Trust Under Board of Directors Benefit

BELLSOUTH CORPORATION
TRUST UNDER BOARD OF DIRECTORS BENEFIT


PLAN(S) TABLE OF CONTENTS


Section 1. Establishment of Trust 2


Section 2. Payments to Plan Participants and
Their Beneficiaries 6


Section 3. Trustee Responsibility Regarding
Payments to Trust Beneficiary When
Company is Insolvent 9


Section 4. Payments to Company 10


Section 5. Investment Authority 11


Section 5A. Sale of Company Stock by Trustee 15


Section 6. Disposition of Income 19


Section 7. Accounting by Trustee 20


Section 8. Responsibility of Trustee 21


Section 9. Compensation and Expenses of
Trustee 21


Section 10. Resignation and Removal of
Trustee 21


Section 11. Appointment of Successor 22


Section 12. Amendment or Termination 23


Section 13. Miscellaneous 24


Section 14. Effective Date 29


BELLSOUTH CORPORATION
TRUST UNDER BOARD OF DIRECTORS BENEFIT PLAN(S)


This Agreement made this 23rd day of May, 1996, by and between BellSouth Corporation, a Georgia corporation (Company) and Bankers Trust Company, a New York corporation (Trustee);
(a) WHEREAS, Company has adopted the nonqualified deferred compensation Plan(s) as listed in Appendix A for certain members of its Board of Directors;
(b) WHEREAS, Company has incurred or expects to incur liability under the terms of such Plan(s) with respect to the individuals participating in such Plan(s);
(c) WHEREAS, to make certain provisions for the payment of such liability, Company and Trustee on April 25, 1990 executed a trust agreement for the benefit of certain directors of Company and Company's affiliates who participate in the Plan(s) (the "Predecessor Trust");
(d) WHEREAS, Company and Trustee on November 9, 1993 amended and restated the Predecessor Trust insofar as it related to Company's obligations (but not obligations of subsidiary or other affiliated entities) to pay benefits under the Plan(s) (hereinafter, called "Trust") and contributed assets to the Trust, subject to the claims of Company's creditors in the event of Company's Insolvency, as herein defined, until full payment has been made in respect of such obligations of Company to Plan participants and their beneficiaries in such manner and at such times as specified in the Plan(s);
(e) WHEREAS, Company and Trustee on April 28, 1995 amended and restated the Trust;
(f) WHEREAS, Company and Trustee now desire once again to amend and restate the Trust in the form of this Trust Agreement; (g) WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plan(s) as an unfunded plan maintained for the purpose of providing deferred compensation for members of Company's board of directors who are not employees of Company or affiliated entities; and
(h) WHEREAS, it is the intention of Company to make contributions to the Trust to provide itself with a source of funds to assist it in the meeting of its liabilities under the Plan(s);
NOW, THEREFORE, the parties do hereby establish the Trust and agree that the Trust shall be comprised, held and disposed of as follows:


Section 1. Establishment of Trust.
(a) Company and Trustee hereby amend and restate in all respects the Trust in the form of this Trust Agreement. The principal of the Trust shall be held, administered and disposed of by Trustee as provided in this Trust Agreement


(b) The Trust hereby established shall be irrevocable.


(c) The Trust is intended to be a grantor trust, of which Company is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly.


