EXHIBIT 10-r
SBC Communications Inc.
1996 STOCK AND INCENTIVE PLAN
Plan Effective: January 1, 1996
As amended through: November 19, 1999
TABLE OF CONTENTS
Article 1 Establishment and Purpose..........................................1
1.1 Establishment of the Plan.............................................1
1.2 Purpose of the Plan...................................................1
1.3 Effective Date of the Plan............................................1
Article 2 Definitions........................................................1
Article 3 Administration.....................................................5
3.1 The Committee.........................................................5
3.2 Authority of the Committee............................................6
Article 4 Shares Subject to the Plan.........................................6
4.1 Number of Shares......................................................6
4.2 Lapsed Awards.........................................................7
4.3 Adjustments in Authorized Plan Shares.................................7
Article 5 Eligibility and Participation......................................7
5.1 Eligibility...........................................................7
5.2 Actual Participation..................................................8
Article 6 Stock Options......................................................8
6.1 Grant of Options......................................................8
6.2 Form of Issuance......................................................8
6.3 Exercise Price........................................................9
6.4 Duration of Options...................................................9
6.5 Vesting of Options....................................................9
6.6 Exercise of Options...................................................9
6.7 Payment...............................................................9
6.8 Termination of Employment............................................11
6.9 Employee Transfers...................................................12
6.10 Restrictions on Exercise and Transfer of Options.....................12
6.11 Competition..........................................................12
Article 7 Restricted Stock..................................................13
7.1 Grant of Restricted Stock............................................13
7.2 Restricted Stock Agreement...........................................13
7.3 Transferability......................................................13
7.4 Other Restrictions...................................................13
7.5 Removal of Restrictions..............................................14
7.6 Voting Rights, Dividends and Other Distributions.....................14
7.7 Termination of Employment Due to Death or Disability.................14
7.8 Termination of Employment for Other Reasons..........................14
7.9 Employee Transfers...................................................14
7.10 Other Grants.........................................................15
Article 8 Performance Units and Performance Shares..........................15
8.1 Grants of Performance Units and Performance Shares...................15
8.2 Value of Performance Shares and Units................................15
8.3 Performance Period...................................................16
8.4 Performance Goals....................................................16
8.5 Dividend Equivalents on Performance Shares...........................18
8.6 Form and Timing of Payment of Performance Units and Performance
Shares.............................................................18
8.7 Termination of Employment Due to Death, Disability, or Retirement....19
8.8 Termination of Employment for Other Reasons..........................19
8.9 Termination of Employment for Cause..................................19
8.10 Nontransferability...................................................19
Article 9 Beneficiary Designation...........................................20
Article 10 Deferrals........................................................20
10.1 Deferrals............................................................20
10.2 Deferral of Performance Unit and Performance Share Distributions.....20
Article 11 Employee Matters.................................................21
11.1 Employment Not Guaranteed............................................21
11.2 Participation........................................................21
11.3 Claims and Appeals...................................................21
Article 12 Change in Control................................................22
Article 13 Amendment, Modification, and Termination.........................22
13.1 Amendment, Modification, and Termination.............................22
13.2 Awards Previously Granted............................................22
Article 14 Withholding......................................................22
14.1 Tax Withholding......................................................22
14.2 Share Withholding....................................................23
Article 15 Successors.......................................................23
Article 16 Legal Construction...............................................23
16.1 Gender and Number....................................................23
16.2 Severability.........................................................23
16.3 Requirements of Law..................................................24
16.4 Securities Law Compliance............................................24
16.5 Governing Law........................................................24
SBC Communications Inc.
1996 Stock and Incentive Plan
Article 1 Establishment and Purpose.
1.1 Establishment of the Plan. SBC Communications Inc., a Delaware
corporation (the "Company" or "SBC"), hereby establishes an
incentive compensation plan (the "Plan"), as set forth in this
document.
1.2 Purpose of the Plan. The purpose of the Plan is to promote the
success and enhance the value of the Company by linking the personal
interests of Participants to those of the Company's shareowners, and
by providing Participants with an incentive for outstanding
performance.
The Plan is further intended to attract and retain the services of
Participants upon whose judgment, interest, and special efforts the
successful operation of SBC and its subsidiaries is dependent.
1.3 Effective Date of the Plan. The Plan shall become effective on
January 1, 1996; however, grants may be made before that time subject
to becoming effective on or after that date. During the first year
this Plan is effective, Awards shall be issued only to the extent the
potential payout of Shares shall not exceed 10% of the Shares
approved for issuance under this Plan.
Article 2 Definitions.
Whenever used in the Plan, the following terms shall have the
meanings set forth below and, when the meaning is intended, the
initial letter of the word is capitalized:
(a) "Award" means, individually or collectively, a grant under
this Plan of Nonqualified Stock Options, Incentive Stock
Options, Restricted Stock, Performance Units, or Performance
Shares.
(b) "Award Agreement" means an agreement which may be entered
into by each Participant and the Company, setting forth the
terms and provisions applicable to Awards granted to
Participants under this Plan.
(c) "Board" or "Board of Directors" means the SBC Board of
Directors.
(d) "Cause" shall mean willful and gross misconduct on the part
of an Employee that is materially and demonstrably
detrimental to the Company or any Subsidiary as determined by
the Committee in its sole discretion.
