to accident for
purposes of this Section 8.4 shall be made by the Committee in the manner
provided in the Qualified Pension Plan.
8.5 Waiver by Damage Claims or Suits. Should a claim be presented or suit
brought against the Company or any Participating Company, other than under
the Plan, for damages on account of the death of an individual who was at
any time a Participant in the Plan, no Death Benefits shall be payable under
the Plan except as provided in Section 8.6 below or unless the Committee, in
its sole discretion and upon such terms as it may prescribe, waives this
provision after withdrawal of the claim or dismissal of the suit.
8.6 Offset for Judgment or Settlement. In case any judgment is recovered
against any Participating Company or any settlement is made of any claim or
suit on account of the death of an individual who was at any time a
Participant in the Plan, and the amount paid to the beneficiaries who would
have received Death Benefits under the Plan is less than what would
otherwise have been payable under the Plan, the difference between the two
amounts may, in the sole discretion of the Committee, be distributed to the
beneficiaries.
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8.7 Offset for Payments Under Law. If any benefit becomes payable to a
Participant or his or her surviving spouse, joint annuitant or beneficiaries
under any law now in force or hereafter enacted, and if the Committee
determines that it is of the same general character as a benefit provided by
the Plan, then only the excess, if any, of the amount prescribed in the Plan
above the amount of the payment prescribed by law shall be payable under the
Plan. In those cases where the existence of an excess is not ascertainable
by mere comparison because of such factors as differences in the
beneficiaries or the time or methods of payment, the Committee shall have
sole discretion to determine whether or not any excess exists and to make
any adjustments necessary to carry out in a fair and equitable manner the
spirit of this provision. Notwithstanding the foregoing, no benefit payable
under this Plan shall be reduced by reason of any governmental benefit or
pension payable on account of military service, or by reason of any benefit
provisions of the Social Security Act other than those related to
disability.
SECTION 9. SOURCE OF BENEFIT PAYMENTS
9.1 Participating Company Liability. Where a Participant's Term of
Employment includes service with more than one Participating Company, or
with one or more Participating Companies and one or more non-participating
corporations or partnerships, the last Participating Company to employ the
Participant as an Executive prior to his or her Termination of Employment
with entitlement to a benefit hereunder shall be primarily liable for the
full benefit payable under the Plan. However, if for any reason the
primarily liable Participating Company fails to make timely payment of an
amount due to or on behalf of a Participant, the Company shall be
secondarily liable for the obligation to pay the amount due. A
Participating Company's withdrawal from participation shall not affect that
company's liability hereunder. In addition, the liability of a
Participating Company shall not be affected by any action or inaction (on
the part of the Participant, his or her surviving spouse, joint annuitant or
beneficiaries, or any company) with respect to amounts owed, including but
not limited to the granting of extensions of time or other indulgences, the
failure to make timely demand, the failure to make timely payment or the
failure to give notices of any type, other than as prescribed in Section
10.4.
9.2 All Benefits Unfunded. All benefits payable under the Plan shall be
paid from the Company's or Participating Company's operating expenses,
though the purchase of insurance from an insurance company, or through a
trust established by the Company and/or the other Participating Companies
for this purpose, as the Company may determine.
9.3 No Right to Company Assets. Neither an Executive nor any other person
shall acquire by reason of the Plan any right in or title to any assets,
funds or property of the Company or any other Participating Company,
including, without limiting the generality of the foregoing, any specific
funds, trust accounts or assets which any Participating Company, in its sole
discretion, may earmark or set aside in anticipation of a liability under
the Plan. A Participating Company's obligation to pay any amounts under the
Plan shall be unfunded as to the Executive, whose rights shall be those of a
general unsecured creditor.
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SECTION 10. ADMINISTRATION
10.1 Plan Sponsor. The Company shall be the sponsor of the Plan as that
term is defined in ERISA.
10.2 Plan Administrator. The Executive Vice President-Human Resources of
the Company shall be the Plan Administrator as that term is defined in
ERISA. The Plan Administrator shall have the specific powers granted to him
elsewhere in the Plan and shall also have such other powers as may be
necessary in order to administer the Plan in his sole discretion, except for
those powers granted or provided to be granted to others by the Plan. The
Plan Administrator shall determine conclusively for all parties all
questions arising in the administration of the Plan and, insofar as
permitted by applicable law, any decision of the Plan Administrator shall
not be subject to further review.
10.3 Procedure To Approve and Deny Claims. The Committee shall have sole
discretion to determine the rights of Participants (or their surviving
spouses, joint annuitants or other beneficiaries) to benefits under the
Plan, and to authorize disbursements under the Plan. In all questions
relating to age and service for eligibility for any benefit under the Plan,
or relating to service and rates of pay for determining benefits payable
under the Plan, the decisions of the Committee, based upon this Plan and
upon the records of the Participating Companies employing the individual,
shall be final insofar as permitted by applicable law. The Committee may
adopt such rules of procedure as it may find appropriate. A claim for
benefits under the Plan shall be deemed denied unless the decision of the
Committee is sent within 90 days of its receipt of the claim (or within 180
days, if the Committee extends the time by notifying the claimant in writing
of the special circumstances requiring an extension and the date by which
the decision is expected). If a claim is denied in whole or part by the
Committee, it shall send a written decision stating (a) the specific reasons
for the denial, making specific reference to pertinent provisions of the
Plan; (b) what additional information, if any, would help perfect the claim
for benefits; and (c) what steps the claimant must take to submit the claim
for review.
10.4 Review Procedure. The Board of Directors of the Company shall serve as
the final review committee, under the Plan and ERISA, for the review of all
claims appealed by Participants (or their surviving spouses, joint
annuitants or other beneficiaries) whose initial claims for benefits have
been denied, in whole or in part, by the Committee. Within 60 days after
the date of a denial by the Committee, the claimant may file a written
request for the Board of Directors of the Company to review the denial.
Such request for review must be made in a timely manner for the purpose of
seeking any further review of a decision or determining any entitlement to a
benefit under the Plan. In such a case, the Board of Directors of the
Company shall conduct a full and fair review of the Committee's decision and
notify the claimant in writing of the review decision, specifying the
reasons for the decision and the Plan provisions on which it is based. A
claim shall be deemed denied unless the decision on appeal is sent within 60
days (or within 120 days, if the Board of Directors of the Company extends
the time to respond by notifying the claimant in writing of the special
circumstances requiring an extension of time).
14
<PAGE>
10.5 Further ERISA Rights. Any Participant (or surviving spouse, joint
annuitant or other beneficiary) whose claim for benefits has been denied
upon review shall have such further rights as are provided in Section 503 of
ERISA and the regulations thereunder. The Company, the Board of Directors
of the Company, the Committee and the Executive Vice President-Human
Resources of the Company shall retain such rights, authority and discretion
as are provided or not expressly limited by section 503 of ERISA and the
regulations thereunder.
10.6 Named Fiduciaries. The Company, each Participating Company, the Board
of Directors of the Company, the Committee and the Executive Vice President-
Human Resources of the Company are each a named fiduciary as that term is
used in ERISA with respect to the particular duties and responsibilities
allocated to each of them. Any person or group of persons may serve in more
than one fiduciary capacity with respect to the Plan.
10.7 Allocation of Responsibilities. The Company, the Committee, the
Executive Vice President-Human Resources of the Company and each
Participating Company may designate in writing other persons to carry out
their respective responsibilities under the Plan and may employ persons to
advise them with regard to any such responsibilities.
10.8 Administrative Expenses. The expenses of administering the Plan shall
be apportioned among the Participating Companies, as determined by the Plan
Administrator.
SECTION 11. AMENDMENT AND TERMINATION
11.1 Plan Amendment. The Company may from time to time make any changes in
the Plan which it deems appropriate, with or without notice to Participants,
by appropriate action of its Board of Directors. In addition, the Plan
Administrator, with the approval of the Executive Vice President and General
Counsel of the Company, shall be authorized to make minor or administrative
changes to the Plan, as well as changes dictated by the requirements of
federal or state statutes applicable to the Company or authorized or made
desirable by such statutes. However, in recognition of the reliance placed
upon the Plan and its contractual nature in inducing the change in position
caused by retirement, any such change or modification shall not result in
the cessation or reduction of benefits to retired individuals or their
surviving spouses or joint annuitants, nor shall such modification affect
the rights of any individual to any benefit to which he or she may have
previously become entitled under the Plan.
11.2 Plan Termination. At any time, for any reason, and with or without
notice to Participants, the Company retains the right to terminate the Plan
in whole or in part by appropriate action of its Board of Directors, and
each Participating Company retains the right to withdraw from the Plan.
Neither termination of the Plan nor withdrawal by a Participating Company
shall result the cessation or reduction of benefits to any retired
Participant (or his or her surviving spouse, joint annuitant or other
beneficiary), or affect the rights of any individual to any benefit to which
he or she may have previously become entitled under the Plan. A Participat-
ing Company's withdrawal from participation shall not affect that company's
liability to provide benefits to a Participant as described in Section 9.1
of the Plan.
15
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SECTION 12. DEFINITIONS
"Basic Benefit" is a benefit that is used in the determination of the
amount of the Executive Pension, as set forth in Section 3.2.
"Committee" means the Compensation and Personnel Committee of the Board
of Directors of the Company.
"Company" means Pacific Telesis Group, a Nevada corporation, or its
successors.
"Effective Date" means July 1, 1995.
"Employee" means a common law employee of the Company or any other
Participating Company.
"Employer Group" shall have the meaning set forth in the Qualified
Pension Plan.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
it may be amended from time to time
"Executive" means an Officer of any Participating Company or any other
Employee who has been designated by the Committee to be within a Participat-
ing Company's executive group for purposes of the Plan.
"Executive Pension" means the pension provided pursuant to Section 3 of
this Plan.
"Final Annual Pay," which is used in determining the Special Minimum
Pension in Section 3.4(b)(i), the Special Surviving Spouse Benefit in
Section 6.3(b)(i) and the Death Benefit in Section 7.2(a)(i), means the
Participant's annual rate of base pay (whether or not deferred) on the last
day he or she was on the active payroll of a Participating Company plus the
Participant's annual Standard Award as determined under the Short Term
Incentive Plan on the last day he or she was on the active payroll.
"Final Average Monthly Base Pay," which is used in determining the
Regular Basic Benefit in Section 3.2(a)(i) and the Officer Minimum Benefit
in Section 3.3(b)(i), means the average of the Participant's monthly rates
of base pay, whether or not deferred, for the final 60 months in his or her
Term of Employment that is recognized for this purpose under the Qualified
Pension Plan.
16
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"Final Average Monthly STIP Award," as used in Section 3.2(a)(i) for
the purpose of determining the Regular Basic Benefit and in Section
3.3(b)(i) for the purpose of determining the Officer Minimum Benefit, means
the average of the Participant's "Monthly STIP Awards" for the final 60
months in his or her Term of Employment that is recognized for this purpose
as set forth under the Qualified Pension Plan. "Monthly STIP Award" means,
for any month in a calendar year, 1/12 of the Participant's annual Standard
Award (whether or not deferred) as set forth under the Short Term Incentive
Plan for that calendar year. In the case of Participants who were Employees
on the Separation Date and who had participated in the PacTel Corporation
Short Term Incentive Plan, the "Monthly STIP Award" for any month before
April 1, 1994, during such participation means 1/12 of the Participant's
annual standard award under the PacTel Corporation Short Term Incentive
Plan, as adjusted for changes in position rate.
