-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TQEjwHBPnS6F+4HkGMOSl79V18uLgdxP/tIW40lmf9VVHrVbvtbYtWJc1UFmgvgI yiUfztwXXuTTYeMN7RDSeg== 0000790650-96-000003.txt : 19960322 0000790650-96-000003.hdr.sgml : 19960322 ACCESSION NUMBER: 0000790650-96-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960321 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORP CENTRAL INDEX KEY: 0000790650 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 061157778 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09157 FILM NUMBER: 96536711 BUSINESS ADDRESS: STREET 1: 227 CHURCH ST CITY: NEW HAVEN STATE: CT ZIP: 06510 BUSINESS PHONE: 2037715200 MAIL ADDRESS: STREET 1: 227 CHURCH STREET CITY: NEW HAVEN STATE: CT ZIP: 06510 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K (Mark One) X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended December 31, 1995. TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to . Commission File Number 1-9157 SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION (Exact name of registrant as specified in its charter) Connecticut 06-1157778 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 227 Church Street, New Haven, CT 06510 (Address of principal executive offices) (Zip Code) (203) 771-5200 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common stock-par value $1 per share New York and Pacific Stock Exchanges Rights to purchase common stock New York and Pacific Stock Exchanges (Currently traded with common stock) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X. No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X At February 29, 1996, 65,261,643 common shares were outstanding. At February 29, 1996, the aggregate market value of the voting stock held by non-affiliates was $2,665,600,545. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's combined Proxy Statement and 1995 Annual Report to Shareholders dated March 20, 1996 issued in connection with the 1996 Annual Meeting of Shareholders [Part II and Part III] 1 TABLE OF CONTENTS Item Page PART I 1. Business......................................................... 3 2. Properties....................................................... 12 3. Legal Proceedings................................................ 13 4. Submission of Matters to a Vote of Security Holders.............. 13 PART II 5. Market for the Registrant's Common Stock and Related Stockholder Matters............................................ 15 6. Selected Financial Data......................................... 15 7. Management's Discussion and Analysis of Financial Condition and Operating Results.......................................... 15 8. Financial Statements and Supplementary Data..................... 15 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............................ 15 PART III 10. Directors and Executive Officers of the Registrant.............. 15 11. Executive Compensation.......................................... 15 12. Security Ownership of Certain Beneficial Owners and Management.. 15 13. Certain Relationships and Related Transactions.................. 15 PART IV 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K. 16 See page 14 for "Executive Officers of the Registrant" 2 PART I Item 1. Business GENERAL Southern New England Telecommunications Corporation ("Corporation") was incorporated in 1986 under the laws of the State of Connecticut and has its principal executive offices at 227 Church Street, New Haven, Connecticut 06510 (telephone number (203) 771-5200). The Corporation is a holding company engaged through its subsidiaries in operations principally in Connecticut with expanded cellular services in Rhode Island and certain areas in Massachusetts. The Corporation has business units in the following telecommunications product groups: wireline; wireless; and information and entertainment. Wireline includes The Southern New England Telephone Company's telecommunications services; SNET America, Inc. (providing national and international long-distance services to Connecticut customers); and SNET Diversified Group, Inc. (providing premium telecommunications services and the selling and leasing of communications equipment to residential and business customers). Wireless includes SNET Cellular, Inc., SNET Mobility, Inc. and SNET Paging, Inc. (providing cellular (wholesale and retail), personal communications and paging resale services). Information and entertainment includes directory publishing, advertising and multimedia services. Non-telecommunications services include SNET Real Estate, Inc. (engaging in leasing commercial real estate) and the holding company (engaging in financial and strategic planning). WIRELINE The Southern New England Telephone Company's Telecommunications Services The Southern New England Telephone Company ("Telephone Company"), a local exchange carrier ("LEC"), was incorporated in 1882 under the laws of the State of Connecticut and is engaged in providing telecommunications services in Connecticut, most of which are subject to various degrees of rate regulation. These telecommunications services include: local and intrastate toll services; network access service, which links customers' premises to the facilities of other carriers; and other services such as digital transmission of data and transmission of radio and television programs, packet switched data network and private line services. In 1995, approximately 70% of the Corporation's consolidated revenues and sales were derived from the Telephone Company's rate regulated telecommunications services. The remainder was derived principally from the Corporation's other subsidiaries, directory publishing operations, and activities associated with the provision of facilities and non-access services to interexchange carriers. About 71% of the operating revenues from rate regulated services were attributable to intrastate operations, with the remainder attributable to interstate access services. The Telephone Company is subject to the jurisdiction of the Federal Communications Commission ("FCC") with respect to interstate rates, services, access charges and other matters, including the prescription of a uniform system of accounts. The FCC also prescribes the principles and procedures (referred to as "separations procedures") used to separate investments, revenues, expenses, taxes and reserves between the interstate and intrastate jurisdictions. In addition, the FCC has adopted accounting and cost allocation rules for the separation of costs of regulated from non-regulated telecommunications services for interstate ratemaking purposes. The Telephone Company's interstate services have been 3 subject to price cap regulation since January 1991. Price caps are a form of incentive regulation to limit prices and improve productivity. The price cap plan sets maximum limits on prices and requires LECs to share earnings in excess of authorized levels. The Telephone Company, in providing telecommunications services in Connecticut, is subject to regulation by the Connecticut Department of Public Utility Control ("DPUC"), which has jurisdiction with respect to intrastate rates and services and other matters such as the approval of accounting procedures and the issuance of securities. The DPUC has adopted accounting and cost allocation rules for intrastate ratemaking purposes, similar to those adopted by the FCC, for the separation of costs of regulated from non-regulated activities. The Telephone Company's intrastate services have been subject to the traditional rate of return regulation. In 1996, the DPUC issued a decision that replaces traditional rate of return regulation with alternative (price based) regulation to be employed during the transition to full competition [see State Regulatory Initiatives]. Competition Connecticut's telecommunications industry continues to move toward a fully competitive marketplace brought about by legislative and regulatory initiatives during recent years. As a result of these initiatives, the Corporation is experiencing increased competition from interexchange carriers and competitive access