(e) "Change in Control" shall be deemed to have occurred if (i)
any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than a trustee or other
fiduciary holding securities under an employee benefit plan
of the Company or a corporation owned directly or indirectly
by the shareowners of the Company in substantially the same
proportions as their ownership of stock of the Company, is or
becomes the "beneficial owner" (as defined in Rule 13d-3
under said Act), directly or indirectly, of securities of the
Company representing twenty percent (20%) or more of the
total voting power represented by the Company's then
outstanding voting securities, or (ii) during any period of
two (2) consecutive years, individuals who at the beginning
of such period constitute the Board of Directors of the
Company and any new Director whose election by the Board of
Directors or nomination for election by the Company's
shareowners was approved by a vote of at least two-thirds
(2/3) of the Directors then still in office who either were
Directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for
any reason to constitute a majority thereof, or (iii) the
shareowners of the Company approve a merger or consolidation
of the Company with any other corporation, other than a
merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity) at least eighty percent (80%) of the
total voting power represented by the voting securities of
the Company or such surviving entity outstanding immediately
after such merger or consolidation, or the shareowners of the
Company approve a plan of complete liquidation of the Company
or an agreement for the sale or disposition by the Company of
all or substantially all the Company's assets.
(f) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(g) "Committee" means the committee or committees, as specified
in Article 3, appointed by the Board to administer the Plan
with respect to grants of Awards.
(h) "Director" means any individual who is a member of the SBC
Board of Directors.
(i) "Disability" shall mean the Participant's inability to
perform the Participant's normal Employment functions due to
any medically determinable physical or mental disability,
which can last or has lasted 12 months or is expected to
result in death.
(j) "Employee" means any management employee of the Company or of
one of the Company's Subsidiaries. "Employment" means the
employment of an Employee by the Company or one of its
Subsidiaries. Directors who are not otherwise employed by the
Company shall not be considered Employees under this Plan.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor Act thereto.
(l) "Exercise Price" means the price at which a Share may be
purchased by a Participant pursuant to an Option, as
determined by the Committee.
(m) "Fair Market Value" shall mean the closing price on the New
York Stock Exchange ("NYSE") for Shares 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 select any
other index or measurement to determine the Fair Market
Value of Shares under the Plan.
(n) "Incentive Stock Option" or "ISO" means an option to purchase
Shares from SBC, granted under this Plan, which is designated
as an Incentive Stock Option and is intended to meet the
requirements of Section 422 of the Code.
(o) "Insider" shall mean an Employee who is, on the relevant
date, an officer, director, or ten percent (10%) beneficial
owner of the Company, as those terms are defined under
Section 16 of the Exchange Act.
(p) "Key Executive Officer Short Term Award" means a
Performance Unit expressed in dollars.
(q) "Nonqualified Stock Option" or "NQSO" means the option to
purchase Shares from SBC, granted under this Plan, which is
not intended to be an Incentive Stock Option.
(r) "Option" or "Stock Option" shall mean an Incentive Stock
Option or a Nonqualified Stock Option, and shall include a
Restoration Option.
(s) "Participant" means a person who holds an outstanding Award
granted under the Plan.
(t) "Performance Unit" and "Performance Share" shall each mean an
Award granted to an Employee pursuant to Article 8 herein.
(u) "Plan" means this 1996 Stock and Incentive Plan. The Plan
may also be referred to as the "SBC 1996 Stock and
Incentive Plan" or as the "SBC Communications Inc. 1996
Stock and Incentive Plan."
(v) "Restricted Stock" means an Award of Stock granted to an
Employee pursuant to Article 7 herein.
(w) "Restriction Period" means the period during which Shares of
Restricted Stock are subject to restrictions or conditions
under Article 7.
(x) "Retirement" or to "Retire" shall mean the termination of a
Participant's employment with the Company or one of its
Subsidiaries, for any reason other than death, Disability or
for Cause, on or after the earlier of the following dates, or
as otherwise provided by the Committee: (1) the date the
Participant would be eligible to retire with an immediate
pension under the rules of the SBC Supplemental Retirement
Income Plan, whether or not actually a participant in such
plan; 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, except as otherwise
indicated below:
Net Credited Service Age
-------------------- ---
10 Years of more 65 or older
20 years or more 55 or older
25 years or more 50 or older
30 years or more Any age
With respect to a Participant who is granted an EMP Service
Pension under and pursuant to the provisions of the SBC
Pension Benefit Plan - Nonbargained Program upon termination
of employment, the terms "Retirement" or to "Retire" shall
include such Participant's termination of employment.
(y) "Rotational Work Assignment Company ("RWAC") shall mean any
entity with which SBC Communications Inc. or any of its
Subsidiaries may enter into an agreement to provide an
employee for a rotational work assignment.
(z) "Shares" or "Stock" means the shares of common stock of the
Company.
(aa)"Subsidiary" shall mean any corporation in which the Company
owns directly, or indirectly through subsidiaries, more than
fifty percent (50%) of the total combined voting power of all
classes of Stock, or any other entity (including, but not
limited to, partnerships and joint ventures) in which the
Company owns more than fifty percent (50%) of the combined
equity thereof.
(bb)"Window Period" means the period beginning on the third
business day following the date of public release of the
Company's quarterly sales and earnings information, and ending
on the twelfth business day following such date.
Article 3 Administration.
3.1 The Committee. Administration of the Plan shall be bifurcated as
follows:
(a) With respect to Insiders, the Plan and all Awards hereunder
shall be administered only by the Human Resources Committee
of the Board or such other Committee as may be appointed by
the Board for this purpose (the "Disinterested Committee"),
where each Director on such Disinterested Committee is a
"Disinterested Person" (or any successor designation for
determining who may administer plans, transactions or awards
exempt under Section 16(b) of the Exchange Act), as that term
is used in Rule 16b-3 under the Exchange Act, as that rule
may be modified from time to time.
(b) The Disinterested Committee and such other Committee as the
Board may create, if any, specifically to administer the Plan
with respect to non-Insiders (the "Non-Insider Committee")
shall each have full authority to administer the Plan and all
Awards hereunder with respect to all persons who are not
Insiders, except as otherwise provided herein or by the
Board. Either Committee may be replaced by the Board at any
time.