"Interest" means hypothetical earnings on an account balance, which
shall be calculated in the manner determined by the Committee in its sole
discretion. The Committee may, but is not required to, calculate Interest
based on the interest rate used to calculate Present Value as of a
Participant's Pension Effective Date.
"Joint Venture Employer" has the meaning set forth in the Qualified
Pension Plan.
"Mandatory Retirement Age" means age 65 for those Participants who meet
the requirements of section 12(c)(1) of the Age Discrimination in Employment
Act of 1967, as amended ("ADEA"); or as permitted under the ADEA, for those
Participants for whom age is a bona fide occupational qualification within
the meaning of section 4(f)(1) of the ADEA. There shall be no Mandatory
Retirement Age for other Participants, if any.
"Mid-Career Benefit" means the amount of the monthly pension, if any,
that would be payable as a life annuity under the Pacific Telesis Group Mid-
Career Pension Plan as of the Participant's Pension Effective Date, adjusted
for early payment if applicable. Any ad hoc or other increases to the Mid-
Career Benefit payable after the Participant's Pension Effective Date shall
be disregarded.
"Officer" means an individual elected or appointed to, and serving in,
one or more of the following positions:
(i) A position with the Company described in the bylaws of
the Company as that of an officer, other than an assistant officer
position; or
(ii) A position with Pacific Bell described in the bylaws of
Pacific Bell as that of an officer, other than an assistant officer
position; or
(iii) A position with any Participating Company for which
there is in effect a specific designation by the Committee that the
position shall be considered to be that of an Officer for purposes of
the benefit and retirement plans.
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An "Officer" also means a named Employee of any Participating Company for
which there is in effect a specific designation by the Committee that the
named Employee shall be included in the definition of "Officer" for purposes
of the benefit and retirement plans.
"Officer Minimum Benefit" is a benefit that is used to determine the
amount of the Executive Pension, as set forth in Section 3.3.
"PacTel Account Benefit," which is used to reduce the Officer Minimum
Benefit and the Special Minimum Benefit in Sections 3.3(b) and 3.4(b) of the
Plan, means a monthly life annuity, commencing as of the Participant's
Pension Effective Date, whose Present Value equals the sum of the following
amounts:
(i) Value of the Basic Account under the PacTel Retirement
Plan on the Separation Date, plus Interest to the Pension Effective
Date;
(ii) Value of the Variable Account under the PacTel
Retirement Plan on the Separation Date, plus Interest to the Pension
Effective Date;
(iii) Value of the Transition Account under the PacTel
Retirement Plan on the Separation Date, plus Interest to the Pension
Effective Date;
(iv) Amount of all withdrawals and distributions made from
the Basic, Variable and Transition Accounts under the PacTel Retirement
Plan prior to the Separation Date, plus Interest from the date of
withdrawal to the Pension Effective Date; and
(v) Value of the Participant's accounts attributable to
Company contributions under the PacTel Corporation Excess Benefit Plan
and the PacTel Corporation Deferred Compensation Plan as of the
Separation Date, other than Company "matching" contributions, plus
Interest to the Pension Effective Date. (As of the Separation Date,
assets and liabilities attributable to these plans were transferred to
the AirTouch Communications Excess Benefit Plan.)
"PacTel Employee" means a Participant who was employed by PacTel
Corporation or any of its subsidiaries (if such subsidiary was a
participating company in the PacTel Corporation Employees Pension Plan)
before the Separation Date.
"PacTel Pension Benefit," which is used to reduce the Officer Minimum
Benefit and the Special Minimum Benefit in Sections 3.3(b) and 3.4(b) of the
Plan, means the sum of the pensions payable at age 65 that were accrued as
of the Separation Date under the AirTouch Communications Employees Pension
Plan (other than any pension payable under Supplements A, B and C of that
plan) and the AirTouch Communications Supplemental Executive Pension Plan,
except that each pension shall be adjusted for early payment, under the
terms of its plan in effect at the Separation Date, as if the Participant's
annuity under the plan commenced on the Participant's pension effective date
under those plans, if received as a service pension, or on the Pension
Effective Date under this Plan, if received as a vested pension.
18
<PAGE>
"PacTel Retirement Plan" means the defined contribution plan maintained
by the Company before the Separation Date for the benefit of employees of
PacTel Corporation and its subsidiaries. Its formal name was the PacTel
Corporation Retirement Plan. (As of the Separation Date, assets and
liabilities attributable to this plan were transferred to the AirTouch
Communications Retirement Plan).
"Participant" means an Executive or former Executive who meets the
eligibility requirements of Section 2 of the Plan.
"Participating Companies" mean the Company and each other corporation
or partnership that both (a) participates in the Qualified Pension Plan and
(b) has determined, with the concurrence of the Company's Board of
Directors, to participate in this Plan.
"Pension Effective Date" means the date as of which the Participant's
Executive Pension is calculated, as follows:
(i) For service pensions, the Pension Effective Date is the
day after the Participant's Termination of Employment.
(ii) For vested pensions, the Pension Effective Date is the
date as of which the Pension is paid under Section 4.
(iii) For disability pensions, the Pension Effective Date is
the day after the Participant's Termination of Employment due to
disability.
"Plan" means this Pacific Telesis Group Executive Supplemental Pension
Plan.
"Plan Administrator" means the Executive Vice President-Human Resources
of the Company, as set forth in Section 10.2 of the Plan.
"Predecessor Plans" mean the Pacific Telesis Group Executive Non-
Qualified Pension Plan, the Pacific Telesis Group Supplemental Executive
Retirement Plan, and the minimum pension and related welfare and surviving
spouse benefit provisions of the Pacific Telesis Group Executive Disability
and Survivor Protection Plan (formerly called the Pacific Telesis Group
Senior Management Long Term Disability and Survivor Protection Plan). It
also means the predecessor plan to those plans, i.e., the Bell System Senior
Management Non-Qualified Pension Plan.
"Present Value" means a single sum amount which is actuarially
equivalent to a monthly annuity payable for life, based on actuarial factors
set forth in the Qualified Pension Plan for the purposes of determining
cashout payments.
19
<PAGE>
"Qualified Pension Benefit" means the amount of the monthly pension
that would be payable to a Participant under the Qualified Pension Plan as
of the Participant's Pension Effective Date, adjusted for early payment if
applicable and further adjusted for any additional pension actually payable
after the Pension Effective Date due to increased limits under section 415
of the Internal Revenue Code. However, if a Participant is not an Executive
at his or her Termination of Employment and if nonqualified pension benefits
are payable under the Qualified Pension Plan due to limits under sections
401(a)(17) and 415 of the Internal Revenue Code, then the Participant's
Qualified Pension Benefit shall include the nonqualified pension benefits
payable under the Qualified Pension Plan. Any ad hoc or other increases
payable under the Qualified Pension Plan after the Pension Effective Date
(other than increases due to section 415 limits) shall not be included in
the amount of the Participant's Qualified Pension Benefit.
"Qualified Pension Plan" means the Pacific Telesis Group Pension Plan
for Salaried Employees.
"Separation Date" means April 1, 1994, the date as of which occurred
the total and complete separation of the ownership of PacTel Corporation
from the Company.
"Short Term Incentive Plan" means the Pacific Telesis Group Short Term
Incentive Plan and its predecessor plan.
"Special Minimum Benefit" is a benefit that is used to determine the
amount of the Executive Pension, as set forth in Section 3.4.
"Standard Award" shall have the meaning set forth in the Short Term
Incentive Plan, which includes adjustments for changes in position rate.
"Term of Employment" means the number of years credited to the
Participant for purposes of determining eligibility for a service pension
and the early payment discount under the Qualified Pension Plan. As
provided under the Qualified Pension Plan, a Participant's Term of
Employment (a) includes all periods that the Participant was employed by the
Company, other companies participating in the Qualified Pension Plan,
certain joint venture employers, and certain predecessor employers; (b) does
not include service before a break in service until such service is
"bridged" as provided in the Qualified Pension Plan; and (c) excludes any
period of employment which was transferred from the Qualified Pension Plan
to the PacTel Corporation Employees Pension Plan effective before the
Separation Date and was included in the Participant's service recognized by
that plan as of the Separation Date.
"Termination of Employment" means the date on which a Participant
terminates employment with all Participating Companies and members of the
Employer Group.
20
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"Years of Credited Service" means the number of whole and partial years
credited to the Participant for purposes of calculating the monthly pension
benefit under the Qualified Pension Plan except that, as provided in Section
3.1(b) above, if a Participant is not an Executive upon his or her
Termination of Employment, the years so credited under the Qualified Pension
Plan after the Participant ceased serving as an Executive shall be
disregarded. As provided under the Qualified Pension Plan, a Participant's
Years of Credited Service (a) reflect an adjustment for part-time
employment; (b) do not include periods of service with a non-Participating
Company without a transfer of assets and corresponding Disabilities; (c) do
not include periods that the Participant was employed by PacTel Corporation
(and its subsidiaries) between January 1, 1987, and the Separation Date
unless the Participant was an Employee on the Separation Date and had been a
full accrual participant under the PacTel Corporation Employees Pension Plan
before the Separation Date; (d) do not include periods of service before a
break in service until such service is "bridged" as provided in the
Qualified Pension Plan; and (e) are limited to the greater of 30 years or
the actual years accrued as of December 31, 1994.
"Years of Officer Service" means the number of whole and partial 365-
day periods during which the Participant was continuously employed as an
Officer of a Participating Company. In addition, Years of Officer Service
include periods of service with other members of the Employer Group or Joint
Venture Employers (non-Participating Companies) if such service is included
in the Participant's Term of Employment and if the position in which the
Participant served at the non-Participating Company is designated by the
Committee to be the equivalent of an Officer position for purposes of this
Plan. Such service with non-Participating Companies shall not be considered
a break in the continuity of Years of Officer Service for purposes of
Sections 3.3(a) and (b). If a Participant has a break in the continuity of
Years of Officer Service which does not exceed six months, service before
and after the break shall be included in the Participant's Years of Officer
Service. However, if a Participant is reemployed after a break of more than
six (6) months in the continuity of Years of Officer Service, the
Participant's service before the break shall not be included in his or her
Years of Officer Service until the Participant completes five (5) Years of
Officer Service after reemployment. Subject to these break-in-service
rules, service as an Officer with a company that participated in a
Predecessor Plan before the Separation Date (including PacTel Corporation)
shall be included in the Participant's Years of Officer Service, regardless
of whether or not such service is included in the Participant's Term of
Employment after the Separation Date.