providers with respect to the wireline's (Telephone Company's) existing services. Management supports bringing to customers the benefits of competition and affording all competitors the opportunity to compete fairly. As demand increases for telecommunications services in an increasingly competitive environment, the Corporation continues to seek growth opportunities beyond its traditional services. In May 1994, the State of Connecticut Legislature enacted Public Act 94-83 ("Act"), providing a new regulatory framework for the Connecticut telecommunications industry. The Act, which took effect on July 1, 1994, represents a broad strategic response to the changes facing the telecommunications industry in Connecticut based on the premise that broader participation in the Connecticut telecommunications market will be more beneficial to the public than will broader regulation. The Act opens Connecticut telecommunications services to full competition, including local exchange service currently provided primarily by the Telephone Company, and encourages the DPUC to adopt alternative forms of regulation for telephone companies, including the Telephone Company. The DPUC has conducted, and is conducting, a number of proceedings, in phases, to implement the Act. In the competitive phase, the DPUC addressed competition in the areas of: local exchange service; alternative operator services and customer owned coin operated telephone service; universal service and lifeline program policy issues; unbundling of LECs' local networks; and reclassification of LECs' products and services into non-competitive, emerging competitive and competitive categories. During the alternative regulation phase, the DPUC issued a decision replacing traditional rate of return regulation with alternative (price based) regulation to be employed during the transition to full competition. In addition, the alternative regulation phase involved a complete financial review of the Telephone Company and addressed cost of service, capital recovery and service standards [see State Regulatory Initiatives]. The Telephone Company's regulated services are subject to competition from companies and carriers, including competitive access providers, that construct and operate their own communications systems and networks, as well as from companies that resell the telecommunications systems and networks of underlying carriers. Over 85 telecommunications providers have received approval from the DPUC to 4 offer "10XXX" or other competitive intrastate long-distance services. In addition, over 35 companies have filed for initial certificates of public convenience and necessity and are awaiting DPUC approval. The reduction in intrastate toll rates, and the increasingly competitive intrastate toll market continue to place significant downward pressure on intrastate toll revenues. Also contributing to lower intrastate toll revenues is the implementation of intrastate equal access for all dual preferred interexchange carrier ("PIC") capable switches by December 1, 1996. Although the DPUC ordered the Telephone Company to bear its proportionate share of the costs to deploy the dual PIC technology, the DPUC added the estimated 1996 average net toll revenue loss to the cost recovery formula. These costs will be recovered through an intrastate equal access rate element on the presubscribed lines of all carriers. Since the introduction of "10XXX" competition, major carriers have increased their marketing efforts in Connecticut to sell intrastate long-distance services to Connecticut customers. In response to competitors' efforts, the Telephone Company has undertaken a number of initiatives. The Telephone Company remains focused on providing excellent customer service and quality products and has made several changes to its product lines. Throughout 1995, the Telephone Company, with its affiliate, has enhanced several discount calling plans in its High Volume Discount Toll service offering and realigned its discount and rate structures to provide Connecticut customers with SNET All Distance[SM], a seamless toll service product line which includes a discount structure that combines intrastate, interstate and international calling. One such product, SNET All Distance Simple Solutions[SM], was made available to small business and residence customers beginning in September 1995. This easy-to- understand calling plan provides simple, competitive rates with a sliding discount based on calling volume. Concerning competition for local exchange service, seven telecommunications providers have been granted a certificate of public convenience and necessity for local service and one additional application is pending before the DPUC. The effect of increased competition on the Corporation's operating results cannot be predicted at this time. While some customers may purchase services from competitors, the Corporation expects that most competitors will utilize the Telephone Company's network and that increased network access revenues will offset a portion of local service revenues lost to competition. The Corporation's ability to compete continues to depend upon regulatory reform that will allow pricing flexibility to meet competition and provide a level playing field with similar regulation for similar services and with reduced regulation to reflect an emerging competitive marketplace. Local service competition began in early 1996. Regulatory Matters State Regulatory Initiatives In March 1996, the DPUC issued a decision that replaces traditional rate of return regulation with alternative (price based) regulation to be employed during the transition to full competition. The decision contains the following major items: price cap regulation for non-competitive services; a five year monitoring period on financial results; and a price cap formula on services categorized as non-competitive (utilizing an inflation factor, a 5% productivity offset, a narrowly defined exogenous factor, a potential service quality adjustment and various pricing bands). In addition, basic local service rates for residence, business and coin are frozen until January 1, 1998, at which time the price cap formula becomes effective for these services. The decision also authorized a rate of return on the Telephone Company's common equity of 11.90% during the monitoring period. The impact of these changes on the Telephone Company's operating results will depend on the timing of classifying the various products and services into categories (non-competitive, emerging competitive and competitive) for pricing (banding) 5 changes. As of December 31, 1995, the Telephone Company's rate of return was below the 11.90% threshold. On July 5, 1995, the Telephone Company filed a tariff with the DPUC to offer wholesale local service and certain related features. The service provides competitive local exchange carriers with an alternative to building facilities or constructing a ubiquitous network to meet their local service coverage obligations. On December 20, 1995, the DPUC, in a final decision, established interim rates for unbundled network elements and wholesale local service. The rates will remain in effect until the Telephone Company files revised cost studies during the second quarter of 1996. Federal Regulatory Initiatives On February 1, 1996, the U.S. Congress passed legislation that created broad changes in telecommunications law and regulation nationwide. The primary thrust of this legislation opens local telecommunications markets to competition and allows the Regional Bell Operating Companies to provide long-distance services. In addition, the legislation permits telecommunications companies to enter the cable television business and eases cable regulation. The FCC is required to adopt terms and conditions to implement the legislation in the near term. The majority of the federal legislation is consistent with legislation enacted by the State of Connecticut in 1994. Public Act 94-83 opened the Connecticut telecommunications market to competition, and the DPUC is nearing completion of the implementation proceedings. Certain