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, 1996
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
SBC COMMUNICATIONS INC.
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 31, 1996, 609,295,818 common shares were outstanding.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SBC COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF INCOME
Dollars in millions except per share amounts
(Unaudited)
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Operating Revenues
Local service $1,842.3 $ 1,625.0 $ 3,574.9 $ 3,164.9
Network access 803.8 766.6 1,607.8 1,509.9
Long-distance service 239.4 208.8 463.8 419.0
Directory advertising 111.4 118.6 215.6 233.6
Other 335.8 306.0 667.3 607.5
Total operating revenues 3,332.7 3,025.0 6,529.4 5,934.9
Operating Expenses
Cost of services and products 980.3 881.8 1,913.4 1,749.3
Selling, general and administrative 953.5 849.7 1,871.2 1,652.0
Depreciation and amortization 553.8 539.3 1,099.7 1,071.5
Total operating expenses 2,487.6 2,270.8 4,884.3 4,472.8
Operating Income 845.1 754.2 1,645.1 1,462.1
Other Income (Expense)
Interest expense (117.2) (126.2) (237.3) (260.0)
Equity in net income of affiliates 65.6 46.1 119.0 54.4
Other expense - net (13.9) (5.9) (17.9) (4.1)
Total other income (expense) (65.5) (86.0) (136.2) (209.7)
Income Before Income Taxes 779.6 668.2 1,508.9 1,252.4
Income Taxes
Federal 249.7 200.1 487.6 370.8
State and local 28.9 26.1 56.3 44.4
Total income taxes 278.6 226.2 543.9 415.2
Net Income $ 501.0 $ 442.0 $ 965.0 $ 837.2
Earnings Per Common Share $ 0.82 $ 0.73 $ 1.58 $ 1.38
Weighted Average Number of Common
Shares Outstanding (in millions) 609.2 608.2 609.2 607.9
Dividends Declared Per Common Share $ 0.43 $ 0.4125 $ 0.86 $ 0.825
See Notes to Consolidated Financial Statements
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SBC COMMUNICATIONS INC.
CONSOLIDATED BALANCE SHEETS
Dollars in millions except per share amounts
<CAPTION>
June 30, December 31,
1996 1995
<S> <C> <C>
Assets
(Unaudited)
Current Assets
Cash and cash equivalents $ 368.7 $ 489.9
Short-term cash investments and other current asset 704.5 311.0
Accounts receivable - net of allowances for uncollectibles of
$140.7 and $134.0 2,220.0 2,389.2
Material and supplies 84.2 130.6
Prepaid expenses 269.6 156.8
Deferred charges 227.1 201.9
Total current assets 3,874.1 3,679.4
Property, Plant and Equipment - at cost 31,702.2 30,789.5
Less: Accumulated depreciation and amortization 18,426.5 17,801.2
Property, Plant and Equipment - Net 13,275.7 12,988.3
Intangible Assets - Net of Accumulated Amortization of
$559.1 and $547.7 2,593.7 2,679.4
Investments in Equity Affiliates 1,709.3 1,586.3
Other Assets 1,042.1 1,069.1
Total Assets $ 22,494.9 $ 22,002.5
Liabilities and Shareowners' Equity
Current Liabilities
Debt maturing within one year $ 1,721.1 $ 1,679.5
Accounts payable and accrued liabilities 3,135.8 3,125.3
Dividends payable 262.0 251.4
Total current liabilities 5,118.9 5,056.2
Long-Term Debt 5,534.7 5,672.3
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes 769.8 723.5
Postemployment benefit obligation 2,728.0 2,735.7
Unamortized investment tax credits 270.4 286.6
Other noncurrent liabilities 1,382.5 1,272.4
Total deferred credits and other noncurrent liabilities 5,150.7 5,018.2
Shareowners' Equity
Common shares issued ($1 par value) 620.5 620.5
Capital in excess of par value 6,311.8 6,297.6
Retained earnings 1,119.0 672.4
Guaranteed obligations of employee stock ownership plans (246.7) (272.5)
Foreign currency translation adjustment (600.5) (580.9)
Treasury shares (at cost) (513.5) (481.3)
Total shareowners' equity 6,690.6 6,255.8
Total Liabilities and Shareowners' Equity $ 22,494.9 $ 22,002.5
See Notes to Consolidated Financial Statements.
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SBC COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in millions, increase (decrease) in cash and cash equivalents
(Unaudited)
<CAPTION>
Six months ended
June 30,
1996 1995
<S> <C> <C>
Operating Activities
Net income $ 965.0 $ 837.2
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,099.7 1,071.5
Undistributed earnings from investments in equity (85.7) (7.7)
affiliates
Provision for uncollectible accounts 92.1 68.5
Amortization of investment tax credits (16.2) (24.0)
Pensions and other postemployment expenses 66.5 (50.2)
Deferred income taxes 95.1 68.2
Other - net (65.2) (45.8)
Total adjustments 1,186.3 1,080.5
Net Cash Provided by Operating Activities 2,151.3 1,917.7
Investing Activities
Construction and capital expenditures (1,268.9) (1,041.4)
Investments in affiliates (24.1) (16.0)
Purchase of short-term investments (675.9) (200.3)
Proceeds from short-term investments 294.1 134.8
Dispositions 52.3 -
Acquisitions (17.0) (434.4)
Net Cash Used in Investing Activities (1,639.5) (1,557.3)
Financing Activities
Net change in short-term borrowings with original
maturities of three months or less 108.3 25.0
Issuance of other short-term borrowings 163.8 60.0
Repayment of other short-term borrowings (88.8) -
Issuance of long-term debt 0.2 408.9
Repayment of long-term debt (275.3) (60.3)
Purchase of treasury shares (105.2) (105.8)
Issuance of treasury shares 23.8 32.9
Dividends paid (459.8) (438.4)
Net Cash Used in Financing Activities (633.0) (77.7)
Net increase (decrease) in cash and cash equivalents (121.2) 282.7
Cash and cash equivalents beginning of year 489.9 364.6
Cash and Cash Equivalents End of Period $ 368.7 $ 647.3
Cash paid during the six months ended June 30 for:
Interest $ 256.9 $ 262.3
Income taxes $ 328.5 $ 403.6
See Notes to Consolidated Financial Statements.
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SBC COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY
Dollars in millions
(Unaudited)
<CAPTION>
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, 1994 $ 620.5 $ 6,286.1 $ 2,593.5 $ (314.7) $ (366.5) $ (463.3)
Net income 837.2
Dividends to shareowners (501.1)
Reduction of debt associated with
Employee Stock Ownership Plans 24.5
Foreign currency translation adjustment (58.9)
Purchase of treasury shares (105.8)
Issuance of treasury shares:
Dividend Reinvestment Plan 5.6 58.5
Other (3.6) 26.2
Other 4.7
Balance, June 30, 1995 $ 620.5 $ 6,288.1 $ 2,934.3 $ (290.2) $ (425.4) $ (484.4)
Balance, December 31, 1995 $ 620.5 $ 6,297.6 $ 672.4 $ (272.5) $ (580.9) $ (481.3)
Net income 965.0
Dividends to shareowners (523.9)
Reduction of debt associated with
Employee Stock Ownership Plans 25.8
Foreign currency translation adjustment (19.6)
Purchase of treasury shares (105.2)
Issuance of treasury shares:
Dividend Reinvestment Plan 16.5 53.9
Other (2.3) 19.1
Other 5.5
Balance, June 30, 1996 $ 620.5 $ 6,311.8 $ 1,119.0 $ (246.7) $ (600.5) $ (513.5)
See Notes to Consolidated Financial Statements.
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* * * *
SELECTED FINANCIAL AND OPERATING DATA
At June 30, or for the six months then ended: 1996 1995
Return on weighted average shareowners' equity * . . . 29.44% 19.74%
Debt ratio *. . . . . . . . . . . . . . . . . . . . . . 52.03% 46.89%
Network access lines in service (000) . . . . . . . . . 14,632 13,899
Access minutes of use (000,000) . . . . . . . . . . . . 28,724 26,145
Long-distance messages billed (000) . . . . . . . . . . 498,246 497,493
Cellular customers (000). . . . . . . . . . . . . . . . 3,961 3,243
Number of employees . . . . . . . . . . . . . . . . . . 60,090 58,550
* 1996 reflects the impact of the 1995 third quarter extraordinary loss from
discontinuance of regulatory accounting on shareowners' equity.
SBC COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Dollars in millions except per share amounts
1. BASIS OF PRESENTATION - The consolidated financial
statements have been prepared by SBC Communications Inc. (SBC)
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) 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 1995 consolidated
financial statements to conform with the 1996 presentation. The
results for the interim periods are not necessarily indicative of
results for the full year. The consolidated financial statements
contained herein should be read in conjunction with the
consolidated financial statements and notes thereto included in
SBC's 1995 Annual Report to Shareowners. Effective September
1995, Southwestern Bell Telephone Company (Telephone Company),
SBC's largest subsidiary, discontinued its application of
Statement of Financial Accounting Standards No. 71, "Accounting
for the Effects of Certain Types of Regulation."
2. CONSOLIDATION - The consolidated financial statements
include the accounts of SBC and its majority-owned subsidiaries.
The Telephone Company is SBC's largest subsidiary. All
significant intercompany transactions are eliminated in the
consolidation process. Investments in companies in which SBC
owns 20% to 50% 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
SBC's Consolidated Statements of Income.
3. MERGER AGREEMENT - On April 1, 1996, SBC and Pacific Telesis
Group (PAC) jointly announced a definitive agreement to merge an
SBC subsidiary with PAC, in a transaction in which each share of
PAC common stock will be exchanged for 0.733 of a share of SBC
common stock, subject to adjustment as described in the merger
agreement. After the merger, PAC will be a wholly-owned
subsidiary of SBC. The transaction is intended to be accounted
for as a pooling of interests and to be a tax-free
reorganization. On July 31, 1996, the shareowners of SBC and PAC
each approved the transaction, which had previously been approved
by the board of directors of each company. The merger agreement
is subject to certain regulatory approvals, including approval by
the California Public Utilities Commission, which has established
a schedule for review of the transaction with final comments from
the interested parties due in December 1996. If approvals are
granted, the transaction is expected to close in the first half
of 1997.