3.2 Authority of the Committee. The Committee shall have full power
except as limited by law and subject to the provisions herein, to
select the recipients of Awards, to determine the size and types of
Awards; to determine the terms and conditions of such Awards in a
manner consistent with the Plan; to construe and interpret the Plan
and any agreement or instrument entered into under the Plan; to
establish, amend, or waive rules and regulations for the Plan's
administration; and (subject to the provisions of Article 13 herein)
to amend the terms and conditions of any outstanding Award to the
extent such terms and conditions are within the discretion of the
Committee as provided in the Plan. Further, the Committee shall make
all other determinations which may be necessary or advisable for the
administration of the Plan.
No Award other than Restoration Options may be made under the Plan
after December 31, 2010.
All determinations and decisions made by the Committee pursuant to
the provisions of the Plan and all related orders or resolutions of
the Board shall be final, conclusive, and binding on all persons,
including the Company, its stockholders, Employees, Participants, and
their estates and beneficiaries.
Subject to the terms of this Plan, the Committee is authorized,
and shall not be limited in its discretion, to use any of the
Performance Criteria specified herein in its determination of Awards
under this Plan.
Article 4 Shares Subject to the Plan.
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3
herein, the number of Shares available for grant under the Plan shall
not exceed 30 million Shares of Stock. No more than 10% of the Shares
approved for issuance under this Plan may be Shares of Restricted
Stock. No more than 40% of the Shares approved for issuance under
this Plan may be issued to Participants as a result of Performance
Share or Restricted Stock Awards. The Shares granted under this Plan
may be either authorized but unissued or reacquired Shares. The
Disinterested Committee shall have full discretion to determine the
manner in which Shares available for grant are counted in this Plan.
Without limiting the discretion of the Committee under this
section, unless otherwise provided by the Committee, the following
rules will apply for purposes of the determination of the number of
Shares available for grant under the Plan or compliance with the
foregoing limits:
(a) The grant of a Stock Option or a Restricted Stock Award shall
reduce the Shares available for grant under the Plan by the
number of Shares subject to such Award. However, to the
extent the Participant uses previously owned Shares to pay
the Exercise Price or any taxes, or Shares are withheld to
pay taxes, these Shares shall be available for regrant under
the Plan.
(b) With respect to Performance Shares, the number of Performance
Shares granted under the Plan shall be deducted from the
number of Shares available for grant under the Plan. The
number of Performance Shares which cannot be, or are not,
converted into Shares and distributed (including deferrals)
to the Participant (after any applicable tax withholding)
following the end of the Performance Period shall increase
the number of Shares available for regrant under the Plan by
an equal amount.
(c) With respect to Performance Units representing a fixed dollar
amount that may only be settled in cash, the Performance
Units Award shall not affect the number of Shares available
under the Plan.
4.2 Lapsed Awards. If any Award granted under this Plan is canceled,
terminates, expires, or lapses for any reason, Shares subject to such
Award shall be again available for the grant of an Award under the
Plan.
4.3 Adjustments in Authorized Plan Shares. In the event of any merger,
reorganization, consolidation, recapitalization, separation,
liquidation, Stock dividend, split-up, Share combination, or other
change in the corporate structure of the Company affecting the
Shares, an adjustment shall be made in the number and class of Shares
which may be delivered under the Plan (including individual limits),
and in the number and class of and/or price of Shares subject to
outstanding Awards granted under the Plan, and/or the number of
outstanding Options, Shares of Restricted Stock, and Performance
Shares constituting outstanding Awards, as may be determined to be
appropriate and equitable by the Committee, in its sole discretion,
to prevent dilution or enlargement of rights.
Article 5 Eligibility and Participation.
5.1 Eligibility. All management Employees are eligible to participate
in this Plan.
5.2 Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees,
those to whom Awards shall be granted and shall determine the nature
and amount of each Award. No Employee is entitled to receive an Award
unless selected by the Committee.
Article 6 Stock Options.
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Employees at any time and from time to
time, and under such terms and conditions, as shall be determined by
the Committee. The Committee shall have discretion in determining the
number of Shares subject to Options granted to each Employee;
provided, however, that the maximum number of Shares subject to
Options which may be granted to any single Employee during any
calendar year shall not exceed 2% of the Shares approved for issuance
under this Plan. The Committee may grant ISOs, NQSOs, or a
combination thereof; provided, however, that no ISO may be issued
after January 1, 2006. The Committee may authorize the automatic
grant of additional Options ("Restoration Options") when a
Participant exercises already outstanding Options, or options granted
under a prior option plan of the Company, on such terms and
conditions as it shall determine. Unless otherwise provided by the
Committee, the number of Restoration Options granted to a Participant
with respect to the exercise of an option (including an Option under
this Plan) shall not exceed the number of Shares delivered by the
Participant in payment of the Exercise Price of such option, and/or
in payment of any tax withholding resulting from such exercise, and
any Shares which are withheld to satisfy withholding tax liability
arising out of such exercise. A Restoration Option shall have an
Exercise Price of not less than 100% of the per Share Fair Market
Value on the date of grant of such Restoration Option, and shall be
subject to all the terms and conditions of the original grant,
including the expiration date, and such other terms and conditions as
the Committee in its sole discretion shall determine.
6.2 Form of Issuance. Each Option grant may be issued in the form of an
Award Agreement and/or may be recorded on the books and records of
the Company for the account of the Participant. If an Option is not
issued in the form of an Award Agreement, then the Option shall be
deemed granted as determined by the Committee. The terms and
conditions of an Option shall be set forth in the Award Agreement, in
the notice of the issuance of the grant, or in such other documents
as the Committee shall determine. Such terms and conditions shall
include the Exercise Price, the duration of the Option, the number of
Shares to which an Option pertains (unless otherwise provided by the
Committee, each Option may be exercised to purchase one Share), and
such other provisions as the Committee shall determine, including,
but not limited to whether the Option is intended to be an ISO or a
NQSO.