21
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Exhibit 10nn
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PACIFIC TELESIS GROUP
MID-CAREER PENSION PLAN
(Amended and Restated as of July 1, 1995)
TABLE OF CONTENTS
Page
SECTION 1. INTRODUCTION AND PURPOSE................................... 1
SECTION 2. ELIGIBILITY ............................................... 1
2.1 Eligibility to Participate ................................ 1
2.2 Mandatory Retirement Age .................................. 1
2.3 Eligibility for Mid-Career Pension ........................ 1
SECTION 3. AMOUNT OF MID-CAREER PENSION .............................. 2
3.1 Formula for Mid-Career Pension ............................ 2
3.2 Determination of Mid-Career Pension Credits ............... 3
3.3 Limitations on Mid-Career Pension ......................... 3
3.4 Adjustments to Mid-Career Pensions for Early Payment ...... 4
3.5 Special Increases ......................................... 5
3.6 Retiree Welfare Benefits .................................. 5
SECTION 4. PAYMENT OF MID-CAREER PENSION ............................. 5
4.1 Service and Vested Pensions ............................... 5
4.2 Disability Pensions ....................................... 6
4.3 Notification of and Application for Benefits .............. 6
4.4 Actual Payment Date Following Pension Effective Date ...... 6
4.5 Death Following Pension Effective Date .................... 6
SECTION 5. SURVIVING SPOUSE BENEFITS ................................. 7
5.1 Eligibility ............................................... 7
5.2 Amount .................................................... 7
5.3 Form and Time of Payment .................................. 7
5.4 Special Increases ......................................... 7
SECTION 6. RIGHTS TO BENEFITS ........................................ 8
6.1 Rights to Benefits ........................................ 8
6.2 Effect of Reemployment .................................... 8
6.3 Forfeiture for Misconduct ................................. 8
6.4 Offset for Payments Under Law ............................. 8
SECTION 7. SOURCE OF BENEFIT PAYMENTS .............................. 9
7.1 Participating Company Liability ........................... 9
7.2 All Benefits Unfunded ..................................... 9
7.3 No Right to Company Assets ................................ 9
<PAGE>
PACIFIC TELESIS GROUP
MID-CAREER PENSION PLAN
(Amended and Restated as of July 1, 1995)
TABLE OF CONTENTS
Page
SECTION 8. ADMINISTRATION ............................................ 9
8.1 Plan Sponsor .............................................. 9
8.2 Plan Administrator ........................................ 9
8.3 Procedure to Approve and Deny Claims ...................... 10
8.4 Review Procedure .......................................... 10
8.5 Further ERISA Rights ...................................... 10
8.6 Named Fiduciaries ......................................... 11
8.7 Allocation of Responsibilities ............................ 11
8.8 Administrative Expenses ................................... 11
SECTION 9. AMENDMENT AND TERMINATION ................................. 11
9.1 Plan Amendments ........................................... 11
9.2 Plan Termination .......................................... 11
SECTION 10. DEFINITIONS .............................................. 12
<PAGE>
PACIFIC TELESIS GROUP
MID-CAREER PENSION PLAN
(Amended and Restated as of July 1, 1995)
SECTION 1. INTRODUCTION AND PURPOSE
The Pacific Telesis Group Mid-Career Pension Plan (the "Plan") was adopted
effective November 18, 1981, and has been amended and restated as of July 1,
1995. The purpose of the Plan is to assist the Participating Companies in
attracting and retaining highly competent management by providing certain
unfunded pension payments to eligible Employees. Capitalized terms are
defined in Section 10 of the Plan.
SECTION 2. ELIGIBILITY
2.1 Eligibility to Participate. An Employee who was hired or rehired by
the Employer Group (or by The Pacific Telephone and Telegraph Company or
other Bell System Company prior to January 1, 1984) at age 35 or older at
Fourth Level or above and whose Term of Employment includes at least one
year of continuous full-time service at Fourth Level or above shall be a
Participant in this Plan, but only if:
(a) The Employee, as of the date of such hire or rehire, was employed
by a Participating Company; and
(b) The Employee's hire was not the result of the Employer Group's
acquisition of stock or assets of the Employee's immediate prior employer.
A Participant shall remain a Participant after Termination of Employment to
the extent that Plan benefits are paid or payable.
2.2 Mandatory Retirement Age. Each Participant, whether or not eligible
for benefits under this Plan, shall cease to be eligible for continued
employment no later than the last day of the month in which the Participant
attains the Mandatory Retirement Age.
2.3 Eligibility for Mid-Career Pension.
(a) Fifth-Level Service Required. A Participant shall be eligible to
receive a Mid-Career Pension under this Plan if, at the time of his or her
Termination of Employment, the Participant is employed at Fifth Level or
above by any member of the Employer Group and the Participant's Term of
Employment includes at least five years of full-time service at Fifth Level
or above. A Participant shall not be eligible to receive a Mid-Career
Pension before Termination of Employment.
(b) Type of Pension. The Mid-Career Pension shall be paid:
(i) As a service pension, if the Participant is eligible for a
service pension under the Qualified Pension Plan (without regard to
minimum benefits or early retirement window benefits which change the
age and service requirements for a service pension); or
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(ii) As a vested pension, if the Participant's Mid-Career Pension
is not payable as a service pension and if the Participant's pension
under the Qualified Pension Plan is payable as a vested pension; or
(iii) As a disability pension, if the Participant's Mid-Career
Pension is not paid as a service pension and if the Participant is
eligible for a disability pension under the Qualified Pension Plan.
Should the disability pension under the Qualified Pension Plan be
discontinued pursuant to the terms of that plan, the disability benefit
hereunder shall also be discontinued.
(c) Continuation of Pensions Commenced Under Predecessor Plan. All
former Employees who were entitled to receive benefits under the terms of
the Predecessor Plan as of the Effective Date of this Plan shall be
Participants under the Plan and shall continue to be entitled to receive the
benefits they were receiving or entitled to receive under the terms of the
Predecessor Plan.
SECTION 3. AMOUNT OF MID-CAREER PENSION
3.1 Formula for Mid-Career Pension.
(a) Service Only as Non-Officer. The monthly pension amount for a
Participant whose Years of Credited Service do not include any period of
service as an Officer shall equal his or her Mid-Career Pension Credits, as
determined in Sections 3.2 and 3.3(a) below, multiplied by one percent (1%)
of the sum of his or her Final Average Monthly Base Pay plus his or her
Final Average Monthly STIP Award.
(b) Service Only as Officer. The monthly pension amount for a
Participant whose Years of Credited Service include only periods of service
as an Officer shall equal his or her Mid-Career Pension Credits, as
determined in Sections 3.2 and 3.3(a) below, multiplied by 1.45% of the sum
of his or her Final Average Monthly Base Pay plus his or her Final Average
Monthly STIP Award.
(c) Officer and Non-Officer Service. For a Participant whose Years of
Credited Service include periods of service as both an Officer and a non-
Officer, the monthly pension amount shall be calculated as provided for
Officers in Section 3.1(b) above, except that 1.45% shall be replaced with
the following fraction:
A x .0145 + B x .01
--------------------
C
with A, B and C having the following definitions:
A = Months of full-time service at Officer level included in the
Participant's Years of Credited Service
B = Months of full-time service below Officer level included in the
Participant's Years of Credited Service
C = Total months of full-time service included in the Participant's Years
of Credited Service
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3.2 Determination of Mid-Career Pension Credits. For those Participants
who are hired or rehired at Fifth Level or above and whose entire Years of
Credited Service include only service at Fifth Level or above, "Mid-Career
Pension Credits" means the excess of 35 years over the Years of Credited
Service that the Participant could accrue if he or she worked for a
Participating Company to age 65, subject to the limitation on the maximum
number of Mid-Career Pension Credits set forth in Section 3.3(a) below. For
all other Participants who are hired or rehired at Fourth Level or above and
whose Years of Credited Service include service at Fourth Level or below,
"Mid-Career Pension Credits" means the product computed by multiplying the
Mid-Career Pension Credits determined in the preceding sentence by a
fraction whose numerator is the number of full months of full-time service
at Fifth Level or above in the Participant's Years of Credited Service, and
whose denominator is the total number of months of full-time service in the
Participant's Years of Credited Service.
3.3 Limitations on Mid-Career Pension.
(a) Limit on Mid-Career Pension Credits. Regardless of the number of
a Participant's Mid-Career Pension Credits determined under Section 3.2
above, the Participant's Mid-Career Pension Credits at Termination of
Employment shall not exceed the Participant's Years of Credited Service with
Participating Companies accrued as of such termination.
(b) Limit on Amount of Mid-Career Pension. Notwithstanding the
pension otherwise provided by Section 3.1, the maximum monthly pension
provided by this Plan shall not exceed:
(i) 43.5% of the sum of the Participant's Final Average Monthly
Base Pay and Final Average Monthly STIP Awards, as adjusted for early
payment in accordance with Section 3.4 below, if applicable; reduced by
(ii) The sum of:
(A) The monthly pension payable from the trust fund under
the Qualified Pension Plan;
(B) The monthly nonqualified pensions payable under the
Qualified Pension Plan due to the limits under sections 415 and
401(a)(17) of the Internal Revenue Code;
(C) The monthly nonqualified pension payable under the
Qualified Pension Plan due to deferrals of compensation under the
Pacific Telesis Group Nonqualified Savings Plan; and
(D) The monthly pension payable under the "basic benefit"
provisions of the Executive Pension Plan;
all as adjusted for early payment, if applicable.
3.4 Adjustments to Mid-Career Pensions for Early Payment. The monthly
amount of a Mid-Career Pension as determined under Section 3.1 above shall
be adjusted for early payment as follows:
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(a) Disability Pensions. No adjustment shall be made if the
Participant's Mid-Career Pension is paid either as a disability pension or
as a service pension which is payable on account of total disability (as
provided under the Qualified Pension Plan);
(b) Pensions for Certain Officers. No adjustment shall be made if the
Participant has at least ten (10) Years of Officer Service and if, at the
time of his or her Termination of Employment, the Participant is at least
age 55 and is an Officer;
(c) Service Pensions Without Adjustment. No adjustment shall be made
if the Participant's Mid-Career Pension is payable as a service pension and
if, at the time of his or her Termination of Employment, the Participant
either has a Term of Employment of at least 30 years or is at least 55 years
of age;
(d) Other Service Pensions. If the Participant's Mid-Career Pension
is paid as a service pension in any other case, the monthly amount shall be
reduced by one-half percent (0.5%) for each calendar month or part thereof
by which the Participant's age at Termination of Employment is less than 55
years; or
(e) Other Vested Pensions. If the Participant's Mid-Career Pension is
paid as a vested pension and if the Participant is less than 65 years of age
on the Pension Effective Date, the monthly amount of the Mid-Career Pension
shall be reduced in accordance with the early payment factor table for
vested pensions under the Qualified Pension Plan.
3.5 Special Increases. Unless the Committee determines otherwise, Mid-
Career Pensions payable as monthly service or disability (but not vested)
pensions to retired Participants and their joint annuitants shall be
increased by the same percentage and pursuant to the same terms and
conditions applicable to ad hoc increases for retired participants or their
joint annuitants under the Qualified Pension Plan.
3.6 Retiree Welfare Benefits. A Participant who is not eligible for
retiree welfare benefit coverage under the Company's group welfare benefit
plans but who, at Termination of Employment, has at least ten (10) Years of
Officer Service, has reached age 55 and is an Officer, shall be entitled
under Section 5 of the Executive Pension Plan to medical, dental and life
insurance benefits which are equivalent to the benefits which would have
been provided to the Participant under the Company's group welfare plans if
he or she had been eligible for a service pension under the Qualified
Pension Plan.
SECTION 4. PAYMENT OF MID-CAREER PENSION
4.1 Service and Vested Pensions.
(a) Time of Payment. A Participant's Mid-Career Pension paid as a
service or vested pension shall commence on the date that the Participant's
benefits under the Qualified Pension Plan are paid or commence, subject to
the Committee's discretion to determine another time or times of payment.
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(b) Form of Payment. Subject to the Committee's discretion to
determine another form of payment, a Participant may elect, before the date
of his or her Termination of Employment, one of the following forms of
payment for his or her Mid-Career Pension paid as a service or vested
pension:
(i) Life Annuity. An annuity payable monthly for the life of the
Participant only, in the amount determined under Section 3 above,
including any adjustment for early payment; or
(ii) Joint and Survivor Annuity. A reduced annuity payable
monthly for the life of the Participant and, upon the Participant's
death, 50% of such annuity payable for the life of the Participant's
surviving spouse to whom he or she was married at the Pension Effective
Date. The reduced annuity payable during the life of the Participant
shall be 90% of the amount of the life annuity determined in Clause (i)
above, except that it shall be increased to 100% of the life annuity if
the spouse dies before the Participant.
