FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended June 30, 1994
or
___ Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 1-8610
SOUTHWESTERN BELL CORPORATION
Incorporated under the laws of the State of Delaware
I.R.S. Employer Identification Number 43-1301883
175 E. Houston, San Antonio, Texas 78205
Telephone Number: (210) 821-4105
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
At July 29, 1994, 601,814,367 common shares were outstanding.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SOUTHWESTERN BELL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Dollars in millions except per share amounts
(Unaudited)
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Operating Revenues
Local service $ 1,435.1 $ 1,280.4 $ 2,799.3 $ 2,502.4
Network access 705.7 662.6 1,387.2 1,300.3
Long-distance service 229.7 245.1 453.3 483.6
Directory advertising 123.3 109.4 242.8 220.6
Other 270.8 241.8 528.2 490.2
Total operating revenues 2,764.6 2,539.3 5,410.8 4,997.1
Operating Expenses
Cost of services and products 867.0 803.9 1,706.5 1,591.3
Selling, general and administrative 739.3 680.9 1,455.6 1,358.2
Depreciation and amortization 504.5 479.6 996.5 952.0
Total operating expenses 2,110.8 1,964.4 4,158.6 3,901.5
Operating Income 653.8 574.9 1,252.2 1,095.6
Other Income (Expense)
Interest expense (117.2) (130.8) (232.7) (258.7)
Equity in net income of affiliates 67.4 59.8 137.4 113.9
Other expense - net (17.8) (19.0) (31.7) (26.5)
Total other income (expense) (67.6) (90.0) (127.0) (171.3)
Income Before Income Taxes,
Extraordinary Loss and Cumulative Effect
of Changes in Accounting Principles 586.2 484.9 1,125.2 924.3
Income Taxes
Federal 175.8 129.0 334.8 245.7
State and local 24.9 17.9 47.2 38.1
Total income taxes 200.7 146.9 382.0 283.8
Income Before Extraordinary Loss
and Cumulative Effect of Changes
in Accounting Principles 385.5 338.0 743.2 640.5
Extraordinary Loss on Early Extinguishment
of Debt, net of tax - (43.6) - (133.0)
Cumulative Effect of Changes in Accounting
Principles, net of tax - - - (2,127.2)
Net Income (Loss) $ 385.5 $ 294.4 $ 743.2 $ (1,619.7)
See Notes to Consolidated Financial Statements.
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(Continued)
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SOUTHWESTERN BELL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Dollars in millions except per share amounts
(Unaudited)
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Earnings Per Common Share:
Income Before Extraordinary Loss and
Cumulative Effect of Changes in
Accounting Principles $ 0.64 $ 0.56 $ 1.24 $ 1.07
Extraordinary Loss on Early
Extinguishment of Debt, net of tax - (0.07) - (0.22)
Cumulative Effect of Changes in
Accounting Principles, net of tax - - - (3.55)
Net Income (Loss) $ 0.64 $ 0.49 $ 1.24 $ (2.70)
Weighted Average Number of Common
Shares Outstanding (in millions) 601.3 600.2 601.6 600.2
Dividends Declared Per Common Share $ 0.3950 $ 0.3775 $ 0.7900 $ 0.7550
See Notes to Consolidated Financial Statements.
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SOUTHWESTERN BELL CORPORATION
CONSOLIDATED BALANCE SHEETS
Dollars in millions except per share amounts
June 30, December 31,
1994 1993
Assets (Unaudited)
Current Assets
Cash and cash equivalents $ 484.0 $ 618.4
Accounts receivable - net of allowances
for uncollectibles of
$111.3 and $111.2 1,962.6 2,055.2
Material and supplies 140.2 148.9
Prepaid expenses 196.1 126.5
Deferred charges 235.8 192.0
Deferred income taxes 209.2 197.0
Other 147.8 281.8
Total current assets 3,375.7 3,619.8
Property, Plant and Equipment - at cost 29,101.8 28,170.6
Less: Accumulated depreciation and amortization 11,675.6 11,079.1
Property, Plant and Equipment - Net 17,426.2 17,091.5
Intangible Assets - Net of Accumulated Amortization of
$373.9 and $368.2 1,815.9 1,147.4
Investments in Equity Affiliates 1,412.5 1,420.8
Other Assets 995.6 1,028.0
Total Assets $ 25,025.9 $ 24,307.5
Liabilities and Shareowners' Equity
Current Liabilities
Debt maturing within one year $ 1,666.4 $ 1,385.7
Accounts payable and accrued liabilities 3,034.9 2,876.2
Dividends payable 237.8 226.6
Total current liabilities 4,939.1 4,488.5
Long-Term Debt 5,527.1 5,459.4
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes 2,526.7 2,387.0
Postemployment benefit obligation 2,696.4 2,897.0
Unamortized investment tax credits 400.5 430.4
Other noncurrent liabilities 1,092.9 1,076.8
Total deferred credits and other noncurrent liabilities 6,716.5 6,791.2
Shareowners' Equity
Common shares issued ($1 par value) 605.2 602.7
Capital in excess of par value 5,677.7 5,577.0
Retained earnings 2,162.0 1,891.4
Guaranteed obligations of employee stock ownership plans (329.7) (352.9)
Foreign currency translation adjustment (137.5) (40.2)
Treasury shares (at cost) (134.5) (109.6)
Total shareowners' equity 7,843.2 7,568.4
Total Liabilities and Shareowners' Equity $ 25,025.9 $ 24,307.5
See Notes to Consolidated Financial Statements.
SOUTHWESTERN BELL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in millions, increase (decrease) in cash and cash equivalents
(Unaudited)
Six months ended
June 30,
1994 1993
Operating Activities
Net income (loss) $ 743.2 $ (1,619.7)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 996.5 952.0
Undistributed earnings from investments in
equity affiliates (88.8) (55.4)
Provision for uncollectible accounts 60.4 54.4
Amortization of investment tax credits (29.9) (32.3)
Pensions and other postemployment expenses 169.4 144.8
Deferred income tax expense 65.0 63.7
Extraordinary loss, net of tax - 133.0
Cumulative effect of accounting changes, net of tax - 2,127.2
Other - net (208.0) (384.0)
Total adjustments 964.6 3,003.4
Net Cash Provided by Operating Activities 1,707.8 1,383.7
Investing Activities
Construction and capital expenditures (1,054.0) (1,048.6)
Purchase of short-term investments (78.1) (157.0)
Proceeds from short-term investments 191.2 181.4
Dispositions - 69.1
Acquisitions (773.9) -
Net Cash Used in Investing Activities (1,714.8) (955.1)
Financing Activities
Net change in short-term borrowings with original
maturities of three months or less 620.1 305.6
Issuance of other short-term borrowings 7.5 -
Repayment of other short-term borrowings (5.0) (126.6)
Issuance of long-term debt 150.7 1,141.5
Repayment of long-term debt (403.6) (180.0)
Early extinguishment of debt and related call premiums - (1,094.8)
Issuance of common shares 20.9 -
Purchase of treasury shares (117.3) (149.0)
Issuance of treasury shares 13.3 55.1
Dividends paid (414.0) (398.7)
Net Cash Used in Financing Activities (127.4) (446.9)
Net decrease in cash and cash equivalents (134.4) (18.3)
Cash and cash equivalents beginning of year 618.4 505.2
Cash and Cash Equivalents End of Period $ 484.0 $ 486.9
Cash Paid During the Six Months Ended June 30 for:
Interest $ 250.5 $ 282.7
Income taxes $ 425.7 $ 223.4
See Notes to Consolidated Financial Statements.
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SOUTHWESTERN BELL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY
Dollars in millions
(Unaudited)
<CAPTIONS>
Guaranteed
Obligations Foreign
Capital in of Employee Currency
Common Excess of Retained Stock Owner- Translation Treasury
Shares Par Value Earnings ship Plans Adjustment Shares
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $300.9 $5,834.8 $3,634.8 ($397.3) ($27.9) ($68.9)
Net income (loss) - - (1,619.7) - - -
Dividends to shareowners - - (452.9) - - -
Two-for-one stock split 300.9 (300.9) - - - -
Reduction of debt associated with
Employee Stock Ownership Plans - - - 22.1 - -
Foreign currency
translation adjustment - - - - (1.4) -
Purchase of treasury shares - - - - - (149.4)
Issuance of treasury shares:
Dividend Reinvestment Plan 3.3 - - - 68.8
Other issuances - 0.4 - - - 36.1
Other - - 3.1 - - -
Balance, June 30, 1993 $601.8 $5,537.6 $1,565.3 ($375.2) ($29.3) ($113.4)
Balance, December 31, 1993 $602.7 $5,577.0 $1,891.4 ($352.9) ($40.2) ($109.6)
Net income - - 743.2 - - -
Dividends to shareowners - - (475.8) - - -
Reduction of debt associated with
Employee Stock Ownership Plans - - - 23.2 - -
Foreign currency translation
adjustment - - - - (97.3) -
Issuance of common shares:
Dividend Reinvestment Plan 1.8 70.1 - - - -
Other 0.7 26.5
Purchase of treasury shares - - - - - (117.6)
Issuance of treasury shares - 4.1 - - - 92.7
Other - - 3.2 - - -
Balance, June 30, 1994 $605.2 $5,677.7 $2,162.0 ($329.7) ($137.5) ($134.5)
See Notes to Consolidated Financial Statements.
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* * * *
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<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
At June 30, or for the six months then ended: 1994 1993
<S> <C> <C>
Return on weighted average shareowners' equity* # . . . . . . . 18.92% 17.23%
Debt ratio # . . . . . . . . . . . . . . . . . . . . . . . . . . 47.84% 50.13%
Network access lines in service (000) . . . . . . . . . . . . . 13,472 13,023
Access minutes of use (000,000) # . . . . . . . . . . . . . . . 23,540 21,451
Long-distance messages (000) . . . . . . . . . . . . . . . . . 548,638 539,765
Cellular customers (000) . . . . . . . . . . . . . . . . . . . 2,425 1,643
Number of employees . . . . . . . . . . . . . . . . . . . . . 59,360 60,390
* 1993 calculated using Income Before Extraordinary Loss and Cumulative Effect
of Changes in Accounting Principles.
# 1993 amounts have been restated to conform to the current year's
classifications.
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SOUTHWESTERN BELL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. PREPARATION OF INTERIM FINANCIAL STATEMENTS - The consolidated
financial statements have been prepared by Southwestern Bell
Corporation (Corporation) pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC) and, in the opinion of
management, include all adjustments (consisting only of normal
recurring accruals and adjustments necessary for adoption of new
accounting standards) necessary to present fairly the results for the
interim periods shown. Certain information and footnote disclosures,
normally included in financial statements prepared in accordance with
generally accepted accounting principles, have been condensed or
omitted pursuant to such SEC rules and regulations. Management
believes that the disclosures made are adequate to make the
information presented not misleading. Certain reclassifications have
been made to the 1993 consolidated financial statements to conform
with the 1994 presentation. The results for the interim periods are
not necessarily indicative of results for the full year. The
financial statements contained herein should be read in conjunction
with the consolidated financial statements and notes thereto included
in the Corporation's 1993 Annual Report.
2. CONSOLIDATION - The consolidated financial statements include the
accounts of the Corporation and its majority-owned subsidiaries.
Southwestern Bell Telephone Company (Telephone Company) is the
Corporation's largest subsidiary. All significant intercompany
transactions are eliminated in the consolidation process. Investments
in companies in which the Corporation owns 20 percent to 50 percent of
the voting common stock or otherwise exercises significant influence
over operating and financial policies of the company are accounted for
under the equity method. Earnings from foreign investments accounted
for under the equity method are included for periods ended within
three months of the date of the Corporation's Consolidated Statements
of Income.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Dollars in millions except per share amounts
RESULTS OF OPERATIONS
Southwestern Bell Corporation (Corporation) reported net income of
$385.5 or $.64 per share for the second quarter of 1994 and net income
of $743.2, or $1.24 per share, for the first six months of 1994.