(d) The principal of the Trust, and any earnings thereon shall be held separate and apart from other funds of Company and shall be used exclusively for the uses and purposes of Plan participants and general creditors as herein set forth. Plan participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Plan(s) and this Trust Agreement shall be mere unsecured contractual rights of Plan participants and their beneficiaries against Company. Any assets held by the Trust will be subject to the claims of Company's general creditors under federal and state law in the event of Insolvency, as defined in Section 3(a) herein.
(e)(1) Company, in its sole discretion, may at
any time, or from time to time, make additional
deposits of cash or other property acceptable to
Trustee in trust with Trustee to augment the
principal to be held, administered and disposed of
by Trustee as provided in this Trust Agreement.
Neither Trustee nor any Plan participant or
beneficiary shall have any right to compel any such
additional deposits under this subsection (1).
(2) If, as of the last day of a fiscal year
of the Trust, the funding level of the Trust shall
be less than eighty percent (80%) of the Trust's
funding level as of the last day of any of the five
(5) most recently preceding fiscal years of the
Trust (taking into account contributions made under
this Section 1(e)(2) for each such year),
disregarding for purposes of this Section 1(e)(2)
fiscal years ending prior to January 1, 1994,
Company shall notify Trustee of such situation and
Company shall make an irrevocable contribution to
the Trust as soon as possible, but in no event
longer than one hundred twenty (120) days following
the last day of such fiscal year. Such
contribution shall be in an amount sufficient to
bring the Trust's funding level equal to the
Trust's funding level as of the last day of the
fiscal year among the five (5) most recently
preceding fiscal years on which the Trust's funding
level was highest. In no event shall such
contribution be required if, as of the last day of
such fiscal year, the fair market value of the
Trust's assets is one hundred percent (100%), or
greater, of the aggregate Current Liability (as
defined in subsection (5) of this Section 1(e)) of
Company under the Plan(s). For purposes of this
Section 1(e)(2), "funding level" shall mean the
ratio (stated as a percentage) that the fair market
value of the assets in the Trust bears to the
aggregate Current Liability of Company under the
Plan(s). The Trust's funding level shall be
determined as of the last day of each fiscal year,
except that in determining the amount of the
required contribution, the fair market value of the
Trust's assets shall be determined as of the valuation date most recently preceding the date on which such contribution is made.
(3) If, as of the last day of a fiscal year of the Trust, the funding level of the Trust (taking into account any contribution required under subsection (2) of this Section 1(e)) shall be less than one hundred percent (100%), Company shall notify Trustee of such situation and shall make an irrevocable contribution to the Trust within one hundred eighty (180) days following the last day of such fiscal year. Such contribution shall be in the amount which, had the contribution been made as of the last day of such fiscal year of the Trust, would have been sufficient to bring the Trust's funding level to 100% as of the last day of such fiscal year. For purposes of this Section 1(e)(3), "funding level" shall mean the ratio (stated as a percentage) that the fair market value of the assets in the Trust bears to the aggregate Current Liability of Company under the Plan(s); provided, that such Current Liability shall be determined using, instead of the interest rate described in Section 1(e)(5) hereof, the valuation interest rate assumption reported by the enrolled actuary for Company's principal defined benefit pension plan (measured by the number of active management employees of Company and affiliated entities participating in all such plans at the end of the respective plan year which coincides with or ends within the fiscal year of the Trust), in its actuarial valuation report for such plan for such plan year, for purposes of funding such respective plan for such plan year. Notwithstanding the foregoing, (1) if the enrolled actuary for Company's principal defined benefit pension plan changes the applicable valuation interest rate reported for a plan year, as described in the sentence above, in the enrolled actuary's actuarial statement and opinion subsequently prepared as part of the annual report required by the Employee Retirement Income Security Act of 1974, as amended, for such plan year, (i) Company shall so notify the Trustee, (ii) the changed valuation interest rate shall be substituted for the originally reported valuation interest rate in determining Company's contribution required under this Section 1(e)(3) above, and (iii) Company shall make any additional required contribution resulting from such change within sixty (60) days after the change, and (2) if as of the end of a fiscal year of the Trust, Company and affiliated entities do not maintain a defined benefit pension plan covering management employees with assets having an aggregate market value of at least Fifty Million Dollars ($50,000,000.00), Current Liability for purposes of this Section 1(e)(3) shall be determined using an interest rate assumption equal to the average of the monthly averages of the 30-year constant maturity U.S. Treasury rate, expressed in percent per annum, during such fiscal year of the Trust, as published in the Federal Reserve Report, a successor report or, if there is no successor report, comparable data, plus one percent (1%) per annum.
(4) For purposes of subsections (2) and (3) of this Section 1(e), the funding level of the Trust and all related determinations shall be made by Company; provided, however, that following the engagement of a Trustee's Contractor, such determination shall be made by Trustee's Contractor. The Trustee may rely on the accuracy of all such determinations.
(5)(A) For purposes of this Trust, "Current Liability" shall mean the amount required to pay each Plan participant or beneficiary the benefits to which Plan participants or their beneficiaries would be entitled pursuant to the terms of the Plan(s), to the extent such benefits are obligations of Company (and not obligations of subsidiary or other affiliated entities). The Current Liability on any date with respect to a Plan shall be determined as if the Plan terminated as of such date using an interest rate (subject to Section 1(e)(3)) equal to the Pension Benefit Guaranty Corporation valuation interest rate for immediate annuities as in effect on such date, the 1983 Group Annuity Mortality Table published by the Society of Actuaries, and reasonable actuarial calculation principles consistently applied. Current Liability shall be determined, as of the last day of each fiscal year of the Trust and at such additional times as are necessary to implement the provisions of this Trust Agreement, by Company; provided, however, that following the engagement of
a Trustee's Contractor, such determinations shall be made
by Trustee's Contractor. The Trustee may rely on the
accuracy of all such determinations.
(5)(B) In the event that the interest rate
assumption described in subsection (5)(A) above is at any
time no longer available or the mortality assumption
described above is at any time no longer considered a
reasonable and reliable mortality assumption, other
interest rate (subject to Section 1(e)(3)) or mortality
assumptions, as the case may be, deemed generally comparable to the above specified assumptions, may be used instead. All determinations regarding substitute assumptions, including whether such substitution is reasonably necessary and the selection of the substitute assumption(s), shall be made by Company; provided, however, that following the engagement of a Trustee's Contractor, such determinations shall be made by Trustee's Contractor.