If the Participant does not elect one of these alternative forms of payment
before his or her Termination of Employment, or if the Committee does not
consent to the form of payment elected by the Participant, then the
Committee shall determine, in its sole discretion, the form of payment for
the Participant's Mid-Career Pension and the appropriate adjustment to its
amount.
(c) Coordination With Executive Pension Plan. The foregoing
notwithstanding, a Participant's Mid-Career Pension payable as a service or
vested pension shall be paid at the same time and in the same form as his or
her pension, if any, under the Executive Pension Plan.
4.2 Disability Pensions. If the Participant's Mid-Career Pension is
payable as a disability pension as provided under Section 2.3(b), it shall
be paid monthly as of the day following the Participant's Termination of
Employment and continuing until the Participant is no longer eligible for a
disability pension under the Qualified Pension Plan.
(a) Cessation Before Age 65. If the Participant's eligibility for a
disability pension ends prior to attaining age 65 and the Participant is not
reemployed by a Participating Company, he or she shall then be eligible to
receive a Mid-Career Pension payable as a vested pension. The Participant
may elect a form of payment for the vested pension in the manner provided in
Section 4.1(b) above, except that the election must be made before the
termination date for the disability pension or such other date as may be
specified by the Plan Administrator.
(b) Conversion at Age 65. If the Participant is receiving his or her
Mid-Career Pension as a disability pension immediately before attaining age
65, the disability pension shall then cease and the Participant shall
thereafter be eligible to receive the Mid-Career Pension, in the same
amount, as a service pension. The Participant shall be entitled to elect a
form of payment for the service pension in the manner provided in Section
4.1(b) above, except that the election must be made before the Participant's
65th birthday.
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4.3 Notification of and Application for Benefits. The Plan Administrator
may notify the Participant of the amount of his or her Mid-Career Pension.
The Participant must apply for benefits under the Plan and such application
should be made no earlier than 150 days before the Participant's Pension
Effective Date.
4.4 Actual Payment Date Following Pension Effective Date. If a
Participant's service pension under the Qualified Pension Plan does not
commence on the Pension Effective Date and thus the commencement of his or
her Mid-Career Pension also is delayed, then the unpaid monthly benefits
under this Plan from the Pension Effective Date to the date that the Mid-
Career Pension actually starts shall be paid to the Participant in a single
sum without interest.
4.5 Death Following Pension Effective Date. If a Participant dies before
the Mid-Career Pension commences but after his or her Pension Effective Date
(so that a Surviving Spouse Benefit is not payable under Section 5.1), the
Participant's Mid-Career Pension shall be paid in the form previously
elected under Section 4.1(b), as soon as practicable after the Participant's
death, unless the Committee determines another time and form of payment. If
the Participant had elected a life annuity, unpaid monthly benefits from the
Participant's Pension Effective Date to the date of death shall be payable
to the Participant's estate or to such other person or persons as are
entitled to the Participant's property under applicable law. If the
Participant had elected a Joint and Survivor Annuity, unpaid monthly
benefits from the Participant's Pension Effective Date to the date of death
shall be payable to the Participant's joint annuitant and the survivor
portion of such annuity shall be payable to the joint annuitant as of the
date of the Participant's death.
SECTION 5. SURVIVING SPOUSE BENEFITS
5.1 Eligibility. The surviving spouse of a Participant shall be entitled
to receive a Surviving Spouse Benefit under this Plan if the Participant
dies either (a) while receiving a Mid-Career Pension as a disability
pension or (b) prior to his or her Pension Effective Date, if the
Participant's surviving spouse would be eligible for an automatic survivor
annuity or other surviving annuity under the Qualified Pension Plan.
5.2 Amount. The amount of the monthly Surviving Spouse Benefit payable for
the life of the surviving spouse shall be equal to the survivor's portion of
the Joint and Survivor Annuity that would have been payable under this Plan
if the Participant had commenced receiving a Mid-Career Pension as a service
or vested pension in the form of a Joint and Survivor Annuity under Section
4.1(b)(ii) on the day before his or her death, including any adjustment for
early payment, except that the Mid-Career Pension shall be determined
without an adjustment for early payment if the Participant was then eligible
for a service pension under Section 2.3(b) of the Plan or if the
Participant's Term of Employment at the date of death was at least 15 years.
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5.3 Form and Time of Payment. Subject to the Committee's discretion to
determine another time and form of payment, a Surviving Spouse Benefit shall
be payable as a monthly annuity for the life of the surviving spouse,
commencing as of the date that the surviving spouse's benefits under the
Qualified Pension Plan commence. Notwithstanding the foregoing, the
Surviving Spouse Benefit under this Plan shall be paid at the same time and
in the same form as the Surviving Spouse Benefit, if any, under the
Executive Pension Plan.
5.4 Special Increases. Unless the Committee determines otherwise,
Surviving Spouse Benefits payable as monthly benefits to surviving spouses
who are eligible for automatic survivor annuities under the Qualified
Pension Plan shall be increased by the same percentage and pursuant to the
same terms and conditions set forth in the Qualified Pension Plan for ad hoc
increases to surviving spouses.
SECTION 6. RIGHTS TO BENEFITS
6.1 Rights to Benefits. A Participant's Mid-Career Pension shall be based
on the terms of the Plan in effect at the Participant's Termination of
Employment. Entitlement to a Surviving Spouse Benefit shall accrue on the
date the benefit becomes payable. Except as may be otherwise provided in
the Plan, entitlement to a Mid-Career Pension under the Plan shall accrue on
the date of the Participant's Termination of Employment.
(a) Assignment or Alienation. Assignment or alienation of pensions or
other benefits under this Plan will not be permitted or recognized except as
required by law.
(b) Payments to Others. Benefits payable to an individual unable to
execute a proper receipt may be paid to another person in accordance with
the standards and procedures established under the Qualified Pension Plan.
6.2 Effect of Reemployment. If a Participant who is receiving a Mid-Career
Pension again becomes an Employee of any Participating Company, the monthly
pension benefits otherwise payable under this Plan during the period of
reemployment shall be suspended and forfeited. At the Employee's subsequent
Termination of Employment, his or her Mid-Career Pension shall be
recalculated, as determined by the Committee, in the manner prescribed under
the Qualified Pension Plan for redetermining pensions following reemployment
and for adjusting such pensions for prior Plan payments.
6.3 Forfeiture for Misconduct. Notwithstanding any other provision of the
Plan, all or a portion of the benefits that a Participant or his or her
joint annuitant or surviving spouse would otherwise be eligible to receive
under this Plan may be forfeited, in the sole discretion of the Company's
Board of Directors, under the following circumstances:
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(a) The Participant is discharged by a Participating Company for
cause; or
(b) A determination is made by the board of directors of a Participat-
ing Company that the Participant engaged in misconduct in connection with
his or her employment by that Participating Company.
6.4 Offset for Payments Under Law. If any benefit becomes payable to a
Participant or his or her joint annuitant or surviving spouse under any law
now in force or hereafter enacted, and if the Committee determines that it
is of the same general character as a benefit provided by the Plan, then
only the excess, if any, of the amount prescribed in the Plan above the
amount of the payment prescribed by law shall be payable under the Plan. In
those cases where the existence of an excess is not ascertainable by mere
comparison because of such factors as differences in the beneficiaries or
the time or methods of payment, the Committee shall have sole discretion to
determine whether or not any excess exists and to make any adjustments
necessary to carry out in a fair and equitable manner the spirit of this
provision. Notwithstanding the foregoing, no benefit payable under this
Plan shall be reduced by reason of any governmental benefit or pension
payable on account of military service, or by reason of any benefit
provisions of the Social Security Act.
SECTION 7. SOURCE OF BENEFIT PAYMENTS.
7.1 Participating Company Liability. Where a Participant's Term of
Employment includes service with more than one Participating Company, or
with one or more Participating Companies and one or more non-participating
corporations or partnerships, the last Participating Company to employ the
Participant prior to his or her Termination of Employment with entitlement
to a benefit hereunder shall be primarily liable for the full benefit
payable under the Plan. However, if for any reason the primarily liable
Participating Company fails to make timely payment of an amount due to or on
behalf of a Participant, the Company shall be secondarily liable for the
obligation to pay the amount due. A Participating Company's withdrawal from
participation shall not affect that company's liability hereunder. In
addition, the liability of a Participating Company shall not be affected by
any action or inaction (on the part of the Participant, his or her joint
annuitant or surviving spouse, or any company) with respect to amounts owed,
including but not limited to the granting of extensions of time or other
indulgences, the failure to make timely demand, the failure to make timely
payment or the failure to give notices of any type, other than as prescribed
in Section 8.4.
7.2 All Benefits Unfunded. All benefits payable under the Plan shall be
paid from the Company's or Participating Company's operating expenses,
though the purchase of insurance from an insurance company, or through a
trust established by the Company and/or the other Participating Companies
for this purpose, as the Company may determine.
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7.3 No Right to Company Assets. Neither a Participant nor any other
person shall acquire by reason of the Plan any right in or title to any
assets, funds or property of the Company or any other Participating Company,
including, without limiting the generality of the foregoing, any specific
funds, trust accounts or assets which any Participating Company, in its sole
discretion, may earmark or set aside in anticipation of a liability under
the Plan. A Participating Company's obligation to pay any amounts under the
Plan shall be unfunded as to the Participant, whose rights shall be those of
a general unsecured creditor.
SECTION 8. ADMINISTRATION.
8.1 Plan Sponsor. The Company shall be the sponsor of the Plan as that
term is defined in ERISA.
8.2 Plan Administrator. The Executive Vice President-Human Resources of
the Company shall be the Plan Administrator as that term is defined in
ERISA. The Plan Administrator shall have the specific powers granted to him
elsewhere in the Plan and shall also have such other powers as may be
necessary in order to administer the Plan in his sole discretion, except for
those powers granted or provided to be granted to others by the Plan. The
Plan Administrator shall determine conclusively for all parties all
questions arising in the administration of the Plan and, insofar as
permitted by applicable law, any decision of the Plan Administrator shall
not be subject to further review.
8.3 Procedure To Approve and Deny Claims. The Committee shall have sole
discretion to determine the rights of Participants (or their joint
annuitants or surviving spouses) to benefits under the Plan, and to
authorize disbursements under the Plan. In all questions relating to age
and service for eligibility for any benefit under the Plan, or relating to
service and rates of pay for determining benefits payable under the Plan,
the decisions of the Committee, based upon this Plan and upon the records of
the Participating Companies employing the individual, shall be final insofar
as permitted by applicable law. The Committee may adopt such rules of
procedure as it may find appropriate. A claim for benefits under the Plan
shall be deemed denied unless the decision of the Committee is sent within
90 days of its receipt of the claim (or within 180 days, if the Committee
extends the time by notifying the claimant in writing of the special
circumstances requiring an extension and the date by which the decision is
expected). If a claim is denied in whole or part by the Committee, it shall
send a written decision stating (a) the specific reasons for the denial,
making specific reference to pertinent provisions of the Plan; (b) what
additional information, if any, would help perfect the claim for benefits;
and (c) what steps the claimant must take to submit the claim for review.
