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At&t Senior Officer Severance Plan

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EXHIBIT 10(iii)(A)2


AT&T SENIOR OFFICER SEPARATION PLAN


PLAN DOCUMENT


AND


SUMMARY PLAN DESCRIPTION


(AMENDED AND RESTATED AS OF MAY 19, 2004)


THIS DOCUMENT, LIKE ALL COMPANY PLANS, PERSONNEL POLICIES OR PRACTICES, IS NOT A CONTRACT OF EMPLOYMENT. IT IS NOT INTENDED TO CREATE, AND IT SHOULD NOT BE CONSTRUED TO CREATE, ANY CONTRACTUAL RIGHTS TO CONTINUED EMPLOYMENT, EITHER EXPRESS OR IMPLIED, BETWEEN THE COMPANY AND ITS EMPLOYEES.


AT AT&T CORP., THE EMPLOYMENT RELATIONSHIP WITH EMPLOYEES COVERED BY THIS PLAN IS "AT-WILL." THIS MEANS THAT EMPLOYEES HAVE THE RIGHT TO TERMINATE THEIR EMPLOYMENT AT ANY TIME AND FOR ANY REASON, AND THE COMPANY RESERVES THE RIGHT TO TERMINATE ANY EMPLOYEE'S EMPLOYMENT, WITH OR WITHOUT CAUSE, AT ANY TIME FOR ANY REASON, SUBJECT TO THE RIGHTS OF ELIGIBLE SENIOR OFFICERS TO BENEFITS PROVIDED BY THIS PLAN.


IN THE EVENT THERE IS A CONFLICT BETWEEN STATEMENTS IN THIS PLAN AND THE TERMS OF ANY OTHER BENEFIT PLAN, POLICY, OR PRACTICE, THE APPLICABLE BENEFIT PLAN, POLICY OR PRACTICE PROVIDING THE BENEFITS IN QUESTION WILL CONTROL. AT&T CORP. RESERVES THE RIGHT, AT ANY TIME, TO MODIFY, SUSPEND, CHANGE, OR TERMINATE ITS EMPLOYEE BENEFIT PLANS OR EXECUTIVE LEVEL INCENTIVE, BENEFIT AND/OR PERQUISITE PLANS, PROGRAMS, POLICIES OR PRACTICES.


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AT&T SENIOR OFFICER SEPARATION PLAN


PLAN DOCUMENT


AND


SUMMARY PLAN DESCRIPTION


A. OVERVIEW


The AT&T Senior Officer Separation Plan, which includes the attached Appendix A, Appendix B and Appendix C, (collectively, the "Plan"), which was originally adopted as of October 9, 1997 and periodically amended, is now amended and restated, effective May 19, 2004 ("Effective Date"). The Plan is designed to provide certain supplemental payments and benefit enhancements to eligible Officers (as defined below) of AT&T Corp. ("AT&T") and certain of its Affiliates (as defined below) who are designated by the Board of Directors of AT&T Corp. (the "Board") as eligible to participate in this Plan ("Senior Officers"), and whose employment is terminated under circumstances set forth in this Plan. In this Plan, AT&T, or in the event of a "Change in Control" of AT&T Corp., as that term is defined in the AT&T 2004 Long Term Incentive Program ("CIC"), the successor to AT&T, and its subsidiaries and Affiliates, are referred to collectively as the "Company". A Senior Officer will become eligible for benefits under this Plan only if the conditions for eligibility, as set forth in Section E of this Plan, are met. Appendix A to this Plan contains certain specific provisions for the operation of the Plan following a CIC which become operative as a result of the CIC, including provisions regarding eligibility to receive benefits.