(f) Upon a Change of Control, Company shall promptly notify Trustee thereof and, as soon as possible, but in no event longer than one hundred twenty (120) days following the Change of Control, as defined herein, Company shall make an irrevocable contribution to the Trust in an amount that is sufficient to pay each Plan participant or beneficiary the benefits to which Plan participants or their beneficiaries would be entitled pursuant to the terms of the Plan(s), to the extent such benefits are obligations of Company (and not obligations of subsidiary or other affiliated entities), as of the date on which the Change of Control occurred. Such contribution shall be in an amount equal to the excess, if any, of the aggregate Current Liability as of the date on which the Change of Control occurred over the fair market value of the Trust's assets as of the valuation date most recently preceding the date on which such contribution is made. Thereafter, Company shall make an additional contribution each fiscal year to the Trust, as soon as possible, but in no event longer than one hundred twenty (120) days following the last day of each such fiscal year, in an amount equal to the excess, if any, of the aggregate Current Liability under the Plan(s) as of the last day of the fiscal year over the fair market value of the Trust's assets as determined on the valuation date most recently preceding the date on which such contribution is made. The amount of all such contributions shall be determined by Trustee's Contractor. The Trustee may rely on the accuracy of all such determinations.
(g) If, as of a Distribution Date with respect to outstanding rights to purchase Series A First Preferred Stock, under the terms of and as defined in a Rights Agreement between Company and Chemical Bank, as Rights Agent, under an agreement originally dated November 27, 1989 (a "Distribution Date"), the aggregate Current Liability exceeds the fair market value of the Trust's assets (such fair market value determined as of the valuation date most recently preceding such Distribution Date), Company shall be required to make an additional contribution to the Trust in an amount equal to such excess or, at Company's option, to obtain a letter of credit, or a series of letters of credit, adequate to fund such amount as of such Distribution Date under the Plan(s) and maintain such letter(s) of credit until such time as the aggregate Current Liability no longer exceeds the fair market value of the Trust's assets. The determination of whether the aggregate Current Liability exceeds the fair market value of the Trust's assets upon a Distribution Date and, if so, the amount of such excess, shall be made by Company; provided, however, that following the engagement of a Trustee's Contractor, such determinations shall be made by Trustee's Contractor. The Trustee may rely on the accuracy of all such determinations. Any such letter of credit, or series of letters of credit, shall be part of the general assets of Company and shall not be an asset of this Trust and, unless otherwise agreed to in writing by Trustee, Trustee shall have no responsibility whatsoever with respect to the adequacy of, or selection of the issuer or issuers of, any such letter or letters of credit.
(h) If, in any five (5) consecutive calendar year period, (i) there are five (5) or more final determinations by courts of competent jurisdiction that (A) Company or a subsidiary of Company which both is a member of Company's controlled group of corporations and has adopted a Plan (a "Participating Company") has failed to pay (after reasonable notice and demand for payment) any benefit due under the terms and conditions of a Plan and that (B) there was no material issue of fact or law respecting such company's obligation to make such benefit payment, or (ii) there are two (2) or more final determinations by courts of competent jurisdiction, in lawsuits instituted after reasonable notice and demand with respect thereto, in which the court determines that Company or a Participating Company had acted in bad faith and with a clear and deliberate disregard for such company's obligations under the Plan(s), there shall be deemed to have occurred a Change of Control as defined in this Trust Agreement and Company shall give Trustee prompt written notice of such event. For purposes of this Trust Agreement, (i) the term "controlled group of corporations" has the meaning ascribed to such term in Section 1563(a) of the Internal Revenue Code of 1986, as amended, substituting "more than 50 percent" for the phrase "at least 80 percent" each place it appears in Section 1563(a)(1), and (ii) the term "final determination" means a determination with respect to which all rights of appeal or to request a review, a rehearing or redetermination have been exhausted or have lapsed.
Section 2. Payments to Plan Participants and Their Beneficiaries.


