UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q
 

 
(Mark One)
   

 
x
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 
       
   
For the quarterly period ended June 30, 2009
 
       
   
or
 
       
 
o
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

AT&T INC.

Incorporated under the laws of the State of Delaware
I.R.S. Employer Identification Number 43-1301883
 
208 S. Akard St., Dallas, Texas 75202
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 [   ]
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes [X]   No [   ]
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
[X]
 
Accelerated filer
[   ]
Non-accelerated filer
[   ]
(Do not check if a smaller reporting company)
Smaller reporting company
[   ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [   ]   No [X]
 
At July 31, 2009, there were 5,900 million common shares outstanding.

 
 

 

PART I - FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
   
AT&T INC.
 
CONSOLIDATED STATEMENTS OF INCOME
 
Dollars in millions except per share amounts
 
(Unaudited)
 
   
Three months ended
   
Six months ended
 
   
June 30,
   
June 30,
 
   
2009
   
2008
   
2009
   
2008
 
Operating Revenues
                       
Wireless service
  $ 11,960     $ 10,894     $ 23,606     $ 21,499  
Voice
    8,256       9,519       16,762       19,212  
Data
    6,307       6,054       12,557       12,026  
Directory
    1,211       1,383       2,460       2,781  
Other
    3,000       3,016       5,920       6,092  
Total operating revenues
    30,734       30,866       61,305       61,610  
Operating Expenses
                               
Cost of sales (exclusive of depreciation and amortization shown separately below)
    12,478       11,897       24,720       23,892  
Selling, general and administrative
    7,847       7,444       15,553       15,310  
Depreciation and amortization
    4,903       4,958       9,789       9,861  
Total operating expenses
    25,228       24,299       50,062       49,063  
Operating Income
    5,506       6,567       11,243       12,547  
Other Income (Expense)
                               
Interest expense
    (879 )     (854 )     (1,728 )     (1,719 )
Equity in net income of affiliates
    231       212       368       455  
Other income (expense) – net
    31       29       16       120  
Total other income (expense)
    (617 )     (613 )     (1,344 )     (1,144 )
Income Before Income Taxes
    4,889       5,954       9,899       11,403  
Income taxes
    1,613       2,111       3,422       4,041  
Net Income
    3,276       3,843       6,477       7,362  
Less: Net Income Attributable to Noncontrolling Interest
    (78 )     (71 )     (153 )     (129 )
Net Income Attributable to AT&T
  $ 3,198     $ 3,772     $ 6,324     $ 7,233  
                                 
Basic Earnings Per Share Attributable to AT&T
  $ 0.54     $ 0.64     $ 1.07     $ 1.21  
Diluted Earnings Per Share Attributable to AT&T
  $ 0.54     $ 0.63     $ 1.07     $ 1.21  
Weighted Average Number of Common
                               
Shares Outstanding Basic (in millions)
    5,900       5,926       5,898       5,962  
Dividends Declared Per Common Share
  $ 0.410     $ 0.400     $ 0.820     $ 0.800  
See Notes to Consolidated Financial Statements.

 

 

AT&T INC.
 
CONSOLIDATED BALANCE SHEETS
 
Dollars in millions except per share amounts
           
   
June 30,
   
December 31,
 
   
2009
   
2008
 
Assets
 
(Unaudited)
       
Current Assets
           
Cash and cash equivalents
  $ 7,348     $ 1,792  
Accounts receivable – net of allowances for
               
uncollectibles of $1,269 and $1,270
    14,846       16,047  
Prepaid expenses
    1,786       1,538  
Deferred income taxes
    964       1,014  
Other current assets
    1,996       2,165  
Total current assets
    26,940       22,556  
Property, plant and equipment
    222,926       218,579  
Less: accumulated depreciation and amortization
    (124,697 )     (119,491 )
Property, Plant and Equipment – Net
    98,229       99,088  
Goodwill
    71,691       71,829  
Licenses
    47,674       47,306  
Customer Lists and Relationships – Net
    8,682       10,582  
Other Intangible Assets – Net
    5,773       5,824  
Investments in Equity Affiliates
    2,749       2,332  
Other Assets
    6,180       5,728  
Total Assets
  $ 267,918     $ 265,245  
                 
Liabilities and Stockholders’ Equity
               
Current Liabilities
               
Debt maturing within one year
  $ 10,155     $ 14,119  
Accounts payable and accrued liabilities
    18,046       20,032  
Advanced billing and customer deposits
    3,932       3,849  
Accrued taxes
    1,667       1,874  
Dividends payable
    2,419       2,416  
Total current liabilities
    36,219       42,290  
Long-Term Debt
    66,565       60,872  
Deferred Credits and Other Noncurrent Liabilities
               
Deferred income taxes
    20,354       19,196  
Postemployment benefit obligation
    31,985       31,930  
Other noncurrent liabilities
    13,783       14,207  
Total deferred credits and other noncurrent liabilities
    66,122       65,333  
                 
Stockholders’ Equity
               
Common shares issued ($1 par value)
    6,495       6,495  
Capital in excess of par value
    91,637       91,728  
Retained earnings
    38,069       36,591  
Treasury shares (at cost)
    (21,284 )     (21,410 )
Accumulated other comprehensive loss
    (16,308 )     (17,057 )
Noncontrolling interest
    403       403  
Total stockholders’ equity
    99,012       96,750  
Total Liabilities and Stockholders’ Equity
  $ 267,918     $ 265,245  
See Notes to Consolidated Financial Statements.

 

 

AT&T INC.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Dollars in millions, increase (decrease) in cash and cash equivalents
 
(Unaudited)
 
   
Six months ended
   
June 30,
   
2009
   
2008
 
Operating Activities
           
Net income
  $ 6,477     $ 7,362  
Adjustments to reconcile net income to
               
net cash provided by operating activities:
               
Depreciation and amortization
    9,789       9,861  
Provision for uncollectible accounts
    976       860  
Deferred income tax expense
    744       1,384  
Net loss from impairment and sale of investments
    74       -  
Changes in operating assets and liabilities:
               
Accounts receivable
    226       (776 )
Other current assets
    (105 )     274  
Accounts payable and accrued liabilities
    (887 )     (5,117 )
Stock-based compensation tax benefit
    -       (14 )
Other - net
    (1,492 )     (329 )
Total adjustments
    9,325       6,143  
Net Cash Provided by Operating Activities
    15,802       13,505  
                 
Investing Activities
               
Construction and capital expenditures
               
Capital expenditures
    (7,036 )     (9,320 )
Interest during construction
    (368 )     (257 )
Acquisitions, net of cash acquired
    (55 )     (10,087 )
Dispositions
    199       623  
Proceeds from sale of securities, net of investments
    (21 )     (73 )
Other
    38       41  
Net Cash Used in Investing Activities
    (7,243 )     (19,073 )
                 
Financing Activities
               
Net change in short-term borrowings with
               
original maturities of three months or less
    (3,915 )     6,590  
Issuance of long-term debt
    8,161       10,924  
Repayment of long-term debt
    (2,037 )     (1,605 )
Purchase of treasury shares
    -       (6,077 )
Issuance of treasury shares
    4       310  
Dividends paid
    (4,834 )     (4,802 )
Stock-based compensation tax benefit
    -       14  
Other
    (382 )     (125 )
Net Cash Provided by (Used in) Financing Activities
    (3,003 )     5,229  
Net increase (decrease) in cash and cash equivalents
    5,556       (339 )
Cash and cash equivalents beginning of year
    1,792       1,970  
Cash and Cash Equivalents End of Period
  $ 7,348     $ 1,631  
                 
Cash paid (refunded) during the six months ended June 30 for:
               
Interest
  $ 2,219     $ 1,863  
Income taxes, net of refunds
  $ 2,295     $ 4,730  
See Notes to Consolidated Financial Statements.

 

 

AT&T INC.
     
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
 
     
Dollars and shares in millions, except per share amounts
     
(Unaudited)
     
   
Six months ended
   
June 30, 2009
   
Shares
   
Amount
 
Common Stock
           
Balance at beginning of year
    6,495     $ 6,495  
Balance at end of period
    6,495     $ 6,495  
                 
Capital in Excess of Par Value
               
Balance at beginning of year
          $ 91,728  
Issuance of shares
            26  
Share-based payments
            (117 )
Balance at end of period
          $ 91,637  
                 
Retained Earnings
               
Balance at beginning of year
          $ 36,591  
Net income attributable to AT&T ($1.07 per diluted share)
            6,324  
Dividends to stockholders ($0.82 per share)
            (4,837 )
Other
            (9 )
Balance at end of period
          $ 38,069  
                 
Treasury Shares
               
Balance at beginning of year
    (602 )   $ (21,410 )
Purchase of shares
    -       -  
Issuance of shares
    7       126  
Balance at end of period
    (595 )   $ (21,284 )
                 
Accumulated Other Comprehensive Income (Loss), net of tax
               
Balance at beginning of year
          $ (17,057 )
Other comprehensive income (see Note 2)
            749  
Balance at end of period
          $ (16,308 )
                 
Noncontrolling interest at beginning of year
          $ 403  
Net income
            153  
Distributions
            (145 )
Translation adjustments
            (8 )
Noncontrolling interest at end of period
          $ 403  
                 
Total stockholders equity as of December 31, 2008
          $ 96,750  
Changes attributable to AT&T stockholders
            2,262  
Changes attributable to noncontrolling interest
            -  
Total stockholders equity as of June 30, 2009
          $ 99,012  
See Notes to Consolidated Financial Statements.
 


 

 
AT&T INC.
JUNE 30, 2009

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Dollars in millions except per share amounts

NOTE 1. PREPARATION OF INTERIM FINANCIAL STATEMENTS

Basis of Presentation Throughout this document, AT&T Inc. is referred to as “AT&T,” “we” or the “Company.” The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission that permit reduced disclosure for interim periods. We believe that these consolidated financial statements include all adjustments (consisting only of normal recurring accruals) necessary to present fairly the results for the interim periods shown. The results for the interim periods are not necessarily indicative of results for the full year. You should read this document in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2008.

The consolidated financial statements include the accounts of the Company and our majority-owned subsidiaries and affiliates. Our subsidiaries and affiliates operate in the communications services industry both domestically and internationally, providing wireless and wireline communications services and equipment, managed networking, wholesale services and advertising solutions.

All significant intercompany transactions are eliminated in the consolidation process. Investments in partnerships and less than majority-owned subsidiaries where we have significant influence are accounted for under the equity method. Earnings from certain foreign equity investments accounted for using the equity method are included for periods ended within up to one month of our period end.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes, including estimates of probable losses and expenses. Actual results could differ from those estimates. We have reclassified certain amounts in prior-period financial statements to conform to the current period’s presentation.

In December 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51” (FAS 160). FAS 160 requires noncontrolling interests held by parties other than the parent in subsidiaries to be clearly identified, labeled, and presented in the consolidated statement of financial position within equity, but separate from the parent’s equity. For us, FAS 160 became effective January 1, 2009, with restatement of prior financial statements.

In April 2009, the FASB issued FASB Staff Position FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (FSP FAS 107-1 and APB 28-1), FASB Staff Position FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (FSP FAS 157-4), and FASB Staff Position FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (FSP FAS 115-2 and FAS 124-2). These staff positions require enhanced disclosures on financial instruments, and are effective for interim and annual reporting periods beginning in our second quarter and have increased quarterly disclosures but did not have an impact on our financial position and results of operations (see Note 6).

Valuation and Other Adjustments In accordance with Statement of Financial Accounting Standards No. 112, “Employers’ Accounting for Postemployment Benefits” (FAS 112), we establish obligations for expected termination benefits provided under existing plans to former or inactive employees after employment but before retirement. These benefits include severance payments, workers’ compensation, disability, medical continuation coverage and other benefits. At June 30, 2009, we had severance accruals under FAS 112 of $400. At December 31, 2008, we had severance accruals of $752.


 

 
AT&T INC.
JUNE 30, 2009

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

Included in the current liabilities reported on our consolidated balance sheet are accruals established prior to 2009 under Emerging Issues Task Force (EITF) Issue No. 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination” (EITF 95-3). The liabilities include accruals for severance, lease terminations and equipment removal costs associated with our acquisitions of AT&T Corp., BellSouth Corporation (BellSouth) and Dobson Communications Corporation. Following is a summary of the accruals recorded under EITF 95-3 at December 31, 2008, cash payments made during 2009 and the adjustments thereto.

   
12/31/08
   
Cash
   
Adjustments
   
6/30/09
 
   
Balance
   
Payments
   
and Accruals
   
Balance
 
Severance accruals paid from:
                       
Company funds
  $ 140     $ (89 )   $ (23 )   $ 28  
Pension and postemployment benefit plans
    103       (3 )     -       100  
Lease terminations
    387       (37 )     (11 )     339  
Equipment removal and other related costs
    88       (36 )     (10 )     42  
Total
  $ 718     $ (165 )   $ (44 )   $ 509  

New Accounting Standards

FAS 165   In May 2009, the FASB issued Statement of Financial Accounting Standards No. 165, “Subsequent Events” (FAS 165). FAS 165 establishes general standards of accounting for and disclosing events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This statement is effective for interim and annual periods ending after June 15, 2009. In preparing the accompanying unaudited consolidated financial statements, the Company has reviewed, as determined necessary by the Company’s management, events that have occurred after June 30, 2009, up until the issuance of the financial statements, which occurred on August 5, 2009.

FAS 166   In June 2009, the FASB issued Statement of Financial Accounting Standards No. 166, “Accounting for Transfers of Financial Assets – an amendment of FASB Statement No. 140” (FAS 166). FAS 166 amends FASB Statement of Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” (FAS 140), removing the concept of a qualifying special-purpose entity, and removing the exception from applying FASB Interpretation No. 46(R) (revised December 2003), “Consolidation of Variable Interest Entities” (FIN 46(R)), to qualifying special-purpose entities. This statement is effective for both interim and annual periods as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, and its impact will vary with each future transfer of financial assets.

FAS 167   In June 2009, the FASB issued Statement of Financial Accounting Standards No. 167, “Amendments to FASB Interpretation No. 46(R)” (FAS 167). FAS 167 amends FIN 46(R), to require an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity. This statement is effective for both interim and annual periods as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, and we are currently evaluating its impact on our financial position and results of operations.



 

 
AT&T INC.
JUNE 30, 2009

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

NOTE 2. COMPREHENSIVE INCOME

The components of our comprehensive income for the three and six months ended June 30, 2009 and 2008 include net income, adjustments to stockholders’ equity for the foreign currency translation adjustment, net unrealized gain (loss) on available-for-sale securities, net unrealized gain (loss) on cash flow hedges and defined benefit postretirement plans. The foreign currency translation adjustment was due to exchange rate fluctuations in our foreign affiliates’ local currencies and the reclassification adjustment on cash flow hedges was due to the amortization of losses from our interest rate forward contracts.

Following is our comprehensive income with the respective tax impacts for the three months and six months periods ending June 30, 2009 and 2008:

   
Three months ended
   
Six months ended
 
   
June 30,
   
June 30,
 
   
2009
   
2008
   
2009
   
2008
 
Net income
  $ 3,276     $ 3,843     $ 6,477     $ 7,362  
Other comprehensive income, net of tax:
                               
Foreign currency translation adjustment (includes $1, $8, $8 and $(4) attributable to noncontrolling interest), net of taxes of $63, $17, $44 and $60
    119       31       84       109  
Net unrealized gains (losses) on securities:
                               
Unrealized gains (losses), net of taxes of $63, $14, $15 and $(35)
    119       26       29       (64 )
Less reclassification adjustment realized in net income, net of taxes of $0, $19, $41 and $(9)
    -       34       77       (16 )
Net unrealized gains (losses) on cash flow hedges:
                               
Unrealized gains (losses), net of taxes of $121, $(10), $195 and $(52)
    222       (18 )     368       (96 )
Unrealized gain (loss) on rate locks, net of taxes of $7, $(2), $29 and $(2)
    12       (3 )     50       (3 )
Reclassification adjustment for losses on cash flow hedges included in net income, net of taxes of $1, $3, $4 and $4
    4       5       7       9  
Defined benefit postretirement plans:
                               
Amortization of net actuarial (gain) loss and prior service benefit included in net income, net of taxes of $37, $(17), $67 and $(33)
    69       (31 )     126       (59 )
Other
    1       -       -       -  
Other comprehensive income (loss)
    546       44       741       (120 )
Less: Total comprehensive income attributable to the noncontrolling interest
    (77 )     (63 )     (145 )     (133 )
Total Comprehensive Income Attributable to AT&T
  $ 3,745     $ 3,824     $ 7,073     $ 7,109  

 
 

 
AT&T INC.
JUNE 30, 2009

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

NOTE 3. EARNINGS PER SHARE

A reconciliation of the numerators and denominators of basic earnings per share and diluted earnings per share for net income for the three and six months ended June 30, 2009 and 2008 are shown in the table below:

   
Three months ended
   
Six months ended
 
   
June 30,
   
June 30,
 
   
2009
   
2008
   
2009
   
2008
 
Numerators
                       
Numerator for basic earnings per share:
                       
Net income attributable to AT&T
  $ 3,198     $ 3,772     $ 6,324     $ 7,233  
Dilutive potential common shares:
                               
Other stock-based compensation
    2       2       5       4  
Numerator for diluted earnings per share
  $ 3,200     $ 3,774     $ 6,329     $ 7,237  
Denominators (000,000)
                               
Denominator for basic earnings per share:
                               
Weighted-average number of common
                               
shares outstanding
    5,900       5,926       5,898       5,962  
Dilutive potential common shares:
                               
Stock options
    3       15       3       15  
Other stock-based compensation
    20       21       22       20  
Denominator for diluted earnings per share
    5,923       5,962       5,923       5,997  
Basic earnings per share
  $ 0.54     $ 0.64     $ 1.07     $ 1.21  
Diluted earnings per share
  $ 0.54     $ 0.63     $ 1.07     $ 1.21  

At June 30, 2009, we had issued and outstanding options to purchase approximately 183 million shares of AT&T common stock. The exercise prices of options to purchase a weighted average of 164 million shares in the second quarter and 171 million for the first six months were above the average market price of AT&T stock. Accordingly, we did not include these amounts in determining the dilutive potential common shares for the respective period. At June 30, 2009, the exercise prices of 16 million share options were below market price.

At June 30, 2008, we had issued and outstanding options to purchase approximately 209 million shares of AT&T common stock. The exercise prices of options to purchase a weighted average of 104 million shares in the second quarter and 110 million for the first six months were above the average market price of AT&T stock. Accordingly, we did not include these amounts in determining the dilutive potential common shares for the respective period. At June 30, 2008, the exercise prices of 105 million share options were below market price.


 

 
AT&T INC.
JUNE 30, 2009

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

NOTE 4. SEGMENT INFORMATION

Our segments are strategic business units that offer different products and services over various technology platforms and are managed accordingly. We analyze our various operating segments based on segment income before income taxes, reviewing operating revenues, operating expenses (depreciation and non-depreciation) and equity income for each segment. We make our capital allocations decisions primarily based on the network (wireless or wireline) providing services. Interest expense and other income (expense) – net are managed only on a total company basis and are, accordingly, reflected only in consolidated results. Therefore, these items are not included in the calculation of each segment’s percentage of our consolidated results. We have four reportable segments: (1) wireless, (2) wireline, (3) advertising solutions and (4) other.

The wireless segment uses our nationwide network to provide consumer and business customers with wireless voice and advanced data communications services.

The wireline segment uses our regional, national and global network to provide consumer and business customers with landline voice and data communications services, AT&T U-verse SM TV, high-speed broadband and voice services (U-verse) and managed networking to business customers. Additionally, we offer satellite television services through our agency arrangements.

The advertising solutions segment publishes Yellow and White Pages directories and sells advertising in various media, including directory and Internet-based advertising, and local search.

The other segment includes results from Sterling Commerce Inc., customer information services and all corporate and other operations. This segment includes our portion of the results from our international equity investments. Also included in the other segment are impacts of management decisions affecting the company for which management does not evaluate the individual operating segments.

In the following tables, we show how our segment results are reconciled to our consolidated results. The Wireless, Wireline, Advertising Solutions and Other columns represent the segment results of each operating segment. The Consolidation and Elimination column adds in those line items that we manage on a consolidated basis only: interest expense and other income (expense) – net. This column also eliminates any intersegment transactions included in each segment’s results.

Segment assets for the six months ended June 30, 2009 are materially unchanged from the year ended December 31, 2008 with the exception of other segment assets. Our other segment assets totaled $14,671, which increased $5,969, or 68.6%, primarily due to an increase in cash.


10 
 

 
AT&T INC.
JUNE 30, 2009

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

For the three months ended June 30, 2009
                               
               
Advertising
         
Consolidation
   
Consolidated
 
   
Wireless
   
Wireline
   
Solutions
   
Other
   
and Elimination
   
Results
 
Revenues from external customers
  $ 13,222     $ 15,945     $ 1,211     $ 356     $ -     $ 30,734  
Intersegment revenues
    23       581       20       68       (692 )     -  
Total segment operating revenues
    13,245       16,526       1,231       424       (692 )     30,734  
Operations and support expenses
    8,658       11,265       751       343       (692 )     20,325  
Depreciation and amortization expenses
    1,436       3,258       166       43       -       4,903  
Total segment operating expenses
    10,094       14,523       917       386       (692 )     25,228  
Segment operating income
    3,151       2,003       314       38       -       5,506  
Interest expense
    -       -       -       -       879       879  
Equity in net income of affiliates
    -       4       -       226       1       231  
Other income (expense) – net
    -       -       -       -       31       31  
Segment income before income taxes
  $ 3,151     $ 2,007     $ 314     $ 264     $ (847 )   $ 4,889  

For the six months ended June 30, 2009
                               
               
Advertising
         
Consolidation
   
Consolidated
 
   
Wireless
   
Wireline
   
Solutions
   
Other
   
and Elimination
   
Results
 
Revenues from external customers
  $ 26,060     $ 32,059     $ 2,460     $ 726     $ -     $ 61,305  
Intersegment revenues
    45       1,145       40       135       (1,365 )     -  
Total segment operating revenues
    26,105       33,204       2,500       861       (1,365 )     61,305  
Operations and support expenses
    16,743       22,562       1,500       833       (1,365 )     40,273  
Depreciation and amortization expenses
    2,870       6,498       342       79       -       9,789  
Total segment operating expenses
    19,613       29,060       1,842       912       (1,365 )     50,062  
Segment operating income (loss)
    6,492       4,144       658       (51 )     -       11,243  
Interest expense
    -       -       -       -       1,728       1,728  
Equity in net income of affiliates
    -       8       -       359       1       368  
Other income (expense) – net
    -       -       -       -       16       16  
Segment income before income taxes
  $ 6,492     $ 4,152     $ 658     $ 308     $ (1,711 )   $ 9,899  


11 
 

 
AT&T INC.
JUNE 30, 2009

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts


For the three months ended June 30, 2008
                               
               
Advertising
         
Consolidation
   
Consolidated
 
   
Wireless
   
Wireline
   
Solutions
   
Other
   
and Elimination
   
Results
 
Revenues from external customers
  $ 11,977     $ 17,059     $ 1,383     $ 447     $ -     $ 30,866  
Intersegment revenues
    56       549       24       65       (694 )     -  
Total segment operating revenues
    12,033       17,608       1,407       512       (694 )     30,866  
Operations and support expenses
    7,523       11,192       771       547       (692 )     19,341  
Depreciation and amortization expenses
    1,446       3,281       203       30       (2 )     4,958  
Total segment operating expenses
    8,969       14,473       974       577       (694 )     24,299  
Segment operating income (loss)
    3,064       3,135       433       (65 )     -       6,567  
Interest expense
    -       -       -       -       854       854  
Equity in net income of affiliates
    3       3       -       206       -       212  
Other income (expense) – net
    -       -       -       -       29       29  
Segment income before income taxes
  $ 3,067     $ 3,138     $ 433     $ 141     $ (825 )   $ 5,954  

For the six months ended June 30, 2008
                               
               
Advertising
         
Consolidation
   
Consolidated
 
   
Wireless
   
Wireline
   
Solutions
   
Other
   
and Elimination
   
Results
 
Revenues from external customers
  $ 23,762     $ 34,146     $ 2,781     $ 921     $ -     $ 61,610  
Intersegment revenues
    96       1,086       43       135       (1,360 )     -  
Total segment operating revenues
    23,858       35,232       2,824       1,056       (1,360 )     61,610  
Operations and support expenses
    14,912       22,685       1,558       1,406       (1,359 )     39,202  
Depreciation and amortization expenses
    2,926       6,462       415       59       (1 )     9,861  
Total segment operating expenses
    17,838       29,147       1,973       1,465       (1,360 )     49,063  
Segment operating income (loss)
    6,020       6,085       851       (409 )     -       12,547  
Interest expense
    -       -       -       -       1,719       1,719  
Equity in net income of affiliates
    5       9       -       441       -       455  
Other income (expense) – net
    -       -       -       -       120       120  
Segment income before income taxes
  $ 6,025     $ 6,094     $ 851     $ 32     $ (1,599 )   $ 11,403  

 
12 
 

 
AT&T INC.
JUNE 30, 2009

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

NOTE 5. PENSION AND POSTRETIREMENT BENEFITS

Substantially all of our employees are covered by one of various noncontributory pension and death benefit plans. We also provide certain medical, dental and life insurance benefits to substantially all retired employees under various plans and accrue actuarially determined postretirement benefit costs as active employees earn these benefits. Our objective in funding these plans, in combination with the standards of the Employee Retirement Income Security Act of 1974, as amended (ERISA), is to accumulate assets sufficient to meet the plans’ obligations to provide benefits to employees upon their retirement. No significant cash contributions are required under ERISA regulations during 2009.

The following details pension and postretirement benefit costs included in operating expenses (in cost of sales and selling, general and administrative expenses) in the accompanying Consolidated Statements of Income. We account for these costs in accordance with Statement of Financial Accounting Standards No. 87, “Employers’ Accounting for Pensions” and Statement of Financial Accounting Standards No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions.” In the following table, gains are denoted with parentheses and losses are not. A portion of these expenses is effectively capitalized as part of the benefit load on internal construction and capital expenditures, historically averaging approximately 10%.

   
          Three months ended
   
        Six months ended
 
   
                 June 30,
   
              June 30,
 
   
2009
   
2008
   
2009
   
2008
 
Pension (benefit) cost:
                       
Service cost – benefits earned during the period
  $ 272     $ 293     $ 544     $ 586  
Interest cost on projected benefit obligation
    845       829       1,690       1,659  
Expected return on assets
    (1,141 )     (1,401 )     (2,281 )     (2,801 )
Amortization of prior service cost
    28       33       55       66  
Recognized actuarial loss
    166       4       332       6  
Net pension (benefit) cost
  $ 170     $ (242 )   $ 340     $ (484 )
                                 
Postretirement (benefit) cost:
                               
Service cost – benefits earned during the period
  $ 88     $ 107     $ 176     $ 214  
Interest cost on accumulated postretirement
                               
  benefit obligation
    631       639       1,261       1,275  
Expected return on assets
    (239 )     (332 )     (478 )     (664 )
Amortization of prior service benefit
    (89 )     (89 )     (179 )     (179 )
Recognized actuarial loss
    -       -       -       -  
Postretirement (benefit) cost
  $ 391     $ 325     $ 780     $ 646  
                                 
Combined net pension and postretirement cost
  $ 561     $ 83     $ 1,120     $ 162  

Our combined net pension and postretirement cost increased $478 in the second quarter and $958 for the first six months of 2009. The increase was due to lower expected return on assets and an increase in amortization of unrecognized actuarial losses, both primarily from investment losses in 2008. As allowed under GAAP, we use a method in which gains and losses are amortized only when the net gains or losses exceed 10 percent of the greater of the projected benefit obligation or the market-related value of assets (MRVA). Under GAAP, the expected long-term rate of return is calculated on the MRVA. GAAP requires that actual gains and losses on pension and postretirement plan assets be recognized in the MRVA equally over a period of up to five years. However, we use a methodology, allowed under GAAP, under which we hold the MRVA to within 20% of the actual fair value of plan assets, which can have the effect of accelerating the recognition of excess actual gains and losses in the MRVA in less than five years. The use of this policy increased pre-capitalization pension and postretirement cost by approximately $400 in the second quarter and $800 for the first six months of 2009. This methodology did not have a significant effect on our 2008 combined net pension and postretirement benefits.

We have varying types of pension programs providing benefits for substantially all of certain non-U.S. operations. In addition to the pension and postretirement costs above, we recorded net pension benefit cost for non-U.S. plans of ($4) in the second quarter and ($3) for the first six months of 2009 and $3 in the second quarter and $7 for the first six months of 2008.
 
13
 

 
AT&T INC.
JUNE 30, 2009

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

We also provide senior- and middle-management employees with nonqualified, unfunded supplemental retirement and savings plans. Net supplemental retirement pension benefits cost, which is not included in the table above, was $41 in the second quarter, $35 of which was interest cost and $83 for the first six months of 2009, $70 of which was interest cost. Net supplemental retirement pension benefits cost was $45 in the second quarter, $36 of which was interest cost and $91 for the first six months of 2008, $71 of which was interest cost.

NOTE 6. FINANCIAL INSTRUMENTS

The carrying amounts and estimated fair values of our long-term debt, including current maturities, and other financial instruments, are summarized as follows at June 30, 2009:

 
2009
 
 
Carrying
 
Fair
 
 
Amount
 
Value
 
Notes and debentures
  $ 76,522     $ 77,529  
Commercial paper
    -       -  
Bank borrowings
    28       28  
Available-for-sale equity securities
    1,751       1,751  

Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (FAS 157) requires disclosures for financial assets and liabilities that are remeasured at fair value at least annually. FAS 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Substantially all of our available-for-sale securities are valued using quoted market prices (referred to as Level 1). Adjustments to fair value are recorded in other comprehensive income (OCI) until the investment is sold or experiences an other-than-temporary decline in fair value (see Note 2). All of our derivatives are Level 2.

The fair values of our notes and debentures were estimated based on quoted market prices, where available, or on the net present value method of expected future cash flows using current interest rates. The carrying value of debt with an original maturity of less than one year approximates market value.

Our available-for-sale equity securities are carried at fair value, and realized gains and losses on these equity securities were included in “Other income (expense) – net” in the consolidated statements of income. The fair value of our available-for-sale equity securities was principally determined based on quoted market prices, and the carrying amount of the remaining securities approximates fair value. These securities include $1,350 of equities, $311 in government fixed income bonds and $90 of other securities.

Our short-term investments, other short-term and long-term held-to-maturity investments and customer deposits are recorded at amortized cost, and the carrying amounts approximate fair values.
 
Derivatives   We use interest rate swaps, interest rate forward contracts and foreign currency exchange contracts to manage our market risk to changes in interest rates and foreign exchange rates. We do not use financial instruments for trading or speculative purposes. The majority of our derivatives are designated as fair value hedges or cash flow hedges.

Fair Value Hedging   We designate our fixed-to-floating interest rates swaps as fair value hedges. The purpose of these swaps is to manage interest rate risk by managing our mix of fixed-rate and floating-rate debt. Unrealized gains or losses on interest rate swaps are recorded at fair market value as assets or liabilities, respectively. Changes in the fair value of the interest rate swaps offset changes in the fair value of the fixed-rate notes payable they hedge due to changes in the designated benchmark interest rate and are recognized in interest expense. These swaps involve the receipt of fixed rate amounts for floating interest rate payments over the life of the swaps without exchange of the underlying principal amount.
 
14
 

 
AT&T INC.
JUNE 30, 2009

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

Cash Flow Hedging   Unrealized gains or losses on derivatives designated as cash flow hedges are recorded at fair value as assets or liabilities respectively for the period they are outstanding. For derivative instruments designated as cash flow hedges, the effective portion is reported as a component of Other Comprehensive Income until reclassified into interest expense in the same period the hedged transaction affects earnings. The gain or loss on the ineffective portion is recognized in earnings in each current period.

We designate our combined interest rate foreign currency swap agreements (cross-currency swaps) as cash flow hedges. We have entered into multiple cross-currency swaps to hedge our exposure to variability in expected future cash flows that are attributable to foreign currency risk generated from the issuance of our Euro- and British pound sterling-denominated debt. These agreements include initial and final exchanges of principal from fixed foreign denominations to fixed U.S.-denominated amounts, to be exchanged at a specified rate, which was determined by the market spot rate upon issuance. They also include an interest rate swap of a fixed foreign-denominated rate to a fixed U.S.-denominated interest rate. We evaluate the effectiveness of our cross-currency swaps each period. In the period ending June 30, 2009, no material ineffectiveness was measured. In April 2009, we entered into additional fixed-to-fixed cross-currency swaps, concurrent with our debt issuance of £750 (equivalent of $1,107 when issued) of 5.875% global notes due 2017 and £1,100 (equivalent of $1,621 when issued) of 7.0% global notes due 2040.

Periodically, we enter into and designate interest rate locks to partially hedge the risk of changes in interest payments attributable to changes in the benchmark interest rate during the period leading up to the probable issuance of fixed-rate debt. Gains and losses at the time we settle our interest rate locks are amortized into income over the life of the related debt, except where a material amount is deemed to be ineffective, which would be immediately reclassified to income. In the period ending June 30, 2009, no material ineffectiveness was measured. Over the next 12 months, we expect to reclassify $21 from Other Comprehensive Income to interest expense due to the amortization of net losses on historical rate locks.  Our unutilized rate locks carry mandatory early terminations, the latest occurring in April 2011.

The balance of the derivative loss in accumulated other comprehensive income was $58 at June 30, 2009 and $483 at December 31, 2008.

Periodically, we enter into foreign exchange contracts to manage our exposure to changes in currency exchange rates related to foreign currency-denominated transactions. We may or may not choose to designate these derivatives as hedging instruments under FAS 133 depending on size and duration. As of June 30, 2009, we had no outstanding foreign exchange contracts.

Collateral and Credit-Risk Contingency   We have entered into agreements with most of our derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements. At June 30, 2009, we held $168 of counterparty collateral (a receipt liability). Under the agreements, if our credit rating had been downgraded one rating level, we would have been required to post collateral of $1 (a deposit asset). We do not offset the fair value of collateral, whether the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable), against the fair value of the derivative instruments.

Following is the size and value of our outstanding derivative positions:

Volume of Derivative Activity
   
June 30, 2009
 
   
Notional Value
   
Fair
Value
 
             
Interest rate swaps
  $ 6,750     $ 374  
Cross-currency swaps
    7,502       68  
Rate locks
    2,100       20  


15
 

 
AT&T INC.
JUNE 30, 2009

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions except per share amounts

Following are our derivative instruments and their related hedged items affecting our financial position and performance:

Fair Value of Derivatives in Consolidated Balance Sheet
Derivatives designated as hedging instruments and reflected as other assets, other liabilities and, for a portion of interest rate swaps, accounts receivable.
 
Asset Derivatives
 
June 30,
2009
 
Derivatives designated as hedging instruments under Statement 133
   
       
Interest rate swaps
  $ 374  
Cross-currency swaps
    536  
Rate locks
    47  
Total
  $ 957  
 
   
June 30,
 
Liability Derivatives
 
2009
 
       
Cross-currency swaps
  $ (468 )
Rate locks
    (27 )
Total
  $ (495 )
 
Effect of Derivatives on the Income Statement
   
Three months ending
   
Six months ending
 
Derivatives in Statement 133 Fair Value Hedging Relationships
 
June 30, 2009
   
June 30, 2009
 
             
Interest expense (increase) decrease
           
Gain/(Loss) on swap – interest rate swaps
  $ (169 )   $ (220 )
Gain/(Loss) on long-term debt – interest rate swaps
    169       220  
In addition, the net swap settlements that accrued and settled in the three and six months ended June 30, 2009 were also reported as reductions of interest expense.
 
                 
Derivatives in Statement 133 Cash Flows Value Hedging Relationships
               
                 
Rate locks:
               
Gain/(Loss) recognized in OCI
  $ 19     $ 79  
Interest income (expense) reclassified from OCI into income
    (5 )     (11 )
                 
Cross-currency swaps:
               
Gain/(Loss) recognized in OCI
    343       563  
Other income (expense) reclassified from OCI into Income
    -       -  
                 
Derivatives not designated as hedging instruments under Statement 133
               
                 
Other income – foreign exchange contracts
  $ (9 )   $ 1  
 
 
16
 

 
AT&T INC.
JUNE 30, 2009

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Dollars in millions except per share amounts
RESULTS OF OPERATIONS

For ease of reading, AT&T Inc. is referred to as “we,” “AT&T,” or the “Company” throughout this document and the names of the particular subsidiaries and affiliates providing the services generally have been omitted. AT&T is a holding company whose subsidiaries and affiliates operate in the communications services industry in both the United States and internationally providing telecommunications services and equipment as well as advertising services. You should read this discussion in conjunction with the consolidated financial statements, accompanying notes and management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2008. In the tables throughout this section, percentage increases and decreases that are not considered meaningful are denoted with a dash.

Consolidated Results   Our financial results in the second quarter and for the first six months of 2009 and 2008 are summarized as follows:

   
Second Quarter
   
Six-Month Period
 
   
2009
   
2008
   
Percent
Change
 
2009
   
2008
   
Percent
Change
 
Operating Revenues
  $ 30,734     $ 30,866       (0.4 )%   $ 61,305     $ 61,610       (0.5 )%
Operating expenses
                                               
Cost of sales
    12,478       11,897       4.9       24,720       23,892       3.5  
Selling, general and administrative
    7,847       7,444       5.4       15,553       15,310       1.6  
Depreciation and amortization
    4,903       4,958       (1.1 )     9,789       9,861       (0.7 )
Total Operating Expenses
    25,228       24,299       3.8       50,062       49,063       2.0  
Operating income
    5,506       6,567       (16.2 )     11,243       12,547       (10.4 )
Income before income taxes
    4,889       5,954       (17.9 )     9,899       11,403       (13.2 )
Net Income Attributable to AT&T
  $ 3,198     $ 3,772       (15.2 )%   $ 6,324     $ 7,233       (12.6 )%

Overview
Operating income Our operating income decreased $1,061, or 16.2%, in the second quarter and $1,304, or 10.4%, for the first six months of 2009, primarily due to the decline in voice revenues along with an increase in pension and other postemployment benefits (OPEB) expense, partially offset by continued growth in wireless service revenues. Operating income also decreased in part due to higher cost of sales in our wireless segment mainly attributed to the continued success of the Apple iPhone 3G and the successful launch on June 19 th of the Apple iPhone 3GS (collectively, the Apple iPhone). These factors were the primary causes of our operating income margin decreasing from 21.3% to 17.9% in the second quarter and from 20.4% to 18.3% for the first six months.

Operating revenues   Our operating revenues decreased $132, or 0.4%, in the second quarter and $305, or 0.5%, for the first six months primarily due to the continuing decline in voice revenues, resulting from an 12.1% decrease in total retail consumer voice connections, and a decline in directory revenue driven by lower print revenue. These were partially offset by continued growth in wireless service revenue due to an increase in average customers of 9.2%, driven in part by the continued success of the Apple iPhone 3G and other advanced integrated devices and the successful launch of the Apple iPhone 3GS, and an increase in wireline data revenue largely due to U-verse and broadband growth.

The decline in our voice revenues reflects continuing economic pressures on our consumer and business wireline customers as well as increasing competition. Consumers and businesses disconnected landlines and usage-based services also declined. Customers disconnecting landlines switched to wireless, Voice over Internet Protocol (VoIP) and cable offerings for voice and data. While we lose the voice revenues, we have the opportunity to increase wireless service revenues should the customer choose us as their wireless provider. We also continue to expand our VoIP service for customers who have access to our U-verse video service.

Cost of sales expenses increased $581, or 4.9%, in the second quarter and increased $828, or 3.5%, for the first six months. The increase in the second quarter and first six months was primarily due to higher equipment costs related to the continued success of the Apple iPhone 3G and other smartphones and the successful launch of the Apple iPhone 3GS along with an increase in pension and OPEB expense. The increase in pension and OPEB expense is due to lower expected return on assets and an increase in amortization of unrecognized actuarial losses, both primarily from investment losses in 2008. Partially offsetting these increases were decreases in employee-related costs due to workforce reductions as well as lower traffic compensation expense as usage-based services declined.
 
17
 

 
AT&T INC.
JUNE 30, 2009

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share amounts

The first six months also reflect lower equipment sales costs for traditional equipment sales as well as a decrease in expenses due to the renegotiation of our agreement with Yahoo! and lower volumes for usage-based services.
 
Selling, general and administrative expenses increased $403, or 5.4%, in the second quarter and increased $243, or 1.6%, for the first six months. The increase in the second quarter and first six months was primarily due to higher commissions expenses associated with the Apple iPhone and traditional upgrade sales and an increase in pension and OPEB expense. Selling, general and administrative expenses also increased due to higher customer service costs resulting from wireless subscriber growth along with increased support for data services and integrated devices. These increases were partially offset by decreases in employee-related costs due to workforce reductions.

Depreciation and amortization expense decreased $55, or 1.1%, in the second quarter and decreased $72, or 0.7%, for the first six months. Depreciation and amortization remained relatively stable in the second quarter, and for the first six months, as the declining amortization of identifiable intangible assets, primarily customer relationships, was offset by increased depreciation resulting from capital additions.

Interest expense increased $25, or 2.9%, in the second quarter and $9, or 0.5%, for the first six months of 2009. Interest expense was higher in the second quarter resulting from an increase in our weighted average interest rate, related to a change in our mix of debt, partially offset by a decrease in our average debt balances. For the six months, the increase in the second quarter was offset by first quarter’s decrease resulting in interest expense remaining relatively unchanged with an increase in our average debt balances being offset by a decrease in our weighted average interest rate and higher interest charged during construction. Interest during construction is primarily related to preparing wireless spectrum for advanced services and is higher in 2009 due to acquisition of significant amounts of spectrum for advanced services late in the first quarter of 2008.

Equity in net income of affiliates increased $19, or 9.0%, in the second quarter and decreased $87, or 19.1%, for the first six months of 2009. The second quarter increase is primarily due to improved results at América Móvil, S.A. de C.V. (América Móvil). The year to date decrease is primarily due to foreign exchange translation losses at América Móvil, Telefonos de Mexico, S.A. de C.V. (Telmex) and Telmex Internacional, S.A.B. de C.V. (Telmex Internacional).

Other income (expense) – net   We had other income of $31 in the second quarter and $16 for the first six months of 2009, compared to other income of $29 in the second quarter and $120 for the first six months of 2008. Results in the second quarter of 2009 included $50 in interest and lease gains partially offset by $14 of foreign exchange losses. Results in the second quarter of 2008 included income of $45 related to interest, dividend and leveraged lease income partially offset by $19 of losses on sale of investments.
 
Results for the first six months of 2009 included $119 gains on sale of securities and professional services business, dividend, interest, and leveraged lease income partially offset by $102 related to asset impairment. Results for the first six months of 2008 primarily included income of $117 of interest, dividend and leveraged lease income.

Income taxes decreased $498, or 23.6%, in the second quarter and $619, or 15.3%, for the first six months of 2009. The decrease in income taxes in the second quarter and for the first six months was primarily due to lower income before income taxes. In addition, during the second quarter, the Internal Revenue Service (IRS) completed the examination phase of several audits. As a result, we recorded a net favorable adjustment. This has a positive effect on our effective tax rates, which were 33.0% in the second quarter of 2009 compared to 35.5% in the second quarter of 2008, and 34.6% for the first six months of 2009 compared to 35.4% for the first six months of 2008. In July 2009, in the case regarding the tax treatment of Universal Service Fund receipts on our 1998 and 1999 tax returns, the U.S. District Court granted the Government’s motion for summary judgment and entered final judgment for the Government. We appealed the final judgment to the United States Court of Appeals for the Fifth Circuit.

 
18
 

 
AT&T INC.
JUNE 30, 2009

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share amounts

Selected Financial and Operating Data
   
                 June 30,
 
   
2009
   
2008
 
Wireless customers (000)
    79,600       72,882  
Postpaid wireless customers (000)
    62,096       57,043  
Consumer revenue connections (000) 1,2
    46,289       48,416  
Network access lines in service (000) 2
    52,379       58,860  
Broadband connections (000) 2,3,7
    16,945       15,631  
Video connections (000) 4
    3,787       2,784  
Debt ratio 5,7,8
    43.7 %     41.6 %
Ratio of earnings to fixed charges 6
    4.6       5.5  
Number of AT&T employees
    288,660       307,550  
1
Consumer revenue connections includes retail access lines, U-verse voice over IP connections, broadband and video.
2
Represents services by AT&T’s local exchange companies (ILECs) and affiliates.
3
Broadband connections
4
Video connections include customers that have satellite service under our agency arrangements and U-verse video connections (of 1,577 in 2009 and 549 in 2008).
5
See our “Liquidity and Capital Resources” section for discussion.
6
See Exhibit 12.
7
Prior year amounts restated to conform to current period reporting methodology.
8
Debt ratios are calculated by dividing total debt (debt maturing within one year plus long-term debt) by total capital (total debt plus total stockholders’ equity) and does not consider cash on hand available to pay down debt. Cash on hand was $7,348 as of June 30, 2009, and $1,792 as of December 31, 2008.
 
Segment Results

Our segments represent strategic business units that offer different products and services over various technology platforms and are managed accordingly. Our operating segment results presented in Note 4 and discussed below for each segment follow our internal management reporting. We analyze our various operating segments based on segment income before income taxes, reviewing operating revenues, expenses (depreciation and non-depreciation) and equity income for each segment. We make our capital allocations decisions primarily based on the network (wireless or wireline) providing services. Interest expense and other income (expense) – net are managed only on a total company basis and are, accordingly, reflected only in consolidated results. We have four reportable segments: (1) wireless, (2) wireline, (3) advertising solutions and (4) other.

The wireless segment uses our nationwide network to provide consumer and business customers with wireless voice and advanced data communications services.

The wireline segment uses our regional, national and global network to provide consumer and business customers with landline voice and data communications services, AT&T U-verse SM TV, high-speed broadband and voice services (U-verse) and managed networking to business customers. Additionally, we offer satellite television services through our agency arrangements.

The advertising solutions segment publishes Yellow and White Pages directories and sells advertising in various media, including directory and Internet-based advertising, and local search.

The other segment includes results from Sterling Commerce Inc. (Sterling), customer information services and all corporate and other operations. The other segment includes our portion of the results from our international equity investments. Also included in the other segment are impacts of management decisions affecting the company for which management does not evaluate the individual operating segments.

The following tables show components of results of operations by segment. Significant segment results are discussed following each table. Capital expenditures are discussed in “Liquidity and Capital Resources.”

19 
 

 
AT&T INC.
JUNE 30, 2009

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share amounts


Wireless
Segment Results
   
Second Quarter
   
Six-Month Period
 
   
2009
   
2008
   
Percent
         Change
 
2009
   
2008
   
Percent
Change
 
Segment operating revenues
                                   
Service
  $ 11,983     $ 10,951       9.4 %   $ 23,651     $ 21,596       9.5 %
Equipment
    1,262       1,082       16.6       2,454       2,262       8.5  
Total Segment Operating Revenues
    13,245       12,033       10.1       26,105       23,858       9.4  
Segment operating expenses
                                               
Operations and support
    8,658       7,523       15.1       16,743       14,912       12.3  
Depreciation and amortization
    1,436       1,446       (0.7 )     2,870       2,926       (1.9 )
Total Segment Operating Expenses
    10,094       8,969       12.5       19,613       17,838       10.0  
Segment Operating Income
    3,151       3,064       2.8       6,492       6,020       7.8  
Equity in Net Income of Affiliates
    -       3       -       -       5       -  
Segment Income
  $ 3,151     $ 3,067       2.7 %   $ 6,492     $ 6,025       7.8 %

Operating Income and Margin Trends
Our wireless segment operating income increased $87, or 2.8%, in the second quarter and $472, or 7.8%, for the first six months of 2009, reflecting an increase in our customer base. Our wireless segment operating income margin was 23.8% in the second quarter and 24.9% for the first six months of 2009, compared to margins of 25.5% in the second quarter and 25.2% for the first six months of 2008. The lower margin in 2009 was primarily due to higher costs associated with strong Apple iPhone sales partly offset by revenue growth of $1,212, or 10.1%, in the second quarter and $2,247, or 9.4%, for the first six months of 2009. The majority of the improvement in our revenue results was due to the increase in our customer base of 6.7 million since June 30, 2008. As of June 30, 2009, we served 79.6 million wireless customers. Contributing to our customer base increase was improvement in the postpaid customer turnover (churn) rate to 1.09% as well as strong Apple iPhone sales.

Average service revenue per user/customer (ARPU) in the second quarter of 2009 grew to $50.70 from $50.60 in the second quarter of 2008. Data services ARPU grew 25.7% in the second quarter of 2009, partially offset by a decline in voice service ARPU of 7.4%. We expect continued growth from data services as more customers purchase advanced integrated handsets including the Apple iPhone, broadband laptop cards and as our third-generation network continues to expand. Voice service ARPU declined due to lower postpaid overage charges, access charges, roaming revenues and long-distance usage. Voice service ARPU decline was also driven by increases in our reseller customer base which have lower ARPU than traditional postpaid customers. We expect continued pressure on voice service ARPU.

Our total churn rate improved in the second quarter 2009 to 1.49% from 1.64% in 2008. Our postpaid churn rate improved to 1.09% compared to 1.10% in the second quarter of 2008.


20
 

 
AT&T INC.
JUNE 30, 2009

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share amounts

Operating Results
Service revenues are comprised of voice, data and other revenue. Service revenues increased $1,032, or 9.4%, in the second quarter and $2,055, or 9.5%, for the first six months of 2009. The increase in service revenues primarily consisted of:
·  
Data revenue increases of $934, or 37.2%, in the second quarter and $1,818, or 37.9%, for the first six months primarily due to the increased number of data users and an increase in data ARPU of 25.7% in the second quarter and 25.9% for the first six months. Data revenue growth was primarily driven by strong increases in wireless internet access, messaging and data access revenues. This primarily resulted from increased use of more advanced integrated devices, including the Apple iPhone, which can provide for the data services previously mentioned. Data service revenues represented 28.7% of wireless service revenues in the second quarter and 28.0% for the first six months of 2009, up from 22.9% in the second quarter and 22.2% for the first six months of 2008.
·  
Voice and other revenue increases of $98, or 1.2%, in the second quarter and $237, or 1.4%, for the first six months, primarily due to an increase in the average number of wireless customers of 9.2% and 9.5% for the three and six-month periods, respectively. The subscriber growth impacts on voice and other revenue were partially offset by a decline in voice ARPU of 7.4% for both the second quarter and the first six months of 2009.

Equipment revenues increased $180, or 16.6%, in the second quarter and $192, or 8.5%, for the first six months of 2009. The increase was due to higher handset revenues reflecting a greater proportion of customer gross additions and upgrades to more advanced integrated devices than in prior periods.

Operations and support expenses increased   $1,135, or 15.1%, in the second quarter and $1,831, or 12.3%, for the first six months of 2009. The $1,135 quarterly increase is primarily due to higher equipment costs of $700 reflecting in part the launch of the iPhone 3GS, higher commission expense of $182 due to higher handset upgrade activity, customer service costs of $148; Interconnect, USF and reseller expenses of $93 and selling related expenses of $37; partially offset by lower roaming and long-distance expenses of $62.

The six-month increase is primarily due to higher equipment costs of $950, interconnect, USF, reseller and network systems expenses of $238, higher commission expense of $366, customer service costs of $279 and selling related expenses of $39; partially offset by lower roaming and long-distance expenses of $107. Total equipment costs continue to be higher than equipment revenues due to the sale of discounted handsets to customers.

Depreciation and amortization expenses decreased $10, or 0.7%, in the second quarter and $56, or 1.9%, for the first six months of 2009. Amortization expense decreased $114, or 21.6%, in the second quarter and $238, or 21.7%, for the first six months primarily due to lower amortization of intangibles related to our acquisition of BellSouth’s 40% ownership interest in AT&T Mobility due to the use of accelerated amortization methods, which result in lower expense each year as the remaining useful life of the asset decreases.

Depreciation expense increased $103, or 11.2%, in the second quarter and $181, or 9.9%, for the first six months primarily due to increased expense related to ongoing capital spending for network upgrades and expansion, partially offset by certain network assets becoming fully depreciated.

Wireless Supplementary Operating and Financial Data
   
Three Months Ended
 
Six Months Ended
   
6/30/09
   
6/30/08
   
            Percent
Change
 
6/30/09
   
6/30/08
   
                 Percent
Change
 
Wireless Customers (000)
                      79,600       72,882       9.2 %
Net Customer Additions (000)
    1,368       1,333       2.6 %     2,591       2,628       (1.4 )%
Total Churn
    1.49 %     1.64 %  
-15 BP
    1.53 %     1.69 %  
-16 BP
                                                 
Postpaid Customers (000)
                            62,096       57,043       8.9 %
Net Postpaid Customer Additions (000)
    1,153       894       29.0 %     2,028       1,599       26.8 %
Postpaid Churn
    1.09 %     1.10 %  
-1 BP
    1.14 %     1.17 %  
-3 BP
 
 

21
 

 
AT&T INC.
JUNE 30, 2009

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share amounts

Wireline
Segment Results
   
              Second Quarter
 
                  Six-Month Period
   
2009
   
2008
   
            Percent
            Change
 
2009
   
2008
   
           Percent
            Change
 
Segment operating revenues
                                   
Voice
  $ 8,449     $ 9,757       (13.4 )%   $ 17,157     $ 19,676       (12.8 )%
Data
    6,617       6,287       5.2       13,153       12,492       5.3  
Other
    1,460       1,564       (6.6 )     2,894       3,064       (5.5 )
Total Segment Operating Revenues
    16,526       17,608       (6.1 )     33,204       35,232       (5.8 )
Segment operating expenses
                                               
Operations and support
    11,265       11,192       0.7       22,562       22,685       (0.5 )
Depreciation and amortization
    3,258       3,281       (0.7 )     6,498       6,462       0.6  
Total Segment Operating Expenses
    14,523       14,473       0.3       29,060       29,147       (0.3 )
Segment Operating Income
    2,003       3,135       (36.1 )     4,144       6,085       (31.9 )
Equity in Net Income of Affiliates
    4       3       33.3       8       9       (11.1 )
Segment Income
  $ 2,007     $ 3,138       (36.0 )%   $ 4,152     $ 6,094       (31.9 )%

Operating Income and Margin Trends
Our wireline segment operating income decreased $1,132, or 36.1%, in the second quarter of 2009 and $1,941, or 31.9%, for the first six months of 2009. For the second quarter of 2009 and 2008, our wireline segment operating income margin decreased from 17.8% to 12.1%, and for the first six months decreased from 17.3% in 2008 to 12.5% in 2009. Operating income continued to be pressured by access line declines due to economic pressures on our consumer and business wireline customers and increased competition, as customers either reduced usage or disconnected traditional landline services and switched to alternative technologies such as wireless and VoIP. Our strategy is to offset these line losses by increasing revenues from customer connections for data, including video, broadband and VoIP. Additionally, we have the opportunity to increase wireless segment revenues if customers choose AT&T Mobility as an alternative provider. The decline in segment voice revenue was partially offset by continued growth in data revenue. Also contributing to pressure on our operating margins was increased Pension/OPEB expense in 2009.

Operating Results
Voice revenues decreased $1,308, or 13.4%, in the second quarter and $2,519, or 12.8%, for the first six months of 2009 primarily due to the continuing decline in demand for traditional voice services by our consumer and business customers. Included in voice revenues are revenues from local voice, long-distance (including international) and local wholesale services. Voice revenues do not include VoIP revenues, which are included in data revenues.
·  
Local voice revenues decreased $712, or 12.3%, in the second quarter and $1,344, or 11.5%, for the first six months of 2009. The decrease was driven primarily by an 11% decline in switched access lines and a decrease in average local voice revenue per user. Additionally, there was a decline in revenues from our national mass-market customers of approximately $41 in the second quarter and $81 for the first six months of 2009. We expect our local voice revenue to continue to be negatively affected by the continuing economic recession and increased competition from alternative technologies.
·  
Long-distance revenues decreased $530, or 14.9%, in the second quarter and $1,047, or 14.5%, for the first six months of 2009. The decrease was primarily due to lower demand for long-distance service from global businesses and consumer customers which decreased $388 in the second quarter and $758 for the first six months of 2009, and declines in the number of our national mass-market customers, which decreased $142 in the second quarter and $289 for the first six months of 2009.
·  
Local wholesale revenues decreased $66, or 17.0%, in the second quarter and $128, or 16.2%, for the first six months of 2009. The decrease was primarily due to the declining number of Unbundled Network Element-Platform (UNE-P) lines sold to competitive providers.


22
 

 
AT&T INC.
JUNE 30, 2009

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share amounts

Data revenues increased $330, or 5.2%, in the second quarter and $661, or 5.3%, for the first six months of 2009. Data revenues accounted for approximately 40% of wireline operating revenues in 2009 and 36% in 2008. Data revenues include transport, IP and packet-switched data services.
·  
IP data revenues increased $465 in the second quarter and $894 for the first six months of 2009 primarily due to growth in U-verse video, consumer and business broadband, virtual private networks (VPN) and managed Internet services. U-verse increased approximately $365 in the second quarter and $662 for the first six months of 2009. VPN increased approximately $109 in the second quarter and $228 for the first six months of 2009. The increase in IP data revenues reflects continued growth in the customer base and migration from other traditional circuit-based services.
·  
Packet switched data services, which include frame relay and asynchronous transfer mode services, decreased $126, or 19.3%, in the second quarter and $245, or 18.3%, for the first six months of 2009. This decrease is primarily due to lower demand as customers continue to shift to IP-based technology such as VPN, DSL and managed Internet services. We expect these traditional services to continue to decline as a percentage of our overall data revenues.

Other operating revenues decreased $104, or 6.6%, in the second quarter and $170, or 5.5%, for the first six months of 2009. Integration services and customer premises equipment (CPE), government-related services and managed services account for more than 59% of total other revenue for all periods. Managed services increased $71 in the second quarter and $140 for the first six months of 2009 due to ongoing agreements. Revenue from equipment sales and related network integration decreased by $151 in the second quarter and $268 for the first six months of 2009 primarily related to CPE. Government professional services decreased $22 in the second quarter and $44 for the first six months of 2009.

Operation and support expenses increased $73, or 0.7%, in the second quarter and decreased $123, or 0.5%, for the first six months of 2009. Operation and support expenses consist of costs incurred to provide our products and services, including costs of operating and maintaining our networks and personnel costs, such as salary, wage and bonus accruals. Costs in this category include our repair technicians and repair services, certain network planning and engineering expenses, operator services, information technology and property taxes. Operation and support expenses also include provision for uncollectible accounts; advertising costs; sales and marketing functions, including customer service centers; real estate costs, including maintenance and utilities on all buildings; credit and collection functions; and corporate support costs, such as finance, legal, human resources and external affairs. Pension and postretirement costs, net of amounts capitalized as part of construction labor, are also included to the extent that they are associated with these employees.