This Plan supersedes all prior versions of the AT&T Senior Officer Separation Plan (previously named the AT&T Senior Officer Severance Plan). Except as otherwise expressly provided pursuant to this Plan, this Plan shall be construed and administered in a manner which avoids duplication of compensation and benefits which may be provided under any other plan, program, policy, or other arrangement. In the event a Participant is covered by any other plan, program, policy, individually negotiated agreement or other arrangement, in effect as of his or her Final Payroll Date, that may duplicate the Severance Payment provided for in Section F.1, and/or certain of the post-termination benefits provided for in Sections F.2 - F.17, or the Severance Payment provided in Section 5 of Appendix A and/or certain of the post-termination benefits provided in Sections 6 - 17 of Appendix A, the Executive Vice President - Human Resources is specifically empowered to reduce or eliminate the duplicative benefits provided for under the Plan. In taking such action, the Executive Vice President - Human


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Resources will be guided by the principles that (1) such a Participant will otherwise be treated, for the purpose of the Sections specified above, no more or no less favorably than are other Participants who are not covered by such other plan, program, policy, individually negotiated agreement or other arrangement and (2) the provisions of such other plan, program, policy, individually negotiated agreement or other arrangement (including, but not limited to, a special individual pension, a special deferral account and/or a special equity based grant) which are not duplicative of the Severance Payment provided for in Section F.1 and/or the post-termination benefits specified in Sections F.2 - F.17, or the Severance Payment provided for in Section 5 of Appendix A and/or certain of the post-termination benefits provided for in Section 6 - 17 of Appendix A, will not be considered in determining elimination and/or reductions in Plan benefits.


B. DEFINITIONS


For purposes of this Plan:


"Affiliate" means any entity that is within AT&T's controlled group of corporations within the meaning of Section 1563 of the Internal Revenue Code of 1986, as amended (the "Code").


"Cause" means:


(i) commission of a crime, or conviction of a crime, including by a plea
of guilty or nolo contendere, involving theft, fraud, dishonesty or moral
turpitude;


(ii) intentional or grossly negligent disclosure of confidential or trade
secret information of the Company to anyone not entitled to such
information;


(iii) omission or dereliction of any statutory or common law duty of
loyalty to the Company;


(iv) violation of the Company's Code of Conduct or any other written
Company policy; or


(v) repeated failure to carry out the Senior Officer's duties despite
specific instruction to do so.


"Eligible for Retirement-Related Benefits" means that a Participant, or a CIC Eligible Senior Officer, has satisfied the minimum age and service requirements for the benefits provided under the terms of the AT&T Corp. Postretirement Welfare Benefits Plan, or the successor to such plan, as amended from time to time, as of his or her Final Payroll Date.


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"Final Payroll Date" means the date the Participant or the CIC Eligible Senior Officer actually terminates employment with the Company in accordance with the terms and conditions of this Plan, including Appendix A, if applicable.


"Good Reason" shall mean the occurrence of either of the following events without the Senior Officer's express written consent:


(i) the material reduction of the Senior Officer's authority or
responsibility; or


(ii) a Reduction in Compensation (as defined below).


Whether a reduction in a Senior Officer's authority or responsibility is material shall be determined in accordance with the criteria set forth below in the definition of Reduction in Authority or Responsibility; provided, however, that (1) the Company's decision not to continue an Executive Committee (or similar governance body); or (2) changes in reporting relationships; or (3) a reduction in the Participant's business unit's budget or a reduction in the Participant's business unit's head count, by themselves, do not constitute Good Reason.


"Officer" means a management employee classified as an Officer (MGRO or MGROC) in the compensation job leveling structure of a Participating Company.


"Participant" means a senior management employee who has been designated by the Board (or the successor to the Board) as an individual who is eligible to participate in this Plan.


"Participant Notification Form" means the form indicating that a Senior Officer has been designated as an individual whose employment is being terminated pursuant to the terms of this Plan, or who has elected to terminate employment for Good Reason.


"Reduction in Authority or Responsibility" - shall mean:


(i) the assignment to the Senior Officer of any duties materially
inconsistent in any respect with the Senior Officer's position
(including status, offices, titles and reporting requirements), and
that detract from or reduce the authority, duties or
responsibilities to which the Senior Officer was assigned
immediately prior to the date of such change in such Senior
Officer's authority, duties or responsibilities; or


(ii) any other action by the Company which results in a material
diminution in such position, authority, duties or responsibilities.


"Reduction in Authority or Responsibility" shall not include:


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(a) an isolated, insubstantial and inadvertent action taken in
good faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Senior Officer; or


(b) any temporary reduction in authority or responsibility while
the Senior Officer is absent from active service on any
approved disability or approved leave of absence.


