SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION
1996 NON-EMPLOYEE DIRECTOR STOCK PLAN
Effective June 1, 1996
- 1 -
SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION
1996 NON-EMPLOYEE DIRECTOR STOCK PLAN
1. Establishment of Plan
There is hereby established a plan (the "Plan") effective on
the Effective Date, as defined herein, whereby Directors of
the Company, in consideration for services rendered to the
Company, shall receive shares of the common stock of the
Company. The Plan is intended to promote a greater identity
of interest between the Company's Directors and its
shareholders and to attract and retain Directors by enabling
such Directors to share in the growth of the Company.
2. Definitions
The following defined terms are used in the Plan:
2.1 "Board" shall mean the Board of Directors of
the Company.
2.2 "Committee" shall mean the Committee on Board
Affairs and Public Policy of the Board.
2.3 "Company" shall mean the Southern New England
Telecommunications Corporation.
2.4 "Director" shall mean a member of the Board who is
not currently an employee of the Company or any of its
subsidiaries.
2.5 "Effective Date" shall mean June 1, 1996.
2.6 "Payment Date" shall mean the last business day of a
calendar quarter.
2.7 "Retainer" shall mean the portion of a Director's
total cash compensation that is fixed and paid without
regard to his/her attendance at meetings. "Retainer"
shall not include the Chairperson's Retainer payable to
the Chairperson of a Board committee.
2.8 "Shares" shall mean shares of the Company's common
stock, $1.00 par value.
- 2 -
3. Stock Compensation Determination
3.1 Each Director on the Effective Date and each person
who becomes a Director after the Effective Date shall be
paid three hundred (300) Shares ("Stock Compensation
Shares") annually on the date set forth in Section 4
hereof.
3.2 Each Director may elect to be paid a percent of
his/her Retainer in the form of Shares in lieu of cash
("Elective Stock Retainer"); provided, however, that any
such amount so elected shall be in increments of five
percent (5%) of the Retainer, and, provided further, that
the value of any fraction of shares thereof shall be paid
in cash. Any such election shall be irrevocable for the
calendar year to which it relates and shall be made in
writing prior to the beginning of the calendar year to
which it relates and at least six months in advance of
the first Payment Date of such calendar year.
3.3 The number of Shares of an Elective Stock Retainer
shall be determined by dividing the amount of a
Director's Retainer that is to be paid in Shares by the
fair market value of a Share as of the close of trading
on the business day first preceding the Payment Date.
3.4 The number of Shares to be granted under the Plan
shall be adjusted for any stock split, stock dividend,
recapitalization, merger, consolidation, corporate
reorganization, combination, exchange of Shares or other
similar events.
4. Stock Compensation Distribution
4.1 Each person who is a Director on the Effective Date
shall receive Stock Compensation Shares on July 1, 1996
and for years thereafter on the first quarter's Payment
Date provided such person is a Director on such Payment
Date. Each person who becomes a Director after the
Effective Date shall receive Stock Compensation Shares on
the Payment Date for the calendar quarter during which he
or she became a Director and for years thereafter on the
first quarter's Payment Date provided such person is a
Director on such Payment Date.
4.2 A Director shall receive any Elective Stock Retainer
Shares, if the Elective Stock Retainer represents twenty-
five percent (25%) or less of the Retainer, on the
Payment Date for the first calendar quarter and for each
additional increment of twenty-five percent (25%) or
less, on the Payment Date for the next succeeding
calendar quarter.
4.3 On or before a Payment Date on which Shares are
received, a Director may execute an election pursuant to
Section 83(b) of the Internal Revenue Code of 1986, as
amended (the "Code") to include in income the value of
the Shares as of such Payment Date.
- 3 -
4.4 Shares shall be transferred on the books of the
Company on the Payment Date. In the event of the death
of a Director, any Shares owned by such Director shall be
delivered to the beneficiary designated by the Director
on a form provided by the Committee, or in the absence of
such designation, to the Director's estate. In the event
of the death of a Director, or the resignation of a
Director from the Board, prior to a Payment Date, such
Director shall not be entitled to receive any Shares with
respect to such quarter and instead such Director or the
Director's beneficiary or estate, whichever is
applicable, shall receive cash.
4.5 The Shares transferred pursuant to the Plan shall be
either authorized but unissued shares of common stock of
the Company or issued shares reacquired and held as
treasury shares. The total number of Shares reserved for
issuance shall not exceed in the aggregate 200,000 shares
of common stock of the Company.
5. Dividend and Voting Rights
The Director, as owner of the Shares issued hereunder, shall
have all the rights of a shareholder of the Company,
including, but not limited to, the right to vote such shares
and the right to receive all dividends declared or paid on
such Shares. Notwithstanding the above, any Shares deferred
pursuant to the SNET Deferred Compensation Plan for Non-
Employee Directors shall accrue an amount equal to any
dividends payable on such Shares and such Shares shall not
carry any voting rights until such time as such Shares are
distributed pursuant to such Deferred Compensation Plan.
6. Holding Period
A Director shall not sell, transfer, assign or pledge any
Elective Stock Retainer Shares received on a Payment Date for
a period of six months following such Payment Date. A
Director shall not sell, transfer, assign or pledge any Stock
Compensation Shares until such Director terminates his or her
service as a Director.
7. Change in Control
Notwithstanding any provision of the Plan to the contrary,
upon a Change in Control, as defined below, all Shares not
deferred shall be immediately and fully transferable, subject
to applicable federal securities laws, by a Director. In the
event of a Change in Control during a calendar quarter in
which a Director would receive Shares pursuant to a Section 3,
such Shares shall be transferred on the last business day
prior to the Change in Control.