The increase was primarily due to higher Pension/OPEB expense of $404 in the second quarter and $843 in the first six months due to lower expected return on assets and an increase in amortization of unrecognized actuarial losses, both primarily from investment losses in 2008; uncollectibles also increased $28 in the second quarter and $54 in the first six months. See Note 5 for more information related to Pension/OPEB expense.

Partially offsetting these increases were decreases in traffic compensation (related to lower international long-distance revenues, and lower volume of calls from our declining national mass-market customer base) of $186 in the second quarter and $492 for the first six months of 2009 and other employee related costs of $242 in the second quarter and $443 in the first six months driven by workforce reductions.

Depreciation and amortization expenses decreased $23, or 0.7%, in the second quarter and increased $36, or 0.6%, for the first six months of 2009. The increase for the first six months was primarily due to incremental depreciation associated with new service additions, partially offset by decreased intangible amortization due to accelerated depreciation associated with customer lists from the AT&T Corp. (ATTC) and BellSouth acquisitions.


23
 

 
AT&T INC.
JUNE 30, 2009

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share amounts

Supplemental Information

Telephone, Wired Broadband and Video Connections Summary
Our switched access lines and other services provided by our local exchange telephone subsidiaries at June 30, 2009 and 2008 are shown below and access line trends are addressed throughout this segment discussion.

  (in 000s)
                 
   
June 30,
   
June 30,
   
% Increase
 
   
2009
   
2008
   
(Decrease)
 
Switched Access Lines 1
                 
Retail Consumer
    28,478       33,020       (13.8 )%
Retail Business 2
    20,940       22,419       (6.6 )
Retail Subtotal 2
    49,418       55,439       (10.9 )
Percent of total switched access lines
    94.3 %     94.2 %        
                         
Sold to National mass-markets
    127       154       (17.5 )
Sold to other CLECs   2,3
    2,736       3,103       (11.8 )
Wholesale Subtotal 2
    2,863       3,257       (12.1 )
Percent of total switched access lines
    5.5 %     5.5 %        
                         
Payphone (Retail and Wholesale) 4
    98       164       (40.2 )
Percent of total switched access lines
    0.2 %     0.3 %        
                         
Total Switched Access Lines
    52,379       58,860       (11.0 )%
                         
Total Retail Consumer Voice Connections 7
    29,048       33,051       (12.1 )%
                         
Total Wired Broadband Connections 5
    15,548       14,693       5.8 %
                         
Satellite service 6
    2,210       2,235       (1.1 )%
U-verse video
    1,577       549        -  
Video Connections
    3,787       2,784       36.0 %
1
Represents access lines served by AT&T’s ILECs and affiliates.
2
Prior period amounts restated to conform to current period reporting methodology.
3
Competitive local exchange carriers (CLECs).
4
Revenue from retail payphone lines is reported in the Other segment. We are in the process of ending our retail payphone operations.
5
Total wired broadband connections include DSL, U-verse high-speed Internet access and satellite broadband.
6
Satellite service includes connections under our agency and resale agreements.
7
Includes consumer U-verse Voice over IP connections.
 
 

24
 

 
AT&T INC.
JUNE 30, 2009

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share amounts

Advertising Solutions
Segment Results
   
Second Quarter
   
Six-Month Period
 
   
2009
   
2008
   
          Percent
          Change
 
2009
   
2008
   
        Percent
        Change
 
Total Segment Operating Revenues
  $ 1,231     $ 1,407       (12.5 )%   $ 2,500     $ 2,824       (11.5 )%
Segment operating expenses
                                               
Operations and support
    751       771       (2.6 )     1,500       1,558       (3.7 )
Depreciation and amortization
    166       203       (18.2 )     342       415       (17.6 )
Total Segment Operating Expenses
    917       974       (5.9 )     1,842       1,973       (6.6 )
Segment Income
  $ 314     $ 433       (27.5 )%   $ 658     $ 851       (22.7 )%

Operating Results
Our advertising solutions operating income margin was 25.5% in the second quarter of 2009, compared to 30.8% in the second quarter of 2008 and 26.3% for the first six months of 2009 compared to 30.1% for the first six months of 2008.

Operating revenues decreased $176, or 12.5%, in the second quarter and $324, or 11.5%, for the first six months of 2009 largely driven by continued declines in print revenue of $186 in the second quarter and $347 for the first six months as customers reduced or eliminated print ad purchases due to the continuing economic recession. Sales agency revenue also declined $13 in the second quarter and $36 for the first six months due to the sale of a sales agency business. These decreases were partially offset by increased Internet revenue of $33 in the second quarter and $68 for the first six months as some customers shifted from print ads.

Operating expenses decreased $57, or 5.9%, in the second quarter and $131, or 6.6%, for the first six months of 2009 largely driven by decreased amortization of $37 in the second quarter and $73 for the first six months, resulting from use of an accelerated method of amortization for the customer list acquired as part of the BellSouth acquisition and decreases in print product related expenses of $14 in the second quarter and $37 in the first six months.

Other
Segment Results
 
Second Quarter
 
Six-Month Period
 
 
2009
 
2008
 
             Percent
             Change
2009
 
2008
 
               Percent
               Change
 
Total Segment Operating Revenues
  $ 424     $ 512       (17.2 )%   $ 861     $ 1,056       (18.5 )%
Total Segment Operating Expenses
    386       577       (33.1 )     912       1,465       (37.7 )
Segment Operating Income (Loss)
    38       (65 )     -       (51 )     (409 )     -  
Equity in Net Income of Affiliates
    226       206       9.7       359       441       (18.6 )
Segment Income (Loss)
  $ 264     $ 141       87.2 %   $ 308     $ 32       -  

Our other segment operating results consist primarily of Sterling, customer information services (primarily operator services and payphone), corporate and other operations. Sterling provides business-integration software and services.

Segment operating revenues decreased $88, or 17.2%, in the second quarter and $195, or 18.5%, for the first six months of 2009 primarily due to reduced revenues from our operator services and our retail payphone operations.

Segment operating expenses decreased $191, or 33.1%, in the second quarter and $553, or 37.7%, for the first six months of 2009. The second quarter decrease is primarily due to market-related benefits as well as reclassification to the wireline segment of expenses accrued centrally in the first quarter. The decrease in the first six months is primarily due to first quarter 2008 workforce charges. The workforce reductions, primarily employees in non-customer facing areas of the business, were a result of the restructuring of our operations.

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AT&T INC.
JUNE 30, 2009

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share amounts

Our other segment also includes our equity investments in international companies, the income from which we report as equity in net income of affiliates. Our earnings from foreign affiliates are sensitive to exchange-rate changes in the value of the respective local currencies. Our foreign investments are recorded under GAAP, which include adjustments for the purchase method of accounting and exclude certain adjustments required for local reporting in specific countries. Our equity in net income of affiliates by major investment is listed below:
 
   
Second Quarter
   
Six-Month Period
 
   
2009
   
2008
   
2009
   
2008
 
América Móvil
  $ 157     $ 132     $ 258     $ 270  
Telmex
    49       73       66       170  
Telmex Internacional
    20       -       37       -  
Other
    -       1       (2 )     1  
Other Segment Equity in Net  Income of Affiliates
  $ 226     $ 206     $ 359     $ 441  

Equity in net income of affiliates increased $20, or 9.7%, in the second quarter and decreased $82, or 18.6%, for the first six months of 2009. The second quarter increase is primarily due to improved results at América Móvil, S.A. de C.V. (América Móvil). The year to date decrease is primarily due to foreign exchange translation losses at América Móvil, Telefonos de Mexico, S.A. de C.V. (Telmex) and Telmex Internacional, S.A.B. de C.V. (Telmex Internacional).

OTHER BUSINESS MATTERS

U-verse Services   We are continuing to expand our deployment of U-verse high-speed broadband and TV services. As of June 30, 2009, we have passed more than 19 million living units (constructed housing units as well as platted housing lots) and are marketing the services to 69 percent of those units. Our deployment strategy is to enter each new area on a limited basis in order to ensure that all operating and back-office systems are functioning successfully and then expand within each as we continue to monitor these systems. In these expansions, we expect to continue to use contracted outside labor, in addition to our employees, as installers; our rate of expansion will be slowed if we cannot hire and train an adequate number of qualified contractors and technicians to keep pace with customer demand or if we cannot obtain all required local building permits in a timely fashion. We also continue to work with our vendors on improving, in a timely manner, the requisite hardware and software technology. Our deployment plans could be delayed if we do not receive required equipment and software on schedule.

We believe that our U-verse TV service is subject to federal oversight as a “video service” under the Federal Communications Act. However, some cable providers and municipalities have claimed that certain IP services should be treated as a traditional cable service and therefore subject to the applicable state and local cable regulation. Certain municipalities have delayed our request or have refused us permission to use our existing right-of-ways to deploy or activate our U-verse-related services and products, resulting in litigation. Pending negotiations and current or threatened litigation involving municipalities could delay our deployment plans in those areas. In July 2008, the U.S. District Court for Connecticut affirmed its October 2007 ruling that AT&T’s U-verse TV service is a cable service in Connecticut. We have appealed that decision on the basis that state legislation rendered the case moot. Petitions have been filed at the FCC alleging that the manner in which AT&T provisions "public, educational, and governmental" programming over its U-verse TV service conflicts with federal law, and a state lawsuit has been filed raising similar allegations under California law . If courts having jurisdiction where we have significant deployments of our U-verse services were to decide that federal, state and/or local cable regulation were applicable to our U-verse services, or if the FCC, state agencies or the courts were to rule that AT&T must deliver PEG programming in a manner substantially different from the way it does today or in ways that are inconsistent with AT&T’s current network architecture, it could have a material adverse effect on the cost, timing and extent of our deployment plans.

Retiree Phone Concession Litigation   In May 2005, we were served with a purported class action in U.S. District Court, Western District of Texas (Stoffels v. SBC Communications Inc.), in which the plaintiffs, who are retirees of Pacific Bell Telephone Company, Southwestern Bell and Ameritech, contend that the telephone concession provided by the company is, in essence, a “defined benefit plan” within the meaning of the Employee Retirement Income Security Act of 1974, as amended (ERISA). In October 2006, the Court certified two classes. The issue of whether the concession is an ERISA pension plan was tried before the judge in November 2007. In May 2008, the court ruled that the concession was an ERISA pension plan. We asked the court to certify this ruling for interlocutory appeal and in August 2008, the court denied our request. In May 2009, we filed a motion for reconsideration with the trial court. That motion is pending. A trial on the appropriate remedy has been set for February 1, 2010. We believe that an adverse outcome having a material effect on our financial statements in this case is unlikely, but will continue to evaluate the potential impact of this suit on our financial results as it progresses.

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AT&T INC.
JUNE 30, 2009

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share amounts

NSA Litigation   Twenty-four lawsuits were filed alleging that we and other telecommunications carriers unlawfully provided assistance to the National Security Agency (NSA) in connection with intelligence activities that were initiated following the events of September 11, 2001. In the first filed case, Hepting et al v. AT&T Corp., AT&T Inc. and Does 1-20, a purported class action filed in U.S. District Court in the Northern District of California, plaintiffs alleged that the defendants have disclosed and are currently disclosing to the U.S. Government content and call records concerning communications to which Plaintiffs were a party. Plaintiffs sought damages, a declaratory judgment, and injunctive relief for violations of the First and Fourth Amendments to the United States Constitution, the Foreign Intelligence Surveillance Act, the Electronic Communications Privacy Act, and other federal and California statutes. We filed a motion to dismiss the complaint. The United States asserted the “state secrets privilege” and related statutory privileges and also filed a motion asking the court to dismiss the complaint. The Court denied the motions to dismiss of both parties.

We and the U.S. Government filed interlocutory appeals. The case was argued before a panel of the U.S. Court of Appeals for the Ninth Circuit in August 2007. In August 2008, the court remanded the case to the district court without deciding the issue in light of the passage of the FISA (Foreign Intelligence Surveillance Act) Amendments Act, discussed below.

In July 2008, the President signed into law the FISA Amendments Act of 2008 (the Act), a provision of which addresses the allegations in these pending lawsuits (immunity provision). The immunity provision requires the pending lawsuits to be dismissed if the Attorney General certifies to the court either that the alleged assistance was undertaken by court order, certification, directive, or written request or that the telecom entity did not provide the alleged assistance. In September 2008, the Attorney General filed his certification and asked the court to dismiss all of the lawsuits pending against the telecommunications companies. In October 2008, the plaintiffs filed an opposition to the certification and motion to dismiss arguing that the Act is unconstitutional and, alternatively, that the Government failed to meet its burden of justifying dismissal. The court heard argument on the Government’s motion to dismiss on December 2, 2008. On June 3, 2009, the court granted the Government's motion to dismiss. In July 2009, the court entered a final judgment.

In addition, a lawsuit seeking to enjoin the immunity provision’s application on grounds that it is unconstitutional was filed the day after the Act was signed by the President. That case has been referred to the Joint Panel on Multidistrict Litigation, which has conditionally transferred the case to the Northern District of California, the court referred to above that is considering the Attorney General’s certification and motion to dismiss. In January 2009, the transfer order was filed in the MDL docket, giving the Northern District of California jurisdiction over the case. In March 2009, we and the Government filed motions to dismiss this lawsuit. On July 27 th 2009, the court granted the motion to dismiss and entered a final judgment. All cases brought against the AT&T entities have been dismissed. In August 2009, we received notice that the plaintiffs have filed an appeal with the Ninth Circuit Court of Appeals.

Management believes these actions are without merit and intends to continue to defend these matters vigorously.

Labor Contracts   Contracts covering approximately 80,000 collectively-bargained wireline employees expired in early April 2009. Another contract covering approximately 11,000 wireline employees expired in late June. A remaining contract covering approximately 32,000 wireline employees expires on August 8 th . The Company and the employees’ two unions are continuing to negotiate new contracts on a regional basis. In the absence of an effective contract, the union is entitled to call a work stoppage .

In July 2009, the Company and the Communications Workers of America (CWA) union reached a tentative agreement covering approximately 18,500 employees in the five Midwestern states where we provide local service. The agreement is subject to ratification by the covered employees by August 7, 2009. The agreement provides for a three-year term and, for the vast majority of covered employees, a three percent wage increase in years one and two, a wage increase in year three of 2.75 percent, and pension band increases of two percent for each year of the agreement. For both wages and pension band increases, there is a potential cost-of-living increase based on the consumer price index for the third year. The agreement also provides for continued health care coverage with reasonable cost sharing.

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AT&T INC.
JUNE 30, 2009

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share amounts

Centennial Communications Acquisition   In November 2008, we agreed to acquire Centennial Communications Corp., a regional provider of wireless and wired communications services. The acquisition is subject to regulatory approval and is now expected to close during the third quarter of 2009.

Wireless Properties Transactions   On May 8, 2009, we announced an agreement to acquire certain wireless assets from Verizon Wireless ("VW") for $2.35 billion in cash. The assets primarily represent former Alltel Wireless assets. We will acquire wireless properties, including licenses and network assets, serving approximately 1.5 million subscribers in 79 service areas across 18 states. We also agreed, contingent on completing our acquisition of Centennial Communications Corporation ("Centennial"), to sell to VW certain assets of Centennial for $240 million. These assets represent approximately 120,000 subscribers in five service areas. Each agreement is contingent upon regulatory approval and each is expected to close in the fourth quarter of 2009.

Environmental   The City of Philadelphia notified AT&T Corp. on December 12, 2008 that it would seek civil penalties for alleged violations of state and local air emissions control requirements and permit terms applicable to back-up power generators at an AT&T Corp. facility. In July 2009, AT&T Corp. and the City settled this matter on terms that included civil penalties of less than one hundred thousand dollars.

COMPETITIVE AND REGULATORY ENVIRONMENT

Overview AT&T subsidiaries operating within the U.S. are subject to federal and state regulatory authorities. AT&T subsidiaries operating outside the U.S. are subject to the jurisdiction of national and supranational regulatory authorities in the markets where service is provided, and regulation is generally limited to operational licensing authority for the provision of services to enterprise customers.

In the Telecommunications Act of 1996 (Telecom Act), Congress established a national policy framework intended to bring the benefits of competition and investment in advanced telecommunications facilities and services to all Americans by opening all telecommunications markets to competition and reducing or eliminating regulatory burdens that harm consumer welfare. However, since the Telecom Act was passed, the Federal Communications Commission (FCC) and some state regulatory commissions have maintained certain regulatory requirements that were imposed decades ago on our traditional wireline subsidiaries when they operated as legal monopolies. Where appropriate, we are pursuing additional legislative and regulatory measures to reduce regulatory burdens that inhibit our ability to compete more effectively and offer services wanted and needed by our customers. We are participating in regulatory proceedings that could result in new or different regulatory requirements, such as in areas relating to the provisions of broadband and special access services. We also are supporting efforts to update and improve regulatory treatment for retail services. Passage of legislation is uncertain and depends on many factors.

Our wireless operations operate in robust competitive markets but are likewise subject to substantial governmental regulation. Wireless communications providers must be licensed by the FCC to provide communications services at specified spectrum frequencies within specified geographic areas and must comply with the rules and policies governing the use of the spectrum as adopted by the FCC. While wireless communications providers’ prices and service offerings are generally not subject to state regulation, an increasing number of states are attempting to regulate or legislate various aspects of wireless services, such as in the area of consumer protection. Additionally, we have noted our opposition to proposals to impose “net neutrality” open access regulation on wireless providers and to prohibit wireless providers from entering into exclusive arrangements with handset manufacturers. It is widely recognized that the wireless industry in the United States is characterized by innovation, differentiation, declining prices and extensive competition among handset manufacturers, service providers and applications. For this reason, additional broadband regulation and new wholesale requirements would be unnecessary and counterproductive.


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AT&T INC.
JUNE 30, 2009

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share amounts

ACCOUNTING POLICIES AND STANDARDS

FAS 165   In May 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 165, “Subsequent Events” (FAS 165). FAS 165 establishes general standards of accounting for and disclosing events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This statement is effective for interim and annual periods ending after June 15, 2009. In preparing the accompanying unaudited consolidated financial statements, the Company has reviewed, as determined necessary by the Company’s management, events that have occurred after June 30, 2009, up until the issuance of the financial statements, which occurred on August 5, 2009.

FAS 166   In June 2009, the FASB issued Statement of Financial Accounting Standards No. 166, “Accounting for Transfers of Financial Assets – an amendment of FASB Statement No. 140” (FAS 166). FAS 166 amends FASB Statement of Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” (FAS 140), removing the concept of a qualifying special-purpose entity, and removing the exception from applying FASB Interpretation No. 46(R) (revised December 2003), “Consolidation of Variable Interest Entities” (FIN 46(R)), to qualifying special-purpose entities. This statement is effective for both interim and annual periods as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, and its impact will vary with each future transfer of financial assets.

FAS 167   In June 2009, the FASB issued Statement of Financial Accounting Standards No. 167, “Amendments to FASB Interpretation No. 46(R)” (FAS 167). FAS 167 amends FIN 46(R), to require an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity. This statement is effective for both interim and annual periods as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, and we are currently evaluating its impact on our financial position and results of operations.

LIQUIDITY AND CAPITAL RESOURCES

We had $7,348 in cash and cash equivalents available at June 30, 2009. Cash and cash equivalents included cash of $616 and money market funds and other cash equivalents of $6,732. In the first six months of 2009, cash inflows were primarily provided by cash receipts from operations, the issuance of long-term debt and dispositions. These inflows were offset by cash used to meet the needs of the business including, but not limited to, payment of operating expenses, funding capital expenditures, dividends to stockholders, the repayment of debt and the payment of interest on debt. We discuss many of these factors in detail below.

Cash Provided by or Used in Operating Activities
In the first six months of 2009, cash provided by operating activities was $15,802 compared to $13,505 in the first six months of 2008. Our operating cash flow reflects declines in operating liabilities, decreased tax payments of $2,435, partially offset by reduced net income.

During the second quarter, the IRS completed the examination phase of several audits and issued their reports of proposed adjustments. As expected, the IRS assessed additional taxes related primarily to the timing of certain deductions related to our network assets. We do not agree with the proposed adjustments and are pursuing resolution of the disputed issues with the IRS Appeals Division. During the second quarter, we made deposits totaling $886 to federal and state jurisdictions to reduce the accrual of interest while we continue to work with the taxing authorities to resolve contested issues. We expect to make additional deposits later this year in the $150 to $250 range.

Cash Used in or Provided by Investing Activities
In the first six months of 2009, cash used in investing activities consisted primarily of $7,036 for capital expenditures and $368 for interest during construction. Cash provided by investing activities included dispositions of $199, primarily related to a professional services business.

Our capital expenditures are primarily for our wireless and wireline networks, and support systems for our communications services. Capital spending excluding interest during construction in our wireless segment decreased   12% in the first six months. Expenditures were used for network capacity expansion, integration and upgrades to our Universal Mobile Telecommunications System/High-Speed Packet Access network, as well as for IT and other support systems for our wireless service. Capital expenditures in the wireline segment, which represented 69%   of our capital expenditures, decreased 28% in the first six months of 2009, reflecting decreased spending on U-verse services as the upgrades to our existing network become more mature.

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AT&T INC.
JUNE 30, 2009

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share amounts

We continue to expect that our 2009 capital expenditures will be in the range of $17,000 to $18,000. We continue to expect to fund 2009 capital expenditures for our wireless and wireline segments, including international operations, using cash from operations and incremental borrowings, depending on interest rate levels and overall market conditions. The amount of capital investment is influenced by demand for services and products, continued growth and regulatory considerations.

Cash Used in or Provided by Financing Activities
We continue to fund our 2009 financing activities through long-term borrowings and cash from operations. Our financing activities included the repayment of debt and payment of dividends.

At June 30, 2009, we had $10,155 of debt maturing within one year, which included $10,127 of long-term debt maturities and $28 of other borrowings. We continue to examine our mix of short- and long-term debt in light of interest rate trends.

In the first half of 2009, we received net proceeds of $8,161 from the issuance of long-term debt. Our long-term debt issuances were as follows:
·  
$1,000 of 4.85% global notes due in 2014.
·  
$2,250 of 5.80% global notes due in 2019.
·  
$2,250 of 6.55% global notes due in 2039.
·  
£750 of 5.875% global notes due in 2017 (equivalent to $1,107 when issued).
·  
£1,100 of 7.0% global notes due in 2040 (equivalent to $1,621 when issued).

In the first six months of 2009, we repaid $6,625 of debt, which consisted of $4,588 in repayments of commercial paper and other short-term borrowings and $2,037 of repayments of maturing long-term debt.

Debt maturing within one year includes the following notes that may be put back to us by the holders:
·  
$1,000 of annual put reset securities, which were originally issued by our BellSouth subsidiary, can be put each April until maturity in 2021.
·  
An accreting zero-coupon note may be redeemed each May, excluding May 2011, until maturity in 2022. If the zero-coupon note (issued for principal of $500 in 2007) is held to maturity, the redemption amount will be $1,030.
·  
$2,000 of floating rate notes due April 2010 carry a final put date of August 5, 2009 (exercisable upon thirty-days notice). This put was not exercised prior to the notice period expiring in July.

On December 10, 2007, our Board of Directors authorized the repurchase of up to 400 million shares of AT&T common stock; this authorization expires at the end of 2009. Although we will evaluate additional share repurchases during the remainder of 2009 should the economic environment improve, over the course of the year we intend to focus on reducing debt.

We paid dividends of $4,834 in the first six months of 2009 and $4,802 in the first six months of 2008, primarily reflecting an increase in the quarterly dividend approved by our Board of Directors in December 2008. Dividends declared by our Board of Directors totaled $0.41 per share in the second quarter of 2009 and $0.40 per share in the second quarter of 2008. Our dividend policy considers the expectations and requirements of stockholders, internal requirements of AT&T and long-term growth opportunities. It is our intent to provide the financial flexibility to allow our Board of Directors to consider dividend growth and to recommend an increase in dividends to be paid in future periods. All dividends remain subject to declaration by our Board of Directors.

At June 30, 2009, our debt ratio was 43.7% compared to 41.6% at June 30, 2008 and 43.7% at December 31, 2008. The increased debt ratio from a year ago is due primarily to an accumulation of cash and a decrease in stockholders’ equity driven by a decrease in value of our retirement plans’ assets, partially offset by a $3,427 decrease in debt. Stockholders’ equity in 2009 reflects required adjustments under Statement of Financial Standards No. 158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.”

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AT&T INC.
JUNE 30, 2009

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Dollars in millions except per share amounts

We have a five-year credit agreement with a syndicate of investment and commercial banks. In June 2009, one of the participating banks, Lehman Brothers Bank, Inc., which had declared bankruptcy, terminated their lending commitment of $535 and withdrew from the agreement. As a result of this termination, the outstanding commitments under the agreement have been reduced from a total of $10,000 to $9,465. We still have the right to increase commitments up to an additional $2,535 provided no event of default under the credit agreement has occurred. The current agreement will expire in July 2011. We also have the right to terminate, in whole or in part, amounts committed by the lenders under this agreement in excess of any outstanding advances; however, any such terminated commitments may not be reinstated. Advances under this agreement may be used for general corporate purposes, including support of commercial paper borrowings and other short-term borrowings. We must maintain a debt-to-EBITDA (earnings before interest, income taxes, depreciation and amortization, and other modifications described in the agreement) financial ratio covenant of not more than three-to-one as of the last day of each fiscal quarter for the four quarters then ended. We comply with all covenants under the agreement. At June 30, 2009, we had no borrowings outstanding under this agreement.




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AT&T INC.
JUNE 30, 2009

Item 3. Quantitative and Qualitative Disclosures About Market Risk

At June 30, 2009, we had interest rate swaps with a notional value of $6,750 and a fair value of $374.

 
We have fixed-to-fixed cross-currency swaps on foreign-currency-denominated debt instruments with a U.S. dollar notional value of $7,502 to hedge our exposure to changes in foreign currency exchange rates. These derivatives have been designated at inception and qualify as cash flow hedges with a net fair value of $68 at June 30, 2009.

Item 4. Controls and Procedures

The registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by the registrant is recorded, processed, summarized, accumulated and communicated to its management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosure, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The chief executive officer and chief financial officer have performed an evaluation of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures as of June 30, 2009. Based on that evaluation, the chief executive officer and chief financial officer concluded that the registrant’s disclosure controls and procedures were effective as of June 30, 2009.



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AT&T INC.
JUNE 30, 2009

CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS

Information set forth in this report contains forward-looking statements that are subject to risks and uncertainties, and actual results could differ materially. Many of these factors are discussed in more detail in the “Risk Factors” section. We claim the protection of the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995.

The following factors could cause our future results to differ materially from those expressed in the forward-looking statements:

·  
Adverse economic and/or capital access changes in the markets served by us or in countries in which we have significant investments, including the impact on customer demand and our ability and our suppliers’ ability to access financial markets.
·  
Changes in available technology and the effects of such changes including product substitutions and deployment costs.
·  
Increases in our benefit plans’ costs including increases due to adverse changes in the U.S. and foreign securities markets, resulting in worse-than-assumed investment returns and discount rates, and adverse medical cost trends.
·  
The final outcome of Federal Communications Commission and other Federal agency proceedings and reopenings of such proceedings and judicial review, if any, of such proceedings, including issues relating to access charges, broadband deployment, E911 services, competition, unbundled loop and transport elements and wireless services.
·  
The final outcome of regulatory proceedings in the states in which we operate and reopenings of such proceedings, and judicial review, if any, of such proceedings, including proceedings relating to Interconnection terms, access charges, universal service, unbundled network elements and resale and wholesale rates, broadband deployment including our U-verse services, performance measurement plans, service standards and traffic compensation.
·  
Enactment of additional state, federal and/or foreign regulatory and tax laws and regulations pertaining to our subsidiaries and foreign investments.
·  
Our ability to absorb revenue losses caused by increasing competition, including offerings using alternative technologies (e.g., cable, wireless and VoIP), and our ability to maintain capital expenditures.
·  
The extent of competition and the resulting pressure on access line totals and wireline and wireless operating margins.
·  
Our ability to develop attractive and profitable product/service offerings to offset increasing competition in our wireless and wireline markets.
·  
The ability of our competitors to offer product/service offerings at lower prices due to lower cost structures and regulatory and legislative actions adverse to us, including state regulatory proceedings relating to unbundled network elements and nonregulation of comparable alternative technologies (e.g., VoIP).
·  
The timing, extent and cost of deployment of our U-verse services; the development of attractive and profitable service offerings; the extent to which regulatory, franchise fees and build-out requirements apply to this initiative; and the availability, cost and/or reliability of the various technologies and/or content required to provide such offerings.
·  
The outcome of pending or threatened litigation including patent claims by or against third parties.
·  
The impact on our networks and business of major equipment failures, our inability to obtain equipment/software or have equipment/software serviced in a timely and cost-effective manner from suppliers, severe weather conditions, natural disasters, pandemics or terrorist attacks.
·  
Our ability to successfully negotiate new collective bargaining contracts and the terms of those contracts.
·  
The issuance by the Financial Accounting Standards Board or other accounting oversight bodies of new accounting standards or changes to existing standards.
·  
The issuance by the Internal Revenue Service and/or state tax authorities of new tax regulations or changes to existing standards and actions by federal, state or local tax agencies and judicial authorities with respect to applying applicable tax laws and regulations; and the resolution of disputes with any taxing jurisdictions.
·  
Our ability to adequately fund our wireless operations, including access to additional spectrum; network upgrades and technological advancements.
·  
Changes in our corporate strategies, such as changing network requirements or acquisitions and dispositions, to respond to competition and regulatory, legislative and technological developments.

Readers are cautioned that other factors discussed in this report, although not enumerated here, also could materially affect our future earnings.

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AT&T INC.
JUNE 30, 2009

PART II – OTHER INFORMATION
Dollars in millions except per share amounts

Item 1A. Risk Factors

We discuss in our Annual Report on Form 10-K various risks that may materially affect our business. We use this section to update this discussion to reflect material developments since our Form 10-K was filed. For the second quarter 2009, there were no such material developments.

Item 4. Submission of Matters to a Vote of Security Holders

Annual Meeting of Shareowners (shares in millions)

(a)
The annual meeting of the shareowners of AT&T was held on April 24, 2009, in Dallas, Texas. Shareowners representing 4,618, or 78.4%, of the common shares outstanding as of the February 25, 2009 record date were present in person or were represented at the meeting by proxy.

(b)
Directors Elected at the Meeting (requires majority vote):
 
VOTES
Nominee
For
Against
Abstain
Randall Stephenson
4,423
156
38
William F. Aldinger III
3,643
934
40
Gilbert F. Amelio
3,643
934
40
Reuben V. Anderson
4,464
114
39
James H. Blanchard
3,644
934
40
August A. Busch III
4,394
183
41
Jaime Chico Pardo
4,087
489
42
James P. Kelly
4,467
113
37
Jon C. Madonna
4,464
115
38
Lynn M. Martin
4,410
168
39
John B. McCoy
4,469
109
40
Mary S. Metz
4,424
154
39
Joyce M. Roché
4,436
142
39
Laura D’Andrea Tyson
4,459
120
38
Patricia P. Upton
3,639
940
39

(c)  
Holders of common shares voted at this meeting on the following matters, which were set forth in our proxy statement dated March 11, 2009. Approval of the following proposals required a majority vote (Items 3 through 8 below were stockholder proposals).

 
For
% For 1
Against
% Against 1
Abstain
Non-Vote 2
Ratification of Ernst & Young LLP as Independent Auditors
4,512
98.28
79
1.72
26
-
Amendment to Increase Authorized Shares 3
3,760
63.74
 
811
13.74
 
46
-
Report on Political Contributions
1,038
31.85
 
2,221
68.15
 
502
856
Special Stockholder Meetings
1,851
49.89
 
1,859
50.11
 
51
856
Adoption of Cumulative Voting
1,415
38.12
 
2,297
61.88
 
49
856
Lead Independent Director Bylaw
1,302
35.04
 
2,414
64.96
 
45
856
Advisory Vote On Compensation
1,704
46.97
 
1,925
53.03
 
132
856
Pension Credit Policy
1,687
45.48
2,023
54.52
51
856
1
Percentages are based on the total common shares voted.
2
Difference between total number of votes in table above and number of shareowners represented is due to rounding.
3
Proposal required to and did pass by majority of outstanding shares.
 
Difference between total number of votes in table above and number of shareowners represented is due to rounding.
 
Proposal required to and did pass by majority of outstanding shares.
 
 
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AT&T INC.
JUNE 30, 2009

Item 6. Exhibits

Exhibits identified in parentheses below, on file with the Securities and Exchange Commission, are incorporated by reference as exhibits hereto. Unless otherwise indicated, all exhibits so incorporated are from File No. 1-8610.

3
Restated Certificate of Incorporation, filed with the Secretary of State of Delaware on May 1, 2009.
10-a
2005 Supplemental Employee Retirement Plan, amended and restated January 1, 2010.
10-b
Cash Deferral Plan, as amended through July 29, 2009.
10-c
2006 Incentive Plan, amended through January 1, 2010.
10-d
Supplemental Life Insurance Plan, amended and restated January 1, 2010.
10-e
AT&T Health Plan, effective January 1, 2010.
10-f
Stock Purchase and Deferral Plan, as amended through July 29, 2009.
10-g
BellSouth Corporation Supplemental Executive Retirement Plan, amended and restated effective as of January 1, 2010.
10-h
Administrative Plan, effective January 1, 2010.
10-i
Officer Disability Plan, effective January 1, 2010.
12
Computation of Ratios of Earnings to Fixed Charges
31
Rule 13a-14(a)/15d-14(a) Certifications
31.1   Certification of Principal Executive Officer
31.2   Certification of Principal Financial Officer
32
Section 1350 Certifications
101
XBRL Instance Document

35 
 

 

SIGNATURE



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.

                                                         AT&T Inc.




August 5, 2009                                                                                               /s/ Richard G. Lindner.
                     Richard G. Lindner
                     Senior Executive Vice President
                       and Chief Financial Officer
 
 
 
 
 
 
 
 
 
36
RESTATED CERTIFICATE OF INCORPORATION

OF

AT&T INC.


AT&T INC. , a Corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:
1.  The name of the corporation is AT&T Inc., and the name under which the corporation was originally incorporated was Southwestern Bell Corporation.  The date of filing of its original Certificate of Incorporation with the Secretary of State was October 5, 1983.
2.  This Restated Certificate of Incorporation only restates and integrates and does not further amend the provisions of the Restated Certificate of Incorporation of this corporation as heretofore amended or supplemented and there is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation.
3.  The text of the Restated Certificate of Incorporation as amended or supplemented heretofore is hereby restated without further amendments or changes to read as herein set forth in full.
4.  This Restated Certificate of Incorporation was duly adopted by the Board of Directors on April 24, 2009, in accordance with Section 245 of the General Corporation Law of the State of Delaware.
ARTICLE ONE

The name of the corporation is AT&T Inc.

ARTICLE TWO

The address of the registered office of the corporation in the State of Delaware is 1209 Orange Street, Wilmington, Delaware 19801, County of New Castle.  The name of the registered agent of the corporation at such address is The Corporation Trust Company.

ARTICLE THREE

The purpose of the corporation is to engage in any business, lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

ARTICLE FOUR

The corporation shall have perpetual existence.

ARTICLE FIVE

The aggregate number of shares which the corporation is authorized to issue is 14,010,000,000 shares, consisting of 14,000,000,000 common shares having a par value of $1 per share and 10,000,000 preferred shares having a par value of $1 per share.

The preferred shares may be issued from time to time in one or more series.  The Board of Directors is authorized to establish by resolution the number of preferred shares in each series, the designation thereof, the powers, preferences, and rights and the qualifications, limitations or restrictions of each series and the variations, if any, as between each series.  The Board of Directors has designated a series of its Perpetual Cumulative Preferred Stock pursuant to a Certificate of Designation duly filed with the Delaware Secretary of State on November 18, 2005, a copy of which is attached hereto as Exhibit A, and incorporated herein by reference.

No holder of any class or series of shares shall have any preemptive right to purchase any additional issue of shares of the corporation of any class or series or any security convertible into any class or series of shares.

ARTICLE SIX

The business and affairs of the corporation shall be under direction of a Board of Directors.  The number of directors, their terms and the manner of their election shall be fixed by the Bylaws of the corporation.  The directors need not be elected by written ballot unless required by the Bylaws of the corporation.

No director of this corporation shall be liable to this corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability 1) for any breach of the director’s duty of loyalty to the corporation or its stockholders; 2) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of the law; 3) under Section 174 of the Delaware General Corporation Law; or 4) for any transaction from which a director derived an improper benefit.

ARTICLE SEVEN

The Board of Directors is expressly authorized to adopt, amend or repeal the Bylaws of the corporation.

ARTICLE EIGHT

Notwithstanding any other provisions of this Certificate of Incorporation or the Bylaws of the corporation, no action which is required to be taken or which may be taken at any annual or special meeting of stockholders of the corporation may be taken by written consent without a meeting, except where such consent is signed by stockholders representing at least two-thirds of the total number of shares of stock of the corporation then outstanding and entitled to vote thereon.

ARTICLE NINE

The corporation reserves the right to amend and repeal any provision contained in this Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware.  All rights herein conferred are granted subject to this reservation.


IN WITNESS WHEREOF , said AT&T Inc. has caused this Restated Certificate of Incorporation to be signed by Randall L. Stephenson, its Chairman, Chief Executive Officer and President, and attested by Ann E. Meuleman, its Senior Vice President and Secretary, this 24 th day of April 2009.
AT&T INC.



(seal)                                                      By:     /s/ Randall L. Stephenson
       Randall L. Stephenson
       Chairman, Chief Executive Officer and President



Attest:            /s/ Ann E. Meuleman
Ann E. Meuleman
Senior Vice President and Secretary
 
 
 

 
EXHIBIT A


CERTIFICATE OF DESIGNATIONS
 
OF
 
PERPETUAL CUMULATIVE PREFERRED STOCK
 
OF
 
AT&T INC.
 

 
AT&T Inc. (formerly SBC Communications Inc.), a Delaware corporation (the “Corporation”), does hereby certify :
 
That the following resolution was duly adopted by the Board of Directors of the Corporation (the “Board of Directors”) at a meeting duly convened and held on November 18, 2005, pursuant to authority conferred upon the Board of Directors by the provisions of the Restated Certificate of Incorporation of the Corporation authorizing the Corporation to issue up to 10,000,000 preferred shares, par value $1 per share:
 
Be it Resolved, that the issuance of a series of preferred shares of SBC Communications Inc. (the “Corporation”) be, and hereby is, authorized, and the designation, powers, preferences and rights and the qualifications, limitations and restrictions of such series, in addition to those set forth in the Restated Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”) be, and hereby are, fixed as follows:
 
SECTION 1.   Designation.   The distinctive serial designation of such series is “Perpetual Cumulative Preferred Stock”.  Each share of Perpetual Cumulative Preferred Stock shall be identical in all respects to every other share of Perpetual Cumulative Preferred Stock.
 
SECTION 2.   Number of Shares.   The number of shares of Perpetual Cumulative Preferred Stock shall be 768,392.  Subject to the provisions of Section 6(d) of this Certificate of Designations, such number may from time to time be increased (but not in excess of the total number of authorized preferred shares) or decreased (but not below the number of shares of Perpetual Cumulative Preferred Stock then outstanding) by the Board of Directors of the Corporation (the “Board of Directors”).  Shares of Perpetual Cumulative Preferred Stock that are redeemed, purchased or otherwise acquired by the Corporation shall be cancelled and shall revert to authorized but unissued preferred shares undesignated as to series.
 
SECTION 3.   Rank.   The shares of Perpetual Cumulative Preferred Stock shall rank, with respect to the payment of dividends and in the distribution of assets on any liquidation, dissolution or winding up of the Corporation, prior to the common shares of the Corporation and junior to all series of any other class of preferred shares of the Corporation.
 
SECTION 4.   Dividends and Distributions.
 
(a)   Rate.
 
(i)   Subject to the rights of the holders of any series of preferred shares (or any similar stock) ranking prior to the Perpetual Cumulative Preferred Stock with respect to dividends, the holders of shares of Perpetual Cumulative Preferred Stock, in preference to the holders of common shares, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Perpetual Cumulative Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of:
 
(1)   $1; and
 
(2)   subject to the provision for adjustment set forth in Section 4(a)(ii) below, (x) 155.8840 times the aggregate per share amount of all cash dividends and (y) 155.8840 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions declared on the common shares since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Perpetual Cumulative Preferred Stock, provided , however , that in lieu of any dividends payable in common shares or payable as a result of a subdivision of the outstanding common shares (by reclassification or otherwise), the adjustments set forth in Section 4(a)(ii) below shall be made.
 
(ii)   In the event the Corporation shall at any time declare or pay any dividend on the common shares payable in common shares, or effect a subdivision or combination or consolidation of the outstanding common shares (by reclassification or otherwise than by payment of a dividend in common shares) into a greater or lesser number of common shares, then in each such case the amount to which holders of shares of Perpetual Cumulative Preferred Stock were entitled immediately prior to such event under Section 4(a)(i)(2) above shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of common shares outstanding immediately after such event and the denominator of which is the number of common shares that were outstanding immediately prior to such event.
 
(b)   The Corporation shall declare a dividend or distribution on the Perpetual Cumulative Preferred Stock as provided in Section 4(a)(i) above immediately after it declares a dividend or distribution on the common shares (other than a dividend payable in common shares); provided that, in the event no dividend or distribution shall have been declared on the common shares during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1 per share on the Perpetual Cumulative Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
 
(c)   Dividends shall begin to accrue and be cumulative on outstanding shares of Perpetual Cumulative Preferred Stock from the date of issue of such shares. Accrued but unpaid dividends shall not bear interest.  Dividends paid on the shares of Perpetual Cumulative Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding.  The Board of Directors may fix a record date for the determination of holders of shares of Perpetual Cumulative Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than sixty days nor less than ten days prior to the date fixed for the payment thereof.  In the event that a corresponding dividend or distribution is being paid on the common shares, the record date shall be the same date as that fixed for the determination of holders of common shares entitled to receive payment of the corresponding dividend or distribution.
 
(d)   Whenever quarterly dividends or other dividends or distributions payable on Perpetual Cumulative Preferred Stock provided in Section 4(a) above are in arrears (which for the avoidance of doubt shall not include any failure to make any payment as a result of a waiver by the holders thereof), thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Perpetual Cumulative Preferred Stock outstanding shall have been paid in full, the Corporation shall not:
 
(i)   declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up) to the Perpetual Cumulative Preferred Stock;
 
(ii)   declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up) with the Perpetual Cumulative Preferred Stock, except dividends paid ratably on the Perpetual Cumulative Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
 
(iii)   redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up) to the Perpetual Cumulative Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up) to the Perpetual Cumulative Preferred Stock; or
 
(iv)   redeem or purchase or otherwise acquire for consideration any shares of Perpetual Cumulative Preferred Stock, or any shares of stock ranking on a parity (either as to the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up) with the Perpetual Cumulative Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
 
(e)   The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under Section 4(d) above, purchase or otherwise acquire such shares at such time and in such manner.
 
SECTION 5.   Liquidation, Dissolution or Winding Up.
 
(a)   Subject to the provisions of the Certificate of Incorporation (including any limitations on distributions to preferred shares), upon the distribution of assets on any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (i) to the holders of shares of stock ranking junior (either as to the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up) to the Perpetual Cumulative Preferred Stock unless, prior thereto, the holders of shares of Perpetual Cumulative Preferred Stock shall have received $1,000 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Perpetual Cumulative Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 155.8840 times the aggregate amount to be distributed per share to holders of common shares, provided , further , that in the distribution of assets on any involuntary liquidation, dissolution or winding up of the Corporation, the aggregate amount that all shares of Perpetual Cumulative Preferred Stock shall be entitled to receive (prior to shares of stock ranking junior to such shares) shall be no greater than $500,000,000, with holders of shares of Perpetual Cumulative Preferred Stock entitled to any shortfall or any amount otherwise payable on a pro rata basis with holders of common shares or (ii) to the holders of shares of stock ranking on a parity (either as to the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up) with Perpetual Cumulative Preferred Stock, except distributions made ratably on Perpetual Cumulative Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon the distribution of assets on such liquidation, dissolution or winding up.  In the event the Corporation shall at any time declare or pay any dividend on the common shares payable in common shares, or effect a subdivision or combination or consolidation of the outstanding common shares (by reclassification or otherwise than by payment of a dividend in common shares) into a greater or lesser number of common shares, then in each such case the aggregate amount to which holders of shares of Perpetual Cumulative Preferred Stock were entitled immediately prior to such event under the first proviso in Section 5(a)(i) above shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of common shares outstanding immediately after such event and the denominator of which is the number of common shares that were outstanding immediately prior to such event.
 
(b)   For purposes of this Section 5, the merger or consolidation of the Corporation with any other corporation, including a merger in which the holders of common shares receive other stock or securities, cash and/or any other property for their shares, or the sale of all or substantially all of the assets of the Corporation (any such transaction, a “Business Combination”), shall not constitute a liquidation, dissolution or winding up of the Corporation.   In case the Corporation shall execute an agreement providing for the Corporation to enter into a Business Combination, such agreement shall make provision for the treatment of the shares of Perpetual Cumulative Preferred Stock in such Business Combination, which treatment shall, in the judgment of the Board of Directors, (i) preserve the value of any outstanding shares of Perpetual Cumulative Preferred Stock that will remain outstanding following such Business Combination and/or (ii) provide for the exchange of each outstanding share of Perpetual Cumulative Preferred Stock for consideration that has an aggregate value equal to the value of such share of Perpetual Cumulative Preferred Stock.
 
SECTION 6.   Voting Rights.
 
The holders of shares of Perpetual Cumulative Preferred Stock shall have the following voting rights:
 
(a)   Subject to the provision for adjustment hereinafter set forth, each share of Perpetual Cumulative Preferred Stock shall entitle the holder thereof to 15.5884 votes on all matters submitted to a vote of the stockholders of the Corporation.  In the event the Corporation shall at any time declare or pay any dividend on the common shares payable in common shares, or effect a subdivision or combination or consolidation of the outstanding common shares (by reclassification or otherwise than by payment of a dividend in common shares) into a greater or lesser number of common shares, then in each such case the number of votes per share to which holders of shares of Perpetual Cumulative Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of common shares outstanding immediately after such event and the denominator of which is the number of common shares that were outstanding immediately prior to such event.
 
(b)   Except as otherwise provided herein, in any other certificate of designations creating a series of preferred shares or any similar stock, or by law, the holders of shares of Perpetual Cumulative Preferred Stock and the holders of common shares and any other capital stock of the Corporation having general voting rights shall vote together as a single class on all matters on which holders of common shares are entitled to vote.
 
(c)   If and whenever dividends payable on the Perpetual Cumulative Preferred Stock and any other class or series of stock of the Corporation ranking on a parity with the Perpetual Cumulative Preferred Stock as to payment of dividends (any such class or series being referred to herein as “dividend parity stock”) shall be in arrears (which for the avoidance of doubt shall not include any failure to make any payment as a result of a waiver by the holders thereof) in an aggregate amount equal to at least six quarterly dividends (whether or not consecutive), the number of directors then constituting the Board of Directors shall be increased by two and the holders of shares of Perpetual Cumulative Preferred Stock, together with the holders of all other affected classes and series of dividend parity stock similarly entitled to vote for the election of two additional directors, voting together as a single class, shall be entitled to elect the two additional directors at any annual meeting of stockholders or any special meeting of the holders of shares of Perpetual Cumulative Preferred Stock and such dividend parity stock called as hereinafter provided.  Whenever all arrears in dividends on the Perpetual Cumulative Preferred Stock and dividend parity stock then outstanding shall have been paid in full and dividends thereon for the current quarterly dividend period shall have been paid or declared and set aside for payment, then the right of the holders of shares of Perpetual Cumulative Preferred Stock and such dividend parity stock to elect such additional two directors shall cease (but subject always to the same provisions for the vesting of such voting rights in the case of any similar future arrearages in dividends), and the terms of office of all persons elected as directors by the holders of shares of Perpetual Cumulative Preferred Stock and such dividend parity stock shall forthwith terminate and the number of directors constituting the Board of Directors shall be reduced accordingly.  At any time after such power shall have been so vested in the holders of shares of Perpetual Cumulative Preferred Stock and such dividend parity stock, the Secretary of the Corporation may, and upon the written request of any holder of shares of Perpetual Cumulative Preferred Stock (addressed to the Secretary at the principal office of the Corporation) shall, call a special meeting of the holders of shares of Perpetual Cumulative Preferred Stock and such dividend parity stock for the election of the two directors to be elected by them as herein provided, such call to be made by notice similar to that provided in the by-laws of the Corporation for a special meeting of the stockholders or as required by law.  If any such special meeting so required to be called shall not be called by the Secretary within 20 days after receipt of any such request, then any holder of shares of Perpetual Cumulative Preferred Stock may (at the Corporation’s expense) call such meeting, upon notice as herein provided, and for that purpose shall have access to the stock books of the Corporation.  The directors elected at any such special meeting shall hold office until the next annual meeting of the stockholders if such office shall not have previously terminated as above provided.  In case any vacancy shall occur among the directors elected by the holders of shares of Perpetual Cumulative Preferred Stock and such dividend parity stock, a successor shall be elected by the Board of Directors to serve until the next annual meeting of the stockholders upon the nomination of the then remaining director elected by the holders of shares of Perpetual Cumulative Preferred Stock and such dividend parity stock or the successor of such remaining director.  If the holders of shares of Perpetual Cumulative Preferred Stock become entitled under the foregoing provisions to elect or participate in the election of two directors as a result of dividend arrearages, such entitlement shall not affect the right of such holders to vote as stated in Sections 6(a)-(b) above, including the right to vote in the election of the remaining directors.
 
(d)   So long as any shares of Perpetual Cumulative Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or by the Certificate of Incorporation, the vote or consent of the holders of at least 66⅔% of the shares of Perpetual Cumulative Preferred Stock at the time outstanding, voting separately as a single class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:
 
(i)           any amendment, alteration or repeal of any provision of the Certificate of Incorporation, by-laws of the Corporation or this Certificate of Designations that would alter or change the powers, preferences or special rights of the Perpetual Cumulative Preferred Stock so as to affect them adversely; provided , however , that an amendment of the Certificate of Incorporation so as to authorize or create, or to increase the authorized amount of, any shares of any class or series or any securities convertible into shares of any class or series of capital stock of the Corporation ranking junior to or on a parity with the Perpetual Cumulative Preferred Stock with respect to the payment of dividends and in the distribution of assets on any liquidation, dissolution or winding up of the Corporation shall not be deemed to affect adversely the powers, preferences or special rights of the Perpetual Cumulative Preferred Stock;   or
 
(ii)           any amendment or alteration of the Certificate of Incorporation to authorize or create, or increase the authorized amount of, any shares of any class or series or any securities convertible into shares of any class or series of capital stock of the Corporation ranking prior to the Perpetual Cumulative Preferred Stock with respect to the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Corporation;
 
provided , however , that if any such amendment, alteration or repeal would affect adversely the powers, preferences or special rights of the Perpetual Cumulative Preferred Stock and any other series of preferred shares similarly entitled to vote upon the matters specified herein in substantially the same manner, it shall be sufficient if the holders of shares of Perpetual Cumulative Preferred Stock and all such other series so adversely affected vote thereon together as a single class, regardless of series.
 
(e)           So long as any shares of Perpetual Cumulative Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or by the Certificate of Incorporation, the vote or consent of the holders of at least a majority of the shares of Perpetual Cumulative Preferred Stock and all other series of preferred shares similarly entitled to vote upon the matters specified in this Section 6(e) at the time outstanding, voting together as a single class regardless of series, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating any amendment or alteration of the Certificate of Incorporation to increase the authorized number of shares of Perpetual Cumulative Preferred Stock, or to authorize or create, or increase the authorized amount of, any shares of any class or series or any securities convertible into shares of any class or series of capital stock of the Corporation ranking on a parity with the Perpetual Cumulative Preferred Stock with respect to the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Corporation; provided , however , that no such vote or consent of the holders of shares of Perpetual Cumulative Preferred Stock shall be required if provision is made for the redemption of all shares of Perpetual Cumulative Preferred Stock at the time outstanding at or (with the consent of the holders of such shares) before the time such increase, authorization or creation is to be made.
 
SECTION 7.   Redemption.
 
                      (a)           At any time, the Board of Directors may redeem shares of the Perpetual Cumulative Preferred Stock for common shares of the Corporation at a ratio of 155.8840 common shares per share of Perpetual Cumulative Preferred Stock.  In the event the Corporation shall at any time declare or pay any dividend on the common shares payable in common shares, or effect a subdivision or combination or consolidation of the outstanding common shares (by reclassification or otherwise than by payment of a dividend in common shares) into a greater or lesser number of common shares, then in each such case the number of common shares set forth in the preceding sentence with respect to the redemption of shares of Perpetual Cumulative Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of common shares outstanding immediately after such event and the denominator of which is the number of common shares that were outstanding immediately prior to such event.

(b)           Any redemption pursuant to this Section 7 shall be pursuant to notice and other procedures as determined by the Board of Directors.

SECTION 8.   Other Rights.   The shares of Perpetual Cumulative Preferred Stock shall not have any powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation.
 

 


Exhibit 10-a















2005
SUPPLEMENTAL EMPLOYEE
RETIREMENT PLAN













 









Adopted:  November 19, 2004
             Effective:  November 18, 2005
Amended and Restated:  January 1, 2010


 
 

 

2005 SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN

 
1  
Purpose .
 
The purpose of the 2005 Supplemental Employee Retirement Plan (the “SERP” or the "Plan") is to provide Participants with retirement benefits to supplement benefits payable pursuant to qualified group pension plans sponsored by AT&T or an affiliate of AT&T.  The Plan is a successor to the AT&T Supplemental Retirement Income Plan (“SRIP”) that was effective January 1, 1984 and which was amended, effective December 31, 2004, to cease accruals so that the benefits payable under the SRIP shall be grandfathered and administered in accordance with the provisions of the SRIP in a manner that does not invoke Section 409A of the Code.  The Plan is amended and restated herein, effective January 1, 2010.  In order for a Participant to accrue benefits on and after January 1, 2010 pursuant to Section 3.2 below, then the provisions of Section 8.2 shall apply.
 

2  
Definitions .
 
For purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the context clearly indicates otherwise:
 
Administrative Committee . "Administrative Committee" means a Committee, consisting of the SEVP-HR and two or more other members designated by the SEVP-HR, which shall administer the Plan.
 
Agreement .  "Agreement" means the written agreement entered into between AT&T by its SEVP-HR and a Participant prior to January 1, 2009 to carry out the Plan with respect to such Participant.  No Agreements are necessary for Participants who become eligible to participate in the Plan on or after January 1, 2009.
 
AT&T .  "AT&T" means AT&T Inc.
 
Beneficiary .  "Beneficiary" shall mean any beneficiary or beneficiaries designated by the Participant pursuant to the AT&T Rules for Employee Beneficiary Designations as may hereafter be amended from time-to-time ("Rules").  If a Participant fails to execute a Beneficiary designation form with respect to Plan benefits, his or her Beneficiary designation form with respect to his SRIP benefits shall apply with respect to his Plan benefits.  If a Participant fails to execute a Beneficiary designation form with respect to Plan benefits and with respect to SRIP benefits, the default provisions in the Rules shall apply.
 
CEO or Chief Executive Officer.   “CEO” or “Chief Executive Officer” shall mean the Chief Executive Officer of AT&T.
 
Disabled or Disability .  “Disabled” or "Disability" means the Participant’s (i) inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident or health plan covering employees of the Participant’s employer.  The Administrative Committee, in its complete and sole discretion, determines whether a Participant is Disabled.  The Administrative Committee may require that the Participant submit to an examination by a competent physician or medical clinic selected by the Administrative Committee.  On the basis of such medical evidence, the determination of the Administrative Committee as to whether or not a Participant is Disabled shall be conclusive.
 
Earnings .  "Earnings" means for a given calendar year the Participant's: (1) bonus earned as a short term award during the calendar year but not exceeding 200% of the target amount of such bonus (or such other portion of the bonus or target bonus as may be determined by the Human Resources Committee of the Board of AT&T), plus (2) base salary before reduction due to any contribution pursuant to any deferred compensation plan or agreement sponsored by AT&T or an AT&T affiliate, including but not limited to compensation deferred in accordance with Sections 401(k), 125, or 132(f) of the Internal Revenue Code.
 
Final Average Earnings .  "Final Average Earnings" means the average of the Participant's Monthly Earnings for the thirty-six (36) consecutive months out of the one hundred twenty (120) months next preceding the Participant's Termination of Employment which yields the highest average earnings.  If the Participant has fewer than thirty-six (36) months of employment, the average shall be taken over his or her period of employment.
 
GAAP Rate .  For a referenced calendar year, "GAAP Rate" means the interest rate used for valuing Plan liabilities on December 31 of the immediately preceding calendar year and for calculating periodic pension expense for the referenced calendar year, both for purposes of AT&T's financial statement reporting requirements.
 
Immediate Annuity Value of any AT&T or affiliate Qualified Pensions .  “Immediate Annuity Value of any AT&T or affiliate Qualified Pensions” shall have the meaning as provided in Attachment B.
 
Immediate Annuity Value of SRIP . "Immediate Annuity Value of SRIP" shall have the meaning as provided in Attachment C.
 
Immediate Annuity Value of any other AT&T or affiliate Non-Qualified Pensions other than SERP . "Immediate Annuity Value of any AT&T or affiliate Non-Qualified Pensions other than SERP" shall have the meaning as provided in Attachment D.
 
Mid-Career Hire .   “Mid-Career Hire” means an individual whose Service Commencement Date is on or after the individual’s thirty-fifth (35 th ) birthday.
 
Monthly Earnings .  "Monthly Earnings" means one-twelfth (1/12) of Earnings.
 
Mortality Tables .  "Mortality Tables" means the mortality tables as defined by Code Section 417(e) for valuing minimum lump sum benefits payable from qualified pension plans for the referenced period.
 
Officer . "Officer" shall mean an individual who is designated as an officer level employee for compensation purposes on the records of AT&T.

Participant . "Participant" means:
 

(a)  
Any person who, as of close of business on December 31, 2004, was employed by an AT&T affiliate and was a participant in the SRIP; or
 
(b)  
Any person who was a participant in the SRIP, terminated employment in 2004 and receives Earnings in 2005; or
 
(c)  
An Officer of AT&T or an AT&T affiliate who is designated by the CEO as eligible to participate in the Plan.
 
Notwithstanding the foregoing definition of Participant, the CEO, may, at any time and from time to time, exclude any person or group of persons from being deemed a “Participant” under this plan.
 
An individual’s participation in SERP shall commence as of his or her SERP Effective Date.
 
Retire or Retirement .  "Retire" or "Retirement" shall mean the Termination of Employment of a Participant for reasons other than death, on or after the earlier of the following dates:  (1) the date the Participant is Retirement Eligible or (2) the date the Participant has attained one of the following combinations of age and service at Termination of Employment:

 
Years of Service
       Age
 
25 years or more
50 or older
 
30 years or more
Any age

Retirement Eligible .  "Retirement Eligible" or "Retirement Eligibility" means that a Participant has attained age 55 and has at least five (5) Years of Service.
 