provisions of the federal legislation relating to the prices the Telephone Company charges competitors for services could, however, have the effect of producing below cost prices, therefore necessitating the development of a significantly larger universal service fund than previously anticipated. If there are conflicts between state and federal law for LECs, including the Telephone Company, with less than 2% of the nationwide access lines, federal law prevails subject to a waiver and modification process included in the federal legislation. The DPUC may grant a waiver or modification of the federal law that is consistent with the public interest and avoids a significant adverse economic impact on users or a requirement that is unduly economically burdensome or technically infeasible. Under price cap regulation, the FCC adopted an interim plan in 1995 for interstate access rates, requiring LECs to incorporate higher productivity targets into their rates. The interim plan requires LECs to choose from among three productivity factors: 4.0%, 4.7% or 5.3%. The selected factor is subtracted from inflation-based price increases allowed each year to account for increasing productivity. If either the 4.0% or 4.7% factor is chosen, LECs must share 50% of earnings above a 12.25% rate of return. In addition, all earnings above 13.25% and 16.25%, respectively, will be returned. If the 5.3% factor is chosen, all earnings can be retained without sharing. In addition, companies are required to reinitialize their price cap index ("PCI") on a one-time basis by reducing the PCI by 0.7% for each prior year in which they elected the 3.3% factor. The maximum PCI reduction over the four year price cap period would therefore be 2.8%. The Telephone Company has elected a 3.3% productivity factor each year since entering price cap regulation in 1991. Accordingly, the Telephone Company is required to reinitialize its PCI downward by 2.8%. The Telephone Company has joined a number of other LECs in filing an appeal with the D.C. Circuit Court of Appeals challenging the lawfulness of this interim plan. A decision on this appeal is expected in 1996. In September 1995, the FCC released two further notices of proposed rulemaking that sought comment on changes to the established price cap plan including productivity measurements, sharing, common line formula, exogenous costs and necessary price cap rule changes to respond to a competitive environment for LECs. In response to the FCC, the Telephone Company commented that rule changes are required to 6 allow price cap LECs to compete with alternate providers. The FCC is expected to adopt new price cap rules in 1996. The Telephone Company's 1995 annual interstate access tariff filing under price cap regulation took effect August 1, 1995. The Telephone Company elected a 4.0% productivity factor and was allowed to earn up to a 12.25% interstate rate of return annually before any sharing is required. This filing, which was approved by the FCC, incorporated rate reductions of approximately $10 million in decreased interstate network access revenues for the period August 1, 1995 to June 30, 1996. Management expects this decrease to be partially offset by increased demand. As of December 31, 1995, the Telephone Company's interstate rate of return was below the 12.25% threshold. The Telephone Company's 1994 annual interstate access tariff filing under price cap regulation took effect July 1, 1994. The Telephone Company elected a 3.3% productivity factor and was allowed to earn up to a 12.25% interstate rate of return annually before any sharing is required. This filing, which was approved by the FCC, incorporated rate reductions of approximately $7 million in decreased annual interstate network access revenues for the period July 1, 1994 to June 30, 1995. This decrease was offset by increased demand. The Telephone Company will file its 1996 annual interstate access tariff on April 2, 1996 to become effective July 1, 1996. The filing will adjust interstate access rates for an experienced rate of inflation, the FCC's productivity target and exogenous cost changes, if any. The Telephone Company does not anticipate changing its 4.0% productivity factor election for the next tariff period. Since January 1, 1988, the Telephone Company has utilized an FCC approved, company-specific Cost Allocation Manual ("CAM"), which apportions costs between regulated and non-regulated activities, and describes transactions between the Telephone Company and its affiliates. In addition, the FCC requires larger LECs, including the Telephone Company, to undergo an annual independent audit to determine whether the LEC is in compliance with its approved CAM. The Telephone Company has received audit reports for 1988 through 1994 indicating it is in compliance with its CAM, and is currently undergoing an audit for the year 1995. Capital Expenditures The network access lines provided by the Telephone Company to customers' premises can be interconnected with the access lines of other telephone companies in the United States and with telephone systems in most other countries. The following table sets forth, for the Telephone Company, the number of network access lines in service at the end of each year: 1995 1994 1993 1992 1991 Network Access Lines in Service (thousands) 2,073 2,009 1,964 1,937 1,922 7 The Telephone Company has been making, and expects to continue to make, significant capital expenditures to meet the demand for regulated telecommunications services and to further improve such services [see discussion of I-SNET[SM] in Item 2. Properties]. The total gross investment in telephone plant increased from approximately $3.6 billion at December 31, 1990 to approximately $4.2 billion at December 31, 1995, after giving effect to retirements, but before deducting accumulated depreciation at either date. Since 1991, cash expended for capital additions was as follows: Dollars in millions, For the Years Ended 1995 1994 1993 1992 1991 Cash Expended for Capital Additions $280 $235 $232 $269 $296 In 1995, the Telephone Company funded its cash expenditures for capital additions entirely through cash flows from operations. In 1996, capital additions are expected to be approximately $349 million. The Telephone Company expects to fund substantially all of its 1996 capital additions through cash flows from operations. SNET America, Inc. SNET America, Inc. ("SNET America") was incorporated in 1993 under the laws of the State of Connecticut. SNET America resells a complete range of interstate and international long-distance services to Connecticut customers, including calling card and "800" service, along with volume discount plans such as SNET All Distance Simple Solutions[SM], a calling plan for small business and residence customers. SNET America began offering service in the third quarter of 1993. On April 13, 1994, the DPUC approved a joint marketing arrangement between the Telephone Company and SNET America enabling the Telephone Company to sell SNET America's interstate and international services, and SNET America to sell the Telephone Company's intrastate products and services. This arrangement enabled the Corporation to satisfy its customers' long-distance calling needs with a single point of contact through the SNET All Distance[SM] service offerings. SNET Diversified Group, Inc. SNET Diversified Group, Inc. ("Diversified") was incorporated in 1986 under the laws of the State of Connecticut in order to identify and develop new, non-regulated business opportunities. The majority of Diversified's activities is the offering of premium services, such as information and enhanced network- related services. Another activity is leasing and selling customer premises equipment ("CPE") to residential and small business customers. Key telephone systems and related products are offered and maintained which are complementary to the Telephone Company's central office-based solutions. Diversified faces significant competition from numerous department store, discount store, and business equipment retailers that carry CPE. Diversified has differentiated its product line from its competitors by offering a wide array of quality products including leasing options. 