By way of example, and not by way of limitation, Reduction in Authority or
Responsibility shall include:


(1) The removal of any division, business or operating unit
or other business organization from the direct
managerial responsibility of the Senior Officer, or


(2) The material reduction in the size or scope of
responsibility or operating budget of any division,
business or operating unit or other business
organization for which the Senior Officer has direct
managerial responsibility, or


(3) A reduction in the Senior Officer's authority to legally
bind the Company under the Company's Schedule of
Authorization, as in effect immediately prior to the
Change in Control, without first obtaining any
additional authority or approval.


"Reduction in Compensation" shall mean a reduction in the Participant's "Total Annual Compensation" (defined as the sum of the Participant's Annual Base Salary Rate, Target Annual Bonus and Target Annual Long Term Incentive Compensation (or their equivalent within the context of a successor employer's compensation plans and programs)) for any calendar or fiscal year, as applicable, to an amount that is less than the Senior Officer's Total Annual Compensation that existed immediately prior to such reduction.


For purposes of this definition, a Senior Officer's Target Annual Bonus shall mean the value determined by multiplying the Senior Officer's Target Annual Bonus percentage in effect on the day preceding any Reduction in Compensation by the Senior Officer's annual base salary rate in effect on the day preceding the Reduction in Compensation.


For purposes of this definition, a Senior Officer's Target Annual Long Term Incentive Compensation shall mean, the total value of the annual equity-based incentive compensation grants to the Senior Officer, including the following: (a) "full value equity" compensation, including but not limited to restricted stock, restricted stock units ("RSUs"), performance shares and cash equivalents and (b) "non-full value equity" based compensation including, but not limited to, stock


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options and stock appreciation rights, in each case granted as part of the Senior Officer's annual compensation, assuming 100% performance achievement if such grants include performance criteria, and shall not include any special one-time or periodic grants or awards, granted or awarded as part of a hiring package or retention program, agreement or arrangement:


(a) The value of each "full value equity" grant, if any, shall be the
fair market value ("FMV") of such grant on the date the grant is approved
by the Compensation and Employee Benefits Committee of the AT&T Board of
Directors, by such other management committee or committee of the AT&T
Board of Directors, or by the duly authorized officers of the successor to
AT&T Corp. (for the purpose of this definition, separately and
collectively referred to as the "Committee"). The FMV of each "full value
equity" grant shall be determined by multiplying the number of related
AT&T common shares by the applicable average of the daily high and low
sale prices of AT&T common shares on the New York Stock Exchange, or by
multiplying the number of related common shares of the successor to AT&T
by the applicable average of the daily high and low sale prices of such
successor's common shares on the New York Stock Exchange or other national
exchange on which such shares are listed, as appropriate, for the date the
grant was approved by the Committee.


(b) The value of each "non-full value equity" grant, such as stock
options and stock appreciation rights ("SARs"), shall equal the per option
or per SAR value on the date the grant was approved by the Committee,
based on Black Scholes estimates (or such other option-pricing model,
deemed acceptable by the Financial Accounting Standards Board for valuing
options and SARs and utilized by the Committee when considering such
grant) multiplied by the number of related AT&T common shares in such
grant, and/or other such amounts determined in the same manner and
approved by the Committee for the year in which the grant being valued was
granted.


(c) For this purpose, the Black Scholes value and FMV of the respective
components of AT&T Target Annual Long Term Incentive Compensation shall be
updated annually as approved by the Committee.


"Rule of 65" shall have the same meaning ascribed to such term in Article 2 of the AT&T Corp. Postretirement Welfare Benefits Plan.


"Termination Year" means the calendar year during which the Participant's or CIC Eligible Senior Officer's Final Payroll Date occurs.


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C. TYPE OF PLAN


This Plan is intended to be, and shall be interpreted as an unfunded employee welfare benefit plan under Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and Section 2520.104-24 of the Department of Labor Regulations, maintained primarily for the purpose of providing employee welfare benefits, to the extent that it provides welfare benefits and, under Sections 201, 301 and 401 of ERISA, as a plan that is maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, to the extent that it provides other benefits.


D. PLAN PARTICIPATION


An Officer shall participate in this Plan if he or she is designated by the Board (or the successor to the Board) as being eligible to participate in the Plan. The Board, or its delegate, shall have complete discretionary authority to remove an individual from participation and eligibility for benefits under the Plan. For a period of two years following a CIC, an individual cannot be removed from Participation.