SBC COMMUNICATIONS INC.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Dollars in millions except per share amounts
RESULTS OF OPERATIONS
SBC Communications Inc. (SBC) reported net income of $501.0, or
$.82 per share, for the second quarter of 1996 and net income of
$965.0, or $1.58 per share, for the first six months of 1996.
Financial results for the second quarters and first six months of
1996 and 1995 are summarized as follows:
Second Quarter Six-Month Period
Percent Percent
1996 1995 Change 1996 1995 Change
Operating $ 3,332.7 $ 3,025.0 10.2% $ 6,529.4 $ 5,934.9 10.0%
revenues
Operating $ 2,487.6 $ 2,270.8 9.5% $ 4,884.3 $ 4,472.8 9.2%
expenses
Net income $ 501.0 $ 442.0 13.3% $ 965.0 $ 837.2 15.3%
The primary factor contributing to the increase in net income
during the second quarter and first six months of 1996 was growth
in demand for services and products at Southwestern Bell Telephone
Company (Telephone Company) and Southwestern Bell Mobile Systems
(Mobile Systems). Results for the first six months of 1996 also
reflect an increase in SBC's earnings from its equity affiliate,
Telefonos de Mexico, S.A. de C.V. (Telmex).
SBC's operating revenues in the second quarter and first six
months of 1996 increased $307.7, or 10.2%, and $594.5, or 10.0%,
over the second quarter and first six months of 1995. Components
of operating revenues for the second quarters and first six
months of 1996 and 1995 are as follows:
Second Quarter Six-Month Period
Percent Percent
1996 1995 Change 1996 1995 Change
Local service
Landline $ 1,171.6 $ 1,070.5 9.4% $ 2,292.4 $ 2,107.7 8.8%
Wireless 670.7 554.5 21.0 1,282.5 1,057.2 21.3
Network
access
Interstate 530.6 510.8 3.9 1,064.2 1,008.2 5.6
Intrastate 273.2 255.8 6.8 543.6 501.7 8.4
Long-distance 239.4 208.8 14.7 463.8 419.0 10.7
service
Directory 111.4 118.6 (6.1) 215.6 233.6 (7.7)
advertising
Other 335.8 306.0 9.7 667.3 607.5 9.8
Total $ 3,332.7 $ 3,025.0 10.2% $ 6,529.4 $ 5,934.9 10.0%
Landline local service revenues increased in the second
quarter and first six months of 1996 due primarily to
increases in demand, including increases in access lines and
vertical services revenues. The number of access lines
since June 30, 1995 increased by 5.3%, with approximately
29% of access line growth due to the sales of additional
access lines to existing residential customers. Vertical
services revenues, which include custom calling options,
Caller ID and other enhanced services, increased by
approximately 20%.
Wireless local service revenues increased in the second
quarter and first six months of 1996 due primarily to a
22.1% increase in cellular customers since June 30, 1995,
partially offset by a slight decline in average revenue per
customer. Market penetration at the end of the second
quarters of 1996 and 1995 was 9.7 and 8.0 customers per 100
residents, respectively, in Mobile Systems' service areas.
Interstate network access revenues increased in the second
quarter and first six months of 1996 due primarily to an
increase in demand for access services by interexchange
carriers. Growth in revenues from end user charges
attributable to an increasing access line base also
contributed to the increase.
Intrastate network access revenues increased in the second
quarter and first six months of 1996 due primarily to
increases in demand, including usage by alternative
intraLATA toll carriers.
Long-distance service revenues increased in the second
quarter and first six months of 1996 due to intraLATA toll
pool settlements and the inclusion in 1995 of accruals for
rate reductions relating to an appealed 1992 rate order in
Oklahoma. The settlement of the appeals in October 1995
eliminated the need to continue these accruals. Excluding
these items, long-distance service revenues in the second
quarter and first six months of 1996 decreased due to the
continuing impact of competition from alternative intraLATA
toll carriers. However, long-distance service message
volumes were relatively unchanged; competition-related
decreases in volumes were mostly offset by higher volumes
caused by optional calling plans offered by the Telephone
Company.
Directory advertising revenues decreased in the second
quarter and first six months of 1996 as a result of the
January 1996 sale of SBC's publishing contracts for GTE
Corporation's service areas to GTE Directories.
Other operating revenues increased in the second quarter and
first six months of 1996 due primarily to increased demand
for the Telephone Company's non-regulated services and
products.
SBC's operating expenses in the second quarter and first six
months of 1996 increased $216.8, or 9.5%, and $411.5, or 9.2%,
over the second quarter and first six months of 1995. Components
of operating expenses for the second quarters and first six
months of 1996 and 1995 are as follows:
Second Quarter Six-Month Period
Percent Percent
1996 1995 Change 1996 1995 Change
Cost of
services and $ 980.3 $ 881.8 11.2% $ 1,913.4 $ 1,749.3 9.4%
products
Selling,
general and 953.5 849.7 12.2% 1,871.2 1,652.0 13.3%
administrative
Depreciation
and 553.8 539.3 2.7% 1,099.7 1,071.5 2.6%
amortization
Total $ 2,487.6 $ 2,270.8 9.5% $ 4,884.3 $ 4,472.8 9.2%
Cost of services and products increased for the second
quarter and first six months of 1996 due to demand related
increases at the Telephone Company, primarily increases in
switching system software license fees, materials and
contract services as well as annual compensation increases.
Other increases related to growth at Mobile Systems and
increased directory-related paper and printing costs. These
increases were partially offset by the absence of costs
related to directory printing contracts sold in
January 1996.
Selling, general and administrative expenses increased in
the second quarter and first six months of 1996 due to
growth-related increases at Mobile Systems, higher operating
taxes, including the new Texas Infrastructure Fund
established for use by public institutions in upgrading
their communications and computer technology, and annual
compensation increases.
Interest expense decreased $9.0, or 7.1%, and $22.7, or 8.7%, in
the second quarter and first six months of 1996 due to lower debt
levels and capitalization of interest during construction
required by the discontinuance of regulatory accounting in the
third quarter of 1995. Under regulatory accounting, the
Telephone Company accounted for a capitalization of both interest
and equity costs during periods of construction as other income.
Equity in net income of affiliates increased $19.5 and $64.6 in
the second quarter and first six months of 1996 reflecting
improved results from SBC's investment in French cellular
operations and the inclusion in 1995 of losses on United Kingdom
cable operations which were merged into TeleWest Communications,
P.L.C. and now are accounted for under the cost method. Six-
months results also increased due to higher earnings from SBC's
investment in Telmex. Telmex's earnings reflected the relative
stabilization of the peso and operational growth, indicated by
increases in cellular customers and long-distance usage.
SBC's investment in Telmex is recorded in accordance with U.S.
generally accepted accounting principles, which exclude inflation
adjustments and include adjustments for the purchase method of
accounting.
Income taxes increased $52.4, or 23.2%, and $128.7, or 31.0%, in
the second quarter and first six months of 1996 due to higher
earnings and the effect on taxes of the discontinuance of
regulatory accounting in the third quarter of 1995.
OPERATING ENVIRONMENT AND TRENDS OF THE BUSINESS
COMPETITION
Texas Local Service Certification Approximately 70 applications
for competitive local service certification have been filed by
alternative providers with the Texas Public Utility Commission
(TPUC), and more than half have been approved. Among the
applicants is Sprint Corporation (Sprint), which has sought to
avoid the Texas law's build-out requirements for a competitive
local service certificate in the Telephone Company's service area
through a request for waiver. Texas state law specifies build-
out levels for proposed holders of facilities based certificates
of authority, but the TPUC has indicated that it will waive the
build-out requirements for Sprint.
Interconnect Agreements SBC has signed several interconnect
agreements with companies seeking to provide local service within
portions of the Telephone Company's service areas in Texas and
Missouri. These agreements are subject to approval by the
respective state commissions.
On August 1, 1996, the Federal Communications Commission (FCC)
adopted rules concerning implementation of the Local Competition
Provisions and other sections of the Telecommunications Act of
1996 and Interconnection between Local Exchange Carriers (LECs)
and Commercial Mobile Radio Service Providers. The full text of
the order has not yet been made available at the time of this
filing. Some of the provisions of these rules were stated to
include: establishing a baseline of terms and conditions for all
arbitrated agreements, including default interim ceilings and
ranges for interconnection agreements, discounts from retail
prices for resale and transportation and termination charges;
concluding that cellular, PCS, specialized mobile radio and other
mobile radio service providers are telecommunications carriers,
but not LECs, and, therefore, entitled to reciprocal compensation
arrangements for the completion of calls originating with another
carrier and may request interconnection with a LEC's network
facilities; and, identifying a minimum set of seven network
elements which provide technically feasible points of
interconnection and requiring incumbent LECs to provide access to
those network elements, allowing the requesting carriers to
combine such elements as they choose. Nothing in the FCC's order
as announced currently alters the collection of access charges
paid by an interexchange carrier when the incumbent LEC provides
exchange access service either directly or through resale.
Separate access charge reform and universal service proceedings
will address that issue. Management is not able to assess the
effects of these rules on SBC's financial position or results of
operations.
Long-Distance Services In July 1996, SBC signed a four-year
exclusive memorandum of understanding with Sprint that covers
wholesale long-distance services. The agreement with Sprint is
expected to allow SBC to enter the long-distance marketplace
following regulatory approvals. Exact terms of the agreement are
subject to further negotiations between the companies and SBC
anticipates signing a final contract later this year.
OTHER BUSINESS MATTERS
Merger Agreement On April 1, 1996, SBC and Pacific Telesis Group
(PAC) jointly announced a definitive agreement to merge an SBC
subsidiary with PAC, in a transaction in which each share of PAC
common stock will be exchanged for 0.733 of a share of SBC common
stock, subject to adjustment as described in the merger
agreement. After the merger, PAC will be a wholly-owned
subsidiary of SBC. The transaction is intended to be accounted
for as a pooling of interests and to be a tax-free
reorganization. On July 31, 1996, the shareowners of SBC and PAC
each approved the transaction, which had previously been approved
by the board of directors of each company. The merger agreement
is subject to certain regulatory approvals, including approval by
the California Public Utilities Commission which has established
a schedule for review of the transaction with final comments from
the interested parties due in December 1996. If approvals are
granted, the transaction is expected to close in the first half
of 1997.