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8.4 Review Procedure. The Board of Directors of the Company shall serve as
the final review committee, under the Plan and ERISA, for the review of all
claims appealed by Participants (or their joint annuitants or surviving
spouses) whose initial claims for benefits have been denied, in whole or in
part, by the Committee. Within 60 days after the date of a denial by the
Committee, the claimant may file a written request for the Board of
Directors of the Company to review the denial. Such request for review must
be made in a timely manner for the purpose of seeking any further review of
a decision or determining any entitlement to a benefit under the Plan. In
such a case, the Board of Directors of the Company shall conduct a full and
fair review of the Committee's decision and notify the claimant in writing
of the review decision, specifying the reasons for the decision and the Plan
provisions on which it is based. A claim shall be deemed denied unless the
decision on appeal is sent within 60 days (or within 120 days, if the Board
of Directors of the Company extends the time to respond by notifying the
claimant in writing of the special circumstances requiring an extension of
time).
8.5 Further ERISA Rights. Any Participant (or joint annuitant or surviving
spouse) whose claim for benefits has been denied upon review shall have such
further rights as are provided in section 503 of ERISA and the regulations
thereunder. The Company, the Board of Directors of the Company, the
Committee and the Executive Vice President-Human Resources of the Company
shall retain such rights, authority and discretion as are provided or not
expressly limited by section 503 of ERISA and the regulations thereunder
8.6 Named Fiduciaries. The Company, each Participating Company, the Board
of Directors of the Company, the Committee and the Executive Vice President-
Human Resources of the Company are each a named fiduciary as that term is
used in ERISA with respect to the particular duties and responsibilities
allocated to each of them. Any person or group of persons may serve in more
than one fiduciary capacity with respect to the Plan.
8.7 Allocation of Responsibilities. The Company, the Committee, the
Executive Vice President-Human Resources of the Company and each
Participating Company may designate in writing other persons to carry out
their respective responsibilities under the Plan and may employ persons to
advise them with regard to any such responsibilities.
8.8 Administrative Expenses. The expenses of administering the Plan shall
be apportioned among the Participating Companies, as determined by the Plan
Administrator.
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SECTION 9. AMENDMENT AND TERMINATION.
9.1 Plan Amendment. The Company may from time to time make any changes in
the Plan which it deems appropriate, with or without notice to Participants,
by appropriate action of its Board of Directors. In addition, the Plan
Administrator, with the approval of the Executive Vice President and General
Counsel of the Company, shall be authorized to make minor or administrative
changes to the Plan, as well as changes dictated by the requirements of
federal or state statutes applicable to the Company or authorized or made
desirable by such statutes. However, in recognition of the reliance placed
upon the Plan and its contractual nature in inducing the change in position
caused by retirement, any such change or modification shall not result in
the cessation or reduction of benefits to retired individuals or their joint
annuitants or surviving spouses, nor shall such modification affect the
rights of any individual to any benefit to which he or she may have
previously become entitled under the Plan.
9.2 Plan Termination. At any time, for any reason, and with or without
notice to Participants, the Company retains the right to terminate the Plan
in whole or in part by appropriate action of its Board of Directors, and
each Participating Company retains the right to withdraw from this Plan.
Neither termination of the Plan nor withdrawal by a Participating Company
shall result the cessation or reduction of benefits to any retired
Participant (or his or her joint annuitant or surviving spouse), or affect
the rights of any individual to any benefit to which he or she may have
previously become entitled under the Plan. A Participating Company's
withdrawal from participation shall not affect that company's liability to
provide benefits to a Participant as described in Section 7.1 of the Plan.
SECTION 10. DEFINITIONS
"Committee" means the Compensation and Personnel Committee of the
Board of Directors of the Company.
"Company" means Pacific Telesis Group, a Nevada corporation, or its
successors.
"Effective Date" means November 18, 1981, which was the effective date
for this Plan for Participants who were actively employed on or after that
date.
"Employee" means a common law employee of the Company or any other
Participating Company.
"Employer Group" shall have the meaning set forth in the Qualified
Pension Plan.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
it may be amended from time to time.
"Executive Pension Plan" means the Pacific Telesis Group Executive
Supplemental Pension Plan.
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"Final Average Monthly Base Pay" means the average of the Participant's
monthly rates of base pay, whether or not deferred, for the final 60 months
in his or her Term of Employment that is recognized for this purpose under
the Qualified Pension Plan.
"Final Average Monthly STIP Award" means the average of the
Participant's "Monthly STIP Awards" for the final 60 months in his or her
Term of Employment that is recognized for this purpose under the Qualified
Pension Plan.
(a) "Monthly STIP Award" means, for any month in a calendar year, 1/12
of the Participant's annual "STIP Award" (whether or not deferred) under the
Pacific Telesis Group Short Term Incentive Plan for that calendar year. In
the case of a Participant who was an Employee on April 1, 1994, and who
participated in the PacTel Corporation Short Term Incentive Plan, "Monthly
STIP Award" for any month before April 1, 1994, means 1/12 of the
Participant's annual "STIP Award" (whether or not deferred) under the PacTel
Corporation Short Term Incentive Plan.
(b) "STIP Award" means (i) for Officers, the annual standard award
determined under the applicable incentive plan which contains an adjustment
for changes in position rate; or (ii) for Participants who are not Officers,
the actual award payable under the applicable incentive award plan. In the
case of any non-Officer Participant whose final 60 months includes periods
before 1995 for which the Participant received team awards under the
Company's team award program (and therefore was not eligible for a STIP
Award), the actual team award received shall be considered a STIP Award for
purposes of this definition.
"Joint Venture Employer" has the meaning set forth in the Qualified
Pension Plan.
"Mandatory Retirement Age" means age 65 for those Participants who meet
the requirements of section 12(c)(1) of the Age Discrimination in Employment
Act of 1967, as amended ("ADEA"); or as permitted under the ADEA, for those
Participants for whom age is a bona fide occupational qualification within
the meaning of section 4(f)(1) of the ADEA. There shall be no Mandatory
Retirement Age for other Participants, if any.
"Mid-Career Pension" is the pension payable under Section 3 of the
Plan.
"Officer" means an Employee elected or appointed to, and serving in,
one or more of the following positions:
(a) A position with the Company described in the bylaws of the Company
as that of an officer, other than an assistant officer position; or
(b) A position with Pacific Bell described in the bylaws of Pacific
Bell as that of an officer, other than an assistant officer position; or
(c) A position with any Participating Company for which there is in
effect a specific designation by the Committee that the position shall be
considered to be that of an officer for purposes of the benefit and
retirement plans.
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An "Officer" also means a named Employee of any Participating Company for
which there is in effect a specific designation by the Committee that the
named Employee shall be included in the definition of "Officer" for purposes
of benefit and retirement plans.
"Participant" means an Employee or former Employee who meets the
eligibility requirements in Section 2 of the Plan.
"Participating Companies" mean the Company and each other corporation
or partnership that both (a) participates in the Qualified Pension Plan and
(b) has determined, with the concurrence of the Company's Board of
Directors, to participate in this Plan.
"Pension Effective Date" means the date as of which the Participant's
Mid-Career Pension is calculated, as follows:
(i) For service pensions, the Pension Effective Date is
the day after the Participant's Termination of Employment.
(ii) For vested pensions, the Pension Effective Date is
the date as of which the Mid-Career Pension is paid under Section 4.
(iii) For disability pensions, the Pension Effective Date
is the day after the Participant's Termination of Employment due to
disability.
"Plan" means this Pacific Telesis Group Mid-Career Pension Plan.
"Plan Administrator" means the Executive Vice President-Human Resources
of the Company, as set forth in Section 8.2 of the Plan.
"Predecessor Plan" shall mean the Bell System Mid-Career Pension Plan.
"Qualified Pension Plan" means the Pacific Telesis Group Pension Plan
for Salaried Employees.
"Term of Employment" means the number of years credited to the
Participant for purposes of determining eligibility for a service pension
and the early payment discount under the Qualified Pension Plan. As
provided under the Qualified Pension Plan, a Participant's Term of
Employment (a) includes all periods that the Participant was employed by the
Company, other members of the Employer Group, certain joint venture
employers, and certain predecessor employers; (b) does not include service
before a break in service until such service is "bridged" as provided in the
Qualified Pension Plan; and (c) excludes any period of employment which was
transferred from the Qualified Pension Plan to the PacTel Corporation
Employees Pension Plan effective before April 1, 1994, and was included in
the Participant's service recognized by that plan as of April 1, 1994 (the
date as of which occurred the total and complete separation of the ownership
of PacTel Corporation from the Company). A Participant's Term of Employment
is used to determine the Participant's eligibility to participate under
Section 2.1, and eligibility for a Mid-Career Pension under Section 2.3(a).
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<PAGE>
"Termination of Employment" means the date on which a Participant
terminates employment with all Participating Companies and members of the
Employer Group.
"Years of Credited Service" means the number of whole and partial years
credited to the Participant under the Qualified Pension Plan for benefit
accrual purposes, except any such years representing periods of less than
full-time service or any periods representing service with a participating
company under the Qualified Pension Plan, but not a Participating Company
under this Plan, shall be disregarded for purposes of this Plan. As
provided under the Qualified Pension Plan for benefit accrual purposes,
Years of Credited Service (a) do not include periods of service with a non-
participating company; (b) do not include periods that the Participant was
employed by PacTel Corporation (or any of its subsidiaries) between January
1, 1987, and April 1, 1994, unless that Participant was an Employee on April
1, 1994, and had been a full accrual participant under the PacTel
Corporation Employees Pension Plan before April 1, 1994; and (c) do not
include periods of service before a break in service until such service is
"bridged" as provided in the Qualified Pension Plan. A Participant's Years
of Credited Service are used to limit the number of Mid-Career Pension
Credits recognized by the Plan, as set forth in Section 3.3
"Years of Officer Service" means the number of whole and partial 365-
day periods during which the Participant was continuously employed as an
Officer of a Participating Company. In addition, Years of Officer Service
include periods of service with other members of the Employer Group or Joint
Venture Employers (non-Participating Companies) if such service is included
in the Participant's Term of Employment and if the position in which the
Participant served at the non-Participating Company is designated by the
Committee to be the equivalent of an Officer position for purposes of this
Plan. Such service with non-Participating Companies shall not be considered
a break in the continuity of Years of Officer Service for purposes of
Sections 3.3(a) and (b). If a Participant has a break in the continuity of
Years of Officer Service which does not exceed six months, service before
and after the break shall be included in the Participant's Years of Officer
Service. However, if a Participant is reemployed after a break of more than
six (6) months in the continuity of Years of Officer Service, the
Participant's service before the break shall not be included in his or her
Years of Officer Service until the Participant completes five (5) Years of
Officer Service after reemployment. Subject to these break-in-service
rules, service as an Officer with a company that participated in a
Predecessor Plan before April 1, 1994, (including PacTel Corporation) shall
be included in the Participant's Years of Officer Service, regardless of
whether or not such service is included in the Participant's Term of
Employment after March 31, 1994. A Participant's Years of Officer Service
are used to determine eligibility for a nondiscounted pension under Section
3.4.
14
<PAGE>
Exhibit 10oo
------------
PACIFIC TELESIS GROUP
OUTSIDE DIRECTORS' DEFERRED STOCK UNIT PLAN
ARTICLE 1. INTRODUCTION.
The Plan was adopted by the Board on January 26, 1996, to be effective May
2, 1996. This Plan replaces the Retirement Plan for (a) Outside Directors
whose Service commences on or after January 1, 1996, and (b) Outside
Directors whose Service commenced before January 1, 1996, but who elect to
participate in this Plan in lieu of the Retirement Plan, either as to their
entire benefit or as to a portion of their benefit under the Retirement
Plan.