Financial results for the second quarters and first six months of 1994
and 1993 are summarized as follows:
Second Quarter Six-Month Period
% %
1994 1993 Change 1994 1993 Change
Operating $ 2,764.6 $ 2,539.3 8.9% $ 5,410.8 $ 4,997.1 8.3%
revenues
Operating $ 2,110.8 $ 1,964.4 7.5% $ 4,158.6 $ 3,901.5 6.6%
expenses
Income before
extraordinary
loss and $ 385.5 $ 338.0 14.1% $ 743.2 $ 640.5 16.0%
accounting
changes
Extraordinary - $ (43.6) - - $ (133.0) -
loss
Accounting - - - - $ (2,127.2) -
changes
Net income $ 385.5 $ 294.4 30.9% $ 743.2 $ (1,619.7) -
(loss)
The primary factors contributing to the increase in income before
extraordinary loss and cumulative effect of changes in accounting
principles during the second quarter and first six months of 1994 were
growth in demand for services and products at Southwestern Bell Mobile
Systems, Inc. (Mobile Systems) and Southwestern Bell Telephone Company
(Telephone Company), and an increase in the equity in net income of
affiliates from the Corporation's investment in Telefonos de Mexico,
S.A. de C.V. (Telmex). These increases were partially offset by a
combination of previously ordered rate reductions and accruals for
potential rate reductions at the Telephone Company, as discussed in
the Corporation's 1993 Annual Report.
Results for the second quarter and first six months of 1993 reflect
extraordinary losses of $43.6 and $133.0, respectively, associated with
refinancing of Telephone Company long-term debt. In addition,
effective January 1,1993, the Corporation adopted new financial
accounting standards relating to postretirement benefits,
postemployment benefits, and income taxes resulting in a one-time, non-
cash charge to 1993 earnings of $2,127.2.
The Corporation's operating revenues in the second quarter and first
six months of 1994 increased $225.3, or 8.9 percent, and $413.7, or
8.3 percent, over the second quarter and first six months of 1993.
Components of operating revenues for the second quarters and first six
months of 1994 and 1993 are as follows:
Second Quarter Six-Month Period
1994 1993 % Change 1994 1993 % Change
Local service
Landline $ 1,000.8 $ 965.4 3.7% $ 1,992.3 $ 1,914.3 4.1%
Wireless 434.3 315.0 37.9 807.0 588.1 37.2
Network access
Interstate 460.9 445.2 3.5 915.8 877.3 4.4
Intrastate 244.8 217.4 12.6 471.4 423.0 11.4
Long-distance 229.7 245.1 (6.3) 453.3 483.6 (6.3)
service
Directory 123.3 109.4 12.7 242.8 220.6 10.1
advertising
Other 270.8 241.8 12.0 528.2 490.2 7.8
Total $ 2,764.6 $ 2,539.3 8.9% $ 5,410.8 $4,997.1 8.3%
Landline local service revenues increased in the second quarter
and first six months of 1994 due primarily to increases in
demand, including growth in the number of access lines of 3.4
percent from June 30, 1993. This was partially offset by the
impact of previously ordered rate reductions in Texas and
accruals for potential rate reductions in Missouri.
Wireless local service revenues increased in the second quarter
and first six months of 1994 due primarily to a 47.6 percent
increase in cellular customers offset partially by a decline in
average revenue per customer. Excluding customers added through
acquisition, there was a 45.4 percent increase in cellular
customers from June 30, 1993.
Interstate network access revenues increased in the second
quarter and first six months of 1994 due primarily to an increase
in demand for access services and growth in end user charges
attributable to an increasing access line base, partially offset
by the impact of accruals for sharing under the Federal
Communications Commission (FCC) price cap plan. Network access
revenues also reflect a retroactive billing adjustment that
decreased interstate revenues while increasing intrastate
revenues.
Intrastate network access revenues increased in the second
quarter and first six months of 1994 due to an increase in
demand, partially offset by previously ordered rate reductions,
primarily in Texas. Approximately one-third of the increase
reflects the 1994 partial replacement of the Texas pool
settlement process with a system of primary toll carrier charges.
Charges paid to the Telephone Company by other intrastate
carriers are now recorded as access revenues, while those paid by
the Telephone Company are recorded as cost of services and
products. These amounts are offsetting and did not materially
affect operating income in the second quarter and first six
months of 1994. Previously, the net settlement pool payment or
receipt was recorded as an increase or decrease in revenue.
Revenues also increased as a result of the billing adjustment
noted above.
Long-distance service revenues decreased in the second quarter
and first six months of 1994 due mainly to accruals for potential
rate reductions, primarily in Missouri, and reclassification of
certain revenues to access revenues.
Directory advertising revenues increased in the second quarter
and first six months of 1994 primarily due to recognition in 1994
of white pages advertising revenues in the month of publication,
conforming to the recognition of other directory advertising
revenues. In 1993, white pages revenues were recorded ratably
throughout the year. Second quarter results also reflect growth
in yellow pages revenues.
Other operating revenues increased in the second quarter and
first six months of 1994 due to increased cellular telephone
equipment sales at Mobile Systems, the addition of cable
television revenues resulting from the January 1994 acquisition
of two systems from Hauser Communications, Inc., and increased
demand for the Telephone Company's non-regulated services and
products, including Caller ID equipment. These increases were
partially offset by the absence of revenues associated with
Metromedia Paging Services, Inc., sold in the fourth quarter of
1993 and, for the six-month period, the residential equipment
sales operations of Southwestern Bell Telecommunications, Inc.,
sold after the first quarter of 1993.
The Corporation's operating expenses in the second quarter and first
six months of 1994 increased $146.4, or 7.5 percent, and $257.1, or
6.6 percent over the second quarter and first six months of 1993,
respectively. Components of operating expenses for the second
quarters and first six months of 1994 and 1993 are as follows:
Second Quarter Six-Month Period
1994 1993 % 1994 1993 % Change
Change
Cost of
services and $867.0 $ 803.9 7.8% $ 1,706.5 $ 1,591.3 7.2%
products
Selling,
general and 739.3 680.9 8.6 1,455.6 1,358.2 7.2
administrative
Depreciation
and 504.5 479.6 5.2 996.5 952.0 4.7
amortization
Total $2,110.8 $ 1,964.4 7.5% $ 4,158.6 $ 3,901.5 6.6%
Cost of services and products increased for the second quarter
and first six months of 1994 due to increased demand for cellular
services and products, increased switching system software
license fees at the Telephone Company, including fees related to
enhanced services, annual compensation increases and Texas
primary toll carrier access expenses discussed above. These
increases were partially offset by the absence of expenses
associated with paging services, sold in the fourth quarter of
1993 and, for the six-month period, residential equipment sales
operations, sold after the first quarter of 1993.
Selling, general and administrative expenses increased in the
second quarter and first six months of 1994 due to growth in
cellular operations, higher pension benefit expenses,
compensation increases and higher operating taxes, partially
offset by savings associated with 1993 force reductions.
Depreciation and amortization increased in the second quarter and
first six months of 1994 due primarily to a growth in plant level
and changes in plant composition.
Interest expense decreased $13.6, or 10.4 percent, and $26.0 or
10.1 percent in the second quarter and first six months of 1994,
respectively, due primarily to lower interest rates on Telephone
Company debt refinanced in 1993. Comparisons are also favorably
affected by the recording of interest expense associated with the
settlement of federal income tax audit issues in the second quarter of
1993.
Equity in net income of affiliates, which relates primarily to Telmex,
increased $7.6, or 12.7 percent, and $23.5 or 20.6 percent in the
second quarter and first six months of 1994, respectively. The
increases were due primarily to access line growth, increases in rates
and long distance usage growth, partially offset by declines in the
value of the Mexican peso. Telmex earnings are recorded by the
Corporation for periods ended within three months of the financial
statement date, are stated in accordance with U.S. generally accepted
accounting principles, are not adjusted for the effects of inflation
and reflect certain other purchase accounting adjustments.
Federal income tax expense increased $46.8, or 36.3 percent, in the
second quarter and $89.1, or 36.3 percent, for the first six months of
1994 due primarily to higher income before income taxes and the 1
percent increase in the federal income tax rate enacted in the third
quarter of 1993.
OPERATING ENVIRONMENT AND TRENDS OF THE BUSINESS
Regulatory Developments
Federal - In June 1994, the United States Court of Appeals for the
District of Columbia Circuit (Court of Appeals) released its opinion
on an appeal filed by the Telephone Company and several other local
exchange carriers. The local exchange carriers had appealed the FCC's
October 1992 order which required local exchange carriers to file
tariffs permitting independent parties to physically collocate their
equipment within local exchange carrier central offices for the
purposes of providing certain special access services. The Court of
Appeals vacated the FCC's physical collocation requirement and
remanded the order in all other respects, such as virtual collocation,
to the FCC for further proceedings. Virtual collocation involves a
set of technical and pricing rules intended to position the
interconnector as if its equipment were located in the central office.
In July 1994, the FCC released a Memorandum, Opinion and Order (the
Order) requiring certain local exchange carriers to file virtual
collocation tariffs by September 1, 1994 to become effective December
15, 1994. Under the Order, local exchange carriers are required to
provide equipment designated by independent parties to offer virtual
collocation within the local exchange carriers' central offices.
Local exchange carriers may choose to continue offering physical
collocation instead of filing new tariffs for virtual collocation.
The Corporation intends to appeal the Order. At this time,
management is unable to estimate the financial impact of the Order on the
Corporation.
In July 1994, the Court of Appeals remanded the FCC's decision to deny
increases to the price caps (referred to as "exogenous treatment") to
reflect the incremental interstate costs associated with the
accrual accounting required by Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" (Statement No. 106). The Court of Appeals remand
requires the FCC to reconsider the Telephone Company's existing
request for interstate rate recovery of Statement No. 106 costs.
Because the remand requires further FCC action, interpretation and
negotiation with the Telephone Company and other local exchange
carriers, the financial impact of the remand cannot be estimated at
this time.
In June 1994, the Corporation filed a motion with the United States
District Court for the District of Columbia (the Court) seeking
removal of restrictions that prevent it from providing interLATA long-
distance service to its cellular customers. This filing follows a
period of almost two and one-half years of preliminary discussions
between the Corporation and the United States Department of Justice
(DOJ). In July 1994, the Corporation asked the DOJ to support a
waiver allowing the Corporation to offer interLATA long-distance
service through subsidiaries outside the five-state Telephone Company
service region. Both of these matters are pending.
In July 1994, the Corporation joined with three other Regional Holding
Companies (RHC) in a joint petition asking the Court to vacate the
consent decree issued by the Court at the time of AT&T's divestiture
of the RHCs. Among other items, the consent decree prevents the RHCs
from providing interLATA telephone service and manufacturing
telecommunications equipment. This matter is pending.
Other Business Matters
During the second quarter, the Corporation finalized its acquisition
of cellular systems in Syracuse, Utica and Ithaca, New York. Also
during the second quarter, the Corporation was selected as a partner
in a consortium that will design, build and operate a second
nationwide cellular network in the Republic of Korea. The Corporation
will have an 8.3 percent ownership in the consortium, which expects to
begin providing service by January 1996.
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of 1994, as in 1993, the Corporation's
primary source of funds continued to be cash provided by operating
activities. Other sources of cash used in the 1994 acquisitions of
cable television properties in Washington, D.C., and cellular
properties included proceeds from the issuance of short-term debt and
sales of short-term investments. In addition, portions of the
acquisitions were completed through the issuance of the Corporation's
common shares. In both 1994 and 1993, cash provided by operating
activities is reduced by contributions of $101.0 and $135.5,
respectively, to the collectively bargained Voluntary Employees'
Beneficiary Association trusts for the purpose of funding certain
postretirement benefits.
The Corporation had $484.0 of cash and cash equivalents available at
June 30, 1994. The Corporation has entered into agreements with
several banks for lines of credit totaling $780.0, all of which may be
used to support commercial paper borrowings. These lines had not been
utilized as of June 30, 1994. Commercial paper borrowings as of June
30, 1994 totaled $1,513.1.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of the shareowners of Southwestern Bell
Corporation (Corporation) was held on April 29, 1994, in San
Antonio, Texas. Shareholders representing 484,952,860 shares of
common stock were present in person or were represented at the
meeting by proxy.
(b) At the meeting, holders of common shares voted as indicated below
to elect the following persons to the Board of Directors for a
three year term:
DIRECTOR FOR WITHHELD *
Clarence C. 475,314,555 9,683,305
Barksdale
Jack S. Blanton 475,162,752 9,790,108
Ruben R. Cardenas 475,385,318 9,567,542
Martin K. Eby, Jr. 475,628,191 9,324,669
Charles F. Knight 475,217,216 9,735,644
Carlos Slim Helu 474,515,730 10,437,130
* Includes shares represented at the meeting by proxy where
the shareholder withheld authority to vote for the indicated
director or directors, as well as shares voted in person at the
meeting where the shareholder did not vote for such director or
directors.
