AT&T SENIOR MANAGEMENT INCENTIVE AWARD DEFERRAL PLAN
(as amended December 17, 1997)
1. ELIGIBILITY
Any Senior Manager (as defined in the AT&T 1997 Long Term Incentive
Program [the "1997 Plan"]) of AT&T Corp. ("AT&T") or an Affiliate (as defined in
the 1997 Plan) who is eligible for an award under the AT&T Short Term Incentive
Plan (the "Short Term Incentive Plan") and/or who has been granted a Performance
Award or a Stock Unit Award under the AT&T Senior Management Long Term Incentive
Plan (the "Long Term Incentive Plan") the 1987 Long Term Incentive Plan (the
"1987 Plan") or the 1997 Plan shall be eligible to participate in this AT&T
Senior Management Incentive Award Deferral Plan (the "Plan"). For purposes of
the Plan, AT&T and any Affiliate shall be referred to as a "Participating
Company". Prior to January 1, 1984, the Plan was named the Bell System Senior
Management Incentive Award Deferral Plan.
2. PARTICIPATION
(a) Prior to the beginning of any calendar year, any Senior Manager may
elect to participate in the Plan by directing that (i) all or part of an award
under the Short Term Incentive Plan, or a Performance Award or a Stock Unit
Award under the Long Term Incentive Plan, the 1987 Plan or the 1997 Plan and/or
(ii) all or part of the dividend equivalent payments under the Long Term
Incentive Plan, the 1987 Plan or the 1997 Plan, that such employee's
Participating Company would otherwise pay currently to such employee in such
calendar year, shall be credited to a deferred account subject to the terms of
the Plan. However, in no event shall the part of an award under any plan
credited during any calendar year be less than $1,000 (based on a valuation at
the time the award would otherwise be paid). There shall be no such minimum
limitation on amounts credited during any calendar year that are related to
dividend equivalent payments.
In addition, prior to the beginning of any calendar year, any Senior
Manager may elect to participate in the Plan by directing that all or part of
the compensation related to the exercise (more than six months following such
election and prior to the employee's retirement or other termination of
employment) of an Option awarded under the 1987 Plan or the 1997 Plan shall be
credited to a deferred account subject to the terms of the Plan. The exercise of
an Option shall be considered as an exercise described in the preceding sentence
only if the exercise would otherwise satisfy the requirements for a
stock-for-stock exercise under the stock option award agreement pertaining to
such Option.
In addition, prior to the beginning of any calendar year, the Chairman
of the Board and any other Senior Manager designated by the Chairman of the
Board may elect to participate in the Plan by directing that all or part of such
Senior Manager's salary that such employee's Participating Company would
otherwise pay currently to such employee in such calendar year shall be credited
to a deferred account subject to the terms of the Plan.
In addition, provided such participation shall have been approved by
the Compensation and Employee Benefits Committee of the AT&T Board of Directors
(the "Committee"), prior to the beginning of any calendar year, any Senior
Manager may elect to participate in the Plan as to other awards under the 1987
Plan or 1997 Plan, or other amounts of compensation of such Senior Manager, by
directing that all or part of such awards or compensation that such Senior
Manager's Participating Company would otherwise pay currently to such Senior
Manager in such calendar year be credited to a deferred account subject to the
terms of the Plan.
(b) Such an election to participate in the Plan shall be in the form of
a document executed by the employee and filed with the employee's Participating
Company. An election related to awards, dividend equivalent payments, salary
and/ or other compensation otherwise payable currently in any calendar year
shall become irrevocable on the last day prior to the beginning of such calendar
year.
(c) Notwithstanding anything to the contrary contained in this Section
2, in the case of a Senior Manager who is newly eligible to participate in the
Plan, or in the case of any Senior Manager with respect to awards or
compensation newly eligible to be deferred under the Plan, a deferral election
may be made with respect to compensation otherwise receivable in the same
calendar year and subsequent to such election, provided such election is made
within ninety (90) days of such eligibility.
3. DEFERRED ACCOUNTS
(a) (i) Except as provided in Section 3(b)(iii), deferred amounts
related to awards, dividend equivalent payments which would otherwise have been
distributed in cash by a Participating Company and deferred amounts related to
salary and/or other cash compensation shall be credited to the employee's
account and shall bear interest from the date the awards, dividend equivalent
payments, salary and/or other cash compensation would otherwise have been paid.
The interest credited to the account will be compounded at the end of each
calendar quarter, and the annual rate of interest applied at the end of any
calendar quarter shall be determined by the Committee from time to time,
provided however, that the interest rate to be applied, for any subsequent
quarter, to an employee's (or former employee's) deferred account balance as of
December 31, 1998, plus any additions to such account after December 31, 1998
that result from deferral elections made by an employee prior to December 31,
1998, (reduced by any distributions attributable to such account balance) shall
not be less than the applicable 10 Year U.S. Treasury Note Rate for the prior
calendar quarter, plus five (5) percent.