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of 1996, as in 1995, SBC's primary
source of funds continued to be cash provided by operating
activities. This, combined with external financing and proceeds
from the sale of directory printing contracts, was used primarily
to fund capital expenditures and pay dividends during the first
six months of 1996, and should be adequate to fund these
expenditures for the remainder of the year. Due to high levels
of growth at the Telephone Company and Mobile Systems, SBC
anticipates capital expenditures for 1996 will increase to
approximately $3 billion. SBC had $368.7 of cash and cash
equivalents and $624.8 of other short-term investments available
at June 30, 1996. SBC has entered into agreements with several
banks for lines of credit totaling $1,055.0, all of which may be
used to support commercial paper borrowings. These lines had not
been utilized as of June 30, 1996. Commercial paper and similar
borrowings as of June 30, 1996 totaled $1,421.3.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Annual Meeting of Shareowners
(a) The annual meeting of the shareowners of SBC Communications
Inc. (SBC) was held on April 26, 1996, in San Antonio,
Texas. Shareowners representing 504,514,271 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*
James E. Barnes
492,880,400 11,633,871
Haskell M. Monroe
495,210,842 9,303,429
Patricia P. Upton
495,312,454 9,201,817
Edward E. Whitacre,
Jr. 495,297,928 9,216,343
* Includes shares represented at the meeting by proxy
where the shareowner withheld authority to vote for the
indicated director or directors, as well as shares voted in
person at the meeting where the shareowner did not vote for
such director or directors.
(c) Shareowners ratified the appointment of Ernst & Young LLP
as independent auditors of SBC for the year ended December
31, 1996. The vote was 497,680,311 FOR and 3,936,264
AGAINST, with 2,897,696 shares ABSTAINING.
(d) Shareowners approved the amendment to SBC's Restated
Certificate of Incorporation to increase the number of
authorized shares of common stock. The vote was
427,163,487 FOR and 70,307,703 AGAINST, with 7,043,081
shares ABSTAINING.
(e) Shareowners approved the 1996 Stock and Incentive Plan.
The vote was 425,530,263 FOR and 68,170,139 AGAINST, with
10,813,869 shares ABSTAINING.
Special Meeting of Shareowners
(a) A special meeting of the shareowners of SBC was held on
July 31, 1996, in San Antonio, Texas. Shareowners
representing 448,178,135 shares of common stock were
present in person or were represented at the meeting by
proxy.
(b) Shareowners approved and adopted the Agreement and Plan of
Merger among Pacific Telesis Group, SBC and SBC
Communications (NV) Inc, a wholly-owned subsidiary of SBC
dated as of April 1, 1996 and approved the transactions
contemplated thereby. The vote was 433,944,713 FOR and
9,667,842 AGAINST, with 4,565,580 shares ABSTAINING.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The registrant was previously known as Southwestern
Bell Corporation, and all references in the exhibits
to that name are to the registrant.
Exhibit 10-a Stock Savings Plan, revised effective July 26, 1996.
Exhibit 10-b 1992 Stock Option Plan, revised effective July 26, 1996.
Exhibit 10-c 1995 Management Stock Option Plan, revised effective
July 26, 1996.
Exhibit 10-d 1996 Stock and Incentive Plan, revised effective
July 26, 1996.
Exhibit 12 Computation of Ratios of Earnings to Fixed
Charges.
Exhibit 27 Financial Data Schedule.
(b) Reports on Form 8-K
On April 1, 1996, SBC Communications Inc. (SBC) filed a
Current Report on Form 8-K, reporting on Item 5, Other
Events and Item 7, Exhibits. In the Report, SBC announced
the terms of a definitive agreement to merge an SBC
subsidiary with Pacific Telesis Group.
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.
SBC Communications Inc.
August 6, 1996 /s/ Donald E. Kiernan
Donald E. Kiernan
Senior Vice President,Treasurer
and Chief Financial Officer
Exhibit 10.a
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 Stock is
not traded on the NYSE on such day in which event the
immediate following day in which 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 the
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.
In addition to the foregoing, the HRC may, at any time and
in any manner, limit the number of Options which may be
acquired as a result of cash bonuses being contributed to
the Plan, including but not limited to the Short Term
Incentive Award and the Key Executive Officer Short Term
Incentive Award. Further, except as otherwise provided by
the HRC, in determining the number of Options to be issued
to a Participant with respect to a Participant's
contribution of a specific cash bonus to the Plan and
subsequent crediting of Shares, Options may be issued only
with respect to an amount which does not exceed the target
amount of such cash bonus (or such other portion of the cash
bonus as may be determined by the HRC).
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 sub
paragraph, 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 and Payment of Options. Options shall be
exercised by delivery of a written notice (including
telecopies) to the Company (or, if so provided by the
Company, to its designated agent), which notice shall be
irrevocable, setting forth the exact number of shares of
Stock with respect to which the Option is being exercised
and including with such notice payment of the Option Price.
The Company may waive the requirement that the exercise
notice be in writing upon such terms and conditions as it
shall deem appropriate. When Options have been transferred,
the Company or its designated agent may require appropriate
documentation that the person or persons exercising the
Option, if other than the Participant, has the right to
exercise the Option. No Option may be exercised with
respect to a fraction of a share of Stock.
The Option Price shall be paid in full at the time of
exercise. No Stock shall be issued or transferred until
full payment has been received therefor.
Payment may be made:
(a) in cash, or
(b) unless otherwise provided by the Committee at any time,
and subject to such additional terms and conditions and/or
modifications as the Committee or the Company may impose
from time to time, and further subject to suspension or
termination of this provision by the Committee or the
Company at any time, by:
(i) delivery of Stock owned by the Participant in
partial (if in partial payment, then together with
cash) or full payment (if a fractional share of Stock
remains after payment of the Option Price in full by
previously owned Stock, then the fractional share of
Stock shall be withheld for taxes); provided, however,
as a condition to paying any part of the Option Price
in Stock, at the time of exercise of the Option, the
Participant must establish to the satisfaction of the
Company that the Stock tendered to the Company must
have been held by the Participant for a minimum of six
(6) months preceding the tender; or
(ii) if the Company has designated a stockbroker
to act as the Company's agent to process Option
exercises, issuance of an exercise notice to such
stockbroker together with instructions irrevocably
instructing the stockbroker: (A) to immediately sell a
sufficient portion of the Stock to pay the Option Price
of the Options being exercised and the required tax
withholding, and (B) to deliver on the settlement date
the portion of the proceeds of the sale equal to the
Option Price and tax withholding to the Company. In
the event the stockbroker sells any Stock on behalf of
a Participant, the stockbroker shall be acting solely
as the agent of the Participant, and the Company
disclaims any responsibility for the actions of the
stockbroker in making any such sales. No Stock shall
be issued until the settlement date and until the
proceeds (equal to the Option Price and tax
withholding) are paid to the Company.
If payment is made by the delivery of Stock, the value
of the Stock delivered shall be equal to the Fair Market
Value of the Stock on the day preceding the date of exercise
of the Option.
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 only to that
number of shares equal to the number of shares surrendered
upon the exercise of such Option. In the case of an
incentive stock Option, restricted Stock may not be used to
pay the Option exercise price.
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 Tax Withholding. Upon distribution of
Stock, including but not limited to, shares of Stock
issued upon the exercise of an Option, the Company shall
withhold sufficient shares of Stock having a Fair Market
Value on the date the taxes are determined 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.
Unless otherwise determined by the Committee, when
the method of payment for the Option Price is from the sale
by a stockbroker pursuant to Section 9.5(b)(ii), hereof, of
the Stock acquired through the Option exercise, then the tax
withholding shall be satisfied out of the proceeds. For
administrative purposes in determining the amount of taxes
due, the sale price of such Stock shall be deemed to be the
Fair Market Value of the Stock.
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.
11.21 Distribution Alternative. Effective November 17,
1995, notwithstanding the provisions of Section 6 and of
Section 7, at any time during the calendar year prior to the
calendar year during which a distribution(s) pursuant to a
Savings Unit is scheduled to commence, a Participant may
change his or her previous election(s) applicable to such
Savings Unit to further defer the commencement of the
distribution(s) pursuant to such Savings Unit to a
subsequent calendar year, and in such case to also change
the number of installments applicable to the distribution of
the Savings Unit as follows: (a) the new election(s)
applicable to such Savings Unit must conform with either
Section 6, if the Retirement Alternative is the new
selection for such Savings Unit, or Section 7, if the
Specified Date Alternative is the new selection for such
Savings Unit; (b) either the Retirement Alternative or the
Specified Date Alternative may be selected for the new
election(s) for a Savings Unit irrespective of the
Alternative originally selected for such Savings Unit; (c)
the commencement date for payments pursuant to such Savings
Unit may be delayed to any point in time in a subsequent
calendar year - the commencement date for payments may not
be advanced to an earlier point in time; and (d) any number
of installments may be selected pursuant to the new
election(s) for a Savings Unit irrespective of the number of
installments originally selected for such Savings Unit.
Provided, however, in the event a Participant is
involuntarily terminated from employment (which shall be
deemed to include termination by reason of death), and such
termination is for a reason other than for cause (i.e.,
willful and gross misconduct on the part of the Participant
that is materially and demonstrably detrimental to the
Company or any subsidiary thereof), and such termination is
a Retirement (or in the case of Participant's death,
Participant was Retirement eligible) determined using the
rules upon which Retirement eligibility is based, whether or
not Participant is actually a participant in the plans upon
which such eligibility is based, then Participant (or
Participant's Beneficiary(ies)) may make the change(s) to
Participant's previous election(s) pursuant to this Section
11.21 at the time of Participant's termination of
employment. Amounts with respect to which the Participant's
election(s) are modified in accordance with the provisions
of this Section 11.21 shall continue to be subject toall
provisions of this Plan including further distribution
modifications in accordance with the provisions of the
Section 11.21.
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.