8 WIRELESS The Corporation provides cellular (wholesale and retail), personal communications and paging resale services in Connecticut, Rhode Island and certain areas in Massachusetts, through its subsidiaries SNET Cellular, Inc. ("Cellular"), SNET Mobility, Inc. ("Mobility") and SNET Paging, Inc. ("Paging"). SNET Cellular, Inc. Cellular was incorporated in 1985 under the laws of the State of Connecticut. In 1990, Cellular formed the Springwich Cellular Limited Partnership ("Springwich") with four other partners. Springwich is authorized to provide wholesale cellular radio telecommunications services in the Hartford, New Haven, New London, and Fairfield, Connecticut New England County Metropolitan Areas ("NECMAs") and in the Springfield, Massachusetts NECMA. Springwich also is licensed to provide cellular wholesale service in three Rural Service Areas, Windham and Litchfield Counties in Connecticut and Franklin County in Massachusetts. In July 1995, Cellular purchased from Bell Atlantic Corporation ("Bell Atlantic"), NYNEX Corporation ("NYNEX") and Richmond Telephone Company, for approximately $456 million in aggregate, certain cellular properties in Rhode Island and New Bedford and Pittsfield, Massachusetts, and an increased interest in Springwich. In total, these acquisitions expanded the cellular service area by approximately 2.3 million POPs (population equivalents) to approximately 5.5 million POPs along the Boston to New York corridor. Under the new partnership structure, Cellular holds a 98.6% partnership interest in Springwich. Cellular has "roamer agreements" with other carriers which allow the carriers' subscribers access to Cellular's network and allow Cellular's subscribers access to other networks throughout the United States and Canada. Cellular is currently subject to FCC jurisdiction. During 1994, the Massachusetts Department of Public Utility deregulated cellular services pursuant to congressional legislative action. In August 1994, the DPUC filed a petition with the FCC to continue rate regulation of wholesale cellular services. The FCC denied the DPUC petition on May 19, 1995 and state regulation effectively ended June 19, 1995. However, the DPUC and the Attorney General of Connecticut filed on July 13, 1995 a petition for review with the U.S. Court of Appeals. In its filings, the DPUC claimed that the FCC had made its decision to end regulation based on a set of factors that were inconsistent with the standards that states were told would govern their petitions. In late July 1995, Cellular filed a motion for intervention with the U.S. Court of Appeals ("Court") stating that the reinstitution of the DPUC's regulatory authority at a time when Cellular is subject to increasing competition from firms that are not subject to DPUC rate regulation, would hamper Cellular's ability to respond to such competition. Briefs on the petition for review were filed with the Court and a hearing was held on October 31, 1995 and a final decision is expected in early 1996. During 1994, the FCC issued a spectrum plan allocating radio spectrum to be licensed for the provision of new personal communications services ("PCS"). As a result of the plan, licenses for separate blocks of spectrum were auctioned to potential PCS providers in geographic areas of the United States through 1996. Various telecommunications groups, including primarily all the nation's largest telephone companies, competed for licenses to offer PCS in markets including Cellular's coverage area. These blocks of spectrum could be used to provide a range of wireless services including advanced paging, wireless data services and two-way voice communications. The Corporation did not participate in these auctions since it had adequate spectrum to provide competitive services. 9 In July 1995, Bell Atlantic and NYNEX completed the merger of their cellular service properties. This combination created the largest wireless service provider on the East Coast and the second largest provider in the United States. Cellular expects increasing competition from new alliances and the impact from auctions of PCS licenses. Cellular has made and will continue to make investments in network expansion and enhancements in order to effectively meet the needs of its subscribers. SNET Mobility, Inc. Mobility was incorporated in 1985 under the laws of the State of Connecticut under its predecessor's name SNET MobileCom, Inc. Mobility purchases wholesale cellular communications service from Springwich and resells cellular communications service to the retail market under the registered trademark LINX[R] in Springwich's service area. During 1995, Mobility conducted various market trials of personal communication services. This service incorporates a Local Service Area (LSA) concept where subscribers may choose their county of service at a favorable rate in contrast to traditional cellular service, which is made available at peak and offpeak rates for entire cellular markets. Included was a trial for the SNET Personal Phone Service[SM] in Hartford and Fairfield, Connecticut counties with approximately 1,000 participants. Based on trial results, a formal product launch took place in February 1996. Mobility is the first to market this service in its franchise area. Mobility markets its services through its internal sales force and through agreements with third-party distributors and dealers. Mobility anticipates continuing competition from local, regional and national resellers. Over the past few years, intense competition for new subscribers has led to increases in selling and promotional costs. Mobility anticipates that this trend will continue into the foreseeable future. In response to this competition, Mobility continues to increase the number and quality of its distribution channels, price aggressively and introduce both creative customer acquisition programs and differentiated value-added services. SNET Paging, Inc. Paging was incorporated in February 1990 under the laws of the State of Connecticut. Paging launched service on April 1, 1991. On June 30, 1995, Paging and a subsidiary completed the sale of substantially all of its paging network assets and the subsidiary's reseller accounts, to Paging Network of New York, Inc. Paging will retain its retail accounts and will continue, as a reseller, to market paging services under its Page 2000[R] brand name. INFORMATION AND ENTERTAINMENT Publishing Operations The Telephone Company's publishing operations produces and distributes traditional paper products including White and Yellow Pages directories throughout Connecticut and adjacent communities. To strategically widen its business focus and position itself for the future, the publishing operations is introducing new electronic publishing services, such as SNET Access[SM], Consumer Tips and Electronic Yellow Pages. On June 30, 1994, the DPUC lifted a restriction which prohibited the Telephone 10 Company from developing and providing electronic information services, including electronic publishing services. Key trends affecting publishing revenues include the Connecticut economy and competition. Publishing revenues, a significant portion of which reflect directory contracts entered into in the prior year, continue to remain sensitive to the Connecticut economy, which is in the early stages of recovery. In addition, the Connecticut advertising marketplace is undergoing major structural changes and is becoming increasingly more fragmented and competitive. The publishing division faces increased competition from non-traditional services such as on-line services, desktop publishing, electronic shopping services, CD- ROM and the expansion of cable television. Furthermore, additional competition may arise from the Regional Bell Operating Companies' ability to offer information services. SNET Personal Vision, Inc. On January 25, 1996, SNET Personal Vision, Inc. ("Personal Vision"), a newly formed subsidiary, filed an application with the