6.3 Exercise Price. Unless a greater Exercise Price is determined by the
Committee, the Exercise Price for each Option Awarded under this Plan
shall be equal to one hundred percent (100%) of the Fair Market Value
of a Share on the date the Option is granted.
6.4 Duration of Options. Each Option shall expire at such time as the
Committee shall determine at the time of grant (which duration may be
extended by the Committee); provided, however, that no Option shall
be exercisable later than the tenth (10th) anniversary date of its
grant.
6.5 Vesting of Options. Options shall vest at such times and under such
terms and conditions as determined by the Committee; provided,
however, unless a later vesting period is provided by the Committee
at or before the grant of an Option, one-third of the Options will
vest on each of the first three anniversaries of the grant; if one
Option remains after equally dividing the grant by three, it will
vest on the first anniversary of the grant, if two Options remain,
then one will vest on each of the first two anniversaries. The
Committee shall have the right to accelerate the vesting of any
Option; however, the Chairman of the Board or the Senior Vice
President-Human Resources, or their respective successors, or such
other persons designated by the Committee, shall have the authority
to accelerate the vesting of Options for any Participant who is not
an Insider.
6.6 Exercise of Options. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and
conditions as the Committee shall in each instance approve, which
need not be the same for each grant or for each Participant.
Options shall be exercised by 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. The Exercise Price shall be paid in full at the time of
exercise. No Shares shall be issued or transferred until full payment
has been received therefor.
Payment may be made:
(a) in cash, or
(b) unless otherwise provided by the Committee at any time, and
subject to such additional terms and conditions and/or
modifications as the Committee or the Company may impose from
time to time, and further subject to suspension or
termination of this provision by the Committee or Company at
any time, by:
(i) delivery of Shares of Stock owned by the Participant in
partial (if in partial payment, then together with cash)
or full payment; provided, however, as a condition to
paying any part of the Exercise Price in Stock, at the
time of exercise of the Option, the Participant must
establish to the satisfaction of the Company that the
Stock tendered to the Company must have been held by the
Participant for a minimum of six (6) months preceding
the tender; or
(ii) if the Company has designated a stockbroker to act as
the Company's agent to process Option exercises,
issuance of an exercise notice together with
instructions to such stockbroker irrevocably instructing
the stockbroker: (A) to immediately sell (which shall
include an exercise notice that becomes effective upon
execution of a limit order) a sufficient portion of the
Shares to pay the Exercise Price of the Options being
exercised and the required tax withholding, and (B) to
deliver on the settlement date the portion of the
proceeds of the sale equal to the Exercise Price and tax
withholding to the Company. In the event the stockbroker
sells any Shares on behalf of a Participant, the
stockbroker shall be acting solely as the agent of the
Participant, and the Company disclaims any
responsibility for the actions of the stockbroker in
making any such sales. No Stock shall be issued until
the settlement date and until the proceeds (equal to the
Option Price and tax withholding) are paid to the
Company.
If payment is made by the delivery of Shares of Stock, the value
of the Shares delivered shall be equal to the Fair Market Value of
the Shares on the day preceding the date of exercise of the Option.
Restricted Stock may not be used to pay the Option 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 the
Employment of a Participant shall terminate by reason of
death or Disability, all outstanding Options granted to that
Participant shall immediately vest as of the date of
termination of Employment and may be exercised, if at all, no
more than three (3) years from the date of the termination of
Employment, unless the Options, by their terms, expire
earlier. However, in the event the Participant was eligible
to Retire at the time of termination of Employment,
notwithstanding the foregoing, the Options may be exercised,
if at all, no more than five (5) years from the date of the
termination of Employment, unless the Options, by their
terms, expire earlier.
(b) Termination for Cause. If the Employment of a Participant
shall be terminated by the Company for Cause, all outstanding
Options held by the Participant shall immediately be
forfeited to the Company and no additional exercise period
shall be allowed, regardless of the vested status of the
Options.
(c) Retirement or Other Termination of Employment. If the
Employment of a Participant shall terminate for any reason
other than the reasons set forth in (a) or (b), above, all
outstanding Options which are vested as of the effective date
of termination of Employment may be exercised, if at all, no
more than five (5) years from the date of termination of
Employment if the Participant is eligible to Retire, or one
(1) year from the date of the termination of Employment if
the Participant is not eligible to Retire, as the case may
be, unless in either case the Options, by their terms, expire
earlier. In the event of the death of the Participant after
termination of Employment, this paragraph (c) shall still
apply and not paragraph (a), above.
(d) Options not Vested at Termination. Except as provided in
paragraph (a), above, all Options held by the Participant
which are not vested on or before the effective date of
termination of Employment shall immediately be forfeited to
the Company (and shall once again become available for grant
under the Plan).
(e) Notwithstanding the foregoing, the Committee may, in its sole
discretion, establish different terms and conditions
pertaining to the effect of termination of Employment, but no
such modification shall shorten the terms of Options issued
prior to such modification.
6.9 Employee Transfers. For purposes of the Plan, transfer of employment
of a Participant between the Company and any one of its Subsidiaries
(or between Subsidiaries) or between the Company or a Subsidiary and
a RWAC, to the extent the period of employment at a RWAC is equal to
or less than five (5) years, shall not be deemed a termination of
Employment. Provided, however, for purposes of this Article 6,
termination of employment with a RWAC without a concurrent transfer
to the Company or any of its Subsidiaries shall be deemed a
termination of Employment as that term is used herein. Similarly,
termination of an entity's status as a Subsidiary or as a RWAC shall
be deemed a termination of Employment of any Participants employed by
such Subsidiary or RWAC.