For purposes of this Section, Change in Control shall mean:
(a) an acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934) ("Exchange Act") (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3
thereunder) of 20% or more of either (i) the then outstanding
shares of common stock of the Company (the "Outstanding
Company Common Stock") or (ii) the combined voting power of
the then outstanding voting
- 4 -
securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
Securities"); excluding, however, the following: (i) any
acquisition directly from the Company, other than an
acquisition by virtue of the exercise of a conversion
privilege unless the security being so converted was itself
acquired directly from the Company, (ii) any acquisition by
the Company, (iii) any acquisition by any employee benefit
plan (or related trust) participated in by the Company or any
corporation controlled by the Company, or (iv) any acquisition
by any corporation pursuant to a reorganization, merger,
consolidation or similar corporate transaction (in each case,
a "Corporate Transaction"), if, pursuant to such Corporate
Transaction, the conditions described in clauses (i), (ii) and
(iii) of Paragraph (c) of this Section 7 are satisfied; or
(b) a change in the composition of the Board such that
the individuals who, as of June 1, 1996, constitute the Board
(the Board as of the above date shall be hereinafter referred
to as the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided,
however, for purposes of this Section 7, that any individual
who becomes a member of the Board subsequent to the above date
whose election, or nomination for election by the shareholders
of the Company, was approved by a vote of at least a majority
of those individuals who are members of the Board also shall
be considered as though such individual were a member of the
Incumbent Board; but, provided further, that any such
individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 under the Exchange Act) or
other actual or threatened solicitation of proxies or consents
by or on behalf of a person other than the Board shall not be
so considered as a member of the Incumbent Board; or
(c) the approval by the shareholders of the Company of a
Corporate Transaction or, if consummation of such Corporate
Transaction is subject, at the time of such approval by
shareholders, to the consent of any government or governmental
agency, the obtaining of such consent (either explicitly or
implicitly by consummation); excluding, however, such a
Corporate Transaction pursuant to which (i) all or
substantially all of the individuals and entities who are the
beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities
immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than 60% of,
respectively, the outstanding shares of common stock of the
corporation resulting from such Corporate Transaction and the
combined voting power of the outstanding voting securities of
such corporation entitled to vote generally in the election of
directors, in substantially the same proportions as their
ownership, immediately prior to such Corporate Transaction, of
the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (other
than the Company, any employee benefit plan (or related trust)
participated in by the Company or such corporation resulting
from such Corporate Transaction and any Person beneficially
owning, immediately prior to such Corporate Transaction,
directly or indirectly, 20% or more of the Outstanding Company
Common Stock or Outstanding Company Voting Securities, as the
case may be) will beneficially own, directly or indirectly,
20% or more of, respectively, the outstanding shares of common
stock of the corporation resulting from such Corporate
Transaction or the combined voting power
- 5 -
of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors, and
(iii) individuals who were members of the Incumbent Board will
constitute at least a majority of the members of the board of
directors of the corporation resulting from such Corporate
Transaction; or
(d) the approval by the shareholders of the Company of
(i) a complete liquidation or dissolution of the Company or
(ii) the sale or other disposition of all or substantially all
of the assets of the Company; excluding, however, such a sale
or other disposition to a corporation, with respect to which
following such sale or other disposition, (l) more than 60%
of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors will be then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities
immediately prior to such sale or other disposition in
substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (2) no Person (other
than the Company and any employee benefit plan (or related
trust) participated in by the Company or such corporation and
any Person beneficially owning, immediately prior to such sale
or other disposition, directly or indirectly, 20% or more of
the Outstanding Company Common Stock or Outstanding Company
Voting Securities, as the case may be) will beneficially own,
directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors and (3) individuals who were members
of the Incumbent Board will constitute at least a majority of
the members of the board of directors of such corporation.
8. Administration
The Plan shall be administered by the Committee, which shall
have the sole authority to adopt rules and regulations for
carrying out the Plan and shall interpret and administer the
Plan. The Plan shall be administered such that any Director
participating in the Plan shall continue to be deemed to be a
"disinterested person" under, and any transaction hereunder
shall be governed by, Rule 16b-3 of the Securities and
Exchange Commission under the Exchange Act ("Rule") as such
Rule is in effect on the Effective Date and as it may be
subsequently amended.
9. Governing Law
The Plan shall be construed in all respects under the laws of
the State of Connecticut and the securities laws of the United
States.
- 6 -
10. Amendment and Termination
The Plan may be amended at any time by the Board; provided,
however, that the Board may not, without further approval of
the Company's shareholders, increase the number of Shares
issuable under the Plan, materially increase the benefits
accruing to participants under the Plan, or materially modify
the requirements as to eligibility for participation in the
Plan; and provided, further, however, that the provisions of
Sections 2.4, 3.1, 3.2, 3.3, 4.1, 4.2, and 4.5 may not be
amended more than once every six months, other than to comport
with changes in the Code, the Employee Retirement Income
Security Act, or the rules thereunder. The Senior Vice
President-Organization Development of the Company, with the
concurrence of the Vice President and General Counsel, shall
be authorized to make minor or administrative modifications to
the Plan as well as modifications to the Plan which may be
dictated by requirements of federal or state statutes
applicable to the Company. No modification or termination of
the Plan shall, without the participant's consent, alter or
impair any of the participant's rights or obligations under
the Plan.
The Plan shall terminate upon the earlier of the following events
to occur:
(a) Upon the issuance of all Shares under the Plan; or
(b) Ten (10) years after the Effective Date.
11. Shareholder Approval
This Plan shall become effective on June 1, 1996 subject to
the approval of the Plan by the shareholders of the Company.