DPUC for a certificate of public convenience and necessity to offer cable television service throughout Connecticut. Personal Vision will use I-SNET, a hybrid fiber coaxial network, to reach customers with programming and pay-per-view services. I-SNET is currently under construction and will be completed by 2009. Service, pending regulatory approval, is expected to reach in excess of 20% of Connecticut households by the end of 1997. OTHER SERVICES SNET Real Estate, Inc. SNET Real Estate, Inc. ("Real Estate") was incorporated in 1983 under the laws of the State of Connecticut. Real Estate is the owner of commercial property which it leases under operating leases and is a 99% partner in a limited liability company that also leases commercial property. Currently, Real Estate is managing its existing portfolio and is not actively pursuing additional real estate investments. Real Estate faces a risk that real estate markets in which its properties are located, primarily Connecticut, may further deteriorate from their current value. This risk is minimized by the conservative nature of Real Estate's portfolio, a majority of which is leased to affiliates. Holding Company On February 15, 1995, the DPUC provided the Corporation greater flexibility to diversify into new markets by lifting to 40% a nine-year-old restriction that prevented the Corporation from investing more than 25% of its total assets in unregulated diversified activities without approval of the DPUC. 11 EMPLOYEE RELATIONS The Corporation and its subsidiaries employed approximately 9,111 persons at February 29, 1996, of whom approximately 63% are represented by the Connecticut Union of Telephone Workers, Inc. ("CUTW"), an unaffiliated union. On April 12, 1995, a new labor contract was ratified by members of the CUTW. As part of the new contract, a voluntary early-out offer ("EOO"), which provided incentives in the form of enhanced pension benefits, was available to bargaining-unit employees during July 1995. Approximately 2,700 bargaining-unit employees, or 40.7% of the total bargaining-unit work force, accepted the offer at that time. As of December 31, 1995, 2,050 employees had left the Corporation, with the remaining 650 employees to leave no later than June 1996. CUTW members who remain with the Corporation received a combination of basic wage and lump sum increases to their wages or cash balance plan account totaling 4.0% in January 1996. In both January 1997 and January 1998, they will receive a combination of basic wage and lump sum increases totaling 3.0%. In addition, the contract also provides a sign-on bonus and health benefit and pension enhancements. The new labor agreement will expire on August 8, 1998. The contract is intended to keep layoffs to a minimum while enabling the Corporation to position itself to meet increasing competition. In December 1993, the Corporation recorded a restructuring charge to provide for a comprehensive restructuring program designed to reduce costs and improve delivery of service. The program included incremental costs to be incurred for employee separations. Total employee separations under the restructuring program are expected to approximate up to 4,000 employees. Through December 1995, approximately 3,165 employees (715 management and 2,450 bargaining-unit employees, or 20.0% and 35.9% of the respective total work force at the inception of the restructuring program) had left the Corporation. Total employee separations through the end of 1995 were offset partially by an increase in provisional employees and growth in the business resulting in a net reduction in the Corporation's work force of 1,406 employees from 10,476 employees at year-end 1993 to 9,070 employees at year-end 1995. Item 2. Properties The principal properties of the Corporation do not lend themselves to a detailed description by character and location. The majority of telecommunications property, plant and equipment of the Corporation is owned by the Telephone Company. Of the Corporation's investment in telecommunications property, plant and equipment at December 31, 1995, central office equipment represented 40%; connecting lines not on customers' premises, the majority of which are on or under public roads, highways or streets and the remainder on or under private property, represented 35%; land and buildings (occupied principally by central offices) represented 12%; telephone instruments and related wiring and equipment, including private branch exchanges, substantially all of which are on the premises of customers, represented 2%; and other, principally vehicles and general office equipment, represented 11%. Substantially all of the central office equipment installations and administrative offices are located in Connecticut in buildings owned by the Telephone Company situated on land which it owns in fee. Many garages, service centers and some administrative offices are located in rented quarters. The Corporation has a significant investment in the properties, facilities and equipment necessary to conduct its business with the overwhelming majority of this investment relating to telephone operations. Management believes that the Corporation's facilities and equipment are suitable and adequate for the business. 12 The buildout of I-SNET, a $4.5 billion investment over 15 years, is expected to be completed by 2009. I-SNET, a statewide telephony and information superhighway, is an advanced network capable of delivering voice, video and a full range of information and interactive multimedia services. I-SNET passed approximately 170,000 households by December 1995 and brought service to its first customer in October 1995. The Telephone Company expects I-SNET to pass approximately 230,000 households and provide telephony service on up to 80,000 lines by December 1996. The Telephone Company plans to support this investment primarily through increased productivity from the new technology deployed, ongoing cost-reduction initiatives and customer demand for the new services offered. Item 3. Legal Proceedings The Corporation and certain of its subsidiaries are involved in various claims and lawsuits that arise in the normal conduct of their business. In the opinion of management, upon advice of counsel, these claims will not have a material adverse effect on the financial position, operating results or cash flows of the Corporation or its subsidiaries. Item 4. Submission of Matters to a Vote of Security Holders No matter was submitted to a vote of security holders in the fourth quarter of the fiscal year covered by this report. 13 Executive Officers of the Registrant (1) (as of February 29, 1996) Executive Officer Name Age(2) Position Since Daniel J. Miglio 55 Chairman, President and Chief Executive Officer 1/86 Jean M. LaVecchia 43 Senior Vice President- Organization Development 8/94 Fred T. Page 49 Senior Vice President- Network Services 2/96 Ronald M. Serrano 40 Senior Vice President-Communication, Information and Entertainment Group 1/93 Donald R. Shassian 40 Senior Vice President and Chief Financial Officer 12/93 (1) Executive officers subject to Section 16 of the Securities Exchange Act of 1934. (2) As of December 31, 1995. Mr. Miglio, Ms. LaVecchia and Mr. Page have held high level managerial positions with the Corporation or its subsidiaries for more than the past five years. Mr. Serrano was a Vice President of Mercer Management Consulting, Inc., (formerly Strategic Planning Associates) for more than five years prior to joining the Corporation. Mr. Shassian was a partner with Arthur Andersen & Co., independent accountants, for more than five years prior to joining the Corporation. 