(c) Shareholders ratified the appointment of Ernst & Young as
independent auditors to examine the consolidated financial
statements of the Corporation for the year ended December 31,
1994. The vote was 476,778,757 shares FOR and 4,501,711 shares
AGAINST, with 3,672,392 shares ABSTAINING.
(d) Shareholders approved the establishment of the Southwestern Bell
Corporation Stock Savings Program. The vote was 437,547,636
shares FOR and 38,926,116 shares AGAINST, with 8,479,108 shares
ABSTAINING.
(e) Shareholders approved the establishment of the Southwestern Bell
Corporation Key Executive Officer Short Term Incentive Plan. The
vote was 415,942,091 shares FOR and 56,862,772 shares AGAINST,
with 12,147,997 shares ABSTAINING.
(f) Shareholders rejected the Shareowner Proposal to require the
preparation of a study evaluating the impact on the Corporation
of the North American Free Trade Agreement. The vote was
58,921,431 shares FOR and 339,924,369 shares AGAINST, with
29,302,867 shares ABSTAINING. There were 56,804,193 broker non-
votes recorded.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.1 Southwestern Bell Corporation Stock Savings Plan, revised
effective August 1, 1994.
Exhibit 10.2 Southwestern Bell Corporation 1992 Stock Option Plan,
revised effective August 1, 1994.
Exhibit 10.3 Southwestern Bell Corporation Senior Management Deferred
Compensation Plan (effective for units of participation
having a unit start date prior to January 1, 1988),
revised July 30, 1993. (Exhibit 10.5 to Registration
Statement No. 33-54795.)
Exhibit 10.4 Southwestern Bell Corporation Senior Management Deferred
Compensation Program of 1988, revised July 30, 1993.
(Exhibit 10.6 to Registration Statement No. 33-54795.)
Exhibit 10.5 Southwestern Bell Corporation Restricted Stock Plan for
Non-Employee Directors. (Exhibit 10.17 to Registration
Statement No. 33-54795.)
Exhibit 10.6 Southwestern Bell Corporation Officer Retirement Savings
Plan. (Exhibit 10.18 to Registration Statement No. 33-
54795.)
Exhibit 12 Computation of Ratios of Earnings to Fixed Charges.
(b) Reports on Form 8-K
On April 6, 1994, Southwestern Bell Corporation (Corporation)
filed a Current Report on Form 8-K, reporting on Item 5, Other
Events. The Corporation filed information relating to the
termination of plans to form a cable partnership with Cox Cable
Communications.
On May 19, 1994, the Corporation filed a Current Report on Form 8-K,
reporting on Item 7, Financial Statements and Exhibits. The
Corporation filed exhibits relating to the issuance of floating rate
Medium-Term Notes by Southwestern Bell Capital Corporation
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Southwestern Bell Corporation
August 10, 1994 /s/ Donald E. Kiernan
Donald E. Kiernan
Senior Vice President, Treasurer
and Chief Financial Officer
EXHIBIT 10.1
SOUTHWESTERN BELL CORPORATION
STOCK SAVINGS PLAN
Effective: January 1, 1991
As amended through August 1, 1994
INDEX
Section Subject Page
1 Statement of Purpose
2 Definitions
3 Administration of the Plan
4 Participation
4.1 Election to Commence a Savings Unit
4.2 Termination of Election
5 Pre-Tax Contributions/After-Tax Contributions/
Company Match
5.1 After-Tax and/or Pre-Tax Account(s)
5.2 Employer Contribution Matching Account
5.3 Dividends
5.4 Vesting of Matching Account
5.5 Statement of Accounts
6 Retirement Alternative
6.1 Retirement Distribution
6.2 Termination Distribution
6.3 Disability
6.4 Survivor Distribution
7 Specified Date Alternative
7.1 Specified Date Distribution
7.2 Termination Distribution
7.3 Disability
7.4 Survivor Distribution
8 Beneficiary Designation
9 Options
9.1 Grants
9.2 Term of Options
9.3 Option Price
9.4 Issuance of Options
9.5 Exercise of Options
9.6 Restrictions on Exercise and Transfer
9.7 Termination by Death
9.8 Termination by Disability
9.9 Retirement or Other Termination of
Employment
10 Discontinuation, Termination, Amendment
10.1 Company's Right to Discontinue Offering
Savings Units
10.2 Company's Right to Terminate Plan
10.3 Amendment
11 Miscellaneous
11.1 Additional Benefit
11.2 Small Distribution
11.3 Emergency Distribution
11.4 Commencement of Payments
11.5 Withholding
11.6 Change in Status
11.7 Transfer to a RWAC
11.8 Leave of Absence
11.9 Ineligible Participant
11.10 Unsecured General Creditor
11.11 Offset
11.12 Non-Assignability
11.13 Employment Not Guaranteed
11.14 Gender, Singular and Plural
11.15 Captions
11.16 Applicable Law
11.17 Validity
11.18 Notice
11.19 Successors and Assigns
11.20 Limitations and Adjustments
12 Participation in Previous Non-Qualified
Deferred Compensation Plan(s) of Company
12.1 Agreements Relating to Participation in
Savings Plan for Salaried Employees
12.2 Participation in Southwestern Bell
Corporation Senior Management Deferred
Compensation Program of 1988
Exhibit (1) - AGREEMENTS
SOUTHWESTERN BELL CORPORATION STOCK SAVINGS PLAN
Section 1 - Statement of Purpose
The purpose of the Stock Savings Plan (the "Plan") is to
increase employee stock ownership and to provide retirement
and short-term savings distributions to a select group of
management employees consisting of Eligible Employees of
Southwestern Bell Corporation (the "Company") and its
subsidiaries ("Participating Companies").
Section 2 - Definitions
For the purposes of this Plan, the following words and
phrases shall have the meanings indicated, unless the
context clearly indicates otherwise:
After-Tax Account. "After-Tax Account" means the account
maintained on an after-tax basis on the books of account of
the Employer for each Participant for each Savings Unit to
which After-Tax Amounts are credited. After-Tax Accounts
are available only for Savings Units commenced prior to
January 1, 1995.
After-Tax Amount. "After-Tax Amount" means an amount of
Base Salary contributed on an after-tax basis with respect
to a Savings Unit commenced prior to January 1, 1995 under
this Plan.
Agreement. "Agreement" means the written agreement entitled
"Stock Savings Plan Enrollment Form" and/or, effective on or
after January 1, 1995, the written agreement entitled "Short
Term/Cash Bonus Contribution Form" that shall be entered
into by the Employer and a Participant to carry out the Plan
with respect to such Participant. The forms of Agreement in
current use are attached to the Plan. Any material changes
to the forms must be approved by the HRC.
Base Salary. "Base Salary" means the Participant's annual
base salary before reduction due to any contribution
pursuant to this Plan or reduction pursuant to any deferral
plan of the Employer, including but not limited to a plan
that includes a qualified cash or deferred arrangement under
Section 401(k) of the Internal Revenue Code ("Code").
Beneficiary. "Beneficiary" means the person or persons
designated as such in accordance with Section 8 of this
Plan.
Board. "Board" means the Board of Directors of Southwestern
Bell Corporation.
Chairman. "Chairman" means the Chairman of the Board of
Southwestern Bell Corporation.
Company Match Rate Expressed as a Percent. "Company Match
Rate Expressed as a Percent" means eighty percent (80%), or
such higher percentage as may be determined by the HRC, in
its sole discretion, at any time, or such lower percentage
as may be determined by the HRC, in its sole discretion, and
announced to the Eligible Employees prior to the Unit Start
Date with respect to a Savings Unit.
Disability. "Disability" means inability to work due to
being physically disabled.
Eligible Employee. "Eligible Employee" means an Employee of
the Employer who (a) is in active service, (b) is a Senior
Manager or has an employment status which has been approved
by the Board or the HRC to be eligible to participate in
this Plan, and (c) who continuously maintains the employment
status upon which eligibility to participate in this Plan
was based.
Employee. "Employee" means any person employed by the
Employer on a regular full-time salaried basis.
Employer. "Employer" means Southwestern Bell Corporation or
any of its subsidiaries.
Fair Market Value or FMV. "Fair Market Value" or "FMV"
means, with respect to Stock, the closing price of the Stock
on the relevant date as reported in the consolidated
reporting system, or if on such date the Stock is not traded
on the New York Stock Exchange ("NYSE"), then the closing
price on the immediately preceding date such Stock is
traded.
HRC. "HRC" means the Human Resources Committee of the
Board.
Options. "Options" shall mean the options to purchase Stock
which shall be issued to a Participant pursuant to Section
9.
Participant. "Participant" means an Employee or former
Employee participating in the Plan.
Plan Year. "Plan Year" means the calendar year.
Pre-Tax Account. "Pre-Tax Account" means the account
maintained on a pre-tax basis on the books of account of the
Employer for each Participant for each Savings Unit to which
Pre-Tax Amounts are credited.
Pre-Tax Amount. "Pre-Tax Amount" means an amount of Base
Salary contributed by Participant on a pre-tax basis with
respect to a Savings Unit under this Plan.
Retirement. "Retirement" means the termination of a
Participant's employment with Employer, for reasons other
than death, on or after the date Participant is eligible to
retire with an immediate pension pursuant to the
Southwestern Bell Corporation Management Pension Plan and/or
the Southwestern Bell Corporation Supplemental Retirement
Income Plan ("SRIP").
Retirement Alternative. "Retirement Alternative" means,
with respect to any Savings Unit, the distributions
described in Section 6 that the Plan provides based upon a
selection of such alternative.
Retirement Distribution. "Retirement Distribution" means
the distribution described in Section 6.1.
Rotational Work Assignment Company. "RWAC" shall mean Bell
Communications Research, Inc. ("Bellcore"), formerly the
Central Services Organization, Inc., and/or any other entity
with which Southwestern Bell Corporation or any of its
subsidiaries may enter into an agreement to provide an
employee for a rotational work assignment.
Savings Unit. "Savings Unit" means the Participant's Pre-
Tax Amount and/or After-Tax Amount, and associated Employer
contributions, which provide stated distributions pursuant
to Section 6 or Section 7 of this Plan in accordance with
the Participant's Agreement for such Savings Unit.
Section 16 Officer. "Section 16 Officer" shall mean each
Employee who is an officer as that term is defined in Rule
16a-1(f) promulgated under the Securities Exchange Act of
1934, as amended.
Senior Manager. "Senior Manager" means an individual
employed by Employer in a position in the senior management
group.
Shares. "Shares" means an accounting entry representing a
number of equivalent shares of Stock.
Specified Date. "Specified Date" means, with respect to any
Savings Unit for which the Participant elects the Specified
Date Alternative, the fixed date specified in the Agreement
on which the Specified Date Distribution will commence.
Such date may be the first day of any month at least one (1)
year after the commencement of the Savings Unit.
Specified Date Alternative. "Specified Date Alternative"
means, with respect to any Savings Unit, the distributions
described in Section 7 that the Plan provides based upon a
selection of such alternative.
Specified Date Distribution. "Specified Date Distribution"
means the distribution described in Section 7.1.
Stock. "Stock" means the common stock of Southwestern Bell
Corporation.
Subsidiary. A "Subsidiary" of the Company is any
corporation, partnership, venture or other entity in which
the Company has at least a 50% ownership interest. The HRC
may at its sole discretion designate any other corporation,
partnership, venture or other entity a Subsidiary for the
purpose of participating in this Plan.
Unit Period. "Unit Period" means the calendar year with
respect to which the Participant elects to participate in
the Plan on a pre-tax basis and/or an after-tax basis. The
Unit Period for a Savings Unit will commence on the Unit
Start Date and end upon the earliest to occur of the
following: (i) the last day of the calendar year which
includes the Unit Start Date, or (ii) when the Participant
terminates employment, terminates the Savings Unit or ceases
to be an Eligible Employee.