(a) Company, or the Trustee's Contractor if one shall have been engaged, shall deliver to Trustee a schedule (the "Payment Schedule") that indicates the amounts payable in accordance with the terms and conditions of the Plan(s) in respect of each Plan participant (and his or her beneficiaries), that provides a formula or other instructions acceptable to Trustee for determining the amounts so payable, the form in which such amount is to be paid (as provided for or available under the Plan(s)), and the time of commencement for payment of such amounts. Except as otherwise provided herein, Trustee shall make payments to the Plan participants and their beneficiaries in accordance with such Payment Schedule. The Trustee shall make provision for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of the Plan(s) and shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld and paid by Company. Payments may be made in cash or, where called for under the terms of the Plan(s), in Company Stock (as such term is defined in Section 5(g) hereof). Notwithstanding the foregoing, if a benefit which is distributable in the form of Company Stock under the terms of a Plan becomes payable at a time when there is no (or insufficient) Company Stock in the Trust with which to satisfy such benefit obligation and if the Company fails or refuses to pay such benefit within a reasonable time after notice from Trustee that it has become so payable, Trustee shall use other assets of the Trust to acquire Company Stock, on the open market or otherwise in its discretion, sufficient to satisfy such benefit obligation.
(b) The entitlement of a Plan participant or his or her beneficiaries to benefits payable by Company under the Plan(s) shall be determined in accordance with the terms of the Plan(s) by Company or such party as it shall designate under the Plan(s), or the Trustee's Contractor if one shall have been engaged, and any claim for such benefits shall be considered and reviewed and paid or not paid under the procedures set out in the Plan(s). Notwithstanding any Plan provision to the contrary, if a Trustee's Contractor shall have been engaged, all such determinations shall be made by the Trustee's Contractor whose determinations shall be final, conclusive and binding on all persons. Neither Trustee nor Trustee's Contractor shall have any obligation for determining whether any Plan participant or beneficiary has died and shall be entitled to rely upon any information in this regard furnished by Company.
(c) Company may make payment of benefits directly to Plan participants or their beneficiaries as they become due under the terms of the Plan(s). In such event, Company shall make provision for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of the Plan(s) and shall pay amounts withheld to the appropriate taxing authorities. Company shall notify Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to participants or their beneficiaries. In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits payable by Company in accordance with the terms of the Plan(s), Company shall make the balance of each such payment as it falls due. Trustee shall notify Company where principal and earnings are not sufficient.
(d) Company may engage a third party administrator as a contractor of the Trustee ("Trustee's Contractor"), who shall not be a Plan participant or beneficiary (but who may be the Trustee), to perform functions described in this Section 2(d) and elsewhere in this Trust Agreement which would otherwise be performed by Company.
(1) Upon engagement of a Trustee's Contractor, as
soon as practicable but in no event longer than thirty
(30) days thereafter, Company shall furnish to the
Trustee's Contractor copies of the Plan documents,
employment records of participants, and other information
necessary to determine the benefits which are or may
become payable by Company to or with respect to each participant in each Plan, including any benefits payable after the participant's death, and the recipient of same and the procedures which Company has adopted to calculate such benefit payments. Company shall regularly, at least annually, and upon each benefit change under the Plan(s) furnish revised, updated information to the Trustee's Contractor. In the event Company refuses or neglects to provide updated participant information as contemplated herein, the Trustee's Contractor shall be entitled to rely on the most recent information furnished to it by Company.
(2) In the event of a Change of Control, Company shall have the duty to engage, as soon as practicable thereafter, a Trustee's Contractor reasonably acceptable to the Trustee if there shall at that time be no Trustee's Contractor then serving. In addition, if as of a Distribution Date (as such term is defined in Section 1(g) hereof), there shall be no Trustee's Contractor then serving, Company shall have the duty to designate on a stand-by basis a Trustee's Contractor who shall commence to serve as Trustee's Contractor in the event such Distribution Date is followed by a Change of Control. After a Change of Control, Company shall not have any control or authority with respect to the Trustee's Contractor so engaged or then serving, or any successor Trustee's Contractor, including without limitation any rights with respect to the removal or replacement of any such Trustee's Contractor or its duties pursuant to this Trust Agreement.