6.10 Restrictions on Exercise and Transfer of Options. Unless otherwise
provided by the Committee:
(a) During the Participant's lifetime, the Participant's Options
shall be exercisable only by the Participant or by the
Participant's guardian or legal representative. After the
death of the Participant, except as otherwise provided by
SBC's Rules for Employee Beneficiary Designations, an Option
shall only be exercised by the holder thereof (including, but
not limited to, an executor or administrator of a decedent's
estate) or his or her guardian or legal representative.
(b) No Option shall be transferable except: (i) in the case of
the Participant, only upon the Participant's death and in
accordance with the SBC Rules for Employee Beneficiary
Designations; and (ii) in the case of any holder after the
Participant's death, only by will or by the laws of descent
and distribution.
6.11 Competition. Notwithstanding anything in this Article 6 to the
contrary, prior to a Change in Control, in the event the Committee
determines, in its sole discretion, that a Participant is engaging in
competitive activity with the Company, any Subsidiary, or any
business in which any of the foregoing have a substantial interest
(the "SBC Businesses"), the Committee may cancel any Option granted
to such Participant, whether or not vested, in whole or in part. Such
cancellation shall be effective as of the date specified by the
Committee. Competitive activity shall mean any business or activity
in the same geographical market where a substantially similar
business activity is being carried on by an SBC Business, including,
but not limited to, representing or providing consulting services to
any person or entity that is engaged in competition with an SBC
Business or that takes a position adverse to an SBC Business.
However, competitive activity shall not include, among other things,
owning a nonsubstantial interest as a shareholder in a competing
business.
The determination of whether a Participant has engaged in
competitive activity with the Company shall be determined by the
Committee in good faith and in its sole discretion.
Article 7 Restricted Stock.
7.1 Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant
Shares of Restricted Stock to eligible Employees in such amounts and
upon such terms and conditions as the Committee shall determine. In
addition to any other terms and conditions imposed by the Committee,
vesting of Restricted Stock may be conditioned upon the attainment of
Performance Goals based on Performance Criteria in the same manner as
provided in Section 8.4, herein, with respect to Performance Shares.
No Employee may receive, in any calendar year, in the form of
Restricted Stock more than one-third of 1% of the Shares approved for
issuance under this Plan.
7.2 Restricted Stock Agreement. The Committee may require, as a condition
to an Award, that a recipient of a Restricted Stock Award enter into
a Restricted Stock Award Agreement, setting forth the terms and
conditions of the Award. In lieu of a Restricted Stock Award
Agreement, the Committee may provide the terms and conditions of an
Award in a notice to the Participant of the Award, on the Stock
certificate representing the Restricted Stock, in the resolution
approving the Award, or in such other manner as it deems appropriate.
7.3 Transferability. Except as otherwise provided in this Article 7, the
Shares of Restricted Stock granted herein may not be sold,
transferred, pledged, assigned, or otherwise alienated or
hypothecated until the end of the applicable Restriction Period
established by the Committee, which shall not be less than a period
of three years.
7.4 Other Restrictions. The Committee shall impose such other conditions
and/or restrictions on any Shares of Restricted Stock granted
pursuant to the Plan as it may deem advisable including, without
limitation, a requirement that Participants pay a stipulated purchase
price for each Share of Restricted Stock and/or restrictions under
applicable Federal or state securities laws; and may legend the
certificates representing Restricted Stock to give appropriate notice
of such restrictions.
The Company shall also have the right to retain the certificates
representing Shares of Restricted Stock in the Company's possession
until such time as all conditions and/or restrictions applicable to
such Shares have been satisfied.
7.5 Removal of Restrictions. Except as otherwise provided in this Article
7, Shares of Restricted Stock covered by each Restricted Stock grant
made under the Plan shall become freely transferable by the
Participant after the last day of the Restriction Period and
completion of all conditions to vesting, if any. However, unless
otherwise provided by the Committee, the Committee, in its sole
discretion, shall have the right to immediately waive all or part of
the restrictions and conditions with regard to all or part of the
Shares held by any Participant at any time.
7.6 Voting Rights, Dividends and Other Distributions. During the
Restriction Period, Participants holding Shares of Restricted Stock
granted hereunder may exercise full voting rights and shall receive
all regular cash dividends paid with respect to such Shares. Except
as provided in the following sentence, in the sole discretion of the
Committee, other cash dividends and other distributions paid to
Participants with respect to Shares of Restricted Stock may be
subject to the same restrictions and conditions as the Shares of
Restricted Stock with respect to which they were paid. If any such
dividends or distributions are paid in Shares, the Shares shall be
subject to the same restrictions and conditions as the Shares of
Restricted Stock with respect to which they were paid.
7.7 Termination of Employment Due to Death or Disability. In the event
the Employment of a Participant shall terminate by reason of death or
Disability, all Restriction Periods and all restrictions imposed on
outstanding Shares of Restricted Stock held by the Participant shall
immediately lapse and the Restricted Stock shall immediately become
fully vested as of the date of termination of Employment.
7.8 Termination of Employment for Other Reasons. If the Employment of a
Participant shall terminate for any reason other than those
specifically set forth in Section 7.7 herein, all Shares of
Restricted Stock held by the Participant which are not vested as of
the effective date of termination of Employment immediately shall be
forfeited and returned to the Company.