Unit Start Date. "Unit Start Date" means the date for
commencement of a given Savings Unit. The Unit Start Date
will be January 1, except a new Participant shall be
permitted to elect a Unit Start Date within 30 days after
such Participant first becomes an Eligible Employee; and for
a Savings Unit comprised of all or a portion of a
Participant's Short Term Incentive Award and/or of any other
cash bonus, the Unit Start Date shall be the day the Award
or cash bonus would otherwise have been paid. In the event
a Participant is a Section 16 Officer, then his or her
election shall not be effective until six months after the
election.
Section 3 - Administration of the Plan
The HRC shall be the sole administrator of the Plan and will
administer the Plan, interpret, construe and apply its
provisions in accordance with its terms. The HRC shall
further establish, adopt or revise such rules and
regulations as it may deem necessary or advisable for the
administration of the Plan. All decisions of the HRC shall
be final and binding.
Section 4 - Participation
4.1 Election to Commence a Savings Unit. Any Eligible
Employee may elect to commence a Savings Unit on an after-
tax basis (available for Savings Units commenced prior to
January 1, 1995 only) and/or on a pre-tax basis by filing a
completed Agreement with the Company at least six months
prior to the Unit Start Date. Pursuant to said Agreement,
the Eligible Employee shall elect the percentage(s) of Base
Salary that shall comprise Participant's Pre-Tax Amount
and/or After-Tax Amount (for Savings Units commenced prior
to January 1, 1995 only). Such percentage(s) shall remain
in effect for the duration of the Unit Period even if Base
Salary should change. Such Agreement shall continue to be
regarded as, and shall apply as, the Eligible Employee's
election to commence each successive Savings Unit until the
Company is advised in writing in accordance with the
aforesaid time requirements by the Eligible Employee to the
contrary. In the Agreement, the Participant shall also
elect, for participation on each basis, either the
Retirement Alternative or the Specified Date Alternative and
the timing of distribution of Stock.
The combination of pre-tax contributions and/or after-tax
contributions from all of the Participant's Savings Units
(including the Savings Unit which the Participant is
electing to commence) and deferrals from Units of
Participation (a measure of participation in a plan similar
to a Savings Unit under this Plan) under Company
nonqualified deferred compensation plans, must be at least
six percent (6%) of Participant's Base Salary at the Unit
Start Date for the Savings Unit the Participant is electing
to commence. The sum of Participant's Pre-Tax Amount and/or
After-Tax Amount for a Savings Unit must be at least one
percent (1%) of Base Salary at the Unit Start Date. The sum
of the Participant's Pre-Tax Amounts and/or After-Tax
Amounts for all Savings Units under this Plan at the Unit
Start Date for the Savings Unit the Participant is electing
to commence may not exceed thirty percent (30%) of a
Participant's Base Salary at the Unit Start Date; provided,
however, as an exception to such thirty percent (30%) level
of participation limitation, a Participant shall be
permitted to contribute on an after-tax basis (prior to
January 1, 1995, only) and/or on a pre-tax basis all or a
portion of his Short Term Incentive Award and/or of any
other cash bonus which may be paid to a Participant by an
Employer. Short Term Incentive Awards or any portion thereof
contributed to the Plan prior to January 1, 1995, shall be
credited into a 1994 or prior Savings Unit(s) as specified
by the Participant. Participant's election to contribute on
a pre-tax basis and/or contribute on an after-tax basis all
or a portion of his Short Term Incentive Award and/or of any
other cash bonus which may be paid to a Participant by an
Employer, shall be filed with the Company (on a form to be
provided by the Company for such purpose) prior to the
beginning of the fiscal year during which such Award is
earned or at least 6 months prior to the payment of the
Award and/or cash bonus, whichever is earlier. The pre-tax
contribution and/or after-tax contribution, as applicable,
shall be deemed to have taken place on the day the Award
and/or cash bonus would otherwise have been paid. In the
Agreement relating to the Award and/or cash bonus, the
Participant shall also elect either the Retirement
Alternative or the Specified Date Alternative and the timing
of distribution of Stock. This election is independent of
the election for distribution of contributions associated
with deferrals of Base Salary. Such contribution of all or
a portion of Participant's Short Term Incentive Award and/or
of any other cash bonus shall comprise a separate Savings
Unit.
4.2 Termination of Election. A Participant's election to
participate in the Plan for the duration of the Unit Period
is irrevocable upon the filing of his Agreement with the
Company; provided, however, such election may be terminated
with respect to Base Salary not yet paid by mutual agreement
in writing between the Participant and the HRC. Such
termination if approved shall be effective beginning the
first day of the month following the execution of such
mutual agreement.
Section 5 - Pre-Tax Contributions/After-Tax Contributions/Company
Match
5.1 After-Tax and/or Pre-Tax Account(s). The Company shall
establish and maintain a separate After-Tax Account (for
Savings Units commenced prior to January 1, 1995 only)
and/or Pre-Tax Account for each Participant for each Savings
Unit. On the first business day of each month, the Company
shall credit each Participant's Pre-Tax Account and/or After-
Tax Account, as applicable, with the number of Shares found
by dividing the Participant's Pre-Tax Amount and/or After-
Tax Amount, as applicable, for the previous month by the FMV
on the last day of such previous month. The Participant's
Pre-Tax Account and/or After-Tax Account, as applicable,
will also be credited with the number of Shares found by
dividing the amount of the Participant's Short Term
Incentive Award and/or cash bonus contributed on a pre-tax
basis and/or contributed on an after-tax basis (prior to
January 1, 1995 only) by the FMV on the last day of the
month of contribution.
Shares credited to Participant's Pre-Tax Account and/or
After-Tax Account are 100% vested at all times.
Such Pre-Tax Account and/or After-Tax Account, as
applicable, shall be reduced by the number of Shares
corresponding to the number of shares of Stock distributed
by the Employer to the Participant or the Participant's
Beneficiary with respect to such Savings Unit pursuant to
this Plan.
5.2 Employer Contribution Matching Account. The Company
shall also establish and maintain a separate Matching
Account for each Participant. The Matching Account will
hold the Employer's matching contribution to the Plan.
Immediately following the computation of the Shares to be
added to each Participant's Pre-Tax Account and/or After-Tax
Account (for Savings Units commenced prior to January 1,
1995 only) each month, the Company shall credit each
Participant's Matching Account with the number of Shares
found by taking the Company Match Rate Expressed as a
Percent times the sum of the Participant's After-Tax Amount
plus Pre-Tax Amount for the previous month, and dividing the
resulting figure by the FMV of the Stock on the last day of
such previous month; provided, however, if the Participant
is concurrently participating in a Company non-qualified
deferred compensation plan other than this Plan, the basic
portion of the Southwestern Bell Corporation Savings Plan
for Salaried Employees ("Savings Plan for Salaried
Employees") and this Plan, the Employer matching
contribution credited to the Participant's Matching Account
shall be reduced by Employer matching contributions credited
to such other plans; provided further, however, if the
Participant is concurrently participating in the basic
portion of the Savings Plan for Salaried Employees and this
Plan, the Employer matching contribution shall be credited,
pursuant to this Plan, with respect to no more than six
percent (6%) of the Participant's monthly Base Salary less
the basic election percentage in the Savings Plan for
Salaried Employees; and provided, however, Employer
matching contributions shall be paid, pursuant to this Plan
and all plans of Employer combined, with respect to no more
than six percent (6%) of Participant's monthly Base Salary.
5.3 Dividends. Additional Shares shall be credited to each
Participant's Pre-Tax Account, After-Tax Account, and
Matching Account, respectively, for dividends on Stock, on
the basis of the number of Shares credited to each such
Account on the record date for such dividend.
The number of additional Shares to be credited to each
Account for any dividend payment date shall be determined by
dividing the total dividends which would have otherwise been
payable on the number of Shares recorded in each Account, by
the FMV on the last day of the month containing the dividend
record date. The additional Shares shall be credited to each
Account, as appropriate, on the last day of the month
containing the dividend record date.
5.4 Vesting of Matching Account. A Participant's interest
in his Matching Account shall vest at such time as
Participant shall have five (5) years of service reflected
on the records of Employer; provided, however, the Matching
Account of any Participant who was employed by Employer on
December 31, 1988 shall be 100% vested at all times.
Notwithstanding whether or not a Share in the Matching
Account is vested, a share of Stock corresponding to a Share
shall not be available for distribution to the Participant
until such Share has been in said Matching Account for ten
(10) years and the Participant is at least fifty-five (55)
years of age or until Participant's Retirement or other
termination of employment (including death).
5.5 Statement of Accounts. Each Participant will receive
annual statements in such form as the Company deems
desirable setting forth the balance of Shares standing to
the credit of each of the Participant's Pre-Tax, After-Tax
and Matching Accounts.
Section 6 - Retirement Alternative
Section 6 shall apply to the portions of all Savings Units
for which the Retirement Alternative is elected. (Section 7
shall have no application to such portions of such Savings
Units.) The distributions specified in this Section 6 shall
be provided under the Retirement Alternative.
6.1 Retirement Distribution. Upon Retirement or, effective
for Savings Units commenced on or after January 1, 1995, the
calendar year following Retirement if so elected by the
Participant, with respect to a Savings Unit, the Employer
shall distribute to the Participant each year for up to
fifteen (15) years, the number of years to be selected by
Participant in his Agreement, beginning on the first day of
the month next following the date of Retirement or during
February of the year following Retirement if the calendar
year following Retirement is elected for commencing
distribution of Savings Units commenced on or after January
1, 1995, and annually on such date thereafter, from
Participant's Pre-Tax Account, After-Tax Account, and
Matching Account, shares of Stock corresponding to the
number of Shares in each such Account on such date divided
by the number of distributions to be made immediately prior
to each such distribution. During the payout period, each
such Account shall be credited with dividends in accordance
with Section 5.3.
The Participant shall elect the number of years of
distribution of a Retirement Distribution no later than the
end of the calendar year immediately preceding the first
distribution. If a Participant's Agreement fails to show an
election as to the number of years of distribution of a
Retirement Distribution, and an election is not made no
later than the end of the calendar year immediately
preceding the first distribution, such Participant will
receive distribution in two annual installments beginning on
the first of the month next following the date of Retirement
or during February of the year following Retirement,
whichever commencement date was previously elected by the
Participant.
In the event that a final determination shall be made by the
Internal Revenue Service or any court of competent
jurisdiction that, by reason of Retirement, a Participant
has recognized gross income for Federal income tax purposes
in excess of the Retirement Distribution installment
actually distributed by the Employer to which such gross
income is attributable, the Employer shall make a lump sum
distribution to the Participant of shares of Stock
corresponding to the remaining Shares of his Pre-Tax, After-
Tax and Matching Accounts for any affected Savings Units.
If a distribution is made to a Participant pursuant to this
paragraph for any Savings Unit, no other distributions shall
thereafter be made under this Plan with respect to such
Savings Unit.
Notwithstanding any election made by the Participant, the
Company will distribute the Participant's Retirement
Distribution in the form of a lump sum distribution if the
FMV of his Pre-Tax plus After-Tax plus Matching Accounts for
a Savings Unit is less than $10,000 when distribution of the
Retirement Distribution for such Savings Unit would
otherwise commence.
6.2 Termination Distribution.
6.2(a) Termination of Employment Before Retirement. Upon
any termination of employment of the Participant for reasons
other than death or Disability or Retirement, the Company
shall distribute to the Participant, with respect to a
Savings Unit, in a lump sum, shares of Stock corresponding
to the vested portion of the Shares standing credited to his
Pre-Tax, After-Tax and Matching Accounts for such Savings
Unit determined as of the date of such termination of
service ("Termination Distribution").
6.2(b) Termination of a Savings Unit. A Participant shall
terminate a Savings Unit if he terminates his election to
participate in the Plan with respect to a Savings Unit
pursuant to Section 4.2. Notwithstanding any other
provision of the Plan, upon such discontinuance, the
Participant shall immediately cease to be eligible for any
distribution other than his Termination Distribution with
respect to that Savings Unit (which shall be distributed
upon his severance of employment) except as provided under
Section 11.1. The Participant shall continue to be credited
with dividends on the Shares standing credited to his Pre-
Tax, After-Tax and Matching Accounts as provided under
Section 5.3 and to vest in Shares as provided under Section
5.4 while he remains in employment with the Employer until
payment of his Termination Distribution. However, no
further Participant pre-tax or after-tax or Employer
contributions to this Plan shall be made pursuant to
Sections 5.1 or 5.2 with respect to a Savings Unit after a
Participant terminates such Savings Unit.