(3) Unless Trustee agrees to perform the functions of the Trustee's Contractor described herein, Trustee shall have no responsibility hereunder for any obligation assigned to a Trustee's Contractor or (subject to subsection (4) below) for the performance of a Trustee's Contractor's duties and responsibilities under this Trust Agreement.
(4) Company may replace or remove any Trustee's Contractor from time to time serving hereunder, in its sole discretion, prior to the occurrence of a Change of Control. Following a Change of Control, Trustee, in its sole discretion, may remove a Trustee's Contractor engaged by Company or any successor Trustee's Contractor and shall remove any such person and engage a successor to such person if Trustee deems such person's performance as a Trustee's Contractor unsatisfactory. At all times following a Change of Control, upon any such removal, or the voluntary resignation of any such Trustee's Contractor or the occurrence of any other event which shall result in the cessation of performance of the Trustee's Contractor's duties hereunder, Trustee shall use its best efforts to engage a new Trustee's Contractor (which may be Trustee); provided, however, Trustee shall perform the duties of the Trustee's Contractor during any period for which Trustee is unable to find a new Trustee's Contractor (so that there will be no default in payments under the Plan(s) as a result of the absence of a Trustee's Contractor), and any person engaged as a Trustee's Contractor shall in the judgment of Trustee be independent of Company. The person who removes or replaces a Trustee's Contractor shall be responsible for assuring that there is a timely and complete transfer of records from such Trustee's Contractor to such person's successor.
(5) Except for the records dealing solely with the assets of the Trust and investment of those assets, which shall be maintained by the Trustee, if a Trustee's Contractor shall be engaged, the Trustee's Contractor shall maintain all Plan participant records contemplated by this Agreement, including the Payment Schedule. All such records and copies of the Plan(s) documents and employment records of the participants in the possession of the Trustee's Contractor shall be made available promptly upon request of Trustee or Company. The Trustee's Contractor shall also prepare and distribute participant statements to participants and beneficiaries and shall perform such other duties and responsibilities contemplated under the terms of this Trust Agreement as Company or Trustee, as the case may be, determines is necessary or advisable to achieve the objectives of this Trust Agreement.
(6) Company shall indemnify and hold harmless the
Trustee's Contractor for any liability or expenses,
including without limitation advances for or prompt
reimbursement of reasonable fees and expenses of counsel
and other agents retained by it, incurred by the
Trustee's Contractor with respect to keeping the records
for participants' benefits, reporting thereon to
participants and beneficiaries, certifying benefit
information to Trustee, determining the status of
benefits hereunder and otherwise carrying out its
obligations under this Trust Agreement, other than those
resulting from Trustee's Contractor's negligence or
willful misconduct or its failure to reasonably calculate
and certify the amount of benefits based on the
applicable terms of the Plan documents and other
information and procedures furnished by Company to the
Trustee's Contractor in accordance with this Trust
Agreement. The Trustee's Contractor shall be entitled to
reasonable compensation for services hereunder, the
amount of which shall be agreed upon from time to time
by Company or, following a Change of Control, the
Trustee, and the Trustee's Contractor in writing, and
reimbursement for reasonable expenses incurred in
connection with its performance of such services.
Following a Change of Control, Trustee's good faith
determination of compensation to be paid to a Trustee's
Contractor (including Trustee when it acts in such
capacity) shall be binding on the Company and each other
person having an interest in the Trust. All such
compensation and expenses shall be paid by Trustee from
the assets of the Trust. If not so paid, such
compensation and
expenses shall be paid by Company.
(7) Except as may be otherwise agreed by the
Trustee's Contractor and Company, or Trustee following a
Change of Control, the Trustee's Contractor's obligations
are limited solely to those explicitly set forth herein
and the Trustee's Contractor shall have no
responsibility, authority or control, direct or indirect,
over the maintenance or investment of the Trust and shall
have no obligation in respect of Trustee or the Trustee's
compliance with the Trustee's Contractor's certifications
to Trustee.
Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary When Company Is Insolvent.


(a) Trustee shall cease payment of benefits to Plan participants and their beneficiaries if the Company is Insolvent. ...