Exhibit 10.b
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.
Options shall be exercised by delivery of a written
notice (including telecopies) to the Company (or, if so provided
by the Company, to its designated agent), which notice shall be
irrevocable, setting forth the exact number of Shares with
respect to which the Option is being exercised and including with
such notice payment of the Option Price. The Company may waive
the requirement that the exercise notice be in writing upon such
terms and conditions as it shall deem appropriate. When Options
have been transferred, the Company or its designated agent may
require appropriate documentation that the person or persons
exercising the Option, if other than the Participant, has the
right to exercise the Option. No Option may be exercised with
respect to a fraction of a Share.
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 made:
(a) in cash, or
(b) unless otherwise provided by the Committee at any time,
and subject to such additional terms and conditions and/or
modifications as the Committee or the Company may impose
from time to time, and further subject to suspension or
termination of this provision by the Committee or the
Company at any time, by:
(i) delivery of Shares of Stock owned by the
Participant in partial (if in partial payment, then
together with cash) or full payment (if a fractional
Share remains after payment of the Option Price in full
by previously owned Shares, then the fractional Share
shall be withheld for taxes); provided, however, as a
condition to paying any part of the Option Price in
Stock, at the time of exercise of the Option, the
Participant must establish to the satisfaction of the
Company that the Stock tendered to the Company must
have been held by the Participant for a minimum of six
(6) months preceding the tender; or
(ii) if the Company has designated a stockbroker
to act as the Company's agent to process Option
exercises, issuance of an exercise notice to such
stockbroker together with instructions irrevocably
instructing the stockbroker: (A) to immediately sell a
sufficient portion of the Shares to pay the Option
Price of the Options being exercised and the required
tax withholding, and (B) to deliver on the settlement
date the portion of the proceeds of the sale equal to
the Option Price and tax withholding to the Company.
In the event the stockbroker sells any Shares on behalf
of a Participant, the stockbroker shall be acting
solely as the agent of the Participant, and the Company
disclaims any responsibility for the actions of the
stockbroker in making any such sales. No Stock shall
be issued until the settlement date and until the
proceeds (equal to the Option Price and tax
withholding) are paid to the Company.
If payment is made by the delivery of Shares of Stock,
the value of the Shares delivered shall be equal to 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 exercise of an Option, the
Company shall withhold sufficient Shares having a Fair Market
Value on the date the taxes are determined in an amount 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.
Unless otherwise determined by the Committee, when the
method of payment for the Option Price is from the sale by a
stockbroker pursuant to Section 4.7(b)(ii), hereof, of the Stock
acquired through the Option exercise, then the tax withholding
shall be satisfied out of the proceeds. For administrative
purposes in determining the amount of taxes due, the sale price
of such Stock shall be deemed to be the Fair Market Value of the
Stock.
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.
Exhibit 10.c
1995 MANAGEMENT STOCK OPTION PLAN
ARTICLE 1. PURPOSE, DEFINITIONS AND EFFECTIVE DATE
1.1 Purpose. The purpose of the 1995 Management Stock
Option Plan ("Plan") is to promote the success and enhance the
value of SBC Communications Inc. (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 entry level through
second (2nd) level management.
Directors of the Company 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 SBC
Communications Inc. 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 employee's company
disability plan) or for Cause, on or after the date the
Participant is eligible to retire with an immediate
pension pursuant to the employee's company pension
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 the Company 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 SBC Communications Inc.
(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 Board of Directors.
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").
2.2 Authority of the Committee. The Committee or the Board
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 or the
Board as provided in the Plan.
All determinations and decisions made by the Committee
or the Board 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 5,000,000 Shares. These Shares may be
either authorized but unissued or reacquired Shares. The
Committee or the Board may amend this Plan to increase the number
of authorized 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 or the Board; provided, however, no Options may be
granted after the 10th anniversary of the effective date of the
Plan. The Committee or the Board 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 or the
Board shall have the authority to establish guidelines setting
forth anticipated grant levels which correspond to various salary
grades, salary ranges 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 or the Board;
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 or the Board 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. In
the event the Committee or the Board does not specify the
expiration date of an Option, then such Option will expire on the
fifth (5th) anniversary date of its grant, except as otherwise
provided herein.
4.5 Vesting of Options. Options shall vest at such times
and under such terms and conditions as determined by the
Committee or the Board. The Senior Vice President - Human
Resources, or his or her successor, or such other person
designated by the Committee or the Board, shall have the
authority to accelerate the vesting of Options for any
Participant.
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 or the Board shall
in each instance approve, which need not be the same for each
grant or for each Participant. However, regardless of the
vesting date of a grant, 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.
Options shall be exercised by delivery of a written
notice (including telecopies) to the Company (or, if so provided
by the Company, to its designated agent), which notice shall be
irrevocable, setting forth the exact number of Shares with
respect to which the Option is being exercised and including with
such notice payment of the Option Price. The Company may waive
the requirement that the exercise notice be in writing upon such
terms and conditions as it shall deem appropriate. When Options
have been transferred, the Company or its designated agent may
require appropriate documentation that the person or persons
exercising the Option, if other than the Participant, has the
right to exercise the Option. No Option may be exercised with
respect to a fraction of a Share.
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 made:
(a) in cash, or
(b) unless otherwise provided by the Committee at any time,
and subject to such additional terms and conditions and/or
modifications as the Committee or the Company may impose
from time to time, and further subject to suspension or
termination of this provision by the Committee or the
Company at any time, by:
(i) delivery of Shares of Stock owned by the
Participant in partial (if in partial payment, then
together with cash) or full payment (if a fractional
Share remains after payment of the Option Price in full
by previously owned Shares, then the fractional Share
shall be withheld for taxes); provided, however, as a
condition to paying any part of the Option Price in
Stock, at the time of exercise of the Option, the
Participant must establish to the satisfaction of the
Company that the Stock tendered to the Company must
have been held by the Participant for a minimum of six
(6) months preceding the tender; or
(ii) if the Company has designated a stockbroker to
act as the Company's agent to process Option exercises,
issuance of an exercise notice to such stockbroker
together with instructions irrevocably instructing the
stockbroker: (A) to immediately sell a sufficient
portion of the Shares to pay the Option Price of the
Options being exercised and the required tax
withholding, and (B) to deliver on the settlement date
the portion of the proceeds of the sale equal to the
Option Price and tax withholding to the Company. In
the event the stockbroker sells any Shares on behalf of
a Participant, the stockbroker shall be acting solely
as the agent of the Participant, and the Company
disclaims any responsibility for the actions of the
stockbroker in making any such sales. No Stock shall
be issued until the settlement date and until the
proceeds (equal to the Option Price and tax
withholding) are paid to the Company.
If payment is made by the delivery of Shares of Stock,
the value of the Shares delivered shall be equal to 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 employee's company 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 (5) 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, unless otherwise determined by the Committee or the
Board prior to such 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 Committee
or the Board, may at any time and from time to time, terminate,
amend, or modify the Plan.
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 exercise of an Option, the
Company shall withhold sufficient Shares having a Fair Market
Value on the date the taxes are determined in an amount 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.
Unless otherwise determined by the Committee, when the
method of payment for the Option Price is from the sale by a
stockbroker pursuant to Section 4.7(b)(ii), hereof, of the Stock
acquired through the Option exercise, then the tax withholding
shall be satisfied out of the proceeds. For administrative
purposes in determining the amount of taxes due, the sale price
of such Stock shall be deemed to be the Fair Market Value of the
Stock.
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 Texas.
Exhibit 10.d
1996 Stock and Incentive Plan
Article 1. Establishment and Purpose
1.1 Establishment of the Plan. SBC Communications Inc., a
Delaware corporation (the "Company" or "SBC"), hereby establishes
an incentive compensation plan (the "Plan"), as set forth in this
document.
1.2 Purpose of the Plan. The purpose of the Plan is to
promote the success and enhance the value of the Company by
linking the personal interests of Participants to those of the
Company's shareowners, and by providing Participants with an
incentive for outstanding performance.
The Plan is further intended to attract and retain the
services of Participants upon whose judgment, interest, and
special efforts the successful operation of SBC and its
subsidiaries is dependent.
1.3 Effective Date of the Plan. The Plan shall become
effective on January 1, 1996; however, grants may be made before
that time subject to becoming effective on or after that date.
During the first year this Plan is effective, Awards shall be
issued only to the extent the potential payout of Shares shall
not exceed 10% of the Shares approved for issuance under this
Plan.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have
the meanings set forth below and, when the meaning is intended,
the initial letter of the word is capitalized:
(a) "Award" means, individually or collectively, a grant
under this Plan of Nonqualified Stock Options, Incentive
Stock Options, Restricted Stock, Performance Units, or
Performance Shares.
(b) "Award Agreement" means an agreement which may be
entered into by each Participant and the Company, setting
forth the terms and provisions applicable to Awards granted
to Participants under this Plan.
(c) "Board" or "Board of Directors" means the SBC Board of
Directors.
(d) "Cause" shall mean willful and gross misconduct on the
part of an Employee that is materially and demonstrably
detrimental to the Company or any Subsidiary as determined
by the Committee in its sole discretion.
(e) "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.
(f) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(g) "Committee" means the committee or committees, as
specified in Article 3, appointed by the Board to administer
the Plan with respect to grants of Awards.
(h) "Director" means any individual who is a member of the
SBC Board of Directors.
(i) "Disability" shall mean the Participant's inability to
perform the Participant's normal Employment functions due to
any medically determinable physical or mental disability,
which can last or has lasted 12 months or is expected to
result in death.
(j) "Employee" means any management employee of the Company
or of one of the Company's Subsidiaries. "Employment" means
the employment of an Employee by the Company or one of its
Subsidiaries. Directors who are not otherwise employed by
the Company shall not be considered Employees under this
Plan.
(k) "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, or any
successor Act thereto.
(l) "Exercise Price" means the price at which a Share may
be purchased by a Participant pursuant to an Option, as
determined by the Committee.
(m) "Fair Market Value" shall mean the closing price of
Shares on the relevant date, or (if there were no
sales on such date) the next preceding trading date, all as
reported in the New York Stock Exchange Composite Trading
listings, or in a similar report selected by the Committee.