14 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters The common stock of the Corporation is listed on the New York and Pacific stock exchanges and the number of holders of record, computed on the basis of registered accounts, was 52,962 as of February 29, 1996. Information with respect to the quarterly high, low and closing sales price for the Corporation's common stock and quarterly cash dividends declared is included in the registrant's Annual Report to Shareholders on page 47 under the caption "Market and Dividend Data" and is incorporated herein by reference pursuant to General Instruction G(2). Items 6 through 8. Information required under Items 6 through 8 is included in the registrant's combined Proxy Statement and 1995 Annual Report to Shareholders dated March 20, 1996 on pages 22 through 46 in their entirety and is incorporated herein by reference pursuant to General Instruction G(2). Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure No changes in or disagreements with accountants on any accounting or financial disclosure occurred during the period covered by this report. PART III Items 10 through 13. Information required under Items 10 through 13 is included in the registrant's combined Proxy Statement and 1995 Annual Report to Shareholders dated March 20, 1996 on pages 1 (commencing under the caption "Proxy Information") through 5 and pages 8 through 11. Such information is incorporated herein by reference pursuant to General Instruction G(3). Information regarding executive officers of the registrant required by Item 401(b) and (e) of Regulation S-K is included in Part I of this Annual Report on Form 10-K, following Item 4. 15 PART IV Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K (a) Documents filed as part of the report: Page (1) Report on Consolidated Financial Statements * Report of Audit Committee * Report of Independent Accountants * Consolidated Financial Statements: Consolidated Statements of (Loss) Income - for the years ended December 31, 1995, 1994 and 1993 * Consolidated Balance Sheets - as of December 31, 1995 and 1994 * Consolidated Statements of Changes in Shareholders' Equity - for the years ended December 31, 1995, 1994 and 1993 * Consolidated Statements of Cash Flows - for the years ended December 31, 1995, 1994 and 1993 * Notes to Consolidated Financial Statements * (2) Consolidated Financial Statement Schedule for the year ended December 31, 1995 Report of Independent Accountants 21 II - Valuation and Qualifying Accounts 22 Schedules other than those listed above have been omitted because the required information is contained in the financial statements and notes thereto, or because such schedules are not applicable. * Incorporated herein by reference to the appropriate portions of the registrant's combined Proxy Statement and 1995 Annual Report to Shareholders dated March 20, 1996 [see Part II]. 16 (3) Exhibits: Exhibits identified in parentheses below, on file with the SEC, are incorporated herein by reference as exhibits hereto. Exhibits numbered 10(iii)(A)1 through 10(iii)(A)15 are management contracts or compensatory plans required to be filed as exhibits pursuant to Item 14 (c) of Form 10-K. Exhibit Number 3a Amended and Restated Certificate of Incorporation of the registrant as filed June 14, 1990 (Exhibit 3-A to Form SE dated 3/15/91, File No. 1-9157). 3b By-Laws of the registrant as amended and restated through October 10, 1990 (Exhibit 3 to Form 8-K dated 10/10/90, File No. 1-9157). 4a Rights Agreement dated February 11, 1987 between Southern New England Telecommunications Corporation and The State Street Bank and Trust Company, as Rights Agent (Exhibit 1 to Form SE dated 2/13/87-1, File No. 1-9157). Amendment No. 1 dated December 13, 1989 (Exhibit 4 to Form SE dated 12/28/89, File No. 1-9157). Amendment No. 2 dated October 10, 1990 (Exhibit 4 to Form SE dated 10/12/90, File No. 1-9157). 4b Indenture dated December 13, 1993 between the registrant and Fleet National Bank of Connecticut, Trustee, issued in connection with the sale of $200,000,000 of 6 1/8% Medium-Term Notes, Series C, due December 15, 2003 and $245,000,000 of 7 1/4% Medium-Term Notes, Series C, due December 15, 2033 (Exhibit 4b to 1994 Form 10-K dated 3/10/95, File No. 1-9157). 4c Indenture dated July 10, 1991 between the registrant and Fleet National Bank of Connecticut, Trustee, issued in connection with the sale of $100,000,000 of 6 1/2% Medium-Term Notes, Series 2, due August 15, 2000 and $200,000,000 of 7% Medium-Term Notes, Series 2, due August 15, 2005. 10(iii)(A)1 SNET Short Term Incentive Plan as amended February 8, 1995 (Exhibit 10(iii)(A)1 to 1994 Form 10-K dated 3/10/95, File No. 1-9157). 10(iii)(A)2 SNET Long Term Incentive Plan as amended March 1, 1993 (Exhibit 10(iii)(A)2 to 1992 Form 10-K dated 3/23/93, File No. 1-9157). 10(iii)(A)3 SNET Financial Counseling Program as amended January 1987 (Exhibit 10-D to Form SE dated 3/23/87-1, File No. 1-9157). 10(iii)(A)4 Group Life Insurance Plan and Accidental Death and Dismemberment Benefits Plan for Outside Directors of SNET as amended July 1, 1986 (Exhibit 10-E to Form SE dated 3/23/87-1, File No. 1-9157). 17 (3) Exhibits (continued): Exhibit Number 10(iii)(A)5 SNET Pension Benefit Plan as amended November 1, 1991 (Exhibit 10-A to Form SE dated 3/20/92, File No. 1-9157). Amendment dated December 8, 1993 (Exhibit 10 (iii)(A)5 to 1993 Form 10-K dated 3/23/94, File No. 1-9157). Amendment dated February 8, 1995 (Exhibit 10(iii)(A)5 to 1994 Form 10-K dated 3/10/95, File No. 1-9157). Amendments effective December 13, 1995 and January 1, 1996 . 10(iii)(A)6 SNET Management Pension Plan as amended March 31, 1995. Amendments effective December 20, 1995 through April 1, 1996. 10(iii)(A)7 SNET Incentive Award Deferral Plan as amended March 1, 1993 (Exhibit 10(iii)(A)7 to 1992 Form 10-K dated 3/23/93, File No. 1-9157). 10(iii)(A)8 SNET Mid-Career Pension Plan as amended November 1, 1991 (Exhibit 10-D to Form SE dated 3/20/92, File No. 1-9157). Amendment dated December 8, 1993 (Exhibit 10 (iii)(A)8 to 1993 Form 10-K dated 3/23/94, File No. 1-9157). 10(iii)(A)9 SNET Deferred Compensation Plan for Non-Employee Directors as amended January 1, 1993 (Exhibit 10(iii)(A)9 to 1992 Form 10-K dated 3/23/93, File No. 1-9157). 10(iii)(A)10 Change-in-Control Agreements (Exhibit 10-F to Form SE dated 3/15/91, File No. 1-9157). 10(iii)(A)11 SNET 1986 Stock Option Plan as amended March 1, 1993 (Exhibit 10(iii)(A)11 to 1992 Form 10-K dated 3/23/93, File No. 1-9157). 10(iii)(A)12 SNET Retirement and Disability Plan for Non- Employee Directors as amended April 14, 1993 (Exhibit 10(iii)(A)12 to 1993 Form 10-K dated 3/23/94, File No. 1-9157). Amendment dated January 1, 1994 (Exhibit 10(iii)(A)12 to 1994 Form 10-K dated 3/10/95, File No. . 1-9157). 10(iii)(A)13 SNET Non-Employee Director Stock Plan effective January 1, 1994 (Exhibit 4.4 to Registration No. 33-51055, File No. 1-9157). 10(iii)(A)14 Description of SNET Executive Retirement Savings Plan (Exhibit 10(iii)(A)14 to 1993 Form 10-K dated 3/23/94, File No. 1-9157). 10(iii)(A)15 SNET 1995 Stock Incentive Plan (Exhibit 4.4 to Registration No. 33-64975, File No. 1-9157). 18 (3) Exhibits (continued): Exhibit Number 12 Computation of Ratio of Earnings to Fixed Charges. 13 Pages 22 through 47 of the registrant's combined Proxy Statement and 1995 Annual Report to Shareholders for the fiscal year ended December 31, 1995. 21 Subsidiaries of the Corporation. 23 Consent of Independent Accountants. 24a Power of Attorney. 24b Board of Directors' Resolution. 27 Financial Data Schedule. 99a Annual Report on Form 11-K for the plan year ended December 31, 1995 for the SNET Management Retirement Savings Plan will be filed as an amendment prior to June 30, 1996. 99b Annual Report on Form 11-K for the plan year ended December 31, 1995 for the SNET Bargaining Unit Retirement Savings Plan will be filed as an amendment prior to June 30, 1996. The Corporation will furnish, without charge, to a shareholder upon request a copy of the combined Proxy Statement and 1995 Annual Report to Shareholders, portions of which are incorporated by reference, and will furnish any other exhibit at cost. (b) Reports on Form 8-K: On October 24, 1995, the Corporation and the Telephone Company filed, separately, reports on Form 8-K, dated October 23, 1995 announcing the Corporation's financial results for the third quarter of 1995. On January 22, 1996, the Corporation and the Telephone Company filed, separately, reports on Form 8-K, dated January 22, 1996, announcing the Corporation's 1995 financial results including the fact that it discontinued the use of Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation." 