The purpose of the Plan is to provide compensation to Outside Directors in a
form that aligns their interests with the interests of the Company's
stockholders. The Plan provides for grants of Stock Units whose value at
any given time is equal to the value of shares of Common Stock.
ARTICLE 2. ADMINISTRATION.
The Plan shall be administered by the Committee. The Committee shall (a)
interpret the Plan and (b) make all other decisions relating to the
operation of the Plan. The Committee may adopt such rules or guidelines as
it deems appropriate to implement the Plan. The Committee's determinations
under the Plan shall be final and binding on all persons.
ARTICLE 3. ELIGIBILITY AND PARTICIPATION.
3.1 Commencement of Participation. Participation in the Plan shall be
limited to Outside Directors who either:
(a) Start serving as Outside Directors on or after January 1, 1996; or
(b) Started serving as Outside Directors before January 1, 1996, but
elected to participate in this Plan pursuant to Section 3.2.
Eligible Outside Directors shall begin participating in the Plan on May 2,
1996, or when their Service commences, whichever is later.
3.2 Election To Participate in This Plan. This Section 3.2 shall apply to
each Outside Director who was an Outside Director both on December 31, 1995,
and on January 1, 1996. Such Outside Director shall elect in accordance
with the following alternatives:
(a) If the Outside Director's annual benefit accrued under the
Retirement Plan as of May 1, 1996 is equal to 100% of the annual retainer
payable to Outside Directors, the Outside Director may elect to remain a
participant in the Retirement Plan; or the Outside Director may elect to
become a Participant in this Plan and to waive all benefits under the
Retirement Plan (whether such benefits are attributable to Service before or
after January 1, 1996).
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(b) If the Outside Director's annual benefit accrued under the
Retirement Plan as of May 1, 1996, is less than 100% of the annual retainer
payable to Outside Directors, the Outside Director may elect to remain a
participant in the Retirement Plan as to the Outside Director's prorata
accrued benefit and receive only certain benefits under this Plan as
described under Section 4.2 below, or the Outside Director may elect to
become a Participant in this Plan as to his or her entire retirement benefit
and to waive all benefits under the Retirement Plan (whether such benefits
are attributable to Service before or after January 1, 1996).
The election under this Section 3.2 shall be made in writing on or before
May 1, 1996, and shall be irrevocable thereafter.
3.3 Termination of Participation. Participation in the Plan shall
terminate when the Outside Director has received all benefits payable to him
or her under the Plan.
ARTICLE 4. NUMBER OF STOCK UNITS.
4.1 General Rule. Each Outside Director who began serving as Outside
Director on or after January 1, 1996 shall receive 400 Stock Units for each
calendar year in which he or she meets the following requirements:
(a) The Outside Director is a Participant on January 1 of such year;
and
(b) The Outside Director will not receive any grant of shares of
Common Stock at any time during such year under the Pacific Telesis Group
1994 Stock Incentive Plan or any other plan of the Company.
The grant of Stock Units for a calendar year shall occur as of the date of
the regular annual meeting of the Company's shareowners for such year.
4.2 One-Time Grant for Pre-1996 Directors. Each Participant whose Service
commenced before January 1, 1996, and who has elected to become a
participant under this Plan as to his or her entire retirement benefit shall
receive a grant of Stock Units as of May 2, 1996. The number of Stock Units
included in such grant shall be equal to:
(a) The Present Value of the Participant's accrued benefit under the
Retirement Plan as of May 1, 1996, divided by
(b) The closing price of one share of Common Stock reported by the New
York Stock Exchange Composite Transactions Report (as set forth in the
Western Edition of The Wall Street Journal) for the last trading day prior
to May 2, 1996.
The number of Stock Units shall be rounded to the nearest multiple of five.
4.3 Additional Grant for Certain Pre-1996 Directors. This Section 4.3
shall apply to each Participant whose Service commenced before January 1,
1996, and whose annual benefit accrued under the Retirement Plan as of May
1, 1996, is less than 100% of the annual retainer payable to Outside
Directors.
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(a) Numbers of Stock Units Granted A Participant described in this
Section 4.3 shall receive an additional grant of Stock Units determined as
follows:
(i) There shall be calculated the hypothetical Present Value of
the Participant's accrued benefit under the Retirement Plan as of the Full
Accrual Date, assuming that the Participant had continued to participate in
the Retirement Plan until the Full Accrual Date and from such amount shall
be subtracted the Present Value of the Participant's accrued benefit in full
years under the Retirement Plan as of May 1, 1996.
(ii) The Participant shall receive an additional grant of Stock
Units as of May 2, 1996. The number of Stock Units included in such
additional grant shall be equal to the amount calculated under (i) above,
divided by the closing price of one share of Common Stock reported by the
New York Stock Exchange Composite Transactions Report (as set forth in the
Western Edition of The Wall Street Journal) for the last trading day prior
to May 2, 1996.
The number of Stock Units shall be rounded to the nearest multiple of five.
(b) Vesting of Stock Units and Associated Dividend Equivalents. In
determining the number of Stock Units (and dividend equivalents associated
with such Stock Units) available for settlement and distribution under
Article 6, the Stock Units and associated dividend equivalents granted under
this Section 4.3 shall vest annually as of the date of the regular annual
meeting of the Company's shareowners on a prorata basis during the years
between May 2, 1996 and the Outside Director's Full Accrual Date.
ARTICLE 5. DIVIDEND EQUIVALENTS.
Prior to settlement, each Stock Unit shall carry with it the right to
dividend equivalents. Such right entitles the Participant to be credited
with an amount equal to all cash dividends paid on one share of Common Stock
while the Stock Unit is outstanding. Dividend equivalents shall be
converted into additional Stock Units and shall be settled pursuant to
Article 6. The conversion into Stock Units shall be based on the closing
price of Common Stock reported by the New York Stock Exchange Composite
Transactions Report (as set forth in the Western Edition of The Wall Street
Journal) for the last trading day prior to the date when the dividend is
paid. The number of Stock Units shall be rounded to the nearest whole
number of Units.
ARTICLE 6. DISTRIBUTION RULES AND SETTLEMENT OF STOCK UNITS.
6.1 General Rule. Stock Units shall normally be settled as soon as
reasonably practicable after the Participant's Service terminates for any
reason; provided, however, that any Stock Units or associated dividend
equivalents that have not vested under Section 4.3(b) shall not be available
for settlement or distribution. Stock Units shall be settled by paying the
Participant a lump sum in cash, unless the Participant has made an election
pursuant to Section 6.2 to receive installments. The amount of such lump
sum shall be equal to the product of:
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<PAGE>
(a) The number of vested Stock Units held by the Participant
(including dividend equivalents converted into Stock Units); times
(b) The closing price of one share of Common Stock reported by the New
York Stock Exchange Composite Transactions Report (as set forth in the
Western Edition of The Wall Street Journal) for the trading day coinciding
with or next preceding the Participant's last day of Service.
6.2 Election of Installment Form of Distribution. Within 30 days of the
time a Participant first begins participation under the Plan, he or she may
make an irrevocable written election to receive the distribution of the cash
representing the settlement of his or her Stock Units, less applicable
withholding and employment taxes, in approximately equal annual
installments. In accordance with procedures established by the Company, a
Participant may elect to receive payment in one of the following forms:
(a) approximately five equal annual installments; or
(b) approximately ten equal annual installments.
Installments subsequent to the first installment to the Participant shall be
paid as soon as practicable after the January 1 of each succeeding calendar
year until the entire value, less applicable withholding and employment
taxes, is distributed. The portion of Stock Units being held for future
installments shall be credited with dividend equivalents as described in
Article 5 prior to distribution. The amount of each installment after the
first installment shall be calculated in the manner described in Section 6.1
above, using the closing price the trading coinciding with or next preceding
December 31 of the year prior to distribution.
6.3 Death of Participant. Any payment under Section 6.1 or Section 6.2
after the Participant's death shall be made to his or her beneficiary or
beneficiaries. Each Participant shall designate one or more beneficiaries
for this purpose by filing the prescribed form with the Company. A
beneficiary designation may be changed by filing the prescribed form with
the Company at any time before the Participant's death. If no beneficiary
was designated or if no designated beneficiary survives the Participant,
then any payment after the Participant's death shall be made to his or her
estate.
ARTICLE 7. PROTECTION AGAINST DILUTION
7.1 Adjustments. In the event of a subdivision of the outstanding shares
of Common Stock, a declaration of a dividend payable in Common Stock, a
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise) into a lesser number of shares of Common
Stock, a recapitalization, a spinoff or a similar occurrence, the Committee
shall make such adjustments as it, in its sole discretion, deems appropriate
in one or more of:
(a) The number of Stock Units to be granted thereafter under Article
4; and
(b) The number of Stock Units already held by any Participant.
4
<PAGE>
7.2 Reorganizations. In the event that the Company is a party to a merger
or other reorganization, Stock Units shall be subject to the agreement of
merger or reorganization. Such agreement may provide, without limitation,
for the assumption of the Stock Units by the surviving corporation or its
parent (with equitable adjustments), for their continuation by the Company
(if the Company is a surviving corporation) or for accelerated settlement in
cash.
ARTICLE 8. GENERAL PROVISIONS.
8.1 Creditors' Rights. A Participant shall have no rights other than those
of a general creditor of the Company. Stock Units represent an unfunded and
unsecured obligation of the Company, subject to the terms and conditions of
the Plan.
8.2 Voting Rights. Participants shall have no voting rights with respect
to their Stock Units.
8.3 Assignment of Rights. Amounts credited under the Plan shall not be
anticipated, assigned, attached, garnished, optioned, transferred or made
subject to any creditor's process, whether voluntarily, involuntarily or by
operation of law. Any act in violation of this Section 8.3 shall be void.
However, this Section 8.3 shall not preclude a Participant from designating
one or more beneficiaries pursuant to Section 6.3, nor shall it preclude a
transfer of amounts credited under the Plan by will or by the laws of
descent and distribution.
8.4 Withholding Taxes. To the extent required by applicable federal,
state, local or foreign law, a Participant or his or her successor shall
make arrangements satisfactory to the Company for the satisfaction of any
withholding tax obligations that arise in connection with the Plan. The
Company shall not be required to make any payment under the Plan until such
obligations are satisfied.
8.5 Choice of Law. The Plan shall be governed by, and construed in accord-
ance with, the laws of the State of Nevada (except their choice-of-law
provisions).
8.6 Administration and Interpretation. The Board shall have the sole
authority to construe and interpret this Plan in accordance with its terms
and provisions and to make rules relating to the administration thereof.
The decision of the Board with respect to any issues relating to the
interpretation of this Plan shall be final, conclusive and binding on all
parties. The Board may delegate any part of its duties hereunder to the
Company's Executive Vice President--Human Resources, subject to the final
authority of the Board. The Executive Vice President--Human Resources of
the Company, with the approval of the Executive Vice President and General
Counsel of the Company, shall be authorized to make minor or administrative
changes to the Plan.
5
<PAGE>
ARTICLE 9. FUTURE OF THE PLAN.
9.1 Term of the Plan. The Plan, as set forth herein, shall become
effective on May 2, 1996. The Plan shall remain in effect until it is ter-
minated pursuant to Section 9.2.
9.2 Amendment or Termination. The Board may, at any time and for any
reason, amend or terminate the Plan. An amendment of the Plan shall be
subject to the approval of the Company's stockholders only to the extent
required by applicable laws, regulations or rules. No Stock Units shall be
granted under the Plan after the termination thereof. The termination of
the Plan, or any amendment thereof, shall not affect any Stock Unit previ-
ously granted under the Plan; provided, however, that to the extent that the
Board approves any new benefit plan or improvement to any existing benefit
plan applicable to Outside Directors, it may terminate rights which have
already accrued to a Participant under this Plan if, in its sole discretion,
it determines that the benefits payable to a Participant under such new or
improved plan adequately replace the benefits provided hereunder.