The Board, or its delegate, shall have complete discretionary authority to determine if and when, and to what organizations, positions and groups of senior management employees, this Plan is to be applied.


E. ELIGIBILITY TO RECEIVE BENEFITS


1. BASIC ELIGIBILITY REQUIREMENTS


A Participant or CIC Eligible Senior Officer will receive the payments and benefits described in this Plan, including any benefits that may be provided pursuant to the terms of Appendix A hereto, only if the conditions listed in clause (i) or (ii) and the condition listed in clause (iii) below are satisfied:


(i) The Senior Officer terminates his or her employment with the Company
at the initiation of the Company, in accordance with the terms and
conditions of this Plan, other than (a) with eligibility for
benefits under any AT&T long term disability plan, or (b) for Cause.
A Senior Officer, other than a CIC Eligible Senior Officer, shall
receive a Participant Notification Form that shall indicate his or
her termination pursuant to the terms of this Plan. The Participant
Notification Form shall include the Participant's Final Payroll
Date; or


(ii) The Senior Officer elects to terminate his or her employment with
the Company for Good Reason, having satisfied the Notification
provisions set forth below and having obtained the Company's
agreement that


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the Senior Officer has Good Reason to terminate employment, or, in
the absence of such agreement, having successfully arbitrated his or
her claim that Good Reason occurred, pursuant to the provisions of
Section M. In such event, the Senior Officer shall receive a
Participant Notification Form which shall include the Participant's
Final Payroll Date; and


(iii) The Senior Officer executes a Waiver and Release ("Release") (a copy
of which is attached as Appendix B), and the time during which the
Senior Officer may revoke the Release has expired without
revocation.


Notwithstanding the foregoing, the Senior Officer shall remain subject to the forfeiture and repayment provisions set forth in Section J of this Plan.


2. NOTIFICATION REQUIREMENTS FOR TERMINATION FOR GOOD REASON


In the event a Senior Officer determines that Good Reason exists to elect to terminate his or her employment with the Company, the Senior Officer must notify the Executive Vice President - Human Resources in writing of the specific event which the Senior Officer believes constitutes Good Reason within thirty (30) days of the occurrence of such event.


Within ten (10) business days of the Company's receipt of such written notice, the Company shall notify the Senior Officer that it agrees or disagrees with the Senior Officer's determination that the event specified in the Senior Officer's notice constitutes Good Reason. The Company shall have thirty (30) days from its receipt of the Senior Officer's written notice in which to remedy any event specified in such notice as constituting Good Reason. The Company's notification that it agrees with the Senior Officer's determination shall state whether or not it will take action to remedy the event constituting Good Reason.


In the event the Company notifies the Senior Officer that it agrees with the Senior Officer's determination that the event specified in the Senior Officer's notice constitutes Good Reason, but will not take action to remedy the event, the Senior Officer shall receive a Participant Notification Form within five business days thereafter, which shall include the Participant's Final Payroll Date, which date shall be two weeks from the date of delivery of the Participant Notification Form, or such earlier or later date as the Company and the Senior Officer shall mutually agree.


In the event the Company notifies the Senior Officer that it disagrees with the Senior Officer's determination that the event specified in the Senior Officer's notice constitutes Good Reason, or in the event the Senior Officer believes that the corrective actions taken by the Company fail to adequately address the event claimed to constitute Good Reason specified in the Senior Officer's notice, the procedures set forth in Sections L and M of this Plan shall apply. Under such


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circumstances, the Senior Officer may elect to terminate his or her employment and continue to pursue a claim for benefits by following the procedures set forth in Sections L and M of this Plan. The date the Senior Officer elects to terminate his or her employment shall be his or her Final Payroll Date. If the Senior Officer elects to remain employed while pursuing his or her claim for benefits, and such claim or arbitration is ultimately concluded in the Senior Officer's favor, the Senior Officer shall receive a Participant Notification Form, which shall include the Participant's Final Payroll Date.