A trading day is any day that the Stock is traded on the New
York Stock Exchange.
(n) "Incentive Stock Option" or "ISO" means an option to
purchase Shares from SBC, granted under this Plan, which is
designated as an Incentive Stock Option and is intended to
meet the requirements of Section 422 of the Code.
(o) "Insider" shall mean an Employee who is, on the
relevant date, an officer, director, or ten percent (10%)
beneficial owner of the Company, as those terms are defined
under Section 16 of the Exchange Act.
(p) "Key Executive Officer Short Term Award" means a
Performance Unit expressed in dollars.
(q) "Nonqualified Stock Option" or "NQSO" means the option
to purchase Shares from SBC, granted under this Plan, which
is not intended to be an Incentive Stock Option.
(r) "Option" or "Stock Option" shall mean an Incentive
Stock Option or a Nonqualified Stock Option, and shall
include a Restoration Option.
(s) "Participant" means a person who holds an outstanding
Award granted under the Plan.
(t) "Performance Unit" and "Performance Share" shall each
mean an Award granted to an Employee pursuant to Article 8
herein.
(u) "Plan" means this 1996 Stock and Incentive Plan. The
Plan may also be referred to as the "SBC 1996 Stock and
Incentive Plan" or as the "SBC Communications Inc. 1996
Stock and Incentive Plan."
(v) "Restricted Stock" means an Award of Stock granted to
an Employee pursuant to Article 7 herein.
(w) "Restriction Period" means the period during which
Shares of Restricted Stock are subject to restrictions or
conditions under Article 7.
(x) "Retirement" or to "Retire" shall mean the termination
of a Participant's Employment with the Company or one of its
Subsidiaries, for any reason other than death, Disability or
for Cause, on or after the date the Participant would be
eligible to retire with an immediate pension either under
the rules of the SBC Pension Benefit Plan or the SBC Senior
Management Supplemental Retirement Income Plan, whether or
not actually a participant in either such plan, or as
otherwise provided by the Committee.
(y) "Rotational Work Assignment Company" ("RWAC") shall
mean any entity with which SBC Communications Inc. or any of
its Subsidiaries may enter into an agreement to provide an
employee for a rotational work assignment.
(z) "Shares" or "Stock" means the shares of common stock of
the Company.
(aa) "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.
(bb) "Window Period" means the period beginning on the
third business day following the date of public release of
the Company's quarterly sales and earnings information, and
ending on the twelfth business day following such date.
Article 3. Administration
3.1 The Committee. Administration of the Plan shall be
bifurcated as follows:
(a) With respect to Insiders, the Plan and all Awards
hereunder shall be administered only by the Human Resources
Committee of the Board or such other Committee as may be
appointed by the Board for this purpose (the "Disinterested
Committee"), where each Director on such Disinterested
Committee is a "Disinterested Person" (or any successor
designation for determining who may administer plans,
transactions or awards exempt under Section 16(b) of the
Exchange Act), as that term is used in Rule 16b-3 under the
Exchange Act, as that rule may be modified from time to
time.
(b) The Disinterested Committee and such other Committee as
the Board may create, if any, specifically to administer the
Plan with respect to non-Insiders (the "Non-Insider
Committee") shall each have full authority to administer the
Plan and all Awards hereunder with respect to all persons
who are not Insiders, except as otherwise provided herein or
by the Board. Either Committee may be replaced by the Board
at any time.
3.2 Authority of the Committee. The Committee shall have
full power except as limited by law and subject to the provisions
herein, to select the recipients of Awards, to determine the size
and types of Awards; to determine the terms and conditions of
such Awards in a manner consistent with the Plan; to construe and
interpret the Plan and any agreement or instrument entered into
under the Plan; to establish, amend, or waive rules and
regulations for the Plan's administration; and (subject to the
provisions of Article 13 herein) to amend the terms and
conditions of any outstanding Award 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.
No Award other than Restoration Options may be made under
the Plan after December 31, 2010.
All determinations and decisions made by the Committee
pursuant to the provisions of the Plan and all related orders or
resolutions of the Board shall be final, conclusive, and binding
on all persons, including the Company, its stockholders,
Employees, Participants, and their estates and beneficiaries.
Subject to the terms of this Plan, the Committee is
authorized, and shall not be limited in its discretion, to use
any of the Performance Criteria specified herein in its
determination of Awards under this Plan.
Article 4. Shares Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in
Section 4.3 herein, the number of Shares available for grant
under the Plan shall not exceed 30 million Shares of Stock. No
more than 10% of the Shares approved for issuance under this Plan
may be Shares of Restricted Stock. No more than 40% of the
Shares approved for issuance under this Plan may be issued to
Participants as a result of Performance Share or Restricted Stock
Awards. The Shares granted under this Plan may be either
authorized but unissued or reacquired Shares. The Disinterested
Committee shall have full discretion to determine the manner in
which Shares available for grant are counted in this Plan.
Without limiting the discretion of the Committee under this
section, unless otherwise provided by the Committee, the
following rules will apply for purposes of the determination of
the number of Shares available for grant under the Plan or
compliance with the foregoing limits:
(a) The grant of a Stock Option or a Restricted Stock Award
shall reduce the Shares available for grant under the Plan
by the number of Shares subject to such Award. However, to
the extent the Participant uses previously owned Shares to
pay the Exercise Price or any taxes, or Shares are withheld
to pay taxes, these Shares shall be available for regrant
under the Plan.
(b) With respect to Performance Shares, the number of
Performance Shares granted under the Plan shall be deducted
from the number of Shares available for grant under the
Plan. The number of Performance Shares which cannot be, or
are not, converted into Shares and distributed (including
deferrals) to the Participant (after any applicable tax
withholding) following the end of the Performance Period
shall increase the number of Shares available for regrant
under the Plan by an equal amount.
(c) With respect to Performance Units representing a fixed
dollar amount that may only be settled in cash, the
Performance Units Award shall not affect the number of
Shares available under the Plan.
4.2 Lapsed Awards. If any Award granted under this Plan is
canceled, terminates, expires, or lapses for any reason, Shares
subject to such Award shall be again available for the grant of
an Award under the Plan.
4.3 Adjustments in Authorized Plan Shares. In the event of
any merger, reorganization, consolidation, recapitalization,
separation, liquidation, Stock dividend, split-up, Share
combination, or other change in the corporate structure of the
Company affecting the Shares, an adjustment shall be made in the
number and class of Shares which may be delivered under the Plan
(including individual limits), and in the number and class of
and/or price of Shares subject to outstanding Awards granted
under the Plan, and/or the number of outstanding Options, Shares
of Restricted Stock, and Performance Shares constituting
outstanding Awards, as may be determined to be appropriate and
equitable by the Committee, in its sole discretion, to prevent
dilution or enlargement of rights.
Article 5. Eligibility and Participation
5.1 Eligibility. All management Employees are eligible to
participate in this Plan.
5.2 Actual Participation. Subject to the provisions of the
Plan, the Committee may, from time to time, select from all
eligible Employees, those to whom Awards shall be granted and
shall determine the nature and amount of each Award. No Employee
is entitled to receive an Award unless selected by the Committee.
Article 6. Stock Options
6.1 Grant of Options. Subject to the terms and provisions
of the Plan, Options may be granted to Employees at any time and
from time to time, and under such terms and conditions, as shall
be determined by the Committee. The Committee shall have
discretion in determining the number of Shares subject to Options
granted to each Employee; provided, however, that the maximum
number of Shares subject to Options which may be granted to any
single Employee during any calendar year shall not exceed 2% of
the Shares approved for issuance under this Plan. The Committee
may grant ISOs, NQSOs, or a combination thereof; provided,
however, that no ISO may be issued after January 1, 2006. The
Committee may authorize the automatic grant of additional Options
("Restoration Options") when a Participant exercises already
outstanding Options, or options granted under a prior option plan
of the Company, on such terms and conditions as it shall
determine. Unless otherwise provided by the Committee, the
number of Restoration Options granted to a Participant with
respect to the exercise of an option (including an Option under
this Plan) shall not exceed the number of Shares delivered by the
Participant in payment of the Exercise Price of such option,
and/or in payment of any tax withholding resulting from such
exercise, and any Shares which are withheld to satisfy
withholding tax liability arising out of such exercise. A
Restoration Option shall have an Exercise Price of not less than
100% of the per Share Fair Market Value on the date of grant of
such Restoration Option, and shall be subject to all the terms
and conditions of the original grant, including the expiration
date, and such other terms and conditions as the Committee in its
sole discretion shall determine.
6.2 Form of Issuance. Each Option grant may be issued in
the form of an Award Agreement and/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 an Award
Agreement, then the Option shall be deemed granted as determined
by the Committee. The terms and conditions of an Option shall be
set forth in the Award Agreement, in the notice of the issuance
of the grant, or in such other documents as the Committee shall
determine. Such terms and conditions shall include the Exercise
Price, the duration of the Option, the number of Shares to which
an Option pertains (unless otherwise provided by the Committee,
each Option may be exercised to purchase one Share), and such
other provisions as the Committee shall determine, including, but
not limited to whether the Option is intended to be an ISO or a
NQSO.
6.3 Exercise Price. Unless a greater Exercise Price is
determined by the Committee, the Exercise Price for each Option
Awarded under this Plan shall be equal to one hundred percent
(100%) of the Fair Market Value of a Share on the date the Option
is granted.
6.4 Duration of Options. Each Option shall expire at such
time as the Committee shall determine at the time of grant (which
duration may be extended by the Committee); provided, however,
that no Option shall be exercisable later than the tenth (10th)
anniversary date of its grant.
6.5 Vesting of Options. Options shall vest at such times
and under such terms and conditions as determined by the
Committee; provided, however, unless a later vesting period is
provided by the Committee at or before the grant of an Option,
one-third of the Options will vest on each of the first three
anniversaries of the grant; if one Option remains after equally
dividing the grant by three, it will vest on the first
anniversary of the grant, if two Options remain, then one will
vest on each of the first two anniversaries. The Committee shall
have the right to accelerate the vesting of any Option; however,
the Chairman of the Board or the Senior Vice President-Human
Resources, or their respective successors, or such other persons
designated by the Committee, shall have the authority to
accelerate the vesting of Options for any Participant who is not
an Insider.