ARTICLE 10. DEFINITIONS.
10.1 "Board" means the Company's Board of Directors, as constituted from
time to time.
10.2 "Committee" means the Compensation and Personnel Committee of the
Board.
10.3 "Common Stock" means the common stock of the Company.
10.4 "Company" means Pacific Telesis Group, a Nevada corporation.
10.5 "Full Accrual Date" means the earliest date on which the Outside
Director could separate from Service with a benefit under the Retirement
Plan equal to 100% of the annual retainer payable to Outside Directors, as
in effect at the time of the separation from Service.
10.6 "Outside Director" means a member of the Board who is not a common-law
employee of the Company or a subsidiary of the Company.
10.7 "Participant" means an Outside Director who participates in the Plan
pursuant to Article 3.
10.8 "Plan" means this Pacific Telesis Group Outside Directors' Deferred
Stock Unit Plan, as amended from time to time.
10.9 "Present Value" means the present actuarial value, determined by using
the actuarial assumptions that would be applicable on the date in question
for calculation of pension benefits under the Pacific Telesis Group Pension
Plan for Salaried Employees.
10.10 "Retirement Plan" means the Pacific Telesis Group Outside Directors'
Retirement Plan, as amended from time to time.
6
<PAGE>
10.11 "Service" means service as an Outside Director.
10.12 "Stock Unit" means a bookkeeping entry representing, at any given
time, the dollar value at such time of one share of Common Stock.
ARTICLE 11. EXECUTION.
To record the adoption of the Plan by the Board, the Company has caused its
duly authorized officer to affix the corporate name and seal hereto.
7
<PAGE>
Exhibit 10pp.v
--------------
SUPPLEMENTAL BENEFIT AGREEMENT
This Agreement, entered into effective as of July 1, 1994, between
DAVID W. DORMAN (the "Officer") and PACIFIC TELESIS GROUP, a Nevada
corporation ("PTG"),
W I T N E S S E T H:
WHEREAS the Officer and PTG entered into an Employment Agreement
effective as of July 1, 1994 (the "Employment Agreement"), and agreed on
certain supplemental pension benefits as described in a letter dated June 16,
1994, from J. R. Moberg to Officer (the "June 16 letter"), and
WHEREAS the Officer and PTG wish to supplement the June 16 letter with a
formal agreement in order to reconcile any possible conflicts between the June
16 letter and the Employment Agreement and to clarify any ambiguities in the
supplemental pension benefits to be provided to the Officer:
Now, Therefore, the parties agree as follows:
Section 1. PRIOR AGREEMENTS.
The agreements made in the June 16 letter regarding supplemental pension
benefits are hereby terminated and replaced by this Agreement. This Agreement
shall not supersede or limit, and shall not be superseded or limited by, the
Employment Agreement.
Section 2. AMOUNT OF SUPPLEMENTAL PENSION BENEFIT.
(a) If the Officer ceases to be employed by PTG or any affiliate of PTG
on or after the Officer completes five (5) "Years of Service" as such term is
defined in the Pacific Telesis Group Pension Plan for Salaried Employees (the
"Pension Plan"), then the Officer shall be entitled to a pension paid by PTG
equal to a percentage of his Basic Compensation as set forth in the table
below, up to a maximum of fifty percent (50%) (assuming such pension is
payable as an individual-life annuity).
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Completed Percentage of
Years of Service Basic Compensation
----------------- --------------------
1 0
2 0
3 0
4 0
5 12.25
6 14.70
7 17.15
8 19.60
9 22.05
10 24.50
11 26.95
12 29.40
13 31.85
14 34.30
15 36.75
16 39.20
17 41.65
18 44.10
19 46.55
20 49.00
21 50.00
(Maximum of 50.00%)
(b) For all purposes under this Agreement, the term "Basic Compensation:
shall mean the average annual salary actually received during the Compensation
Period plus the average standard short-term award for the Officer's position
rate for the Compensation Period, before the application of any deferral
elections under plans or programs sponsored by PTG (or its affiliates). The
term "Compensation Period" shall mean the last 60 months of employment by PTG
or any affiliate of PTG.
(c) The amount of any pension benefit payable under this Agreement shall
be reduced (not below zero) by the amount of any pension benefits payable
under the Pacific Telesis Group Executive Non-Qualified Pension Plan, the
Pacific Telesis Group Supplemental Executive Retirement Plan, the Pacific
Telesis Group Mid-Career Pension Plan, the pension portion of the Pacific
Telesis Group Senior Management Long Term Disability and Survivor Protection
Plan and the Pension Plan.
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Section 3. FORM OF SUPPLEMENTAL PENSION BENEFITS.
(a) By filing an election with the Compensation and Personnel Committee
of the Board of Directors of PTG (the "Committee"), the Officer may elect to
receive the pension described in Section 2 in any of the forms available for
benefits under the Pension Plan; provided, however, that any single sum
cashout payment of a benefit hereunder is expressly subject to the Committee's
discretion to pay in a form other than a single sum. Unless the Officer
elects otherwise in accordance with the preceding sentence, the pension
described in Section 2 shall be in the form of a joint-and-survivor annuity.
Such annuity shall be payable first to the Officer and then to his spouse, if
she survives him. The amount of the pension payable as a joint-and-survivor
annuity for the Officer's life shall be equal to 90% of the pension computed
in Section 2, and 50% of the reduced amount shall be payable to his spouse (if
she survives him) for her lifetime.
(b) Pension payments under Section 2 shall be payable in a manner
consistent with the rules concerning the payment of benefits under the Pension
Plan. For this purpose, the Officer's pension effective date shall be deemed
to be the day following the date when termination of employment with PTG or
any affiliate of PTG occurs. Survivor benefits shall be determined in a
manner consistent with the rules concerning the payment of such benefits under
the Pacific Telesis Group Executive Non-Qualified Pension Plan.
Section 4. PLAN AMENDMENTS.
This Agreement shall not limit any right of PTG or its affiliates to
modify at any time their benefit plans, the benefit plans they participate in
or the benefits they provide to employees or former employees, provided that
no modification shall reduce the benefits described in this Agreement.
Section 5. CONSTRUCTION AND ENFORCEMENT.
(a) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision hereof.
(b) The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of California.
(c) Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration pursuant to section
12(g) of the Employment Agreement.
Section 6. MISCELLANEOUS PROVISIONS.
(a) There shall be no right of setoff or counterclaim with respect to
any claim, debt or obligation against payments to the Officer under this
Agreement.
(b) The rights of any person to payments or benefits under this
Agreement shall not be made subject to option or assignment, either by
voluntary or involuntary assignment or operation of law, including (without
limitation) bankruptcy, garnishment, attachment or other creditor's process,
and any action in violation of this Subsection (b) shall be void.
3
<PAGE>
(c) All payments made pursuant to this Agreement shall be subject to
withholding of applicable taxes.
Section 7. EFFECTIVE DATE.
This Agreement shall be effective upon its execution.
4
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of Pacific by its duly authorized officer, as of the day and year
first above written.
PACIFIC TELESIS GROUP
By: /s/ J. R. Moberg
--------------------------
Executive Vice-President -
Human Resources
/s/ David W. Dorman
-------------------------
David W. Dorman
5
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Exhibit 10ss
------------
PACIFIC TELESIS GROUP
OUTSIDE DIRECTORS' RETIREMENT PLAN
WHEREAS, PACIFIC TELESIS GROUP desires to provide retirement income to
its outside directors through the maintenance of an unfunded, nonqualified
retirement plan;
WHEREAS, effective February 22, 1985, PACIFIC TELESIS GROUP adopted the
PACIFIC TELESIS GROUP OUTSIDE DIRECTORS' RETIREMENT PLAN;
NOW, THEREFORE, effective January 26, 1996, PACIFIC TELESIS GROUP does
hereby amend the PACIFIC TELESIS GROUP OUTSIDE DIRECTORS' RETIREMENT PLAN in
its entirety to provide as follows:
ARTICLE I
DEFINITIONS
Section 1.1 General
Whenever the following terms are used in this Plan, they shall have the
meaning specified below unless the context clearly indicates to the contrary.
Section 1.2 Annual Retainer
"Annual Retainer" shall mean the yearly fee paid to an Outside Director,
irrespective of meeting attendance.
Section 1.3 Board of Directors
"Board of Directors" shall mean the Board of Directors of the Company, as
constituted from time to time.
Section 1.4 Company
"Company" shall mean the Pacific Telesis Group, a Nevada corporation.
Section 1.5 Director
"Director" shall mean a member of the Board of Directors.
Section 1.6 Outside Director
"Outside Director" shall mean each Director who is not concurrently an
employee of the Company or of a subsidiary of the Company.
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Section 1.7 Participant
"Participant" shall mean any Outside Director included in the Plan as provided
in Article II.
Section 1.8 Plan
"Plan" shall mean the Pacific Telesis Group Outside Directors' Retirement
Plan, as amended from time to time.
ARTICLE II
ELIGIBILITY AND PARTICIPATION
Section 2.1 Eligibility To Participate
Each Outside Director who was a participant in the Plan as of January 26, 1996
shall remain a Participant in this Plan unless such Outside Director is
eligible to make an election to waive participation and waives participation
in this Plan pursuant to Section 2.2.
Each Outside Director who was an Outside Director both on December 31, 1995,
and on January 1, 1996 and who was not a Participant in this Plan shall become
a Participant in the Plan effective May 2, 1996 if such Outside Director has
not waived participation in this Plan pursuant to Section 2.2.
Section 2.2 Election Not To Participate in This Plan
This Section 2.2 shall apply to each Outside Director who was an Outside
Director both on December 31, 1995, and on January 1, 1996. Such Outside
Director shall elect in accordance with the following alternatives:
(a) If the Outside Director's annual benefit accrued under this Plan as
of May 1, 1996 is equal to 100% of the annual retainer payable to Outside
Directors, the Outside Director may elect to remain a participant in this
Plan, or the Outside Director may elect to become a Participant in the Pacific
Telesis Group Outside Directors' Deferred Stock Unit Plan and to waive all
benefits under this Plan (whether such benefits are attributable to service
before or after January 1, 1996).
(b) If the Outside Director's annual benefit accrued under this Plan as
of May 1, 1996, is less than 100% of the annual retainer payable to Outside
Directors, the Outside Director may elect to remain a participant in this Plan
as to the Outside Director's prorata accrued benefit and receive only certain
benefits under the Pacific Telesis Group Outside Directors' Deferred Stock
Unit, or the Outside Director may elect to become a Participant in the Pacific
Telesis Group Outside Directors' Deferred Stock Unit Plan for his or her
entire retirement benefit and to waive all benefits under this Plan (whether
such benefits are attributable to service before or after January 1, 1996).
The election under this Section 2.2 shall be made in writing on or before
May 1, 1996, and shall be irrevocable thereafter.
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<PAGE>
ARTICLE III
RETIREMENT
Section 3.1 Commencement of Benefit
A Participant's retirement benefit shall commence on the first day of the
month following the later of:
(a) His or her 65th birthday; or
(b) The date he or she ceases to serve as a Director.
Clause (a) shall not apply if the Participant has become permanently and
totally disabled.