19 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION By /s/ Donald R. Shassian Donald R. Shassian, Senior Vice President and Chief Financial Officer March 20, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. PRINCIPAL EXECUTIVE OFFICER: Daniel J. Miglio* Chairman, President, Chief Executive Officer and Director PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER: Donald R. Shassian By /s/ Donald R. Shassian Senior Vice President and (Donald R. Shassian,as attorney- Chief Financial Officer in-fact and on his own behalf) DIRECTORS: William F. Andrews* Richard H. Ayers* Zoe Baird* Robert L. Bennett* Barry M. Bloom* March 20, 1996 Frank J. Connor* William R. Fenoglio* Claire L. Gaudiani* James R. Greenfield* Ira D. Hall* Burton G. Malkiel* Frank R. O'Keefe, Jr.* * by power of attorney 20 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders of Southern New England Telecommunications Corporation: Our report on the consolidated financial statements of Southern New England Telecommunications Corporation has been incorporated by reference in this Form 10-K from the combined Proxy Statement and 1995 Annual Report to Shareholders of Southern New England Telecommunications Corporation on page 29 therein. In connection with our audits of such financial statements, we have also audited the related financial statement schedule for each of the three years in the period ended December 31, 1995 listed in Item 14 (a) (2) of this Form 10-K. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. Hartford, Connecticut COOPERS & LYBRAND L.L.P. January 22, 1996 21 SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS (Dollars in Millions) COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E Additions Balance at Balance at beginning Charged to Charged to end of Description of period expense other accounts Deductions period Allowance for Uncollectible Accounts Receivable: Year 1995 $29.8 $23.1 $3.6 (a) $22.3 (b) $34.2 Year 1994 27.9 20.7 7.5 (a) 26.3 (b) 29.8 Year 1993 23.5 28.4 4.9 (a) 28.9 (b) 27.9 Allowance for Uncollectible Direct-Financing Lease Notes Receivable: Year 1995 $ 8.4 $ 1.4 $ - $ 0.1 (b) $ 9.7 Year 1994 11.7 1.7 - 5.0 (b) 8.4 Year 1993 8.2 15.6 - 12.1 (b) 11.7 Restructuring Charge: Year 1995 $264.9 $ - $ - $187.9 (c) $ 77.0 Year 1994 355.0 - - 90.1 (c) 264.9 Year 1993 - 355.0 - - 355.0 (a) Includes amounts previously written off that were credited directly to this account when recovered and miscellaneous amounts. (b) Includes amounts written off as uncollectible. (c) Includes non-cash amounts charged against the restructuring reserve of $98.8 in 1995 and $26.5 in 1994, primarily net pension and postretirement curtailment losses. 22 Exhibit Index Exhibits identified in parentheses below, on file with the SEC, are incorporated herein by reference as exhibits hereto. Exhibit Number 3a Amended and Restated Certificate of Incorporation of the registrant as filed June 14, 1990 (Exhibit 3-A to Form SE dated 3/15/91, File No. 1-9157). 3b By-Laws of the registrant as amended and restated through October 10, 1990 (Exhibit 3 to Form 8-K dated 10/10/90, File No. 1-9157). 4a Rights Agreement dated February 11, 1987 between Southern New England Telecommunications Corporation and The State Street Bank and Trust Company, as Rights Agent (Exhibit 1 to Form SE dated 2/13/87-1, File No. 1-9157). Amendment No. 1 dated December 13, 1989 (Exhibit 4 to Form SE dated 12/28/89, File No. 1-9157). Amendment No. 2 dated October 10, 1990 (Exhibit 4 to Form SE dated 10/12/90, File No. 1-9157). 4b Indenture dated December 13, 1993 between the registrant and Fleet National Bank of Connecticut, Trustee, issued in connection with the sale of $200,000,000 of 6 1/8% Medium-Term Notes, Series C, due December 15, 2003 and $245,000,000 of 7 1/4% Medium-Term Notes, Series C, due December 15, 2033 (Exhibit 4b to 1994 Form 10-K dated 3/10/95, File No. 1-9157). 4c Indenture dated July 10, 1991 between the registrant and Fleet National Bank of Connecticut, Trustee, issued in connection with the sale of $100,000,000 of 6 1/2% Medium-Term Notes, Series 2, due August 15, 2000 and $200,000,000 of 7% Medium-Term Notes, Series 2, due August 15, 2005. 10(iii)(A)1 SNET Short Term Incentive Plan as amended February 8, 1995 (Exhibit 10(iii)(A)1 to 1994 Form 10-K dated 3/10/95, File No. 1-9157). 10(iii)(A)2 SNET Long Term Incentive Plan as amended March 1, 1993 (Exhibit 10(iii)(A)2 to 1992 Form 10-K dated 3/23/93, File No. 1-9157). 10(iii)(A)3 SNET Financial Counseling Program as amended January 1987 (Exhibit 10-D to Form SE dated 3/23/87-1, File No. 1-9157). 10(iii)(A)4 Group Life Insurance Plan and Accidental Death and Dismemberment Benefits Plan for Outside Directors of SNET as amended July 1, 1986 (Exhibit 10-E to Form SE dated 3/23/87-1, File No. 1-9157). 10(iii)(A)5 SNET Pension Benefit Plan as amended November 1, 1991 (Exhibit 10-A to Form SE dated 3/20/92, File No. 1-9157). Amendment dated December 8, 1993 (Exhibit 10 (iii)(A)5 to 1993 Form 10-K dated 3/23/94, File No. 1-9157). Amendment dated February 8, 1995 (Exhibit 10(iii)(A)5 to 1994 Form 10-K dated 3/10/95, File No. 1-9157). Amendments effective December 13, 1995 and January 1, 1996 . 10(iii)(A)6 SNET Management Pension Plan as amended March 31, 1995. Amendments effective December 20, 1995 through April 1, 1996. 10(iii)(A)7 SNET Incentive Award Deferral Plan as amended March 1, 1993 (Exhibit 10(iii)(A)7 to 1992 Form 10-K dated 3/23/93, File No. 1-9157). 10(iii)(A)8 SNET Mid-Career Pension Plan as amended November 1, 1991 (Exhibit 10-D to Form SE dated 3/20/92, File No. 1-9157). Amendment dated December 8, 1993 (Exhibit 10 (iii)(A)8 to 1993 Form 10-K dated 3/23/94, File No. 1-9157). 10(iii)(A)9 SNET Deferred Compensation Plan for Non-Employee Directors as amended January 1, 1993 (Exhibit 10(iii)(A)9 to 1992 Form 10-K dated 3/23/93, File No. 1-9157). 10(iii)(A)10 Change-in-Control Agreements (Exhibit 10-F to Form SE dated 3/15/91, File No. 1-9157). 10(iii)(A)11 SNET 1986 Stock Option Plan as amended March 1, 1993 (Exhibit 10(iii)(A)11 to 1992 Form 10-K dated 3/23/93, File No. 1-9157). 10(iii)(A)12 SNET Retirement and Disability Plan for Non- Employee Directors as amended April 14, 1993 (Exhibit 10(iii)(A)12 to 1993 Form 10-K dated 3/23/94, File No. 1-9157). Amendment dated January 1, 1994 (Exhibit 10(iii)(A)12 to 1994 Form 10-K dated 3/10/95, File No. . 1-9157). 10(iii)(A)13 SNET Non-Employee Director Stock Plan effective January 1, 1994 (Exhibit 4.4 to Registration No. 33-51055, File No. 1-9157). 10(iii)(A)14 Description of SNET Executive Retirement Savings Plan (Exhibit 10(iii)(A)14 to 1993 Form 10-K dated 3/23/94, File No. 1-9157). 10(iii)(A)15 SNET 1995 Stock Incentive Plan (Exhibit 4.4 to Registration No. 33-64975, File No. 1-9157). 12 Computation of Ratio of Earnings to Fixed Charges. 13 Pages 22 through 47 of the registrant's combined Proxy Statement and 1995 Annual Report to Shareholders for the fiscal year ended December 31, 1995. 21 Subsidiaries of the Corporation. 23 Consent of Independent Accountants. 24a Power of Attorney. 24b Board of Directors' Resolution. 27 Financial Data Schedule. 99a Annual Report on Form 11-K for the plan year ended December 31, 1995 for the SNET Management Retirement Savings Plan will be filed as an amendment prior to June 30, 1996. 99b Annual Report on Form 11-K for the plan year ended December 31, 1995 for the SNET Bargaining Unit Retirement Savings Plan will be filed as an amendment prior to June 30, 1996. EX-4 2 SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION TO THE CONNECTICUT NATIONAL BANK, Trustee Indenture Dated as of July 10, 1991 DEBT SECURITIES TABLE OF CONTENTS* PAGE Parties ........................................................... 1 Recitals of the Issuer ............................................ 1 ARTICLE ONE DEFINITIONS SECTION 1.01. Certain terms defined; other terms defined in Trust Indenture Act of 1939, as amended, or by reference therein in Securities Act of 1933, as amended, to have meanings therein assigned ................... 