6.6 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.
Options shall be exercised by delivery of a written notice
(including telecopies) to the Company (or, if so provided by the
Company, to its designated agent), which notice shall be
irrevocable, setting forth the exact number of Shares with
respect to which the Option is being exercised and including with
such notice payment of the Exercise Price. The Company may waive
the requirement that the exercise notice be in writing upon such
terms and conditions as it shall deem appropriate. When Options
have been transferred, the Company or its designated agent may
require appropriate documentation that the person or persons
exercising the Option, if other than the Participant, has the
right to exercise the Option. No Option may be exercised with
respect to a fraction of a Share.
6.7 Payment. The Exercise 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 made:
(a) in cash, or
(b) unless otherwise provided by the Committee at any time,
and subject to such additional terms and conditions and/or
modifications as the Committee or the Company may impose
from time to time, and further subject to suspension or
termination of this provision by the Committee or Company at
any time, by:
(i) delivery of Shares of Stock owned by the
Participant in partial (if in partial payment, then
together with cash) or full payment (if a fractional
Share remains after payment of the Exercise Price in
full by previously owned Shares, then the fractional
Share shall be withheld for taxes); provided, however,
as a condition to paying any part of the Exercise Price
in Stock, at the time of exercise of the Option, the
Participant must establish to the satisfaction of the
Company that the Stock tendered to the Company must
have been held by the Participant for a minimum of six
(6) months preceding the tender; or
(ii) if the Company has designated a stockbroker
to act as the Company's agent to process Option
exercises, issuance of an exercise notice together with
instructions to such stockbroker irrevocably
instructing the stockbroker: (A) to immediately sell a
sufficient portion of the Shares to pay the Exercise
Price of the Options being exercised and the required
tax withholding, and (B) to deliver on the settlement
date the portion of the proceeds of the sale equal to
the Exercise Price and tax withholding to the Company.
In the event the stockbroker sells any Shares on behalf
of a Participant, the stockbroker shall be acting
solely as the agent of the Participant, and the Company
disclaims any responsibility for the actions of the
stockbroker in making any such sales. No Stock shall
be issued until the settlement date and until the
proceeds (equal to the Option Price and tax
withholding) are paid to the Company.
If payment is made by the delivery of Shares of Stock,
the value of the Shares delivered shall be equal to the Fair
Market Value of the Shares on the day preceding the date of
exercise of the Option.
6.8 Termination of Employment.
Unless otherwise provided by the Committee, the following
limitations on exercise of Options shall apply upon termination
of Employment:
(a) Termination by Death or Disability. In the event the
Employment of a Participant shall terminate by reason of
death or Disability, all outstanding Options granted to that
Participant shall immediately vest as of the date of
termination of Employment and may be exercised, if at all,
no more than three (3) years from the date of the
termination of Employment, unless the Options, by their
terms, expire earlier. However, in the event the
Participant was eligible to Retire at the time of
termination of Employment, notwithstanding the foregoing,
the Options may be exercised, if at all, no more than five
(5) years from the date of the termination of Employment,
unless the Options, by their terms, expire earlier.
(b) Termination for Cause. If the Employment of a
Participant shall be terminated by the Company for Cause,
all outstanding Options held by the Participant shall
immediately be forfeited to the Company and no additional
exercise period shall be allowed, regardless of the vested
status of the Options.
(c) Retirement or Other Termination of Employment. If the
Employment of a Participant shall terminate for any reason
other than the reasons set forth in (a) or (b), above, all
outstanding Options which are vested as of the effective
date of termination of Employment may be exercised, if at
all, no more than five (5) years from the date of
termination of Employment if the Participant is eligible to
Retire, or one (1) year from the date of the termination of
Employment if the Participant is not eligible to Retire, as
the case may be, unless in either case the Options, by their
terms, expire earlier. In the event of the death of the
Participant after termination of Employment, this paragraph
(c) shall still apply and not paragraph (a), above.
(d) Options not Vested at Termination. Except as provided
in paragraph (a), above, all Options held by the Participant
which are not vested on or before the effective date of
termination of Employment shall immediately be forfeited to
the Company (and shall once again become available for grant
under the Plan).
(e) Notwithstanding the foregoing, the Committee may, in its
sole discretion, establish different terms and conditions
pertaining to the effect of termination of Employment, but
no such modification shall shorten the terms of Options
issued prior to such modification.
6.9 Employee 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 period of
employment at a RWAC is equal to or less than five (5) years,
shall not be deemed a termination of Employment. Provided,
however, for purposes of this Article 6, termination of
employment with a RWAC without a concurrent transfer to the
Company or any of its Subsidiaries shall be deemed a termination
of Employment as that term is used herein. Similarly,
termination of an entity's status as a Subsidiary or as a RWAC
shall be deemed a termination of Employment of any Participants
employed by such Subsidiary or RWAC.
6.10 Restrictions on Exercise and Transfer of Options.
Unless otherwise provided by the Committee:
(a) 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 SBC'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.
(b) No Option shall be transferable except: (i) in the case
of the Participant, only upon the Participant's death and in
accordance with the SBC Rules for Employee Beneficiary
Designations; and (ii) in the case of any holder after the
Participant's death, only by will or by the laws of descent
and distribution.
6.11 Competition. Notwithstanding anything in this Article
6 to the contrary, prior to a Change in Control, in the event the
Committee determines, in its sole discretion, that a Participant
is engaging in competitive activity with the Company, any
Subsidiary, or any business in which any of the foregoing have a
substantial interest (the "SBC Businesses"), the Committee may
cancel any Option granted to such Participant, whether or not
vested, in whole or in part. Such cancellation shall be
effective as of the date specified by the Committee. Competitive
activity shall mean any business or activity in the same
geographical market where a substantially similar business
activity is being carried on by an SBC Business, including, but
not limited to, representing or providing consulting services to
any person or entity that is engaged in competition with an SBC
Business or that takes a position adverse to an SBC Business.
However, competitive activity shall not include, among other
things, owning a nonsubstantial interest as a shareholder in a
competing business.
The determination of whether a Participant has engaged in
competitive activity with the Company shall be determined by the
Committee in good faith and in its sole discretion.
Article 7. Restricted Stock
7.1 Grant of Restricted Stock. Subject to the terms and
provisions of the Plan, the Committee, at any time and from time
to time, may grant Shares of Restricted Stock to eligible
Employees in such amounts and upon such terms and conditions as
the Committee shall determine. In addition to any other terms
and conditions imposed by the Committee, vesting of Restricted
Stock may be conditioned upon the attainment of Performance Goals
based on Performance Criteria in the same manner as provided in
Section 8.4, herein, with respect to Performance Shares. No
Employee may receive, in any calendar year, in the form of
Restricted Stock more than one-third of 1% of the Shares approved
for issuance under this Plan.
7.2 Restricted Stock Agreement. The Committee may require,
as a condition to an Award, that a recipient of a Restricted
Stock Award enter into a Restricted Stock Award Agreement,
setting forth the terms and conditions of the Award. In lieu of
a Restricted Stock Award Agreement, the Committee may provide the
terms and conditions of an Award in a notice to the Participant
of the Award, on the Stock certificate representing the
Restricted Stock, in the resolution approving the Award, or in
such other manner as it deems appropriate.
7.3 Transferability. Except as otherwise provided in this
Article 7, the Shares of Restricted Stock granted herein may not
be sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated until the end of the applicable Restriction
Period established by the Committee, which shall not be less than
a period of three years.
7.4 Other Restrictions. The Committee shall impose such
other conditions and/or restrictions on any Shares of Restricted
Stock granted pursuant to the Plan as it may deem advisable
including, without limitation, a requirement that Participants
pay a stipulated purchase price for each Share of Restricted
Stock and/or restrictions under applicable Federal or state
securities laws; and may legend the certificates representing
Restricted Stock to give appropriate notice of such restrictions.
The Company shall also have the right to retain the
certificates representing Shares of Restricted Stock in the
Company's possession until such time as all conditions and/or
restrictions applicable to such Shares have been satisfied.
7.5 Removal of Restrictions. Except as otherwise provided
in this Article 7, Shares of Restricted Stock covered by each
Restricted Stock grant made under the Plan shall become freely
transferable by the Participant after the last day of the
Restriction Period and completion of all conditions to vesting,
if any. However, unless otherwise provided by the Committee, the
Committee, in its sole discretion, shall have the right to
immediately waive all or part of the restrictions and conditions
with regard to all or part of the Shares held by any Participant
at any time.
7.6 Voting Rights, Dividends and Other Distributions.
During the Restriction Period, Participants holding Shares of
Restricted Stock granted hereunder may exercise full voting
rights and shall receive all regular cash dividends paid with
respect to such Shares. Except as provided in the following
sentence, in the sole discretion of the Committee, other cash
dividends and other distributions paid to Participants with
respect to Shares of Restricted Stock may be subject to the same
restrictions and conditions as the Shares of Restricted Stock
with respect to which they were paid. If any such dividends or
distributions are paid in Shares, the Shares shall be subject to
the same restrictions and conditions as the Shares of Restricted
Stock with respect to which they were paid.
7.7 Termination of Employment Due to Death or Disability.
In the event the Employment of a Participant shall terminate by
reason of death or Disability, all Restriction Periods and all
restrictions imposed on outstanding Shares of Restricted Stock
held by the Participant shall immediately lapse and the
Restricted Stock shall immediately become fully vested as of the
date of termination of Employment.
7.8 Termination of Employment for Other Reasons. If the
Employment of a Participant shall terminate for any reason other
than those specifically set forth in Section 7.7 herein, all
Shares of Restricted Stock held by the Participant which are not
vested as of the effective date of termination of Employment
immediately shall be forfeited and returned to the Company.
7.9 Employee 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 period of
employment at a RWAC is equal to or less than five (5) years,
shall not be deemed a termination of Employment. Provided,
however, for purposes of this Article, termination of employment
with a RWAC without a concurrent transfer to the Company or any
of its Subsidiaries shall be deemed a termination of Employment
as that term is used herein. Similarly, termination of an
entity's status as a Subsidiary or as a RWAC shall be deemed a
termination of Employment of any Participants employed by such
Subsidiary or RWAC.