Retirement Percent .  "Retirement Percent" means the percent specified in the Agreement with the Participant (if any) which establishes a Target Retirement Benefit (see Section 3.1) as a percentage of Final Average Earnings. For an individual who becomes a Participant on or after January 1, 2006, "Retirement Percent" means 50 percent unless otherwise provided by the Human Resources Committee of the Board of Directors of AT&T.
 
SERP Effective Date .  “SERP Effective Date” means the date of the written designation of the Participant’s eligibility to participate in SERP, signed by the CEO.
 
SEVP-HR .  “SEVP-HR” means AT&T’s Senior Executive Vice President responsible for Human Resources matters.
 
Supplemental Retirement Income Plan or SRIP .  "Supplemental Retirement Income Plan” or “SRIP" means the AT&T Inc. Supplemental Retirement Income Plan effective January 1, 1984.
 
Service Commencement Date .  “Service Commencement Date” means the Participant’s employment commencement date with AT&T or any AT&T affiliate, as such date may be adjusted from time-to-time in accordance with rules, policies and procedures generally applied by AT&T to adjust for breaks in service or other periods of time, as reflected in AT&T’s or an AT&T affiliate’s records, all as determined in the discretion of the SEVP-HR.
 
Service Factor .  "Service Factor" means, unless otherwise agreed in writing by the Participant and AT&T, either (a) a deduction of 1.43 percent, or .715 percent for Mid-Career Hires, multiplied by the number by which (i) thirty-five (or thirty in the case of a Participant who is an Officer) exceeds (ii) the number of Years of Service of the Participant, or (b) a credit of 0.715 percent multiplied by the number by which (i) the number of Years of Service of the Participant exceeds (ii) thirty-five (or thirty in the case of a Participant who is an Officer).  For purposes of the above computation, a deduction shall result in the Service Factor being subtracted from the Retirement Percent whereas a credit shall result in the Service Factor being added to the Retirement Percent.
 
Termination of Employment .  "Termination of Employment" means the ceasing of the Participant's employment from the AT&T controlled group of companies for any reason whatsoever, whether voluntarily or involuntarily.  A Participant will be deemed to have realized a Termination of Employment at any time that a Participant and the Administrative Committee reasonably anticipate that the bona fide level of services the Participant will perform (whether as an employee or an independent contractor) will be permanently reduced to a level that is less than fifty percent (50%) of the average level of bona fide services the Participant performed during the immediately preceding thirty-six (36) months (or the entire period the Participant has provided services if the Participant has been providing services to the AT&T controlled group of companies less than thirty-six (36) months).
 
Year .   A "Year" is a period of twelve (12) consecutive calendar months.
 
Years of Participation .  "Years of Participation" means the number of each complete Years beginning with the Participant’s SERP Effective Date through each annual anniversary of such date.
 
Years of Service .  "Years of Service" means the number of each complete Years of full-time service as an employee of AT&T or an AT&T affiliate beginning with the Participant’s Service Commencement Date through each annual anniversary of such date, including service prior to the adoption of this Plan. “Years of Service” shall also include, without duplication, (i.) a Participant’s Years of service that are recognized for purposes of the BellSouth Corporation Supplemental Employee Retirement Plan, or (ii.) a Participant’s years of service on the Cingular Wireless payroll during the period beginning on 10/28/01 and ending on or prior to 12/31/04 that were recognized for purposes of the Cingular Wireless SBC Executive Transition Supplemental Retirement Income Plan, but that are not otherwise included pursuant to the immediately preceding sentence.
 
3  
Plan ("SERP") Benefits .
 
              3.1  
SERP Benefit Formula .
 
With respect to (1) a Participant who was a participant in the SRIP prior to January 1, 1998, or (2) a Participant who, prior to January 1, 1998, was an officer of a Pacific Telesis Group ("PTG") company and became a participant in the SRIP after January 1, 1998, the amount of such Participant’s SERP Benefit is calculated as follows:
 
 
  Final Average Earnings 
Revised Retirement Percentage 
Target Retirement Benefit 
Immediate Annuity Value of any AT&T or affiliate Qualified Pensions 
Immediate Annuity Value of any other AT&T or affiliate Non-Qualified Pensions other than the SERP 
Target Benefit 
Age Discount 
Annual Value of Life with 10 Year Certian SERP Benefit payable as a result of Termination of Employment Before SRIP Reduction 
Immediate Annuity Value of SRIP 
Annual Value of Life with 10 Year Certain SERP Benefit payable as a result of Termination of Employment 
 

  With respect to all other Participants, subject to the provisions of Attachment E, the amount of such Participant’s SERP Benefit is calculated as follows:
 
 
  Final Average Earnings 
Revised Retirement Percentage 
Target Retirement Benefit 
Age Discount
Discounted Target Benefit
Immediate Annuity Value of any AT&T or affiliate Qualified Pensions
Immediate Annuity Value of SRIP
Immediate Annuity Value of any other AT&T or affiliate Non- Qualified Pensions other than SERP  
Annual Value of Life with 10 Year Certain SERP Benefit payable as a result of Termination of Employment 
 
Where in both of the above cases the following apply:
 

(a)
Revised Retirement Percentage = Retirement Percent + Service Factor
 
(b)
For purposes of determining the Service Factor, the Participant's actual Years of Service as of the date of Termination of Employment, to the day, shall be used.
 
(c)
For purposes of determining the Final Average Earnings, the Participant's Earnings history as of the date of Termination of Employment shall be used.
 
(d)
Age Discount means the Participant's SERP Benefit shall be decreased by five-tenths of one percent (.5%) for each month that the date of the Participant’s Termination of Employment precedes the date on which the Participant will attain age 60.

Notwithstanding the foregoing, if at the time of Termination of Employment the Participant is, or has been within the one year period immediately preceding the Participant's Termination of Employment, an Officer with 30 or more Years of Service such Participant's Age Discount shall be zero.
 
Except to true up for an actual short term award paid following Termination of Employment, there shall be no recalculation of the value of a Participant's SERP Benefit hereunder following a Participant's Termination of Employment.
 
3.2.   Vesting .
 
Notwithstanding any other provision of this Plan:
 

           (a)  
upon any Termination of Employment of the Participant for a reason other than death or Disability, AT&T shall have no obligation to the Participant under this Plan if the Participant has less than five (5) Years of Service or, for Participants who are informed, in writing, of their SERP eligibility on or after September 28, 2006, less than four (4) Years of Participation, at the time of Termination of Employment; and
 
            (b)  
the terms and conditions set forth in Section 8.2 shall apply to any benefits accrued on or after January 1, 2010, and in order for a Participant to accrue (or collect) such Plan benefits on or after January 1, 2010, the Participant must comply with the terms and conditions set forth in Section 8.2.
 

4  
Election and Form of Distribution of SERP Benefits .
 
4.1  
Normal Form.
 
The normal form of a Participant's benefits hereunder shall be a Life with 10-Year Certain Benefit as described in Section 4.2(a).
 
4.2  
Election Alternatives .
 
Notwithstanding the normal form for distribution of a Participant’s SERP Benefits, a Participant may elect one of the following Benefit Payout Alternatives:
 

         (a)
Life with a 10-Year Certain Benefit .  An annuity payable during the longer of (i) the life of the Participant or (ii) the 10-year period commencing on the Participant’s Termination of Employment and ending on the day next preceding the tenth anniversary of such date (the "Life With 10-Year Certain Benefit").  If a Participant who is receiving a Life with 10-Year Certain Benefit dies prior to the expiration of the 10-year period described in this Section 4.2(a), the Participant's Beneficiary shall be entitled to receive the remaining Life With 10-Year Certain Benefit installments which would have been paid to the Participant had the Participant survived for the entire such 10-year period.
 
          (b)
Joint and 100% Survivor Benefit .  A joint and one hundred percent (100%) survivor annuity payable for life to the Participant and at his or her death to his or her Beneficiary, in an amount equal to one hundred percent (100%) of the amount payable during the Participant's life, for life (the "Joint and 100% Survivor Benefit").
 
          (c)
Joint and 50% Survivor Benefit .  A joint and fifty percent (50%) survivor annuity payable for life to the Participant and at his or her death to his or her Beneficiary, in an amount equal to fifty percent (50%) of the amount payable during the Participant's life, for life (the "Joint and 50% Survivor Benefit").
 
          (d)
Lump Sum Benefit .  A lump sum benefit, which shall apply only if the Participant has attained the age of fifty-five (55) years as of his or her Termination of Employment.  If a Participant elects a lump sum benefit but realizes a Termination of Employment prior to attaining age fifty-five (55), the Participant’s SERP Benefit shall be paid as provided in Section 4.2(a), 4.2(b) or 4.2(c), as elected or deemed elected by the Participant.
 
The Benefit Payout Alternatives described in Section 4.2(b), 4.2(c) and 4.2(d) shall be the actuarially determined equivalent (using the same reasonable actuarial assumptions and methods for valuing each Benefit Payout Alternative as determined by the SEVP-HR in his or her complete and sole discretion) of the Life With 10-Year Certain Benefit that is converted by such election.  The amount of a Participant's lump sum benefit shall be calculated as of the Participant's Termination of Employment by applying the Mortality Tables and the GAAP Rate, both as in effect for the calendar year immediately preceding the calendar year of the Participant’s Termination of Employment, but using the Participant’s age, Years of Service and other factors as of the Participant’s Termination of Employment.
 
4.3  
Distribution Election .
 
              (a)
Individual Who Is A Participant On or Before December 31, 2008 .  An individual who was a Participant on or before December 31, 2008 may make an irrevocable election of a Benefit Payout Alternative before the earlier of December 31 of the year immediately preceding his or her Termination of Employment or December 31, 2008 by delivery of such election, in writing, telecopy, email or in another electronic format, pursuant to or as instructed by the SEVP-HR (as determined by the SEVP-HR in his or her sole and absolute discretion).
 
              (b)
Individual Who Becomes A Participant After December 31, 2008 .  An individual who becomes a Participant after December 31, 2008 may make an irrevocable election of a Benefit Payout Alternative no later than the thirtieth (30 th ) day immediately following the Participant’s SERP Effective Date by delivery of such election in writing, telecopy, email or in another electronic format, pursuant to or as instructed by the SEVP-HR (as determined by the SEVP-HR in his or her sole and absolute discretion).
 
              (c)
Failure to Timely Make a Distribution Election .  If a Participant fails to make a timely election of a Benefit Payout Alternative as provided in Section 4.3(a) or 4.3(b), such Participant shall be deemed to have elected and such Participant's form of benefit shall be the Life With 10-Year Certain Benefit described in Section 4.2(a).
 
               (d)
Death of or Divorce from Annuitant During Participant’s Lifetime .  Notwithstanding any other provision of this Plan to the contrary, in the event of the death of a designated annuitant during the life of the Participant, the Participant's election to have a Benefit Payout Alternative described in Section 4.2(b) or 4.2(c) shall, without any action by the Participant, be revoked, and the Participant’s benefit, or remaining benefit, under the Plan, as the case may be, shall be paid as provided in Section 4.2(a).  Any conversion of benefit from one form to another pursuant to the provisions of this paragraph shall use the same reasonable actuarial assumptions and methods for valuing each annuity form of benefit before and after the death of the designated annuitant and shall be subject to actuarial adjustment (as determined by the SEVP-HR in his or her complete and sole discretion) such that the Participant's new benefit is the actuarial equivalent of the Participant's remaining prior form of benefit.  Payments pursuant to Participant's new form of benefit shall be effective commencing with the first monthly payment for the month following the death of the annuitant.
 
Notwithstanding any other provision of this Plan to the contrary, in the event of the divorce or legal separation of the Participant, the Participant’s election to have a Benefit Payout Alternative described in Section 4.2(b) or 4.2(c), with a survivor annuity for the benefit of the Participant's former spouse as Beneficiary, shall, without any action by the Participant, be revoked, and the Participant's benefit, or remaining benefit, under the Plan, as the case may be, shall be paid as provided in Section 4.2(a) (using the same reasonable actuarial assumptions and methods for valuing each annuity form of benefit before and after the divorce or legal separation  and shall be subject to actuarial adjustment (as determined by the SEVP-HR in his or her complete and sole discretion).  In such event, the 10-Year period as described in Section 4.2(a) shall be the same 10-year period as if such form of benefit was the form of benefit originally selected and the expiration date of such period shall not be extended beyond its original expiration date.  Payments pursuant to Participant’s new form of benefit shall be effective commencing with the first monthly payment following notice from the Participant to the SEVP-HR after the divorce (or legal separation) becomes final.
 
              (e)
Special Provisions for Lump Sum Benefit Election .  A Participant who elects a lump sum benefit under Section 4.2(d) must, contemporaneous with such Lump Sum Benefit election, elect a specific number of year(s), not to exceed twenty (20) years, following his or her Termination of Employment upon which the lump sum benefit (including any interest accrued thereon) shall be distributed; provided, however ,
 
                            (i)
the Participant may not receive more than thirty percent (30%) of his or her lump sum benefit (excluding any interest thereon) until the third (3 rd ) anniversary of his or her Termination of Employment; provided , however , if the Participant is age sixty (60) or older as of his or her Termination of Employment, the Participant, if elected in his or her timely filed election of a Benefit Payout Alternative, may receive one hundred percent (100%) of his or her lump sum benefit upon the day that is six (6) months following his or her Termination of Employment if he or she agrees, in writing, substantially in the form provided in Attachment A, not to compete with an Employer Business within the meaning of Section 8.2 for a period of three (3) years from such Participant’s Termination of Employment and further agrees that if he or she fails to abide by such agreement, the non-compete agreement is challenged, or the non-compete agreement is unenforceable, he or she shall forfeit all benefits hereunder and repay the lump sum benefit to AT&T ; and
 
                             (ii)
prior to distribution of the Participant’s lump sum benefit, interest on such lump sum benefit shall accrue and shall be added to the Participant’s lump sum benefit or distributed monthly, as elected by the Participant in his or her election of a Benefit Payout Alternative .
 
A Participant’s lump sum benefit payment schedule must comply with the rules for payment schedules as adopted by the SEVP-HR (as determined by the SEVP-HR in his or her sole and absolute discretion), which, for example, may require payment of principal to be made no more frequently than once per calendar year.
 
If the payment schedule elected by a Participant does not comply with the rules for payment schedules, (i) thirty percent (30%) of such Participant’s lump sum benefit shall be paid to the Participant upon the date that is six (6) months following the Participant’s Termination of Employment,   and (ii) the remaining seventy percent (70%) shall be paid to the Participant on the third (3 rd ) anniversary of such Participant’s Termination of Employment.
 
             (f)
Lump Sum Benefit Account Balance .  From and after a Participant’s Termination of Employment, the SEVP-HR shall maintain records of a lump sum benefit account balance for each Participant who elected a lump sum benefit.  During such period of time that all or any portion of a Participant’s lump sum benefit is not paid, interest shall be credited using the same methodology used by AT&T for financial accounting purposes using the GAAP Rate that was used to calculate such Participant’s lump sum benefit.  Payments of principal and interest shall be deducted from the lump sum benefit account balance.
 
A Participant whose employment has not terminated may change a prior distribution election at any time on or before December 31, 2008, provided, however, if the Participant’s employment terminates for any reason in the calendar year in which the new distribution election is filed, such new election shall be null and void.  In the event the Participant’s new election is null and void, the Participant’s prior election, if any, shall apply.  If there is no prior election, the Plan’s default distribution provisions shall apply.
 
5  
Death or Disability Benefits .                                                                            
 
5.1  
Death Following Termination of Employment .
 
If a Participant who has commenced payment of his or her SERP benefit hereunder dies, his or her Beneficiary shall be entitled to receive the remaining SERP benefit in accordance with the Benefit Payout Alternative elected or deemed elected by the Participant.
 
5.2  
Death Prior to Termination of Employment .
 
If a Participant dies prior to his or her Termination of Employment, a pre-retirement death benefit will be calculated and paid as though the Participant had Retired  (determined without regard to the 5 Years of Service or the 4 Years of Participation requirements) on the day prior to the date of death.  The pre-retirement death benefit shall be paid at such time and in such form as timely elected or deemed elected by the Participant; provided, if the Participant elected or is deemed to have elected any form of an annuity, such pre-retirement death benefit shall be paid as a Beneficiary Life Annuity (as such term is hereinafter described) based on the life expectancy of the Beneficiary, and, if the Participant elected or is deemed to have elected a Life with a 10-Year Certain Benefit, such Beneficiary Life Annuity shall continue for the longer of (i) the Beneficiary’s life, or (ii) the 10 year period commencing on the Participant’s death.  If paid as a Beneficiary Life Annuity, such benefit shall be the actuarially determined equivalent using the same reasonable actuarial assumptions and methods (as determined by the SEVP-HR in his or her complete and sole discretion) of the Life With 10-Year Certain Benefit that would have been paid to the Participant had he or she Retired on the day immediately prior to his or her death.  If the Participant had timely elected and qualified to receive a Lump Sum Benefit, it shall be calculated in the same manner as provided in Section 4.2 as if the Participant were alive; e.g., calculated as of the Participant's death applying the Mortality Tables and the GAAP Rate, both as in effect for the calendar year immediately preceding the calendar year of the Participant’s death, but using the Participant’s age, Years of Service and other factors as of the Participant’s date of death.
 
5.3  
Disability .
 
Upon a Participant's Termination of Employment and contemporaneous qualification for receipt of long term disability benefits under an AT&T or AT&T affiliate sponsored long term disability benefit plan in which the Participant participates prior to being Retirement Eligible (without regard to the 5 Years of Service or 4 Years of Participation requirements), the Participant will continue to accrue Years of Service during such disability until the earliest of his or her:
 
              (a)
Recovery from Disability,
 
               (b)
Retirement (determined without regard to the 5 Years of Service or 4 Years of Participation requirements), or
 
               (c)
Death.
 
Upon the occurrence of either (a) Participant's recovery from Disability prior to his or her Retirement Eligibility if Participant does not return to employment, or (b) Participant's Retirement (determined without regard to the 5 Years of Service or 4 Years of Participation requirements), the Participant shall be entitled to receive a SERP Benefit as if he or she realized a Termination of Employment as of the date of such occurrence.
 
For purposes of calculating the foregoing benefit, the Participant's Final Average Earnings shall be determined using his or her Earnings history as of the date of his or her Disability.
 
If a Participant who continues to have a Disability dies prior to his or her Retirement Eligibility (without regard to the 5 Years of Service or 4 Years of Participation requirements), the Participant will be treated in the same manner as if he or she had died while in employment (See Section 5.2).
 
6  
Payment of Benefits.
 
6.1  
Commencement of Payments .
 
              (a)
Except as provided in Section 5.3, benefit payments shall commence pursuant to the Benefit Payout Alternative elected by the Participant in his or her Agreement on the date that is six (6) months following his or her Termination of Employment; provided, however, if the Participant dies after Termination of Employment and prior to the lapse of such six (6) month period, benefit payments shall commence upon the Participant’s death.  If a Participant elected (or is deemed to have elected) an annuity form of benefit under Section 4.2(a), 4.2(b) or 4.2(c), the aggregate monthly amount that would be paid between the Participant’s Termination of Employment through the date that benefit payments actually commence, shall be paid in a lump sum on the date that benefit payments actually commence hereunder.  In addition, during the period of time between a Participant’s Termination of Employment and the date that annuity payments hereunder actually commence, interest shall be credited on the withheld annuity amounts for such period of time that each annuity payment is withheld.  The credited interest shall be paid in a lump sum on the date that payments hereunder actually commence.  Interest shall be credited using the GAAP Rate in effect for the calendar year immediately preceding the calendar year of the Participant’s Termination of Employment.
 
               (b)
Notwithstanding the designation of a specific date for commencement of payment of a distribution hereunder, commencement of payments under this Plan may be delayed for administrative reasons in the discretion of the SEVP-HR, but shall begin not later than sixty (60) days following the date upon which payment(s) would otherwise commence under this Plan. A Participant shall not have the right to designate or participate in the decision as to the taxable year of benefit commencement.
 
6.2  
Withholding; Unemployment Taxes .
 
              (a)
A payment may be made from the Plan to reflect the payment of state, local, or foreign tax obligations arising from participation in the Plan that apply to an amount deferred under the Plan before the amount is paid or made available to a Participant (the “State, Local, or Foreign Tax Amount”).  Such payment may not exceed the amount of such taxes due as a result of participation in the Plan.  Such payment may be made by distributions to the Participant in the form of withholding pursuant to provisions of applicable state, local, or foreign law or by distribution directly to the Participant.  Additionally, a payment may be made from the Plan to pay the income tax at source on wages imposed under Code Section 3401 as a result of the payment of the State, Local, or Foreign Tax Amount and to pay the additional income tax at source on wages attributable to such additional Code Section 3401 wages and taxes.  However, the total payment under this Section 6.2 (a) shall not exceed the aggregate of the State, Local, or Foreign Tax Amount and the income tax withholding related to such State, Local, or Foreign Tax Amount.
 
               (b)
A payment may be made from the Plan to pay the Federal Insurance Contributions Act tax imposed by Code Sections 3101, 3121(a), and 3121(v)(2) on compensation deferred under the Plan (the “FICA Amount”).  Additionally, a payment may be made from the Plan to pay the income tax at source on wages imposed under Code Section 3401 or the corresponding withholding provisions of applicable state, local or foreign tax laws as a result of the payment of the FICA Amount and to pay the additional income tax at source on wages attributable to the pyramiding section 3401 wages and taxes.  However, the total payment under this Section 6.2 (b) shall not exceed the aggregate of the FICA Amount and the income tax withholding related to such FICA Amount.
 
6.3  
Recipients of Payments; Designation of Beneficiary .
 
All payments to be made under the Plan shall be made to the Participant during his or her lifetime, provided that if the Participant dies prior to the completion of such payments, then all subsequent payments under the Plan shall be made to the Participant's Beneficiary or Beneficiaries.
 
In the event of the death of a Participant, distributions/benefits under this Plan shall pass to the Beneficiary (ies) designated by the Participant in accordance with this Plan and the Rules.
 
6.4  
No Other Benefits .
 
No benefits shall be paid hereunder to the Participant or his or her Beneficiary except as specifically provided herein.
 
6.5  
Small Benefit .
 
Notwithstanding any election made by the Participant, the SEVP-HR in his or her sole discretion may pay any benefit in the form of a lump sum payment if (A) the lump sum equivalent amount is or would be less than the applicable dollar amount under Code Section 402(g)(1)(B) when payment of such benefit would otherwise commence, and (B) the payment of the lump sum equivalent amount results in the termination and liquidation of the entirety of the Participant’s interest under the Plan and under any other plan that is considered a single nonqualified deferred compensation plan under Treasury Regulations Section 1.409A-1(c)(2).
 
7.  
Conditions Related to Benefits.
 
7.1  
Administration of Plan .
 
The Administrative Committee and the SEVP-HR with respect to specific functions identified in the Plan, shall be the sole administrators of the Plan and will, in their discretion, administer, interpret, construe and apply the Plan in accordance with its terms.  The Administrative Committee or the SEVP-HR shall further establish, adopt or revise such rules and regulations as each may deem necessary or advisable for the administration of the Plan.  The Administrative Committee shall serve as the Plan’s “administrator” within the meaning of the Employee Retirement Income Security Act of 1974, as amended, and regulations thereunder (“ERISA”).   All decisions of the Administrative Committee or the SEVP-HR shall be final and binding unless the Board of Directors should determine otherwise.
 
7.2  
No Right to AT&T Assets .
 
Neither a Participant nor any other person shall acquire by reason of the Plan any right in or title to any assets, funds or property of any AT&T company whatsoever including, without limiting the generality of the foregoing, any specific funds or assets which AT&T, in its sole discretion, may set aside in anticipation of a liability hereunder, nor in or to any policy or policies of insurance on the life of a Participant owned by AT&T.  No trust shall be created in connection with or by the execution or adoption of this Plan or any Agreement, and any benefits which become payable hereunder shall be paid from the general assets of AT&T.  A Participant shall have only a contractual right to the amounts, if any, payable hereunder unsecured by any asset of AT&T.
 
7.3  
Trust Fund .
 
AT&T shall be responsible for the payment of all benefits provided under the Plan.  At its discretion, AT&T may establish one or more trusts, for the purpose of providing for the payment of such benefits.  Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of AT&T's creditors.  To the extent any benefits provided under the Plan are actually paid from any such trust, AT&T shall have no further obligation with respect thereto, but to the extent not so paid, such benefits shall remain the obligation of, and shall be paid by AT&T.
 
7.4  
No Employment Rights .
 
Nothing herein shall constitute a contract of continuing employment or in any manner obligate any AT&T company to continue the service of a Participant, or obligate a Participant to continue in the service of any AT&T company and nothing herein shall be construed as fixing or regulating the compensation paid to a Participant.
 
7.5  
Modification or Termination of Plan .
 
This Plan may be modified or terminated at any time in accordance with the provisions of AT&T's Schedule of Authorizations.  A modification may affect present and future Participants, provided that any prospective amendment or restatement of the Plan shall not apply to any benefits accrued prior to such amendment or restatement.   AT&T also reserves the sole right to terminate at any time any or all Agreements.  In the event of termination of the Plan or of a Participant's Agreement, a Participant shall be entitled to benefits hereunder, if prior to the date of termination of the Plan or of his or her Agreement, such Participant has attained 5 Years of Service and, if applicable, 4 Years of Participation, in which case, regardless of the termination of the Plan/Participant's Agreement, such Participant shall be entitled to benefits at such time as provided in and as otherwise in accordance with the Plan and his or her Agreement, provided, however, a Participant's benefit shall be computed as if the Participant had realized a Termination of Employment as of the date of termination of the Plan or of his or her Agreement; provided further, however, a Participant's service subsequent to Plan/Agreement termination shall be recognized for purposes of reducing or eliminating the Age discount provided for by Section 3.1(d).  No amendment, including an amendment to this Section 7.5, shall be effective, without the written consent of a Participant, to alter, to the detriment of such Participant, the benefits described in this Plan as applicable to such Participant as of the effective date of such amendment.  For purposes of this Section 7.5, an alteration to the detriment of a Participant shall mean a reduction in the amount payable hereunder to a Participant to which such Participant would be entitled if such Participant realized a Termination of Employment at such time, or any change in the form of benefit payable hereunder to a Participant to which such Participant would be entitled if such Participant realized a Termination of Employment at such time.  Any amendment which reduces a Participant's benefit hereunder to adjust for a change in his or her pension benefit resulting from an amendment to any company-sponsored defined benefit pension plan which changes the pension benefits payable to all employees, shall not require the Participant's consent.  Written notice of any amendment shall be given to each Participant.
 
7.6  
Offset .
 
If at the time payments or installments of payments are to be made hereunder, a Participant or his or her Beneficiary or both are indebted to AT&T or any AT&T affiliate as a result of debt incurred in the ordinary course of the employment relationship between the Participant and the AT&T company, then, annually, up to $5,000 of the payments remaining to be made to the Participant or his or her Beneficiary or both, may, at the discretion of the SEVP-HR, be reduced by the amount of such indebtedness; provided, however, that the reduction must be made at the same time and in the same amount as the debt otherwise would have been due and collected from the Participant or his or her Beneficiary; provided, further, however, that an election by the Board of Directors not to reduce any such payment or payments shall not constitute a waiver of such AT&T company's claim for such indebtedness.
 
7.7  
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 Participant, the Participant shall immediately cease to be eligible for any benefits under this Plan except such benefits as had previously vested.  Only Participant's Years of Service and Earnings history prior to the change in his employment status shall be taken into account for purposes of determining Participant's vested benefits hereunder.
 
  
Commencement of Payments .
 
8.   Miscellaneous .
 
8.1  
Nonassignability .
 
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 of the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable.  No part of the amounts payable shall, prior to actual payment, 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.
 
8.2  
Non-Competition .
 
AT&T would be unwilling to provide Plan benefits but for the loyalty conditions and covenants set forth in this Section 8.2, and the conditions and covenants herein are a material inducement to AT&T’s willingness to sponsor the Plan and to offer Plan benefits for the Participants on or after January 1, 2010.  Accordingly, as a condition of accruing and/or receiving any Plan benefits on or after January 1, 2010, each Participant is deemed to agree that he shall not, without obtaining the written consent of AT&T in advance, participate in activities that constitute engaging in competition with AT&T or engaging in conduct disloyal to AT&T, as those terms are defined in this Section 8.2.  Further, notwithstanding any other provision of this Plan, all benefits provided under the Plan with respect to a Participant shall be subject to the enforcement provisions of this Section 8.2 if the Participant, without the consent of AT&T, participates in an activity that constitutes engaging in competition with AT&T or engaging in conduct disloyal to AT&T, as so defined below.  Furthermore, for benefits accrued before January 1, 2010, the provisions of this Section 8.2 as in effect immediately before such date shall also be applicable to the Participant’s Plan benefits, with such provisions and those herein being each separately applicable and effective.
 
              (a)
Definitions.  For purposes of this Section 8.2 and of the Plan generally:
 
                               (i)
an “Employer Business” shall mean AT&T, any subsidiary of AT&T, or any business in which AT&T or a subsidiary or affiliated company of AT&T has a substantial interest or joint venture interest;
 
                               (ii)
“engaging in competition with AT&T” shall mean, , while employed by an Employer Business or within two  (2) years after the Participant’s Termination of Employment, engaging by the Participant in any business or activity in all or any portion of the same geographical market where the same or substantially similar business or activity is being carried on by an Employer business.  “Engaging in competition with AT&T” shall not include owning a nonsubstantial publicly traded interest as a shareholder in a business that competes with an Employer Business. However, “engaging in competition with AT&T shall include representing or providing consulting services to, or being an employee or director of, any person or entity that is engaged in competition with any Employer Business or that takes a position adverse to any Employer Business.
 

                                 (iii)  
“engaging in disloyal conduct disloyal to AT&T” means, while employed by an Employer Business or within two  (2) years after the Participant’s Termination of Employment, (i) soliciting for employment or hire, whether as an employee or as an independent contractor, for any business in competition with an Employer Business, any person employed by AT&T or its affiliates during the one (1) year prior to Participant’s Termination of Employment, whether or not acceptance of such position would constitute a breach of such person’s contractual obligations to AT&T and its affiliates; (ii) soliciting, encouraging, or inducing any vendor or supplier with which Participant had business contact on behalf of any Employer Business during the two (2) years prior to Participant’s Termination of Employment, to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with AT&T or its affiliate; or (iii) soliciting, encouraging, or inducing any customer or active prospective customer with whom Participant had business contact, whether in person or by other media (“Customer”), on behalf of any Employer Business during the two (2) years prior to Participant’s Termination of Employment, to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with any Employer Business, or to purchase competing goods or services from a business competing with any Employer Business, or accepting or servicing business from such Customer on behalf of himself or any other business.  “Engaging in conduct disloyal to AT&T” also means, disclosing Confidential Information to any third party or using Confidential Information, other than for an Employer Business, or failing to return any Confidential Information to the Employer Business following termination of employment.
 

                                 (iv)  
“Confidential Information” shall mean all information belonging to, or otherwise relating to, an Employer Business, which is not generally known, regardless of the manner in which it is stored or conveyed to Participant, and which the Employer Business has taken reasonable measures under the circumstances to protect from unauthorized use or disclosure.  Confidential Information includes trade secrets as well as other proprietary knowledge, information, know-how, and non-public intellectual property rights, including unpublished or pending patent applications and all related patent rights, formulae, processes, discoveries, improvements, ideas, conceptions, compilations of data, and data, whether or not patentable or copyrightable and whether or not it has been conceived, originated, discovered, or developed in whole or in part by Participant.  For example, Confidential Information includes, but is not limited to, information concerning the Employer Business’ business plans, budgets, operations, products, strategies, marketing, sales, inventions, designs, costs, legal strategies, finances, employees, customers, prospective customers, licensees, or licensors; information received from third parties under confidential conditions; or other valuable financial, commercial, business, technical or marketing information concerning the Employer Business, or any of the products or services made, developed or sold by the Employer Business.  Confidential Information does not include information that (i) was generally known to the public at the time of disclosure; (ii) was lawfully received by Participant from a third party; (iii) was known to Participant prior to receipt from the Employer Business; or (iv) was independently developed by Participant or independent third parties; in each of the foregoing circumstances, this exception applies only if such public knowledge or possession by an independent third party was without breach by Participant or any third party of any obligation of confidentiality or non-use, including but not limited to the obligations and restrictions set forth in this Plan.
 

              (b)
Forfeiture of Benefits .  A Participant’s right to receive benefits accrued on or after January 1, 2010 shall terminate and no benefits accrued on or after January 1, 2010 shall be provided under this Plan if the Administrative Committee determines that, within the time period and without the written consent specified, Participant has been either engaging in competitive activity with AT&T or engaging in conduct disloyal to AT&T.
 
                (c)  
Equitable Relief.   The parties recognize (i) that any Participant’s breach of any of the covenants in this Section 8.2 will cause irreparable injury to AT&T, and will represent a failure of the consideration under which AT&T (in its capacity as creator and sponsor of the Plan) agreed to provide the Participant with the opportunity to accrue or receive Plan benefits on and after January 1, 2010, and (ii) that monetary damages would not provide AT&T with an adequate or complete remedy that would warrant AT&T’s continued sponsorship of the Plan and payment of Plan benefits for all Participants.  Accordingly, in the event of a Participant’s actual or threatened breach of covenants in this Section 8.2, the Administrative Committee, in addition to all other rights and acting as a fiduciary under ERISA on behalf of all Participants, shall have a fiduciary duty (in order to assure that AT&T receives fair and promised consideration for its continued Plan sponsorship and funding) to seek an injunction restraining the Participant from breaching the covenants in this Section 8.2.  To enforce its repayment rights with respect to a Participant, the Plan shall have a first priority, equitable lien on all Plan benefits that are paid to the Participant.  In addition, AT&T shall pay for any Plan expenses that the Administrative Committee incurs hereunder, and shall be entitled to recover from the Participant its reasonable attorneys’ fees and costs incurred in obtaining such injunctive remedies.  In the event the Administrative Committee succeeds in enforcing the terms of this Section through a written settlement with the Participant or a court order granting an injunction hereunder, the Participant shall be entitled to collect Plan benefits prospectively, if the Participant is otherwise entitled to such benefits, net of any fees and costs assessed pursuant hereto (which fees and costs shall be paid to AT&T as a repayment on behalf of the Participant), provided that the Participant complies with said settlement or injunction.
 
                (d)  
Uniform Enforcement .  In recognition of AT&T’s need for nationally uniform standards for the Plan administration, it is an absolute condition in consideration of any Participant’s accrual or receipt of benefits under the Plan on or after January 1, 2010 that each and all of the following conditions apply to all Participants and to any benefits that are accrued on or after January 1, 2010 and that are thereafter paid or are payable under the Plan:
 

                               (i)  
ERISA shall control all issues and controversies hereunder, and the Administrative Committee shall serve for purposes hereof as a “fiduciary” of the Plan and as its “named fiduciary” within the meaning of ERISA.
 
                                (ii)  
All litigation between the parties relating to this Section shall occur in federal court, which shall have exclusive jurisdiction, any such litigation shall be held in the United States District Court for the Northern District of Texas, and the only remedies available with respect to the Plan shall be those provided under ERISA.
 
                                 (iii)  
If the Administrative Committee determines in its sole discretion either (I) that AT&T or its affiliate that employed the Participant terminated the Participant’s employment for cause, or (II) that equitable relief enforcing the Participant’s covenants under this Section 8.2 is either not reasonably available, not ordered by a court of competent jurisdiction, or circumvented because the Participant has sued in state court, or has otherwise sought remedies not available under ERISA, then in any and all of such instances the Participant shall not be entitled to collect any Plan benefits accrued on or after January 1, 2010, and if any such Plan benefits have been paid to the Participant, the Participant shall immediately repay all such Plan benefits to the Plan (which shall be used to pay Plan administrative expenses or Plan benefits) upon written demand from the Administrative Committee.  Furthermore, the Participant shall hold AT&T and its affiliates harmless from any loss, expense, or damage that may arise from any of the conduct described in clauses (I) and (II) hereof.
 
8.3  
Notice .
 
Any notice required or permitted to be given to the Administrative Committee or the SEVP-HR under the Plan shall be sufficient if in writing and hand delivered, or sent by certified mail, to the principal office of AT&T, directed to the attention of the SEVP-HR.  Any notice required or permitted to be given to a Participant shall be sufficient if in writing and hand delivered, or sent by certified mail, to Participant at Participant's last known mailing address as reflected on the records of his or her employing company or the company from which the Participant incurred a Termination of Employment, as applicable.  Notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or on the receipt for certification.
 
8.4  
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.
 
8.5  
Applicable Law .
 
This Plan shall be governed and construed in accordance with ERISA, and the laws of the State of Texas to the extent not preempted by ERISA.
 
9.   Claims and Appeal.
 
9.1  
Claims.
 
A person who believes that he or she is being denied a benefit to which he or she is entitled under this Plan (hereinafter referred to as a “Claimant”) may file a written request for such benefit with the Executive Compensation Administration Department, setting forth his or her claim. The request must be addressed to the AT&T Executive Compensation Department at its then principal place of business.
 
9.2  
Claim Decision.
 
Upon receipt of a claim, the AT&T Executive Compensation Department shall review the claim and provide the Claimant with a written notice of its decision within a reasonable period of time, not to exceed ninety (90) days, after the claim is received. If the AT&T Executive Compensation Department determines that special circumstances require an extension of time beyond the initial ninety (90)-day claim review period, the AT&T Executive Compensation Department shall notify the Claimant in writing within the initial ninety (90)-day period and explain the special circumstances that require the extension and state the date by which the AT&T Executive Compensation Department expects to render its decision on the claim. If this notice is provided, the AT&T Executive Compensation Department may take up to an additional ninety (90) days (for a total of one hundred eighty (180) days after receipt of the claim) to render its decision on the claim.
 
If the claim is denied by the AT&T Executive Compensation Department, in whole or in part, the AT&T Executive Compensation Department shall provide a written decision using language calculated to be understood by the Claimant and setting forth:  (i) the specific reason or reasons for such denial; (ii) specific references to pertinent provisions of this Plan on which such denial is based; (iii) a description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation of why such material or such information is necessary; (iv) a description of the Plan’s procedures for review of denied claims and the steps to be taken if the Claimant wishes to submit the claim for review; (v) the time limits for requesting a review of a denied claim under Section 9.3 and for conducting the review under Section 9.4; and (vi) a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA if the claim is denied following review under Section 9.4.
 
9.3  
Request for Review.
 
Within sixty (60) days after the receipt by the Claimant of the written decision on the claim provided for in Section 9.2, the Claimant may request in writing that the Administrative Committee review the determination of the AT&T Executive Compensation Department. Such request must be addressed to the Administrative Committee at the address for giving notice pursuant to Section 8.3. To assist the Claimant in deciding whether to request a review of a denied claim or in preparing a request for review of a denied claim, a Claimant shall be provided, upon written request to the Administrative Committee and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim. The Claimant or his or her duly authorized representative may, but need not, submit a statement of the issues and comments in writing, as well as other documents, records or other information relating to the claim for consideration by the Administrative Committee. If the Claimant does not request a review of the AT&T Executive Compensation Department’s decision by the Administrative Committee within such sixty (60)-day period, the Claimant shall be barred and estopped from challenging the determination of the AT&T Executive Compensation Department.
 
9.4  
Review of Decision.
 
Review of Decision . Within sixty (60) days after the Administrator’s receipt of a request for review, the Administrative Committee will review the decision of the AT&T Executive Compensation Department. If the Administrative Committee determines that special circumstances require an extension of time beyond the initial sixty (60)-day review period, the Administrative Committee shall notify the Claimant in writing within the initial sixty (60)-day period and explain the special circumstances that require the extension and state the date by which the Administrative Committee expects to render its decision on the review of the claim.  If this notice is provided, the Administrative Committee may take up to an additional sixty (60) days (for a total of one hundred twenty (120) days after receipt of the request for review) to render its decision on the review of the claim.
 
During its review of the claim, the Administrative Committee shall:
 

                (a)  
Take into account all comments, documents, records, and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial review of the claim conducted pursuant to Section 9.2;
 
                (b)  
Follow reasonable procedures to verify that its benefit determination is made in accordance with the applicable Plan documents; and
 
                (c)  
Follow reasonable procedures to ensure that the applicable Plan provisions are applied to the Participant to whom the claim relates in a manner consistent with how such provisions have been applied to other similarly-situated Participants.
 
After considering all materials presented by the Claimant, the Administrative Committee will render a decision, written in a manner designed to be understood by the Claimant. If the Administrative Committee denies the claim on review, the written decision will include (i) the specific reasons for the decision; (ii) specific references to the pertinent provisions of this Plan on which the decision is based; (iii) a statement that the Claimant is entitled to receive, upon request to the Administrative Committee and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim; and (iv) a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA.
 
During its review of the claim, the Administrative Committee shall:
 
                (a)  
Take into account all comments, documents, records, and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial review of the claim conducted pursuant to Section 9.2;
 
                (b)  
Follow reasonable procedures to verify that its benefit determination is made in accordance with the applicable Plan documents; and
 
                (c)  
Follow reasonable procedures to ensure that the applicable Plan provisions are applied to the Participant to whom the claim relates in a manner consistent with how such provisions have been applied to other similarly-situated Participants.
 
After considering all materials presented by the Claimant, the Administrative Committee will render a decision, written in a manner designed to be understood by the Claimant. If the Administrative Committee denies the claim on review, the written decision will include (i) the specific reasons for the decision; (ii) specific references to the pertinent provisions of this Plan on which the decision is based; (iii) a statement that the Claimant is entitled to receive, upon request to the Administrative Committee and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim; and (iv) a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA.
 
The Administrative Committee shall serve as the final review committee under the Plan and shall have sole and complete discretionary authority to administer, interpret, construe and apply the Plan provisions, and determine all questions of administration, interpretation, construction, and application of the Plan, including questions and determinations of eligibility, entitlement to benefits and the type, form and amount of any payment of benefits, all in its sole and absolute discretion. The Committee shall further have the authority to determine all relevant facts and related issues, and all documents, records and other information relevant to a claim conclusively for all parties, and in accordance with the terms of the documents or instruments governing the Plan. Decisions by the Administrative Committee shall be conclusive and binding on all parties and not subject to further review.
 
In any case, a Participant or Beneficiary may have further rights under ERISA. The Plan provisions require that Participants or Beneficiary pursue all claim and appeal rights described in this Section 9 before they seek any other legal recourse regarding claims for benefits.  In any case, a Participant or Beneficiary may have further rights under ERISA. The Plan provisions require that Participants or Beneficiary pursue all claim and appeal rights described in this Section 9 before they seek any other legal recourse regarding claims for benefits.

 
 

 
Attachment A

LUMP SUM DISTRIBUTION AGREEMENT

This Lump Sum Distribution Agreement is made as of the ____ day of ______________, ____ by and between AT&T Inc. (“ AT&T ” or the “Company”) and _______________(“Participant”).  Unless otherwise indicated herein, capitalized words used herein shall have the same meaning ascribed to such words in the 2005 Supplemental Employee Retirement Plan (the “Plan” or “SERP”).

WHEREAS, Participant is a Participant in the Plan, which is sponsored by the Company;
 
WHEREAS, pursuant to the Plan, Participant executed an Agreement, governing Participant’s benefits in the Plan;
 
WHEREAS, Participant’s Agreement provides for the distribution of his benefits in the form of a lump sum, payable one hundred percent (100%) upon the six (6) month anniversary of his Termination of Employment provided that Participant is age sixty (60) or older as of the date of his Termination of Employment and Participant agrees not to compete with an Employer Business;
 
NOW, THEREFORE, the parties hereto, for good and valuable consideration, the sufficiency of which is hereby acknowledged, hereby agree as follows:
 
1.  
If Participant is age sixty (60) or over as of the date of his Termination of Employment, Company shall pay to
Participant his   benefits under the Plan in the form of a lump sum distribution, one hundred percent (100%) of which shall be paid upon the six (6) month anniversary of Participant’s Termination of Employment.
 
2.  
In exchange for the right to receive the payment described in Paragraph 1, above, Participant acknowledges and agrees to the terms and conditions of Section 8.2 of the Plan in the form attached hereto.

3.  
Participant acknowledges and agrees that he shall promptly return to the Company and forfeit all consideration previously received pursuant to this Lump Sum Distribution Agreement, specifically the payment referred to in Paragraph 1, if he violates the provisions of Paragraph 2.
 
4.  
Participant may submit a description of any proposed activity that could arguably violate Section 8.2 of the Plan in writing to AT&T and AT&T shall advise Participant   in writing within fifteen (15) business days whether such proposed activity would constitute engaging in competition with an Employer business, within the meaning of this Lump Sum Distribution Agreement.

5.  
It is hereby specifically agreed that the terms of this Lump Sum Distribution Agreement shall be kept strictly confidential and that neither party shall, except as necessary for performance of the terms hereof or as specifically required by law, disclose the existence of this Lump Sum Distribution Agreement or any of its terms to third persons without the express consent of the other party.
 
6.  
Participant   agrees that for any breach or threatened breach of any of the provisions of this Lump Sum Distribution Agreement by Participant, including but not limited to the provisions in Section 8.2 of the Plan, incorporated herein pursuant to Paragraph 2 of this Lump Sum Distribution Agreement, the Company shall have no adequate legal remedy, and in addition to any other remedies available, including the repayment and forfeiture remedies described in Paragraph 3, a restraining order and/or an injunction may be issued against Participant   to prevent or restrain any such breach.
 
7.  
Any notice required hereunder to be given by either party will be in writing and will be deemed effectively given upon personal delivery to the party to be notified, or five (5) days after deposit with the United States Post Office by certified mail, postage prepaid, to the other party at the address set forth below, or to such other address as either party may from time to time designate by ten (10) days advance written notice pursuant to this Paragraph.
 
8.  
In the event any provision of this Lump Sum Distribution Agreement is held invalid, void, or unenforceable, the same shall not affect in any respect whatsoever the validity of any other provision of this Lump Sum Distribution Agreement, except that should any part of the non-compete provisions of Paragraph 2 of this Agreement be held invalid, void, or unenforceable as applicable to and as asserted by Participant, this Lump Sum Distribution Agreement, at the Company's option, may be declared by the Company null and void.  If this Lump Sum Distribution Agreement is declared null and void by Company pursuant to the provisions of this Paragraph, Participant shall return to Company all consideration previously received pursuant to this Lump Sum Distribution Agreement.
 

 
 
AT&T Inc.
 


 
By: Senior Executive Vice     
     President-Human Resources    
     175 E. Houston Street     
     San Antonio, Texas  78205     
 
 
 
 
   
Date    Date 
 


 
 

 
Attachment B

“Immediate Annuity Value of any AT&T or affiliate Qualified Pensions” shall mean:

The annual amount of annuity payments that would be paid out of the qualified defined benefit pension plan sponsored by AT&T or an AT&T affiliate in which the Participant participates on a single life, level payment annuity basis assuming payment of such qualified defined benefit pension plan benefit commenced immediately upon the Participant’s Termination of Employment, notwithstanding the form of payment of such qualified defined benefit pension plan’s benefit actually made to the Participant (i.e., joint and survivor annuity, lump sum, etc.) and notwithstanding the actual commencement date of the payment of such qualified defined benefit pension plan benefit.
 

 
 



 
 

 
Attachment C

Immediate Annuity Value of SRIP . "Immediate Annuity Value of SRIP" shall mean
 

An objectively determined amount as of December 31, 2008 equal to the annual amount of a level payment, single life with 10 year certain annuity benefit that would be paid to the Participant pursuant to the SRIP as it exists on December 31, 2008 assuming the Participant became eligible to receive a distribution of benefit payments under the SRIP on December 31, 2008, applying the Participant’s Final Average Earnings and Years of Service (both as defined in the SRIP) as of December 31, 2004 and the Participant’s age as of December 31, 2008, notwithstanding the form of payment of the SRIP benefit that would actually be made to the Participant (i.e., joint and survivor annuity, lump sum, etc.) and notwithstanding the actual commencement date of the payment of such SRIP benefit.
 

 

 

 


 
 

 
Attachment D

Attachment D to the AT&T 2005 Supplemental Employee Retirement Plan
 
Immediate Annuity Value of any AT&T or AT&T affiliate Non-Qualified Pensions other than SERP .  "Immediate Annuity Value of any AT&T or AT&T affiliate Non-Qualified Pensions other than SERP" shall mean with respect to a Participant, any one or more of the following, as applicable:
 

1.           For a Participant who is a participant in (or otherwise has a benefit in) the AT&T Pension Benefit Make Up Plan No. 1  (“PBMU No. 1”), the AT&T Pension Benefit Make Up Plan No. 2 (“PBMU No. 2”), the AT&T Inc. Management Mid-Career Hire Plan (the “Mid-Career Plan”), the Cingular Wireless SBC Executive Transition Pension Make Up Plan (the “Cingular Plan”) and/or the Pacific Telesis Group Executive Supplemental Cash Balance Pension Plan (“PTG Plan”) and is a Participant in the Plan on December 31, 2008:
 

An objectively determined amount as of December 31, 2008 equal to the annual amount of a level payment, single life annuity benefit that would be paid to the Participant pursuant to the PBMU No. 1, the PBMU No. 2, the Mid-Career Plan, the Cingular Plan, and/or the PTG Plan, as applicable, as they exist on December 31, 2008 assuming the Participant became eligible to receive a distribution of benefit payments under the PBMU No. 1, the PBMU No. 2, the Mid-Career Plan, the Cingular Plan, and/or the PTG Plan, as applicable, on December 31, 2008, notwithstanding the form of payment of the benefit that would actually be made to the Participant pursuant to the PBMU No. 1, the PBMU No. 2, the Mid-Career Plan, the Cingular Plan, and/or the PTG Plan, (i.e., 10-year certain annuity, lump sum, etc.) and notwithstanding the actual commencement date of the payment of such PBMU No. 1, PBMU No. 2, the Mid-Career Plan, the Cingular Plan, and/or PTG Plan benefit.
 
2.           For a Participant who is a participant in (or otherwise has a benefit in) the PBMU No. 1, the PBMU No. 2, the Mid-Career Plan, the Cingular Plan, and/or the PTG Plan and has a SERP Effective Date after December 31, 2008:
 

An objectively determined amount as of the Participant’s SERP Effective Date equal to the annual amount of a level payment, single life annuity benefit that would be paid to the Participant pursuant to the PBMU No. 1, the PBMU No. 2, the Mid-Career Plan, the Cingular Plan, and/or the PTG Plan, as applicable, as they exist on the Participant’s SERP Effective Date assuming the Participant became eligible to receive a distribution of benefit payments under the PBMU No. 1, the PBMU No. 2, the Mid-Career Plan, the Cingular Plan, and/or the PTG Plan, on his or her SERP Effective Date, notwithstanding the form of payment of the benefit that would actually be made to the Participant pursuant to the PBMU No. 1, the PBMU No. 2, the Mid-Career Plan, the Cingular Plan, and/or the PTG Plan (i.e., 10-year certain annuity, lump sum, etc.) and notwithstanding the actual commencement date of the payment of such PBMU No. 1, PBMU No. 2, the Mid-Career Plan, the Cingular Plan, and/or PTG Plan benefit.
 
3.           For a Participant who is a participant in (or otherwise has a benefit in) the BellSouth Corporation Supplemental Executive Retirement Plan (the “BellSouth Plan”) and is a Participant in the Plan on December 31, 2008:
 

An objectively determined amount as of December 31, 2008 equal to the annual amount of a level payment, single life annuity benefit that would be paid to the Participant pursuant to the BellSouth Plan as it exists on December 31, 2008 assuming the Participant became eligible to receive a distribution of benefit payments under the BellSouth Plan on December 31, 2008, but applying the Participant’s age and years of service as if the Participant remained employed through the fourth anniversary of his or her SERP Effective Date and the Participant’s Included Earnings (as defined in the BellSouth Plan) as of December 31, 2008, notwithstanding the form of payment of the BellSouth Plan’s benefit that would actually be made to the Participant (i.e., joint and survivor annuity, lump sum, etc.) and notwithstanding the actual commencement date of the payment of such BellSouth Plan benefit.
 

4.           For a Participant who is a participant in (or otherwise has a benefit in) the BellSouth Plan and has a SERP Effective Date after December 31, 2008:
 

An objectively determined amount as of the Participant’s SERP Effective Date equal to the annual amount of a level payment, single life annuity benefit that would be paid to the Participant pursuant to the BellSouth Plan as it exists on the Participant’s SERP Effective Date assuming the Participant became eligible to receive a distribution of benefit payments under the BellSouth Plan on his or her SERP Effective Date (applying the Participant’s age, years of service and Included Earnings (as defined in the BellSouth Plan) as of the Participant’s SERP Effective Date), notwithstanding the form of payment of the BellSouth Plan’s benefit that would actually be made to the Participant (i.e., joint and survivor annuity, lump sum, etc.) and notwithstanding the actual commencement date of the payment of such BellSouth Plan benefit.
 
5.           For a Participant who is a participant in (or otherwise has a benefit in) the AT&T Corp. Long Term Disability and Survivor Protection Plan (“LTDSPP”) and is entitled to a nonqualified defined benefit from the LTDSPP, the AT&T Corp. Excess Benefit and Compensation Plan, (“Excess Plan”), and/or the AT&T Corp. Non-Qualified Pension Plan (“NQPP”) and is a Participant in the Plan on December 31, 2008 (the Participant’s election as to the time and form of benefits under these plans is identical to such election under this Plan):
 

The benefit payments paid pursuant to the LTDSPP (nonqualified defined benefit only), Excess Plan, and/or the NQPP, as applicable, commencing at the actual time and pursuant to the actual form such benefit payments are made from the LTDSPP, Excess Plan, and/or the NQPP, as applicable.
 

6.           For a Participant who is a participant in (or otherwise has a benefit in) the LTDSPP and is entitled to a nonqualified defined benefit from the LTDSPP, the Excess Plan, and/or the NQPP and has a SERP Effective Date after December 31, 2008:
 

An objectively determined amount as of the Participant’s SERP Effective Date equal to the annual amount of a level payment, single life annuity benefit that would be paid to the Participant pursuant to the LTDSPP (nonqualified defined benefit only), the Excess Plan, and/or the NQPP, as applicable, as they exist on the Participant’s SERP Effective Date assuming the Participant became eligible to receive a distribution of benefit payments under the AT&T Corp. LTDSPP (nonqualified defined benefit only), the Excess Plan, and/or the NQPP, on his or her SERP Effective Date, notwithstanding the form of payment of the benefit that would actually be made to the Participant pursuant to the LTDSPP (nonqualified defined benefit only), the Excess Plan, and/or the NQPP (i.e., 10-year certain annuity, lump sum, etc.) and notwithstanding the actual commencement date of the payment of such the AT&T Corp. LTDSPP (nonqualified defined benefit only), the Excess Plan, and/or the NQPP benefit.
 

 
 

 
Attachment E





Attachment E applies with respect to any Participant who:

·  
Became a Participant in the 2005 AT&T Supplemental Executive Retirement Plan on or before December 31, 2008;
·  
Is a participant in the BellSouth Corporation Supplemental Executive Retirement Plan; and
·  
Attained the age of fifty-four (54) on or before March 1, 2007; and
·  
Realizes a Termination of Employment on or after January 1, 2009.

Upon Termination of Employment, such Participant’s Plan benefit shall equal the greater of his or her benefit determined in accordance with Section 3 of the Plan or this Attachment E.

A.            Definitions .  Solely for purposes of this Attachment E, the following words shall have the meanings as provided in this Attachment E.  Any other capitalized word, not otherwise defined in this Attachment E, shall have the meaning as provided in Section 2 of the Plan.

1.
The term " Annual Bonus Award " shall mean the bonus amount paid annually to an Attachment E Participant that is included in the calculation of pension benefits under the Pension Plan.

2.
The term “ Attachment E Participant ” shall mean any Participant to whom Attachment E applies as described in the first paragraph of this Attachment E.

3.
The terms " BellSouth Corporation " and " Company " shall mean BellSouth Corporation, a Georgia corporation, or its successors.

4.
The term " Included Earnings " shall mean the 12 month average of the sum of (1) the last sixty (60) months of base pay, plus (2) the Annual Bonus Awards payable during or after that sixty (60) month period; provided, however, Included Earnings shall not include base pay or Annual Bonus Awards earned after March 1, 2011.  The amounts of base pay and other payments used to determine Included Earnings as described above include all amounts during the specified period including those amounts previously deferred pursuant to other plans.  If an Attachment E Participant terminates employment while eligible for a benefit under this Attachment E and thereafter receives Included Earnings, these additional Included Earnings shall be deemed to have been paid as of the date of the Attachment E Participant’s Termination of Employment, and the amount of benefit payable under this Attachment E shall be corrected accordingly.

5.
The term “ Merger ” shall mean the merger, pursuant to the Agreement and Plan of Merger dated as of March 4, 2006 (the “Merger Agreement”), by and among BellSouth, AT&T Inc. (“AT&T”), and ABC Consolidation Corp., a Georgia corporation and wholly-owned subsidiary of AT&T (“Merger Sub”), pursuant to which, at the “Effective Time” (as defined in the Merger Agreement), BellSouth was merged with and into the Merger Sub.

6.
The term " Pension Plan " shall mean the BellSouth Personal Retirement Account Pension Plan as in effect on the date of the Merger.

7.
The term " Standard Annual Bonus " shall mean the Attachment E Participant’s Target Award under the AT&T 2006 Incentive Plan or the AT&T Short Term Incentive Plan and for periods of time prior to the Attachment E Participant’s participation in the AT&T 2006 Incentive Plan or the AT&T Short Term Incentive Plan, Standard Annual Bonus shall mean an amount determined by applying a target percentage of an Attachment E Participant’s base pay rate as determined by the annual compensation plan and the Attachment E Participant’s job or pay grade.

8.
The term " Vesting Service Credit ", except as expressly limited or otherwise provided in this Attachment E or under an individual Attachment E Participant’s employment-related agreement with the Company, shall have the same meaning as is attributed to such term under the Pension Plan and shall be interpreted in the same manner as that term is interpreted for purposes of the Pension Plan; provided, however, Vesting Service Credit shall not include any period of time on or after March 1, 2011.

B.            Benefit Amount .  An Attachment E Participant’s benefit under this Attachment E shall be determined as follows:

The aggregate annualized benefit of each Attachment E Participant shall be determined by adding the sum of two percent (2%) of Included Earnings for each year of the Attachment E Participant's Vesting Service Credit for the first twenty years, plus one and one-half percent (1.5%) of Included Earnings for each year of the Attachment E Participant's Vesting Service Credit for the next ten years, plus one percent (1%) of Included Earnings for each year of the Attachment E Participant's Vesting Service Credit for each additional year up to the month in which the Attachment E Participant retires less (1) 100% of the Primary Social Security benefit payable at age 65, (2) 100% of the retirement benefit (unreduced for survivor annuity) payable from the Pension Plan (as defined below), and (3) 100% of the benefit payable from the BellSouth Corporation Supplemental Executive Retirement Plan (as defined below).

a.           The benefit reduction to be applied for the benefit payable from the Pension Plan shall be the amount of such benefit that would be payable on the date that benefits are eligible to be paid (or become payable) under the Plan, or, if earlier, March 1, 2011 (regardless of the Attachment E Participant’s actual pension commencement date under the Pension Plan) and determined assuming that the Attachment E Participant elected a single life annuity (regardless of the actual form of benefit elected under the Pension Plan).