(ii) Furthermore, if an employee made an election described in Section
2, which election was effective on December 31, 1983, then such employee's
account shall also be credited during 1984 with an amount equal to the deferred
amounts which would have been credited to the employee's account during 1984 had
the company which employed the employee on December 31, 1983 continued to be a
Participating Company during 1984, and such amount shall bear interest in
accordance with (a)(i) above from the date such amount would have been credited
had such company continued to be a Participating Company during 1984.
(b)(i) Deferred amounts related to awards that would otherwise have
been distributed in AT&T common shares by a Participating Company shall be
credited to the employee's account as deferred AT&T shares. Furthermore, if an
employee made an election described in Section 2, which election was effective
on December 31, 1983, then such employee's account shall also be credited during
1984 with the deferred AT&T shares which would have been credited to the
employee's account had the company which employed the employee on December 31,
1983 continued to be a Participating Company in the Plan and in the Long Term
Incentive Plan during 1984.
(ii) Deferred amounts related to the compensation on the exercise of an
Option also shall be credited to the employee's account as deferred AT&T shares.
The number of deferred AT&T shares credited under the preceding sentence shall
equal the number of additional AT&T shares the employee would have received on
the actual stock-for-stock exercise of such Option.
(iii) Prior to the beginning of any calendar year, the Chairman of the
Board and any other Senior Manager designated by the Chairman of the Board may
elect that deferred amounts related to dividend equivalent payments, which would
otherwise have been distributed in cash by a Participating Company during such
calendar year, shall be credited to the employee's account as deferred AT&T
shares. The number of deferred AT&T shares credited, with respect to each
dividend equivalent, shall be determined in accordance with the conversion
formula set forth in the following paragraph, as if such dividend equivalent
were the amount to be converted to a number of additional deferred AT&T shares.
(iv) The employee's account shall also be credited on each dividend
payment date for AT&T shares with an amount equivalent to the dividend payable
on the number of AT&T common shares equal to the number of deferred AT&T shares
in the employee's account on the record date for such dividend. Such amount
shall then be converted to a number of additional deferred AT&T shares
determined by dividing such amount by the price of AT&T common shares, as
determined in the following sentence. The price of AT&T common shares related to
any dividend payment date shall be the average of the daily high and low sale
prices of AT&T common shares on the New York Stock Exchange ("NYSE") for the
period of five trading days ending on such dividend payment date, or the period
of five trading days immediately preceding such dividend payment date if the
NYSE is closed on the dividend payment date.
(c) In the event of any change in outstanding AT&T common shares by
reason of any stock dividend or split, recapitalization, merger, consolidation,
combination or exchange of shares or other similar corporate change, the
Committee shall make such adjustments, if any, that it deems appropriate in the
number of deferred AT&T shares then credited to employees' accounts. Any and all
such adjustments shall be conclusive and binding upon all parties concerned.
4. DISTRIBUTION
(a) At the time an eligible employee makes an election to participate
in the Plan, the employee shall also make an election with respect to the
distribution (during the employee's lifetime or in the event of the employee's
death) of the amounts credited to the employee's deferred account. Such an
election related to the distribution during the employee's lifetime, of amounts
otherwise payable currently in any calendar year, shall become irrevocable on
the last day prior to the beginning of such calendar year.
The election related to the distribution in the event of the employee's
death, including the designation of a beneficiary or beneficiaries, may be
changed by the employee at any time by filing the appropriate document with the
Secretary of the Company.
Amounts credited as cash plus accumulated interest shall be distributed
in cash; amounts credited as deferred AT&T shares shall be distributed in the
form of an equal number of AT&T shares.
(b)(i) With respect to amounts related to deferred cash credited to the
employee's account under Section 3(a), and to deferred AT&T shares credited to
the employee's account under Section 3(b)(i) or (iii), an employee may elect to
receive such amounts in one payment or in some other number of approximately
equal annual installments (not exceeding 20), provided however, that the number
of annual installments may not extend beyond the life expectancy of the
employee, determined as of the date the first installment is paid. The
employee's election shall also specify that the first installment (or the single
payment if the employee has so elected) shall be paid either (1) as soon as
practicable after the first day of the calendar quarter next following the end
of the month in which the employee attains the age specified in such election,
which age shall not be earlier than age 55 or later than age 70-1/2, or (2) as
soon as practicable after the first day of the calendar quarter next following
the end of the month in which the employee retires from a Participating Company
or otherwise terminates employment with a Participating Company (except for a
transfer to another Participating Company); provided, however, that the
Committee may, in its sole discretion, direct that the first installment (or the
single payment) shall be paid on the first day of the first calendar quarter in
the calendar year next following the year of retirement or other termination of
employment. In addition any Senior Manager eligible to defer salary may specify
that the first installment (or the single payment if the employee has so
elected) shall be paid as soon as practicable after the first day of the first
calendar quarter in the calendar year next following the calendar year in which
the employee retires from a Participating Company or otherwise terminates
employment with a Participating Company (except for a transfer to another
Participating Company).