Section 3.2 Retirement Benefit Amount
The annual retirement benefit payable to a Participant under this Article III
shall be equal to a percentage of the annual retainer in effect at the time of
retirement, which percentage is equal to 15% multiplied by the Director's
years of service (not to exceed 100%). Service prior to the effective date of
this Plan shall be taken into account for the purpose of this Section 3.2,
including service on the Board of Directors of Pacific Bell (formerly known as
"The Pacific Telephone and Telegraph Company"). Simultaneous service on the
Boards of the Company and of Pacific Bell shall count as only one period of
service. For purposes of this Section 3.2 only, any period served will be
rounded to the next higher whole year. For Outside Directors whose accrued
benefit as of May 1, 1996, is equal to less than 100% of the annual retainer
and who elect pursuant to Section 2.2 to continue participation of this Plan,
the "years of service" for purposes of calculating the percentage of the
retainer benefit shall be the whole years calculated as of May 1, 1996, and
such years shall not increase with further service.
This benefit shall continue for the life of the Participant. If the
Participant is reelected to the Board while receiving a retirement benefit,
further payment of such benefit shall be terminated until the Participant once
again ceases to serve as an Outside Director.
3
<PAGE>
ARTICLE IV
PLAN ADMINISTRATION
Section 4.1 Funding
This Plan shall not be funded either by the creation of a separate trust fund
or by the establishment of any alternative funding program. Benefits shall be
paid from the general assets of the Company. The Company shall be under no
obligation to segregate or earmark any cash or other property for the payment
of any benefits under this Plan, nor shall the Company be under any obligation
to purchase insurance to provide any benefits. If any cash or other property
is segregated or earmarked by the Company or if insurance is purchased for
such purpose, no Participant shall have any right whatsoever in any such cash
or other property but the same shall remain free for disposition for any
purpose by the Company. Participation in the Plan shall not give any person
any right of claim to a retirement income or any other benefit hereunder
except to the extent that there are funds therefor as part of the general
assets of the Company.
Section 4.2 Administration and Interpretation
The Board of Directors shall have the sole authority to construe and interpret
this Plan in accordance with its terms and provisions and to make rules
relating to the administration thereof. The decision of the Board of
Directors with respect to any issues relating to the interpretation of this
Plan shall be final, conclusive and binding on all parties. The Board of
Directors may delegate any part of its duties hereunder to the Company's
Executive Vice President--Human Resources, subject to the final authority of
the Board of Directors.
Section 4.3 Termination and Amendment
The Board of Directors may terminate, suspend or amend this Plan in whole or
in part, at any time, as it may deem advisable. No such termination,
suspension, or amendment shall impair any rights which have already accrued to
a Participant under this Plan; provided, however, that to the extent that the
Board of Directors approves any new benefit plan or improvement to any
existing benefit plan applicable to Outside Directors, it may terminate rights
which have already accrued to a Participant under this Plan if, in its sole
discretion, it determines that the benefits payable to a Participant under
such new or improved plan adequately replace the benefits provided hereunder.
Section 4.4 Assignment
No Participant nor any other person shall have any right or interest in this
Plan or its continuance, or in the payment of any benefit hereunder, unless
and until all the provisions of this Plan, the rules adopted hereunder, and
restrictions and limitations on any benefit provided herein have been fully
satisfied. No rights under this Plan, contingent or otherwise, shall be
assignable or subject to any pledge or encumbrance of any nature.
4
<PAGE>
Section 4.5 Required Withholdings
There shall be deducted from all payments of benefits under the Plan any taxes
or other amounts which may be required to be withheld by the Company in
respect of such payments.
5
<PAGE>
Exhibit 11
----------
PACIFIC TELESIS GROUP AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Dollars in millions, except per share amounts; shares in thousands)
For the Year Ended December 31,
1995 1994 1993
--------------------------------
Net income (loss) ........................ $(2,312) $1,159 $(1,504)
======== ======= ========
Weighted average number of common
shares outstanding .................... 425,996 423,969 414,171
Common stock equivalent shares
applicable to stock options ........... 389 818 1,172
-------- ------- --------
Total number of shares for computing
primary earnings per share ............ 426,385 424,787 415,343
Incremental shares for computing fully
diluted earnings per share ............ 323 0 538
------- ------- --------
Total number of shares for computing
fully diluted earnings per share ...... 426,708 424,787 415,881
======= ======= ========
Earnings (loss) per common share
(as reported).......................... $(5.43) $2.73 $(3.63)
Primary earnings (loss) per share ........ $(5.42) $2.73 $(3.62)
Fully diluted earnings (loss) per share .. $(5.42) $2.73 $(3.62)
Earnings per share amounts for the three-years ended December 31, 1995, as
reported in the Consolidated Statements of Income, were based on the weighted
average number of common shares outstanding for the respective years. Primary
and fully diluted earnings per share amounts were not shown in the
Consolidated Statements of Income, as they differ from the reported earnings
per share amounts by less than three percent.
<PAGE>
Exhibit 12
PACIFIC TELESIS GROUP AND SUBSIDIARIES ----------
RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions) 1995 1994 1993 1992* 1991*
------- ------- ------- ------- -------
1. Earnings
--------
Adjusted income from
continuing operations
before income taxes $1,611 $1,793 $201 $1,782 $1,514
Interest expense 442 455 509 506 588
Interest in operating
rental expense (a) 31 43 40 44 36
------- ------- ------- ------- -------
Total earnings -
continuing operations $2,084 $2,291 $750 $2,332 $2,138
------- ------- ------- ------- -------
2. Fixed Charges
-------------
Interest expense (b) 442 455 $509 $ 510 $ 590
Interest in operating
rental expense (a) 31 43 40 44 36
------- ------- ------- ------- -------
Total fixed charges -
continuing operations $ 473 $ 498 $549 $ 554 $ 626
------- ------- ------- ------- -------
RATIO OF EARNINGS TO FIXED
CHARGES (1 divided by 2) 4.41 4.60 1.37** 4.21 3.42**
======= ======= ======= ======= =======
(a) Computed as 1/3 of operating rental expense.
(b) Includes capitalized interest.
* Restated to reflect the spin-off of the Corporation's wireless
operations which are excluded from amounts for the "continuing
operations" of Pacific Telesis Group.
** Results for 1993 and 1991 reflect restructuring charges which reduced
income from continuing operations before income taxes by $1,431 and
$203 million for each respective year.
<PAGE>
Exhibit 21
----------
SUBSIDIARIES OF PACIFIC TELESIS GROUP
Name State of Incorporation
- - ---- ----------------------
Pacific Bell California
Pacific Bell Directory California
Pacific Bell Information Services California
Pacific Bell Mobile Services California
Pacific Bell Internet Services California
Pacific Bell Network Integration California
Nevada Bell Nevada
Pacific Telesis Mobile Services California
Pacific Bell Communications California
Pacific Telesis Enterprises California
Pacific Telesis Enhanced Services California
Pacific Telesis Interactive Media California
Pacific Telesis Video Services California
Cross Country Wireless Inc. Delaware
Pacific Telesis Wireless Broadband Services California
Telesis Technologies Laboratory, Inc. California
PacTel Capital Resources California
PacTel Capital Funding California
PacTel Re Insurance Company, Inc. Hawaii
Pacific Telesis - Washington California
<PAGE>
Exhibit 23
----------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference of our reports dated February 22,
1996 on our audits of the consolidated financial statements and the financial
statement schedule of Pacific Telesis Group and Subsidiaries as of
December 31, 1995 and 1994 and for each of the three years in the period ended
December 31, 1995, which reports are included, or incorporated by reference,
in the Pacific Telesis Group Annual Report on Form 10-K and in the
Corporation's registration statements as follows:
Form S-3: PacTel Capital Resources $500,000,000 debt securities and
guarantee thereof by Pacific Telesis Group
Form S-3: Secondary Offering of 137,504 shares of Pacific Telesis Group
Common Stock
Form S-3: Shareowner Dividend Reinvestment and Stock Purchase Plan
Form S-3: Pacific Telesis Group and Pacific Telesis Financing I, II, and
III filed to sell up to $1 billion of Trusts' preferred
securities
Form S-4: ABI American Businessphones, Inc. Merger
Form S-8 Nonemployee Director Stock Option Plan
Form S-8: Supplemental Retirement and Savings Plan for Salaried Employees
Form S-8: Supplemental Retirement and Savings Plan for Nonsalaried
Employees
Form S-8: Stock Option and Stock Appreciation Rights Plan
Form S-8: Stock Incentive Plan
/s/ COOPERS & LYBRAND L.L.P.
San Francisco, California
March 22, 1996
<PAGE>
Exhibit 24
----------
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, PACIFIC TELESIS GROUP, a Nevada corporation (the "Corporation"),
proposes to file with the Securities and Exchange Commission (the "SEC"),
under the provisions of the Securities Act of 1934, as amended, an Annual
Report on Form 10-K; and
WHEREAS, each of the undersigned is a director of the Corporation;
NOW, THEREFORE, each of the undersigned, hereby constitutes and appoints
P. J. Quigley, W. E. Downing and R. W. Odgers, and each of them, his/her
attorney for him/her in his stead, in his/her capacity as a director of the
Corporation, to execute and file such Annual Report on Form 10-K, and any and
all amendments, modifications or supplements thereto, and any exhibits
thereto, and granting to each of said attorneys full power and authority to
sign and file any and all other documents and to perform and do all and every
act and thing whatsoever requisite and necessary to be done as fully, to all
intents and purposes, as he/she might or could do if personally present at the
doing thereof, and hereby ratifying and confirming all that said attorneys may
or shall lawfully do, or cause to be done, by virtue hereof in connection with
effecting the filing of the Annual Report on Form 10-K.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his/her hand this
22nd day of March, 1996.
/s/ Gilbert F. Amelio /s/ Lewis E. Platt
Director Director
/s/ William P. Clark /s/ Toni Rembe
Director Director
/s/ Herman E. Gallegos /s/ S. Donley Ritchey
Director Director
/s/ Frank C. Herringer /s/ Richard M. Rosenberg
Director Director
/s/ Mary S. Metz
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, PACIFIC TELESIS GROUP, a Nevada corporation (the "Corporation"),
proposes to file with the Securities and Exchange Commission (the "SEC"),
under the provisions of the Securities Act of 1934, as amended, an Annual
Report on Form 10-K; and
WHEREAS, each of the undersigned is an officer or director, or both, of the
Corporation, as indicated below under his name;
NOW, THEREFORE, each of the undersigned, hereby constitutes and appoints
P. J. Quigley, W. E. Downing and R. W. Odgers, and each of them, his attorney
for him in his stead, in his capacity as an officer or director, or both, of
the Corporation, to execute and file such Annual Report on Form 10-K, and any
and all amendments, modifications, or supplements thereto, and any exhibits
thereto, and granting to each of said attorneys full power and authority to
sign and file any and all other documents and to perform and do all and every
act and thing whatsoever requisite and necessary to be done as fully, to all
intents and purposes, as he might or could do if personally present at the
doing thereof, and hereby ratifying and confirming all that said attorneys may
or shall lawfully do, or cause to be done, by virtue hereof in connection with
effecting the filing of the Annual Report on Form 10-K.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand this
22nd day of March, 1996.
/s/ Philip J. Quigley /s/ William E. Downing
- - ----------------------------------- -----------------------------------
Philip J. Quigley William E. Downing
Chairman of the Board, Executive Vice President, Chief
President and Chief Financial Officer and Treasurer
Executive Officer
<TABLE> <S> <C>
<PAGE>
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<PERIOD-TYPE> 12-MOS
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0
0
<OTHER-SE> 2,147
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<TOTAL-REVENUES> 9,042
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