The benefit reduction to be applied for the benefit payable from the BellSouth Corporation Supplemental Executive Retirement Plan shall be an objectively determined amount as of December 31, 2008 equal to the annual amount of a level payment, single life annuity benefit that would be paid to the Attachment E Participant pursuant to the BellSouth Supplemental Executive Retirement Plan as it exists on December 31, 2008 assuming the Attachment E Participant became eligible to receive a distribution of benefit payments under the BellSouth Supplemental Executive Retirement Plan on December 31, 2008, but applying the Attachment E Participant’s age and years of service as of March 1, 2011 and the Attachment E Participant’s Included Earnings as of December 31, 2008, notwithstanding the form of payment of the BellSouth Supplemental Executive Retirement Plan’s benefit that would actually be made to the Attachment E Participant (i.e., joint and survivor annuity, lump sum, etc.) and notwithstanding the actual commencement date of the payment of such BellSouth Supplemental Executive Retirement Plan benefit.

b.           The benefit amount determined in accordance with this Attachment E (expressed as an annuity) at the time of the Attachment E Participant’s Termination of Employment shall not be less than the benefit that would have been payable to the Attachment E Participant if the Attachment E Participant had a Termination of Employment on any prior December 31 (using pay, service, offsets and all factors applicable on the previous dates and assuming an immediate benefit commencement).

c.           The benefit amount determined in accordance with this Attachment E shall be reduced (before the offset for benefits under the Pension Plan) by one-quarter percent (0.25%) for each calendar month or part thereof by which the Attachment E Participant’s Termination of Employment precedes his or her 62nd birthday.


Exhibit 10-b













AT&T INC.

CASH DEFERRAL PLAN


Adopted November 19, 2004


As amended through July 29, 2009























 
 

 

Article 1 − Statement of Purpose
 
The purpose of the Cash Deferral Plan (“Plan”) is to provide savings opportunities to a select group of management employees of AT&T Inc. (“AT&T”) and its Subsidiaries.
 
Article 2 − Definitions
 
For the purpose of this Plan, the following words and phrases shall have the meanings indicated, unless the context indicates otherwise:
 
Annual Bonus.  The award designated the “Annual Bonus” by AT&T (including but not limited to an award that may be paid in more frequent installments than annually), together with any individual discretionary award made in connection therewith, or comparable awards, if any, determined by AT&T to be used in lieu of these awards.
 
Base Compensation.  The following types of cash-based compensation paid by an Employer (but not including payments made by a non-Employer, such as state disability payments), before reduction due to any contribution pursuant to this Plan or reduction pursuant to any deferral plan of an Employer, including but not limited to a plan that includes a qualified cash or deferral arrangement under Section 401(k) of the Code:
 
(a)  base salary;
 
(b)  lump sum payments in lieu of a base salary increase; and
 
(c) Annual Bonus.
 
Payments by an Employer under a disability plan made in lieu of any compensation described above, shall be deemed to be a part of the respective form of compensation it replaces for purposes of this definition.  Base Compensation does not include zone allowances or any other geographical differential and shall not include payments made in lieu of unused vacation or other paid days off, and such payments shall not be contributed to this Plan.
 
Determinations by AT&T (the Committee with respect to Officer Level Employees) of the items that make up Base Compensation shall be final.  The Committee may, from time to time, add or subtract types of compensation to or from the definition of  “Base Compensation” provided, however, any such addition or subtraction shall  be effective only with respect to the next period in which a Participant may make an election to establish a Cash Deferral Account.  Base Compensation that was payable in a prior Plan Year but paid in a later Plan Year shall not be used to determine Employee Contributions in the later Plan Year.
 
Business Day.  Any day during regular business hours that AT&T is open for business.
 
Cash Deferral Account or Account.  The Account or Accounts established annually by an election by a Participant to make Employee Contributions to the Plan with each account relating to a Plan Year.  For each Plan Year after 2008, there shall be a separate Cash Deferral Account for Base Compensation (excluding Annual Bonus) and a separate Cash Deferral Account for the Short Term Incentive Award and/or Annual Bonus.  Earnings on each of Employee Contributions shall accrue to the respective Cash Deferral Accounts where they are earned.
 
Change in Control.  With respect to AT&T’s direct and indirect ownership of an Employer, a “Change in the effective control of a Corporation,” as defined in Treasury Regulation Section 1.409A−3(i)(5)(vi)(A)(1), regardless of whether the Employer is a corporation or non-corporate entity as  permitted by the regulation, and using “50 percent” in lieu of “30 percent” in such regulation.  A Change in Control will not apply to AT&T itself.
 
Chief Executive Officer.  The Chief Executive Officer of AT&T Inc.
 
Code.  References to the Code shall be to provisions of the Internal Revenue Code of 1986, as amended, including regulations promulgated thereunder and successor provisions.  Similarly, references to regulations shall include amendments and successor provisions.
 
Committee.  The Human Resources Committee of the Board of Directors of AT&T Inc.
 
Disability.  Absence of an Employee from work with an Employer under the relevant Employer’s disability plan.
 
Eligible Employee.  An Employee who:
 
(a) is a full or part time, salaried Employee of AT&T or an Employer in which AT&T has a direct or indirect 100% ownership interest and who is on active duty or Leave of Absence (but only while such Employee is deemed by the Employer to be an Employee of such Employer);
 
(b) is, as determined by AT&T, a member of Employer’s “select group of management or highly compensated employees” within the meaning of  the Employee Retirement Income Security Act of 1974, as amended, and regulations thereunder (“ERISA”), which is deemed to include each Officer Level  Employee; and
 
(c) has an employment status which has been approved by AT&T to be eligible to participate in this Plan or is an Officer Level Employee.
 
Notwithstanding the foregoing, AT&T (the Committee with respect to Officer Level Employees) may, from time to time, exclude any Employee or group of Employees from being deemed an “Eligible Employee” under this Plan.
 
In the event a court or other governmental authority determines that an individual was improperly excluded from the class of persons who would be permitted to make Employee Contributions during a particular time for any reason, that individual shall not be permitted to make such contributions for purposes of the Plan for the period of time prior to such determination.
 
Employee.  Any person employed by an Employer and paid on an Employer’s payroll system, excluding persons hired for a fixed maximum term and excluding persons who are neither citizens nor permanent residents of the United States, all as determined by AT&T.  For purposes of this Plan, a person on Leave of Absence who otherwise would be an Employee shall be deemed to be an Employee.
 
Employee Contributions.  Amounts credited to a Cash Deferral Account pursuant to Section 4.1 (Election to Make Contributions) of the Plan.
 
Employer.  AT&T Inc. or any of its Subsidiaries.
 
Incentive Award.  A cash award paid by an Employer (and not by a non-Employer, such as state disability payments) under the Short Term Incentive Plan or any successor plan, the 2006 Incentive Plan or any successor plan, or any other award that the Committee specifically permits to be contributed to a Cash Deferral Account under this Plan (regardless of the purpose of the award).
 
Leave of Absence.  Where a person is absent from employment with an Employer on a leave of absence, military leave, sick leave, or Disability, where the leave is given in order to prevent a break in the continuity of term of employment, and permission for such leave is granted (and not revoked) in conformity with the rules of the Employer that employs the individual, as adopted from time to time, and the Employee is reasonably expected to return to service.  Except as set forth below, the leave shall not exceed six (6) months for purposes of this Plan, and the Employee shall Terminate Employment upon termination of such leave if the Employee does not return to work prior to or upon expiration  of such six (6) month period, unless the individual retains a right to reemployment under law or by contract.  A twenty-nine (29) month limitation shall apply in lieu of such six (6) month limitation if the leave is due to the Employee being “disabled” (within the meaning of Treasury Regulation §1.409A−3(i)(4)).  A Leave of Absence shall not commence or shall be deemed to cease under the Plan where the Employee has incurred a Termination of Employment.
 
Officer Level Employee.  Any executive officer of AT&T, as that term is used under the Securities Exchange Act of 1934, as amended, and any Employee that is an “officer level” Employee for compensation purposes as shown on the records of AT&T.
 
Participant.  An Employee or former Employee who participates in this Plan.
 
Plan Interest Rate.  An annual rate of interest equal to Moody’s Long-Term Corporate Bond Yield Average for the September preceding the calendar year during which the interest rate will apply.  The Committee may choose another method of calculating the Plan Interest Rate, but such other method may only apply to Cash Deferral Units that Participants have not yet elected to establish.
 
Plan Year.  Each of the following shall be a Plan year:  the period from January 1, 2005 through January 15, 2006; the period January 16, 2006 through December 31, 2006; and, for all later Plan Years, it is defined as the period from January 1 through December 31.
 
Retirement or Retire.  Termination of Employment on or after the date the Participant has attained one of the following combinations of age and Net Credited Service:
 
Net Credited Service                                    Age
 
10 years or more                                           65 or older
 
20 years or more                                           55 or older
 
25 years or more                                           50 or older
 
30 years or more                                           Any age
 
For purposes of this Plan only, Net Credited Service shall be calculated in the same manner as “Pension Eligibility Service” under the AT&T Pension Benefit Plan – Nonbargained Program (“Pension Plan”), as the same existed on October1, 2008, except that service with an Employer shall be counted as though the Employer were a “Participating Company” under the Pension Plan and the Employee was a participant in the Pension Plan.
 
Short Term Incentive Award.  A cash award paid by an Employer (and not by a non-Employer, such as state disability payments) under the Short Term Incentive Plan or any successor plan, together with any individual discretionary award made in connection therewith; an award under a similar plan intended by the Committee to be in lieu of an award under such Short Term Incentive Plan, including, but not limited to, Performance Units granted under the 2006 Incentive Plan or any successor plan.  It shall also include any other award that the Committee designates as a Short Term Incentive Award specifically for purposes of this Plan (regardless of the purpose of the award) provided the deferral election is made in accordance with Section 409A.
 
Specified Employee.  Any Participant who is a “Key Employee” (as defined in Code Section 416(i) without regard to paragraph (5) thereof), as determined by AT&T in accordance with its uniform policy with respect to all arrangements subject to Code Section 409A, based upon the 12-month period ending on each December 31st (such 12-month period is referred to below as the “identification period”).  All Participants who are determined to be Key Employees under Code Section 416(i) (without regard to paragraph (5) thereof) during the identification period shall be treated as Key Employees for purposes of the Plan during the 12-month period that begins on the first day of the 4th month following the close of such identification period.
 
Subsidiary.  Any corporation, partnership, venture or other entity or business with which AT&T would be considered a single employer under Sections 414(a) and (c) of the Code, using 50% as the ownership threshold as provided under Section 409A of the Code.
 
Termination of Employment.  References herein to “Termination of Employment,” “Terminate Employment” or a similar reference, shall mean the event where the Employee has a “separation from service,” as defined under Section 409A, with all Employers.  For purposes of this Plan, a Termination of Employment with respect to an Employer also shall be deemed to occur when such Employer incurs a Change in Control.
 
Article 3 − Administration of the Plan
 
3.1           The Committee.
 
Except as delegated by this Plan or by the Committee, the Committee shall be the administrator of the Plan and will administer the Plan, interpret, construe and apply its provisions and all questions of administration, interpretation and application of the Plan, including, without limitation, questions and determinations of eligibility entitlement to benefits and payment of benefits, all in its sole and absolute discretion.  The Committee may further establish, adopt or revise such rules and regulations and such additional terms and conditions regarding participation in the Plan as it may deem necessary or advisable for the administration of the Plan.  References in this Plan to determinations or other actions by AT&T, herein, shall mean actions authorized by the Committee, the Chief Executive Officer, the Senior Executive Vice President of AT&T in charge of Human Resources, or their respective successors or duly authorized delegates, in each case in the discretion of such person.  All decisions by the Committee, its delegate or AT&T, as applicable, shall be final and binding.
 
3.2           Claims and Appeals.
 
(a)           Claims.  A person who believes that he or she is being denied a benefit to which he or she is entitled under this Plan (hereinafter referred to as a “Claimant”) may file a written request for such benefit with the Executive Compensation Administration Department, setting forth his or her claim. The request must be addressed to the AT&T Executive Compensation Administration Department at its then principal place of business.
 
(b)           Claim Decision.  Upon receipt of a claim, the AT&T Executive Compensation Administration Department shall review the claim and provide the Claimant with a written notice of its decision within a reasonable period of time, not to exceed ninety (90) days, after the claim is received. If the AT&T Executive Compensation Administration Department determines that special circumstances require an extension of time beyond the initial ninety (90)-day claim review period, the AT&T Executive Compensation Administration Department shall notify the Claimant in writing within the initial ninety (90)-day period and explain the special circumstances that require the extension and state the date by which the AT&T Executive Compensation Administration Department expects to render its decision on the claim. If this notice is provided, the AT&T Executive Compensation Administration Department may take up to an additional ninety (90) days (for a total of one hundred eighty (180) days after receipt of the claim) to render its decision on the claim.
 
If the claim is denied by the AT&T Executive Compensation Administration Department, in whole or in part, the AT&T Executive Compensation Administration Department shall provide a written decision using language calculated to be understood by the Claimant and setting forth:  (i) the specific reason or reasons for such denial; (ii) specific references to pertinent provisions of this Plan on which such denial is based; (iii) a description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation of why such material or such information is necessary; (iv) a description of the Plan’s procedures for review of denied claims and the steps to be taken if the Claimant wishes to submit the claim for review; (v) the time limits for requesting a review of a denied claim under this section and for conducting the review under this section; and (vi) a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA if the claim is denied following review under this section.
 
(c)           Request for Review. Within sixty (60) days after the receipt by the Claimant of the written decision on the claim provided for in this section, the Claimant may request in writing that the Committee review the determination of the AT&T Executive Compensation Administration Department.  Such request must be addressed to the Committee at the address for giving notice under this Plan.  To assist the Claimant in deciding whether to request a review of a denied claim or in preparing a request for review of a denied claim, a Claimant shall be provided, upon written request to the Committee and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim.  The Claimant or his or her duly authorized representative may, but need not, submit a statement of the issues and comments in writing, as well as other documents, records or other information relating to the claim for consideration by the Committee.  If the Claimant does not request a review of the AT&T Executive Compensation Administration Department’s decision by the Committee within such sixty (60)-day period, the Claimant shall be barred and estopped from challenging the determination of the AT&T Executive Compensation Administration Department.
 
(d)           Review of Decision. Within sixty (60) days after the Committee’s receipt of a request for review, the Administrator will review the decision of the AT&T Executive Compensation Administration Department.  If the Committee determines that special circumstances require an extension of time beyond the initial sixty (60)-day review period, the Committee shall notify the Claimant in writing within the initial sixty (60)-day period and explain the special circumstances that require the extension and state the date by which the Committee expects to render its decision on the review of the claim.  If this notice is provided, the Committee may take up to an additional sixty (60) days (for a total of one hundred twenty (120) days after receipt of the request for review) to render its decision on the review of the claim.
 
During its review of the claim, the Committee shall:
 
(1)           Take into account all comments, documents, records, and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial review of the claim conducted pursuant to this section;
 
(2)           Follow reasonable procedures to verify that its benefit determination is made in accordance with the applicable Plan documents; and
 
(3)           Follow reasonable procedures to ensure that the applicable Plan provisions are applied to the Participant to whom the claim relates in a manner consistent with how such provisions have been applied to other similarly-situated Participants.
 
After considering all materials presented by the Claimant, the Committee will render a decision, written in a manner designed to be understood by the Claimant.  If the Committee denies the claim on review, the written decision will include (i) the specific reasons for the decision; (ii) specific references to the pertinent provisions of this Plan on which the decision is based; (iii) a statement that the Claimant is entitled to receive, upon request to the Committee and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim; and (iv) a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA.
 
The Committee shall serve as the final review committee under the Plan and shall have sole and complete discretionary authority to administer, interpret, construe and apply the Plan provisions, and determine all questions of administration, interpretation, construction, and application of the Plan, including questions and determinations of eligibility, entitlement to benefits and the type, form and amount of any payment of benefits, all in its sole and absolute discretion.  The Committee shall further have the authority to determine all relevant facts and related issues, and all documents, records and other information relevant to a claim conclusively for all parties, and in accordance with the terms of the documents or instruments governing the Plan. Decisions by the Committee shall be conclusive and binding on all parties and not subject to further review.
 
In any case, a Participant or Beneficiary may have further rights under ERISA.  The Plan provisions require that Participants or Beneficiary pursue all claim and appeal rights described in this section before they seek any other legal recourse regarding claims for benefits.
 
Article 4 − Contributions
 
4.1           Election to Make Contributions.
 
(a)  The Committee shall establish dates and other conditions for participation in the Plan and making contributions as it deems appropriate.  Except as otherwise provided by the Committee, each year an Employee who is an Eligible Employee as of September 30 may thereafter make an election on or prior to the last Business Day of the immediately following November (such election shall be cancelled if the Employee is not an Eligible Employee on the last day such an election may be made) to contribute on a pre-tax basis, through payroll deductions, any combination of the following:
 
(1)  From 1% to 50% (in whole percentage increments) of the Participant’s monthly Base Compensation, other than Annual Bonus, during the calendar year (the Plan Year for such contributions) following the calendar year of such election.  Employees who are below the level of Senior Manager, as shown on the records of AT&T at the time of the election, may contribute no more than 25% or such other amount as determined by AT&T.
 
(2)  Up to 95% (in whole percentage increments) of a Short Term Incentive Award, or up to 50% (in whole percentage increments) of Annual Bonus (25% for Employees who are below the level of Senior Manager), in each case such contributions shall be made during the second calendar year (which is the Plan Year for such contributions) following the year of such election, except that in 2008 a separate election may be made with respect to contributions to be made in 2009.  An Employee may make such an election with respect to the type of Award (Short Term Incentive Award or Annual Bonus) that the Employee is under as of the time the Employee’s eligibility to make such election is determined.  If because of a promotion or otherwise, the Employee receives a different type of Award instead of or in partial or full replacement for the type of Award subject to the Employee’s election for the relevant Plan Year, the election will apply to the other Award as well, including but not limited to any individual discretionary award related thereto.
 
(b)  The Committee may permit an Eligible Employee to make an election to make other contributions under this Plan with compensation other than Base Compensation or Short Term Incentive Awards on such terms and conditions as such Committee may permit from time to time provided that any such election is made in accordance with Section 409A of the Code.)
 
(c)  Notwithstanding anything to the contrary in this Plan, no election shall be effective to the extent it would permit an Employee Contribution or distribution to be made that is not in compliance with Section 409A of the Code.  To the extent such election related to Employee Contributions that complied with such statute and regulations, thereunder, that portion of the election shall remain valid, except as otherwise provided under this Plan.
 
(d)  To the extent permitted by Section 409A of the Code, AT&T may refuse or terminate, in whole or in part, any election to make contributions to the Plan at any time; provided, however, only the Committee may take such action with respect to persons who are Officer Level Employees.
 
(e)  In the event the Participant takes a hardship withdrawal pursuant to Treasury Regulation §1.401(k)−1 from a benefit plan qualified under the Code and sponsored by an Employer, any election to make Employee Contributions by such Participant shall be cancelled on a prospective basis, and the Participant shall not be permitted to make a new election with respect to Employee Contributions that would be contributed during the then current and immediately following calendar year.
 
(f)  To the extent a Participant makes contributions to the Plan where the payment of which would be deductible by AT&T under Section 162(m) of the Code without regard to the size of the distribution, such contributions and earnings thereon shall be distributed first.
 
(g)  With respect to a Plan Year, an Employee may elect to (1) make Employee Contributions of Base Compensation other than Annual Bonus to this Plan but only if the Employee elects to contribute at least 15% of Base Compensation other than Annual Bonus for the same Plan Year to the Stock Purchase and Deferral Plan and/or (2) make Employee Contributions of Annual Bonus to this Plan but only if the Employee elects to contribute at least 15% of Annual Bonus for the same Plan Year to the Stock Purchase and Deferral Plan.
 
4.2           Contributions to a Cash Deferral Account.
 
(a)  Employee Contributions shall be made pursuant to a proper election, only during the Participant’s lifetime; provided, however, with respect to Employee Contribution elections made prior to 2007, the Employee must remain an Eligible Employee while making any such contributions.  In the event of a Change in Control of an Employer, subsequent compensation from the Employer may not be contributed to the Plan.  The Employer may continue the then current elections of the participants under a subsequent plan in order to comply with applicable tax laws.
 
(b)  A Participant’s contributions shall be credited to the Participant’s Cash Deferral Account on the day the compensation – from which the contribution is to be deducted – is to be paid (“paid,” as used in this Plan, includes amounts contributed to the Plan that would have been paid were it not for an election under this Plan), as determined by the relevant Employer.  Earnings on each Cash Deferral Account shall be recorded on Participant’s statements quarterly.  The Committee may modify or change this paragraph (b) from time to time.
 
4.3           Earnings on Cash Deferral Accounts.
 
During a calendar year, the Participant’s Cash Deferral Account shall accrue interest on amounts held by such Account at the Plan Interest Rate for such year, compounded quarterly on the last day of each quarter.  Interest will accrue on unpaid amounts in the Cash Deferral Account from the date credited to such Account.
 
Article 5 − Distributions
 
5.1           Distributions of Cash Deferral Accounts.
 
(a)  Initial Election with Respect to a Cash Deferred Account.  At the time the Participant makes an election to make Employee Contributions with respect to a Cash Deferral Account, the Participant shall also elect the calendar year of the distribution of the Cash Deferral Account and the number of installments.  The Participant may elect either of the following:
 
(1)  Specified Date Distribution.  That the distribution of the Cash Deferral Account commence in the calendar year specified by the Participant, but no later than the 5th calendar year after the Plan Year the Cash Deferral Account commenced, in up to Ten (10) installments.  However, for purposes of Initial Elections with respect to Plan Years prior to 2009 only, in the event the Participant Terminates Employment prior to the calendar year of the distribution, the Cash Deferral Account must commence distribution the calendar year following the calendar year of the Termination of Employment, with the same number of installments, unless the Employee has made an irrevocable election under (b), below.  For example, if the Participant elected a 2010 distribution with five (5) installments, but Terminated Employment in 2007, the Cash Deferral Account would commence distribution in 2008.
 
(2)  Retirement Distribution.  That the distribution of the Cash Deferral Account commence the calendar year following the calendar year of Retirement in up to (10) installments.  If the Participant Terminates Employment while not Retirement eligible, the distribution shall commence the calendar year following the calendar year of Termination of Employment, but shall be limited to five (5) installments.  This distribution alternative will not be available for Initial Elections made after 2007.
 
If no timely distribution election is made by the Participant, then the Participant will be deemed to have made an election to have the Cash Deferral Account distributed in a single installment in the first calendar year after the calendar year Employee Contributions were first made.
 
(b)  If an Employee elected a Specified Date Distribution for a Cash Deferral Account, the Employee may elect a new Specified Date Distribution commencement date but not a new number of installments; provided, however, Termination of Employment will not accelerate the distribution, unlike the initial deferral election.  Unless otherwise provided by the Committee, the election of a new commencement date must be made on or after October 1, and on or before the last Business Day of the next following December, of the calendar year that is the second calendar year preceding the calendar year of the relevant commencement date.  To make this election, the Participant must be an Eligible Employee both on the September 30 immediately preceding such election and on the last day such an election may be made.  For example, an election to defer a scheduled distribution that would otherwise commence in 2010 must be made during the period from October 1, 2008, through the last business day of December 2008, and the Participant must be an Eligible Employee both on September 30, 2008, and the last business day of December 2008.  The new distribution election must delay commencement of the distribution by five (5) years.  An election to create a new Specified Date Distribution and defer the commencement of the distribution of a Cash Deferral Account may not be made in the same calendar year the election to establish the Cash Deferral Account is made.  Notwithstanding anything to the contrary in this Plan, (1) such election to create a new Specified Date Distribution must be made at least 12 months prior to the date of the first scheduled payment under the prior distribution election and (2) the election shall not take effect until at least 12 months after the date on which the election is made.
 
(c)  A Participant’s Cash Deferral Account shall be distributed to the Participant on March 10 (or as soon thereafter as administratively practicable, as determined by AT&T) of the calendar year elected by the Participant for the Account.  In the event the distribution is to be made to a “Specified Employee” as a result of the Participant’s Termination of Employment (other than as a result of a Change in Control), the distribution shall not occur until the later of such March 10 or six (6) months after the Termination of Employment, except it shall be distributed upon the Participant’s earlier death in accordance with this Plan.  The distributions shall continue annually on each successive March 10 (or such other date as determined by AT&T) until the number of installments elected by the Participant is reached.  In each installment, AT&T shall distribute to the Participant that portion of the Participant’s Cash Deferral Account that is equal to the total dollar amount of the Participant’s Account divided by the number of remaining installments.
 
(d)  The Committee may establish other distribution alternatives from time to time, but such alternatives may be offered no earlier than the next period in which a Participant may make an election to establish a Cash Deferral Account.
 
5.2           Death of the Participant.
 
In the event of the death of a Participant, notwithstanding anything to the contrary in this Plan, all undistributed Cash Deferral Accounts shall be distributed to the Participant’s beneficiary in accordance with the AT&T Rules for Employee Beneficiary Designations, as the same may be amended from time to time, within the later of 90 days following such determination or the end of the calendar year in which determination was made.
 
5.3           Unforeseeable Emergency Distribution.
 
If a Participant experiences an “Unforeseeable Emergency,” the Participant may submit a written petition to AT&T (the Committee in the case of Officer Level Employees), to receive a partial or full distribution of his Cash Deferral Account(s).  In the event that AT&T (the Committee in the case of Officer Level Employees), upon review of the written petition of the Participant, determines in its sole discretion that the Participant has suffered an “Unforeseeable Emergency,” AT&T shall make a distribution to the Participant from the Participant’s Cash Deferral Accounts, on a pro-rata basis, within the later of 90 days following such determination or the end of the calendar year in which determination was made, subject to the following:
 
(a)           “Unforeseeable Emergency” shall mean a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s legal spouse, the Participant’s beneficiary, or the Participant’s dependent (as defined in Code Section 152, without regard to Code Section 152(b)(1), (b)(2), and (d)(1)(B)); loss of the Participant’s property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Committee.  Whether a Participant is faced with an Unforeseeable Emergency permitting a distribution is to be determined based on the relevant facts and circumstances of each case, but, in any case, a distribution on account of Unforeseeable Emergency shall not be made to the extent that such emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not cause severe financial hardship, or by cessation of deferrals under the Plan.
 
(b)           The amount of a distribution to be made because of an Unforeseeable Emergency shall not exceed the amount reasonably necessary, as determined by AT&T (the Committee in the case of Officer Level Employees) in its sole discretion, to satisfy the emergency need (which may include amounts necessary to pay any Federal, state, local, or foreign income taxes or penalties reasonably anticipated to result from the distribution).  Determinations of the amount reasonably necessary to satisfy the emergency need shall take into account any additional compensation that is available if the plan provides for cancellation of a deferral election upon a payment due to an Unforeseeable Emergency.  The determination of amounts reasonably necessary to satisfy the Unforeseeable Emergency need is not required to, but may, take into account any additional compensation that, due to the Unforeseeable Emergency, is available under another nonqualified deferred compensation plan but has not actually been paid, or that is available due to the Unforeseeable Emergency under another plan that would provide for deferred compensation except due to the application of the effective date provisions under Treasury Regulation § 1.409A−6.
 
(c)           Upon such distribution on account of an Unforeseeable Emergency under this Plan, any election to make Employee Contributions by such Participant shall be immediately cancelled, and the Participant shall not be permitted to make a new election with respect to Employee Contributions that would be contributed during the then current and immediately following calendar year.
 
5.4           Ineligible Participant.
 
Notwithstanding any other provisions of this Plan to the contrary, if AT&T receives an opinion from counsel selected by AT&T, or a final determination is made by a Federal, state or local government or agency, acting within its scope of authority, to the effect that an individual’s continued participation in the Plan would violate applicable law, then such person shall not make further contributions to the Plan to the extent permitted by Section 409A of the Code.
 
Article 6 − Transition Provisions
 
6.1           2005 Cash Deferral Accounts.
 
Notwithstanding Article 4 to the contrary, if an Employee is an Eligible Employee on September 30, 2004, the Employee may make an election under Article 4 on or prior to December 15, 2004, with respect to the establishment of a Cash Deferral Account for the contribution of Base Compensation and/or Incentive Awards that would otherwise be paid during the period from January 1, 2005, through January 15, 2006, which shall be the Plan Year for such Cash Deferral Account.
 
6.2           2007 Amendments.
 
Amendments made to the Plan on November 15, 2007, shall be effective January 1, 2008, except for amendments to this Article 7, which shall be effective upon adoption.  Any Participants electing prior to November 15, 2007, to make Employee Contributions in 2008 shall have their elections canceled if they do not consent by December 14, 2007, to all prior amendments to this Plan and to the Stock Purchase and Deferral Plan.  Subject to the foregoing consent requirements, all Employee Contribution elections made prior to 2008, including but not limited to elections to contribute cash with respect to Performance Shares granted that would be distributed under the 2001 Incentive Plan or a successor plan, shall remain in force, subject to all other terms of the amended Plan.
 
6.3           2008 Amendments.  For the 2008 Plan Year, only Salary and Short Term Incentive Awards paid after Termination of Employment may be contributed to the Plan.
 
Article 7 − Discontinuation, Termination, Amendment.
 
7.1           AT&T’s Right to Discontinue Offering Cash Deferral Accounts.
 
The Committee may at any time discontinue offerings of Cash Deferral Accounts or contributions under the Plan.  Any such discontinuance shall have no effect upon existing Cash Deferral Accounts or the terms or provisions of this Plan as applicable to such Accounts.
 
7.2           AT&T’s Right to Terminate Plan.
 
The Committee may terminate the Plan at any time.  Upon termination of the Plan, contributions shall no longer be made under the Plan.
 
After termination of the Plan, Participants shall continue to earn interest on undistributed amounts and shall continue to receive all distributions under this Plan at such time as provided in and pursuant to the terms and conditions of Participant’s elections and this Plan.  Notwithstanding the foregoing, the termination of the Plan shall be made solely in accordance with Section 409A of the Code and in no event shall cause the accelerated distribution of any Account unless such termination is effected in accordance with Section 409A of the Code.
 
7.3           Amendment.
 
The Committee may at any time amend the Plan in whole or in part; provided, however, that no amendment, including but not limited to an amendment to this section, shall be effective, without the consent of a Participant, to alter, to the material detriment of such Participant, any of the Cash Deferral Accounts of the Participant, other than as provided elsewhere in this section.  For purposes of this section, an alteration to the material detriment of a Participant shall include, but not be limited to, a material reduction in the period of time over which the Participant’s Cash Deferral Account may be distributed to a Participant, any reduction in the amounts credited to the Participant’s Cash Deferral Accounts, or any reduction in the Plan Interest Rate (other than as it may fluctuate in accordance with its terms) for Cash Deferral Accounts previously elected by the Participant.  Any such consent may be in a writing, telecopy, or e-mail or in another electronic format.  An election to make Employee Contributions shall be conclusively deemed to be the consent of the Participant to any and all amendments to the Plan prior to such election, and such consent shall be a condition to making any election with respect to Employee Contributions.
 
The Plan is established in order to provide deferred compensation to a select group of management and highly compensated employees with in the meaning of Sections 201(2) and 301(a)(3) of ERISA.  To the extent legally required, the Code and ERISA shall govern the Plan, and if any provision hereof is in violation of an applicable requirement thereof, the Company reserves the right to retroactively amend the Plan to comply therewith to the extent permitted under the Code and ERISA.  The Company also reserves the right to make such other changes as may facilitate implementation of Section 409A of the Code.  Provided, however, that in no event shall any such amendments be made in violation of the requirements of Section 409A of the Code.
 
Article 8 − Miscellaneous
 
8.1           Tax Withholding.
 
Upon a distribution from a Participant’s Cash Deferral Account, AT&T shall withhold sufficient amounts to satisfy the minimum amount of Federal, state, and local taxes required by law to be withheld as a result of such distribution.
 
8.2           Loyalty Conditions.
 
(a)   By making an Employee Contribution election under Section 4.1 of this Plan after September 1, 2009, a Participant acknowledges that AT&T would be unwilling to provide for such an election but for the loyalty conditions and covenants set forth in this section, and that the conditions and covenants herein are a material inducement to AT&T’s willingness to sponsor the Plan and to offer Plan benefits for the Participants.  Accordingly, as a condition to making an Employee Contribution election under Section 4.1 of this Plan after September 1, 2009,  each such electing Participant is deemed to agree that he shall not, without obtaining the written consent of the Committee in advance, participate in activities that constitute engaging in competition with AT&T or engaging in conduct disloyal to AT&T, as those terms are defined in this section.
 
(b)   Definitions .  For purposes of this section and of the Plan generally:
 
(i)   an “Employer Business” shall mean AT&T Inc. and any of its Subsidiaries, or any business in which they or any affiliate of theirs has a substantial ownership or joint venture interest;
 
(ii)   “engaging in competition with AT&T” shall mean, while employed by AT&T or any of its Subsidiaries, or within two (2) years after Participant’s Termination of Employment, engaging by the Participant in any business or activity in all or any portion of the same geographical market where the same or substantially similar business or activity is being carried on by an Employer Business.  “Engaging in competition with AT&T” shall not include owning a non-substantial publicly traded interest as a shareholder in a business that competes with an Employer Business.  “Engaging in competition with AT&T” shall include representing or providing consulting services to, or being an employee of, any person or entity that is engaged in competition with any Employer Business or that takes a position adverse to any Employer Business.
 
(iii)   “engaging in conduct disloyal to AT&T” means, while employed by AT&T or any of its Subsidiaries, or within two (2) years after Participant’s Termination of Employment, (i) soliciting for employment or hire, whether as an employee or as an independent contractor, for any business in competition with an Employer Business, any person employed by AT&T or any of its Subsidiaries during the one (1) year prior to the Participant’s Termination of Employment, whether or not acceptance of such position would constitute a breach of such person’s contractual obligations to AT&T or any of its Subsidiaries; (ii) soliciting, encouraging, or inducing any vendor or supplier with which Participant had business contact on behalf of any Employer Business during the two (2) years prior to the Participant’s Termination of Employment (regardless of the reason for that termination) to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with AT&T or any of its Subsidiaries; or (iii) soliciting, encouraging, or inducing any customer or active prospective customer with whom Participant had business contact, whether in person or by other media (“Customer”), on behalf of any Employer Business during the two (2) years prior to the Participant’s Termination of Employment (regardless of the reason for that termination), to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with any Employer Business, or to purchase competing goods or services from a business competing with any Employer Business, or accepting or servicing business from such Customer on behalf of himself or any other business.  “Engaging in conduct disloyal to AT&T” shall also mean, disclosing Confidential Information to any third party or using Confidential Information, other than for an Employer Business, or failing to return any Confidential Information to the Employer Business following termination of employment.
 
(iv)   “Confidential Information” shall mean all information belonging to, or otherwise relating to, an Employer Business, which is not generally known, regardless of the manner in which it is stored or conveyed to Participant, and which the Employer Business has taken reasonable measures under the circumstances to protect from unauthorized use or disclosure.  Confidential Information includes trade secrets as well as other proprietary knowledge, information, know-how, and non-public intellectual property rights, including unpublished or pending patent applications and all related patent rights, formulae, processes, discoveries, improvements, ideas, conceptions, compilations of data, and data, whether or not patentable or copyrightable and whether or not it has been conceived, originated, discovered, or developed in whole or in part by Participant.  For example, Confidential Information includes, but is not limited to, information concerning the Employer Business’ business plans, budgets, operations, products, strategies, marketing, sales, inventions, designs, costs, legal strategies, finances, employees, customers, prospective customers, licensees, or licensors; information received from third parties under confidential conditions; or other valuable financial, commercial, business, technical or marketing information concerning the Employer Business, or any of the products or services made, developed or sold by the Employer Business.  Confidential Information does not include information that (i) was generally known to the public at the time of disclosure; (ii) was lawfully received by Participant from a third party; (iii) was known to Participant prior to receipt from the Employer Business; or (iv) was independently developed by Participant or independent third parties; in each of the foregoing circumstances, this exception applies only if such public knowledge or possession by an independent third party was without breach by Participant or any third party of any obligation of confidentiality or non-use, including but not limited to the obligations and restrictions set forth in this Plan.
 
(c)   Equitable Relief.  The parties recognize that any Participant’s breach of any of the covenants in this section will cause irreparable injury to the AT&T, will represent a failure of the consideration under which AT&T (in its capacity as creator and sponsor of the Plan) agreed to provide the Participant with the opportunity to receive Plan benefits, and that monetary damages would not provide AT&T with an adequate or complete remedy that would warrant AT&T’s continued sponsorship of the Plan (including the accrual or granting of Share Units, Matching Share Units and Options) for all Participants.  Accordingly, in the event of a Participant’s actual or threatened breach of the covenants in this section, the Committee, in addition to all other rights and acting as a fiduciary under ERISA on behalf of all Participants, shall have a fiduciary duty (in order to assure that AT&T receives fair and promised consideration for its continued Plan sponsorship and funding) to seek an injunction restraining the Participant from breaching the covenants in this Section.  AT&T shall pay for any Plan expenses that the Committee incurs hereunder, and shall be entitled to recover from the Participant its reasonable attorneys’ fees and costs incurred in obtaining such injunctive remedies.
 
(d)   Uniform Enforcement.  In recognition of AT&T’s need for nationally uniform standards for the Plan administration, it is an absolute condition in consideration of any Participant’s ability to make Employee Contribution elections under Section 4.1 of this Plan after September 1, 2009, that each and all of the following conditions apply to all such electing Participants:
 
(i)   ERISA shall control all issues and controversies hereunder, and the Committee shall serve for purposes hereof as a “fiduciary” of the Plan and its “named fiduciary” within the meaning of ERISA.
 
(ii)   All litigation between the parties relating to this section shall occur in federal court, which shall have exclusive jurisdiction; any such litigation shall be held in the United States District Court for the Northern District of Texas, and the only remedies available with respect to the Plan shall be those provided under ERISA.
 
8.4           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 any Employer.  No assets of any 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 any Employer under this Plan.  Any and all of each Employer’s assets shall be, and remain, the general, unpledged, unrestricted assets of such Employer.  The only obligation of an Employer under the Plan shall be merely that of an unfunded and unsecured promise of AT&T to make distributions under and in accordance with the terms of the Plan.
 
8.5           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, any Cash Deferral Account 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  a distributable Cash Deferral Account 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.
 
8.6           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 an Employer or to serve as a director.
 
8.7           Errors.
 
At any time AT&T or an Employer may correct any error made under the Plan without prejudice to AT&T or any Employer.  Neither AT&T nor any Employer shall be liable for any damages resulting from failure to timely allow any contribution to be made to the Plan or for any damages resulting from the correction of, or a delay in correcting, any error made under the Plan.  In no event shall AT&T or any Employer be liable for consequential or incidental damages arising out of a failure to comply with the terms of the Plan.
 
8.8           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.
 
8.9           Governing Law.
 
To the extent not preempted by Federal law, the Plan, and all benefits and agreements hereunder, and any and all disputes in connection therewith, shall be governed by and construed in accordance with the substantive laws of the State of Texas, without regard to conflict or choice of law principles which might otherwise refer the construction, interpretation or enforceability of this Plan to the substantive law of another jurisdiction.
 
Because benefits under the Plan are granted in Texas, records relating to the Plan and benefits thereunder are located in Texas, and the Plan and benefits thereunder are administered in Texas, AT&T and the Participant under this Plan, for themselves and their successors and assigns, irrevocably submit to the exclusive and sole jurisdiction and venue of the state or Federal courts of Texas with respect to any and all disputes arising out of or relating to this Plan, the subject matter of this Plan or any benefits under this Plan, including but not limited to any disputes arising out of or relating to the interpretation and enforceability of any benefits or the terms and conditions of this Plan.  To achieve certainty regarding the appropriate forum in which to prosecute and defend actions arising out of or relating to this Plan, and to ensure consistency in application and interpretation of the Governing Law to the Plan, the parties agree that (a) sole and exclusive appropriate venue for any such action shall be an appropriate Federal or state court in Dallas County, Texas, and no other, (b) all claims with respect to any such action shall be heard and determined exclusively in such Texas court, and no other, (c) such Texas court shall have sole and exclusive jurisdiction over the person of such parties and over the subject matter of any dispute relating hereto and (d) that the parties waive any and all objections and defenses to bringing any such action before such Texas court, including but not limited to those relating to lack of personal jurisdiction, improper venue or forum non conveniens.
 
8.10           Plan to Comply with Section 409A.
 
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.  Notwithstanding any provision to the contrary in this Plan, each provision in this Plan shall be interpreted to permit the deferral of compensation in accordance with Section 409A of the Code and any provision that would conflict with such requirements shall not be valid or enforceable.
 
8.11           Successors and Assigns.
 
This Plan shall be binding upon AT&T and its successors and assigns.
 

 


 
Exhibit 10-c
 
AT&T INC.
 

 
2006 INCENTIVE PLAN
 
Plan Effective: May 1, 2006
Amended Through: January 1, 2010
 

 
 

 

AT&T INC.
 
2006 Incentive Plan
 
Article 1.  
Establishment and Purpose .
 
1.1  
Establishment of the Plan .  AT&T Inc., a Delaware corporation (the “Company” or “AT&T”), 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.
 
1.3  
Effective Date of the Plan .  The Plan was originally effective on May 1, 2006, and is being hereby amended and restated effective January 1, 2010.
 
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)   “Applicable Law” means the legal requirements relating to the administration of options and share-based or performance-based awards under any applicable laws of the United States, any other country, and any provincial, state, or local subdivision, any applicable stock exchange or automated quotation system rules or regulations, as such laws, rules, regulations and requirements shall be in place from time to time.
 
(b)   “Award” means, individually or collectively, a grant or award under this Plan of Stock Options, Restricted Stock (including unrestricted Stock), Restricted Stock Units, Performance Units, or Performance Shares.
 
(c)   “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.
 
(d)   “Board” or “Board of Directors” means the AT&T Board of Directors.
 
(e)   “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 Company in its sole discretion.
 
(f)   “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 consummation of 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 fifty percent (50%) 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.
 
(g)   “Code” means the Internal Revenue Code of 1986, as amended from time to time.
 
(h)   “Committee” means the committee or committees of the Board of Directors given authority to administer the Plan as provided in Article 3.
 
(i)   “Director” means any individual who is a member of the AT&T Board of Directors.
 
(j)   “Disability” shall mean absence of an Employee from work under the relevant Company or Subsidiary long term disability plan.
 
(k)   “Employee” means any 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.
 
(l)   “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor Act thereto.
 
(m)   “Exercise Price” means the price at which a Share may be purchased by a Participant pursuant to an Option, as determined by the Committee.
 
(n)   “Fair Market Value” shall mean the closing price on the New York Stock Exchange (“NYSE”) for a Share on the relevant date, or if such date was not a trading day, the next preceding trading date, all as determined by the Company.  A trading day is any day that the Shares are traded on the NYSE.  In lieu of the foregoing, the Committee may, from time to time, select any other index or measurement to determine the Fair Market Value of Shares under the Plan, including but not limited to an average determined over a period of trading days.
 
(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)   “Option” means an option to purchase Shares from AT&T.
 
(q)   “Participant” means an Employee or former Employee who holds an outstanding Award granted under the Plan.
 
(r)   “Performance Unit” and “Performance Share” shall each mean an Award granted to an Employee pursuant to Article 8 herein.
 
(s)   “Plan” means this 2006 Incentive Plan.  The Plan may also be referred to as the “AT&T 2006 Incentive Plan” or as the “AT&T Inc.  2006 Incentive Plan.”
 
(t)   “Retirement” or to “Retire” shall mean the Participant’s Termination of Employment for any reason other than death, Disability or for Cause, on or after the earlier of the following dates, or as otherwise provided by the Committee: (1) for Officer Level Employees (Participants deemed officer level Employees for compensation purposes as indicated on the records of AT&T), the date the Participant is at least age 55 and has five (5) years of net credited service); or (2) the date the Participant has attained one of the following combinations of age and service, except as otherwise indicated below:
 
 
    Net Credited Service
Age
10 years or more
65 or older
20 years or more
55 or older
25 years or more
50 or older
30 years or more
Any age

 
For purposes of this Plan only, Net Credited Service shall be calculated in the same manner as “Pension Eligibility Service” under the AT&T Pension Benefit Plan – Nonbargained Program (“Pension Plan”), as that may be amended from time to time, except that service with an Employer shall be counted as though the Employer were a “Participating Company” under the Pension Plan and the Employee was a participant in the Pension Plan.
 
(u)   “Rotational Work Assignment Company” (“RWAC”) shall mean any entity with which AT&T Inc. or any of its Subsidiaries may enter into an agreement to provide an employee for a rotational work assignment.
 
(v)   “Shares” or “Stock” means the shares of common stock of the Company.
 
(w)   “Subsidiary” shall mean any corporation, partnership, venture or other entity in which AT&T holds, directly or indirectly, a fifty percent (50%) or greater ownership interest.  The Committee may, at its sole discretion, designate, on such terms and conditions as the Committee shall determine, any other corporation, partnership, limited liability company, venture other entity a Subsidiary for purposes of this Plan.  Unless otherwise provided by the Committee, Cingular and its direct or indirect majority-owned subsidiaries shall each be deemed a Subsidiary so long as AT&T holds a direct or indirect twenty five percent (25%) or greater ownership interest in Cingular Wireless LLC or its successor.
 
(x)   “Termination of Employment” or a similar reference shall mean the event where the Employee is no longer an Employee of the Company or of any Subsidiary, including but not limited to where the employing company ceases to be a Subsidiary.  With respect to any Award that constitutes a “nonqualified deferred compensation plan” within the meaning of Section 409A of the Code, “Termination of Employment” shall mean a “separation from service” as defined under Section 409A of the Code.
 
Article 3.  
Administration .
 
3.1  
The Committee .  Administration of the Plan shall be as follows:
 
(a)   With respect to Insiders, the Plan and Awards hereunder shall be administered by the Human Resources Committee of the Board or such other committee as may be appointed by the Board for this purpose (each of the Human Resources Committee and such other committee is the “Disinterested Committee”), where each Director on such Disinterested Committee is a “Non-Employee Director,” as that term is used in Rule 16b-3 under the Exchange Act (or any successor designation for determining the committee that may administer plans, transactions or awards exempt under Section 16(b) of the Exchange Act), as that rule may be modified from time to time.
 
(b)   With respect to persons who are not Insiders, the Plan and Awards hereunder shall be administered by each of the Disinterested Committee and such other committee, if any, to which the Board may delegate such authority (such other Committee shall be the “Non-Insider Committee”), and each such Committee shall have full authority to administer the Plan and all Awards hereunder, except as otherwise provided herein or by the Board.  The Disinterested Committee may, from time to time, limit the authority of the Non-Insider Committee in any way.  Any Committee may be replaced by the Board at any time.
 
(c)   Except as otherwise indicated from the context, references to the “Committee” in this Plan shall be to either of the Disinterested Committee or the Non-Insider Committee.
 
3.2  
Authority of the Committee .  The Committee shall have complete control over the administration of the Plan and shall have the authority in its sole discretion to (a) exercise all of the powers granted to it under the Plan, (b) construe, interpret and implement the Plan, grant terms and grant notices, and all Award Agreements, (c) prescribe, amend and rescind rules and regulations relating to the Plan, including rules governing its own operations, (d) make all determinations necessary or advisable in administering the Plan, (e) correct any defect, supply any omission and reconcile any inconsistency in the Plan, (f) amend the Plan to reflect changes in applicable law (whether or not the rights of the holder of any Award are adversely affected, unless otherwise provided by the Committee), (g) grant Awards and determine who shall receive Awards, when such Awards shall be granted and the terms and conditions of such Awards, including, but not limited to, conditioning the exercise, vesting, payout or other term of condition of an Award on the achievement of Performance Goals (defined below), (h) unless otherwise provided by the Committee, amend any outstanding Award in any respect, not materially adverse to the Participant, including, without limitation, to (1) accelerate the time or times at which the Award becomes vested, unrestricted or may be exercised (and, in connection with such acceleration, the Committee may provide that any Shares acquired pursuant to such Award shall be Restricted Shares, which are subject to vesting, transfer, forfeiture or repayment provisions similar to those in the Participant’s underlying Award), (2) accelerate the time or times at which shares of Common Stock are delivered under the Award (and, without limitation on the Committee’s rights, in connection with such acceleration, the Committee may provide that any shares of Common Stock delivered pursuant to such Award shall be Restricted Shares, which are subject to vesting, transfer, forfeiture or repayment provisions similar to those in the Grantee’s underlying Award), or (3) waive or amend any goals, restrictions or conditions applicable such Award, or impose new goals, restrictions and (i) determine at any time whether, to what extent and under what circumstances and method or methods (1) Awards may be (A) settled in cash, shares of Stock, other securities, other Awards or other property (in which event, the Committee may specify what other effects such settlement will have on the Participant’s Award), (B) exercised or (C) canceled, forfeited or suspended, (2) Shares, other securities, cash, other Awards or other property and other amounts payable with respect to an Award may be deferred either automatically or at the election of the Participant or of the Committee, or (3) Awards may be settled by the Company or any of its Subsidiaries or any of its or their designees.
 
No Award may be made under the Plan more than ten years after April 30, 2016.
 
References to determinations or other actions by AT&T or the Company, herein, shall mean actions authorized by the Committee, the Chairman of the Board of AT&T, the Senior Executive Vice President of AT&T in charge of Human Resources or their respective successors or duly authorized delegates, in each case in the discretion of such person, provided, however, only the Disinterested Committee may take action with respect to Insiders with regard to granting or determining the terms of Awards or other matters that would require the Disinterested Committee to act in order to comply with Rule 16b-3 promulgated under the Exchange Act.
 
All determinations and decisions made by AT&T 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 but not limited to the Company, its stockholders, Employees, Participants, and their estates and beneficiaries.
 
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 issuance under the Plan shall not exceed 90 million Shares.  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.
 
4.2  
Share Accounting .  Without limiting the discretion of the Committee under this section, unless otherwise provided by the Disinterested 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)   If an outstanding Award for any reason expires or is terminated or canceled without having been exercised or settled in full, or if Shares acquired pursuant to an Award subject to forfeiture or repurchase are forfeited or repurchased by the Company for an amount not greater than the Participant’s original purchase price, the Shares allocable to the terminated portion of such Award or such forfeited or repurchased Shares shall again be available for issuance under the Plan.
 
(b)   Shares shall not be deemed to have been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash, other than an Option.
 
(c)   Shares withheld or reacquired by the Company in satisfaction of tax withholding obligations under a Restricted Stock Award shall not again be available for issuance under the Plan; however Shares withheld for tax withholding from other awards shall be available for issuance again.
 
(d)   If the exercise price of an Option is paid by tender to the Company, or attestation to the ownership, of Shares owned by the Participant, or an Option is settled without the payment of the exercise price, the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which the Option is exercised.
 
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 but not limited to 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 (and Performance Units and other Awards whose value is based on a number of Shares) constituting outstanding Awards, as may be determined to be appropriate and equitable by the Disinterested 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 receive Awards under 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 eligible Employees at any time and from time to time, and under such terms and conditions, as shall be determined by the Committee.  In addition, the Committee may, from time to time, provide for the payment of dividend equivalents on Options, prospectively and/or retroactively, on such terms and conditions as the Committee may require.  The Committee shall have discretion in determining the number of Shares subject to Options granted to each Employee; provided, however, that no single Employee may receive Options under this Plan for more than one percent (1%) of the Shares approved for issuance under this Plan during any calendar year.  The Committee may not grant Incentive Stock Options, as described in Section 422 of the Code, under this Plan.
 
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.
 
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.  In the event the Committee does not specify the expiration date of an Option, then such Option will expire on the tenth (10th) anniversary date of its grant, except as otherwise provided herein.
 
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 another 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 Executive 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.  Exercises of Options may be effect only on days and during the hours that the New York Stock Exchange is open for regular trading.  The Company may change or limit the times or days Options may be exercised.  If an Option expires on a day or at a time when exercises are not permitted, then the Options may be exercised no later than the immediately preceding date and time that the Options were exercisable.
 
Options shall be exercised by providing notice to the designated agent selected by the Company (if no such agent has been designated, then to the Company), in the manner and form determined by the Company, 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.  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 .  Unless otherwise determined by the Committee, 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.
 
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 owned by the Participant in partial (if in partial payment, then together with cash) or full payment; provided, however, as a condition to paying any part of the Exercise Price in Shares, 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 has 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 (which shall include an exercise notice that becomes effective upon execution of a sale order) a sufficient portion of the Shares to be received from the Option exercise 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 Shares 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, the value of the Shares delivered shall be equal to the then most recent Fair Market Value of the Shares established before the exercise of the Option.
 
Restricted Stock may not be used to pay the Exercise Price.
 
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 of the Participant’s Termination of Employment 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 .  In the event of the Participant’s Termination of Employment 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 .  In the event of the Participant’s Termination of Employment for any reason other than the reasons set forth in (a) or (b), above:
 
                      (i)  
If upon the Participant’s Termination of Employment, the Participant is eligible to Retire (and if the Participant is an officer level employee for compensation purposes as determined by AT&T, the employee must also be age 55 or older at Termination of Employment), then all outstanding unvested Options granted to that Participant shall immediately vest as of the date of the Participant’s Termination of Employment;
 
                      (ii)  
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 three (3) months 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; and
 
                       (iii)  
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 paragraphs (a) and (c)(i), 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 the Shares subject to such forfeited Options shall once again become available for issuance under the Plan).
 
(e)     Notwithstanding the foregoing, the Committee may, in its sole discretion, establish different, or waive, terms and conditions pertaining to the effect of Termination of Employment on Options, whether or not the Options are outstanding, but no such modification shall shorten the terms of Options issued prior to such modification or otherwise be materially adverse to the Participant.
 
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 AT&T’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 AT&T 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.
 
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 achievement of Performance Goals in the same manner as provided in Section 8.4, herein, with respect to Performance Shares.  No Employee may be awarded, in any calendar year, a number of Shares in the form of Restricted Stock (or Restricted Stock Units) exceeding one percent (1%) of the Shares approved for issuance under this Plan.
 
7.2  
Restricted Stock Agreement .  The Committee may require, as a condition to receiving a Restricted Stock Award, that the Participant 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, and subject to any additional terms in the grant thereof, Shares of Restricted Stock granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until fully vested.
 
7.4  
Restrictions .  The Restricted Stock shall be subject to such vesting terms, including the achievement of Performance Goals (as described in Section 8.4), as may be determined by the Committee.  Unless otherwise provided by the Committee, to the extent Restricted Stock is subject to any condition to vesting, if such condition or conditions are not satisfied by the time the period for achieving such condition has expired, such Restricted Stock shall be forfeited.  The Committee may impose such other conditions and/or restrictions on any Shares of Restricted Stock granted pursuant to the Plan as it may deem advisable including but not limited to 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 Committee may also grant Restricted Stock without any terms or conditions in the form of vested Stock Awards.
 
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 the Shares are fully vested and 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 or otherwise provided in the grant thereof, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan shall become freely transferable by the Participant after completion of all conditions to vesting, if any.  However, the Committee, in its sole discretion, shall have the right to immediately vest the shares and 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 .  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 of the Participant’s Termination of Employment by reason of death or Disability, 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 .  Unless otherwise provided by the Committee, in the event of the Participant’s Termination of Employment 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.
 
7.10  
Restricted Stock Units .  In lieu of or in addition to Restricted Stock, the Committee may grant Restricted Stock Units (“Units”) under such terms and conditions as shall be determined by the Committee.  Units shall otherwise be subject to the same terms and conditions under this Plan as Restricted Stock (including but not limited to Change in Control provisions), except that upon vesting, the Participant holding such Units shall receive Shares (or cash equal to the Fair Market Value of the number of Shares) equal to the number of such Units no later than ninety (90) days after the date of such vesting.  Units shall have no voting rights, and Units shall not receive dividends, but shall, unless otherwise provided by the Committee, receive dividend equivalents at the time and at the same rate per Unit as dividends are paid per Share with the same record and pay dates.
 
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 and the terms and conditions of each such Award.
 
8.2  
Value of Performance Shares and Units .
 
(a)    A Performance Share is equivalent in value to a Share.  In any calendar year, no individual may be awarded Performance Shares having a potential payout of Shares exceeding one percent (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, as of the date of granting the Award, of one percent (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.  The Committee may denominate a Performance Unit Award in dollars instead of Performance Units.  A Performance Unit Award may be referred to as a “Key Executive Officer Short Term Award.”
 
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 (and may establish for other Awards) performance objectives (“Performance Goals”) for the Company, its Subsidiaries, and/or divisions of any of foregoing, using the Performance Criteria and other factors set forth in (a) and (b), below.  It may also use other criteria or factors in establishing Performance Goals in addition to or in lieu of the foregoing.  A Performance Goal may be stated as an absolute value or as a value determined relative to an index, budget, prior period, similar measures of a peer group of other companies or other standard selected by the Committee.  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.  Unless previously canceled or reduced, Performance Shares and Performance Units which may not be converted because of failure in whole or in part to satisfy the relevant Performance Goals or for any other reason shall be canceled at the time they would otherwise be distributable.  When the Committee desires an Award of Performance Shares, Performance Units, Restricted Stock or Restricted Stock Units to qualify under Section 162(m) of the Code, as amended, the Committee shall establish the Performance Goals for the respective Award prior to or within 90 days of the beginning of the Performance Period relating to such Performance Goal, and not later than after 25% of such period 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, including but not limited to the offset against each other of any combination of the following criteria:
 
                       (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, Value Added (after- tax cash operating profit less depreciation and less a capital charge), EBITDA (earnings before interest, taxes, depreciation and amortization), revenues, sales, expenses, costs, gross margin, operating margin, profit margin, pre-tax profit, market share, volumes of a particular product or service or category thereof, including but not limited to the product’s life cycle (for example, products introduced in the last 2 years), number of customers or subscribers, number of items in service, including but not limited to every category of access or other telecommunication or television lines, return on net assets, return on assets, return on capital, return on invested capital, cash flow, free cash flow, operating cash flow, operating revenues, operating expenses, and/or operating income.
 
                       (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.  Employee satisfaction, employee retention, product development, completion of a joint venture or other corporate transaction, completion of an identified special project, and effectiveness of management.
 
                       (3)  
The Company’s Stock price, return on stockholders’ equity, total stockholder return (Stock price appreciation plus dividends, assuming the reinvestment of dividends), and/or earnings per Share.
 
                       (4)  
Impacts of acquisitions, dispositions, or restructurings, on any of the foregoing.
 
(b)     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, the effects of such events 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 but not limited to 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 Award 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 held by a Participant on the record date for the dividend.
 
8.6  
Form and Timing of Payment of Performance Units and Performance Shares .  As soon as practicable (but in no event more than ninety (90) days) 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 Goal), 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 or prohibited by this Plan (such as in the case of a Change in Control), 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 cancel any part or all of a grant or award of Performance Units or Performance Shares, 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).
 