7.9 Employee Transfers. For purposes of the Plan, transfer of employment
of a Participant between the Company and any one of its Subsidiaries
(or between Subsidiaries) or between the Company or a Subsidiary and
a RWAC, to the extent the period of employment at a RWAC is equal to
or less than five (5) years, shall not be deemed a termination of
Employment. Provided, however, for purposes of this Article,
termination of employment with a RWAC without a concurrent transfer
to the Company or any of its Subsidiaries shall be deemed a
termination of Employment as that term is used herein. Similarly,
termination of an entity's status as a Subsidiary or as a RWAC shall
be deemed a termination of Employment of any Participants employed by
such Subsidiary or RWAC.
7.10 Other Grants. Subject to the terms and provisions of the Plan, the
Committee, at any time and from time to time, may make grants of cash
or other property to eligible Employees in such amounts and upon such
terms and conditions as the Committee shall determine. If the grant
is in the form of stock or shares in a company other than SBC: (a)
the award shall be subject to tax withholding in accordance with
Article 14, hereof, in the same manner as Stock, and (b) for purposes
of deferrals under Article 10, hereof, the award shall be treated as
Shares except that any dividends or dividend equivalents thereon
shall be paid out unless otherwise provided by the Committee, which
may, among other things, provide that the dividends or dividend
equivalents be deferred in the same manner as a cash award.
Article 8 Performance Units and Performance Shares.
8.1 Grants of Performance Units and Performance Shares. Subject to the
terms of the Plan, Performance Shares and Performance Units may be
granted to eligible Employees at any time and from time to time, as
determined by the Committee. The Committee shall have complete
discretion in determining the number of Performance Units and/or
Performance Shares Awarded to each Participant.
8.2 Value of Performance Shares and Units.
(a) A Performance Share is equivalent in value to a Share of
Stock. In any calendar year, no individual may be Awarded
Performance Shares having a potential payout of Shares of
Stock exceeding two-thirds of 1% of the Shares approved for
issuance under this Plan.
(b) A Performance Unit shall be equal in value to a fixed dollar
amount determined by the Committee. In any calendar year, no
individual may be Awarded Performance Units having a
potential payout equivalent exceeding the Fair Market Value
of two-thirds of 1% of the Shares approved for issuance under
this Plan. The number of Shares equivalent to the potential
payout of a Performance Unit shall be determined by dividing
the maximum cash payout of the Award by the Fair Market Value
per Share on the effective date of the grant. In the event
the Committee denominates a Performance Unit Award in dollars
instead of Performance Units, the Award may be referred to as
a Key Executive Officer Short Term Award. In all other
respects, the Key Executive Officer Short Term Award will be
treated in the same manner as Performance Units under this
Plan.
8.3 Performance Period. The Performance Period for Performance Shares and
Performance Units is the period over which the Performance Goals are
measured. The Performance Period is set by the Committee for each
Award; however, in no event shall an Award have a Performance Period
of less than one year.
8.4 Performance Goals. For each Award of Performance Shares or
Performance Units, the Committee shall establish performance
objectives ("Performance Goals") for the Company, its Subsidiaries,
and/or divisions of any of foregoing, based on the Performance
Criteria and other factors set forth in (a) through (d), below.
Performance Goals shall include payout tables, formulas or other
standards to be used in determining the extent to which the
Performance Goals are met, and, if met, the number of Performance
Shares and/or Performance Units which would be converted into Stock
and/or cash (or the rate of such conversion) and distributed to
Participants in accordance with Section 8.6. All Performance Shares
and Performance Units which may not be converted under the
Performance Goals or which are reduced by the Committee under Section
8.6 or which may not be converted for any other reason after the end
of the Performance Period shall be canceled at the time they would
otherwise be distributable. When the Committee desires an Award to
qualify under Section 162(m) of the Code, as amended, the Committee
shall establish the Performance Goals for the respective Performance
Shares and Performance Units prior to or within 90 days of the
beginning of the service relating to such Performance Goal, and not
later than after 25% of such period of service has elapsed. For all
other Awards, the Performance Goals must be established before the
end of the respective Performance Period.
(a) The Performance Criteria which the Committee is authorized to
use, in its sole discretion, are any of the following
criteria or any combination thereof:
(1) Financial performance of the Company (on a consolidated
basis), of one or more of its Subsidiaries, and/or a
division of any of the foregoing. Such financial
performance may be based on net income and/or Value Added
(after-tax cash operating profit less depreciation and
less a capital charge).
(2) Service performance of the Company (on a consolidated
basis), of one or more of its Subsidiaries, and/or of a
division of any of the foregoing. Such service
performance may be based upon measured customer
perceptions of service quality.
(3) The Company's Stock price; return on shareholders'
equity; total shareholder return (Stock price
appreciation plus dividends, assuming the reinvestment of
dividends); and/or earnings per share.
(4) With respect to the Company (on a consolidated basis), to
one or more of its Subsidiaries, and/or to a division of
any of the foregoing: sales; costs; market share of a
product or service; return on net assets; return on
assets; return on capital; profit margin; and/or
operating revenues, expenses or earnings.
(b) If the performance of more than one Subsidiary is being
measured to determine the attainment of performance goals,
then a weighted average of the Subsidiaries' results shall be
used, as determined by the Committee, including, but not
limited to, basing such weighting upon the revenues, assets
or net income for each Subsidiary for any year prior to the
Performance Period or by using budgets to weight such
Subsidiaries.
(c) Except to the extent otherwise provided by the Committee in
full or in part, if any of the following events occur during
a Performance Period and would directly affect the
determination of whether or the extent to which Performance
Goals are met, they shall be disregarded in any such
computation: changes in accounting principles; extraordinary
items; changes in tax laws affecting net income and/or Value
Added; natural disasters, including floods, hurricanes, and
earthquakes; and intentionally inflicted damage to property
which directly or indirectly damages the property of the
Company or its Subsidiaries. No such adjustment shall be made
to the extent such adjustment would cause the Performance
Shares or Performance Units to fail to satisfy the
performance based exemption of Section 162(m) of the Code.