6.2(c) Loss of Eligibility. In the event that the
Participant ceases to be an Eligible Employee by reason of a
change to an employment status which is not eligible to
participate in this Plan, the Participant shall nevertheless
continue participation in this Plan while he remains in
employment with the Employer; however, no further
Participant pre-tax contributions or after-tax
contributions, or Employer contributions shall be made to
this Plan pursuant to Sections 5.1 or 5.2 subsequent to the
date of such loss of eligibility. The provisions of this
subparagraph 6.2(c) shall not apply if the Participant in
his new employment status is an eligible employee under
another similar stock savings plan of the Employer. In such
event the provisions of Section 11.6 of this Plan shall
apply.
6.3 Disability. In the event that a Participant suffers a
Disability, pre-tax contributions and/or after-tax
contributions and Employer contributions that otherwise
would have been credited to Participant's Pre-Tax Account,
After-Tax and Matching Accounts, as applicable, in
accordance with Sections 5.1 and 5.2 will continue to be
credited to such Accounts out of his disability payments at
the same time and in the same amounts as they would have
been credited if the Participant had not suffered a
Disability for as long as he is eligible to receive monthly
disability benefits equal to 100 percent of his monthly base
salary at the time of his Disability. At such time as the
Participant is not eligible to receive monthly disability
benefits equal to 100 percent of his monthly Base Salary at
the time of his Disability, Participant pre-tax
contributions and/or after-tax contributions and Employer
contributions that otherwise would have been credited to the
Accounts of the Participant in accordance with Section 5.1
and 5.2 shall cease.
If the Participant recovers from his Disability and returns
within sixty (60) days thereafter to employment with the
Employer in an employment status which would make him
eligible to participate in this Plan and prior to the end of
the original Unit Period, the Participant shall continue or
resume making pre-tax contributions and/or after-tax
contributions, as the case may be, in accordance with
Section 5.1 and the Employer shall continue or resume making
contributions, as the case may be, in accordance with
Section 5.2 until the end of the original Unit Period.
If the Participant recovers from his Disability, the
Participant shall be treated as terminating service with the
Employer on the date of his recovery, unless within sixty
(60) days thereafter he returns to employment with the
Employer in an employment status which makes him eligible to
participate in this Plan.
If a Participant's Disability terminates by reason of his
death, the rights of his Beneficiary shall be determined
pursuant to Section 6.4 as if the Participant had not been
disabled but rather had been in service on the date of his
death and died on such date. If a Participant's Disability
terminates by reason of attainment of age 65, the
Participant shall upon the attainment of age 65 be entitled
to a Retirement Distribution determined pursuant to Section
6.1. If a Participant's Disability terminates by reason of
Retirement, the Participant shall be treated as having a
Retirement on the date elected by the Participant and shall
be entitled to a Retirement Distribution determined pursuant
to Section 6.1.
6.4 Survivor Distribution.
6.4(a) If a Participant dies while in service with the
Employer (or while suffering from a Disability) prior to
eligibility for Retirement with respect to a Savings Unit,
upon the Participant's death the Employer will distribute to
the Participant's Beneficiary with respect to such Savings
Unit, shares of Stock corresponding to all of the Shares in
Participant's Pre-Tax, After-Tax and Matching Accounts.
Distribution shall occur in the month following the date of
death.
6.4(b) If a Participant dies while in service after
eligibility for Retirement with respect to a Savings Unit,
but prior to commencement of distribution of a Retirement
Distribution with respect to such Savings Unit, the Employer
will distribute to the Participant's Beneficiary the Stock
that such Participant's Beneficiary would have received with
respect to such Savings Unit had the Participant retired and
commenced to receive a Retirement Distribution on the day
prior to such Participant's death. Such distributions shall
be made in accordance with the number of installments which
the Participant had elected for distribution of his
Retirement Distribution.
6.4(c) If a Participant dies after Retirement but before
commencement of distribution of a Retirement Distribution
with respect to a Savings Unit, the Employer will distribute
to the Participant's Beneficiary the installments that
Participant would have received with respect to such Savings
Unit had the Participant survived. Payments will commence
effective with the Participant's death. Such distributions
shall be made in accordance with the method of distribution
which the Participant had elected for distribution of his
Retirement Distribution.
6.4(d) If a Participant dies after the commencement of
payment of a Retirement Distribution with respect to a
Savings Unit, the Employer will distribute to the
Participant's Beneficiary the remaining installments that
would have been distributed to the Participant had the
Participant survived.
Section 7 - Specified Date Alternative
Section 7 shall apply to the portions of all Savings Units
for which the Specified Date Alternative is elected.
(Section 6 shall have no application to such portions of
such Savings Units.) The distributions specified in this
Section 7 shall be provided under the Specified Date
Alternative.
7.1 Specified Date Distribution. If a Participant elects
the Specified Date Alternative with respect to a Savings
Unit, the Employer shall distribute to the Participant each
year for up to four (4) years, the number of years to be
selected by Participant in his Agreement, beginning on the
first day of the month selected in his Agreement for
commencement of distributions, and annually on such date
thereafter, from Participant's Pre-Tax Account, After-Tax
Account, and Matching Account (to the extent available for
distribution), shares of Stock corresponding to the number
of Shares in each such Account on such date divided by the
number of distributions to be made immediately prior to each
such distribution. During the payout period, each such
Account shall be credited with dividends in accordance with
Section 5.3. Shares of Stock corresponding to Shares in the
Matching Account which are not immediately available for
distribution shall be distributed to the Participant in a
lump sum distribution as soon as practicable after such
Shares become available for distribution. While such Shares
remain in the Matching Account, such Account shall be
credited with dividends on such Shares in accordance with
Section 5.3.
A Participant may elect, as the Specified Date for a Savings
Unit, the first day of any month at least one year after the
commencement of the Savings Unit.
Notwithstanding any election made by the Participant, the
Company will distribute the Participant's Specified Date
Distribution in the form of a lump sum distribution if the
FMV of his Pre-Tax plus After-Tax plus Matching Accounts for
a Savings Unit is less than $10,000 when distribution of a
Specified Date Distribution for such Savings Unit would
otherwise commence.
7.2 Termination Distribution.
7.2(a) Termination of Employment Prior to Specified Date.
Upon any termination of employment of the Participant for
reasons other than death or Disability or Retirement before
the Specified Date selected for a Savings Unit, the Company
shall distribute to the Participant, with respect to such
Savings Unit, in a lump sum, shares of Stock corresponding
to the vested portion of the Shares standing credited to his
Pre-Tax, After-Tax and Matching Accounts for such Savings
Unit determined as of the date of such termination of
service ("Termination Distribution").
7.2(b) Termination of a Savings Unit. The provisions of
Section 6.2(b) shall apply with respect to the termination
of any Savings Unit for which the Specified Date Alternative
is selected.
7.2(c) Loss of Eligibility. The provisions of Section
6.2(c) shall apply with respect to the loss of eligibility
under any Savings Unit for which the Specified Date
Alternative is selected.
7.3 Disability. In the event that a Participant suffers a
Disability, the provisions of Section 6.3 shall apply except
that the provisions of the following paragraphs shall
govern.
If a Participant's Disability terminates by reason of his
death prior to the Specified Date, the rights of his
Beneficiary shall be determined pursuant to Section 7.4 as
if the Participant had not been disabled but rather had been
in service on the date of his death and died on such date.
If a Participant suffering from a Disability attains the
Specified Date for a Savings Unit, the Participant shall be
entitled to the Specified Date Distribution determined
pursuant to Section 7.1.
7.4 Survivor Distribution.
7.4(a) If a Participant dies prior to the commencement of
distribution of the Specified Date Distribution with respect
to a Savings Unit, upon the Participant's death the Employer
will distribute to the Participant's Beneficiary with
respect to such Savings Unit, shares of Stock corresponding
to all of the Shares in Participant's Pre-Tax, After-Tax and
Matching Accounts. Distribution shall occur in the month
following the date of death.
7.4(b) If a Participant dies after the commencement of
payment of an Specified Date Distribution with respect to a
Savings Unit, the Employer will distribute to the
Participant's Beneficiary the remaining installments of any
such distribution that would have been distributed to the
Participant had the Participant survived.
Section 8 - Beneficiary Designation
Each Participant shall have the right, at any time, to
designate pursuant to the Southwestern Bell Corporation
Rules for Employee Beneficiary Designations as may hereafter
be amended from time to time ("Rules"), which Rules shall
apply hereunder and are incorporated herein by this
Reference, any person or persons as his Beneficiary or
Beneficiaries (both primary as well as contingent) to whom
distributions of Stock under this Plan shall be made in the
event of his death prior to complete distribution to
Participant of the distributions due him under the Plan.
Each Beneficiary designation shall become effective only
when filed in writing with the Company during the
Participant's lifetime on a form prescribed by the Company
with written acknowledgment of receipt.
The filing of a new Beneficiary designation form will cancel
all Beneficiary designations previously filed. The spouse
of a married Participant domiciled in a community property
jurisdiction shall join in any designation of Beneficiary or
Beneficiaries other than the spouse.
If a Participant fails to designate a Beneficiary as
provided above, or if all designated Beneficiaries
predecease the Participant or die prior to complete
distribution of the Participant's distributions, then the
Company shall direct the distribution of such distributions
according to the Rules.
Section 9 - Options
9.1 Grants. The HRC shall determine at its discretion
whether the Options issued pursuant to this Plan shall be
non-qualified stock Options or incentive stock Options
within the meaning of Section 422 of the Code. Any Options
issued hereunder shall be non-qualified Options unless the
HRC specifies prior to the Unit Start Date that they shall
be incentive stock Options. Notwithstanding any other
provision of the Plan, any incentive stock Options issued
under this Plan shall be issued and exercised in accordance
with Section 422 of the Code. The Options may be issued in
definitive form or recorded on the books and records of the
Company for the account of the Participant, at the
discretion of the Company. If the Company elects not to
issue the Options in definitive form, they shall be deemed
issued, and the Participants shall have all rights incident
thereto as if they were issued on the dates provided herein,
without further action on the part of the Company or the
Participant. In addition to the terms herein, all Options
shall be subject to such additional provisions and
limitations as provided in any Administrative Procedures
adopted by the HRC prior to the issuance of such Options.
The number of Options issued to a Participant shall be
reflected on the Participant's annual statement of account.
9.2 Term of Options. The Options may only be exercised
after the expiration of one year from date of issue and no
later than the tenth anniversary of their issue, and shall
be subject to earlier termination as provided herein.
9.3 Option Price. The price per share of Stock purchasable
under an Option shall be the Fair Market Value of the Stock
on the date of issuance of the Options.
9.4 Issuance of Options. February 1 and August 1 of each
year shall each be an Option issuance date, unless
Southwestern Bell Corporation Stock is not traded on the
NYSE on such day in which event the immediate following day
in which Southwestern Bell Stock is so traded shall be the
Option issuance date. On each Option issuance date, each
Participant shall receive two Options, or such higher number
as may be determined by the HRC, in its sole discretion, at
any time, or such lower number as may be determined by the
HRC, in its sole discretion, and announced to Participants
prior to the Unit Start Date with respect to a Savings Unit,
for each Share credited to the Participant's Pre-Tax and/or
After-Tax Accounts during the preceding six months. The
number of Options to be received shall be determined by
multiplying the number of Shares by the number of Options to
be received for each Share and rounding up to the next whole
number; provided, however, that no more than 200,000 Options
shall be issued to any individual during a calendar year.
No Share may be counted more than once for the issuance of
Options and Options shall only be issued for Shares credited
to a Savings Unit with respect to its Unit Period.
Accordingly, the following rules shall apply:
Options To Be Issued With Respect To A Short Term
Incentive Award And/Or Other Cash Bonus Contributed To
The Plan.
Following Retirement, a Participant shall be
permitted to contribute his Short Term Incentive Award
and/or other cash bonus, although paid after
Retirement, into the Stock Savings Plan; and, subject
to application of the rule in the following
subparagraph, Options may be issued thereon and on the
dividends that would accumulate thereon applicable to
the calendar year when the Short Term Award and/or cash
bonus was placed into the Plan.
Participants Who Retire, Terminate Employment Or
Terminate A Savings Unit During The Calendar Year.