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 Fair Market Value of a Share on the date the Committee authorizes the payout of Awards.  Performance Shares to be distributed in the form of Stock will be converted at the rate of one (1) Share per Performance Share.
 
8.7  
Termination of Employment Due to Death or Disability .  In the event of the Participant’s Termination of Employment 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.
 
8.8  
Termination of Employment for Other Reasons .  Unless the Committee determines otherwise, in the event of the Participant’s Termination of Employment for other than a reason set forth in Section 8.7 (and other than for Cause), if the Participant is not Retirement eligible at Termination of Employment, then upon Termination, the number of the Participant’s Performance Units and/or Performance Shares shall be reduced at the time of the Termination of Employment so that the Participant may receive no more than a prorated payout of all Performance Units and Performance Shares granted, based on the number of months the Participant worked at least one day during the respective Performance Period divided by the number of months in the Performance Period, to be paid, if at all, at the same time and under the same terms that such outstanding Performance Units and Performance Shares would otherwise be paid.
 
8.9  
Termination of Employment for Cause .  In the event of the Termination of Employment of a Participant 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 AT&T 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 AT&T Rules for Employee Beneficiary Designations, as the same may be amended from time to time.  Beneficiary Designations of a Participant received by AT&T prior to November 16, 2001, that were applicable to awards under the 1996 Stock and Incentive Plan will also apply to awards under this Plan unless and until the Participant provides to the contrary in accordance with the procedures set forth in such Rules.
 
Article 10.  
Deferrals .  Unless otherwise provided by the Committee, a Participant may, as permitted by the Company, defer all or part of Awards made under this Plan in accordance with and subject to the terms of such plans so long as such deferral is determined by the Company to be consistent in all respects with Section 409A of the Code.
 
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  
Loyalty Conditions and Enforcement.  This section relates solely to Awards granted on or after January 1, 2010.
 
(a)     Each Award under the Plan is intended to closely align the Participant’s long-term interests with those of the Company and its shareholders, and the conditions set forth in subsections (b), (c), and (e) hereof (collectively, the “Loyalty Conditions”) are intended to protect the Company’s critical need for each Participant’s loyalty to the Company and its shareholders.  If any Participant does not comply with a Loyalty Condition, either during employment or within the periods described below following Termination of Employment for any reason, then the Participant is acting contrary to the long-term interests of the Company, and there will be a failure of the consideration on which the Participant received any Award or Awards pursuant to the Plan.  Accordingly, unless otherwise provided in the Award, as a condition of such Award granted on or after January 1, 2010, the Participant is deemed to agree that he shall not, without obtaining the written consent of AT&T in advance, violate the Loyalty Provisions of this Section 11.3.  Unless otherwise expressly provided in an Award Agreement, if the Participant violates a Loyalty Condition, then the Company may terminate any outstanding, unexercised, unexpired, unpaid, or deferred Awards granted on or after January 1, 2010 (“Award Termination”), rescind any exercise, payment or delivery pursuant to any Award or Awards (“Rescission”), or recapture any cash or Shares (whether restricted or unrestricted) issued pursuant to any Award or Awards, or proceeds from the Participant’s sale of such Shares (“Recapture”).
 
(b)    During the Participant’s employment with the Company and any of its Subsidiaries and for a period of two years after a Termination of Employment for any reason, a Participant shall not, without the Company’s prior written authorization, (i) disclose to anyone outside the Company or use, other than in the Company’s business, any Confidential Information, or (ii) disclose any trade secrets of the Company, as that term is defined under Applicable Law, for as long as such information is not generally known to the Company’s competitors through no fault or negligence of the Participant.
 
Confidential Information ” means all information belonging to, or otherwise relating to the business of the Company, which is not generally known, regardless of the manner in which it is stored or conveyed to Participant, and which the Company has taken reasonable measures under the circumstances to protect from unauthorized use or disclosure.  Confidential Information includes trade secrets as well as other proprietary knowledge, information, know-how, and non-public intellectual property rights, including unpublished or pending patent applications and all related patent rights, formulae, processes, discoveries, improvements, ideas, conceptions, compilations of data, and data, whether or not patentable or copyrightable and whether or not it has been conceived, originated, discovered, or developed in whole or in part by Participant.  For example, Confidential Information includes, but is not limited to, information concerning the Company’s business plans, budgets, operations, products, strategies, marketing, sales, inventions, designs, costs, legal strategies, finances, employees, customers, prospective customers, licensees, or licensors; information received from third parties under confidential conditions; or other valuable financial, commercial, business, technical or marketing information concerning the Company, or any of the products or services made, developed or sold by the Company.  Confidential Information does not include information that (i) was generally known to the public at the time of disclosure; (ii) was lawfully received by Participant from a third party; (iii) was known to Participant prior to receipt from the Company; or (iv) was independently developed by Participant or independent third parties; in each of the foregoing circumstances, this exception applies only if such public knowledge or possession by an independent third party was without breach by Participant or any third party of any obligation of confidentiality or non-use, including but not limited to the obligations and restrictions set forth in this Agreement.
 
(c)    Coincidentally with the exercise, receipt of payment, or delivery of cash or Shares pursuant to an Award granted after January 1, 2010, the Company may require that the Participant shall give a certification to the Company in writing if the Participant is not for any reason in full compliance with the terms and conditions of the Plan, including its Loyalty Conditions.  If a Termination of Employment has occurred for any reason, the Participant’s certification shall state the name and address of the Participant’s then-current employer or any entity for which the Participant performs business services and the Participant’s title, and shall identify any organization or business in which the Participant owns an equity interest of greater than five percent.
 
(d)            If the Company determines, in its sole and absolute discretion, that (i) a Participant has violated any of the Loyalty Conditions, or (ii) during his or her employment by the Company or any of its Subsidiaries, or within two years after the Termination of Employment for any reason, a Participant has engaged in any of the following conduct:
 
                      (i)  
 owned, operated or controlled, or participated in the ownership, operation or control of, any business enterprise (including, without limitation, any corporation, partnership, proprietorship or other venture) that competes with the Company in the Restricted Business (defined below) anywhere in the Restricted Territory (defined below);
 
                      (ii)  
 become employed as an officer or executive by any business enterprise (including, without limitation, any corporation, partnership, proprietorship or other venture) that competes with the Company in the Restricted Business anywhere in the Restricted Territory, if such employment or engagement requires Participant to compete against the Company in the Restricted Business;
 
                       (iii)  
 solicited any nonclerical employee of the Company with whom the Participant had Contact during his or her employment to terminate employment with the Company; or
 
                        (iv)  
 committed any breach of Participant’s fiduciary duty or the duty of loyalty, as determined by Applicable Law,
 
then the Committee may, in its sole and absolute discretion, impose an Award Termination, Rescission, and/or Recapture with respect to any or all of the Participant’s Awards granted after January 1, 2010, including any Shares or cash associated therewith, or any proceeds thereof.  For purposes of this Agreement, the term “Restricted Business” means the business of providing communications or connectivity services, including both wireless and wire-lined telephone, messaging, Internet, data, and related services; the term “Restricted Territory” shall mean the state in which the Participant maintained his or her principal office with the Company on the date the Award was granted; and the term “Contact” means interaction between the Participant and the nonclerical employee during performance of Participant’s job responsibilities on behalf of the Company.
 
(e)    Within ten days after receiving notice from the Company of any such activity described in subsection (e) above, the Participant shall deliver to the Company the cash or Shares acquired pursuant to any and all Awards granted on or after January 1, 2010, or, if Participant has sold the Shares, the gain realized, or payment received as a result of the rescinded exercise, payment, or delivery; provided, that if the Participant returns Shares that the Participant purchased pursuant to the exercise of an Option (or the gains realized from the sale of such Shares), the Company shall promptly refund the exercise price, without earnings or interest, that the Participant paid for the Shares.  Any payment by the Participant to the Company pursuant to this Section shall be made either in cash or by returning to the Company the number of Shares that the Participant received in connection with the rescinded exercise, payment, or delivery.  It shall not be a basis for Award Termination, Rescission or Recapture if, after a Termination of Employment, the Participant purchases, as an investment or otherwise, stock or other securities of an organization engaged in the Restricted Business, so long as (i) such stock or other securities are listed upon a recognized securities exchange or traded over the counter, and (ii) such investment does not represent more than a ten percent (10%) equity interest in the organization or business.
 
(f)             Notwithstanding the foregoing provisions of this Section, the Company has sole and absolute discretion not to require Award Termination, Rescission and/or Recapture, and its determination not to require Award Termination, Rescission and/or Recapture with respect to any particular act by a particular Participant or Award shall not in any way reduce or eliminate the Company’s authority to require Award Termination, Rescission and/or Recapture with respect to any other act or Participant or Award.  Nothing in this Section shall be construed to impose obligations on the Participant to refrain from engaging in lawful competition with the Company after the Participant’s Termination of Employment that does not violate subsections (b), (c), or (e) of this Section, other than any obligations that are part of any separate agreement between the Company and the Participant or that arise under Applicable Law.
 
(g)     All administrative and discretionary authority given to the Company under this Section shall be exercised by the most senior human resources executive of the Company or such other person or committee (including without limitation the Committee) as the Committee may designate from time to time.
 
(h)            If any provision within this Section is determined to be unenforceable or invalid under any applicable law, such provision will be applied to the maximum extent permitted by Applicable Law, and shall automatically be deemed amended in a manner consistent with its objectives and any limitations required under Applicable Law.
 
11.4  
Reimbursement of Company for Unearned or Ill-gotten Gains.  Unless otherwise specifically provided in an Award Agreement, and to the extent permitted by Applicable Law, the Committee may in its sole and absolute discretion, without obtaining the approval or consent of the Company’s shareholders or of any Participant, with respect to Awards granted after January 1, 2010, require that any Participant reimburse the Company for all or any portion of any Awards granted or settled under this Plan (with each such case being a “Reimbursement”), or the Committee may require the Termination or Rescission of, or the Recapture associated with, any Award, if and to the extent the Committee determines in its discretion that either —
 
(a)    the Participant personally engaged in one or more material acts of fraud or misconduct that have caused or partially caused the need for a financial restatement by the Company and/or any Affiliate; or
 
(b)    (i) the granting, vesting, or payment of such Award (or portion thereof) was predicated upon the achievement of financial results involving statements of earnings, revenues, gains, or other financial criteria relating to the Company, an Affiliate or Affiliates of the Company, or any divisions or units of any of them; (ii) the Participant benefited from a calculation that later proves to be materially inaccurate; and (iii) a lower granting, vesting, payment, or other settlement of such Award would have occurred but for the conduct described in clause (b)(ii) of this Section.
 
In each instance described in clause (a) or (b) above, the Committee may, to the extent practicable and allowable under Applicable Laws, require Reimbursement, Award Termination or Rescission of, or Recapture relating to, any such Award granted to a Participant; provided that the Company will not seek Reimbursement, Award Termination or Rescission of, or Recapture relating to, any such Awards that were paid or vested more than three years prior to the first date of a financial period that is subject to a restatement described in clause (a) above.
 
Article 12.  
Change in Control .
 
Unless the Committee provides otherwise prior to the grant of an Award, upon the occurrence of a Change in Control, the following shall apply to such Award:
 
(a)    Any and all Options granted hereunder to a Participant immediately shall become vested and exercisable upon the Termination of Employment of the Participant by the Company or by the Participant for “Good Reason”;
 
(b)    Any Restriction Periods and all restrictions imposed on Restricted Stock shall lapse and they shall immediately become fully vested upon the Termination of Employment of the Participant by the Company or by the Participant for “Good Reason”;
 
(c)    Unless otherwise determined by the Committee, the payout of Performance Units and Performance Shares shall be determined exclusively by the attainment of the Performance Goals established by the Committee, which may not be modified after the Change in Control, and AT&T shall not have the right to reduce the Awards for any other reason;
 
(d)    For purposes of this Plan, “Good Reason” means in connection with a termination of employment by a Participant within two (2) years following a Change in Control, (a) a material adverse alteration in the Participant’s position or in the nature or status of the Participant’s responsibilities from those in effect immediately prior to the Change in Control, or (b) any material reduction in the Participant’s base salary rate or target annual bonus, in each case as in effect immediately prior to the Change in Control, or (c) the relocation of the Participant’s principal place of employment to a location that is more than fifty (50) miles from the location where the Participant was principally employed at the time of the Change in Control or materially increases the time of the Participant’s commute as compared to the Participant’s commute at the time of the Change in Control (except for required travel on the Company’s business to an extent substantially consistent with the Participant’s customary business travel obligations in the ordinary course of business prior to the Change in Control).
 
In order to invoke a Termination of Employment for Good Reason, a Participant must provide written notice to AT&T or the Employer with respect to which the Participant is employed or providing services of the existence of one or more of the conditions constituting Good Reason within ninety (90) days following the Participant’s knowledge of the initial existence of such condition or conditions, specifying in reasonable detail the conditions constituting Good Reason, and AT&T shall have thirty (30) days following receipt of such written notice (the “Cure Period”) during which it may remedy the condition.  In the event that AT&T or the Employer fails to remedy the condition constituting Good Reason during the applicable Cure Period, the Participant’s “separation from service” (within the meaning of Section 409A of the Code) must occur, if at all, within two (2) years following such Cure Period in order for such termination as a result of such condition to constitute a Termination of Employment for Good Reason.
 
Article 13.  
Amendment, Modification, and Termination .
 
13.1  
Amendment, Modification, and Termination .  The Board or the Disinterested Committee may at any time and from time to time, alter or amend the Plan or any Award in whole or in part or suspend or terminate the Plan in whole or in part.
 
13.2  
Awards Previously Granted .  No termination, amendment, or modification of the Plan or any Award shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award; provided, however, that any such modification made for the purpose of complying with Section 409A of the Code may be made by the Company without the consent of any Participant.
 
13.3  
Delay in Payment .   To the extent required in order to avoid the imposition of any interest and/or additional tax under Section 409A(a)(1)(B) of the Code, any amount that is considered deferred compensation under the Plan or Agreement and that is required to be postponed pursuant to Section 409A of the Code, following the a Participant’s Termination of Employment shall be delayed for six months if a Participant is deemed to be a “specified employee” as defined in Section 409A(a)(2)(i)(B) of the Code; provided that, if the Participant dies during the postponement period prior to the payment of the postponed amount, the amounts withheld on account of Section 409A shall be paid to the executor or administrator of the decedent’s estate within 60 days following the date of his death.  A “Specified Employee” means any Participant who is a “key employee” (as defined in Code Section 416(i) without regard to paragraph (5) thereof), as determined by AT&T in accordance with its uniform policy with respect to all arrangements subject to Code Section 409A, based upon the twelve (12) month period ending on each December 31st (such twelve (12) month period is referred to below as the “identification period”).  All Participants who are determined to be key employees under Code Section 416(i) (without regard to paragraph (5) thereof) during the identification period shall be treated as Specified Employees for purposes of the Plan during the twelve (12) month period that begins on the first day of the 4th month following the close of such identification period.
 
Article 14.  
Withholding .
 
14.1  
Tax Withholding .  Unless otherwise provided by the Committee, the Company shall deduct or withhold an amount sufficient to satisfy Federal, state, and local taxes (including but not limited to 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 .  Unless otherwise provided by the Committee, upon the exercise of Options, the lapse of restrictions on Restricted Stock, the distribution of Performance Shares in the form of Stock, or any other taxable event hereunder involving the transfer of Stock to a Participant, the Company shall withhold Stock equal in value, using the Fair Market Value on the date determined by the Company to be used to value the Stock for tax purposes, to the Withholding Taxes applicable to such transaction.
 
Any fractional Share of Stock payable to a Participant shall be withheld as additional Federal withholding, or, at the option of the Company, paid in cash to the Participant.
 
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.
 
If permitted by the Committee, 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.
 
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  
Errors .  At any time AT&T may correct any error made under the Plan without prejudice to AT&T.  Such corrections may include, among other things, changing or revoking an issuance of an Award.
 
16.5  
Elections and Notices .  Notwithstanding anything to the contrary contained in this Plan, all elections and notices of every kind shall be made on forms prepared by AT&T or the General Counsel, Secretary or Assistant Secretary, or their respective delegates or shall be made in such other manner as permitted or required by AT&T or the General Counsel, Secretary or Assistant Secretary, or their respective delegates, including but not limited to elections or notices through electronic means, over the Internet or otherwise.  An election shall be deemed made when received by AT&T (or its designated agent, but only in cases where the designated agent has been appointed for the purpose of receiving such election), which may waive any defects in form.  AT&T may limit the time an election may be made in advance of any deadline.
 
Where any notice or filing required or permitted to be given to AT&T under the Plan, it shall be delivered to the principal office of AT&T, directed to the attention of the Senior Executive Vice President-Human Resources of AT&T or his or her successor.  Such notice shall be deemed given on the date of delivery.
 
Notice to the Participant shall be deemed given when mailed (or sent by telecopy) to the Participant’s work or home address as shown on the records of AT&T or, at the option of AT&T, to the Participant’s e-mail address as shown on the records of AT&T.
 
It is the Participant’s responsibility to ensure that the Participant’s addresses are kept up to date on the records of AT&T.  In the case of notices affecting multiple Participants, the notices may be given by general distribution at the Participants’ work locations.
 
16.6  
Governing Law .  To the extent not preempted by Federal law, the Plan, and all awards and agreements hereunder, and any and all disputes in connection therewith, shall be governed by and construed in accordance with the substantive laws of the State of Texas, without regard to conflict or choice of law principles which might otherwise refer the construction, interpretation or enforceability of this Plan to the substantive law of another jurisdiction.
 
16.7  
Venue .   Because awards under the Plan are granted in Texas, records relating to the Plan and awards thereunder are located in Texas, and the Plan and awards thereunder are administered in Texas, the Company and the Participant to whom an award under this Plan is granted, for themselves and their successors and assigns, irrevocably submit to the exclusive and sole jurisdiction and venue of the state or federal courts of Texas with respect to any and all disputes arising out of or relating to this Plan, the subject matter of this Plan or any awards under this Plan, including but not limited to any disputes arising out of or relating to the interpretation and enforceability of any awards or the terms and conditions of this Plan.  To achieve certainty regarding the appropriate forum in which to prosecute and defend actions arising out of or relating to this Plan, and to ensure consistency in application and interpretation of the Governing Law to the Plan, the parties agree that (a) sole and exclusive appropriate venue for any such action shall be an appropriate federal or state court in Dallas County, Texas, and no other, (b) all claims with respect to any such action shall be heard and determined exclusively in such Texas court, and no other, (c) such Texas court shall have sole and exclusive jurisdiction over the person of such parties and over the subject matter of any dispute relating hereto and (d) that the parties waive any and all objections and defenses to bringing any such action before such Texas court, including but not limited to those relating to lack of personal jurisdiction, improper venue or forum non conveniens .
 

Exhibit 10-d
 

 
AT&T
 
SUPPLEMENTAL LIFE INSURANCE PLAN
 

 
Effective: January 1, 1986
 
Revisions Effective:  January 1, 2010
 

 

 
1.   Purpose.  The purpose of the Supplemental Life Insurance Plan (“Plan”) is to allow for provision of additional survivor benefits for Eligible Employees.
 
2.   Definitions.  For purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the context clearly indicates otherwise:
 
Annual Base Salary or Annual Salary or Salary.
 
“Annual Base Salary” or “Annual Salary” or “Salary” shall mean an Eligible Employee’s annual base salary rate determined by AT&T, excluding (1) all differentials regarded as temporary or extra payments and (2) all payments and incentive awards and distributions made either as a long-term award or as a short-term award; and such Salary shall be as before reduction due to any contribution pursuant to any deferred compensation plan or agreement provided by AT&T, including but not limited to compensation deferred in accordance with Section 401(k) of the Internal Revenue Code.  Annual Salary or Salary shall mean an annualized amount determined from an Eligible Employee’s Annual Base Salary rate.
 
Beneficiary.  “Beneficiary” shall mean any beneficiary or beneficiaries designated by the Eligible Employee pursuant to the AT&T Rules for Employee Beneficiary Designations as may hereafter be amended from time to time (“Rules”).
 
BSLIP Offset.  “BSLIP Offset” shall equal the sum of the amounts (1) and (2) described below:  an amount of level death benefit that would be paid under the participant’s BellSouth Supplemental Life Insurance Plan (“BSLIP”) policy(ies) as if the participant had restructured such policy(ies) based on the December 31, 2008 cash value to provide a level death benefit assuming no additional premium payments to the policy(ies), as calculated by the BSLIP administrator during 2008 and communicated to each active officer; or, an amount of level death benefit that would be paid under the participant’s Cingular Wireless BLS Executive Transition Supplemental Life Insurance Plan policy(ies) as if the participant had restructured such policy(ies) based on the December 31, 2007 cash value to provide a level death benefit assuming no additional premium payments to the policy(ies), as calculated by the BSLIP administrator during 2008 and communicated to each active officer; and an amount equal to the death benefit provided under the participant’s BellSouth Split Dollar Life Insurance Plan policy(ies) as of December 31, 2008 and Cingular Wireless BLS Executive Transition Split Dollar Life Insurance Plan policy(ies) as of December 31, 2007.
 
This sum is applied as an offset to this Plan as described in Section 4, regardless of whether or not the participant actually restructured his policy or made other decisions regarding such BellSouth and Cingular policy(ies).
 
BSLIP Retiree Offset.  “BSLIP Retiree Offset” shall equal the sum of the amounts (1) and (2) described below:  (1) an amount equal to the death benefit provided under the participant’s BellSouth Supplemental Life Insurance Plan policy(ies) as if the participant died on December 31, 2008; and (2) an amount equal to the death benefit that was provided under the participant’s BellSouth Split Dollar Life Insurance policy(ies) as if the participant died on his BSLIP retirement date.  This amount is applied as an offset to this Plan as described in Section 4.
 
Chairman.  “Chairman” shall mean the Chairman of the Board of AT&T Inc.
 
Committee.  “Committee” shall mean the Human Resources Committee of the Board of AT&T Inc.
 
Eligible Employee.  “Eligible Employee” shall mean an Officer and any other individual who is participating in the Plan as of September 1, 2005.  Notwithstanding the foregoing, the CEO may, from time to time, exclude any Officer or group of Officers from being an “Eligible Employee” under this Plan.  Further, an employee of a company acquired by AT&T shall not be considered an Eligible Employee unless designated as eligible by the CEO.
 
ELIP Offset.  “ELIP Offset” shall equal an amount of level death benefit that would be paid under the participant’s AT&T Supplemental Life Insurance Program (“ELIP”) policy as if the participant had restructured his ELIP policy based on the December 31, 2007 cash value to provide a level death benefit assuming no additional premium payments to the policy, as calculated by the ELIP administrator during 2007 and communicated to each active officer participating in ELIP.  This amount is applied as an offset to this Plan as described in Section 4, regardless of whether or not the participant actually restructured his policy or made other decisions regarding such ELIP policy.
 
Insurance Contract.  “Insurance Contract” shall mean a contract(s) of life insurance insuring the life of the Eligible Employee entered into by AT&T.
 
Officer.  “Officer” shall mean an individual who is designated as an officer of AT&T or of any AT&T subsidiary for compensation purposes on AT&T’s records.
 
Plan Administrator. “Plan Administrator” shall mean any person or persons whom the Committee may appoint to administer the Plan; provided that the Committee may act as the Plan Administrator at any time.
 
Retirement.  “Retirement” shall mean the termination of an Eligible Employee’s employment with AT&T or any of its subsidiaries, for reasons other than death, on or after the earlier of the following dates:  (1) the date a participant has attained age 55, and, for an individual who becomes a participant on or after January 1, 2002, has five (5) years of service, or (2) the date the Eligible Employee has attained one of the following combinations of age and service at termination of employment on or after April 1, 1997, except as otherwise indicated below:
 
Net Credited Service
Age
25 years or more
50 or older
30 years or more
Any age

With respect to an Eligible Employee who is granted an EMP Service Pension under and pursuant to the provisions of the AT&T Pension Benefit Plan - Nonbargained Program (“ATTPBP”) upon termination of Employment, the term “Retirement” shall include such Eligible Employee’s termination of employment.
 
Termination Under EPR.  In determining whether an Eligible Employee’s termination of employment under the Enhanced Pension and Retirement Program (“EPR”) is a Retirement for purposes of this Plan, five years shall be added to each of age and net credited service (“NCS”).  If with such additional age and years of service, (1) an Eligible Employee upon such termination of employment under EPR is Retirement Eligible according to the AT&T Supplemental Retirement Income Plan (“SRIP”) or (2) the Eligible Employee upon such termination of employment under EPR has attained one of the following combinations of age and service,
 
Actual NCS + 5 Years
Actual Age +5 Years
10 years or more
65 or older
20 years or more
55 or older
25 years or more
50 or older
30 years or more
Any age

then such termination of employment shall be a Retirement for all purposes under this Plan and the Eligible Employee shall be entitled to the treatment under this Plan afforded in the case of a termination of employment which is a Retirement.
 
AT&T.  “AT&T” shall mean AT&T Inc.
 
3.   Eligibility.  Each Eligible Employee shall be eligible to participate in the Plan.
 
4.   Pre-Retirement Benefits and Post-Retirement Benefits.
 
Basic Death Benefit
 
While this plan is in effect, the Beneficiary who is designated by the Eligible Employee shall be entitled to receive as a Basic Death Benefit from the proceeds of the Insurance Contract an amount equal to the result of multiplying the Eligible Employee’s Annual Salary rounded to the next higher $1,000 by the following amounts:
 
Chief Executive Officer                                           2
Other Eligible Employees                                       1

This amount shall be reduced (but not below zero) by any amount payable under any group term life insurance covering the Eligible Employee which is maintained by AT&T, which amount of group term life insurance will be limited to a maximum of $50,000.
 
In addition, the Basic Death Benefit will be reduced (but not below zero) by the ELIP Offset amount, BSLIP Offset amount or BSLIP Retiree Offset amount.
 
Furthermore, any officer who becomes eligible to participate in this Plan on or after the date that an ELIP Offset, BSLIP Offset or BSLIP Retiree Offset has been determined by the ELIP or BSLIP plan administrator, as applicable, will have his Basic Death Benefit reduced accordingly by such offset amount.
 
The amount of Basic Death Benefit payable hereunder will automatically increase if pay increases.
 
At Retirement, the pre-retirement benefit converts to a post-retirement benefit.  This benefit is equal to one times Salary rounded to the next higher $1,000 (at the time of retirement) and shall be reduced (but not below zero) by any amount payable under any group term life insurance covering the Eligible Employee which is maintained by AT&T, which amount of group term life insurance will be limited to a maximum of $50,000; provided, however, for an executive who first becomes a Plan participant on or after January 1, 1998, this post-retirement death benefit shall be reduced by 10% of its original post-retirement amount each year for five years beginning at the later of the date the Eligible Employee attains age 66 or Retirement.
 
Optional Supplementary Benefit
 
Subject to the limitations in the remaining paragraphs in this section describing optional supplementary benefits, each Eligible Employee may also purchase optional supplementary pre-retirement life insurance coverage from AT&T in an amount equal to one times the Eligible Employee’s Annual Salary rounded to the next higher $1,000, and an additional amount of such insurance in an amount equal to another one times such amount (for a total of two times the Annual Salary rounded to the next higher $1,000), which insurance shall be payable from the proceeds of the Insurance Contract.  Each such amount of insurance (“one times salary”) continued until such employee reaches age 65, by continuing to contribute for it, shall entitle the beneficiary under the Insurance Contract to receive an amount from the proceeds of such Insurance Contract equal to one times the Eligible Employee’s final Annual Salary rounded to the next higher $1,000, when such Eligible Employee dies after Retirement.
 
No ELIP Offset, BSLIP Offset, nor BSLIP Retiree Offset will reduce the amount of Optional Supplementary Benefit for any participant.
 
To elect this optional supplementary coverage, the Eligible Employee must complete an enrollment form on which he or she specifies the amount of coverage he or she wishes to purchase and authorizes his or her employing company to deduct his or her contributions for coverage from his or her salary.
 
An Eligible Employee may not elect this coverage while receiving disability benefits under any Company disability benefit plan.
 
An Eligible Employee must make his or her election to purchase optional supplementary coverage within three calendar months of being declared eligible to participate in the Plan; except any Eligible Employee who was declared an Eligible Employee before October 1, 1997, shall have until December 31, 1997 to enroll for such optional supplementary coverage or to increase such coverage.
 
The optional supplementary life insurance is effective upon AT&T’s binding of life insurance coverage for the Eligible Employee pursuant to an Insurance Contract.
 
Effective January 1, 1998, once an Eligible Employee enrolls for optional supplementary coverage, he or she can later decrease or terminate such coverage but never increase or reinstate such coverage.
 
Regardless of the amount of coverage elected, the amount in force will automatically increase if Salary increases.  The cost for this coverage will increase accordingly.
 
This optional supplementary life insurance is paid for on a contributory basis by those Eligible Employees who enroll in the coverage.  The cost of coverage, and therefore, how much an Eligible Employee contributes, depends on age and the amount of coverage and shall be as determined by AT&T.  There will be no periodic waiver of premium payments.
 
In the event of death, the Eligible Employee’s optional supplementary life insurance benefit will be paid to the Eligible Employee’s Beneficiary or Beneficiaries in a lump sum, unless the Salary Continuation Death Benefit form of payment was elected on the Eligible Employee’s enrollment form.  The option to elect other than a lump sum payment is limited to an Eligible Employee who became an Eligible Employee on or before January 1, 1998.  If the Eligible Employee has no surviving beneficiaries, the benefit will be paid in a lump sum in accordance with the Rules.
 
The optional supplementary life insurance coverage hereunder will automatically continue while an Eligible Employee is receiving disability benefits under any AT&T disability benefit plan, provided the Eligible Employee continues his or her contributions.
 
If an Eligible Employee terminates employment with AT&T or any of its subsidiaries for any reason other than Retirement, this coverage will stop at the end of the month of termination; provided, however, Eligible Employees who are 65 at the time of their termination will continue to have non-contributory unreduced coverage after age 65.
 
Alternate Death Benefit
 
Alternate death benefit coverage shall only be available to an Eligible Employee who became an Eligible Employee before January 1, 1998.  Such Eligible Employees shall be entitled to elect to receive alternate death benefit life insurance coverage; provided such election is made before January 1, 1998.
 
Under such coverage, an Eligible Employee’s Beneficiary or Beneficiaries will be entitled to receive from the proceeds of the Insurance Contract a payment equal to the Eligible Employee’s final Annual Salary upon his or her death.  This benefit will not be rounded to the next higher $1,000.  The amount of insurance in force will automatically increase if salary increases.  Coverage applies to death from any cause, except with respect to an on-the-job accident for which an Eligible Employee is protected while an active employee by any Accident Death Benefit feature of the ATTPBP.
 
By enrolling in this coverage, an Eligible Employee automatically waives his or her eligibility for any Sickness Death Benefit and Pensioner Death Benefits otherwise payable under the ATTPBP.
 
The coverage provided by the alternate death benefit life insurance coverage will continue after Retirement.
 
To elect this coverage, an Eligible Employee must complete an irrevocable enrollment and waiver form.
 
AT&T pays the full cost of the alternate death benefit life insurance coverage.
 
The insurance benefit provided under this alternate death benefit life insurance will be paid in a lump sum, unless otherwise elected on the Eligible Employee’s enrollment form.
 
Alternate death benefit coverage ceases upon an Eligible Employee’s Termination of Employment other than a Retirement.  This alternate death benefit life insurance may not be converted to an individual policy.
 
Salary Continuation Death Benefit.
 
The salary continuation death benefit shall only be available under the conditions specified hereunder, to an Eligible Employee who became an Eligible Employee before January 1, 1998.
 
By a written election filed with AT&T before January 1, 1998, an Eligible Employee may terminate his or her rights to a Basic Death Benefit and/or to Optional Supplementary Coverage (if any) and/or to an Alternate Death Benefit (if any).
 
If such an election is filed, and the Eligible Employee dies on or after the first day of the calendar year following the year in which such election is filed and prior to the termination of coverage pursuant to Section 7, the Eligible Employee’s Beneficiary or Beneficiaries theretofore named shall be paid by AT&T an amount per annum for ten (10) years which amounts, in the aggregate, have a net present value, using an eleven percent (11%) discount rate, equal to one hundred eight-five percent (185%) of the (i) Basic Death Benefit amount and/or (ii) the amount elected as Optional Supplementary coverage (if any) and/or (iii) the amount elected as an Alternate Death Benefit (if any) which would be payable to his or her Beneficiary or Beneficiaries as of the date of the Eligible Employee’s death, and no other benefit shall be payable hereunder as either a Basic Death Benefit, Optional Supplementary Coverage or Alternate Death Benefit.  Such payment(s) shall commence no later than sixty (60) days following the date of the Eligible Employee’s death.
 
On or after January 1, 1998, an Eligible Employee who has elected death benefits in the form of salary continuation pursuant to this Section may cancel such election and have his or her Beneficiaries receive death benefits as insurance in a lump-sum but, an Eligible Employee who cancels his or her salary continuation election may not thereafter re-elect such option.
 
Survivor Annuity Equivalent
 
Additionally, each Eligible Employee who is not eligible for the Immediate Automatic Pre-retirement Survivor Annuity of the ATTPBP (or equivalent thereof) shall be eligible hereunder for a Survivor Annuity Equivalent benefit of one times salary payable to the surviving spouse of such Eligible Employee.  Such benefit shall be paid as follows:  an amount per annum for ten (10) years shall be paid to the Eligible Employee’s surviving spouse which amounts, in the aggregate, shall have a net present value, using an eleven percent (11%) discount rate, equal to one hundred eighty-five percent (185%) of one times the Eligible Employee’s salary at the time of his or her death; provided, however, no such Survivor Annuity Equivalent payments will be made on or after the date of death of the surviving spouse.  Such payments shall commence no later than sixty (60) days following the date of the Eligible Employee’s death.
 
For the purposes of the Survivor Annuity Equivalent, the Eligible Employee’s surviving spouse means a spouse legally married to the Eligible Employee at the time of the Eligible Employee’s death.
 
Eligibility for the Survivor Annuity Equivalent shall automatically cease on the date of termination of the Eligible Employee’s employment.  If the Eligible Employee becomes totally disabled prior to Retirement, the Eligible Employee shall continue to be eligible for the Survivor Annuity Equivalent until the expiration of disability benefits.  If the Eligible Employee is granted a leave of absence, other than for military service of more than four weeks, the Eligible Employee shall continue to be eligible for the Survivor Annuity Equivalent during such leave of absence.
 
The Eligible Employee shall cease to be eligible for the Survivor Annuity Equivalent at the conclusion of the day immediately preceding the date the Eligible Employee becomes eligible for the Immediate Automatic Pre-retirement Survivor Annuity of the ATTPBP.
 
5.   Incidents of Ownership.  AT&T will be the owner and hold all the incidents of ownership in the Insurance Contract, including the right to dividends, if paid.  The Eligible Employee may specify in writing to AT&T, the Beneficiary or Beneficiaries and the mode of payment for any death proceeds not in excess of the amounts payable under this Plan.  Upon receipt of a written request from the Eligible Employee, AT&T will immediately take such action as shall be necessary to implement such Beneficiary appointment.  Any balance of proceeds from the Insurance Contract not paid as either a Basic Death Benefit or otherwise pursuant to the Plan shall be paid to AT&T.
 
6.   Premiums.  All premiums due on the Insurance Contract shall be paid by AT&T.  However, the Eligible Employee agrees to reimburse AT&T by January 31 following the date of each premium payment in an amount such that, for Federal Income Tax purposes the reimbursement for each year is equal to the amount which would be required to be included in the Eligible Employee’s income for Federal Income Tax purposes by reasons of the “economic benefit” of the Insurance Contract provided by AT&T; provided, however, that AT&T, in its sole discretion, may decline to accept any such reimbursement and require the inclusion of such “economic benefit” in the Eligible Employee’s income.  In its discretion AT&T may deduct the Eligible Employee’s portion of the premiums from the Eligible Employee’s pay.  For purposes of this Plan, the value of the “economic benefit” shall be determined based on the insurers published premium rates available to all standard risks for initial issue one-year term insurance in compliance with Revenue Rulings 66-110 and 67-154 issued by the Internal Revenue Service.
 
7.   Termination of Coverage.  An Eligible Employee’s coverage under this Plan shall terminate immediately when the Eligible Employee realizes an “Event of Termination” which shall mean any of the following:
 
(a)   Termination of an Eligible Employee’s employment with his or her employing company for any reason other than (i) death, (ii) Disability as such term is defined in the SRIP or, for an Eligible Employee whose termination of employment is after December 31, 2004, the 2005 Supplemental Employee Retirement Plan (“SERP”), or (iii) Retirement.
 
(b)   In the case of an Eligible Employee who terminates employment by reason of a disability but who does not realize an Event of Termination because of Section 7a(ii) above, a termination of the Eligible Employee’s total Disability that is not accompanied by either a return to employment with his or her employing company or the Eligible Employee’s death or Retirement.
 
(c)   Except in the case of an Eligible Employee who has theretofore terminated employment for a reason described in Section 7a(ii) or (iii) above, AT&T elects to terminate the Eligible Employee’s coverage under the Plan by a written notice to that effect given to the Eligible Employee.  AT&T shall have no right to amend the Plan or terminate the Eligible Employee’s coverage under the Plan with respect to an Eligible Employee who has theretofore terminated employment for a reason described in Section 7a(ii) or (iii) above without the written consent of the Eligible Employee.
 
8.   Non-Competition. Eligible Employee acknowledges that AT&T would be unwilling to provide Plan benefits but for the loyalty conditions and covenants set forth in this Section, and that the conditions and covenants herein are a material inducement to AT&T’s willingness to sponsor the Plan and to offer Plan benefits to Eligible Employees.  Accordingly, as a condition of receiving coverage and any Plan benefits, each Eligible Employee is deemed to agree that he shall not, without obtaining the written consent of the Plan Administrator in advance, participate in activities that constitute engaging in competition with AT&T or engaging in conduct disloyal to AT&T, as those terms are defined in this Section.  Further, notwithstanding any other provision of this Plan, all Basic Death Benefits, Alternate Death Benefits, and the premiums paid by the Company therefore, provided under the Plan with respect to an Eligible Employee shall be subject in their entirety to the enforcement provisions of this Section if the Eligible Employee, without the consent of AT&T, participates in an activity that constitutes engaging in competition with AT&T or engaging in conduct disloyal to AT&T, as defined below.  The provisions of this Section 8 as in effect immediately before such date shall be applicable to Eligible Employee who retire before January 1, 2010.
 
(a)   Definitions .  For purposes of this Section 8 and of the Plan generally:
 
(i)  
an “Employer Business” shall mean AT&T, any subsidiary of AT&T, or any business in which AT&T or a subsidiary or an affiliated company of AT&T has a substantial ownership or joint venture interest;
 
(ii)  
“engaging in competition with AT&T” shall mean, while employed by an Employer Business or within two  (2) years after the Eligible Employee’s termination of employment, engaging by the Eligible Employee in any business or activity in all or any portion of the same geographical market where the same or substantially similar business or activity is being carried on by an Employer Business.  “Engaging in competition with AT&T” shall not include owning a nonsubstantial publicly traded interest as a shareholder in a business that competes with an Employer Business.  “Engaging in competition with AT&T” shall include representing or providing consulting services to, or being an employee or director of, any person or entity that is engaged in competition with any Employer Business or that takes a position adverse to any Employer Business.
 
(iii)  
“engaging in conduct disloyal to AT&T” means, while employed by an Employer Business or within two  (2) years after the Eligible Employee’s termination of employment, (i) soliciting for employment or hire, whether as an employee or as an independent contractor, for any business in competition with an Employer Business, any person employed by AT&T or its affiliates during the one (1) year prior to the Eligible Employee’s termination of employment, whether or not acceptance of such position would constitute a breach of such person’s contractual obligations to AT&T and its affiliates; (ii) soliciting, encouraging, or inducing any vendor or supplier with which Eligible Employee had business contact on behalf of any Employer Business during the two (2) years prior to the Eligible Employee’s termination of employment, to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with AT&T or its affiliate; or (iii) soliciting, encouraging, or inducing any customer or active prospective customer with whom  had business contact, whether in person or by other media, on behalf of any Employer Business during the two (2) years prior to the Eligible Employee’s termination of employment (“Customer”), to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with any Employer Business, or to purchase competing goods or services from a business competing with any Employer Business, or accepting or servicing business from such Customer on behalf of himself or any other business.  “Engaging in conduct disloyal to AT&T” also means, disclosing Confidential Information to any third party or using Confidential Information, other than for an Employer Business, or failing to return any Confidential Information to the Employer Business following termination of employment.
 
                                        (iv)
“Confidential Information” shall mean all information belonging to, or otherwise relating to, an Employer Business, which is not generally known, regardless of the manner in which it is stored or conveyed to the Eligible Employee, and which the Employer Business has taken reasonable measures under the circumstances to protect from unauthorized use or disclosure.  Confidential Information includes trade secrets as well as other proprietary knowledge, information, know-how, and non-public intellectual property rights, including unpublished or pending patent applications and all related patent rights, formulae, processes, discoveries, improvements, ideas, conceptions, compilations of data, and data, whether or not patentable or copyrightable and whether or not it has been conceived, originated, discovered, or developed in whole or in part by the Eligible Employee.  For example, Confidential Information includes, but is not limited to, information concerning the Employer Business’ business plans, budgets, operations, products, strategies, marketing, sales, inventions, designs, costs, legal strategies, finances, employees, customers, prospective customers, licensees, or licensors; information received from third parties under confidential conditions; or other valuable financial, commercial, business, technical or marketing information concerning the Employer Business, or any of the products or services made, developed or sold by the Employer Business.  Confidential Information does not include information that (i) was generally known to the public at the time of disclosure; (ii) was lawfully received by the Eligible Employee from a third party; (iii) was known to the Eligible Employee prior to receipt from the Employer Business; or (iv) was independently developed by the Eligible Employee or independent third parties; in each of the foregoing circumstances, this exception applies only if such public knowledge or possession by an independent third party was without breach by the Eligible Employee or any third party of any obligation of confidentiality or non-use, including but not limited to the obligations and restrictions set forth in this Plan.
 
(b)   Forfeiture of Benefits .  Basic Death Benefits, Alternate Death Benefits, and all Company paid premiums therefore, shall be forfeited and shall not be provided under this Plan if the Committee determines that, within the time period and without the written consent specified, Eligible Employee has been either engaging in competition with AT&T or engaging in conduct disloyal to AT&T.
 
(c)   Equitable Relief.     The parties recognize (i) that any Eligible Employee’s breach of any of the covenants in this Section 8 will cause irreparable injury to the Company, and will represent a failure of the consideration under which AT&T (in its capacity as creator and sponsor of the Plan) agreed to provide the Eligible Employee with the opportunity to receive Basic Death Benefits and/or Alternate Death Benefits   under the Plan, and (ii) that monetary damages would not provide AT&T with an adequate or complete remedy that would warrant AT&T’s continued sponsorship of the Plan and provision of Basic Death Benefits and/or Alternate Death Benefits for all Eligible Employees.  Accordingly, in the event of an Eligible Employee’s actual or threatened breach of covenants in this Section 8, the Committee, in addition to all other rights and acting as a fiduciary under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) on behalf of all Eligible Employees, shall have a fiduciary duty (in order to assure that AT&T receives fair and promised consideration for its continued Plan sponsorship and funding of Basic Death Benefits) to seek an injunction restraining the Eligible Employee from breaching the covenants in this Section 8.  In addition, AT&T shall pay for any Plan expenses that the Committee incurs hereunder, and shall be entitled to recover from the Eligible Employee its reasonable attorneys’ fees and costs incurred in obtaining such injunctive remedies.  To enforce its repayment rights with respect to an Eligible Employee, the Plan shall have a first priority, equitable lien on all Basic Death Benefits, Alternate Death Benefits and/or any Company paid premiums therefore paid pursuant to the Plan (and the value of any coverage for such death benefits) provided pursuant to the Plan with respect to the Eligible Employee.  In the event the Committee succeeds in enforcing the terms of this Section through a written settlement with the Eligible Employee or a court order granting  an injunction hereunder, the Eligible Employee shall be entitled to collect Basic Death Benefits, Alternate Death Benefits, and/or Company paid premiums therefore, and to receive coverage for such Basic Death Benefits and/or Alternate Death Benefits following the date of the settlement or injunction prospectively, if the Eligible Employee is otherwise entitled to such benefits, net of any fees and costs assessed pursuant hereto (which fees and costs shall be paid to AT&T as a repayment on behalf of the Eligible Employee), provided that the Eligible Employee complies with said settlement or injunction.
 
(d)   Uniform Enforcement .  In recognition of AT&T’s need for nationally uniform standards for the Plan administration, it is an absolute condition in consideration of any Eligible Employee’s coverage for or receipt of payments of Basic Death Benefits under the Plan after January 1, 2010 that each and all of the following conditions apply to all Eligible Employees and to any benefits that are paid or are payable under the Plan:
 
(i)  
ERISA shall control all issues and controversies hereunder, and the Committee shall serve for purposes hereof as a “fiduciary” of the Plan and as its “named fiduciary” within the meaning of ERISA.
 
(ii)  
All litigation between the parties relating to this Section shall occur in federal court, which shall have exclusive jurisdiction, any such litigation shall be held in the United States District Court for the Northern District of Texas, and the only remedies available with respect to the Plan shall be those provided under ERISA.
 
(iii)  
If the Committee determines in its sole discretion either (I) that AT&T or its affiliate that employed the Eligible Employee terminated the Eligible Employee’s employment for cause, or (II) that equitable relief enforcing the Eligible Employee’s covenants under this Section 8 is either not reasonably available, not ordered by a court of competent jurisdiction, or circumvented because the Eligible Employee has sued in state court, or has otherwise sought remedies not available under ERISA, then in any and all of such instances the Eligible Employee shall not be entitled to collect any Basic Death Benefits, and if any such benefits have been paid to the Eligible Employee, the Eligible Employee or his or her Beneficiaries shall immediately repay to the Plan (which shall be used to pay Plan administrative expenses or Plan benefits) the value of the coverage for all Basic Death Benefits, and any such benefits actually paid, upon written demand from the Committee.  Furthermore, the Eligible Employee shall hold AT&T and its affiliates harmless from any loss, expense, or damage that may arise from any of the conduct described in clauses (I) and (II) hereof.
 
9.   Restriction on Assignment.  The Eligible Employee may assign all or any part of his or her right, title, claim, interest, benefits and all other incidents of ownership which he or she may have in the Insurance Contract to any other individual or trustee, provided that any such assignment shall be subject to the terms of this Plan; except neither the Eligible Employee 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 the amounts, if any, payable as a Salary Continuation Death Benefit hereunder, which are, and all rights to which are, expressly declared to be unassignable and non-transferable.  No part of the amounts payable as a Salary Continuation Death Benefit hereunder shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by the Eligible Employee or any other person, nor be transferable by operation of law in the event of the Eligible Employee’s or any other person’s bankruptcy or insolvency.  Except as provided in this Section 8, no assignment or alienation of any benefits under the Plan will be permitted or recognized.
 
10.   Unsecured General Creditor.  Except to the extent of rights with respect to the Insurance Contract in the absence of an election to receive benefits in Salary Continuation Death Benefit form, the Eligible Employee and his or her Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interest or claims in any property or assets of AT&T, nor shall they be beneficiaries, or have any rights, claims or interests in, any life insurance policies, annuity contracts or the proceeds therefrom owned or which may be acquired by AT&T (“Policies”); such Policies or other assets of AT&T shall not be held under any trust for the benefit of the Eligible Employee, his or her designated beneficiaries, heirs, successors or assigns, or held in any way as collateral security for the fulfilling of the obligations of AT&T under this Agreement; any and all of AT&T’s assets and Policies shall be, and remain, the general, unpledged, unrestricted assets of AT&T; AT&T shall have no obligation to acquire any Policies or any other assets; and AT&T’s obligations under this Agreement shall be merely that of an unfunded and unsecured promise of AT&T to pay money in the future.
 
11.   Employment Not Guaranteed.  Nothing contained in this Plan nor any action taken hereunder shall be construed as a contract of employment or as giving the Eligible Employee any right to be retained in the employ of any AT&T company.
 
12.   Protective Provisions.  The Eligible Employee will cooperate with AT&T by furnishing any and all information requested by AT&T, in order to facilitate the payment of benefits hereunder, taking such physical examinations as AT&T may deem necessary and taking such other relevant action as may be requested by AT&T, in order to facilitate the payment of benefits hereunder.  If the Eligible Employee refuses so to cooperate, the Eligible Employee’s participation in the Plan shall terminate and AT&T shall have no further obligation to the Eligible Employee or his or her designated Beneficiary hereunder.  If the Eligible Employee commits suicide during the two-year period beginning on the date of eligibility under the Plan, or if the Eligible Employee makes any material misstatement of information or nondisclosure of medical history, then no benefits will be payable by reason of this Plan to the Eligible Employee or his or her designated Beneficiary, or in AT&T’s sole discretion, benefits may be payable in a reduced amount.
 
13.   Change in Status.  In the event of a change in the employment status of an Eligible Employee to a status in which he or she is no longer an Eligible Employee under the Plan, such Eligible Employee shall immediately cease to be eligible for any benefits under this Plan; provided, however, such survivor benefits as would be available to such employee by reason of his or her new status but which do not automatically become effective upon attainment of such new status shall continue to be provided under this Plan until such benefits become effective or until such employee has had reasonable opportunity to effectuate such benefits but has failed to take any requisite action necessary for such benefits to become effective.
 
14.   Named Fiduciary.  If this Plan is subject to the Employee Retirement Income Security Act of 1974 (ERISA), AT&T is the “named fiduciary” of the Plan.
 
15.   Applicable Law.  This Plan and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of Texas to the extent such law is not preempted by ERISA.
 
16.   Administration of the Plan.  The Committee 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 Committee 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 Committee shall be binding.
 
17.   Relation to Prior Plans.  This Plan supersedes and replaces prior Senior Management Survivor Benefit, Senior Management Supplementary Life Insurance, and Senior Management Alternate Death Benefit Life Insurance Plans as in effect prior to January 1, 1986, except such plans shall continue to apply to Eligible Employees who retired before January 1, 1986; provided, however, that with respect to those Eligible Employees who retired during calendar year 1986 by reason of the fact of attaining age 65, the Post-Retirement Benefit provided pursuant to the Senior Management Survivor Benefit Plan as in effect prior to January 1, 1986, shall continue to apply and the post-retirement benefit provided under the Basic Death Benefit portion hereof shall not apply.
 
Effective January 1, 2008, this Plan supersedes and replaces the Cingular Wireless SBC Executive Transition Life Insurance Plan (the “Cingular Plan”), and all policies issued under the Cingular Plan shall be transferred to and governed by the Plan.
 
18.   Amendments and Termination.  This Plan may be modified or terminated at any time in accordance with the provisions of AT&T’s Schedule of Authorizations.  A modification or Plan termination may affect present and future Eligible Employees; provided, however, that no modification shall be made to this Plan with respect to an Eligible Employee who terminates employment for reason of disability or Retirement), nor shall a termination of the Plan operate so as to be applicable to such an individual, without the written consent of the Eligible Employee.
 

 
Exhibit 10-e




















AT&T HEALTH PLAN




















Effective:  January 1, 1987
                                                                Revisions Effective:  January 1, 2010


 
 

 

AT&T HEALTH PLAN


ARTICLE 1   PURPOSE
The AT&T Health Plan ("Plan") provides Participants, certain Retired Participants, and each of their Dependents with supplemental medical, dental, and vision benefits.

ARTICLE 2   DEFINITIONS
For purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the context clearly indicates otherwise:

2.1   Basic Plan(s) . “Basic Plan(s)” shall mean AT&T’s group managed care medical (known as the AT&T Medical Plan), dental (non-DHMO option), and vision care plans (including the AT&T Retiree Vision Care Program).   For a Participant who Retired on or before August 31, 1992, Basic Plans shall mean the AT&T Medical and Group Life Insurance Plan–CustomCare (“CustomCare”) and dental (non-DHMO option) plans.

2.2   CEO .  "CEO" shall mean the Chief Executive Officer of AT&T Inc.

2.3   COBRA .  “COBRA” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

2.4   Committee .  "Committee" shall mean the Human Resources Committee of the Board of Directors of AT&T Inc.

2.5   Dependent(s) .  “Dependent(s)” shall mean those individuals who would qualify as a Participant’s dependent(s) under the terms of the major medical Basic Plan in which the Participant participates, or, if applicable, Substitute Basic Coverage.

2.6   Disability .   "Disability" shall mean qualification for long term disability benefits under Section 3.1 of the Officer Disability Plan.

2.7   Eligible Employee .  "Eligible Employee" shall mean an Officer.  Notwithstanding the foregoing, the CEO may, from time to time, exclude any Officer or group of Officers from being an “Eligible Employee” under this Plan.  Employees of a company acquired by AT&T shall not be considered an Eligible Employee unless designated as such by the CEO.

2.8   Employer .  "Employer" shall mean AT&T Inc. or any of its Subsidiaries.

2.9   Executive Officer .  “Executive Officer” shall mean any executive officer of AT&T, as that term is used under the Securities Exchange Act of 1934.

2.10   Officer .  "Officer" shall mean an individual who is designated as an officer level Employee for compensation purposes on the records of AT&T.

2.11   Participant .  “Participant” shall mean an Eligible Employee or Retired Eligible Employee who has elected to participate in the Plan and his/ her Dependent(s).

2.12   Plan Administrator .  “Plan Administrator” shall mean the SEVP-HR, or any other person or persons whom the Committee may appoint to administer the Plan; provided that the Committee may act as the Plan Administrator at any time.

2.13   Plan Year .   ”Plan Year” shall mean the calendar year.

2.14   Qualified Dependent .  “Qualified Dependent” shall mean a Dependent who loses coverage under a COBRA Eligible Program due to a Qualifying Event.

2.15   Qualifying Event .   “Qualifying Event” shall mean any of the following events if, but for COBRA continuation coverage, they would result in a Participant’s loss of coverage under this Plan:
 
(1) 
death of a covered Employee;
(2) 
termination (other than by reason of such Employee’s gross  misconduct) of an Employee’s employment;
(3) 
reduction in hours of an Employee;
(4) 
divorce or legal separation of an Employee or dissolution of an Employee’s registered domestic partnership;
(5) 
an Employee’s entitlement to Medicare benefits; or
(6) 
death of a covered Employee;
 
 
2.16   Retire or Retirement .  “Retire” or "Retirement" shall mean the termination of a Participant's employment with AT&T or any of its Subsidiaries, for reasons other than death, on or after the earlier of the following dates:  (1) the date such Participant has attained age 55, and, for a Participant on or after January 1, 2002, has five (5) years of service, or (2) the date the Participant has attained one of the following combinations of age and service at termination of employment on or after April 1, 1997: 

Net Credited Service                       Age
25 years or more                            50 or older
30 years or more                            Any age

2.16             SEVP-HR .   “SEVP-HR” shall mean AT&T’s highest ranking Officer, specifically responsible for human resources matters.

2.17             Subsidiary .  "Subsidiary" shall mean any corporation, partnership, venture or other entity in which AT&T holds, directly or indirectly, a 50% or greater ownership interest.  The Committee may, at its sole discretion, designate any other corporation, partnership, venture or other entity a Subsidiary for the purpose of participating in this Plan.  Notwithstanding anything herein to the contrary, unless designated a “Subsidiary” pursuant to the immediately preceding sentence, Cingular Wireless LLC, Sterling Commerce, Inc., and their respective subsidiaries shall not be considered a Subsidiary under this Plan.

2.18             AT&T .  "AT&T" shall mean AT&T Inc.

ARTICLE 3   ELIGIBILITY

3.1   Active Participants and their Dependents .   Each Eligible Employee shall be eligible to participate in this Plan along with his/her Dependent(s) beginning on the effective date of the employee becoming an Eligible Employee.

Upon becoming an Eligible Employee, he/she shall have 90 days to elect to participate in this Plan.  In order to continue participation, the Participant must pay all applicable contributions.  If a Participant terminates participation in this Plan at any time for any reason, that Participant and his/her Dependent(s) shall be ineligible to participate in the Plan at any time in the future.

3.2   Retired Participants and their Dependents .   Provisions of this Plan will continue in effect during Retirement for each Participant and his/her Dependent(s) with respect to any Eligible Employee who became a Participant before January 1, 1999.  Neither an Eligible Employee who became a Participant after December 31, 1998 nor his/her Dependent(s) shall be eligible for participation hereunder on or after such Participant’s Retirement.

3.3   Requirement to Enroll and Participate in Basic Plans and Medicare .   As a condition to participation in the Plan, each Participant must be enrolled in, paying for, and participating in (i) the Basic Plans, or, if applicable, Substitute Basic Coverage, and (ii) all parts of Medicare for which such Participant is eligible and for which Medicare would be primary if enrolled therein, except for Medicare Part D relating to prescription drug coverage.

Notwithstanding any other provision of the Plan to the contrary, an individual who first becomes an Eligible Employee in the middle of a Plan Year and who is enrolled in AT&T sponsored group health plans other than the Basic Plans, will be allowed to participate in the Plan for the remainder of the Plan Year along with his/her Dependent(s) who are enrolled in such other AT&T sponsored health plans, as if they were participating in the Basic Plans.  At the next group enrollment opportunity for the Basic Plans, the Participant and his/her Dependent(s) must enroll in the Basic Plans to continue participation in this Plan.

ARTICLE 4   BENEFITS

4.1   Covered Benefits . Subject to the limitations in this Plan (including but not limited to the loyalty conditions set forth in Article 8 below), this Plan provides 100% payment, through reimbursement or otherwise, of all medical, dental, and vision services not paid under the Participant’s (i) Basic Plans or, if applicable, Substitute Basic Coverage, or (ii) Medicare, provided expenses for such services would qualify as deductible medical expenses for federal income tax purposes, whether deducted or not. Contributions or premiums for participation in this Plan, the Basic Plans, Medicare, or any other health plan are not considered “services”, and are therefore not eligible benefits under this Plan.

4.2   Benefit Limits .  Benefits paid to any Participant or any one of his/her Dependents under this Plan shall not exceed $50,000 per Plan Year per individual, and benefits paid to any Participant and his/her Dependents under this Plan shall not exceed $100,000 total per Plan Year. Amounts paid to or on behalf of a Participant or his/her Dependent(s) under (i) the Basic Plans, or if applicable, Substitute Basic Coverage, (ii) Medicare, or (iii) any other AT&T sponsored group health plan will not be included in these limits.

4.3   Priority of Paying Covered Claims .  Claims for benefits will be applied against the various health plans and coordinated with Medicare in the following order:
 
(1) 
Medicare, to the extent the Participant is eligible therefore and such claim is actually paid by Medicare,
(2) 
Basic Plans,
(3) 
CarePlus, if elected,
(4) 
Long Term Care Plan, if elected,
(5) 
this Plan.
 