F. PLAN PAYMENTS AND BENEFITS


A Participant who satisfies the conditions for receipt of benefits or payments under Section E shall be entitled to the following:


1. SEVERANCE PAYMENT


A Participant shall receive a severance payment under this Section F.1 that will equal two hundred percent (200%) of the sum of (i) the Participant's annual base salary rate, plus (ii) the Participant's target annual incentive, (such sum to be referred to as the "Severance Payment"), in each case, determined as of the Participant's Final Payroll Date, as indicated on the Participant Notification Form; provided, however, that if a Participant's termination for Good Reason results from a Reduction in Compensation, a Participant's base salary and target annual incentive shall be determined as of the date immediately prior to such Reduction in Compensation. The Severance Payment will be paid in a single lump sum as soon as administratively feasible after expiration of the revocation period indicated in the Participant's Release without revocation, unless deferral of such Severance Payment is elected in accordance with Section F.2 below.


2. DEFERRAL OPTION


The Participant may elect to defer receipt of the Severance Payment. The Participant's written deferral election must be submitted to the AT&T Executive Benefits Organization not later than the day prior to the date on which the Release is executed. A copy of the deferral election form to be completed is attached as Appendix C. Deferral may be for a period of up to five (5) years following the Participant's Final Payroll Date, in whole year increments. Payout of the deferred Severance Payment may be in the form of a lump sum, or up to a maximum of five (5) approximately equal annual installments, as indicated on the deferral election form.


The first installment from the deferred account (or the single payment, if the Participant so elected), including interest thereon, will be paid by the end of the calendar quarter which immediately follows the calendar quarter in which the first, second, third, fourth or fifth anniversary (as so elected by the Participant) of the Participant's Final Payroll Date occurs. All unpaid deferred amounts will


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continue to accrue interest at the rate of return set forth below. In the event of a Participant's death prior to the payment of all deferred amounts, the unpaid balance shall be paid to his or her named beneficiary (or to his or her estate, if no beneficiary has been named) in a lump sum not later than the end of the calendar quarter immediately following the calendar quarter in which the AT&T Executive Benefits Organization receives written notice of such death.


For individuals designated as Senior Officers as of May 19, 2004, deferred amounts will be credited quarterly with interest equal to one-quarter (1/4) of the average rate applicable to actively traded 10-year US Treasury Notes for the prior calendar quarter, plus 1.25 percent. The Company reserves the right to change the interest rate to be credited on deferred amounts with respect to an individual who is designated as a Senior Officer after May 19, 2004, provided, however, that in the absence of such action by the Company, the interest rate described in the previous sentence will apply. The crediting of interest on deferred amounts, commencing with the Participant's Final Payroll Date, shall be calculated in accordance with rules and procedures determined by the Company in its sole and absolute discretion. Participants who elect to defer amounts under this arrangement shall be unsecured general creditors of the Company. The Company shall establish for each such Participant, an unfunded bookkeeping account to which deferred amounts (and interest) will be credited, but the Company shall have no obligation to fund or set aside assets for the payment of any deferred amounts under this arrangement.


3. ANNUAL BONUS


A Participant who has performed at least eighty eight (88) consecutive days of service to the Company during his or her Termination Year, will be eligible to receive a prorated portion of the annual incentive applicable to the Termination Year based on the Participant's time on the active payroll during the Termination Year, in an amount equal to the product of the actual achievement level for the Participant's annual incentive for such year, as determined by the Company in its sole discretion, multiplied by a fraction, the numerator of which is the number of completed months of the Participant's employment during the Termination Year (including the last month of employment if the Participant's Final Payroll Date is on or after the 15th of the month) and the denominator of which is 12. Such amount shall be payable during the first quarter of the following year, in accordance with existing practices and terms of the AT&T Short Term Incentive Plan.


If a Participant's Final Payroll Date occurs prior to the payment of his or her annual incentive with respect to the year preceding his or her Termination Year, such Participant will be eligible to receive such annual incentive, which shall be paid at the same time as such annual incentive is paid to other actively employed senior management employees.


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4. OUTSTANDING LONG TERM INCENTIVES


a) GENERAL - Subject to the provisions of paragraphs (b), (c), (d),
(e), (f), (g), (h) and (i) of this Section F.4, following a
Participant's Final Payroll Date, the Participant shall retain any
performance shares, stock units, unexercised options to purchase
AT&T common stock, restricted stock and restricted stock units
payable or redeemable in shares of AT&T common stock, cash
equivalent awards, and any other awards granted as part of a
standard annual grant, as a special recognition or retention grant,
or in connection with AT&T's offer of employment to such
Part
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