Options are calculated on August 1 and February 1,
in each case for the six preceding months based on the
Shares posted to the Participant's accounts. The
August 1 options are for January through June
contributions plus 1st quarter and 2nd quarter dividend
equivalents. The February 1 options are for July
through December contributions plus the 3rd quarter and
4th quarter dividend equivalents. If a Participant
retires, terminates employment or terminates a Savings
Unit during an ongoing savings period, since the Unit
Period ends upon Retirement, termination, etc., a
dividend equivalent shall be treated as being paid with
respect to a Unit Period (i.e., for purposes of
receiving Options on such dividend equivalent) only if
the Participant is employed on any day of the last
month of the quarter preceding payment of the dividend,
e.g., one must be employed at least one day in December
in order to receive Options on the fourth quarter
dividend equivalent paid the following February 1. A
retiree shall thus receive Options on dividends issued
with respect to his/her last quarter if he or she
worked at any time during the last month of such
quarter. The same shall apply if a Savings Unit is
terminated. However, for termination of employment, no
Options shall be granted on the last quarter's dividend
since Participant's account will be distributed
following termination and even if Options were
calculated, they could not be exercised as a
Participant terminating employment has three months to
exercise Options and the Options would not be available
for exercise until one year following the issuance
date.
9.5 Exercise of Options. An Option may be exercised in
whole or in part during the term of the Option by giving
written notice of exercise to the Company specifying the
number of shares of Stock to be purchased, accompanied by
payment in full of the purchase price in cash or its
equivalent. Payment may be made in the form of unrestricted
Stock already owned by the optionee, or, in the case of the
exercise of a non-qualified Option, restricted Stock, in
each case, based on the Fair Market Value of the Stock on
the date immediately preceding the date the Option is
exercised; provided, however, in the case of an incentive
stock Option, the right to make payment in the form of
already owned Stock may be authorized only at the time of
issuance. As a condition to paying any part of the exercise
price in Stock, the Stock tendered to the Company must have
been held by the Participant for a minimum of six (6) months
preceding the tender. If payment of the Option exercise
price of a non-qualified stock Option is made in whole or in
part in the form of restricted Stock, the Stock received
upon the exercise of such Option shall be restricted in
accordance with the original terms of the restricted Stock
in question except that such restrictions shall apply to
only that number of shares equal to the number of shares
surrendered upon the exercise of such Option. An optionee
shall generally have the rights to dividends or other rights
of a shareholder with respect to the shares which are
subject to the Option when the optionee has given written
notice of exercise and has paid in full for such shares.
With respect to any payment made in shares of Stock, the
transaction shall be deemed to have occurred prior to the
close of business on the day of tender of said shares.
9.6 Restrictions on Exercise and Transfer. During the
optionee's lifetime (for purposes of Paragraphs 9.6 through
9.9, "optionee" shall only refer to the original recipient
of an Option), the optionee's Options shall be exercisable
only by the optionee or by the optionee's guardian or legal
representative. After the death of the optionee, except as
otherwise provided by the Company's Rules for Employee
Beneficiary Designations, an Option shall only be exercised
by the holder thereof (including, but not limited to, an
executor or administrator of a decedent's estate) or his or
her guardian or legal representative.
No Option shall be transferable except: (a) upon the death
of the optionee in accordance with the Company's Rules for
Employee Beneficiary Designations; and (b) in the case of
any holder after the optionee's death, only by will or by
the laws of descent and distribution.
9.7 Termination by Death. If an optionee's employment with
Employer terminates by reason of death, the Option may
thereafter be exercised, to the extent then exercisable, for
a period of three (3) years from the date of such death or
until the expiration of the stated term of such Option,
whichever period is shorter.
9.8 Termination by Disability. If an optionee's employment
with Employer terminates by reason of Disability, any Option
held by such optionee may thereafter be exercised, to the
extent it was exercisable at the time of such termination
(or on such accelerated basis as the HRC shall determine at
the time of grant), for a period of three (3) years from the
date of such termination of employment or the expiration of
the stated term of such Option, whichever period is shorter;
provided, however, that, if the optionee dies within such
three (3) year period, any unexercised Option held by such
optionee shall thereafter be exercisable to the extent to
which it was exercisable at the time of death, for a period
of three (3) years from the time of termination or for the
stated term of such Stock Option, whichever period is
shorter.
9.9 Retirement or Other Termination of Employment. Except
as otherwise provided in this paragraph, if an optionee's
employment with Employer terminates as a result of
Retirement or for any reason other than death or Disability,
the Option may be exercised until the earlier of three
months from the date of termination or three years from the
date of Retirement, as applicable, or the expiration of the
term of such Option; provided, however, that a transfer to a
RWAC shall not be considered a termination of employment to
the extent the term of employment at a RWAC is equal to or
less than five years.
Section 10 - Discontinuation, Termination, Amendment
10.1 Company's Right to Discontinue Offering Savings Units.
The Chairman may at any time discontinue offerings of
additional Savings Units with respect to any or all future
Plan Years. Any such discontinuance shall have no effect
upon the pre-tax contributions or after-tax contributions or
the terms or provisions of this Plan as applicable to any
then previously existing Savings Units.
10.2 Company's Right to Terminate Plan. No Savings Unit
may be commenced after December 31, 2004. The HRC may
terminate the Plan at any earlier time. Termination of the
Plan shall mean that (1) there shall be no further offerings
of additional Savings Units with respect to any future Plan
Year; (2) pre-tax contributions and after-tax contributions
shall prospectively cease with respect to all Savings Units
for the then Plan Year and thereafter; and (3) all then
currently existing Savings Units shall be treated as
follows:
The Participant's Matching Accounts shall be 100%
vested. The Participant shall receive or continue to
receive all distributions under this Plan at such time
as provided in and pursuant to the terms and conditions
of his Agreement(s) and as described in this Plan;
provided, however, any distributions under a Savings
Unit that is not completed due to a termination of the
Plan under this Section 10.2 shall be based upon only
the actual pre-tax contributions plus after-tax
contributions plus Employer contributions made with
respect to such Savings Unit prior to such termination,
and dividends on same thereafter.
10.3 Amendment. The HRC may at any time amend the Plan in
whole or in part including, but not limited to, changing the
formulas for determining the amount of Employer
contributions under Section 5 or the number of Options to be
issued under Section 9; provided, however, that no
amendment, including an amendment to this Section 10, shall
be effective, without the written consent of a Participant,
to alter, to the detriment of such Participant, the
distributions described in this Plan as applicable to a
Savings Unit of the Participant or to decrease the number of
Shares standing credited to such Participant's Pre-Tax,
After-Tax and Matching Accounts under the Plan. For
purposes of this Section 10.3, an alteration to the
detriment of a Participant shall mean a reduction in the
period of time over which stock is distributable under a
Participant's Agreement, or any reduction in the number of
Options, increase in Option price or decrease in the term of
an Option. Written notice of any amendment shall be given
to each Participant.
Notwithstanding anything to the contrary contained in this
section of the Plan, the HRC may modify this Plan with
respect to any person subject to the provisions of Section
16 of the Securities Exchange Act of 1934 as amended
("Exchange Act") to place additional restrictions on the
exercise of any Option or the transfer of any Stock not yet
issued under the Plan.
Section 11 - Miscellaneous.
11.1 Additional Benefit. The reduction of any benefit
payable under the Southwestern Bell Corporation Management
Pension Plan, which results from participation in this Plan,
will be restored as an additional benefit ("make-up piece")
under this Plan or under any other comparable Stock savings
plan. The Participant shall elect prior to commencement of
payment of the make-up piece whether to receive such benefit
in cash in a lump sum (consisting of the present value
equivalent of the pension retirement benefit (life annuity)
make-up piece) or such benefit in an annuity form of
payment. Notwithstanding the proceeding provisions of this
Section 11.1, if all or a portion of the make-up piece is
paid pursuant to SRIP or another non-qualified plan, then
such amount shall not be payable pursuant to this Plan.
11.2 Small Distribution. Notwithstanding any election made
by the Participant, the Company will distribute any shares
of Stock corresponding to Shares in the form of a lump sum
distribution if the Shares in Participant's Pre-Tax Account
plus After-Tax Account plus Matching Account have a FMV of
less than $10,000 when such distribution would otherwise
commence.
Any distribution of a fractional share of Stock
corresponding to a fractional Share shall be in cash.
11.3 Emergency Distribution. In the event that the HRC,
upon written petition of the Participant, determines in its
sole discretion, that the Participant has suffered an
unforeseeable financial emergency, the Employer shall
distribute to the Participant, as soon as practicable
following such determination, Stock corresponding to the
number of Shares ordered by the HRC from his Pre-Tax, After-
Tax and Matching Accounts for one or more Savings Units as
necessary to meet the emergency (the "Emergency
Distribution"). For purposes of this Plan, an unforeseeable
financial emergency is an unexpected need for cash arising
from an illness, casualty loss, sudden financial reversal,
or other such unforeseeable occurrence. Cash needs arising
from foreseeable events such as the purchase of a house or
education expenses for children shall not be considered to
be the result of an unforeseeable financial emergency. Upon
receipt of an Emergency Benefit, a Participant shall not be
permitted to commence a new Savings Unit until one whole
calendar year has elapsed.
11.4 Commencement of Payments. Except as otherwise
provided in this Plan, commencement of a distribution under
this Plan shall begin sixty (60) days following the event
which entitles a Participant (or a Beneficiary) to such
distribution, or at such earlier date as may be determined
by the HRC.
11.5 Withholding. Upon any distribution of
stock, including, but not limited to, shares of Stock
issued upon the exercise of an Option, the Company shall
withhold sufficient Shares necessary to satisfy the
minimum amount of federal, state and local taxes required
by law to be withheld as a result of such distribution.
Any excess fractional amounts remaining after such
withholding shall be withheld as additional federal
withholding.
11.6 Change in Status. In the event of a change in the
employment status of a Participant to a status in which he
is no longer an Eligible Employee under this Plan, but is an
eligible employee under another similar plan of the Employer
having similar provisions, the Participant and all of his
Savings Units under this Plan shall automatically be
transferred to such other plan for which he is then an
eligible employee, unless otherwise determined by the HRC.
In the event of any such transfer, the provisions of the
other plan to which the Participant transfers shall
thereafter determine the rights and distributions of the
Participant with respect to all of his Savings Units, unless
otherwise determined by the HRC. The Employer may, but
shall not be required to, enter into revised Agreements with
the Participant to carry out the provisions of this Section,
provided that any Participant who is transferred to another
plan will not be deemed a new Participant for purposes of a
Unit Start Date.
11.7 Transfer to a RWAC. If a Participant transfers to a
RWAC, all of the Participant's Savings Units shall be frozen
upon transfer, unless otherwise determined by the Company.
No further Participant pre-tax contributions, after-tax
contributions or Employer contributions shall be made
subsequent to the transfer. During the period of employment
at a RWAC (for a period not to exceed five (5) years), the
Participant shall continue to be credited with dividends on
his Pre-Tax, After-Tax and Matching Accounts, as applicable,
as provided under Section 5.3 and to vest in such amounts as
provided under Section 5.4, and all distributions shall
continue to be payable to the Participant and his
Beneficiaries in accordance with Section 6 and/or Section 7
hereof, as applicable. If the Participant has not resumed
employment with the Employer in an employment status which
makes him eligible to participate in this Plan within five
(5) years from the date of transfer, a Termination
Distribution based on the amounts credited to the
Participant's Pre-Tax, After-Tax and Matching Accounts, as
applicable, shall be paid upon termination of employment
with a RWAC or the expiration of such five (5) year period,
whichever is earlier.
11.8 Leave of Absence. If a Participant absents himself
from employment on a formally granted leave of absence
(i.e., the absence is with formal permission in order to
prevent a break in the continuity of the Employee's term of
employment, which permission is granted in conformity with
the rules of the Employer which employs the individual, as
adopted from time to time), all of the Participant's Savings
Units shall automatically be frozen upon such leave of
absence, unless otherwise determined by the HRC. No
Participant pre-tax contributions or after-tax contributions
or Employer contributions shall be made during the leave of
absence. However, during the leave of absence, the
Participant shall continue to be credited with dividends on
his Pre-Tax, After-Tax and Matching Accounts, as applicable,
as provided under Section 5.3 and to vest in such amounts as
provided under Section 5.4, and all distributions shall
continue to be payable to the Participant and his
Beneficiaries in accordance with Section 6 and/or Section 7
hereof, as applicable. If the Participant returns to
employment with the Employer in an employment status which
makes him eligible to participate in this Plan before
completion of or immediately upon the expiration of the
leave of absence, Participant pre-tax contributions and/or
After-Tax contributions and Employer contributions will
resume until the end of the original Unit Period. If the
Participant has not resumed employment with the Employer in
an employment status which makes him eligible to participate
in this Plan before completion of or immediately upon the
expiration of the leave of absence, a Termination
Distribution based on the amounts credited to the
Participant's Pre-Tax, After-Tax and Matching Accounts shall
be paid to the Participant.