 
4.4   Substitute Basic Coverage .  Notwithstanding any other provision of this Plan to the contrary, if a Participant is eligible for participation under this Plan during Retirement, but not eligible to participate under the Basic Plans, the Plan shall provide medical, dental, and vision benefits for the Participant and his/her Dependent(s) substantially equivalent to the benefits under the Basic Plans through an insured product (hereinafter, "Substitute Basic Coverage"). Eligibility for Substitute Basic Coverage is conditioned upon the Participant’s payment of contributions in the same amount that a similarly situated retired Basic Plan participant is required to pay under the Basic Plans. Such Substitute Basic Coverage shall constitute such Participant’s Basic Plans for all purposes under this Plan.  The costs of Substitute Basic Coverage (except for the required monthly contributions referenced in this paragraph) shall be borne by AT&T, and the costs of Substitute Basic Coverage shall not be included in the determination of any Participant’s annual Plan contribution amount as provided in Article 7.

ARTICLE 5   TERMINATION OF PARTICIPATION

5.1   Termination of Participation .   Participation will cease on the last day of the month in which one of the following conditions occurs:
 
 
(1) 
The Participant is no longer a participant in the Basic Plans or Substitute Basic Coverage, in which case participation ceases for such Participant;
(2) 
A Participant eligible to enroll in Medicare is no longer a participant in all parts of Medicare for which such Participant is eligible to enroll and for which Medicare would be primary if enrolled therein, except for Medicare Part D relating to prescription drug coverage, in which case participation ceases for such Participant;
(3) 
The Participant’s termination of employment for reasons other than Death, Disability, or Retirement, in which case participation ceases for the Participant and his/her Dependent(s);
(4) 
The demotion or designation of a Participant so as to no longer be eligible to participate in the Plan, in which case participation ceases for the Participant and his/her Dependent(s);
(5) 
The Participant (or Retired Participant) participates in an activity that constitutes engaging in competitive activity with AT&T or engaging in conduct disloyal to AT&T under Article 8, in which case participation ceases for the Participant (or Retired Participant) and his/her Dependent(s); or
(6) 
Discontinuance of the Plan by AT&T, or, with respect to a Subsidiary’s Participants (or Retired Participants), such Subsidiary’s failure to make the benefits hereunder available to Participant employed by it (or its Retired Participants), in which case participation ceases for the Participant (or Retired Participant) and his/her Dependent(s).
 
 
 
5.2   Dependents Failure to Participate in Basic Plans .  If a Dependent ceases participation under a Basic Plan or, if applicable, Substitute Basic Coverage, such Dependent’s participation under this Plan will cease with the same effective date.

5.3   Death .  In the event of the Participant’s (or Retired Participant’s) death, the Participant’s (or Retired Participant’s) Dependents may continue participation in this Plan as follows:

 
      (1)
In the event of the death of a Retired Participant such Retired Participant’s Dependents may continue participation in this Plan for so long as such Dependents are participating in the Basic Plans (or, if applicable, Substitute Basic Coverage) and are paying any applicable contributions for this Plan as provided in Article 7.

 
      (2)
In the event of an in-service death of a Participant eligible to participate in the Plan in Retirement as provided under Article 3.2, such Participant’s surviving Dependents may continue participation in this Plan for so long as such Dependents are participating in the Basic Plans (or, if applicable Substitute Basic Coverage) and are paying any applicable contributions for this Plan as provided in Article 7.  If a surviving spouse of such Participant otherwise eligible for participation in the Plan remarries, his/her participation will cease with the effective date of his/ her marriage.

 
       (3)
In the event of an in-service death of a Participant not eligible to participate in the Plan in Retirement as provided in Article 3.2, such Participant’s Dependent(s) may continue participation in this Plan for a 12-month period commencing the month following the month in which such Participant dies as long as such Dependent(s) are participating in the Basic Plans and are paying any applicable contributions for this Plan as provided in Article 7.  If the Participant’s Dependent(s) are eligible for COBRA, they will automatically be enrolled in COBRA so that there is no lapse in coverage, and this 12-month coverage will be integrated and run concurrently with COBRA coverage.

ARTICLE 6   DISABILITY

6.1   Disability .  With respect to any Participant who is receiving short term or long term disability benefits under the Officer Disability Plan, participation under this Plan will be as follows:

 
      (1)
The Participant will be eligible to participate in this Plan for as long as he/she receives short term or long term disability benefits under the Officer Disability Plan.

 
      (2)
An individual who became a Participant on or after January 1, 1999 will no longer be eligible to participate in this Plan once long term disability benefits under the Officer Disability Plan are discontinued, unless the Participant is otherwise eligible for continued benefits under this Plan.

 
      (3)
An Employee who became a Participant before January 1, 1999, will be eligible for participation in this Plan as follows:
 
 
                 (a)
If the individual is Retirement eligible at the time long term disability benefits under the Officer Disability Plan commence, he/she will be eligible to continue participation in this Plan on the same terms and conditions that participation would be available to such Participant in Retirement, regardless of his/her continued receipt of long term disability benefits.
 
 
                 (b)
If the individual is not Retirement eligible at the time long term disability benefits under the Officer Disability Plan commence, he/she will be eligible to participate in this Plan for as long as such Participant participates in the Basic Plans.
 
 
ARTICLE 7   COSTS

7.1   Costs of the Plan .  Except as provided below in this Article 7, costs and expenses incurred in the operation and administration of this Plan will be borne by AT&T, and each Subsidiary shall reimburse AT&T for applicable costs and expenses attributable to Participants employed by it (and Retired Participants formerly employed by it).

7.2   Active Participant Contributions .  An Eligible Employee electing to participate in the Plan will pay to participate in the Plan while in active service or while receiving short term or long term disability benefits under the Officer Disability Plan. The contribution for participation may change annually, effective at the beginning of each Plan Year.  Contributions to be made by Participants electing to participate in the Plan during active service or while receiving short term or long term disability benefits under the Disability Plan shall be set annually by the SEVP-HR, determined in the SEVP-HR’s sole and absolute discretion.  The SEVP-HR may adopt tiered rates for similarly situated groups of Participants based on factors such as the number of Dependents covered or Medicare eligibility.  Notwithstanding the foregoing, required contributions for Executive Officers shall be approved by the Human Resources Committee of the AT&T Inc. Board of Directors.

7.3   Retired Participants Contributions .  Participants entitled to participate in the Plan after Retirement or after termination of long term disability benefits under the Officer Disability Plan who elect to participate will pay to participate in the Plan. The contribution for participation may change annually, effective at the beginning of each Plan Year.  Contributions to be made by Participants entitled to participate in the Plan after Retirement or after termination of long term disability benefits under the Officer Disability Plan who elect to participate shall be set annually by the SEVP-HR (in his/her sole and absolute discretion), to the extent their contributions have not previously been provided for in a separate agreement.

7.4   Survivor Contributions.  Upon the death of a Participant the contribution percentage paid by the surviving spouse will be equal to the contribution, adjusted (if applicable) for factors such as the number of Dependents or Medicare eligibility that that would have been paid by the Participant had he/she survived.  In the event there is no surviving spouse but there are surviving eligible Dependents, such Dependents shall pay a ratable share of the contribution, adjusted (if applicable) for factors such as the number of Dependents or Medicare eligibility that would have been paid by the Participant had he/she survived.


In order to continue participation, the Retired Participant or his/her Dependent(s) must pay all applicable contributions.

If a Retired Participant terminates participation at any time for any reason, participation of that Retired Participant and his/her Dependent(s) may not be reinstated for any reason.

ARTICLE 8   LOYALTY CONDITIONS

8.1   Participants acknowledge that no coverage and benefits would be provided under this Plan on and after January 1, 2010 but for the loyalty conditions and covenants set forth in this Article, and that the conditions and covenants herein are a material inducement to AT&T’s willingness to sponsor the Plan and to offer Plan coverage and benefits for the Participants on or after January 1, 2010.  Accordingly, as a condition of receiving coverage and any Plan benefits on or after January 1, 2010, each Participant is deemed to agree that he shall not, without obtaining the written consent of the Plan Administrator in advance, participate in activities that constitute engaging in competition with AT&T or engaging in conduct disloyal to AT&T, as those terms are defined in this Section.  Further and notwithstanding any other provision of this Plan, all coverage and benefits under this Plan on and after January 1, 2010 with respect to a Participant and his or her Dependents shall be subject in their entirety to the enforcement provisions of this Section if the Participant, without the Plan Administrator’s consent, participates in an activity that constitutes engaging in competition with AT&T or engaging in conduct disloyal to AT&T, as defined below.  The provisions of this Article 8 as in effect immediately before such date shall be applicable to Participant who retire before January 1, 2010.
 
8.2   Definitions .  For purposes of this Article and of the Plan generally
 
(1)   an “Employer Business” shall mean AT&T, any Subsidiary, or any business in which AT&T or a Subsidiary or an affiliated company of AT&T has a substantial ownership or joint venture interest;
 
(2)   “engaging in competition with AT&T” shall mean, while employed by an Employer Business or within two  (2) years after the Participant’s termination of employment, engaging by the Participant in any business or activity in all or any portion of the same geographical market where the same or substantially similar business or activity is being carried on by an Employer Business.  “Engaging in competition with AT&T” shall not include owning a nonsubstantial publicly traded interest as a shareholder in a business that competes with an Employer Business.  “Engaging in competition with AT&T” shall include representing or providing consulting services to, or being an employee or director of, any person or entity that is engaged in competition with any Employer Business or that takes a position adverse to any Employer Business.
 
(3)       “engaging in conduct disloyal to AT&T” means, while employed by an Employer Business or within two  (2) years after the Participant’s termination of employment, (i) soliciting for employment or hire, whether as an employee or as an independent contractor, for any business in competition with an Employer Business, any person employed by AT&T or its affiliates during the one (1)  year prior to the termination of the Participant’s employment, whether or not acceptance of such position would constitute a breach of such person’s contractual obligations to AT&T and its affiliates; (ii) soliciting, encouraging, or inducing any vendor or supplier with which Participant had business contact on behalf of any Employer Business during the two (2) years prior to the termination of the Participant’s employment, for any reason to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with AT&T or its affiliate; or (iii) soliciting, encouraging, or inducing any customer or active prospective customer with whom Participant had business contact, whether in person or by other media, on behalf of any Employer Business during the two (2) years prior to the termination of Participant’s employment for any reason (“Customer”), to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with any Employer Business, or to purchase competing goods or services from a business competing with any Employer Business, or accepting or servicing business from such Customer on behalf of himself or any other business.  “Engaging in conduct disloyal to AT&T” also means, disclosing Confidential Information to any third party or using Confidential Information, other than for an Employer Business, or failing to return any Confidential Information to the Employer Business following termination of employment.
 
(4)    “Confidential Information” shall mean all information belonging to, or otherwise relating to, an Employer Business, which is not generally known, regardless of the manner in which it is stored or conveyed to the Participant, and which the Employer Business has taken reasonable measures under the circumstances to protect from unauthorized use or disclosure.  Confidential Information includes trade secrets as well as other proprietary knowledge, information, know-how, and non-public intellectual property rights, including unpublished or pending patent applications and all related patent rights, formulae, processes, discoveries, improvements, ideas, conceptions, compilations of data, and data, whether or not patentable or copyrightable and whether or not it has been conceived, originated, discovered, or developed in whole or in part by the Participant.  For example, Confidential Information includes, but is not limited to, information concerning the Employer Business’ business plans, budgets, operations, products, strategies, marketing, sales, inventions, designs, costs, legal strategies, finances, employees, customers, prospective customers, licensees, or licensors; information received from third parties under confidential conditions; or other valuable financial, commercial, business, technical or marketing information concerning the Employer Business, or any of the products or services made, developed or sold by the Employer Business.  Confidential Information does not include information that (i) was generally known to the public at the time of disclosure; (ii) was lawfully received by the Participant from a third party; (iii) was known to the Participant prior to receipt from the Employer Business; or (iv) was independently developed by the Participant or independent third parties; in each of the foregoing circumstances, this exception applies only if such public knowledge or possession by an independent third party was without breach by the Participant or any third party of any obligation of confidentiality or non-use, including but not limited to the obligations and restrictions set forth in this Plan.
 
8.3   Forfeiture of Benefits .  Coverage and benefits shall be forfeited and shall not be provided under this Plan for any period as to which the Plan Administrator determines that, within the time period and without the written consent specified, Participant has been either engaging in competition with AT&T or engaging in conduct disloyal to AT&T.
 
8.4   Equitable Relief .   The parties recognize that any Participant’s breach of any of the covenants in this Article 8 will cause irreparable injury to AT&T, will represent a failure of the consideration under which AT&T (in its capacity as creator and sponsor of the Plan) agreed to provide the Participant with the opportunity to receive Plan coverage and benefits, and that monetary damages would not provide AT&T with an adequate or complete remedy that would warrant AT&T’s continued sponsorship of the Plan and payment of Plan benefits for all Participants.  Accordingly, in the event of a Participant’s actual or threatened breach of the covenants in this Article, the Plan Administrator, in addition to all other rights and acting as a fiduciary under ERISA on behalf of all Participants, shall have a fiduciary duty (in order to assure that AT&T receives fair and promised consideration for its continued Plan sponsorship and funding) to seek an injunction restraining the Participant from breaching the covenants in this Article 8.  In addition, AT&T shall pay for any Plan expenses that the Plan Administrator incurs hereunder, and shall be entitled to recover from the Participant its reasonable attorneys’ fees and costs incurred in obtaining such injunctive remedies.  To enforce its repayment rights with respect to a Participant, the Plan shall have a first priority, equitable lien on all Plan benefits provided to or for the Participant and his or her Dependents.  In the event the Plan Administrator succeeds in enforcing the terms of this Article through a written settlement with the Participant or a court order granting an injunction hereunder, the Participant shall be entitled to collect Plan benefits collect Plan benefits prospectively, if the Participant is otherwise entitled to such benefits, net of any fees and costs assessed pursuant hereto (which fees and costs shall be paid to AT&T as a repayment on behalf of the Participant), provided that the Participant complies with said settlement or injunction.
 
8.5   Uniform Enforcement.  In recognition of AT&T’s need for nationally uniform standards for the Plan administration, it is an absolute condition in consideration of any Participant’s accrual or receipt of benefits under the Plan after January 1, 2010 that each and all of the following conditions apply to all Participants and to any benefits that are paid or are payable under the Plan:
 
(1)   ERISA shall control all issues and controversies hereunder, and the Committee shall serve for purposes hereof as a “fiduciary” of the Plan, and as its “named fiduciary” within the meaning of ERISA.
 
(2)   All litigation between the parties relating to this Article shall occur in federal court, which shall have exclusive jurisdiction, any such litigation shall be held in the United States District Court for the Northern District of Texas, and the only remedies available with respect to the Plan shall be those provided under ERISA.
 
(3)       If the Plan Administrator determines in its sole discretion either (I) that AT&T or its affiliate that employed the Participant terminated the Participant’s employment for cause, or (II) that equitable relief enforcing the Participant’s covenants under this Article 8 is either not reasonably available, not ordered by a court of competent jurisdiction, or circumvented because the Participant has sued in state court, or has otherwise sought remedies not available under ERISA, then in any and all of such instances the Participant shall not be entitled to collect any Plan benefits, and if any Plan benefits have been paid to the, the Participant shall immediately repay all Plan benefits to the Plan (with such repayments being used within such year for increased benefits for other Participants in any manner determined in the Plan Administrator’s discretion) upon written demand from the Plan Administrator.  Furthermore, the Participant shall hold AT&T and its affiliates harmless from any loss, expense, or damage that may arise from any of the conduct described in clauses (I) and (II) hereof.
 

ARTICLE 9  MISCELLANEOUS

9.1   Administration .  Subject to the terms of the Plan, the CEO or SEVP-HR shall establish such rules as are deemed necessary for the proper administration of the Plan. AT&T will compute a "gross-up" allowance which will be paid to a Participant to offset any income tax liabilities incurred as a result of receiving benefits under this Plan.

9.2   Amendments and Termination .  This Plan may be modified or terminated at any time in accordance with the provisions of AT&T's Schedule of Authorizations.

9.3   Newborns' and Mothers' Health Protection Act of 1996 .  To the extent this Plan provides benefits for hospital lengths of stay in connection with childbirth, the Plan will cover the minimum length of stay required for deliveries (i.e., a 48-hour hospital stay after a vaginal delivery or a 96-hour stay following a delivery by Cesarean section.)  The mother’s or newborn’s attending physician, after consulting with the mother, may discharge the mother or her newborn earlier than the minimum length of stay otherwise required by law.  Such coverage shall be subject to all other provisions of this Plan.

9.4   Women's Health and Cancer Rights Act of 1998 .  To the extent this Plan provides benefits for mastectomies, it will provide, for an individual who is receiving benefits in connection with a mastectomy and who elects breast reconstruction in connection with such mastectomy, coverage for reconstruction on the breast on which the mastectomy was performed, surgery and reconstruction on the other breast to give a symmetrical appearance, and prosthesis and coverage for physical complications of all stages of the mastectomy, including lymphedemas.  Such coverage shall be subject to all other provisions of this Plan.
 
9.5   Mental Health Parity Act of 1996 .  To the extent this Plan provides mental health benefits other than treatment for substance or alcohol abuse, it will not place annual or lifetime maximums for such benefits that are lower than the annual and lifetime maximums for physical health benefits.  Such coverage shall be subject to all other provisions of this Plan.

9.6   Continuation of Coverage During Family or Medical Leave .  During any period which a Participant is on a family or medical leave as defined in the Family or Medical Leave Act, any benefit elections in force for the Participant shall remain in effect.  While the Participant is on paid leave, contributions shall continue.  If the Participant is on an unpaid leave, the Participant may elect to prepay required contributions on a pre-tax basis before the commencement of such unpaid leave.  Alternatively, the Participant may elect to make such payments on an after-tax basis monthly in accordance with an arrangement that the Plan Administrator shall provide.  If coverage is not continued during the entire period of the family or medical leave because the Participant declines to pay the premium, the coverage must be reinstated upon reemployment with no exclusions or waiting periods, notwithstanding any other provision of this Plan to the contrary. If the Participant does not return to work upon completion of the leave, the Participant must pay the full cost of any health care coverage that was continued on his/her behalf during the leave.  These rules apply to the COBRA Eligible Programs.
 
9.7   Rights While on Military Leave .  Pursuant to the provisions of the Uniformed Services Employment and Reemployment Rights Act of 1994, an Employee on military leave will be considered to be on a Leave of Absence and will be entitled during the leave to the health and welfare benefits that would be made available to other similarly situated Employees if they were on a Leave of Absence.  This entitlement will end if the Employee provides written notice of intent not to return to work following the completion of the military leave.  The Employee shall have the right to continue his/her coverage, including any Dependent coverage, for the lesser of the length of the leave or 18 months.  If the military leave is for a period of 31 days or more, the Employee may be required to pay 102 percent of the total premium (determined in the same manner as a COBRA continuation coverage premium).  If coverage is not continued during the entire period of the military leave because the Employee declines to pay the premium or the leave extends beyond 18 months, the coverage must be reinstated upon reemployment with no pre-existing condition exclusions (other than for service-related illnesses or injuries) or waiting periods (other than those applicable to all Eligible Employees).

9.8   Qualified Medical Child Support Orders .  The Plan will comply with any Qualified Medical Child Support Order issued by a court of competent jurisdiction or administrative body that requires the Plan to provide medical coverage to a Dependent child of a Participant.  The Plan Administrator will establish reasonable procedures for determining whether a court order or administrative decree requiring medical coverage for a Dependent child meets the requirements for a Qualified Medical Child Support Order.  The cost of coverage or any additional cost of such coverage, if any, shall be borne by the Participant.

9.9   Right of Recovery .   If the Plan has made an erroneous or excess payment to any Participant, the Plan Administrator shall be entitled to recover such excess from the individual or entity to whom such payments were made.  The recovery of such overpayment may be made by offsetting the amount of any other benefit or amount payable by the amount of the overpayment under the Plan.

ARTICLE 10   COBRA

10.1   Continuation of Coverage Under COBRA .  Participants shall have all COBRA continuation rights required by federal law and all conversion rights.  COBRA continuation coverage shall be continued as provided in this Article 10.

10.2   COBRA Continuation Coverage for Terminated Participants .  A covered Participant may elect COBRA continuation coverage, at his/her own expense, if his participation under this Plan would terminate as a result of one of the following Qualifying Events: an Employee’s termination of employment or reduction of hours with an Employer.

10.3   COBRA Continuation Coverage for Dependents .  A Qualified Dependent may elect COBRA continuation coverage, at his/her own expense, if his/her participation under this Plan would terminate as a result of a Qualifying Event.

10.4   Period of Continuation Coverage for Covered Participants .   A covered Participant who qualifies for COBRA continuation coverage as a result of a Participant’s termination of employment or reduction in hours of employment described in Subsection 10.2 may elect COBRA continuation coverage for up to 18 months measured from the date of the Qualifying Event.
Coverage under this Subsection 10.4 may not continue beyond the:

 
     (1)
date on which the Participant’s Employer ceases to maintain this Plan;
 
 
     (2)
last day of the month for which premium payments have been made with respect to this Plan, if the individual fails to make premium payments on time, in accordance with Subsection 10.6;

 
     (3)
date the covered Participant becomes entitled to Medicare; or

 
     (4)
date the covered Participant is no longer subject to a pre-existing condition exclusion under the Participant's other coverage or new employer plan for the type of coverage available under the COBRA Eligible Program for which the COBRA election was made.
 
10.5   Period of COBRA Continuation Coverage for Dependents .  If a Qualified Dependent elects COBRA continuation coverage under a COBRA Eligible Program as a result of the an Employee’s termination of employment as described in Subsection 10.2, continuation coverage may be continued for up to 18 months measured from the date of the Qualifying Event.  COBRA continuation coverage for all other Qualifying Events may continue for up to 36 months.

Continuation coverage under this Subsection 10.5 with respect to a COBRA Eligible Program may not continue beyond the date:

 
     (1)
on which premium payments have not been made, in accordance with Subsection 10.6 below;
 
 
     (2)
the Participant becomes entitled to Medicare;

 
     (3)
on which the Employer ceases to maintain this Plan; or

 
     (4)
the Participant is no longer subject to a pre-existing condition exclusion under the Participant’s other coverage or new employer plan for the type of coverage available under this Plan.
 
10.6   Contribution Requirements for COBRA Continuation Coverage .  Covered Participants and Qualified Dependents who elect COBRA continuation coverage as a result of a Qualifying Event will be required to pay continuation coverage payments.  Continuation coverage payments are the payments required for COBRA continuation coverage that is an amount equal to a reasonable estimate of the cost to this Plan of providing coverage for all covered Participants at the time of the Qualifying Event plus a  2% administrative expense.  In the case of a disabled individual who receives an additional 11-month extended coverage under COBRA, the Employer may assess up to 150% of the cost for this extended coverage period.  Such cost shall be determined on an actuarial basis and take into account such factors as the Secretary of the Treasury may prescribe in regulations.

Covered Participants and Qualified Dependents must make the continuation coverage payment prior to the first day of the month in which such coverage will take effect.  However, a covered Participant or Qualified Dependent has 45 days from the date of an affirmative election to pay the continuation coverage payment for the first month's payment and the cost for the period between the date medical coverage would otherwise have terminated due to the Qualifying Event and the date the covered Participant and/or Qualified Dependent actually elects COBRA continuation coverage.

The covered Participant and/or Qualified Dependent shall have a 30-day grace period to make the continuation coverage payments due thereafter.  Continuation coverage payments must be postmarked on or before the completion of the 30-day grace period.  If continuation coverage payments are not made on a timely basis, COBRA continuation coverage will terminate as of the last day of the month for which timely premiums were made.  The 30-day grace period shall not apply to the 45-day period for the first month’s payment of COBRA premiums as set out in the section above.

If payment is received that is significantly less than the required continuation coverage payment, then continuation coverage will terminate as of the last day of the month for which premiums were paid.  A payment is considered significantly less than the amount due if it is greater than the lesser of $50 or 10% of the required continuation coverage payment.  Upon receipt of a continuation coverage payment that is insignificantly less than the required amount, the Plan Administrator must notify the covered Participant or Qualified Dependent of the amount of the shortfall and provide them with an additional 30-day grace period from the date of the notice for this payment only.

10.7   Limitation on Participant's Rights to COBRA Continuation Coverage .
 
 
     (1)
If a Qualified Dependent loses, or will lose medical coverage under this Plan as a result of divorce, legal separation, entitlement to Medicare, or ceasing to be a Dependent, such Qualified Dependent is responsible for notifying the Plan Administrator in writing within 60 days of the Qualifying Event.  Failure to make timely notification will terminate the Qualified Dependent's rights to COBRA continuation coverage under this Article.

 
     (2)
A Participant must complete and return the required enrollment materials within 60 days from the later of (a) the date of loss of coverage, or (b) the date the Plan Administrator sends notice of eligibility for COBRA continuation coverage.  Failure to enroll for COBRA continuation coverage during this 60-day period will terminate all rights to COBRA continuation coverage under this Article.  An affirmative election of COBRA continuation coverage by a Participant or his/her spouse shall be deemed to be an election for that Participant's Dependent(s) who would otherwise lose coverage under the Plan.
 
10.8   Subsequent Qualifying Event .  If a second Qualifying Event occurs during an 18-month extension explained above, coverage may be continued for a maximum of 36 months from the date of the first Qualifying Event.  In the event the Dependent loses coverage due to a Qualifying Event and after such date the Participant becomes entitled to Medicare, the Dependent shall have available up to 36 months of coverage measured from the date of the Qualifying Event that causes the loss of coverage.  If the Participant was entitled to Medicare prior to the Qualifying Event, the Dependent shall have up to 36 months of coverage measured from the date of entitlement to Medicare.

10.9   Extension of COBRA Continuation Period for Disabled Individuals .  The period of continuation shall be extended to 29 months in total (measured from the date of the Qualifying Event) in the event the individual is disabled as determined by the Social Security laws within 60 days of the Qualifying Event.  The individual must provide evidence to the Plan Administrator of such Social Security determination prior to the earlier of 60 days after the date of the Social Security determination, or the expiration of the initial 18 months of COBRA continuation coverage.  In such event, the Employer may charge the individual up to 150% of the COBRA cost of the coverage.

ARTICLE 11   PRIVACY OF MEDICAL INFORMATION

11.1   Definitions .  For purposes of this Article 11, the following defined terms shall have the meaning assigned to such terms in this subsection:
 
 
     (1)
 “Business Associate” shall mean an outside entity or person that  performs administrative or other functions on behalf of the Plan;
 
 
     (2)
 “Health Care Operations” shall mean activities that involve, but are not limited to, quality assessment and improvement, the assessment of health care professionals, disease management, case management, legal services, benefits fraud and abuse investigations, and business planning and development (including cost-management and planning analyses).  Health Care Operations also include, but are not limited to, general health care plan administrative functions such as management activities relating to compliance with HIPAA’s administrative simplification requirements, customer service involving the provision of data analysis for the Plan Sponsor of the HIPAA Plan and other entities whose employees participate in the HIPAA Plan, resolution of internal grievances and due diligence in connection with the sale or transfer of assets to a potential successor in interest if the potential successor is a covered entity, or will become a covered entity, under HIPAA;

 
     (3)
“HIPAA” shall mean the Health Insurance Portability and Accountability Act of 1996 as amended from time to time.
 
 
     (4)
“Payment” shall mean any activities performed that involve making benefit determinations and payment. These activities include, but are not limited to, billing, reviews for medical necessity, claims management, coordination of benefits, adjudication of health benefits claims (including appeals and other payment-related disputes), subrogation, plan reimbursement, investigations of potential fraud, determining employee contributions, reviews of appropriateness of care, preauthorizations and utilization reviews;
 
 
     (5)
“Protected Health Information” or “PHI” shall mean individually  identifiable information created or retained by the HIPAA Plan beginning on or after April 14, 2003 which pertains to a person’s past, present or future physical or mental health, the health care the person is receiving or has received in the past and all past, present or future Payments for the person’s health care;

 
     (6)
“Treatment” means the provision, coordination or management of health care and related services by one or more health care providers. This category includes, but is not limited to, consultations and referrals between health care providers, the coordination or management of health care by a health care provider with a third party and the referral of a patient for health care from one health care provider to another.
 
11.2   Privacy Provisions Relating to Protected Health Information (“PHI”) .  The Plan and its Business Associates (collectively referred to in this Article 11 as a “HIPAA Plan”) shall use and disclose PHI to the extent permitted by, and in accordance with, HIPAA.  Specifically, each HIPAA Plan will use and disclose PHI for Treatment, Payment and Health Care Operations.

11.3   Disclosure of De-Identified or Summary Health Information .  The HIPAA Plan, or, with respect to the HIPAA Plan, a health insurance issuer, may disclose de-identified or summary health information to the Plan Sponsor of the HIPAA Plan (and its affiliates) if such entity requests the de-identified or summary health information for the purpose of:
 
 
     (1)
Obtaining premium bids from health plans for providing health insurance coverage under the HIPAA Plan;
 
 
     (2)
Modifying, amending or terminating the group health benefits  under the HIPAA Plan;

In addition, the HIPAA Plan or a health insurance insurer with respect to the HIPAA Plan may disclose to the Plan Sponsor of the HIPAA Plan (or its affiliates) information on whether an individual is participating in the group health benefits provided by the HIPAA Plan or is enrolled in, or has ceased enrollment with health insurance offered by the HIPAA Plan.

11.4   The HIPAA Plan Will Use and Disclose PHI as Required by Law  or as Permitted by the Authorization of the Participant or Beneficiary .

Upon submission of an authorization signed by a Participant, beneficiary, subscriber or personal representative that meets HIPAA requirements, the HIPAA Plan will disclose PHI to a Company (or affiliate) sponsored pension plan, long term care plan, disability plan or other benefit plan sponsored by the Company (or an affiliate) with a need to access this PHI for purposes related to such benefit plan’s administration. Authorizations will also be honored when provided to the HIPAA Plan with respect to job accommodation requests, Family Medical Leave Act requests, drug/substance abuse testing, fitness for duty exams, and workers compensation claims.
 
In addition, PHI will be disclosed to the extent permitted or required by law, without the submission of an authorization form.

11.5   Disclosure of PHI to the Plan Sponsor .   The HIPAA Plan will disclose information to the Plan Sponsor only upon certification from the Plan Sponsor that the HIPAA Plan documents have been amended to incorporate the assurances provided below.

The Plan Sponsor agrees to:
 
 
     (1)
not use or further disclose PHI other than as permitted or required by the HIPAA Plan document or as required by law;
 
 
     (2)
ensure that any affiliates or agents, including a subcontractor, to whom the Plan Sponsor provides PHI received from the HIPAA Plan, agrees to the same restrictions and conditions that apply to the Plan Sponsor with respect to such PHI;

 
     (3)
not use or disclose PHI for employment-related actions and decisions unless authorized by the individual to whom the PHI relates;
 
 
     (4)
not use or disclose PHI in connection with any other benefits or employee benefit plan of the Plan Sponsor or its affiliates unless permitted by the Plan or authorized by an individual to whom the PHI relates;

 
     (5)
report to the Plan any PHI use or disclosure that is inconsistent with the uses or disclosures provided for of which it becomes aware;
 
 
     (6)
make PHI available to an individual in accordance with HIPAA’s access rules;
 
 
     (7)
make PHI available for amendment and incorporate any amendments to PHI in accordance with HIPAA;
 
 
     (8)
make available the information required to provide an accounting of disclosures;
 
 
     (9)
make internal practices, books and records relating to the use and disclosure of PHI received from the HIPAA Plan available to the Secretary of the United States Department of Health and Human Resources for purposes of determining the Plan’s compliance with HIPAA; and
 
 
     (10)
if feasible, return or destroy all PHI received from the HIPAA Plan that the Plan Sponsor still maintains in any form, and retain no copies of such PHI when no longer needed for the purpose for which disclosure was made (or if return or destruction is not feasible, limit further uses and disclosures to those purposes that make the return or destruction infeasible.)
 
11.6   Separation Between the Plan Sponsor and the HIPAA Plan .   In accordance with HIPAA, only the following employees and Business Associate personnel shall be given access to PHI:
 
 
     (1)
employees of the AT&T Benefits and/or AT&T Executive Compensation organizations responsible for administering group health plan benefits under the HIPAA Plan, including those employees whose functions in the regular course of business include Payment, Health Care Operations or other matters pertaining to the health care programs under a HIPAA Plan;
 
 
     (2)
employees who supervise the work of the employees described in (1), above;

 
     (3)
support personnel, including other employees outside of the AT&T Benefits or AT&T Executive Compensation organizations whose duties require them to rule on health plan-related appeals or perform functions concerning the HIPAA Plan;
 
 
     (4)
investigatory personnel to the limited extent that such PHI is necessary to conduct investigations of possible fraud;

 
     (5)
outside and in-house legal counsel providing counsel to the HIPAA Plan;
 
 
     (6)
consultants providing advice concerning the administration of the HIPAA Plan; and
 
 
     (7)
the employees of Business Associates charged with providing services to the HIPAA Plan.
 
The persons identified above shall have access to and use PHI to the extent that such access and use is necessary for the administration of group health benefits under a HIPAA Plan.  If these persons do not comply with this Plan document, the Plan Sponsor shall provide a mechanism for resolving issues of noncompliance, including disciplinary sanctions.

Exhibit 10-f



AT&T INC.

STOCK PURCHASE AND DEFERRAL PLAN

Adopted November 19, 2004
As amended through July 29, 2009


Article 1 - Statement of Purpose

The purpose of the Stock Purchase and Deferral Plan (“Plan”) is to increase stock ownership by, and to provide savings opportunities to, a select group of management employees of AT&T Inc. (“AT&T”) and its Subsidiaries.

Article 2 - Definitions

For the purpose of this Plan, the following words and phrases shall have the meanings indicated, unless the context indicates otherwise:

Annual Bonus .  The award designated the “Annual Bonus” by AT&T (including but not limited to an award that may be paid in more frequent installments than annually), together with any individual discretionary award made in connection therewith, or comparable awards, if any, determined by AT&T to be used in lieu of these awards.

 
            Base Compensation.   The following types of cash-based compensation paid by an Employer (but not including payments made by a non-Employer, such as state disability payments), before reduction due to any contribution pursuant to this Plan or reduction pursuant to any deferral plan of an Employer, including but not limited to a plan that includes a qualified cash or deferral arrangement under Section 401(k) of the Code:

(a)  
base salary;
 
 (b)  lump sum payments in lieu of a base salary increase;  and

 (c) Annual Bonus.

Payments by an Employer under a disability plan made in lieu of any compensation described above, shall be deemed to be a part of the respective form of compensation it replaces for purposes of this definition.  Base Compensation does not include zone allowances or any other geographical differential and shall not include payments made in lieu of unused vacation or other paid days off, and such payments shall not be contributed to this Plan.

Determinations by AT&T (the Committee with respect to Officer Level Employees) of the items that make up Base Compensation shall be final.  The Committee may, from time to time, add or subtract types of compensation to or from the definition of “Base Compensation” provided, however, any such addition or subtraction shall be effective only with respect to the next period in which a Participant may make an election to establish a Share Deferral Account.  Base Compensation that was payable in a prior Plan Year but paid in a later Plan Year shall not be used to determine Employee Contributions or Matching Contributions in such later Plan Year.

Business Day.   Any day during regular business hours that AT&T is open for business.

Change in Control.   With respect to AT&T’s direct and indirect ownership of an Employer, a “Change in the effective control of a Corporation,” as defined in Treasury Regulation Section 1.409A-3(i)(5)(vi)(A)(1), regardless of whether the Employer is a corporation or non corporate entity as permitted by the regulation, and using “50 percent” in lieu of “30 percent” in such regulation.  A Change in Control will not apply to AT&T itself.

Chief Executive Officer.   The Chief Executive Officer of AT&T Inc.

Code.   References to the Code shall be to provisions of the Internal Revenue Code of 1986, as amended, including regulations promulgated thereunder and successor provisions.  Similarly, references to regulations shall include amendments and successor provisions.

Committee.   The Human Resources Committee of the Board of Directors of AT&T Inc.

Disability. Absence of an Employee from work with an Employer under the relevant Employer's disability plan.

Eligible Employee.   An Employee who:
(a) is a full or part time, salaried Employee of AT&T or an Employer in which AT&T has a direct or indirect 100% ownership interest and who is on active duty or Leave of Absence (but only while such Employee is deemed by the Employer to be an Employee of such Employer);

(b) is, as determined by AT&T, a member of Employer's “select group of management or highly compensated employees” within the meaning of the Employee Retirement Income Security Act of 1974, as amended, and regulations thereunder (“ERISA”), which is deemed to include each Officer Level Employee; and

(c) has an employment status which has been approved by AT&T to be eligible to participate in this Plan or is an Officer Level Employee.
 
Notwithstanding the foregoing, AT&T (the Committee with respect to Officer Level Employees) may, from time to time, exclude any Employee or group of Employees from being deemed an “Eligible Employee” under this Plan.

In the event a court or other governmental authority determines that an individual was improperly excluded from the class of persons who would be permitted to make Employee Contributions during a particular time for any reason, that individual shall not be permitted to make such contributions for purposes of the Plan for the period of time prior to such determination.

            Employee.   Any person employed by an Employer and paid on an Employer’s payroll system, excluding persons hired for a fixed maximum term and excluding persons who are neither citizens nor permanent residents of the United States, all as determined by AT&T.   For purposes of this Plan, a person on Leave of Absence who otherwise would be an Employee shall be deemed to be an Employee.

Employee Contributions.   Amounts credited to a Share Deferral Account pursuant to Section 4.1 (Election to Make Contributions) of the Plan.

Employer.   AT&T Inc. or any of its Subsidiaries.

Exercise Price.   The price per share of Stock purchasable under an Option.

             Fair Market Value or FMV.   In valuing Stock or any other item subject to valuation under this Plan, the Committee may use such index or measurement as the Committee may reasonably determine from time to time, and such index or measurement shall be the FMV of such Stock or other item, provided that for purposes of determining the Exercise Price of Stock Options, the Committee shall use a value consistent with the requirements of Section 409A.  In the absence of such action by the Committee, FMV means, with respect to Stock, the closing price on the New York Stock Exchange (“NYSE”) of the Stock on the relevant date, or if on such date the Stock is not traded on the NYSE, then the closing price on the immediately preceding date such Stock is so traded.

Leave of Absence.   Where a person is absent from employment with an Employer on a leave of absence, military leave, sick leave, or Disability where the leave is given in order to prevent a break in the continuity of term of employment, and permission for such leave is granted (and not revoked) in conformity with the rules of the Employer that employs the individual, as adopted from time to time, and the Employee is reasonably expected to return to service.  Except as set forth below, the leave shall not exceed six (6) months for purposes of this Plan, and the Employee shall Terminate Employment upon termination of such leave if the Employee does not return to work prior to or upon expiration of such six (6) month period, unless the individual retains a right to reemployment under law or by contract.  A twenty-nine (29) month limitation shall apply in lieu of such six (6) month limitation if the leave is due to the Employee being "disabled" (within the meaning of Treasury Regulation §1.409A-3(i)(4)).  A Leave of Absence shall not commence or shall be deemed to cease under the Plan where the Employee has incurred a Termination of Employment.

Officer Level Employee.   Any executive officer of AT&T, as that term is used under the Securities Exchange Act of 1934, as amended, and any Employee that is an “officer level” Employee for compensation purposes as shown on the records of AT&T.

Options or Stock Options.   Options to purchase Stock issued pursuant to this Plan.

Participant.   An Employee or former Employee who participates in this Plan.

Plan Year.   Each of the following shall be a Plan Year:  the period January 1, 2005, through January 15, 2006; the period January 16, 2006, through December 31, 2006; and, for all later Plan Years, it is defined as the period from January 1 through December 31.

Retirement or Retire.   Termination of Employment on or after the earlier of the following dates, unless otherwise provided by the Committee:  (a) for Officer Level Employees, the date the Participant is at least age 55 and has five (5) years of Net Credited Service; or (b) the date the Participant has attained one of the following combinations of age and Net Credited Service:
 
               Net Credited Service                                    Age
                      10 years or more                                           65 or older
                      20 years or more                                           55 or older
                      25 years or more                                           50 or older
                      30 years or more                                           Any age

For purposes of this Plan only, Net Credited Service shall be calculated in the same manner as “Pension Eligibility Service” under the AT&T Pension Benefit Plan – Nonbargained Program (“Pension Plan”), as amended from time to time, except that service with an Employer shall be counted as though the Employer were a “Participating Company” under the Pension Plan and the Employee was a participant in the Pension Plan.

Shares or Share Units.   An accounting entry representing the right to receive an equivalent number of shares of Stock.

Share Deferral Account or Account.   The Account or Accounts established annually by an election by a Participant to make Employee Contributions to the Plan, with each Account relating to a Plan Year.  For each Plan Year after 2008, there shall be (1) a separate Share Deferral Account for Share Units purchased with Employee Contributions of Base Compensation (excluding Annual Bonus) and related Matching Share Units and (2) a separate Share Deferral Account for Share Units purchased with Employee Contributions of Short Term Incentive Award and/or Annual Bonus and any related Matching Share Units.  Earnings on Share Units and Matching Share Units shall accrue to the respective Share Deferral Accounts where they are earned.

Short Term Incentive Award.   A cash award paid by an Employer (and not by a non-Employer, such as state disability payments) under the Short Term Incentive Plan or any successor plan, together with any individual discretionary award made in connection therewith; an award under a similar plan intended by the Committee to be in lieu of an award under such Short Term Incentive Plan, including, but not limited to, Performance Units granted under the 2006 Incentive Plan or any successor plan.  It shall also include any other award that the Committee designates as a Short Term Incentive Award specifically for purposes of this Plan (regardless of the purpose of the award) provided the deferral election is made in accordance with Section 409A.

Specified Employee .  Any Participant who is a “Key Employee” (as defined in Code Section 416(i) without regard to paragraph (5) thereof), as determined by AT&T in accordance with its uniform policy with respect to all arrangements subject to Code Section 409A, based upon the 12-month period ending on each December 31st (such 12-month period is referred to below as the “identification period”).  All Participants who are determined to be Key Employees under Code Section 416(i) (without regard to paragraph (5) thereof) during the identification period shall be treated as Key Employees for purposes of the Plan during the 12-month period that begins on the first day of the 4th month following the close of such identification period.

Stock.   The common stock of AT&T Inc.

Subsidiary.   Any corporation, partnership, venture or other entity or business with which AT&T would be considered a single employer under Sections 414(a) and (c) of the Code, using 50% as the ownership threshold as provided under Section 409A of the Code.

Termination of Employment. References herein to “Termination of Employment," “Terminate Employment” or a similar reference, shall mean the event where the Employee has a “separation from service,” as defined under Section 409A, with all Employers. For purposes of this Plan, a Termination of Employment with respect to an Employer shall be deemed to also occur when such Employer incurs a Change in Control.


Article 3 - Administration of the Plan

3.1             The Committee .
Except as delegated by this Plan or by the Committee, the Committee shall be the administrator of the Plan and will administer the Plan, interpret, construe and apply its provisions and determine all questions of administration, interpretation and application of the Plan, including, without limitation, questions and determinations of eligibility, entitlement to benefits and payment of benefits, all in its sole and absolute discretion.  The Committee may further establish, adopt or revise such rules and regulations and such additional terms and conditions regarding participation in the Plan as it may deem necessary or advisable for the administration of the Plan.  References in this Plan to determinations or other actions by AT&T, herein, shall mean actions authorized by the Committee, the Chief Executive Officer, the Senior Executive Vice President of AT&T in charge of Human Resources, or their respective successors or duly authorized delegates, in each case in the discretion of such person.  All decisions by the Committee, its delegate or AT&T, as applicable, shall be final and binding.

3.2           Authorized Shares of Stock.
(a) Except as provided below, the number of shares of Stock which may be distributed pursuant to the Plan, exclusive of Article 8 - Options, is 21,000,000.  The number of shares of Stock which may be issued pursuant to the exercise of Stock Options is 34,000,000 (together with an equal number of Stock Options).  Only the actual number of shares of Stock that are issued (shares issued would not include, for example, any reduction in shares to be issued as a result of tax withholding in connection with a distribution of Stock, exercise of options, or otherwise) shall be counted against the authorized number of shares of Stock. To the extent an Option issued under this Plan is canceled, terminates, expires, or lapses for any reason, such Option shall again be available for issuance under the Plan.  Conversions of Stock awards into Share Units and their eventual distribution (excluding the effects of any dividends on such Share Units) shall count only against the limits of the plans from which they originated and shall not be applied against the limits in this Plan.  To the extent Share Units are credited through deferrals of Stock or Employee Contributions where the distribution of which would be deductible by AT&T under Section 162(m) of the Code without regard to the size of the distribution, and such deductible Share Units are available for distribution, such Share Units shall be distributed first.

(b)  In the event the Committee determines that continuing the issuance of Share Units under the Plan or Stock Options under the Plan may cause the number of shares of Stock that are to be distributed under this Plan or the number of Stock Options (as determined pursuant to subsection (a), above) to exceed the number of authorized shares of Stock, then in lieu of distributing Stock, the Committee may provide after such determination and only with respect to Share Units that have not theretofore been credited to a Share Deferral Account, that such Share Units may be settled in cash equal to the value of the Stock that would otherwise be distributed based on the FMV of the Stock on the date of the distribution of such Share Unit.  The Committee may also provide after such determination and only with respect to Stock Options that have not theretofore been issued that such Stock Options may only be settled on a Net-Settled basis in cash equal to the value of the Stock that would otherwise be distributed based on the FMV of the Stock on the day of exercise.

(c) 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 AT&T affecting the shares of Stock (including a conversion of Stock into cash or other property), such adjustment shall be made to the number and class of the shares of Stock which may be delivered under the Plan (including but not limited to individual limits), and in the number and class of and/or price of shares of Stock subject to outstanding Options granted under the Plan, and/or in the number of outstanding Options and Share Units, or such other adjustment determined by the Committee, in each case as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or enlargement of rights.
 
3.3             Claims and Appeals .
        
         (a)           Claims.  A person who believes that he or she is being denied a benefit to which he or she is entitled under this Plan (hereinafter referred to as a “Claimant”) may file a written request for such benefit with the Executive Compensation Administration Department, setting forth his or her claim. The request must be addressed to the AT&T Executive Compensation Administration Department at its then principal place of business.
 
         (b)           Claim Decision.  Upon receipt of a claim, the AT&T Executive Compensation Administration Department shall review the claim and provide the Claimant with a written notice of its decision within a reasonable period of time, not to exceed ninety (90) days, after the claim is received. If the AT&T Executive Compensation Administration Department determines that special circumstances require an extension of time beyond the initial ninety (90)- day claim review period, the AT&T Executive Compensation Administration Department shall notify the Claimant in writing within the initial ninety (90)-day period and explain the special circumstances that require the extension and state the date by which the AT&T Executive Compensation Administration Department expects to render its decision on the claim. If this notice is provided, the AT&T Executive Compensation Administration Department may take up to an additional ninety (90) days (for a total of one hundred eighty (180) days after receipt of the claim) to render its decision on the claim.
 
         If the claim is denied by the AT&T Executive Compensation Administration Department, in whole or in part, the AT&T Executive Compensation Administration Department shall provide a written decision using language calculated to be understood by the Claimant and setting forth:  (i) the specific reason or reasons for such denial; (ii) specific references to pertinent provisions of this Plan on which such denial is based; (iii) a description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation of why such material or such information is necessary; (iv) a description of the Plan’s procedures for review of denied claims and the steps to be taken if the Claimant wishes to submit the claim for review; (v) the time limits for requesting a review of a denied claim under this section and for conducting the review under this section ; and (vi)  a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA if the claim is denied following review under this section .
 
         (c)           Request for Review. Within sixty (60) days after the receipt by the Claimant of the written decision on the claim provided for in this section , the Claimant may request in writing that the Committee review the determination of the AT&T Executive Compensation Administration Department.  Such request must be addressed to the Committee at the address for giving notice in this Plan.  To assist the Claimant in deciding whether to request a review of a denied claim or in preparing a request for review of a denied claim, a Claimant shall be provided, upon written request to the Committee and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim.  The Claimant or his or her duly authorized representative may, but need not, submit a statement of the issues and comments in writing, as well as other documents, records or other information relating to the claim for consideration by the Committee.  If the Claimant does not request a review by the Committee of the AT&T Executive Compensation Administration Department’s decision within such sixty (60)-day period, the Claimant shall be barred and estopped from challenging the determination of the AT&T Executive Compensation Administration Department.
 
         (d)           Review of Decision.  Within sixty (60) days after the Committee’s receipt of a request for review, the Administrator will review the decision of the AT&T Executive Compensation Administration Department.  If the Committee determines that special circumstances require an extension of time beyond the initial sixty (60)-day review period, the Committee shall notify the Claimant in writing within the initial sixty (60)-day period and explain the special circumstances that require the extension and state the date by which the Committee expects to render its decision on the review of the claim.  If this notice is provided, the Committee may take up to an additional sixty (60) days (for a total of one hundred twenty (120) days after receipt of the request for review) to render its decision on the review of the claim.
 
During its review of the claim, the Committee shall:
 
(1)           Take into account all comments, documents, records, and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial review of the claim conducted pursuant to this section;
 
(2)           Follow reasonable procedures to verify that its benefit determination is made in accordance with the applicable Plan documents; and
 
(3)           Follow reasonable procedures to ensure that the applicable Plan provisions are applied to the Participant to whom the claim relates in a manner consistent with how such provisions have been applied to other similarly-situated Participants.
 
After considering all materials presented by the Claimant, the Committee will render a decision, written in a manner designed to be understood by the Claimant.  If the Committee denies the claim on review, the written decision will include (i) the specific reasons for the decision; (ii) specific references to the pertinent provisions of this Plan on which the decision is based; (iii) a statement that the Claimant is entitled to receive, upon request to the Committee and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim; and (iv) a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA.
 
The Committee shall serve as the final review committee under the Plan and shall have sole and complete discretionary authority to administer, interpret, construe and apply the Plan provisions, and determine all questions of administration, interpretation, construction, and application of the Plan, including questions and determinations of eligibility, entitlement to benefits and the type, form and amount of any payment of benefits, all in its sole and absolute discretion.  The Committee shall further have the authority to determine all relevant facts and related issues, and all documents, records and other information relevant to a claim conclusively for all parties, and in accordance with the terms of the documents or instruments governing the Plan.  Decisions by the Committee shall be conclusive and binding on all parties and not subject to further review.
 
In any case, a Participant or Beneficiary may have further rights under ERISA. The Plan provisions require that Participants or Beneficiary pursue all claim and appeal rights described in this section before they seek any other legal recourse regarding claims for benefits.
 

Article 4 - Contributions

4.1             Election to Make Contributions.
(a)   The Committee shall establish dates and other conditions for participation in the Plan and making contributions as it deems appropriate.  Except as otherwise provided by the Committee, each year an Employee who is an Eligible Employee as of September 30 may thereafter make an election on or prior to the last Business Day of the immediately following November (such election shall be cancelled if the Employee is not an Eligible Employee on the last day such an election may be made) to contribute on a pre-tax basis, through payroll deductions, any combination of the following:

(1)  From 6% to 30% (in whole percentage increments) of the Participant’s monthly Base Compensation, other than Annual Bonus, during the calendar year (the Plan Year for such contributions) following the calendar year of such election.  The Employee Contributions shall be used to acquire Share Units to be credited to the Share Deferral Account for that Plan Year.
(2)  Up to 95% (in whole percentage increments or limited to the target amount) of a Short Term Incentive Award, or from 6% to 30% (in whole percentage increments) of Annual Bonus, in each case such contributions shall be made during the second calendar year (which is the Plan Year for such contributions) following the year of such election, except that in 2008 a separate election may be made with respect to contributions to be made in 2009. An Employee may make such an election with respect to the type of Award (Short Term Incentive Award or Annual Bonus) that the Employee is under as of the time the Employee’s eligibility to make such election is determined.  If because of a promotion or otherwise, the Employee receives a different type of Award instead of, or in partial or full replacement for, the type of Award subject to the Employee’s election for the relevant Plan Year, the election will apply to the other Award as well, including but not limited to any individual discretionary award related thereto.

(b)  The Committee may permit an Eligible Employee to make an election to purchase Share Units under this Plan with compensation other than Base Compensation or Short Term Incentive Awards on such terms and conditions as such Committee may permit from time to time, provided that any such election is made in accordance with Section 409A of the Code.  In no event shall an acquisition of Share Units pursuant to this paragraph (b) or pursuant to the conversion of a right to receive Stock into Share Units (such as through a distribution of Stock under the 2001 Incentive Plan) result in the crediting of an AT&T Matching Contribution or Options.

(c) Notwithstanding anything to the contrary in this Plan, no election shall be effective to the extent it would permit an Employee Contribution or distribution to be made that is not in compliance with Section 409A of the Code.  To the extent such election related to Employee Contributions that complied with such statute and regulations thereunder, that portion of the election shall remain valid, except as otherwise provided under this Plan.

(d)  To the extent permitted by Section 409A of the Code, AT&T may refuse or terminate, in whole or in part, any election to purchase Share Units in the Plan at any time; provided, however, that only the Committee may take such action with respect to persons who are Officer Level Employees.

(e)  In the event the Participant takes a hardship withdrawal pursuant to Treasury Regulation §1.401(k)-1 from a benefit plan qualified under the Code and sponsored by an Employer, any election to make Employee Contributions by such Participant shall be cancelled on a prospective basis, and the Participant shall not be permitted to make a new election with respect to Employee Contributions that would be contributed during the then current and immediately following calendar year.

4.2           Purchase of Share Units.
(a) Employee Contributions (as well as any corresponding AT&T Matching Contributions) shall be made pursuant to a proper election, only during the Participant’s lifetime; provided, however, with respect to Employee Contribution elections made prior to 2007, the Employee must remain an Eligible Employee while making any such contributions.  In the event of a Change in Control of an Employer, subsequent compensation from the Employer may not be contributed to the Plan.  The Employer may continue the then current elections of the participants under a subsequent plan in order to comply with applicable tax laws.

(b)  The number of Share Units purchased by a Participant during a calendar month shall be found by dividing the Participant's Employee Contributions during the month by the FMV of a share of Stock on the last day of such month.

(c)  A contribution to the Plan shall be made when the compensation – from which the contribution is to be deducted – is to be paid (“paid,” as used in this Plan, includes amounts contributed to the Plan that would have been paid were it not for an election under this Plan), as determined by the relevant Employer.   The Committee may modify or change this paragraph (c) from time to time.

4.3             Reinvestment of Dividends.
In the month containing a record date for a cash dividend on Stock, each Share Deferral Account shall be credited with that number of Share Units equal to the declared dividend per share of Stock, multiplied by the number of Share Units held in such Share Deferral Account as of such record date, and dividing the product by the FMV of a share of Stock on the last day of such month.

 

Article 5 - AT&T Matching Contributions

5.1             AT&T Match.
(a) Each month AT&T shall credit the Participant's relevant Share Deferral Account with  the number of “Matching Share Units” found by taking eighty percent (80%) of the Participant's Employee Contributions from Base Compensation made to this Plan and to the Cash Deferral Plan during the month with respect to the first six percent (6%) of the Participant’s monthly Match Eligible Compensation (as defined below) and dividing the resulting figure by the FMV of the Stock on the last day of such month. The monthly “Match Eligible Compensation” shall be the sum of:

(1) the monthly Employee Contributions from Base Compensation to this Plan and the Cash Deferral Plan (in the aggregate, “Deferred BC”), plus

(2) the amount of the Participant’s monthly Base Compensation in excess of the Deferred BC (“Non-Deferred BC”) but only to the extent such monthly Non-Deferred BC, when aggregated with the Participant’s total Non-Deferred BC for prior months in such Plan Year, as determined by the relevant Employer, exceeds the limit in effect under Section 401(a)(17) of the Code applicable with respect to such Plan Year.

The foregoing formula shall apply regardless of whether or not the Participant makes contributions to a 401(k) plan.

A Participant may receive Matching Share Units in a Share Deferral Account for a particular form of compensation only if the Participant is then making contributions to the same Share Deferral Account; provided, however, this condition shall not apply for purposes of determining under Section 5.1(a)(2) whether the limit described therein has been reached.
 
As provided in the definition of Share Deferral Account, Matching Share Units shall be credited to the respective Share Deferral Account that is related to the same form of Employee Contributions (either (1) Base Compensation excluding Annual Bonus or (2) Annual Bonus).

(b) In the sole discretion of the Committee, in the event the Committee reduces the number of Options that AT&T issues for each Share Unit purchased, the Committee may provide for the contribution of a Bonus Matching Contribution on such terms as the Committee determines.  Such Bonus Matching Contribution may not exceed 20% of the Participant’s Employee Contributions for the month.  The Bonus Matching Contribution shall be subject to such terms and conditions as required by the Committee and, unless otherwise provided by the Committee, to the same vesting and distribution requirements as AT&T Matching Contributions.

5.2             Distribution of Share Units Acquired with Matching Contributions .
A Participant's Matching Share Units shall be distributed in a lump sum, in accordance with the Plan's distribution provisions, in the earlier of: (a) the calendar year following the calendar year of the Termination of Employment of the Participant, or (b) the calendar year in which the Participant reaches age 55, in each case only with respect to Matching Share Units relating to Share Deferral Accounts for Plan Years before such distribution calendar year.

Matching Share Units acquired as part of a Share Deferral Account that commences in or after the calendar year the Employee reaches age 55 or after the calendar year in which the Employee Terminates Employment will be distributed in the same manner and time as other Share Units in such Share Deferral Account.

Notwithstanding anything to the contrary in this section, Matching Share Units acquired in 2008 and later shall be distributed at the same time as other Share Units (including those acquired with Employee Contributions) in the same Share Deferral Account.


Article 6 - Distributions

6.1
Distributions of Share Units.
(a)  Initial Election with Respect to a Share Deferral Account.  At the time the Participant makes an election to make Employee Contributions with respect to a Share Deferral Account, the Participant shall also elect the calendar year the Share Deferral Account shall be distributed, which may be from the first through fifth calendar years after the Plan Year the Account commenced (except as otherwise provided in this Plan with respect to Matching Share Units).  For example, if an Account commenced in 2005, the Participant may elect to commence the distribution in any calendar year from and including 2006 to and including 2010.  If no timely distribution election is made by the Participant, then the Participant will be deemed to have made an election to have the Share Deferral Account distributed in a single installment in the first calendar year after the calendar year the Account commenced.  However, for purposes of Initial Elections with respect to Plan Years prior to 2008 only, in the event the Participant Terminates Employment, the distribution of the Share Deferral Unit shall occur in the calendar year following the calendar year of the Participant’s Termination of Employment unless the Employee has made an irrevocable election under (b), below.