8.5 Dividend Equivalents on Performance Shares. Unless reduced or
eliminated by the Committee, a cash payment in an amount equal to the
dividend payable on one Share will be made to each Participant for
each Performance Share which on the record date for the dividend had
been awarded to the Participant and not converted, distributed (or
deferred) or canceled.
8.6 Form and Timing of Payment of Performance Units and Performance
Shares. As soon as practicable after the applicable Performance
Period has ended and all other conditions (other than Committee
actions) to conversion and distribution of a Performance Share and/or
Performance Unit Award have been satisfied (or, if applicable, at
such other time determined by the Committee at or before the
establishment of the Performance Goals for such Performance Period),
the Committee shall determine whether and the extent to which the
Performance Goals were met for the applicable Performance Units and
Performance Shares. If Performance Goals have been met, then the
number of Performance Units and Performance Shares to be converted
into Stock and/or cash and distributed to the Participants shall be
determined in accordance with the Performance Goals for such Awards,
subject to any limits imposed by the Committee. Unless the
Participant has elected to defer all or part of his Performance Units
or Performance Shares as provided in Article 10, herein, payment of
Performance Units and Performance Shares shall be made in a single
lump sum, as soon as reasonably administratively possible following
the determination of the number of Shares or amount of cash to which
the Participant is entitled. Performance Units will be distributed to
Participants in the form of cash. Performance Shares will be
distributed to Participants in the form of 50% Stock and 50% Cash, or
at the Participant's election, 100% Stock or 100% Cash. In the event
the Participant is no longer an Employee at the time of the
distribution, then the distribution shall be 100% in cash, provided
the Participant may elect to take 50% or 100% in Stock. At any time
prior to the distribution of the Performance Shares and/or
Performance Units (or if distribution has been deferred, then prior
to the time the Awards would have been distributed), unless otherwise
provided by the Committee, the Committee shall have the authority to
reduce or eliminate the number of Performance Units or Performance
Shares to be converted and distributed or to mandate the form in
which the Award shall be paid (i.e., in cash, in Stock or both, in
any proportions determined by the Committee).
Unless otherwise provided by the Committee, any election to take a
greater amount of cash or Stock with respect to Performance Shares
must be made in the calendar year prior to the calendar year in which
the Performance Shares are distributed (or if distribution has been
deferred, then in the year prior to the year the Performance Shares
would have been distributed absent such deferral). In addition, if
required in order to exempt the transaction from the provisions of
Section 16(b) of the Exchange Act, any election by an Insider to take
a greater amount in cash must be made during a Window Period and
shall be subject to Committee approval.
For the purpose of converting Performance Shares into cash and
distributing the same to the holders thereof (or for determining the
amount of cash to be deferred), the value of a Performance Share
shall be the average of the Fair Market Values of Shares for the
period of five (5) trading days ending on the valuation date. The
valuation date shall be the first business day of the second month in
the year of distribution (or the year it would have been distributed
were it not deferred), except that in the case of distributions due
to death or Disability, the valuation date shall be the first
business day of the month in which the Committee determines the
distribution. Performance Shares to be distributed in the form of
Stock will be converted at the rate of one (1) Share of Stock per
Performance Share.
8.7 Termination of Employment Due to Death, Disability, or Retirement. If
the Employment of a Participant shall terminate by reason of death or
Disability, the Participant shall receive a lump sum payout of all
outstanding Performance Units and Performance Shares calculated as if
all unfinished Performance Periods had ended with 100% of the
Performance Goals achieved, payable in the year following the date of
termination of Employment. In the event of Retirement, the full
Performance Units and Performance Shares shall be converted and
distributed based on and subject to the achievement of the
Performance Goals and in accordance with all other terms of the Award
and this Plan.
8.8 Termination of Employment for Other Reasons. If the Employment of a
Participant shall terminate for other than a reason set forth in
Section 8.7 (and other than for Cause), the number of Performance
Units and Performance Shares to be converted and distributed shall be
converted and distributed based upon the achievement of the
Performance Goals and in accordance with all other terms of the Award
and the Plan; however, the Participant may receive no more than a
prorated payout of all Performance Units and Performance Shares,
based on the portions of the respective Performance Periods that have
been completed.
8.9 Termination of Employment for Cause. In the event that a
Participant's Employment shall be terminated by the Company for
Cause, all Performance Units and Performance Shares shall be
forfeited by the Participant to the Company.
8.10 Nontransferability. Performance Units and Performance Shares may not
be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than in accordance with the SBC Rules for
Employee Beneficiary Designations.
Article 9 Beneficiary Designation.
In the event of the death of a Participant, distributions or
Awards under this Plan, other than Restricted Stock, shall pass in
accordance with the SBC Rules for Employee Beneficiary Designations.
Article 10 Deferrals.
10.1 Deferrals. Unless otherwise provided by the Committee, a Participant
may defer all or part of the Stock or cash to be received upon
conversion and distribution of Performance Units or Performance
Shares. In the event of the termination of Employment of a
Participant prior to becoming eligible for Retirement, no deferrals
under this Article shall be permitted and any previously deferred
Performance Shares or Performance Units, and earnings thereon, shall
be distributed as soon as administratively possible.
10.2 Deferral of Performance Unit and Performance Share Distributions.
Prior to the calendar year in which Performance Units or Performance
Shares are to be distributed (or if deferred, prior to the calendar
year the Awards would have been distributed), Participants may elect
to defer the receipt of a Performance Unit or Performance Share
distribution upon such terms as the Committee deems appropriate.