This Section 11.8 shall not apply with respect to any period
during which a Participant is suffering from a Disability,
and such period of Disability shall not be included under
this Section 11.8 as a portion of a period of leave of
absence.
11.9 Ineligible Participant. Notwithstanding any other
provisions of this Plan to the contrary, if any Participant
is determined not to be a "management or highly compensated
employee" within the meaning of the Employee Retirement
Income Security Act of 1974, as amended (ERISA) or
Regulations thereunder, such Participant will not be
eligible to participate in this Plan and shall receive an
immediate lump sum distribution of shares of Stock
corresponding to the vested portion of the Shares standing
credited to his Pre-Tax plus After-Tax plus Matching
Accounts. Upon such payment no other distribution shall
thereafter be payable under this Plan either to the
Participant or any Beneficiary of the Participant, except as
provided under Section 11.1.
11.10 Unsecured General Creditor. Participants and their
Beneficiaries, heirs, successors, and assigns shall have no
legal or equitable rights, interest, or claims in any
property or assets of Employer. No assets of Employer shall
be held under any trust for the benefit of Participants,
their Beneficiaries, heirs, successors, or assigns, or held
in any way as collateral security for the fulfilling of the
obligations of Employer under this Plan. Any and all of the
Employer's assets shall be, and remain, the general,
unpledged, unrestricted assets of Employer. Employer's
obligation under the Plan shall be merely that of an
unfunded and unsecured promise of Employer to distribute
shares of Stock corresponding to Shares, and Options, under
the Plan in the future.
11.11 Offset. If a Participant becomes entitled to a
distribution of Stock under the Plan, the Employer may
offset against the amount of Stock otherwise distributable,
any claims to reimbursement for intentional wrongdoing by
the Participant against the Employer or an affiliate. Such
determination shall be made by the Company.
11.12 Non-Assignability. Neither a Participant nor any
other person shall have any right to commute, sell, assign,
transfer, pledge, anticipate, mortgage, or otherwise
encumber, transfer, hypothecate or convey in advance of
actual receipt, shares of Stock corresponding to Shares
under the Plan, if any, or any part thereof, which are, and
all rights to which are, expressly declared to be
unassignable and non-transferable. No part of the Stock
distributable shall, prior to actual distribution, be
subject to seizure or sequestration for the payment of any
debts, judgments, alimony or separate maintenance owed by a
Participant or any other person, nor be transferable by
operation of law in the event of a Participant's or any
other person's bankruptcy or insolvency.
11.13 Employment Not Guaranteed. Nothing contained in this
Plan nor any action taken hereunder shall be construed as a
contract of employment or as giving any Employee any right
to be retained in the employ of the Employer or to serve as
a director.
11.14 Gender, Singular and Plural. All pronouns and any
variations thereof shall be deemed to refer to the masculine
or feminine, as the identity of the person or persons may
require. As the context may require, the singular may be
read as the plural and the plural as the singular.
11.15 Captions. The captions of the articles, sections,
and paragraphs of this Plan are for convenience only and
shall not control nor affect the meaning or construction of
any of its provisions.
11.16 Applicable Law. This Plan shall be governed and
construed in accordance with the laws of the State of
Missouri.
11.17 Validity. In the event any provision of this Plan is
held invalid, void, or unenforceable, the same shall not
affect, in any respect whatsoever, the validity of any other
provision of this Plan.
11.18 Notice. Any notice or filing required or permitted
to be given to the Company under the Plan shall be
sufficient if in writing and hand delivered, or sent by
registered or certified mail, to the principal office of the
Employer, directed to the attention of the Vice President-
Human Resources of the Employer. Such notice shall be
deemed given on the date of delivery or, if delivery is made
by mail, on the date shown on the postmark on the receipt
for registration or certification.
11.19 Successors and Assigns. This Plan shall be binding
upon the Company and its successors and assigns.
11.20 Limitations and Adjustments. The number of shares of
Stock which may be distributed pursuant to the Plan,
exclusive of Section 9, is 2,500,000. The number of stock
Options which may be issued pursuant to Section 9 of the
Plan is 4,100,000. The number of incentive stock Options
which may be issued pursuant to the Plan is 4,100,000.
In the event of a merger, reorganization, consolidation,
recapitalization, separation, liquidation, stock dividend,
stock split, share combination, or other change in the
corporate structure of the Company affecting the shares of
Stock, such adjustment shall be made in the number and class
of shares of Stock which may be delivered under the Plan,
and in the number and class of and/or price of shares of
Stock subject to outstanding Options granted under the Plan,
as may be determined to be appropriate and equitable by the
Committee, in its sole discretion, to prevent dilution or
enlargement of rights.
Section 12 - Participation in Previous Non-Qualified Deferred
Compensation Plan(s) of Company
12.1 Agreements Relating to Participation in Savings Plan
for Salaried Employees. For purposes of this Plan, the term
"SBCDCPA" shall mean any deferred compensation plan
agreement entered into previously between a Participant and
Company relative to Participant's participation in a Company
non-qualified deferred compensation plan or program.
Notwithstanding the provisions of any SBCDCPA to the effect
that if Participant's basic allotment percentage in the
Savings Plan for Salaried Employees is changed from the
level stated in said SBCDCPA then said SBCDCPA will be void,
Participant shall be allowed to reduce his basic allotment
percentage in the Savings Plan for Salaried Employees, and
in such event said SBCDCPA shall not be void but rather
shall continue to be in full force and effect.
Participant's reduction of his basic allotment percentage in
accordance with this Section 12.1 shall constitute and
operate as an amendment to his prior SBCDCPA.
12.2 Participation in Southwestern Bell Corporation Senior
Management Deferred Compensation Program of 1988.
Notwithstanding the provisions of any SBCDCPA entered into
previously between a Participant and Company relative to
Participant's participation in the Southwestern Bell Corporation
Senior Management Deferred Compensation Program of 1988 ("1988
Program"), a Participant shall be allowed to freeze some or all
of his Units of Participation in such 1988 Program at the close
of business on December 31, 1990 and redirect the future
deferrals under such frozen Units of Participation into this Plan
commencing January 1, 1991. Freezing a Unit of Participation
shall mean that deferrals shall prospectively cease with respect
to such Unit of Participation commencing January 1, 1991 and
thereafter, and that the Participant shall receive all benefits
under that frozen Unit of Participation at such time as provided
in and pursuant to the terms and conditions of his Agreement and
as described in the 1988 Program. Participant's Pre-Retirement
Survivor Benefit pursuant to said frozen Unit of Participation
under the 1988 Program shall not be reduced by reason of
Participant's freezing of his Unit of Participation.
Participant's freezing of a Unit of Participation in accordance
with this Section 12.2 shall constitute and operate as an
amendment to his prior SBCDCPA relating to such Unit of
Participation.
SBC STOCK SAVINGS PLAN
ENROLLMENT FORM
1995 ENROLLMENT FORM DUE DATE:JUNE 30, 1994
DEFERRAL INTO STOCK SAVINGS PLAN Return of this form is Required.
Name Social Security Number
Please Print
Senior Manager elects to contribute a portion of his/her Base Salary to invest
in SBC Equivalent Shares effective January 1, 1995 as shown below, the terms of
the plan to govern and control. All Elections are irrevocable.
1. Deferral Election
Effective 1/1/95, I elect to:
A. Discontinue additional investments in the Stock Savings Plan.
(Complete Section 3).
B. Maintain my 1994 "Ongoing" deferral percentage. (Complete
Sections 2 & 3).
C. Enroll or change my enrollment in the Stock Savings Plan.
(Complete the following and Sections 2 & 3):
I elect the following"Ongoing" pre-tax, Base Salary
deferral percent effective 1/1/95 (indicate whole percent
below not to exceed 30%):
Pre-Tax Contribution______ %
2. Distribution Election
Please indicate your choices for DISTRIBUTION of your PRE-TAX
contributions made pursuant to this Unit including dividends thereon and
any Company contribution available for distribution.
A At Retirement - I elect to defer making my choice as to the
number of payments at Retirement until no later than the last day
of the calendar year preceding the year in which my Retirement takes
place.
B At Retirement - I elect to receive my distribution in
(specify number not exceeding 15) annual
installments.
C Year Following Retirement- I elect to defer making my choice
as to the number of payments beginning in February of the year
following my Retirement until no later than the last calendar day of
the year in which my Retirement takes place.
D Year Following Retirement- I elect to receive my distribution
beginning in February of the year following my Retirement in
(specify number not exceeding 15) annual installments.
E At Specified Date - I elect to receive my distribution in
(specify number not exceeding 4) annual installments commencing
_______.
(mo/year)
F Annual
3. Signature
ACCEPTED AND AGREED BY SENIOR MANAGER:
BY THE COMPANY:
By___________________________________ _________________________ _________
Its Senior Executive Vice President- Date
Human Resources
SPECIMEN
Exhibit 10.2
SOUTHWESTERN BELL CORPORATION
1992 STOCK OPTION PLAN
ARTICLE 1. PURPOSE, DEFINITIONS AND EFFECTIVE DATE
1.1 Purpose. The purpose of the Southwestern Bell
Corporation 1992 Stock Option Plan ("Plan") is to promote the
success and enhance the value of Southwestern Bell Corporation
(the "Company") by linking the personal interests of the
Employees of the Company and its Subsidiaries to the interests of
the Company's shareowners, and by providing Employees with an
additional incentive for outstanding performance. To achieve
this purpose, Options to purchase common stock of the Company may
be granted to Employees of the Company and its Subsidiaries
pursuant to the Plan.
1.2 Additional Definitions. In addition to definitions set
forth elsewhere in the Plan, for purposes of the Plan:
(a) "Cause" shall mean willful and gross
misconduct on the part of a Participant that is
materially and demonstrably detrimental to the
Company or any Subsidiary as determined by the
Committee in its sole discretion.
(b) "Employee" shall mean any management
employee of the Company or of one of its
Subsidiaries in the third (3rd) level of
management or above. Directors who are not
otherwise employed by the Company or any of its
Subsidiaries shall not be considered Employees
under the Plan.
(c) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended, or any successor
Act thereto.
(d) "Fair Market Value" shall mean the
closing price of Shares on the relevant date, or
on the next preceding trading day if such date was
not a trading day, all as reported on the New York
Stock Exchange Composite Trading listings, or a
similar report selected by the Committee.
(e) "Option" shall mean the right to
purchase one or more shares of the common stock of
Southwestern Bell Corporation on the terms and
conditions contained in this Plan, the rules of
the Committee, and the terms of the Option.
(f) "Retirement" shall mean the termination
of a Participant's employment with the Company or
one of its Subsidiaries, for reasons other than
death, disability (as that term is used in the
Southwestern Bell Corporation Senior Management
Long Term Disability Plan) or for Cause, on or
after the date the Participant is eligible to
retire with an immediate pension pursuant to the
Southwestern Bell Corporation Management Pension
Plan and/or the Southwestern Bell Corporation
Supplemental Retirement Income Plan.
(g) "Rotational Work Assignment Company" or
"RWAC" shall mean Bell Communications Research,
Inc., formerly the Central Services Organization,
Inc., and/or any other entity with which
Southwestern Bell Corporation or any of its
subsidiaries may enter into an agreement to
provide an employee for a rotational work
assignment.
(h) "Shares" or "Stock" or "Shares of Stock"
shall mean the common stock of Southwestern Bell
Corporation.
(i) "Subsidiary" shall mean any corporation
in which the Company owns directly, or indirectly
through subsidiaries, more than fifty percent
(50%) of the total combined voting power of all
classes of Stock, or any other entity (including,
but not limited to, partnerships and joint
ventures) in which the Company owns more than
fifty percent (50%) of the combined equity
thereof.