Article 8. Performance Units and Performance Shares
8.1 Grants of Performance Units and Performance Shares.
Subject to the terms of the Plan, Performance Shares and
Performance Units may be granted to eligible Employees at any
time and from time to time, as determined by the Committee. The
Committee shall have complete discretion in determining the
number of Performance Units and/or Performance Shares Awarded to
each Participant.
8.2 Value of Performance Shares and Units.
(a) A Performance Share is equivalent in value to a Share
of Stock. In any calendar year, no individual may be
Awarded Performance Shares having a potential payout of
Shares of Stock exceeding two-thirds of 1% of the Shares
approved for issuance under this Plan.
(b) A Performance Unit shall be equal in value to a fixed
dollar amount determined by the Committee. In any calendar
year, no individual may be Awarded Performance Units having
a potential payout equivalent exceeding the Fair Market
Value of two-thirds of 1% of the Shares approved for
issuance under this Plan. The number of Shares equivalent
to the potential payout of a Performance Unit shall be
determined by dividing the maximum cash payout of the Award
by the Fair Market Value per Share on the effective date of
the grant. In the event the Committee denominates a
Performance Unit Award in dollars instead of Performance
Units, the Award may be referred to as a Key Executive
Officer Short Term Award. In all other respects, the Key
Executive Officer Short Term Award will be treated in the
same manner as Performance Units under this Plan.
8.3 Performance Period. The Performance Period for
Performance Shares and Performance Units is the period over which
the Performance Goals are measured. The Performance Period is
set by the Committee for each Award; however, in no event shall
an Award have a Performance Period of less than one year.
8.4 Performance Goals. For each Award of Performance Shares
or Performance Units, the Committee shall establish performance
objectives ("Performance Goals") for the Company, its
Subsidiaries, and/or divisions of any of foregoing, based on the
Performance Criteria and other factors set forth in (a) through
(d), below. Performance Goals shall include payout tables,
formulas or other standards to be used in determining the extent
to which the Performance Goals are met, and, if met, the number
of Performance Shares and/or Performance Units which would be
converted into Stock and/or cash (or the rate of such conversion)
and distributed to Participants in accordance with Section 8.6.
All Performance Shares and Performance Units which may not be
converted under the Performance Goals or which are reduced by the
Committee under Section 8.6 or which may not be converted for any
other reason after the end of the Performance Period shall be
canceled at the time they would otherwise be distributable. When
the Committee desires an Award to qualify under Section 162(m) of
the Code, as amended, the Committee shall establish the
Performance Goals for the respective Performance Shares and
Performance Units prior to or within 90 days of the beginning of
the service relating to such Performance Goal, and not later than
after 25% of such period of service has elapsed. For all other
Awards, the Performance Goals must be established before the end
of the respective Performance Period.
(a) The Performance Criteria which the Committee is
authorized to use, in its sole discretion, are any of the
following criteria or any combination thereof:
(1) Financial performance of the Company (on a
consolidated basis), of one or more of its
Subsidiaries, and/or a division of any of the
foregoing. Such financial performance may be based on
net income and/or Value Added (after-tax cash operating
profit less depreciation and less a capital charge).
(2) Service performance of the Company (on a
consolidated basis), of one or more of its
Subsidiaries, and/or of a division of any of the
foregoing. Such service performance may be based upon
measured customer perceptions of service quality.
(3) The Company's Stock price; return on
shareholders' equity; total shareholder return (Stock
price appreciation plus dividends, assuming the
reinvestment of dividends); and/or earnings per share.
(4) With respect to the Company (on a consolidated
basis), to one or more of its Subsidiaries, and/or to a
division of any of the foregoing: sales; costs; market
share of a product or service; return on net assets;
return on assets; return on capital; profit margin;
and/or operating revenues, expenses or earnings.
(b) If the performance of more than one Subsidiary is being
measured to determine the attainment of performance goals,
then a weighted average of the Subsidiaries' results shall
be used, as determined by the Committee, including, but not
limited to, basing such weighting upon the revenues, assets
or net income for each Subsidiary for any year prior to the
Performance Period or by using budgets to weight such
Subsidiaries.
(c) Except to the extent otherwise provided by the
Committee in full or in part, if any of the following events
occur during a Performance Period and would directly affect
the determination of whether or the extent to which
Performance Goals are met, they shall be disregarded in any
such computation: changes in accounting principles;
extraordinary items; changes in tax laws affecting net
income and/or Value Added; natural disasters, including
floods, hurricanes, and earthquakes; and intentionally
inflicted damage to property which directly or indirectly
damages the property of the Company or its Subsidiaries. No
such adjustment shall be made to the extent such adjustment
would cause the Performance Shares or Performance Units to
fail to satisfy the performance based exemption of Section
162(m) of the Code.
8.5 Dividend Equivalents on Performance Shares. Unless
reduced or eliminated by the Committee, a cash payment in an
amount equal to the dividend payable on one Share will be made to
each Participant for each Performance Share which on the record
date for the dividend had been awarded to the Participant and not
converted, distributed (or deferred) or canceled.
8.6 Form and Timing of Payment of Performance Units and
Performance Shares. As soon as practicable after the applicable
Performance Period has ended and all other conditions (other than
Committee actions) to conversion and distribution of a
Performance Share and/or Performance Unit Award have been
satisfied (or, if applicable, at such other time determined by
the Committee at or before the establishment of the Performance
Goals for such Performance Period), the Committee shall determine
whether and the extent to which the Performance Goals were met
for the applicable Performance Units and Performance Shares. If
Performance Goals have been met, then the number of Performance
Units and Performance Shares to be converted into Stock and/or
cash and distributed to the Participants shall be determined in
accordance with the Performance Goals for such Awards, subject to
any limits imposed by the Committee. Unless the Participant has
elected to defer all or part of his Performance Units or
Performance Shares as provided in Article 10, herein, payment of
Performance Units and Performance Shares shall be made in a
single lump sum, as soon as reasonably administratively possible
following the determination of the number of Shares or amount of
cash to which the Participant is entitled. Performance Units
will be distributed to Participants in the form of cash.
Performance Shares will be distributed to Participants in the
form of 50% Stock and 50% Cash, or at the Participant's election,
100% Stock or 100% Cash. In the event the Participant is no
longer an Employee at the time of the distribution, then the
distribution shall be 100% in cash, provided the Participant may
elect to take 50% or 100% in Stock. At any time prior to the
distribution of the Performance Shares and/or Performance Units
(or if distribution has been deferred, then prior to the time the
Awards would have been distributed), unless otherwise provided by
the Committee, the Committee shall have the authority to reduce
or eliminate the number of Performance Units or Performance
Shares to be converted and distributed or to mandate the form in
which the Award shall be paid (i.e., in cash, in Stock or both,
in any proportions determined by the Committee).
Unless otherwise provided by the Committee, any election to
take a greater amount of cash or Stock with respect to
Performance Shares must be made in the calendar year prior to the
calendar year in which the Performance Shares are distributed (or
if distribution has been deferred, then in the year prior to the
year the Performance Shares would have been distributed absent
such deferral). In addition, if required in order to exempt the
transaction from the provisions of Section 16(b) of the Exchange
Act, any election by an Insider to take a greater amount in cash
must be made during a Window Period and shall be subject to
Committee approval.
For the purpose of converting Performance Shares into cash
and distributing the same to the holders thereof (or for
determining the amount of cash to be deferred), the value of a
Performance Share shall be the average of the Fair Market Values
of Shares for the period of five (5) trading days ending on the
valuation date. The valuation date shall be the first business
day of the second month in the year of distribution (or the year
it would have been distributed were it not deferred), except that
in the case of distributions due to death or Disability, the
valuation date shall be the first business day of the month in
which the Committee determines the distribution. Performance
Shares to be distributed in the form of Stock will be converted
at the rate of one (1) Share of Stock per Performance Share.
8.7 Termination of Employment Due to Death, Disability, or
Retirement. If the Employment of a Participant shall terminate
by reason of death or Disability, the Participant shall receive a
lump sum payout of all outstanding Performance Units and
Performance Shares calculated as if all unfinished Performance
Periods had ended with 100% of the Performance Goals achieved,
payable in the year following the date of termination of
Employment. In the event of Retirement, the full Performance
Units and Performance Shares shall be converted and distributed
based on and subject to the achievement of the Performance Goals
and in accordance with all other terms of the Award and this
Plan.
8.8 Termination of Employment for Other Reasons. If the
Employment of a Participant shall terminate for other than a
reason set forth in Section 8.7 (and other than for Cause), the
number of Performance Units and Performance Shares to be
converted and distributed shall be converted and distributed
based upon the achievement of the Performance Goals and in
accordance with all other terms of the Award and the Plan;
however, the Participant may receive no more than a prorated
payout of all Performance Units and Performance Shares, based on
the portions of the respective Performance Periods that have been
completed.
8.9 Termination of Employment for Cause. In the event that
a Participant's Employment shall be terminated by the Company for
Cause, all Performance Units and Performance Shares shall be
forfeited by the Participant to the Company.
8.10 Nontransferability. Performance Units and Performance
Shares may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than in accordance
with the SBC Rules for Employee Beneficiary Designations.
Article 9. Beneficiary Designation
In the event of the death of a Participant, distributions or
Awards under this Plan, other than Restricted Stock, shall pass
in accordance with the SBC Rules for Employee Beneficiary
Designations.
Article 10. Deferrals
10.1 Deferrals. Unless otherwise provided by the Committee,
a Participant may defer all or part of the Stock or cash to be
received upon conversion and distribution of Performance Units or
Performance Shares. In the event of the termination of
Employment of a Participant prior to becoming eligible for
Retirement, no deferrals under this Article shall be permitted
and any previously deferred Performance Shares or Performance
Units, and earnings thereon, shall be distributed as soon as
administratively possible.