Unless otherwise provided by the Committee, Participants may elect to
defer receipt of all or part of a Performance Unit or Performance
Share for distribution in a lump sum in February of any calendar year
following the year in which the Awards would otherwise be
distributed, or to be distributed in up to 15 annual installments
(each installment shall be equal to the total Shares or cash in the
Award divided by the number of remaining installments), payable each
calendar year in the month determined by the Participant, beginning
as soon as administratively possible after Retirement or in a later
month in the calendar year of Retirement, or in the calendar year
immediately thereafter.
(a) Deferred amounts which would otherwise have been distributed
in cash shall be credited to the Participant's account and
shall bear interest from the date the Awards would otherwise
have been paid. The interest will be credited quarterly to
the account at the declared rate determined by the Company
from time to time, which shall not be less than one-fourth of
the annual Moody's Corporate Bond Yield Average-Monthly
Average Corporates, as published by Moody's Investor Service,
Inc., (or successor thereto) for the month of September
before the calendar year in question.
(b) Deferred amounts which would otherwise have been distributed
in Shares by the Company shall be credited to the
Participant's account as deferred Shares. The Participant's
account shall also be credited on each dividend payment date
for Shares with an amount equivalent to the dividend payable
on the number of Shares equal to the number of deferred
Shares in the Participant's account on the record date for
such dividend. Such amount shall then be converted to a
number of additional deferred Shares determined by dividing
such amount by the price of Shares, as determined in the
following sentence. The price of Shares related to any
dividend payment date shall be the average of the Fair Market
Values of Shares for the period of five (5) trading days
ending on such dividend payment date, or the period of five
(5) trading days immediately preceding such dividend payment
date if the New York Stock Exchange is closed on the dividend
payment date.
(c) At any time during the calendar year prior to the calendar
year during which an Award deferred under the provisions of
this Article 10 is scheduled for distribution, a Participant
may further defer the commencement of the distribution of
such Award to a subsequent calendar year and upon such
further deferral, change the number of installments
applicable to the distribution of the Award. Amounts that are
further deferred pursuant to this Article 10 shall continue
to be subject to all provisions of this Plan including
further distribution modifications as provided herein.
Article 11. Employee Matters.
11.1 Employment Not Guaranteed. Nothing in the Plan shall interfere with
or limit in any way the right of the Company or any Subsidiary to
terminate any Participant's Employment at any time, nor confer upon
any Participant any right to continue in the employ of the Company or
one of its Subsidiaries.
11.2 Participation. No Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be
selected to receive a future Award.
11.3 Claims and Appeals. Any claim under the Plan by a Participant or
anyone claiming through a Participant shall be presented to the
Committee. Any person whose claim under the Plan has been denied may,
within sixty (60) days after receipt of notice of denial, submit to
the Committee, a written request for review of the decision denying
the claim. The Committee shall determine conclusively for all parties
all questions arising in the administration of the Plan.
Article 12 Change in Control.
Upon the occurrence of a Change in Control:
(a) Any and all Options granted hereunder immediately shall
become vested and exercisable;
(b) Any Restriction Periods and all restrictions imposed on
Restricted Shares shall lapse and they shall immediately
become fully vested;
(c) The 100% Performance Goal for all Performance Units and
Performance Shares relating to incomplete Performance Periods
shall be deemed to have been fully achieved and shall be
converted and distributed in accordance with all other terms
of the Award and this Plan; provided, however,
notwithstanding anything to the contrary in this Plan, no
outstanding Performance Unit or Performance Share may be
reduced.
Article 13. Amendment, Modification, and Termination.
13.1 Amendment, Modification, and Termination. The Board may at any time
suspend or terminate the Plan in whole or in part; the Disinterested
Committee may at any time and from time to time, alter or amend the
Plan in whole or in part.
13.2 Awards Previously Granted. No termination, amendment, or modification
of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the
Participant holding such Award.
Article 14 Withholding.
14.1 Tax Withholding. The Company shall deduct or withhold an amount
sufficient to satisfy Federal, state, and local taxes (including the
Participant's employment tax obligations) required by law to be
withheld with respect to any taxable event arising or as a result of
this Plan ("Withholding Taxes").
14.2 Share Withholding. With respect to withholding required upon the
exercise of Options, upon the lapse of restrictions on Restricted
Stock, upon the distribution of Performance Shares in the form of
Stock, or upon any other taxable event hereunder involving the
transfer of Stock to a Participant, the Company shall withhold Stock
having a Fair Market Value on the date the tax is to be determined in
an amount equal to the Withholding Taxes on such Stock.
Any fractional Share 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.
Prior to the end of any Performance Period a Participant may elect
to have a greater amount of Stock withheld from the distribution of
Performance Shares to pay withholding taxes; provided, however, the
Committee may prohibit or limit any individual election or all such
elections at any time. In addition, if required in order to exempt
the transaction from the provisions of Section 16(b) of the Exchange
Act, any such election by an Insider must be made during a Window
Period and shall be subject to Committee approval.
Article 15 Successors.
All obligations of the Company under the Plan, with respect to
Awards granted hereunder, shall be binding on any successor to the
Company, whether the existence of such successor is the result of a
direct or indirect purchase, merger, consolidation, or otherwise, of
all or substantially all of the business and/or assets of the
Company.
Article 16 Legal Construction.
16.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the
plural.
16.2 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if the illegal or invalid provision had not
been included.
16.3 Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules,
and regulations, and to such approvals by any governmental agencies
or national securities exchanges as may be required.
16.4 Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions
or Rule 16b-3 or its successors under the Exchange Act. To the extent
any provision of the plan or action by the Committee fails to comply
with a condition of Rule 16b-3 or its successors, it shall not apply
to the Insiders or transactions thereby.
16.5 Governing Law. To the extent not preempted by Federal law, the
Plan, and all agreements hereunder, shall be construed in
accordance with and governed by the laws of the State of Texas.