1.3 Effective Date. The Plan shall be effective on the
date it is approved by the Company's shareowners.
ARTICLE 2. ADMINISTRATION
2.1 The Committee. The Plan shall be administered by a
committee (the "Committee") which shall be the Human Resources
Committee or any other committee appointed by the Board of
Directors (the "Board") consisting of two or more Directors, each
of whom is a disinterested administrator, i.e., a Director who
was not, during the one year prior to service as an administrator
of the Plan, or during such service, granted or awarded equity
securities (as defined in Rule 16a-1(d) of the Exchange Act)
pursuant to this Plan or any other plan of the Company, except as
otherwise provided in Rule 16b-3(c)(2)(i)(A) through (D)
promulgated under the Exchange Act.
2.2 Authority of the Committee. The Committee shall have
full power, except as limited by law or by the Articles of
Incorporation or Bylaws of the Company, and subject to the
provisions of this Plan, to select the recipients of Options
("Participants"); determine the sizes of grants of Options under
the Plan; determine the exercise price, duration, vesting
requirements, and period of exercisability of each Option;
determine the terms and conditions of such Option grants in a
manner consistent with the Plan; construe and interpret the Plan
and any agreement or instrument entered into under the Plan;
establish, amend, or waive rules and regulations for the Plan's
administration; and, subject to the provisions of Article 5 -
Amendment, Modification, and Termination, herein, amend the terms
and conditions of any outstanding Option to the extent such terms
and conditions are within the discretion of the Committee as
provided in the Plan. Further, the Committee shall make all
other determinations which may be necessary or advisable for the
administration of the Plan.
All determinations and decisions made by the Committee
pursuant to the provisions of the Plan, and all related orders
and resolutions of the Board shall be final, conclusive, and
binding on all persons, including the Company, its shareowners,
Employees, Participants, and their estates and beneficiaries.
ARTICLE 3. SHARES SUBJECT TO THE PLAN
3.1 Number of Shares. Subject to adjustment as provided in
Section 3.3 Adjustments in Authorized Shares, herein, the total
number of Shares of Stock for which Options may be granted under
the Plan may not exceed 9,000,000 Shares. These Shares may be
either authorized but unissued or reacquired Shares.
3.2 Lapsed Options. If any Option granted under the Plan
is canceled, terminates, expires, or lapses for any reason, any
Shares subject to such Option again shall be available for the
grant of an Option under the Plan.
3.3 Adjustments in Authorized Shares. In the event of a
merger, reorganization, consolidation, recapitalization,
separation, liquidation, stock dividend, stock split, share
combination, or other change in the corporate structure of the
Company affecting the Shares, such adjustment shall be made in
the number and class of Shares which may be delivered under the
plan, and in the number and class of and/or price of Shares
subject to outstanding Options granted under the Plan, as may be
determined to be appropriate and equitable by the Committee, in
its sole discretion, to prevent dilution or enlargement of
rights; and provided that the number of Shares subject to any
Option shall always be a whole number.
ARTICLE 4. STOCK OPTIONS
4.1 Grant of Options. Subject to the terms and provisions
of the Plan, Options may be granted to such Employees, at such
times and on such terms and conditions, as shall be determined by
the Committee; provided, however, no Options may be granted after
the 10th anniversary of the effective date of the Plan. The
Committee shall have discretion in determining the number of
Options and the number of Shares subject to each Option granted
to each Participant. Without limiting the generality of the
foregoing, the Committee shall have the authority to establish
guidelines setting forth anticipated grant levels which
correspond to various salary grades or the equivalent thereof.
4.2 Form of Issuance. Options may be issued in the form of
a certificate or may be recorded on the books and records of the
Company for the account of the Participant. If an Option is not
issued in the form of a certificate, then the Option shall be
deemed granted upon issuance of a notice of the grant addressed
to the recipient. The terms and conditions of an Option shall be
set forth in the certificate, in the notice of the issuance of
the grant, or in such other documents as the Committee shall
determine. The Committee may require a Participant to enter into
a written agreement containing terms and conditions relating to
the Option and its exercise.
4.3 Option Price. The Option Price for each grant of an
Option shall be determined by the Committee; provided, however,
that the minimum Option Price shall be one hundred percent (100%)
of the Fair Market Value of a Share on the date the Option is
granted.
4.4 Duration of Options. Each Option shall expire at such
time as the Committee shall determine at the time of grant;
provided, however, that no Option shall be exercisable later than
the tenth (10th) anniversary date of its grant.
4.5 Vesting of Options. Options shall vest at such times
and under such terms and conditions as determined by the
Committee. The Committee shall have the authority to accelerate
the vesting of any Option; provided, however, that the Senior
Executive Vice President - Human Resources, or his successor, or
such other person designated by the Committee, shall have the
authority to accelerate the vesting of Options for any
Participant who is in the fifth level of management or below and
who is not a Director or an officer (as that term is defined in
Section 16 of the Exchange Act).
4.6. Exercise of Options. Options granted under the Plan
shall be exercisable at such times and be subject to such
restrictions and conditions as the Committee shall in each
instance approve, which need not be the same for each grant or
for each Participant. However, in no event may any Option
granted under this Plan become exercisable prior to the first
anniversary of the date of its grant, except as provided in
Section 4.11 Change in Control.
4.7 Payment. The Option Price shall be paid in full at the
time of exercise. No Shares shall be issued or transferred until
full payment has been received therefor. Payment may be in cash
or, unless otherwise provided by the Committee at any time, by
delivery of Shares of Stock owned by the Participant in partial
or full payment; provided, however, as a condition to paying any
part of the exercise price in Stock, the Stock tendered to the
Company must have been held by the Participant for a minimum of
six (6) months preceding the tender. If payment is made by the
delivery of Shares of Stock, the value of the Shares delivered
shall be the Fair Market Value of the Shares on the day preceding
the date of exercise of the Option.
4.8 Termination of Employment.
(a) Termination by Reason of Death or
Disability. In the event the employment of a
Participant is terminated by reason of death or
disability (as that term is used in the
Southwestern Bell Corporation Senior Management
Long Term Disability Plan), any outstanding
Options granted to the Participant shall vest as
of the date of termination of employment and may
be exercised, if at all, no more than one (1) year
following termination of employment, unless the
Options, by their terms, expire earlier.
(b) Termination by Retirement. In the event
the employment of a Participant is terminated by
reason of Retirement, any outstanding Options
granted to the Participant which are vested as of
the date of termination of employment may be
exercised, if at all, no more than three (3) years
following termination of employment, unless the
Options, by their terms, expire earlier.
(c) Termination of Employment for Other
Reasons. If the employment of a Participant shall
terminate for any reason other than the reasons
set forth in (a) or (b), above, and other than for
Cause, all outstanding Options granted to the
Participant which are vested as of the date of
termination of employment may be exercised by the
Participant within the period beginning on the
effective date of termination of employment and
ending three (3) months after such date, unless
the Options, by their terms, expire earlier.
(d) Termination for Cause. If the
employment of a Participant shall terminate for
Cause, all outstanding Options held by the
Participant shall immediately terminate and be
forfeited to the Company, and no additional
exercise period shall be allowed.
(e) Options not Vested at Termination. Any
outstanding Options not vested as of the effective
date of termination of employment shall expire
immediately and shall be forfeited to the Company.
4.9 Transfers. For purposes of the Plan, transfer of
employment of a Participant between the Company and any one of
its Subsidiaries (or between Subsidiaries) or between the Company
or a Subsidiary and a RWAC, to the extent the term of employment
at a RWAC is equal to or less than five years shall not be deemed
a termination of employment.
4.10 Restrictions on Exercise and Transfer of Options.
During the Participant's lifetime, the Participant's Options
shall be exercisable only by the Participant or by the
Participant's guardian or legal representative. After the death
of the Participant, except as otherwise provided by the Company's
Rules for Employee Beneficiary Designations, an Option shall only
be exercised by the holder thereof (including, but not limited
to, an executor or administrator of a decedent's estate) or his
or her guardian or legal representative.
No Option shall be transferable except: (a) in the case of
the Participant, only upon the Participant's death and in
accordance with the Company's Rules for Employee Beneficiary
Designations; and (b) in the case of any holder after the
Participant's death, only by will or by the laws of descent and
distribution.
4.11 Change in Control. Upon the occurrence of a Change in
Control, all Options held by Participants hereunder shall
immediately become vested and exercisable, notwithstanding the
provisions of Section 4.6 Exercise of Options to the contrary. A
"Change in Control" shall be deemed to have occurred if (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a
corporation owned directly or indirectly by the shareowners of
the Company in substantially the same proportions as their
ownership of stock of the Company, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing twenty
percent (20%) or more of the total voting power represented by
the Company's then outstanding voting securities, or (ii) during
any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of the
Company and any new Director whose election by the Board of
Directors or nomination for election by the Company's shareowners
was approved by a vote of at least two-thirds (2/3) of the
Directors then still in office who either were Directors at the
beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to
constitute a majority thereof, or (iii) the shareowners of the
Company approve a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) at least eighty percent (80%)
of the total voting power represented by the voting securities of
the Company or such surviving entity outstanding immediately
after such merger or consolidation, or the shareowners of the
Company approve a plan of complete liquidation of the Company or
an agreement for the sale or disposition by the Company of all or
substantially all the Company's assets.
ARTICLE 5. AMENDMENT, MODIFICATION, AND TERMINATION
5.1 Amendment, Modification, and Termination. The Board,
may at any time and from time to time, terminate, amend, or
modify the Plan. However, no such amendment, modification, or
termination of the Plan may be made without the approval of the
shareowners of the Company, if such approval is required by the
Internal Revenue Code, by the insider trading rules of Section 16
of the Exchange Act, by any national securities exchange or
system on which the Shares are then listed or reported, or by a
regulatory body having jurisdiction with respect hereto.
5.2 Awards Previously Granted. No termination, amendment,
or modification of the Plan shall in any material manner
adversely affect any Option previously granted under the Plan,
without the written consent of the Participant holding such
Option.
ARTICLE 6. WITHHOLDING
6.1 Tax Withholding. Upon the exercise of an Option, the
Company shall withhold sufficient Shares necessary to satisfy the
minimum amount of federal, state, and local taxes required by law
to be withheld as a result of such exercise. Any excess
fractional amounts remaining after such withholding shall be
withheld as additional federal withholding.
ARTICLE 7. MISCELLANEOUS
7.1 Employment. Nothing in the Plan shall interfere with
or limit in any way the right of the Company or any Subsidiary
thereof to terminate any Participant's employment at any time,
nor confer upon any Participant any right to continue in the
employment of the Company or any Subsidiary thereof.
7.2 Participation. No Employee shall have the right to be
selected to receive an Option under the Plan, or, having been so
selected, to be selected to receive a future Option.
7.3 Successors. All obligations of the Company under the
Plan shall be binding on any successor to the Company, whether
the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business and/or assets of the Company.
7.4 Governing Law. The Plan, and any and all agreements
hereunder, shall be construed in accordance with and governed by
the laws of the State of Missouri.
<TABLE>
EXHIBIT 12
SOUTHWESTERN BELL CORPORATION
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
DOLLARS IN MILLIONS
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1994 1993 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
Income Before Income Taxes,
Extraordinary Loss and Cumulative
Effect of Changes in
Accounting Principles* $1,036.4 $ 868.9 $1,882.9 $1,701.2 $1,557.0 $ 1,541.4 $ 1,479.5
Add: Interest Expense 232.7 258.7 496.2 530.0 577.7 529.7 543.8
1/3 Rental Expense 20.0 20.0 41.0 45.1 37.5 43.4 42.5
Adjusted Earnings $1,289.1 $1,147.6 $2,420.1 $2,276.3 $2,172.2 $ 2,114.5 $ 2,065.8
Total Interest Charges $ 232.7 $ 258.7 $ 496.2 $ 530.0 $ 577.7 $ 529.7 $ 543.8
1/3 Rental Expense 20.0 20.0 41.0 45.1 37.5 43.4 42.5
Adjusted Fixed Charges $ 252.7 $ 278.7 $ 537.2 $ 575.1 $ 615.2 $ 573.1 $ 586.3
Ratio of Earnings to Fixed Charges 5.10 4.12 4.51 3.96 3.53 3.69 3.52
*Undistributed earnings on investments accounted for under the equity method
have been excluded.
</TABLE>