10.2 Deferral of Performance Unit and Performance Share
Distributions. Prior to the calendar year in which Performance
Units or Performance Shares are to be distributed (or if
deferred, prior to the calendar year the Awards would have been
distributed), Participants may elect to defer the receipt of a
Performance Unit or Performance Share distribution upon such
terms as the Committee deems appropriate. Unless otherwise
provided by the Committee, Participants may elect to defer
receipt of all or part of a Performance Unit or Performance Share
for distribution in a lump sum in February of any calendar year
following the year in which the Awards would otherwise be
distributed, or to be distributed in up to 15 annual installments
(each installment shall be equal to the total Shares or cash in
the Award divided by the number of remaining installments),
payable each calendar year in the month determined by the
Participant, beginning as soon as administratively possible after
Retirement or in a later month in the calendar year of
Retirement, or in the calendar year immediately thereafter.
(a) Deferred amounts which would otherwise have been
distributed in cash shall be credited to the Participant's
account and shall bear interest from the date the Awards
would otherwise have been paid. The interest will be
credited quarterly to the account at the declared rate
determined by the Company from time to time, which shall not
be less than one-fourth of the annual Moody's Corporate Bond
Yield Average-Monthly Average Corporates, as published by
Moody's Investor Service, Inc., (or successor thereto) for
the month of September before the calendar year in question.
(b) Deferred amounts which would otherwise have been
distributed in Shares by the Company shall be credited to
the Participant's account as deferred Shares. The
Participant's account shall also be credited on each
dividend payment date for Shares with an amount equivalent
to the dividend payable on the number of Shares equal to the
number of deferred Shares in the Participant's account on
the record date for such dividend. Such amount shall then be
converted to a number of additional deferred Shares
determined by dividing such amount by the price of Shares,
as determined in the following sentence. The price of Shares
related to any dividend payment date shall be the average of
the Fair Market Values of Shares for the period of five (5)
trading days ending on such dividend payment date, or the
period of five (5) trading days immediately preceding such
dividend payment date if the New York Stock Exchange is
closed on the dividend payment date.
(c) At any time during the calendar year prior to the
calendar year during which an Award deferred under the
provisions of this Article 10 is scheduled for distribution,
a Participant may further defer the commencement of the
distribution of such Award to a subsequent calendar year and
upon such further deferral, change the number of
installments applicable to the distribution of the Award.
Amounts that are further deferred pursuant to this Article
10 shall continue to be subject to all provisions of this
Plan including further distribution modifications as
provided herein.
Article 11. Employee Matters
11.1 Employment Not Guaranteed. Nothing in the Plan shall
interfere with or limit in any way the right of the Company or
any Subsidiary to terminate any Participant's Employment at any
time, nor confer upon any Participant any right to continue in
the employ of the Company or one of its Subsidiaries.
11.2 Participation. No Employee shall have the right to be
selected to receive an Award under this Plan, or, having been so
selected, to be selected to receive a future Award.
11.3 Claims and Appeals. Any claim under the Plan by a
Participant or anyone claiming through a Participant shall be
presented to the Committee. Any person whose claim under the Plan
has been denied may, within sixty (60) days after receipt of
notice of denial, submit to the Committee, a written request for
review of the decision denying the claim. The Committee shall
determine conclusively for all parties all questions arising in
the administration of the Plan.
Article 12. Change in Control
Upon the occurrence of a Change in Control:
(a) Any and all Options granted hereunder immediately shall
become vested and exercisable;
(b) Any Restriction Periods and all restrictions imposed on
Restricted Shares shall lapse and they shall immediately
become fully vested;
(c) The 100% Performance Goal for all Performance Units and
Performance Shares relating to incomplete Performance
Periods shall be deemed to have been fully achieved and
shall be converted and distributed in accordance with all
other terms of the Award and this Plan; provided, however,
notwithstanding anything to the contrary in this Plan, no
outstanding Performance Unit or Performance Share may be
reduced.
Article 13. Amendment, Modification, and Termination
13.1 Amendment, Modification, and Termination. The Board
may at any time suspend or terminate the Plan in whole or in
part; the Disinterested Committee may at any time and from time
to time, alter or amend the Plan in whole or in part.
13.2 Awards Previously Granted. No termination, amendment,
or modification of the Plan shall adversely affect in any
material way any Award previously granted under the Plan, without
the written consent of the Participant holding such Award.
Article 14. Withholding
14.1 Tax Withholding. The Company shall deduct or withhold
an amount sufficient to satisfy Federal, state, and local taxes
(including the Participant's employment tax obligations) required
by law to be withheld with respect to any taxable event arising
or as a result of this Plan ("Withholding Taxes").
14.2 Share Withholding. With respect to withholding
required upon the exercise of Options, upon the lapse of
restrictions on Restricted Stock, upon the distribution of
Performance Shares in the form of Stock, or upon any other
taxable event hereunder involving the transfer of Stock to a
Participant, the Company shall withhold Stock having a Fair
Market Value on the date the tax is to be determined in an amount
equal to the Withholding Taxes on such Stock. Any fractional
Share remaining after the withholding shall be withheld as
additional Federal withholding.
Unless otherwise determined by the Committee, when the
method of payment for the Exercise Price is from the sale by a
stockbroker pursuant to Section 6.7(b)(ii), herein, of the Stock
acquired through the Option exercise, then the tax withholding
shall be satisfied out of the proceeds. For administrative
purposes in determining the amount of taxes due, the sale price
of such Stock shall be deemed to be the Fair Market Value of the
Stock.
Prior to the end of any Performance Period a Participant may
elect to have a greater amount of Stock withheld from the
distribution of Performance Shares to pay withholding taxes;
provided, however, the Committee may prohibit or limit any
individual election or all such elections at any time. In
addition, if required in order to exempt the transaction from the
provisions of Section 16(b) of the Exchange Act, any such
election by an Insider must be made during a Window Period and
shall be subject to Committee approval.
Article 15. Successors
All obligations of the Company under the Plan, with respect
to Awards granted hereunder, 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.
Article 16. Legal Construction
16.1 Gender and Number. Except where otherwise indicated by
the context, any masculine term used herein also shall include
the feminine; the plural shall include the singular and the
singular shall include the plural.
16.2 Severability. In the event any provision of the Plan
shall be held illegal or invalid for any reason, the illegality
or invalidity shall not affect the remaining parts of the Plan,
and the Plan shall be construed and enforced as if the illegal or
invalid provision had not been included.
16.3 Requirements of Law. The granting of Awards and the
issuance of Shares under the Plan shall be subject to all
applicable laws, rules, and regulations, and to such approvals by
any governmental agencies or national securities exchanges as may
be required.
16.4 Securities Law Compliance. With respect to Insiders,
transactions under this Plan are intended to comply with all
applicable conditions or Rule 16b-3 or its successors under the
Exchange Act. To the extent any provision of the plan or action
by the Committee fails to comply with a condition of Rule 16b-3
or its successors, it shall not apply to the Insiders or
transactions thereby.
16.5 Governing Law. To the extent not preempted by Federal
law, the Plan, and all agreements hereunder, shall be construed
in accordance with and governed by the laws of the State of
Texas.
<TABLE>
EXHIBIT 12
SBC COMMUNICATIONS INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
Dollars in Millions
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Income Before Income Taxes,
Extraordinary Loss and Cumulative
Effect of Changes in
Accounting Principles* $ 1,423.2 $1,244.7 $2,698.2 $2,300.0 $1,882.9 $1,701.2 $1,557.0
Add: Interest Expense 237.3 260.0 515.1 480.2 496.2 530.0 577.7
1/3 Rental Expense 21.0 17.7 45.9 41.8 41.0 45.1 37.5
Adjusted Earnings $ 1,681.5 $1,522.4 $3,259.2 $2,822.0 $2,420.1 $2,276.3 $2,172.2
Total Interest Charges $ 248.6 $ 260.0 $ 515.1 $ 480.2 $ 496.2 $ 530.0 $ 577.7
1/3 Rental Expense 21.0 17.7 45.9 41.8 41.0 45.1 37.5
Adjusted Fixed Charges $ 269.6 $ 277.7 $ 561.0 $ 522.0 $ 537.2 $ 575.1 $ 615.2
Ratio of Earnings to Fixed Charges 6.24 5.48 5.81 5.41 4.51 3.96 3.53
*Undistributed earnings on investments accounted for under the equity method have been excluded.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SBC
COMMUNICATIONS INC. JUNE 30, 1996 CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 368,700
<SECURITIES> 624,800
<RECEIVABLES> 2,360,700
<ALLOWANCES> 140,700
<INVENTORY> 0<F1>
<CURRENT-ASSETS> 3,874,100
<PP&E> 31,702,200
<DEPRECIATION> 18,426,500
<TOTAL-ASSETS> 22,494,900
<CURRENT-LIABILITIES> 5,118,900
<BONDS> 5,534,700
0
0
<COMMON> 620,500
<OTHER-SE> 6,070,100
<TOTAL-LIABILITY-AND-EQUITY> 22,494,900
<SALES> 0<F2>
<TOTAL-REVENUES> 6,529,400
<CGS> 0<F3>
<TOTAL-COSTS> 1,913,400
<OTHER-EXPENSES> 1,099,700
<LOSS-PROVISION> 92,100
<INTEREST-EXPENSE> 237,300
<INCOME-PRETAX> 1,508,900
<INCOME-TAX> 543,900
<INCOME-CONTINUING> 965,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 965,000
<EPS-PRIMARY> 1.58
<EPS-DILUTED> 0
<FN>
<F1>THIS AMOUNT IS IMMATERIAL.
<F2>NET SALES OF TANGIBLE PRODUCTS IS NOT MORE THAN 10% OF TOTAL OPERATING REVENUES
AND THEREFORE HAS NOT BEEN STATED SEPARATELY IN THE FINANCIAL STATEMENTS
PURSUANT TO REGULATION S-X, RULE 5-03(B). THIS AMOUNT IS INCLUDED IN THE
"TOTAL REVENUE" TAG.
<F3>COST OF TANGIBLE GOODS SOLD IS INCLUDED IN COST OF SERVICES AND PRODUCTS IN THE
FINANCIAL STATEMENTS AND THE "TOTAL-COST" TAG, PURSUANT TO REGULATION S-X, RULE
5-03(B).
</FN>
</TABLE>