(ii) With respect to deferred AT&T shares credited to the employee's
account under Section 3(b)(ii), an employee may elect to receive the deferred
AT&T shares in one payment or in some other number of approximately equal annual
installments (not exceeding 20), provided however, that the number of annual
installments may not extend beyond the life expectancy of the employee,
determined as of the date the first installment is paid. The employee's election
shall also specify that the first installment (or the single payment if the
employee has so elected) shall be paid as soon as practicable after the first
day of the calendar quarter next following the later of (1) the end of the month
that is five years following the month in which the related deferred AT&T shares
were initially credited, and (2)(A) the end of the month in which the employee
attains the age specified in such election, which age shall not be earlier than
age 55 or later than age 70-1/2, or (B) the end of the month in which the
employee retires from a Participating Company or otherwise terminates employment
with a Participating Company (except for a transfer to another Participating
Company); provided, however, that the Committee may, in its sole discretion,
direct that the first installment (or the single payment) shall be paid on the
first day of the first calendar quarter in the calendar year next following the
year of retirement or other termination of employment.
(c) Notwithstanding an election pursuant to Paragraph (b) of this
Section 4, the entire amount then credited to an employee's account shall be
paid immediately in a single payment (1) if the employee is discharged for cause
by his or her Participating Company, (2) if the such Participating Company
determines that the employee engaged in misconduct in connection with the
employee's employment with the Participating Company, (3) if the employee
without the consent of his or her Participating Company, while employed by such
Participating Company or after the termination of such employment, establishes a
relationship with a competitor of the Company or engages in activity which is in
conflict with or adverse to the interest of the Company as determined under the
AT&T Non-Competition Guideline, or (4) the employee becomes employed by a
governmental agency having jurisdiction over the activities of a Participating
Company or any of its subsidiaries.
(d) An employee may elect that, in the event the employee should die
before full payment of all amounts credited to the employee's account, the
balance of the deferred amounts shall be distributed in one payment or in some
other number of approximately equal annual installments (not exceeding 10) to
the beneficiary or beneficiaries designated in writing by the employee, or if no
designation has been made, to the estate of the employee. The first installment
(or the single payment if the employee has so elected) shall be paid on the
first day of the calendar quarter next following the month of death; provided,
however, that the Committee may, in its sole discretion, direct that the first
installment (or the single payment) shall be paid on the first day of the first
calendar quarter in the calendar year next following the year of death.
(e) Installments subsequent to the first installment to the employee,
or to a beneficiary or to the employee's estate, shall be paid on the first day
of the applicable calendar quarter in each succeeding calendar year until the
entire amount credited to the employee's deferred account shall have been paid.
Deferred amounts held pending distribution shall continue to be credited with
interest or additional deferred AT&T shares, as applicable, determined in
accordance with Section 3(a) and (b).
(f) In the event an employee, or the employee's beneficiary after the
employee's death, incurs a severe financial hardship, the Committee, in its sole
discretion, may accelerate or otherwise revise the payment schedule from the
employee's account to the extent reasonably necessary to eliminate the severe
financial hardship. For the purpose of this subsection (f), a severe financial
hardship must have been caused by an accident, illness, or other event beyond
the control of the employee or, if applicable, the beneficiary.
(g) The obligation to make a distribution of deferred amounts credited
to an employee's account during any calendar year plus the additional amounts
credited on such deferred amounts pursuant to Section 3(a) and (b) shall be
borne by the Participating Company which otherwise would have paid the related
award or salary currently. However, the obligation to make distribution with
respect to deferred amounts which are related to amounts credited to an
employee's account under Section 3(a)(ii) and under the second sentence of
Section 3(b)(i), and with respect to which no Participating Company would
otherwise have paid the related award currently, shall be borne by the
Participating Company which employed the employee on January 1, 1984.
5. MISCELLANEOUS
(a) The deferred amounts shall be held in the general funds of the
Participating Companies. The Participating Companies shall not be required to
reserve, or otherwise set aside, funds for the payment of such amounts.
(b) The rights of an employee to any deferred amounts plus the
additional amounts credited pursuant to Section 3(a) and (b) shall not be
subject to assignment by the employee.
(c) The Executive Vice President - Human Resources of AT&T shall have
the authority to administer the Plan.
(d) The Committee may at any time amend the Plan or terminate the Plan,
but such amendment or termination shall not adversely affect the rights of any
employee, without his or her consent, to any benefit under the Plan to which
such employee may have previously become entitled prior to the effective date of
such amendment or termination. The Executive Vice President - Human Resources of
AT&T with the concurrence of the General Counsel of AT&T shall be authorized to
make minor or administrative changes to the Plan, as well as amendments required
by applicable federal or state law (or authorized or made desirable by such
statutes).