(b)  Election to Delay a Scheduled Distribution.  A Participant may elect to defer a scheduled distribution of a Share Deferral Account for five (5) additional calendar years beyond that previously elected (except as otherwise provided in this Plan with respect to Matching Share Units).  Unless otherwise provided by the Committee, the election to defer the distribution must be made on or after October 1, and on or before the last Business Day of the next following December, of the calendar year that is the second calendar year preceding the calendar year of the relevant scheduled distribution.  To make this election, the Participant must be an Eligible Employee both on the September 30 immediately preceding such election and on the last day such an election may be made.  For example, an election to defer a scheduled distribution in 2010 must be made during the period from October 1, 2008, through the last business day of December 2008, and the Participant must be an Eligible Employee both on September 30, 2008, and the last business day of December 2008.  An election to defer the distribution of a Share Deferral Account may not be made in the same calendar year that the election to establish the Share Deferral Account is made.  Notwithstanding anything to the contrary in this Plan, (1) an election to defer the distribution of a Share Deferral Account must be made at least 12 months prior to the date of the first scheduled payment under the prior distribution election and (2) the election shall not take effect until at least 12 months after the date on which the election is made.

(c)  A Participant’s Share Deferral Account shall be distributed to the Participant on March 10 (or as soon thereafter as administratively practicable as determined by AT&T) of the calendar year elected by the Participant for that Account.  In the event the distribution is to be made to a “Specified Employee” as a result of the Participant’s Termination of Employment (other than as a result of a Change in Control), the distribution shall not occur until the later of such March 10 or six (6) months after the Termination of Employment, except it shall be distributed upon the Participant’s earlier death in accordance with this Plan.

6.2           Death of the Participant.
In the event of the death of a Participant, notwithstanding anything to the contrary in this Plan, all undistributed Share Deferral Accounts shall be distributed to the Participant's beneficiary in accordance with the AT&T Rules for Employee Beneficiary Designations, as the same may be amended from time to time, within the later of 90 days following such determination or the end of the calendar year in which determination was made.

6.3             Unforeseeable Emergency Distribution .
If a Participant experiences an “Unforeseeable Emergency,” the Participant may submit a written petition to AT&T (the Committee in the case of Officer Level Employees), to receive a partial or full distribution of his Share Deferral Account(s).  In the event that AT&T (the Committee in the case of Officer Level Employees), upon review of the written petition of the Participant, determines in its sole discretion that the Participant has suffered an “Unforeseeable Emergency,” AT&T shall make a distribution to the Participant from the Participant’s Share Deferral Accounts (other than Matching Share Units), on a pro-rata basis, within the later of 90 days following such determination or the end of the calendar year in which determination was made, subject to the following:

(a)       “Unforeseeable Emergency” shall mean a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s legal spouse, the Participant’s beneficiary, or the Participant’s dependent (as defined in Code Section 152, without regard to Code Section 152(b)(1), (b)(2), and (d)(1)(B)); loss of the Participant’s property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Committee.  Whether a Participant is faced with an Unforeseeable Emergency permitting a distribution is to be determined based on the relevant facts and circumstances of each case, but, in any case, a distribution on account of Unforeseeable Emergency shall not be made to the extent that such emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not cause severe financial hardship, or by cessation of deferrals under the Plan.

(b)       The amount of a distribution to be made because of an Unforeseeable Emergency shall not exceed the lesser of (i) the FMV of the Participant's vested Share Deferral Account, calculated as the date on which the amount becomes payable, as determined by AT&T (the Committee in the case of Officer Level Employees) in its sole discretion, and (ii) the amount reasonably necessary, as determined by the AT&T (the Committee in the case of Officer Level Employees) in its sole discretion, to satisfy the emergency need (which may include amounts necessary to pay any Federal, state, local, or foreign income taxes or penalties reasonably anticipated to result from the distribution).  Determinations of the amount reasonably necessary to satisfy the emergency need shall take into account any additional compensation that is available if the plan provides for cancellation of a deferral election upon a payment due to an Unforeseeable Emergency.  The determination of amounts reasonably necessary to satisfy the Unforeseeable Emergency need is not required to, but may, take into account any additional compensation that, due to the Unforeseeable Emergency, is available under another nonqualified deferred compensation plan but has not actually been paid, or that is available due to the Unforeseeable Emergency under another plan that would provide for deferred compensation except due to the application of the effective date provisions under Treasury Regulation §1.409A-6.

(c)       Upon such distribution on account of an Unforeseeable Emergency under this Plan, any election to make Employee Contributions by such Participant shall be immediately cancelled, and the Participant shall not be permitted to make a new election with respect to Employee Contributions that would be contributed during the then current and immediately following calendar year.

6.4           Ineligible Participant.
Notwithstanding any other provisions of this Plan to the contrary, if AT&T receives an opinion from counsel selected by AT&T, or a final determination is made by a Federal, state or local government or agency, acting within its scope of authority, to the effect that an individual’s continued participation in the Plan would violate applicable law, then such person shall not make further contributions to the Plan to the extent permitted by Section 409A of the Code.

6.5
Distribution Process.
A Share Deferral Account shall be distributed under this Plan by taking the number of Share Units comprising the Account to be distributed and converting them into an equal number of shares of Stock.  (Once distributed, a Share Unit shall be canceled.)


Article 7 - Transition Provisions

7.1
Stockholder Approval
The Plan was approved by Stockholders at the 2005 Annual Meeting of Stockholders.

7.2             2005 Share Deferral Accounts.
Notwithstanding Article 4 to the contrary, if an Employee is an Eligible Employee on September 30, 2004, the Employee may make an election under Article 4 on or prior to December 15, 2004, with respect to the establishment of a Share Deferral Account for the (i) contribution of Base Compensation and/or Short Term Incentive Awards paid during the period from January 1, 2005, through January 15, 2006, which shall be the Plan Year for such Share Deferral Account; and/or (ii) the conversion of a distribution of Stock that would be made during the same Plan Year pursuant to the 2001 Incentive Plan into an equal number of Share Units, so long as such conversion would not cause the recognition of income for Federal income tax purposes in respect of such distribution of Stock prior to distribution of Share Units under this Plan.
 
7.3           2007 Amendments.
(a) Amendments made to the Plan on November 15, 2007, shall be effective January 1, 2008. except for amendments to this Article 7, which shall be effective upon adoption.  Any Participants electing prior to November 15, 2007, to make Employee Contributions in 2008 shall have their elections canceled if they do not consent by December 14, 2007, to all prior amendments to this Plan and to the Cash Deferral Plan.  Subject to the foregoing consent requirements, all Employee Contribution elections made prior to 2008, including but not limited to elections to contribute Stock that would be distributed under the 2001 Incentive Plan or a successor plan, shall remain in force, subject to all other terms of the amended Plan. In addition, all unvested but not forfeited Matching Share Units shall vest on November 15, 2007.  Matching Shares that have been forfeited shall not be reinstated, and no amendment to this Plan shall be interpreted as reinstating such forfeitures.

 (b)  Not withstanding anything to the contrary in this Plan, a Participant who as of December 29, 2006, was eligible for an additional payment pursuant to Section 4A of the BellSouth Corporation Executive Incentive Award Deferral Plan shall not, with respect to the 2008 Plan Year, receive Matching Share Units on Base Compensation that exceeds $230,000.

7.4           2008 Amendments.
For Plan Years prior to 2009, Participants who, at the time of the determination of their eligibility to participate in an Account, are paid through a “sales plan” involving the use of commissions may elect to contribute up to 40% of Base Compensation.  For the 2008 Plan Year, only Salary and Short Term Incentive Awards paid after Termination of Employment may be contributed to the Plan.


Article 8 - Options

8.1             Grants.
Options may be issued in definitive form or recorded on the books and records of AT&T for the account of the Participant, at the discretion of AT&T.  If AT&T 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 AT&T 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 Committee 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.

8.2             Term of Options.
The Options may only be exercised:  (a) after the earlier of (i) the expiration of one (1) year from date of issue or (ii) the Participant's Termination of Employment, and (b) no later than the tenth (10 th ) anniversary of their issue; and Options shall be subject to earlier termination as provided herein.

8.3             Exercise Price.
The Exercise Price of an Option shall be the FMV of the Stock on the date of issuance of the Option, and an Option may not be repriced.

8.4             Issuance of Options .

(a)  For each Share Deferral Account established by a Participant:

(1)  on June 15 of the Plan Year for the Share Deferral Account, the Participant shall receive two (2) Options for each Share Unit acquired by the Participant as part of such Share Deferral Account during the immediately preceding January through May period with Employee Contributions of Base Compensation and/or Short Term Incentive Award.  A fractional number of Options shall be rounded up to the next whole number.

(2)  on the February 15 immediately following the Plan Year for the Share Deferral Account, a Participant shall receive:
 
(i)   two (2) Options for each Share Unit acquired by the Participant as part of such Share Deferral Account during the immediately preceding June through the remainder of the relevant Plan Year with Employee Contributions of Base Compensation and/or Short Term Incentive Award; and

(ii)      two (2) Options for each Share Unit acquired prior to such date by the Participant with dividend equivalents that were derived, directly or indirectly (such as dividend equivalents paid on Share Units acquired with dividend equivalents), from Share Units acquired with Employee Contributions as part of such Share Deferral Account.

(b) A fractional number of Options shall be rounded up to the next whole number.

(c) If Stock is not traded on the NYSE on any of the foregoing Option issuance dates, then the Options shall not be issued until the next such day on which Stock is so traded.

(d) If a Participant Terminates Employment other than (i) while Retirement eligible or (ii) because of death or Disability, no further Options shall be issued to or with respect to such Participant.  In the event of re-Employment following a Termination of Employment, the preceding sentence shall not apply to those Options resulting from participation in the Plan after such re-Employment until a subsequent Termination of Employment.

(e) No more than 400,000 Options shall be issued to any individual under this Plan during a calendar year.  No Share Unit may be counted more than once for the issuance of Options.

(f) The Committee may, in its sole discretion, at any time, increase or lower the number of Options that are to be issued for each Share Unit acquired, not to exceed two (2) Options per Share Unit purchased.  However, if the Committee lowers the number of Options, then such change shall only be effective with respect to the next Share Deferral Account a Participant may elect to establish.

(g) The Committee may also, at any time and in any manner, limit the number of Options which may be acquired as a result of the Short Term Incentive Award being contributed to the Plan.  Further, except as otherwise provided by the Committee, in determining the number of Options to be issued to a Participant with respect to a Participant's contribution of a Short Term Incentive Award to the Plan and subsequent crediting of Share Units, Options may be issued only with respect to an amount which does not exceed the target amount of such award (or such other portion of the award as may be determined by the Committee).  Where a Participant’s election to contribute a Short Term Incentive Award to the Plan becomes applicable to Annual Bonus, the above limitation on options shall apply to the contribution of Annual Bonus as though it were a Short Term Incentive Award.

(h) No options shall be issued to or in respect of a Participant for a particular issuance, unless at least ten (10) Options will be issued to that Participant.

8.5             Exercise and Payment of Options .
Options shall be exercised by providing notice to the designated agent selected by AT&T (if no such agent has been designated, then to AT&T), in the manner and form determined by AT&T, 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 Exercise Price.  When Options have been transferred, AT&T 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.

Exercises of Options may be effected only on days and during the hours that the New York Stock Exchange is open for regular trading or as otherwise provided or limited by AT&T.  If an Option expires on a day or at a time when exercises are not permitted, then the Options may be exercised no later than the immediately preceding date and time that the Options were exercisable.

The Exercise Price shall be paid in full at the time of exercise.  No Stock shall be issued or transferred until full payment has been received therefore.

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 AT&T may impose from time to time, and further subject to suspension or termination of this provision by AT&T 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; 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 AT&T that the Stock tendered to AT&T must have been held by the Participant for a minimum of six (6) months preceding the tender; or

(ii) if AT&T has designated a stockbroker to act as AT&T'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 (which shall include an exercise notice that becomes effective upon execution of a sell order) a sufficient portion of the Stock 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 AT&T.  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 AT&T 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 Exercise Price and tax withholding) are paid to AT&T.

If payment is made by the delivery of Stock, the value of the Stock delivered shall be equal to the FMV of the Stock on the day preceding the date of exercise of the Option.

Restricted Stock may not be used to pay the Option exercise price.

8.6             Restrictions on Exercise and Transfer.
No Option shall be transferable except: (a) upon the death of a Participant in accordance with AT&T's Rules for Employee Beneficiary Designations, as the same may be amended from time to time; and (b) in the case of any holder after the Participant's death, only by will or by the laws of descent and distribution.  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, 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.  In each such case the Option holder shall be considered a Participant for the limited purpose of exercising such Options.

8.7             Termination of Employment .
(a)   Not Retirement Eligible.   Unless otherwise provided by the Committee, if a Participant Terminates Employment while not Retirement eligible, a Participant's Options may be exercised, to the extent then exercisable:

(i) if such Termination of Employment is by reason of death or Disability, then for a period of three (3) years from the date of such Termination of Employment or until the expiration of the stated term of such Option, whichever period is shorter; or

(ii) if such Termination of Employment is for any other reason, then for a period of one (1) year from the date of such Termination of Employment or until the expiration of the stated term of such Option, whichever period is shorter.

(b)   Retirement Eligible.   Unless otherwise provided by the Committee, if a Participant Terminates Employment while Retirement eligible, the Participant's Option may be exercised, to the extent then exercisable:  (i) for a period of five (5) years from the date of Retirement or (ii) until the expiration of the stated term of such Option, whichever period is shorter.

(c) Re-Employment of a Participant after a Termination of Employment shall have no effect on the periods during which Options resulting from the prior Employment may be exercised.  For example, if the Option exercise period has been shortened because of the prior Termination of Employment, it shall not be extended because of the re-Employment.

(d)  Notwithstanding any other definition of Termination of Employment under this Plan, for purposes of this Article 8 – Options only, a Termination of Employment shall mean the cessation of the Employee being employed by any corporation, partnership, venture or other entity in which AT&T holds, directly or indirectly, a 50% or greater ownership interest, including but not limited to where AT&T ceases to hold such interest in the employing company.  In addition, the definition of Retirement for purposes of this Article 8 shall use the immediately foregoing definition of Termination of Employment in  lieu of any other definition.



Article 9 - Discontinuation, Termination, Amendment .

9.1             AT&T's Right to Discontinue Offering Share Units.
The Committee may at any time discontinue offerings of Share Units under the Plan.  Any such discontinuance shall have no effect upon existing Share Units or the terms or provisions of this Plan as applicable to such Share Units.

9.2             AT&T's Right to Terminate Plan.
The Committee may terminate the Plan at any time.  Upon termination of the Plan, contributions shall no longer be made under the Plan.

After termination of the Plan, Participants shall continue to earn dividend equivalents in the form of Share Units on undistributed Share Units and shall continue to receive all distributions under this Plan at such time as provided in and pursuant to the terms and conditions of Participant's elections and this Plan.  Notwithstanding the foregoing, the termination of the Plan shall be made solely in accordance with Section 409A of the Code and in no event shall cause the accelerated distribution of any Account unless such termination is effected in accordance with Section 409A of the Code.

9.3
Amendment .
The Committee 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 AT&T Matching Contributions under Article 5 or decreasing the number of Options to be issued under Article 8; provided, however, that no amendment, including but not limited to an amendment to this section, shall be effective, without the consent of a Participant, to alter, to the material detriment of such Participant, a Share Deferral Account of the Participant, other than as provided elsewhere in this section.   For purposes of this section, an alteration to the material detriment of a Participant shall include, but not be limited to, a material reduction in the period of time over which Stock may be distributed to a Participant, any reduction in the Participant's number of vested Share Units or Options, or an increase in the Exercise Price or decrease in the term of an Option.   Any such consent may be in a writing, telecopy, or e-mail or in another electronic format. An election to acquire Share Units with Employee Contributions shall be conclusively deemed to be the consent of the Participant to any and all amendments to the Plan prior to such election, and such consent shall be a condition to making any election with respect to Employee Contributions.

Notwithstanding anything to the contrary contained in this section of the Plan, the Committee 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.

The Plan is established in order to provide deferred compensation to a select group of management and highly compensated employees with in the meaning of Sections 201(2) and 301(a)(3) of ERISA. To the extent legally required, the Code and ERISA shall govern the Plan, and if any provision hereof is in violation of an applicable requirement thereof, the Company reserves the right to retroactively amend the Plan to comply therewith to the extent permitted under the Code and ERISA.  The Company also reserves the right to make such other changes as may facilitate implementation of Section 409A of the Code.  Provided, however, that in no event shall any such amendments be made in violation of the requirements of Section 409A of the Code.


Article 10 – Miscellaneous.

10.1             Tax Withholding .
Upon distribution of Stock, including but not limited to, shares of Stock issued upon the exercise of an Option, AT&T shall withhold shares of Stock sufficient in value, using the FMV on the date determined by AT&T to be used to value the Stock for tax purposes, to satisfy the minimum amount of Federal, state, and local taxes required by law to be withheld as a result of such distribution.

Any fractional share of Stock payable to a Participant shall be withheld as additional Federal withholding, or, at the option of AT&T, paid in cash to the Participant.

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 8.5, 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 FMV of the Stock.

10.2             Elections and Notices.
Notwithstanding anything to the contrary contained in this Plan, all elections and notices of every kind under this Plan shall be made on forms prepared by AT&T or the General Counsel, Secretary or Assistant Secretary, or their respective delegates or shall be made in such other manner as permitted or required by AT&T or the General Counsel, Secretary or Assistant Secretary, or their respective delegates, including through electronic means, over the Internet or otherwise.  An election shall be deemed made when received by AT&T (or its designated agent, but only in cases where the designated agent has been appointed for the purpose of receiving such election), which may waive any defects in form.  Unless made irrevocable by the electing person, each election with regard to making Employee Contributions or distributions of Share Deferral Accounts shall become irrevocable at the close of business on the last day to make such election. AT&T may limit the time an election may be made in advance of any deadline.

If not otherwise specified by this Plan or AT&T, any notice or filing required or permitted to be given to AT&T under the Plan shall be delivered to the principal office of AT&T, directed to the attention of the Senior Executive Vice President in charge of Human Resources for AT&T or his or her successor.  Such notice shall be deemed given on the date of delivery.

Notice to the Participant shall be deemed given when mailed (or sent by telecopy) to the Participant's work or home address as shown on the records of AT&T or, at the option of AT&T, to the Participant's e-mail address as shown on the records of AT&T.  It is the Participant's responsibility to ensure that the Participant's addresses are kept up to date on the records of AT&T.  In the case of notices affecting multiple Participants, the notices may be given by general distribution at the Participants' work locations.

By participating in the Plan, each Participant agrees that AT&T may provide any documents required or permitted under the Federal or state securities laws, including but not limited to the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, by e-mail, by e-mail attachment, or by notice by e-mail of electronic delivery through AT&T's Internet Web site or by other electronic means.

10.3             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 any Employer.  No assets of any 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 any Employer under this Plan.  Any and all of each Employer's assets shall be, and remain, the general, unpledged, unrestricted assets of such Employer.  The only obligation of an Employer under the Plan shall be merely that of an unfunded and unsecured promise of AT&T to distribute shares of Stock corresponding to Share Units and Options, under the Plan.
 
10.4             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 Share Units 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.

10.5             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 an Employer or to serve as a director.

10.6           Errors.
At any time AT&T or an Employer may correct any error made under the Plan without prejudice to AT&T or any Employer.  Neither AT&T nor any Employer shall be liable for any damages resulting from failure to timely allow any contribution to be made to the Plan or for any damages resulting from the correction of, or a delay in correcting, any error made under the Plan.  In no event shall AT&T or any Employer be liable for consequential or incidental damages arising out of a failure to comply with the terms of the Plan.

10.7
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.

10.8          Governing Law .
To the extent not preempted by Federal law, the Plan, and all benefits and agreements hereunder, and any and all disputes in connection therewith, shall be governed by and construed in accordance with the substantive laws of the State of Texas, without regard to conflict or choice of law principles which might otherwise refer the construction, interpretation or enforceability of this Plan to the substantive law of another jurisdiction.

Because benefits under the Plan are granted in Texas, records relating to the Plan and benefits thereunder are located in Texas, and the Plan and benefits thereunder are administered in Texas, AT&T and the Participant under this Plan, for themselves and their successors and assigns, irrevocably submit to the exclusive and sole jurisdiction and venue of the state or Federal courts of Texas with respect to any and all disputes arising out of or relating to this Plan, the subject matter of this Plan or any benefits under this Plan, including but not limited to any disputes arising out of or relating to the interpretation and enforceability of any benefits or the terms and conditions of this Plan.  To achieve certainty regarding the appropriate forum in which to prosecute and defend actions arising out of or relating to this Plan, and to ensure consistency in application and interpretation of the Governing Law to the Plan, the parties agree that (a) sole and exclusive appropriate venue for any such action shall be an appropriate Federal or state court in Dallas County, Texas, and no other, (b) all claims with respect to any such action shall be heard and determined exclusively in such Texas court, and no other, (c) such Texas court shall have sole and exclusive jurisdiction over the person of such parties and over the subject matter of any dispute relating hereto and (d) that the parties waive any and all objections and defenses to bringing any such action before such Texas court, including but not limited to those relating to lack of personal jurisdiction, improper venue or forum non conveniens .

10.9          Plan to Comply with Section 409A.
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.  Notwithstanding any provision to the contrary in this Plan, each provision in this Plan shall be interpreted to permit the deferral of compensation in accordance with Section 409A of the Code and any provision that would conflict with such requirements shall not be valid or enforceable.

10.10        Successors and Assigns .
This Plan shall be binding upon AT&T and its successors and assigns.

10.11       Loyalty Conditions.
 
(a)   By making an Employee Contribution election under Section 4.1 of this Plan after September 1, 2009, a Participant acknowledges that AT&T would be unwilling to provide for such an election but for the loyalty conditions and covenants set forth in this section, and that the conditions and covenants herein are a material inducement to AT&T’s willingness to sponsor the Plan and to offer Plan benefits for the Participants.  Accordingly, as a condition to making an Employee Contribution election under Section 4.1 of this Plan after September 1, 2009,  each such electing Participant is deemed to agree that he shall not, without obtaining the written consent of the Committee in advance, participate in activities that constitute engaging in competition with AT&T or engaging in conduct disloyal to AT&T, as those terms are defined in this section.
 
(b)   Definitions .  For purposes of this section and of the Plan generally:
 
(i)   an “Employer Business” shall mean AT&T Inc. and any of its Subsidiaries, or any business in which they or any affiliate of theirs has a substantial ownership or joint venture interest;
 
(ii)   “engaging in competition with AT&T” shall mean, while employed by AT&T or any of its Subsidiaries, or within two (2) years after Participant’s Termination of Employment, engaging by the Participant in any business or activity in all or any portion of the same geographical market where the same or substantially similar business or activity is being carried on by an Employer Business.  “Engaging in competition with AT&T” shall not include owning a non-substantial publicly traded interest as a shareholder in a business that competes with an Employer Business.  “Engaging in competition with AT&T” shall include representing or providing consulting services to, or being an employee of, any person or entity that is engaged in competition with any Employer Business or that takes a position adverse to any Employer Business.
 
(iii)   “engaging in conduct disloyal to AT&T” means, while employed by AT&T or any of its Subsidiaries, or within two (2) years after Participant’s Termination of Employment, (i) soliciting for employment or hire, whether as an employee or as an independent contractor, for any business in competition with an Employer Business, any person employed by AT&T or any of its Subsidiaries during the one (1) year prior to the Participant’s Termination of Employment, whether or not acceptance of such position would constitute a breach of such person’s contractual obligations to AT&T or any of its Subsidiaries; (ii) soliciting, encouraging, or inducing any vendor or supplier with which Participant had business contact on behalf of any Employer Business during the two (2) years prior to the Participant’s Termination of Employment (regardless of the reason for that termination) to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with AT&T or any of its Subsidiaries; or (iii) soliciting, encouraging, or inducing any customer or active prospective customer with whom Participant had business contact, whether in person or by other media (“Customer”), on behalf of any Employer Business during the two (2) years prior to the Participant’s Termination of Employment (regardless of the reason for that termination), to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with any Employer Business, or to purchase competing goods or services from a business competing with any Employer Business, or accepting or servicing business from such Customer on behalf of himself or any other business.  “Engaging in conduct disloyal to AT&T” shall also mean, disclosing Confidential Information to any third party or using Confidential Information, other than for an Employer Business, or failing to return any Confidential Information to the Employer Business following termination of employment.
 
(iv)   “Confidential Information” shall mean all information belonging to, or otherwise relating to, an Employer Business, which is not generally known, regardless of the manner in which it is stored or conveyed to Participant, and which the Employer Business has taken reasonable measures under the circumstances to protect from unauthorized use or disclosure.  Confidential Information includes trade secrets as well as other proprietary knowledge, information, know-how, and non-public intellectual property rights, including unpublished or pending patent applications and all related patent rights, formulae, processes, discoveries, improvements, ideas, conceptions, compilations of data, and data, whether or not patentable or copyrightable and whether or not it has been conceived, originated, discovered, or developed in whole or in part by Participant.  For example, Confidential Information includes, but is not limited to, information concerning the Employer Business’ business plans, budgets, operations, products, strategies, marketing, sales, inventions, designs, costs, legal strategies, finances, employees, customers, prospective customers, licensees, or licensors; information received from third parties under confidential conditions; or other valuable financial, commercial, business, technical or marketing information concerning the Employer Business, or any of the products or services made, developed or sold by the Employer Business.  Confidential Information does not include information that (i) was generally known to the public at the time of disclosure; (ii) was lawfully received by Participant from a third party; (iii) was known to Participant prior to receipt from the Employer Business; or (iv) was independently developed by Participant or independent third parties; in each of the foregoing circumstances, this exception applies only if such public knowledge or possession by an independent third party was without breach by Participant or any third party of any obligation of confidentiality or non-use, including but not limited to the obligations and restrictions set forth in this Plan.
 
(c)   Equitable Relief.  The parties recognize that any Participant’s breach of any of the covenants in this section will cause irreparable injury to the AT&T, will represent a failure of the consideration under which AT&T (in its capacity as creator and sponsor of the Plan) agreed to provide the Participant with the opportunity to receive Plan benefits, and that monetary damages would not provide AT&T with an adequate or complete remedy that would warrant AT&T’s continued sponsorship of the Plan (including the accrual or granting of Share Units, Matching Share Units and Options) for all Participants.  Accordingly, in the event of a Participant’s actual or threatened breach of the covenants in this section, the Committee, in addition to all other rights and acting as a fiduciary under ERISA on behalf of all Participants, shall have a fiduciary duty (in order to assure that AT&T receives fair and promised consideration for its continued Plan sponsorship and funding) to seek an injunction restraining the Participant from breaching the covenants in this Section.  AT&T shall pay for any Plan expenses that the Committee incurs hereunder, and shall be entitled to recover from the Participant its reasonable attorneys’ fees and costs incurred in obtaining such injunctive remedies.
 
(d)   Uniform Enforcement.  In recognition of AT&T’s need for nationally uniform standards for the Plan administration, it is an absolute condition in consideration of any Participant’s ability to make Employee Contribution elections under Section 4.1 of this Plan after September 1, 2009, that each and all of the following conditions apply to all such electing Participants:
 
(i)   ERISA shall control all issues and controversies hereunder, and the Committee shall serve for purposes hereof as a “fiduciary” of the Plan and its “named fiduciary” within the meaning of ERISA.
 
(ii)   All litigation between the parties relating to this section shall occur in federal court, which shall have exclusive jurisdiction; any such litigation shall be held in the United States District Court for the Northern District of Texas, and the only remedies available with respect to the Plan shall be those provided under ERISA.
 
Exhibit 10-g










BELLSOUTH CORPORATION

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN




Amended and Restated effective as of January 1, 2010


 
 

 

BELLSOUTH CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN


ARTICLE I.     STATEMENT OF PURPOSE

The purpose of the BellSouth Corporation Supplemental Executive Retirement Plan is to provide supplemental pension benefits to Executives and certain other employees of BellSouth Corporation and certain subsidiaries of BellSouth Corporation, hereinafter referred to as Participants, who retire or terminate from service.  The Plan was originally effective as of January 1, 1984 and was subsequently amended from time to time.  The Plan was amended and restated, effective as of January 1, 2005, and as so amended and restated is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to all benefits accrued and vested on or after January 1, 2005.  Further, with respect to all benefits of Participants employed on or after January 1, 2007, the Plan is intended to fully comply with the requirements of Code Section 409A.  During the period from January 1, 2005, to the date of the adoption of this restated Plan document, the Plan has been operated in good faith compliance with the provisions of Code Section 409A, Internal Revenue Service Notice 2005-1, the proposed Treasury Regulations for Code Section 409A, the Final Treasury Regulations for Code Section 409A, applicable Internal Revenue Services Notices and Announcements and any other generally applicable guidance published in the Internal Revenue Service Bulletin.

Following the merger of AT&T Inc. and BellSouth Corporation, the Plan was amended and restated, effective January 1, 2008, to reflect the transition of certain participants to other AT&T retirement plans and/or other AT&T companies.  The Plan is now hereby amended and restated herein, effective January 1, 2010.  In order for a Participant to accrue benefits on or after January 1, 2010, the provisions of Article VIII shall apply.  This amendment and restatement shall supersede in all respects the amendment and restatement previously effective January 1, 2008.

ARTICLE II.     DEFINITIONS

 1.
The term “ ADEA ” shall mean the Age Discrimination in Employment Act of 1967, as amended from time to time.

 2.
The term " Affiliate " shall mean any corporation, other than BellSouth Corporation (or a Participating Company), which is a member of the same controlled group of corporations (within the meaning of Code Section 414(b)) as BellSouth Corporation and any trade or business (whether or not incorporated) which is under common control with BellSouth Corporation within the meaning of Code Section 414(c).

 3.
The term " Annual Bonus Award " shall mean the bonus amount paid annually to a Participant that is included in the calculation of pension benefits under the Pension Plan.

 4.
The term “ AT&T SERP Participant ” shall mean an officer who is designated as a participant in the AT&T, Inc. 2005 Supplemental Employee Retirement Plan (the “A&T SERP”).  The initial day of participation in such plan is the named officer’s “SERP Effective Date” as defined in the AT&T SERP.
 
 
5.  
The term “ AT&T SERP Vesting Date ” shall mean the date that an AT&T SERP Participant becomes 100% vested in the AT&T SERP.

 6.
The terms " BellSouth Corporation " and " Company " shall mean BellSouth Corporation, a Georgia corporation, or its successors.

 7.
The terms " Chairman of the Board ", " President " and " Board of Directors " or " Board " shall mean the Chairman of the Board of Directors, President and Board of Directors, respectively, of the Company.

 8.
The term “ Claim Review Committee ” shall mean the BellSouth Corporation Employees’ Benefit Claim Review Committee appointed by the Committee to be the claims fiduciary for any claims brought under the Pension Plan.

 9.
The term " Code " shall mean the Internal Revenue Code of 1986, as amended from time to time.

10.
The term " Committee " shall mean the Employee Benefit Committee of BellSouth Corporation appointed by the Company to administer the Pension Plan.

11.
The term “ Disabled ” or “ Disability ” means the following:

 
(a)
the inability of the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; OR

 
(b)
the Participant is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under a short-term disability plan covering employees of a Participating Company.

12.
The term " Executive " shall mean an employee on the active payroll of any Participating Company who holds a position that the Board of Directors has designated to be within the Company’s executive compensation group.

13.
The term “ Executive Severance Agreement ” means a BellSouth executive change in control agreement entered into by and between an executive who is a Participant in this Plan and BellSouth, as amended and/or superseded from time to time, providing certain benefits in the event of a change in corporate control of BellSouth Corporation.

13.
The term " Former Affiliate " shall have the same meaning as “Interchange Company”.

15.
The term " Included Earnings " shall have the meaning ascribed to such term in Section 4(a)(ii) of Article IV of this Plan.

16.
The term " Interchange Company " shall have the same meaning as is attributed to such term under the Pension Plan.

17.
The term " Mandatory Retirement Age " shall have the same meaning as is attributed to such term under the Pension Plan.

18.
The term “ Merger ” shall mean the merger, pursuant to the Agreement and Plan of Merger dated as of March 4, 2006 (the “Merger Agreement”), by and among BellSouth, AT&T Inc. (“AT&T”), and ABC Consolidation Corp., a Georgia corporation and wholly-owned subsidiary of AT&T (“Merger Sub”), pursuant to which, at the “Effective Time” (as defined in the Merger Agreement), BellSouth was  merged with and into the Merger Sub.

19.
The term “ Merger Severance Plan ” means a severance plan (or plans) adopted under the terms of the Company Disclosure Letter to the Merger Agreement (as defined in Section 16 of this Article II).

20.
The term " Net Credited Service ", except as expressly limited or otherwise provided in this Plan or under an individual Participant’s employment-related agreement with the Company, shall have the same meaning as is attributed to such term under the Pension Plan and shall be interpreted in the same manner as that term is interpreted for purposes of the Pension Plan.

21.  
The term " Participants " shall mean all Executives as defined herein, as well as all other management employees ( i.e., non-collectively bargained employees) at pay grade E01 (or equivalent) and above and any other employees designated by the Chief Executive Officer of BellSouth Corporation or his or her delegated representative.

No employee shall commence or re-commence participation in the Plan on and after February 8, 2007.

22.  
The term " Participating Company " shall mean BellSouth Corporation, and each subsidiary of BellSouth Corporation which shall have determined, with the concurrence of the senior human resources officer of BellSouth Corporation, to participate in the Plan.  Each Participating Company participating in the Plan as of the adoption of this amendment and restatement shall be a Participating Company in the Plan.

In addition, any Participant who transfers employment on or after December 29, 2006 from a Participating Company to an Affiliate shall remain an eligible Participant in this Plan, and the employing Affiliate shall be considered a Participating Company for purposes of that Participant’s service and earnings hereunder.

23.
The term " Pension Act " shall mean the Employee Retirement Income Security Act of 1974 (ERISA) as it may be amended from time to time.

24.
The term " Pension Commencement Date " shall have the same meaning as is attributed to such term under the Pension Plan.

25.
The term " Pension Plan " shall mean the BellSouth Personal Retirement Account Pension Plan as in effect on the date of the Merger.

26.
The term " Plan " shall mean this BellSouth Corporation Supplemental Executive Retirement Plan.

27.
The term " Post-04 Benefit ” shall mean the Participant’s Plan benefit accrued on or after January 1, 2005 determined in accordance with the provisions of Code Section 409A.

28.
The term " Pre-05 Benefit ” shall mean the Participant’s Plan benefit accrued and vested as of December 31, 2004 determined in accordance with the provisions of Code Section 409A.

29.
The term “ Rabbi Trust Agreement ” shall mean each and all of the following: (i) BellSouth Corporation Trust Under Executive Benefit Plan(s); (ii) BellSouth Telecommunications, Inc. Trust Under Executive Benefit Plan(s); (iii) BellSouth Enterprises, Inc. Trust Under Executive Benefit Plan(s); (iv) BellSouth Corporation Trust Under Executive Benefit Plan(s) for Mobile Systems Executives; (v) BellSouth Corporation Trust Under Executive Benefit Plan(s) for Advertising and Publishing Executives; (vi) Trust Under Executive Benefit Plan(s) for Certain BellSouth Companies; in each case, as amended from time to time.

30.
The term “Specified Employee” shall mean, for periods on or after December 29, 2006, any Participant who is a “Key Employee” (as defined in Code Section 416(i) without regard to paragraph (5) thereof), as determined by AT&T in accordance with its uniform policy with respect to all arrangements subject to Code Section 409A, based upon the 12-month period ending on each December 31 st (such 12-month period is referred to below as the “identification period”).  All Participants who are determined to be Key Employees under Code Section 416(i) (without regard to paragraph (5) thereof) during the identification period shall be treated as Key Employees for purposes of the Plan during the 12-month period that begins on the first day of the 4 th month following the close of such identification period.  For periods prior to December 29, 2006, the term Specified Employee shall mean a specified employee under Code Section 409A.

31.
The term " Standard Annual Bonus " shall mean an amount determined by (1) a stated dollar amount, or (2) applying a target percentage of a Participant’s base pay rate, as determined by the annual compensation plan and the Participant’s current job or pay grade.

32.
The term " Vesting Service Credit ", except as expressly limited or otherwise provided in this Plan or under an individual Participant’s employment-related agreement with the Company, shall have the same meaning as is attributed to such term under the Pension Plan and shall be interpreted in the same manner as that term is interpreted for purposes of the Pension Plan.

 
An AT&T SERP Participant whose SERP Effective Date is prior to January 1, 2009 shall have his Vesting Service Credit (“VSC”) determined in the same manner that is determined in the Pension Plan; provided however, his VSC shall not increase after his AT&T SERP Vesting Date (i.e., years of VSC earned after that date will not be included for purposes of calculating this Plan’s benefit).

 
In addition, any AT&T SERP Participant whose SERP Effective Date is on or after January 1, 2009 shall have his VSC determined in the same manner that is determined in the Pension Plan; provided however, his VSC shall not increase after his SERP Effective Date.

33.
The use in this Plan of personal pronouns of the masculine gender is intended to include both the masculine and feminine genders.

ARTICLE III.     ADMINISTRATION

 1.
The Company shall be the Plan Administrator and the Plan Sponsor of the Plan as those terms are defined in the Pension Act.  The Company may allocate all or any part of its responsibilities for the operation and administration of the Plan, except to the extent expressly prohibited by the Plan's terms. The Company may designate in writing other persons to carry out its responsibilities under the Plan, and may employ persons to advise it with regard to such responsibilities.  The Company, acting through the Committee, the Claim Review Committee or any other person designated by the Company, as applicable, shall have the exclusive responsibility and complete discretionary authority to interpret the terms of the Plan (including the power to construe ambiguous or uncertain terms), to control the operation and administration of the Plan and to resolve all questions in connection therewith, with all powers necessary to enable it to properly carry out such responsibilities, including without limitation the powers and responsibilities set forth in this Article III, and its determinations shall be final, conclusive and binding on all  persons.

2.
The Plan Administrator shall have the power to determine status, coverage, eligibility for and the amount of benefits under the Plan and all questions arising in connection therewith, with respect to employees of each Participating Company, respectively, and shall have the power to authorize disbursements according to this Plan.

3.
The review and final determination of claims and appeals for Participants and beneficiaries under the Plan shall be determined by, and in the complete discretion of, the Plan Administrator acting through the Claim Review Committee and in accordance with the claims and appeals procedures set forth in the summary plan description for the Pension Plan and shall be administered and interpreted in accordance with the Pension Act and procedures in effect under the Pension Plan.  All determinations of the Plan Administrator shall be final and binding and not subject to further administrative review.

4.
The expenses of administering the Plan shall be borne by the Company and/or the applicable Participating Company.

5.
The Company, the Committee and the Claim Review Committee, and each other Plan Administrator described herein, are each a named fiduciary as that term is used in the Pension Act with respect to the particular duties and responsibilities herein provided to be allocated to each of them.

6.  
Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan.

7.
Notwithstanding the preceding, effective as of the date of the Merger, responsibility for administration of the Plan shall be determined under the terms of the Rabbi Trust Agreements.  As provided in the Rabbi Trust Agreements, claims for benefits, appeals of benefit denials and Plan interpretations shall be made by a “Trust Contractor” or “Independent Fiduciary” (as such terms are defined in the Rabbi Trust Agreements), as the case may be.  At any time during which a Trust Contractor or Independent Fiduciary shall, under the terms of the Rabbi Trust Agreements, have such Plan administrative responsibilities, the term “Plan Administrator” as used in this Plan shall refer to such Trust Contractor or Independent Fiduciary.

ARTICLE IV.     BENEFITS

 1.
Participation

 
All persons included in the definition of the term "Participants" are deemed participants in this Plan.  In addition, each individual who has participated in this Plan but who has ceased to be included in the definition of "Participants", whether due to demotion, termination or otherwise, shall continue to be a Participant in this Plan, except for purposes of accruing additional benefits under Section 4 of this Article IV, and shall be entitled to a benefit under this Plan if, at the time such individual ceased to be included in the definition of "Participants", he or she had satisfied the service requirements for a deferred vested pension under the Pension Plan.  Each such individual shall receive a benefit under the terms of the Plan as in effect immediately prior to the effective date of such demotion, termination or other event, the amount of such benefit to be calculated as if the individual retired (or otherwise terminated employment) on such date, it being the Company's intent that any such demotion, termination or other event removing individuals from the definition of "Participants" shall not adversely affect entitlement to such benefits.
 
 
 2.
Mandatory Retirement Age

 
Each Participant, whether or not eligible for benefits under this Plan, shall cease to be eligible for continued employment no later than the last day of the month in which such Participant attains the Mandatory Retirement Age.

 3.
Eligibility

 
(a)
Service Benefit

An individual who is both a Participant in this Plan and who is eligible for a service pension pursuant to the terms of the Pension Plan at the time of employment termination or whose age and Net Credited Service recognized under this Plan would satisfy the eligibility requirements of the Pension Plan for a service pension is eligible for a service benefit pursuant to this Plan.  Additionally, each Participant who has attained age 62 or older and whose Net Credited Service is ten years or more at the time of employment termination is eligible for a service benefit under this Plan.  Each Participant whose employment terminates pursuant to and under the terms of the Merger Severance Plan may also be eligible for a service benefit under this Plan, if at the time of employment termination the Participant's age and Net Credited Service meets the requirements established under such severance program to be deemed service pension eligible for purposes of this Plan.  Each Participant whose employment terminates pursuant to and under the terms of an Executive Severance Agreement shall be deemed to be eligible for a service pension for purposes of this Plan.

 
(b)
Deferred Benefit

 
(i)
Any individual not described in Section 3(a) of this Article IV who is a Participant in this Plan at the time of voluntary employment termination is eligible for a deferred vested pension pursuant to this Plan, provided he is eligible for a deferred vested pension pursuant to the Pension Plan.

 
(ii)
In the event that a Participant’s employment is terminated involuntarily prior to his or her becoming eligible for a deferred benefit under this Plan, and the termination is not for cause, such Participant shall nevertheless be entitled to a deferred benefit hereunder, based upon the Participant’s Vesting Service Credit at his or her date of termination.
 
 
(c)
Disability Pension
 
 
An individual who while a Participant in this Plan has become eligible for a disability pension pursuant to the terms of the Pension Plan and who is also determined to be Disabled shall be eligible for a disability pension hereunder, calculated as follows:  the amount is determined in accordance with Section 4 of this Article IV calculated to one year after date of Disability (pro-rata if less than 20 years of service) with no reduction factor but offset by the actual service or deferred benefit determined under Section 4 of this Article IV applying all applicable early retirement reduction factors (determined assuming that the service or deferred benefit is payable as an annuity).  Should the disability pension be discontinued pursuant to the terms of the Pension Plan, the disability pension hereunder shall be discontinued as well.  Regardless of the Participant’s Disabled status, the disability pension hereunder shall be discontinued upon the Participant’s attaining age 65.

4.
Benefit Amounts

 
(a)
Computation of Benefit

 
(i)
(A)
Benefit Formula

 
The aggregate annualized benefit of each Participant payable as provided in the Plan shall be determined by adding the sum of two percent (2%) of Included Earnings for each year of the Participant's Vesting Service Credit for the first twenty years, plus one and one-half percent (1.5%) of Included Earnings for each year of the Participant's Vesting Service Credit for the next ten years, plus one percent (1%) of Included Earnings for each year of the Participant's Vesting Service Credit for each additional year up to the month in which the Participant retires less (1) 100% of the retirement benefit (unreduced for survivor annuity) payable from the Pension Plan and (2) 100% of the Primary Social Security benefit payable at age 65.

An AT&T SERP Participant whose SERP Effective Date is prior to January 1, 2009 shall have his Pension Plan benefit and Primary Social Security benefit calculated and frozen as of his AT&T SERP Vesting Date for purposes of calculating this Plan’s benefit.

In addition, any AT&T SERP Participant whose SERP Effective Date is on or after January 1, 2009 shall have his Pension Plan benefit and Primary Social Security benefit calculated and frozen as of his AT&T SERP Effective Date.

 
(B)
Special Rules

 
(1)
With respect to service benefits, the benefit reduction to be applied pursuant to Section 4(a)(i)(A)(1) above for the  benefit payable from the Pension Plan shall be the amount of such benefit that would be payable on the date that benefits are eligible to be paid (or become payable) under this Plan (regardless of the Participant’s actual pension commencement date under the Pension Plan) and determined assuming that the Participant elected a single life annuity (regardless of the actual form of benefit elected under the Pension Plan).
 
 
 
(2)
With respect to deferred vested benefits, the benefit reduction to be applied pursuant to Section 4(a)(i)(A)(1) above for the benefit payable from the Pension Plan shall be the amount of such benefit that would be payable on the Participant’s 65 th birthday (regardless of the Participant’s actual pension commencement date under the Pension Plan) and determined assuming that the Participant elected a single life annuity (regardless of the actual form of benefit elected under the Pension Plan).

 
(3)
In the case of any Executive (i) who has attained the age of sixty-two (62) or more or who is deceased, (ii) who was previously employed by a Former Affiliate, (iii) who serves or has served as an officer (as such term is used in the employment practices and policies of the relevant company) of BellSouth Corporation or an Affiliate, and (iv) whose service with a Former Affiliate is disregarded in determining the Executive's Vesting Service Credit under the Pension Plan, for purposes of this Plan, the Executive’s Vesting Service Credit and Net Credited Service shall be increased by

 
(x)  the Executive's Vesting Service Credit and Net Credited Service with the Former Affiliate(s) (determined under the rules of the Pension Plan as if the Executive had been employed by BellSouth Corporation during such period and had no other service covered under the Pension Plan), multiplied by

 
(y) a fraction, the numerator of which is the number of whole years (not to exceed ten (10)) of such Executive's Net Credited Service as an officer of BellSouth Corporation or an Affiliate and the denominator of which is ten (10).

 
Notwithstanding the foregoing, no Executive's Vesting Service Credit or Net Credited Service, for purposes of this Plan shall be increased for service with a Former Affiliate to the extent that any such service would otherwise be considered, directly or indirectly, in determining such Executive's benefits under this Plan by virtue of the terms of any other agreement, plan or arrangement.
 
                                     (4)
In the case of any Participant whose Vesting Service Credit or Net Credited Service includes a period of service with an employer with respect to which the Participant is entitled to any retirement benefit payable from defined benefit pension plan(s ) (including qualified plans and nonqualified plans such as excess benefit and supplemental executive retirement plans), including any Executive whose Vesting Service Credit and Net Credited Service under this Plan is increased pursuant to Section 4(a)(i)(B)(3) preceding, the benefit reduction described in Section 4(a)(i)(A)(1) above for the retirement benefit payable from the Pension Plan shall include any such retirement benefit payable by such employer.  The determination of the benefit reduction for any such benefit shall be made using approaches which approximate as nearly as practicable the approaches used in making such determinations with respect to benefits payable under the Pension Plan, as described above in this Section 4(a)(i).  In the case of any Executive whose Vesting Service Credit and Net Credited Service under this Plan is increased pursuant to paragraph (B)(3) of this Section 4(a)(i), the benefit payable by such employer shall first be multiplied  by the fraction described in that paragraph and the product thereof shall be the amount of the benefit reduction.

                                        (5)  
A Participant’s service or deferred benefit (the value of which is expressed as an annuity) at the time of termination of employment shall not be less than the service or deferred benefit that would have been payable to the Participant if the Participant had terminated employment on any prior December 31 (using pay, service, offsets and all factors applicable on the previous dates and assuming an immediate benefit commencement).

                                        (6)  
In the case of each Participant who terminates employment pursuant to the terms of the Merger Severance Plan, the service benefit or deferred vested benefit calculated hereunder shall be calculated by adding additional months of Vesting Service Credit and an equal amount of months of age with the amount of such months equaling (i) 24, minus (ii) the number of months that have elapsed since the closing of the Merger (but not below zero).

                                        (7)  
The terms and conditions set forth in Article VIII shall apply to any benefits accrued under any provision of this Plan on or after January 1, 2010, and in order for a Participant to accrue (or collect) such Plan benefits on or after January 1, 2010, the Participant must comply with the terms and conditions set forth in Article VIII.

 
(ii)
Included Earnings

Included Earnings shall equal the 12 month average of the sum of (1) the last sixty (60) months of base pay, plus (2) the Annual Bonus Awards payable during or after that sixty (60) month period.  The amounts of base pay and other payments used to determine Included Earnings as described above include all amounts during the specified period including those amounts previously deferred pursuant to other plans.  If a Participant terminates employment while eligible for a benefit under this Plan and thereafter receives compensation of the types described in clause (ii) of this Section 4(a), the additional Included Earnings shall be deemed to have been paid as of the date the Participant terminated employment, and the amount of benefit payable under this Plan shall be corrected accordingly.

An AT&T SERP Participant whose SERP Effective Date is prior to January 1, 2009 shall have his Included Earnings calculated and frozen as of his AT&T SERP Vesting Date for purposes of calculating this Plan’s benefit.

In addition, any AT&T SERP Participant whose SERP Effective Date is on or after January 1, 2009 shall have his Included Earnings calculated and frozen as of his SERP Effective Date.
 
 
(b)
Minimum Benefit

 
In no event shall a Participant, whose Vesting Service Credit has been five years or more, who terminates employment on or after his or her sixty-second birthday, or who is retired on a service or disability pension under the Pension Plan or is otherwise eligible for a service pension benefit hereunder, receive a total annual retirement benefit (including any benefit under the Pension Plan) from the Company of less than 15% of the employee's annual base salary plus Standard Annual Bonus in effect on the employee's last day on the active payroll.

An AT&T SERP Participant whose SERP Effective Date is prior to January 1, 2009 shall have his Minimum Benefit calculated and frozen as of his AT&T SERP Vesting Date for purposes of calculating this Plan’s benefit.

In addition, any AT&T SERP Participant whose SERP Effective Date is on or after January 1, 2009 shall have his Minimum Benefit calculated and frozen as of his SERP Effective Date.

 
(c)
Early Retirement Discount

 
(i)
The service benefit amount, determined in accordance with the provisions of this Section 4, for each Participant who is granted a service benefit, shall be reduced (before the offset for benefits under the Pension Plan) by one-half percent (0.5%) for each calendar month or part thereof by which the commencement of benefits under this Plan precedes the Participant’s 62nd birthday, except that each employee retired with thirty (30) or more years of service (either Net Credited Service or Vesting Service Credit) shall receive a service benefit reduced by one-quarter percent (0.25%) for each calendar month or part thereof by which the commencement of benefits under this Plan precedes the Participant’s 62nd birthday. With respect to Participants who terminate employment and receive benefits under the Merger Severance Plan, the preceding sentence shall be applied by substituting “twenty-eight (28) or more” for the words “thirty (30) or more.”  Further, with respect to a Participant who retires during 2006, in no event shall the amount by which such Participant’s benefit is reduced pursuant to this provision be greater than the amount by which such benefit would have been reduced pursuant to this provision had the Participant retired on December 31, 2005.

 
(ii)
The deferred vested benefit amount, determined in accordance with the provisions of this Section 4, for each Participant who is granted a deferred vested benefit, shall be reduced (after the offset for benefits under the Pension Plan) by an actuarially equivalent amount, using mortality rates and other assumptions then in effect under the Pension Plan, for each calendar month or part thereof by which the commencement of benefits under this Plan precedes the Participant’s 65th birthday.
 
 
(iii)
An AT&T SERP Participant whose SERP Effective Date is prior to January 1, 2009 shall have his Early Retirement Discount calculated and frozen as of his AT&T SERP Vesting Date for purposes of calculating this Plan’s benefit.
 
In addition, any AT&T SERP Participant whose SERP Effective Date is on or after January 1, 2009 shall have his Early Retirement Discount calculated and frozen as of his SERP Effective Date.


(d)            Survivor/Death Benefits for Participant’s Terminating Employment prior to January 1, 2007

                     (i)  
Benefit Payable Before Benefit Commencement

If a Participant who has not made a valid lump sum election with respect to his or her Pre-2005 Benefit dies prior to termination of employment (or commencement of benefits for Participants with a deferred benefit) and leaves a surviving spouse at the time of his death, a pre-retirement survivor benefit is payable to the surviving spouse as an immediate life annuity equal to 100% of the service benefit or deferred benefit that the Participant would have received with respect to his or her Pre-2005 Benefit had he survived and terminated employment on the date of his death and commenced benefit payments.  In addition, with respect to the Participant’s Post-2004 Benefit, such benefit shall be paid to the surviving spouse as soon as administratively feasible following the Participant’s death in a single sum payment calculated in accordance with Section 5 of this Article IV.  If such Participant does not have a surviving spouse at the time of his death, the entire survivor benefit described in this paragraph shall be paid to the Participant’s estate as soon as administratively feasible following the Participant’s death (even if the Participant was a Band BB officer or above) in the form of a single sum payment calculated in accordance with the provisions of Section 5 of this Article IV.

                       (ii)  
Benefit Payable After Benefit Commencement

 
If the Participant was receiving benefits in the form of an annuity with respect to his Pre-2005 Benefit (or was eligible to receive benefits in the form of an annuity because of termination of employment), and leaves a surviving spouse at the time of his/her death, then such surviving spouse shall automatically receive a survivor annuity for life equal to 50% of the net pension benefit that the Participant was receiving (or eligible to receive) just prior to his death.  If the Participant was eligible to receive payment of his Post-2004 Benefit but had not yet received such payment, then his Post-2004 Benefit shall be paid to the spouse, if any, and otherwise to the Participant’s estate in the form of a single lump sum payment calculated in accordance with the provisions of Section 5 of this Article IV.

                       (iii)  
Lump Sum Election

In the event of the death of a Participant who has made a valid lump sum election under the Plan with respect to his or her Pre-2005 Benefit, his surviving spouse (or his estate if there is no surviving spouse) shall be entitled to receive 100% of the lump sum payment that would have been payable to the Participant as of the date of his death (including the lump sum payment of the Participant’s Post-2004 Benefit), and such lump sum shall be payable as soon as administratively feasible following the Participant’s death (even if the Participant was an Executive designated as a Band BB officer or above).

                       (iv)  
Lump Sum Settlement

If a Participant has already received a lump sum settlement of his entire benefit under the Plan, then no further benefits are payable under this subparagraph (d).

(e)            Survivor/Death Benefits for Participant’s Terminating Employment on or after January 1, 2007

                     (i)  
Benefit Payable Before Benefit Commencement

If a Participant dies prior to termination of employment and leaves a surviving spouse at the time of his death, a pre-retirement survivor benefit is payable to the surviving spouse in the same form as elected by the Participant for payment of his benefit ( i.e.,  single lump sum, 10 year installments, or single life annuity) in an amount equal to 100% of the service benefit or deferred benefit that the Participant would have received with respect to his benefit had he survived and terminated employment on the date of his death and commenced benefit payments; provided, if the survivor benefit is payable in a single life annuity, there will be no payment of an additional survivor annuity upon the surviving spouse’s death.  If such Participant does not have a surviving spouse at the time of his death, the entire survivor benefit described in this paragraph shall be paid to the Participant’s estate as soon as administratively feasible following the Participant’s death (even if the Participant was a “specified employee” as defined under Code Section 409A) in the form of a single sum payment calculated in accordance with the provisions of Section 5 of this Article IV.

                      (ii)  
Benefit Payable After Benefit Commencement

                                        (A)  
Life Annuity .  If the Participant leaves a surviving spouse and was receiving benefits in the form of an annuity (or was eligible to receive benefits in the form of an annuity because of termination of employment and because the Participant had elected an annuity form of payment in accordance with Section 5 of this Article IV),  then such surviving spouse shall automatically receive a survivor annuity for life equal to 50% of the net pension benefit that the Participant was receiving (or eligible to receive) just prior to his death.  If the Participant does not leave a surviving spouse and was receiving benefits in the form of an annuity (or was eligible to receive benefits in the form of an annuity because of termination of employment and because the Participant had elected an annuity form of payment in accordance with Section 5 of this Article IV), then no further benefits will be payable after the Participant’s death, subject to the provisions of Section 6(b)(iii) of this Article IV.

                                       (B)  
10-Year Installments .  If the Participant leaves a surviving spouse and was receiving benefits in the form of 10-year installments, then the remaining installments shall continue to be paid to the surviving spouse.  If the Participant was receiving benefits in the form of 10-year installments and does not leave a surviving spouse, then the remaining installments shall be paid in the form of a single lump sum payable to his estate, subject to the provisions of Section 6(b)(iii) of this Article IV.

                                       (C)  
Lump Sum Payment .  If the Participant was eligible to receive a single lump sum payment of his Plan benefit but dies prior to the payment being made, then the single lump sum payment shall be made to his surviving spouse, if applicable, and otherwise to his estate, subject to the provisions of Section 6(b)(iii) of this Article IV.

                       (iii)  
Lump Sum Settlement

If a Participant has already received a lump sum settlement of his entire benefit under the Plan, then no further benefits are payable under this subparagraph (e).

 
(f)
Special Increases

Service and disability benefit payments of retired Participants shall be increased by the same percentage and pursuant to the same terms and conditions as are set forth in the Pension Plan.

5.
Form of Benefit Payments

               (a)
Rules Applicable to Participants who terminate Employment Prior to January 1, 2007

 
(i)
Annuity Payments.   With respect to a Participant who has not made a valid lump sum election in accordance with subparagraph (ii) hereof, such Participant’s Pre-2005 Benefit shall be paid in monthly payments.  Notwithstanding the foregoing, if at the time of the Participant’s termination of employment, the present value of the benefit of a Participant, whether payable as a service benefit, a deferred benefit, or a survivor’s benefit, is less than $20,000, such benefit shall be paid in the form of a single lump sum payment, calculated in accordance with subparagraph (c) of this Section 5.

 
(ii)
Lump Sum Benefit Payment

 
(1)
Pre-2005 Benefit .   A Participant may elect to receive his Pre-2005 Benefit hereunder, whether payable as a service benefit, a deferred benefit or a survivor’s benefit, paid in the form of a single lump sum payment,  calculated in accordance with the provisions of subparagraph (c) of this Section 5; provided, any such election must be made in accordance with procedures established by the Company and must be on file with the Company, or its designee, for at least 12 consecutive calendar months prior to the Participant’s termination of employment or death in order to be valid and in effect.

 
(2)
Post-2004 Benefit .  All Post-2004 Benefits, whether payable as a service benefit or a deferred benefit shall be paid in the form of a single lump sum payment, calculated in accordance with the provisions of subparagraph (c) of this Section 5.

   (b)
Rules Applicable to Participants who terminate Employment on or after January 1, 2007

 
(i)
Lump Sum Benefit Payment.    Absent an election to the contrary in accordance with subparagraph (iv) hereof, a Participant’s entire benefit under the Plan, whether payable as a service benefit or a deferred benefit, shall be paid in the form of a single lump sum payment, calculated in accordance with the provisions of subparagraph (c) of this Section 5.

 
(ii)
10-Year Installments .  If a Participant made a valid election for 10-year installments under subparagraph (iv) hereof, such Participant’s entire benefit under the Plan, whether payable as a service benefit or a deferred benefit, shall be paid in the form of annual installments payable over a period of 10 years.  The amount of the annual installments shall be determined by calculating the Participant’s benefit under the Plan as a single lump sum in accordance with subparagraph (c) of this Section 5 and then paying 1/10 th of the amount each year plus interest annually at the rate then specified under the Pension Plan.

 
                            (iii)  
Life Annuity .  If a Participant made a valid election for a life annuity under subparagraph (iv) hereof, such Participant’s entire benefit under the Plan, whether payable as a service benefit or a deferred benefit, shall be paid in the form of monthly payments payable over the life of the Participant.  The amount of the monthly payments shall equal the Participant’s annualized benefit determined under Section 4(a)(i)(A) of Article IV divided by 12.

If a Participant is Disabled, the disability pension described in Section 3(d) of Article IV shall be paid in the form of monthly payments until the earlier of the Participant’s death or attaining age 65.

 
(iv)
Election Opportunity

                                 (1)  
Initial Election .  Participants who are participating in the Plan as of September 30, 2006 (or become newly eligible during October 2006) may elect a single lump sum payment, 10-year installments or a life annuity during the period between October 1, 2006 and November 30, 2006.  Participants who first become Participants in the Plan on or after November 1, 2006 may elect a single lump sum, 10-year installments or a life annuity; provided such election must be made within 30 days of the Participant’s initial participation in the Plan.

                                  (2)  
Subsequent Elections .  Participants may elect to change the form of payment (and the timing of payment) during a time other than that specified under subparagraph (1) above; however, such election must comply with the requirements of Code Section 409A and applicable regulations thereunder, which means that the subsequent election will only be effective if made at least one year prior to the time at which the distribution would be made absent the subsequent election AND if the first payment under the form of payment elected is delayed for at least a five year period.

Participants may not make a payment election with regard to any disability benefit that may become payable under the Plan.

 
(v)
De Minimis Cash-Out .  Notwithstanding any election made under subparagraph (iv) of this Section 5(b), if at the time of the Participant’s termination of employment, the present value of the benefit of a Participant, whether payable as a service benefit or a deferred benefit, is less than $20,000, such benefit shall be paid in the form of a single lump sum payment, calculated in accordance with subparagraph (c) of this Section 5.  The preceding paragraph will no longer apply for distributions made after December 31, 2008.

(c)            Lump Sum Calculation

Benefits payable in a single lump sum in accordance with the Plan shall be the amount that is the actuarial present value of the Participant’s benefit, or applicable portion thereof, expressed as a single life annuity and shall be determined using (i) the applicable interest rate then in effect under the Pension Plan, and (ii) the applicable mortality table then in effect under the Pension Plan.

6.            Timing of Payment of Benefits

Except for the reasons specified below, benefits granted under this Plan shall commence on the day following the date of termination of employment from the Company and all Affiliates.

(a)  
For Terminations of Employment Occurring Prior to January 1, 2007

                     (i)  
An Executive who is a Band BB officer or above and who has made a valid lump sum election shall receive the lump sum payment (including interest accrued annually at the applicable interest rate in effect under the Pension Plan) as soon as administratively feasible following the date that is 2 years following his date of retirement or other termination of employment.

 
(ii)
Participants eligible for a deferred vested benefit will have their entire benefit commence at such time as the individual otherwise elects to commence payment of benefits under the Pension Plan provided such benefits commence on or before December 31, 2008.  Otherwise, payment of the deferred vested benefit will automatically commence as soon as administratively practicable following July 1, 2009.

 
(iii)
Participants who have a Post-2004 Benefit and who are Executives or otherwise Specified Employees at the time of his or her termination of employment shall receive the lump sum payment (including interest accrued annually at the applicable interest rate in effect under the Pension Plan) as soon as administratively feasible following the date that is 6 months following his or her date of retirement or other termination of employment.

  (b)  
For Terminations of Employment On or After January 1, 2007

 
(i)
Participants electing a single lump sum payment or 10-year installment payments and who are Executives or otherwise Specified Employees at the time of his or her termination of employment shall receive the single lump sum payment or the first installment under the 10-year installment form of benefit (each including interest accrued annually at the applicable interest rate in effect under the Pension Plan) as soon as administratively feasible following the date that is 6 months following his or her date of retirement or other termination of employment.

 
(ii)
Participants electing a life annuity payment form and who are Executives or otherwise Specified Employees shall receive the first annuity payment as soon as administratively feasible following the date that is 6 months following his or her retirement date or other termination of employment and this first payment shall equal 7 monthly annuity payments.

 
(iii)
Notwithstanding anything herein to the contrary, if a Participant whose benefit is delayed under subparagraphs (i) or (ii) of this Section 6(b) dies prior to the payment of such delayed amounts, such delayed amounts shall be paid in a single lump sum payment to the Participant’s estate.  The remainder of such Participant’s benefit (if any) shall be paid in accordance with Section 4(e) of this Article IV.

7.            Treatment During Subsequent Employment

Employment with any Participating Company or Affiliate for which a Participant is an eligible employee, subsequent to retirement or termination of employment with entitlement to any type of benefits described heretofore, shall result in the permanent suspension of the benefit for the period of such employment or reemployment.  Upon termination of such subsequent employment, the full benefit payable hereunder shall be recalculated and then offset by any amounts previously paid to the Participant using assumptions set forth under the Pension Plan.  The benefit will commence following the subsequent termination of employment but shall be subject to the provisions set forth in Section 6 of this Article IV regarding the timing of payment of benefits.  This Section 7 shall not apply on or after January 1, 2009, provided, however, that any Participant whose benefits were suspended as of December 31, 2008 shall be grandfathered and shall continue to have his benefits suspended subject to the provisions of this Section 7.

8.            Employment with Cingular


Individuals who were Participants as of December 23, 2001 and who transferred to Cingular Wireless, LLC on or before December 23, 2001 pursuant to the Contribution Agreement by and between BellSouth Corporation and AT&T Inc. (formerly SBC Communications, Inc.) continue to be treated as actively employed by the Company for all purposes of this Plan while they remain actively employed by Cingular Wireless, LLC or an AT&T Affiliate, subject to all conditions and provisions set forth in this plan.

ARTICLE V.    DEATH BENEFITS

1.
Eligibility and Administration

All individuals who became eligible to participate in the Plan prior to January 1, 2006 shall be eligible for death benefits under this Plan.  With respect to individuals who become eligible to participate in the Plan on or after January 1, 2006, no death benefits shall be payable pursuant to this Article V.  Death benefits described herein are in addition to death benefits payable under the Pension Plan but shall be subject to the same terms and conditions of, and administered in the same manner as, corresponding death benefit provisions of the Pension Plan.

2.            Amount of Death Benefit

For an Executive, the benefit equals the annual base salary plus two times the Standard Annual Bonus.  The above stated amounts of base salary and Standard Annual Bonus are those amounts in effect at the earlier of retirement or death including those amounts previously deferred pursuant to other plans. For all other Participants, the benefit equals the Standard Annual Bonus in effect at the earlier of retirement or death.  In addition, the death benefit for all Participants will include the amount of death benefit, if any, that would otherwise have been payable under the Pension Plan had there been no deferral of compensation under any plan of the Company.  The benefit amount will also include the amount of death benefit, if any, that would otherwise have been payable under the Pension Plan had the restriction on the amount of compensation that may be taken into account under Code Section 401(a)(17) not been applicable.

3.            Death Benefits After 2005

Notwithstanding the provisions of Section 2 of this Article V, with respect to each Participant in the Plan on December 31, 2005, the amount of any death benefit payable pursuant to Section 1 of this Article V shall in no event be based on base salary and/or Standard Award amounts greater than such Participant’s base salary and the Standard Award applicable with respect to such Participant on December 31, 2005.

4.
Form and Source of Payments

All death benefits payable pursuant to this Article V of the Plan shall be paid in a single lump sum as soon as administratively feasible following the death of the Participant and shall be paid from Company or Participating Company's operating expenses, or through the purchase of insurance from an insurance company as the Company may determine.


ARTICLE VI.    GENERAL PROVISIONS

1.            Effective Date
 
  This Plan was originally effective January 1, 1984 and this restatement of the Plan is effective January 1, 2010.

2.            Rights to Benefit

There is no right to any benefit under this Plan except as may be provided by the Company or each Participating Company.  Participants have the status of general, unsecured creditors of the Participating Company and the Plan constitutes a mere promise by the Participating Company to make benefit payments in the future.  A Participant shall have only a contractual right to receive the benefits provided for hereunder if and when he complies with all of the conditions set forth herein.  Nothing contained in this Plan and no action taken pursuant to the provisions of this Plan shall create or be construed to create a trust of any kind.  The Plan is intended to be "unfunded" for purposes of the Pension Act and the Code. If any payment is made to a Participant, his or her surviving spouse or other beneficiary with respect to benefits described in this Plan from any source arranged by the Company or a Participating Company including the Rabbi Trust Agreements and also including, without limitation, any other fund, trust, insurance arrangement, bond, security device, or any similar arrangement, such payment shall be deemed to be in full and complete satisfaction of the obligation of the Company or Participating Company under this Plan  to the extent of such payment as if such payment had been made directly by the Company or Participating Company.  If any payment from a source described in the preceding sentence shall be made, in whole or in part, prior to the time payment would be made under the terms of this Plan, such payment shall be deemed to satisfy the obligation of the Company or Participating Company to pay Plan benefits beginning with the benefit which would next become payable under the Plan and continuing in the order in which benefits are so payable, until the payment from such other source is fully recovered. In determining the benefits satisfied by a payment, Plan benefits, as they become payable, shall be discounted to their value as of the date such actual payment was made using an interest rate equal to the valuation interest rate for deferred annuities as last published by the Pension Benefit Guaranty Corporation prior to the date of such actual payment.  If the benefits which actually become payable under this Plan, after applying the discount described in the preceding sentence, are less than the amount of any prepayment described herein, any such shortfall shall not be collected from or enforced against the Participant as a claim by the Company or Participating Company.

3.            Liability for Payment of Benefits

Where a Participant's period of service includes service in more than one Participating Company or in a company that is not a Participating Company, the last Participating Company to employ him or her immediately prior to his or her retirement or termination of employment with entitlement to a benefit hereunder shall be responsible for the full benefit under this Plan.

4.            Governing Law

The Company intends that this Plan be an unfunded deferred compensation plan maintained primarily for a select group of management and highly compensated employees exempt from Parts 2, 3 and 4 of Title I of the Pension Act by reason of the exemptions set forth in Sections 201(a), 301(a) and 401(a) of the Pension Act and from Part 1 of the Pension Act by reason of the exemption set forth in Section 2520.104-23 of applicable United States Department of Labor regulations.  This Plan shall be interpreted and administered accordingly.  This Plan shall be construed in accordance with the laws of the State of Texas to the extent such laws are not preempted by the Pension Act.  Notwithstanding any provision to the contrary in this Plan, each provision of this Plan shall be interpreted to permit the deferral of compensation and the payment of deferred amounts in accordance with Code Section 409A and any provision that would conflict with such requirements shall not be valid or enforceable.

 5.            Assignment or Alienation

Benefits payable, and rights to benefits, under this Plan may not in any manner be anticipated, sold, transferred, assigned (either at law or in equity), alienated, pledged, encumbered or subject to attachment, garnishment, levy, execution or other legal or equitable process.

 
6.            Employment at Will

Nothing contained in this Plan shall be construed as conferring upon a Participant the right to continue in the employ of the Company.

7.            Savings Clause

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.

8.            Payments to Others

Benefits payable to a former employee or retiree unable to execute a proper receipt may be paid to other person(s) in accordance with the standards and procedures set forth in the Pension Plan.

9.            Plan Termination

Subject to the limitations described below, the Company retains the right to terminate, in whole or in part, and each Participating Company retains the right to withdraw from this Plan, at any time, for any reason, with or without notice.  The Company will continue to make payments, in accordance with the terms and conditions of the Plan, to all Participants who were either retired or terminated prior to Plan termination, and will also continue to recognize its obligation to the surviving spouse of the aforementioned individuals.  Additionally, Participants who have satisfied the service requirements for a deferred vested pension under the Pension Plan on the date of Plan termination shall receive benefits under the terms of the Plan as in effect immediately prior to its termination, the amount of such benefit to be calculated as if the Participant retired (or otherwise terminated employment) on the termination date of the Plan, it being the Company's intent that termination of the Plan shall not adversely affect any entitlement to such benefits and any amendment, modification or termination of this Plan inconsistent with this expression of intent shall be null and void.

ARTICLE VII.    INTERCHANGE OF BENEFIT OBLIGATION

The same transfer of service credit provisions contained in interchange agreements presently in existence under the Pension Plan, or as they may be amended from time to time, by and between the Company, on behalf of all Participating Companies, and any Interchange Company shall apply to the transfer of service credit for purposes of this Plan.

ARTICLE VIII.    LOYALTY CONDITIONS

1.  
Generally
 
AT&T would be unwilling to provide Plan benefits but for the loyalty conditions and covenants set forth in this Article VIII, and the conditions and covenants herein are a material inducement to AT&T’s willingness to sponsor the Plan and to offer Plan benefits for the Participants on or after January 1, 2010.  Accordingly, as a condition of accruing and/or receiving any Plan benefits on or after January 1, 2010, each Participant is deemed to agree that he shall not, without obtaining the written consent of AT&T in advance, participate in activities that constitute engaging in competition with AT&T or engaging in conduct disloyal to AT&T, as those terms are defined in Article VIII, Section 2 hereof.  Further, notwithstanding any other provision of this Plan, all benefits provided under the Plan with respect to a Participant shall be subject to the enforcement provisions of this Article VIII if the Participant, without the consent of AT&T, participates in an activity that constitutes engaging in competition with AT&T or engaging in conduct disloyal to AT&T, as so defined.
 
2.  
Definitions .
 
For purposes of this Article VIII and of the Plan generally:
 
     (a)  
an “Employer Business” shall mean AT&T, any subsidiary of AT&T, the Company, a Participating Company, an Affiliate, and any business in which any of them or a subsidiary or an affiliated company of theirs has a substantial ownership or joint venture interest;
 
     (b)  
“engaging in competition with AT&T” shall mean, while employed by an Employer Business or within two (2) years after the Participant’s termination of employment, engaging by the Participant in any business or activity in all or any portion of the same geographical market where the same or substantially similar business or activity is being carried on by an Employer Business.  “Engaging in competition with AT&T” shall not include owning a nonsubstantial publicly traded interest as a shareholder in a business that competes with an Employer Business.  However, “engaging in competition with AT&T” shall include representing or providing consulting services to, or being an employee or director of, any person or entity that is engaged in competition with any Employer Business or that takes a position adverse to any Employer Business.
 
    (c)  
“engaging in conduct disloyal to AT&T” means, while employed by an Employer Business or within two (2) years after the Participant’s termination of employment, (i) soliciting for employment or hire, whether as an employee or as an independent contractor, for any business in competition with an Employer Business, any person employed by an Employer Business during the one (1) year prior to Participant’s termination of employment, whether or not acceptance of such position would constitute a breach of such person’s contractual obligations to any Employer Business; (ii) soliciting, encouraging, or inducing any vendor or supplier with which Participant had business contact on behalf of any Employer Business during the two (2) years prior to Participant’s termination of employment, to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with AT&T or its affiliate; or (iii) soliciting, encouraging, or inducing any customer or active prospective customer with whom Participant had business contact, whether in person or by other media (“Customer”), on behalf of any Employer Business during the two (2) years prior to Participant’s termination of employment, to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with any Employer Business, or to purchase competing goods or services from a business competing with any Employer Business, or accepting or servicing business from such Customer on behalf of himself or any other business. “Engaging in conduct disloyal to AT&T” also means, disclosing Confidential Information to any third party or using Confidential Information, other than for an Employer Business, or failing to return any Confidential Information to the Employer Business following termination of employment.
 
     (d)  
“Confidential Information” shall mean all information belonging to, or otherwise relating to, an Employer Business, which is not generally known, regardless of the manner in which it is stored or conveyed to Participant, and which the Employer Business has taken reasonable measures under the circumstances to protect from unauthorized use or disclosure.  Confidential Information includes trade secrets as well as other proprietary knowledge, information, know-how, and non-public intellectual property rights, including unpublished or pending patent applications and all related patent rights, formulae, processes, discoveries, improvements, ideas, conceptions, compilations of data, and data, whether or not patentable or copyrightable and whether or not it has been conceived, originated, discovered, or developed in whole or in part by Participant.  For example, Confidential Information includes, but is not limited to, information concerning the Employer Business’ business plans, budgets, operations, products, strategies, marketing, sales, inventions, designs, costs, legal strategies, finances, employees, customers, prospective customers, licensees, or licensors; information received from third parties under confidential conditions; or other valuable financial, commercial, business, technical or marketing information concerning the Employer Business, or any of the products or services made, developed or sold by the Employer Business.  Confidential Information does not include information that (i) was generally known to the public at the time of disclosure; (ii) was lawfully received by Participant from a third party; (iii) was known to Participant prior to receipt from the Employer Business; or (iv) was independently developed by Participant or independent third parties; in each of the foregoing circumstances, this exception applies only if such public knowledge or possession by an independent third party was without breach by Participant or any third party of any obligation of confidentiality or non-use, including but not limited to the obligations and restrictions set forth in this Plan.
 
3.  
Forfeiture of Benefits
 
 
A Participant’s right to receive Plan benefits accrued on or after January 1, 2010 shall be forfeited and no benefits accrued on or after January 1, 2010 shall be provided under this Plan if the Committee determines that, within the time period and without the written consent specified, Participant either engaged in competition with AT&T or engaged in conduct disloyal to AT&T, as defined in Article VIII, Section 2, hereof, regardless of the position or duties the Participant takes and regardless of whether or not the employing company, or the company that Participant becomes associated with or renders service to, is itself engaged in direct competition with an Employer Business.
 
4.  
Equitable Relief
 
The parties recognize (i) that any Participant’s breach of any of the covenants in this Article VIII will cause irreparable injury to the Company, and will represent a failure of the consideration under which the Company (in its capacity as creator and sponsor of the Plan) agreed to provide the Participant with the opportunity to accrue Plan benefits on and after January 1, 2010, and (ii) that monetary damages would not provide the Company with an adequate or complete remedy that would warrant the Company’s continued sponsorship of the Plan and payment of Plan benefits for all Participants.  Accordingly, in the event of a Participant’s actual or threatened breach of covenants in this Article VIII, the Committee, in addition to all other rights and acting as a fiduciary under ERISA for the limited purpose of enforcing the provisions hereof on behalf of all Participants, shall have a fiduciary duty (in order to assure that the Company receives fair and promised consideration for its continued Plan sponsorship and funding) to seek an injunction restraining the Participant from breaching the covenants in this Article VIII.  To enforce its repayment rights with respect to a Participant, the Plan shall have a first priority, equitable lien on all Plan benefits that are paid to the Participant.  In addition, the Company shall pay for any Plan expenses that the Committee incurs hereunder, and shall be entitled to recover from the Participant its reasonable attorneys’ fees and costs incurred in obtaining such injunctive remedies.  In the event the Committee succeeds in enforcing the terms of this Section through a written settlement with the Participant or a court order granting an injunction hereunder, the Participant shall be entitled to collect Plan benefits prospectively, if the Participant is otherwise entitled to such benefits, net of any fees and costs assessed pursuant hereto (which fees and costs shall be paid to AT&T as a repayment on behalf of the Participant), provided that the Participant complies with said settlement or injunction.
 
5.  
Uniform Enforcement .
 
In recognition of AT&T’s need for nationally uniform standards for the Plan’s administration, it is an absolute condition in consideration of any Participant’s accrual or receipt of benefits under the Plan on or after January 1, 2010 that each and all of the following conditions apply to all Participants and to any benefits that are accrued on or after January 1, 2010 and that are thereafter paid or are payable under the Plan:
 
     (a)  
ERISA shall control all issues and controversies hereunder, and the Committee shall serve for the limited purposes of this Article VIII as a “fiduciary” of the Plan.
 
     (b)  
All litigation between the parties relating to this Section shall occur in federal court, which shall have exclusive jurisdiction, any such litigation shall be held in the United States District Court for the Northern District of Texas, and the only remedies available with respect to the Plan shall be those provided under ERISA.
 
     (c)  
If the Committee determines in its sole discretion either (I) that the Company or any Employer Business that employed the Participant terminated the Participant’s employment for cause, or (II) that equitable relief enforcing the Participant’s covenants under this Article VIII is either not reasonably available, not ordered by a court of competent jurisdiction, or circumvented because the Participant has sued in state court, or has otherwise sought remedies not available under ERISA, then in any and all of such instances the Participant shall not be entitled to collect any Plan benefits accrued on or after January 1, 2010, and if any such Plan benefits have been paid to the Participant, the Participant shall immediately repay all such Plan benefits to the Plan (which shall be used to pay Plan administrative expenses or Plan benefits.) upon written demand from the Committee.  Furthermore, the Participant shall hold the Company and each Employer Business harmless from any loss, expense, or damage that may arise from any of the conduct described in clauses (I) and (II) hereof.
 
ARTICLE IX.     PLAN MODIFICATION

The Company may, in its sole discretion, from time to time make any changes in the Plan as it deems appropriate, provided, that no such action shall accelerate or postpone the time or schedule of payment of any Plan benefit except as may be permitted under Code Section 409A and regulations thereunder; and provided further, such modifications shall not result in a reduction of benefits to either: (i) those participants or their surviving spouses already receiving benefits under this Plan, or (ii) those participants who have satisfied the service requirements for a deferred vested pension under the Pension Plan.  Specifically, no Plan modification shall have the effect of reducing a Participant's benefits under the Plan to which he or she would be entitled under the terms of the Plan as in effect immediately prior to its modification, the amount of such benefit to be calculated as if the Participant retired (or otherwise terminated employment) on the date the Plan was modified, it being the Company's intent that any modification of the Plan shall not adversely affect any entitlement to such benefits and any amendment, modification or termination of this Plan inconsistent with this expression of intent shall be null and void.  In addition, the Company may authorize the execution of agreements providing retirement benefits subject generally to the terms and conditions of the Plan and benefits under such agreements shall be deemed provided hereunder, and any such amendments authorized prior to the amendment and restatement of the Plan shall be incorporated herein by reference.
Exhibit 10-h
 


 

 
Effective January 1, 2010
 

Administrative Plan
 

 

The benefits under this Plan are offered by AT&T Inc. (“AT&T”) to persons who have been identified by AT&T as executive officers under Rule 3b-7 of the Securities Exchange Act of 1934 (“Executive Officers”).
 
Administration of Plan .  The Plan or the benefits hereunder may be modified or terminated by the Human Resources Committee in its sole discretion at any time.
 
Except to the extent otherwise provided herein, the Vice President responsible for Human Resources (or the successor to such position) shall be the Administrator of the Plan and will administer the Plan, interpret, construe and apply its provisions in accordance with its terms.  The Administrator, in his or her sole discretion, may establish, adopt or revise rules, as he or she may deem necessary or advisable for the administration of the Plan, including the allocation or limitation of benefits.
 
The Administrator may adopt another plan, not to exceed the benefits included herein, for the benefit of such other employees or former employees of Employers as the Administrator may determine in his or her sole discretion, on such terms and conditions as the Administrator shall determine.  The Administrator may, from time to time, revise the plan solely to increase the financial limits on benefits, not to exceed the corresponding proportional increase in the consumer price index from January 1, 2003, through the date of change.
 
All decisions of the Administrator shall be final and binding unless the Board of Directors or its delegate should determine otherwise.
 
No Employment Rights .  Nothing herein shall constitute a contract of continuing employment or in any manner obligate AT&T or any Executive Officer to continue the employment relationship of, or obligate an Executive Officer to continue in the service of AT&T or any Affiliate.
 
Non-Transferability .  No recipient of benefits under this Plan nor any other person shall have any right to sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey any of the benefits hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable.
 
Notice .  Any notice required or permitted to be given to the Administrator under the Plan shall be sufficient if in writing and hand delivered, or sent by certified mail, to the principal office of AT&T, directed to the attention of the Senior Executive Vice President-Human Resources.  Any notice required or permitted to be given to any other person shall be sufficient if in writing and hand delivered, or sent by certified mail, to the person at the person's last known mailing address as reflected on the records of his or her employing company.  Notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or on the receipt for certification.
 
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.
 
Applicable Law .  This Plan shall be governed and construed in accordance with the laws of the State of Texas to the extent not preempted by the Employee Retirement Income Security Act of 1974, as amended, and regulations thereunder ("ERISA").
 
Automobile .  Each Executive Officer may receive the use of a four-door automobile or an automobile allowance and expenses associated with the operation of the automobile.  The Administrator shall determine the amount of the allowance for each Executive Officer provided that the allowance shall not exceed $2,000 per month.
 
Communications .  Each Executive Officer may receive reasonable communications services including local, long distance, DSL, Internet, wireless, satellite television/video and related equipment.
 
Financial Counseling.   Executive Officers may receive income tax preparation services and financial planning services from a list of designated providers not to exceed $14,000 per year.
 
Estate Planning.   Executive Officers may receive estate planning documentation services not to exceed $10,000 per year.  The Estate Planning limit restarts in the even of a company-initiated relocation to another state.
 
Clubs.   Executive Officers may receive initiation fees, dues, assessments and other charges for reasonable memberships as approved by the CEO or the Administrator, in each case in his or her sole discretion. AT&T does not reimburse for dues, initiation fees or other expenses incurred in connection with a membership in a club that discriminates in its membership policies based on race, creed, gender or ethnic origin.  The Administrator shall report annually to the Human Resources Committee as to the usage of this benefit by the Chief Executive Officer and to the Chief Executive Officer on the usage by all other Executive Officers.

Executive Protection .  Based upon the concern for the security of Executive Officers, the need to secure their optimum availability for business purposes and to permit uninterrupted communications between them, the Executive Officers are authorized to receive home security services, and, whenever feasible, to use AT&T provided aircraft in connection with business travel and to use such aircraft for the personal travel of Executive Officers where the Chief Executive Officer, in his or her sole discretion, deems such use appropriate because of similar considerations.
 
Retirement.   Upon the Retirement of an Executive Officer, he or she may receive up to an additional amount for financial consulting reasonably in connection with his/her Retirement, as follows:  In any given year, 1. for retirements occurring from January 1 through June 30 (inclusive), the amount will be $20,000 in the calendar year of retirement; 2. for retirements occurring from July 1 through November 30 (inclusive), the amount will be $10,000 in the calendar year of retirement and $10,000 in the immediately following calendar year; and 3. For retirements occurring from December 1 through December 31 (inclusive), the amount will be $20,000 in the year following retirement.  After the Retirement of an Executive Officer he or she shall continue to receive the communications, financial counseling and estate planning benefits until his or her death.  After the death of an Executive Officer or Retired Executive Officer, his or her survivor shall receive the communications benefit for 6 billing cycles and shall receive the financial counseling and estate planning benefits for the remainder of the year of death and the immediately following calendar year. LOYALTY CONDITIONS
 
This Section applies to Executive Officers who are actively employed on or after January 1, 2010.
 
Executive Officers acknowledge that no coverage and benefits would be provided under this Plan on and after January 1, 2010 but for the loyalty conditions and covenants set forth below, and that the conditions and covenants herein are a material inducement to AT&T’s willingness to sponsor the Plan and to offer Plan coverage and benefits for the Executive Officers on or after January 1, 2010.  Accordingly, as a condition of receiving coverage and any Plan benefits on or after January 1, 2010, each Executive Officer is deemed to agree that he shall not, without obtaining the written consent of AT&T in advance, participate in activities that constitute engaging in competition with AT&T or engaging in conduct disloyal to AT&T, as those terms are defined in this Section.  Further, notwithstanding any other provision of this Plan, all coverage and benefits under this Plan on and after January 1, 2010 with respect to an Executive Officer and his or her Dependents shall be subject in their entirety to the enforcement provisions below if the Executive Officer, without the Administrator’s consent participates in an activity that constitutes engaging in competition with AT&T or engaging in conduct disloyal to AT&T, as defined below.
 
 Definitions.  For purposes of this Section and of the Plan generally
 

·  
an “Employer Business” shall mean AT&T, any subsidiary, or any business in which AT&T or a subsidiary or an affiliated company of AT&T has a substantial ownership or joint venture interest;
 
·  
“engaging in competition with AT&T” shall mean, while employed by an Employer Business or within two  (2) years after the Executive Officer’s termination of employment,  engaging by the Executive Officer in any business or activity in all or any portion of the same geographical market where the same or substantially similar business or activity is being carried on by an Employer Business.  “Engaging in competition with AT&T” shall not include owning a nonsubstantial publicly traded interest as a shareholder in a business that competes with an Employer Business.  “Engaging in competition with AT&T” shall include representing or providing consulting services to, or being an employee or director of, any person or entity that is engaged in competition with any Employer Business or that takes a position adverse to any Employer Business.
 
·  
“engaging in conduct disloyal to AT&T” means, while employed by an Employer Business or within two  (2) years after the Executive Officer’s termination of employment, (i) soliciting for employment or hire, whether as an employee or as an independent contractor, for any business in competition with an Employer Business, any person employed by AT&T or its affiliates during the one (1)  year prior to the termination of the Executive Officer’s employment, whether or not acceptance of such position would constitute a breach of such person’s contractual obligations to AT&T and its affiliates; (ii) soliciting, encouraging, or inducing any vendor or supplier with which the Executive Officer had business contact on behalf of any Employer Business during the two (2) years prior to the termination of the Executive Officer’s employment, for any reason to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with AT&T or its affiliate; or (iii) soliciting, encouraging, or inducing any customer or active prospective customer with whom Executive Officer had business contact, whether in person or by other media, on behalf of any Employer Business during the two (2) years prior to the termination of Executive Officer’s employment for any reason (“Customer”), to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with any Employer Business, or to purchase competing goods or services from a business competing with any Employer Business, or accepting or servicing business from such Customer on behalf of himself or any other business.  “Engaging in conduct disloyal to AT&T” also means, disclosing Confidential Information to any third party or using Confidential Information, other than for an Employer Business, or failing to return any Confidential Information to the Employer Business following termination of employment.
 
·  
“Confidential Information” shall mean all information belonging to, or otherwise relating to, an Employer Business, which is not generally known, regardless of the manner in which it is stored or conveyed to the Executive Officer, and which the Employer Business has taken reasonable measures under the circumstances to protect from unauthorized use or disclosure.  Confidential Information includes trade secrets as well as other proprietary knowledge, information, know-how, and non-public intellectual property rights, including unpublished or pending patent applications and all related patent rights, formulae, processes, discoveries, improvements, ideas, conceptions, compilations of data, and data, whether or not patentable or copyrightable and whether or not it has been conceived, originated, discovered, or developed in whole or in part by the Executive Officer.  For example, Confidential Information includes, but is not limited to, information concerning the Employer Business’ business plans, budgets, operations, products, strategies, marketing, sales, inventions, designs, costs, legal strategies, finances, employees, customers, prospective customers, licensees, or licensors; information received from third parties under confidential conditions; or other valuable financial, commercial, business, technical or marketing information concerning the Employer Business, or any of the products or services made, developed or sold by the Employer Business.  Confidential Information does not include information that (i) was generally known to the public at the time of disclosure; (ii) was lawfully received by the Executive Officer from a third party; (iii) was known to the Executive Officer prior to receipt from the Employer Business; or (iv) was independently developed by the Executive Officer or independent third parties; in each of the foregoing circumstances, this exception applies only if such public knowledge or possession by an independent third party was without breach by the Executive Officer or any third party of any obligation of confidentiality or non-use, including but not limited to the obligations and restrictions set forth in this Plan.
 
Forfeiture of Benefits.  Coverage and benefits under this Plan shall be forfeited and shall not be provided under this Plan for any period as to which the Administrator determines that, within the time period and without the written consent specified, the Executive Officer has been either engaging in competition with AT&T or engaging in conduct disloyal to AT&T.
 
Equitable Relief .   The parties recognize that any Executive Officer’s breach of any of the covenants in this Section will cause irreparable injury to AT&T, will represent a failure of the consideration under which AT&T (in its capacity as creator and sponsor of the Plan) agreed to provide the Executive Officer with the opportunity to receive Plan coverage and benefits, and that monetary damages would not provide AT&T with an adequate or complete remedy that would warrant AT&T’s continued sponsorship of the Plan and payment of Plan benefits for all Executive Officers.  Accordingly, in the event of an Executive Officer’s actual or threatened breach of the covenants herein, the Administrator, in addition to all other rights and acting as a fiduciary under ERISA on behalf of all Executive Officers, shall have a fiduciary duty (in order to assure that AT&T receives fair and promised consideration for its continued Plan sponsorship and funding) to seek an injunction restraining the Executive Officer from breaching the covenants in this Section.  In addition, AT&T shall pay for any Plan expenses that the Administrator incurs hereunder, and shall be entitled to recover from the Executive Officer its reasonable attorneys’ fees and costs incurred in obtaining such injunctive remedies.  To enforce its repayment rights with respect to an Executive Officer, the Plan shall have a first priority, equitable lien on all Plan benefits provided to or for the Executive Officer and his or her Dependents.  In the event the Administrator succeeds in enforcing the terms of this Article through a written settlement with the Executive Officer or a court order granting an injunction hereunder, the Executive Officer shall be entitled to collect Plan benefits prospectively, if the Executive Officer is otherwise entitled to such benefits, net of any fees and costs assessed pursuant hereto (which fees and costs shall be paid to AT&T as a repayment on behalf of the Executive Officer), provided that the Executive Officer complies with said settlement or injunction.
 
Uniform Enforcement.  In recognition of AT&T’s need for nationally uniform standards for the Plan administration, it is an absolute condition in consideration of any Executive Officer’s accrual or receipt of benefits under the Plan after January 1, 2010 that each and all of the following conditions apply to all Executive Officers and to any benefits that are paid or are payable under the Plan:
 

(1)   To the maximum extent applicable ERISA shall control all issues and controversies hereunder, and the Administrator shall serve for purposes hereof as a “fiduciary” of the Plan, and as its “named fiduciary” within the meaning of ERISA.
 
(2)   All litigation between the parties relating to this Article shall occur in federal court, which shall have exclusive jurisdiction, any such litigation shall be held in the United States District Court for the Northern District of Texas, and the only remedies available with respect to the Plan shall be those provided under ERISA to the extent it is applicable.
 
(3)   If the Administrator determines in its sole discretion either (I) that AT&T or its affiliate that employed the Executive Officer terminated the Executive Officer’s employment for cause, or (II) that equitable relief enforcing the Executive Officer’s covenants under this Section is either not reasonably available, not ordered by a court of competent jurisdiction, or circumvented because the Executive Officer has sued in state court, or has otherwise sought remedies not available under ERISA (to the extent applicable), then in any and all of such instances the Executive Officer shall not be entitled to collect any Plan benefits, and if any Plan benefits have been paid to the Executive Officer, the Executive Officer shall immediately repay all Plan benefits to the Plan (which shall be used to pay Plan administrative expenses or Plan benefits) upon written demand from the Administrator.  Furthermore, the Executive Officer shall hold AT&T and its affiliates harmless from any loss, expense, or damage that may arise from any of the conduct described in clauses (I) and (II) hereof.
 
Taxes.   Subject to the foregoing loyalty and enforcement provisions, each recipient of benefits under this Plan shall receive an amount equal to that necessary to offset the Federal, state and local income taxes, as well as associated employment taxes, of the recipient (including taxes on tax reimbursements) resulting from the benefits in this Plan, other than (1) the monthly automobile allowance for Executive Officers; and (2) personal use of aircraft.

Annual Limits.  Expenses will be charged against the annual limits for the calendar year based on the date of the invoice.




 
 

 
 


Administrative Plan Addendum for Calendar Years 2005 - 2008


Estate Planning

The annual limit for Estate Planning services provided under this Plan for the years 2005 through 2008 is $25,000.

The Estate Planning limit restarts in the event of a company-initiated relocation to another state.


Financial Consulting in Connection with Retirement

For Retirements with a pension effective date from January 1, 2005 through December 31, 2007, the annual limit is based on the participant's distribution election under the  Supplemental Retirement Income Plan ("SRIP"), as follows :

SRIP Election
Annual Limit
Annuity
$10,000 in the year of retirement and $10,000 in the immediately following calendar year.
Lump Sum
$5,000 in the year of retirement, $10,000 in the immediately following calendar year, and $5,000 in the second calendar year following retirement


For Retirements with a pension effective date from January 1, 2008 through December 31, 2008, the annual limit shall be as follows:

Retirements Occurring Between (dates are inclusive)
Annual Limit
January 1 and June 30
20,000 in the calendar year of retirement
July 1 and November 30
$10,000 in the calendar year of retirement and $10,000 in the immediately following calendar year;
December 1 and December 31
$20,000 in the year following retirement


Exhibit 10-i
 

 

 

 

 

 

 

 

 

 
OFFICER DISABILITY PLAN

 

 

 

 

 

 

 

 
Plan Effective: January 1, 1984
Revisions Effective: January 1, 2010
 
 
 

 
 
OFFICER DISABILITY PLAN
 
The AT&T Inc. (“AT&T” or “Company”) Officer Disability Plan (“Plan”) was formerly known as the Senior Management Long Term Disability Plan prior to November 1, 2002.  The purpose of the Plan is to supplement an Eligible Employee’s disability benefits provided under an AT&T Group Disability Plan.
 
Section 1.     − Definitions
 
“Committee” shall mean the Human Resources Committee of the Board of Directors of AT&T Inc.
 
Eligible Employee ” shall mean an Officer and any other individual who is participating in the Plan as of September 1, 2005.  Notwithstanding the foregoing, the CEO of AT&T Inc. (“CEO”) may, from time to time, exclude any Officer or group of Officers from being an “Eligible Employee” under this Plan.  Further, an employee of a company acquired by AT&T shall not be considered an Eligible Employee unless designated as eligible by the CEO.
 
Employer ” shall mean AT&T or any of its Subsidiaries.
 
Group Disability Plan ” shall mean any Employer-paid group disability plan sponsored by AT&T or any Subsidiary.
 
Long Term Disability Benefit ” shall mean the disability benefit provided under Section 3 of this Plan.
 
Officer ” shall mean an individual who is designated as an officer for compensation purposes on the records of AT&T.
 
Participant ” shall mean an Eligible Employee who is disabled within the meaning of Section 2.1 or 3.1 of this Plan.
 
“Plan Administrator” shall mean the SEVP-HR, or any other person or persons whom the Committee may appoint to administer the Plan; provided that the Committee may act as the Plan Administrator at any time.
 
Pay ” shall mean the monthly amount of an Eligible Employee’s annual base salary rate (as determined by his or her Employer) on the last day prior to entitlement to disability benefits under this Plan, but excluding all differentials regarded as temporary or extra payments and excluding all cash payments and distributions made under the AT&T Short Term Incentive Plan, the AT&T 2001 Incentive Plan, and the AT&T 2006 Incentive Plan, or successor plans.
 
SEVP-HR ” shall mean the company’s highest ranking Officer specifically responsible for human resources matters.
 
Short Term Disability Benefit ” shall mean the disability benefit provided under Section 2 of this Plan.
 
Section 2.   Subsidiary ” shall mean any corporation in which the Company owns, directly or indirectly, more than fifty percent (50%) of the total combined voting power of all classes of equity interests, 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.   − Short Term Disability Benefits
 
2.1   If an Eligible Employee is eligible to receive short term disability benefits under the Group Disability Plan, he/she is also eligible to receive Short Term Disability Benefits under this Plan. Otherwise, an Eligible Employee who, due to a physical or mental impairment, is prevented from meeting the performance requirements of the position he or she held immediately preceding the onset of his or her physical or mental impairment shall be entitled to Short Term Disability Benefits under this Section 2.
 
2.2   Subject to the reductions and offsets described in Section 2.3, the Short Term Disability Benefits provided under this Section 2 shall be a monthly amount equal to one hundred percent (100%) of the Participant’s Pay.
 
2.3   The Participant’s Short Term Disability Benefit shall be reduced by his or her short term disability benefit received under a Group Disability Plan, if any.  In addition, the Participant’s combined Short Term Disability Benefit under this Plan and his or her short term disability benefit under the Group Disability Plan, if any, shall be reduced by any offsets as provided in the Group Disability Plan.
 
Short Term Disability Benefits shall commence on the date that short term disability benefits start under the Group Disability Plan, or the date that short term disability benefits would start under the Group Disability Plan had the Participant been eligible for benefits under that plan.  Short Term Disability Benefits under this Plan shall be paid until the earliest to occur of (i) the lapse of short term disability benefits under the Group Disability Plan (whether or not actually receiving benefits under the plan), or (ii) the Participant’s ability to meet the performance requirements of the position he or she held immediately preceding the onset of his or her physical or mental impairment.
 
Section 3.     – Long Term Disability Benefits
 
3.1   If an Eligible Employee is eligible to receive long term disability benefits under the Group Disability Plan, he/she is also eligible to receive Long Term Disability Benefits under this Plan. Otherwise, an Eligible Employee shall be entitled to Long Term Disability Benefits after the lapse of the Participant’s Short Term Disability Benefits if the Eligible Employee, due to a physical or mental impairment, is prevented from meeting the performance requirements of (i) the position he or she held immediately preceding the onset of his or her physical or mental impairment, (ii) a similar position, and (iii) any appropriate position that the Participant would otherwise be capable of performing by reason of his or her background or experience.
 
3.2   Subject to the reductions and offsets described in Section 3.3, the Long Term Disability Benefits provided under this Section 3 shall be a monthly amount equal to eighty percent (80%) of the Participant’s Pay.
 
3.3   The Participant’s Long Term Disability Benefit shall be reduced by his or her long term disability benefit received under a Group Disability Plan, if any.  In addition, the Participant’s combined Long Term Disability Benefit under this Plan and his or her long term disability benefit under the Group Disability Plan, if any, shall be reduced by any offsets as provided in the Group Disability Plan.
 
3.4   Long Term Disability Benefits under this Plan shall be paid until earliest to occur of (i) the Participant’s attainment of age 65, or (ii) the Participant’s ability to meet the performance requirements of (a) the position he or she held immediately preceding the onset of his or her physical or mental impairment, (b) a similar position, or (c) any appropriate position that the Participant would otherwise be capable of performing by reason of his or her background or experience.
 
Section 4.     – Claims and Appeals
 
4.1   A Disability Review Committee (“Committee”) will be established to review any issues arising under this Plan, including any claims made under this Plan.  The Committee shall be appointed by the SEVP-HR and shall be comprised of at least three managers, one of which shall be an Officer. The Committee, which shall be a fiduciary under the Plan with respect to the review of claims, shall have the authority, in its sole and absolute discretion, to interpret and administer the Plan, including the authority, in its sole and absolute discretion, to make the determinations as to whether an Eligible Employee is disabled within the meaning of Sections 2 and 3 of the Plan and any other claim arising under the Plan.  The SEVP-HR, who shall be a fiduciary under the Plan with respect to the review of appealed claims, shall have the sole and absolute discretion to make determinations with respect to an appeal of a claim that is denied by the Committee.
 
4.2   An Eligible Employee or a Participant (the “Claimant”) may file a claim under the Plan by sending a written notice of such claim to AT&T Executive Compensation, 208 South Akard Street, Room 2355, Dallas, Texas 75202-4206, which shall include a brief description of the Claimant’s claim.
 
4.3   Upon receipt of a written claim, the Committee shall notify the Claimant of the Committee’s decision regarding the claim within forty-five (45) days of the date the claim is made.  The Committee may extend this 45-day period for up to 30 days (plus an additional 30 days if needed) if it determines that special circumstances require more time to determine the claim.  The Committee shall notify the Claimant, in writing, within the initial 45-day period (and within the first 30-day extension period if an additional 30 days is needed) if additional time is needed and what special circumstances require the extra time.  If extensions are required because the Committee needs additional information from the Claimant, the Claimant shall be given 45 days from the Committee’s notification within which to provide that information.
 
4.4   A claim is denied if:  (a) the Claimant receives a written denial from the Committee, (b) the Claimant receives no reply from the Committee after 45 days, or (c) the Committee has extended the time to reply by an additional 30 or 60 days and the Claimant receives no reply after the additional 30 or 60 days.  The written notice of a denied claim shall include: (a) the specific reasons for the denial, (b) a specific reference to the Plan provision upon which the denial is based, (c) a description of any additional information that is needed to make the claim acceptable and the reason it is needed, and (d) a description of the procedure by which the Claimant may appeal the denial to the Human Resources Committee of the AT&T Board of Directors.
 
4.5   If a claim is denied by the Committee, or treated as denied, and the Claimant disagrees with the Committee’s decision, the Claimant may appeal the Committee’s decision by filing a written request for review.  The Claimant or someone authorized by the Claimant must make the request for review within 180 days of receipt of the denial notice or, if no notice is received, 180 days after the expiration of 45, 75 or 105 days, whichever is applicable.  A written request for review must be sent to the SEVP-HR at the address provided in the claim denial letter or, if no denial letter was sent, to the SEVP-HR, 208 South Akard Street, Room 2355, Dallas, Texas 75202.  The appeal of a denied claim may include:  (a) a written statement of the issues and any other comments, along with any new or additional evidence or materials in support of the Claimant’s appeal, (b) a request to examine documents that bear on the Claimant’s appeal, and (c) a request to review pertinent Plan documents.
 
4.6   Unless the Claimant is notified in writing that more time is needed, a review and decision on the Claimant’s appeal must be made within 45 days after the appeal is received.  If special circumstances require more time to consider the appeal, the SEVP-HR may take an additional 45 days to reach a decision after providing written notice that there will be a delay.  The appeal is deemed denied if notice of the decision is not provided by the end of the 45 or 90-day period.  If an appeal is denied by the SEVP-HR, it is final and not subject to further review; however, the Claimant may have further rights under ERISA.
 
Section 5.    – Loyalty Conditions
 
5.1   Eligible Employees acknowledge that no coverage and benefits would be provided under this Plan on and after January 1, 2010 but for the loyalty conditions and covenants set forth in this Section, and that the conditions and covenants herein are a material inducement to AT&T’s willingness to sponsor the Plan and to offer Plan coverage and benefits for the Participants.  Accordingly, as a condition of receiving coverage and any Plan benefits on or after January 1, 2010, each Eligible Employee is deemed to agree that he shall not, without obtaining the written consent of the Plan Administrator in advance, participate in activities that constitute engaging in competition with AT&T or engaging in conduct disloyal to AT&T, as those terms are defined in this Section.  Further, notwithstanding any other provision of this Plan, all coverage and benefits under this Plan on and after January 1, 2010 with respect to an Eligible Employee shall be subject in their entirety to the enforcement provisions of this Section if the Eligible Employee, without the Plan Administrator’s consent, participates in an activity constituting engaging in competition with AT&T or engaging in conduct disloyal to AT&T, as defined below.
 
5.2   Definitions.  For purposes of this Section and of the Plan generally
 
(a)   an “Employer Business” shall mean AT&T, any Subsidiary, or any business in which AT&T or a Subsidiary or an affiliated company of AT&T has a substantial ownership or joint venture interest;
 
(b)   “engaging in competition with AT&T” shall mean, while employed by an Employer Business or within two  (2) years after the Eligible Employee’s termination of employment, engaging by the Eligible Employee in any business or activity in all or any portion of the same geographical market where the same or substantially similar business or activity is being carried on by an Employer Business.  “Engaging in competition with AT&T” shall not include owning a nonsubstantial publicly traded interest as a shareholder in a business that competes with an Employer Business.  “Engaging in competition with AT&T” shall include representing or providing consulting services to, or being an employee or director of, any person or entity that is engaged in competition with any Employer Business or that takes a position adverse to any Employer Business.
 
(c)   “engaging in conduct disloyal to AT&T” means, while employed by an Employer Business or within two  (2) years after the Eligible Employee’s termination of employment, (i) soliciting for employment or hire, whether as an employee or as an independent contractor, for any business in competition with an Employer Business, any person employed by AT&T or its affiliates during the one (1)  year prior to the date on which the Eligible Employee commences receiving benefits under this Plan, whether or not acceptance of such position would constitute a breach of such person’s contractual obligations to AT&T and its affiliates; (ii) soliciting, encouraging, or inducing any vendor or supplier with which Participant had business contact on behalf of any Employer Business during the two (2) years prior to the date on which the Eligible Employee most recently commenced receiving benefits under this Plan to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with AT&T or its affiliate; or (iii) soliciting, encouraging, or inducing any customer or active prospective customer with whom Eligible Employee had business contact, whether in person or by other media, on behalf of any Employer Business during the two (2) years prior to the date on which the Eligible Employee most recently commenced receiving benefits under this Plan (“Customer”), to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with any Employer Business, or to purchase competing goods or services from a business competing with any Employer Business, or accepting or servicing business from such Customer on behalf of himself or any other business.  “Engaging in conduct disloyal to AT&T” also means, disclosing Confidential Information to any third party or using Confidential Information, other than for an Employer Business, or failing to return any Confidential Information to the Employer Business following termination of employment.
 
(d)           “Confidential Information” shall mean all information belonging to, or otherwise relating to, an Employer Business, which is not generally known, regardless of the manner in which it is stored or conveyed to the Eligible Employee, and which the Employer Business has taken reasonable measures under the circumstances to protect from unauthorized use or disclosure.  Confidential Information includes trade secrets as well as other proprietary knowledge, information, know-how, and non-public intellectual property rights, including unpublished or pending patent applications and all related patent rights, formulae, processes, discoveries, improvements, ideas, conceptions, compilations of data, and data, whether or not patentable or copyrightable and whether or not it has been conceived, originated, discovered, or developed in whole or in part by the Eligible Employee.  For example, Confidential Information includes, but is not limited to, information concerning the Employer Business’ business plans, budgets, operations, products, strategies, marketing, sales, inventions, designs, costs, legal strategies, finances, employees, customers, prospective customers, licensees, or licensors; information received from third parties under confidential conditions; or other valuable financial, commercial, business, technical or marketing information concerning the Employer Business, or any of the products or services made, developed or sold by the Employer Business.  Confidential Information does not include information that (i) was generally known to the public at the time of disclosure; (ii) was lawfully received by the Eligible Employee from a third party; (iii) was known to the Eligible Employee prior to receipt from the Employer Business; or (iv) was independently developed by the Eligible Employee or independent third parties; in each of the foregoing circumstances, this exception applies only if such public knowledge or possession by an independent third party was without breach by the Eligible Employee or any third party of any obligation of confidentiality or non-use, including but not limited to the obligations and restrictions set forth in this Plan.
 
5.3   Forfeiture of Benefits.  Coverage and benefits shall be forfeited and shall not be provided under this Plan for any period as to which the Plan Administrator determines that, within the time period and without the written consent specified, the Eligible Employee has been either engaging in competition with AT&T or engaging in conduct disloyal to AT&T.
 
5.4   Equitable Relief .   The parties recognize that any Eligible Employee’s breach of any of the covenants in this Section 5 will cause irreparable injury to AT&T, will represent a failure of the consideration under which AT&T (in its capacity as creator and sponsor of the Plan) agreed to provide the Eligible Employee with the opportunity to receive Plan coverage and benefits, and that monetary damages would not provide AT&T with an adequate or complete remedy that would warrant AT&T’s continued sponsorship of the Plan and payment of Plan benefits for all Participants.  Accordingly, in the event of an Eligible Employee’s actual or threatened breach of the covenants in this Section 5, the Plan Administrator, in addition to all other rights and acting as a fiduciary under ERISA on behalf of all Participants, shall have a fiduciary duty (in order to assure that AT&T receives fair and promised consideration for its continued Plan sponsorship and funding) to seek an injunction restraining the Eligible Employee from breaching the covenants in this Section 5.  In addition, AT&T shall pay for any Plan expenses that the Plan Administrator incurs hereunder, and shall be entitled to recover from the Participant its reasonable attorneys’ fees and costs incurred in obtaining such injunctive remedies.  To enforce its repayment rights with respect to an Eligible Employee, the Plan shall have a first priority, equitable lien on all Plan benefits provided to or for the Eligible Employee and his or her Dependents.  In the event the Plan Administrator succeeds in enforcing the terms of this Article through a written settlement with the Eligible Employee or a court order granting an injunction hereunder, the Eligible Employee shall be entitled to collect Plan benefits prospectively, if the Eligible Employee is otherwise entitled to such benefits, net of any fees and costs assessed pursuant hereto (which fees and costs shall be paid to AT&T as a repayment on behalf of the Eligible Employee), provided that the Eligible Employee complies with said settlement or injunction.
 
5.5   Uniform Enforcement.  In recognition of AT&T’s need for nationally uniform standards for the Plan administration, it is an absolute condition in consideration of any Eligible Employee’s accrual or receipt of benefits under the Plan after January 1, 2010 that each and all of the following conditions apply to all Participants and to any benefits that are paid or are payable under the Plan:
 
(a)   ERISA shall control all issues and controversies hereunder, and the Committee shall serve for purposes hereof as a “fiduciary” of the Plan, and as its “named fiduciary” within the meaning of ERISA.
 
(b)   All litigation between the parties relating to this Article shall occur in federal court, which shall have exclusive jurisdiction, any such litigation shall be held in the United States District Court for the Northern District of Texas, and the only remedies available with respect to the Plan shall be those provided under ERISA.
 
(c)   If the Plan Administrator determines in its sole discretion either (I) that AT&T or its affiliate that employed the Eligible Employee terminated the Eligible Employee’s employment for cause, or (II) that equitable relief enforcing the Eligible Employee’s covenants under this Section 5 is either not reasonably available, not ordered by a court of competent jurisdiction, or circumvented because the Eligible Employee has sued in state court, or has otherwise sought remedies not available under ERISA, then in any and all of such instances the Eligible Employee shall not be entitled to collect any Plan benefits, and if any Plan benefits have been paid to the Eligible Employee, the Eligible Employee shall immediately repay all Plan benefits to the Plan (which shall be used to pay Plan administrative expenses or Plan benefits) upon written demand from the Plan Administrator.  Furthermore, the Eligible Employee shall hold AT&T and its affiliates harmless from any loss, expense, or damage that may arise from any of the conduct described in clauses (I) and (II) hereof.
 
Section 6.     − General Provisions
 
6.1   AT&T, in its sole discretion may reduce the disability allowance by the amount of outside compensation or earnings of the Participant for work performed by the Participant during the period for which any Short Term Disability Benefit or Long Term Disability Benefit is provided.
 
6.2   The rights of a Participant to benefits under the Plan shall not be subject to assignment or alienation, except as required by law.
 
6.3   AT&T may from time to time make changes in the Plan and may terminate the Plan in its sole and absolute discretion.  In addition, the SEVP-HR of AT&T (or his or her successor), shall be authorized to make minor or administrative changes to the Plan, as well as changes dictated by any requirement of Federal or state statutes or authorized or made desirable by such statutes.  Such changes or termination shall not affect the rights of any Participant, without his/her consent, to any benefit under the Plan to which such Participant may have previously become entitled as a result of a disability, death or termination of employment that occurred prior to the effective date of such change or termination.
 
6.4   Should a claim, other than under this Plan or under any other plan maintained by the Employer, be presented or suit brought against the Company, an Employer, or against any other Subsidiary, for damages on account of injury or death of a Participant, nothing shall be payable under this Plan; provided however, that the Committee may, in its discretion and upon such terms as it may prescribe waive this provision if such claims be withdrawn or if such suit be discontinued.
 
6.5   All benefits authorized under the Plan shall be charged to the operating expense accounts of the Participant’s Employer when and as paid.
 
6.6   The expenses of administering the Plan shall be borne by the Employers in such proportions as shall be mutually agreed upon by such Employers.
 
6.7   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.
 
6.8   At any time AT&T may correct any error made under the Plan without prejudice to AT&T.  Such corrections may include, among other things, changing or revoking a disability benefit.
 
6.9     To the extent not preempted by Federal law, this Plan shall be governed by and construed in accordance with the substantive laws of the State of Texas, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan to provisions of the substantive law of any jurisdiction other than the State of Texas.
 
6.10   The use of personal pronouns of either gender in the Plan is intended to include both masculine and feminine genders.
 

 


EXHIBIT 12
 
AT&T INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
Dollars in Millions
                                           
 
Six Months Ended
                           
   
June 30,
 
Year Ended
     
2009
   
2008
   
2008
   
2007
   
2006
   
2005
   
2004
Earnings:
                                         
Income from continuing operations before income taxes*
 
$
9,899
 
$
11,403
 
$
20,164
 
$
18,399
 
$
10,886
 
$
5,720
 
$
7,164
Equity in net income of affiliates included above
   
(368)
   
(455)
   
(819)
   
(692)
   
(2,043)
   
(609)
   
(873)
Fixed charges
   
2,567
   
2,372
   
4,963
   
4,536
   
2,209
   
1,680
   
1,238
Distributed income of equity affiliates
   
29
   
40
   
165
   
395
   
97
   
158
   
331
Interest capitalized
   
(368)
   
(257)
   
(659)
   
(171)
   
(73)
   
(36)
   
(31)
                                           
Earnings, as adjusted
 
$
11,759
 
$
13,103
 
$
23,814
 
$
22,467
 
$
11,076
 
$
6,913
 
$
7,829
                                           
Fixed Charges:
                                         
Interest expense
 
$
1,728
 
$
1,719
 
$
3,390
 
$
3,507
 
$
1,843
 
$
1,456
 
$
1,023
Interest capitalized
   
368
   
257
   
659
   
171
   
73
   
36
   
31
Dividends on preferred securities
   
-
   
2
   
3
   
3
   
3
   
31
   
24
Portion of rental expense representative of interest factor
   
471
   
394
   
911
   
855
   
290
   
157
   
160
                                           
Fixed Charges
 
$
2,567
 
$
2,372
 
$
4,963
 
$
4,536
 
$
2,209
 
$
1,680
 
$
1,238
                                           
Ratio of Earnings to Fixed Charges
   
4.58
   
5.52
   
4.80
   
4.95
   
5.01
   
4.11
   
6.32
                                           
 
 
* All periods presented exclude undistributed earnings on investments accounted for under the equity method as well as "Income From discountinued Operations, net of tax" in our Consolidated Statements of Income, which was from the sale of our interest in the directory advertising business in Illinois and northwest Indiana.
Exhibit 31.1
 
CERTIFICATION

I, Randall Stephenson, certify that:

1.  
I have reviewed this report on Form 10-Q of AT&T Inc.;

2.  
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)  
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)  
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)  
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)  
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)  
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)  
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 5, 2009

/s/ Randall Stephenson.
Randall Stephenson
Chairman of the Board,
Chief Executive Officer and President


Exhibit 31.2
 
CERTIFICATION

I, Richard G. Lindner, certify that:

1.  
I have reviewed this report on Form 10-Q of AT&T Inc.;

2.  
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)  
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)  
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)  
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)  
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)  
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)  
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2009

/s/ Richard G. Lindner.
Richard G. Lindner
Senior Executive Vice President
     and Chief Financial Officer

Exhibit 32

Certification of Periodic Financial Reports

 
 
Pursuant to 18 U.S.C. Section 1350, each of the undersigned officers of AT&T Inc. (the “Company”) hereby certifies that the Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 2009 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
 
August 5, 2009                                                                                                August 5, 2009




By:     /s/ Randall Stephenson.  By:   /s/ Richard G. Lindner.
   Randall Stephenson
   Richard G. Lindner
   Chairman of the Board, Chief Executive Officer
     Senior Executive Vice President
 
          and President
          and Chief Financial Officer
   


The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document. This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (“Exchange Act”) or otherwise subject to liability under that section. This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act except to the extent this Exhibit 32 is expressly and specifically incorporated by reference in any such filing.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to AT&T Inc. and will be retained by AT&T Inc. and furnished to the Securities and Exchange Commission or its staff upon request.