1 Authenticating Agent ............................... 2 Board of Directors ................................. 2 Board Resolution ................................... 2 Business Day ....................................... 2 Commission ......................................... 2 Company ............................................ 2 Corporate Trust Office or principal office of the Trustee .......................................... 2 Depository ......................................... 2 Event of Default ................................... 2 Global Security .................................... 2 Holder, Holder of Securities, securityholders or Registered Holder ................................ 3 include ............................................ 3 Indenture .......................................... 3 Issuer or Company .................................. 3 Issuer Order ....................................... 3 Officers' Certificate .............................. 3 Opinion of Counsel ................................. 3 Outstanding ........................................ 3 Paying Agent ....................................... 4 person ............................................. 4 responsible officer ................................ 4 Security or Securities ............................. 4 Securities Register ................................ 4 Trust Indenture Act ................................ 4 Trustee ............................................ 4 SECTION 1.02. Other defined terms ................................ 4 * This Table of Contents shall not, for any purpose, be deemed to be part of the Indenture or to have any bearing upon the interpretation of any of its terms or provisions. i ARTICLE TWO SECURITY FORMS PAGE SECTION 2.01. Forms generally .................................... 4 SECTION 2.02. Form of Trustee's certificate of authentication .... 5 SECTION 2.03. Form of Trustee's certificate of authentication by an Authenticating Agent ....................... 5 SECTION 2.04. Securities issuable in the form of Global Securities 5 ARTICLE THREE THE SECURITIES SECTION 3.01. Amount unlimited; issuable in series ............... 7 SECTION 3.02. Form and denominations ............................. 9 SECTION 3.03. Authentication, dating and delivery of Securities .. 10 SECTION 3.04. Execution of Securities ............................ 12 SECTION 3.05. Exchange of Securities ............................. 13 Registration of transfer of Securities to be endorsed or accompanied instruments of transfer .. 13 Charges upon exchange or transfer of Securities .... 13 Restrictions on issue and registration of transfer or exchange at time of redemption ................ 13 SECTION 3.06. Temporary Securities, if any ....................... 13 SECTION 3.07. Mutilated, destroyed, lost or stolen Securities .... 14 SECTION 3.08. Cancellation of surrendered Securities ............. 15 SECTION 3.09. Provisions of the Indenture and Securities for the sole benefit of the parties and the securityholders .................................. 15 SECTION 3.10. Computation of Interest ............................ 15 ARTICLE FOUR COVENANTS OF THE ISSUER SECTION 4.01. Payment of principal of (and premium, if any) and interest on Securities ........................... 15 SECTION 4.02. Maintenance of office or agency for transfer, exchange and payment of Securities ............... 15 SECTION 4.03. Not to secure indebtedness with lien or other encumbrance on common stock of principal subsidiaries ..................................... 16 SECTION 4.04. Not to dispose of common stock of principal subsidiaries or to reduce ownership percentage of a principal subsidiary below eighty percent ... 16 SECTION 4.05. Appointment to fill a vacancy in the office of Trustee .......................................... 17 SECTION 4.06. (a) Duties of Paying Agent ......................... 17 (b) Company as Paying Agent ........................ 17 (c) Turnover to Trustee by Paying Agent or Company . 17 (d) Holdings sums in trust ......................... 17 SECTION 4.07. Written Statement to Trustee ....................... 18 ii ARTICLE FIVE SECURITYHOLDERS' LISTS AND REPORTS BY THE ISSUER AND THE TRUSTEE PAGE SECTION 5.01. Company to furnish Trustee information as to names and addresses of securityholders ................. 18 SECTION 5.02. (a) Trustee to preserve information as to names and addresses of securityholders ................... 18 (b) Trustee to make information as to names and addresses of securityholders available to "applicants" or mail communications to securityholders in certain circumstances ....... 18 Procedure if Trustee elects not to make information available to "applicants" .......... 19 (c) Company and Trustee not accountable for disclosure of information ...................... 19 SECTION 5.03. (a) Annual and other reports to be filed by Company with Trustee ................................... 19 (b) Additional information and reports to be filed with Trustee and Commission .................... 20 (c) Summaries of information and reports to be transmitted by Company to securityholders ...... 20 SECTION 5.04. (a) Trustee to transmit reports to securityholders . 20 (b) Trustee to transmit certain further reports to securityholders ................................ 21 (c) Securityholders to be mailed reports ........... 21 (d) Copies of reports to be filed with stock exchanges and Commission ....................... 21 ARTICLE SIX REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT SECTION 6.01. Events of Default defined .......................... 21 Acceleration of maturity upon Event of Default ..... 23 Waiver of default and rescission of declaration of maturity ......................................... 24 Restoration of former position and rights .......... 24 SECTION 6.02. Covenant of Company to pay to Trustee upon demand whole amount due on Securities on default in payment of interest or principal (or premium, if any) .......................................... 24 Trustee may recover judgment for whole amount due on Securities on failure of Company to pay .......... 25 Filing of proof of claim by Trustee in bankruptcy, reorganization, receivership, or other judicial proceedings ...................................... 25 Rights of action and to assert claims may be enforced by Trustee without possession of Securities ...... 26 Trustee may enforce rights vested in it by Indenture by appropriate judicial proceedings .............. 26 SECTION 6.03. Application of moneys collected by Trustee ......... 26 SECTION 6.04. Limitation on suits by holders of Securities ....... 27 iii PAGE SECTION 6.05. Remedies cumulative ................................ 27 Delay or omission in exercise of rights not a waiver of default ....................................... 28 SECTION 6.06. Rights of holders of majority in principal amount of Securities to direct Trustee and to waive defaults 28 SECTION 6.07. Trustee to give notice of defaults known to it, but may withhold in certain circumstances ............ 28 SECTION 6.08. Requirement of an undertaking to pay costs in certain suits under this Indenture or against the Trustee .......................................... 29 ARTICLE SEVEN CONCERNING THE TRUSTEE SECTION 7.01. Upon Event of Default occurring and continuing, Trustee shall exercise such powers vested in it, and use same degree of care and skill in their exercise, as a prudent man would use ............. 29 Trustee not relieved from liability for negligence or wilful misconduct except as provided in this Section .......................................... 30 (a) Prior to Event of Default and after the curing of all Events of Default which may have occurred 30 (1) Trustee not liable except for performance of duties specifically set forth ........... 30 (2) In absence of bad faith, Trustee may conclusively rely on certificates or opinions furnished it hereunder, subject to duty to examine the same if specifically required to be furnished to it ......................... 30 (b) Trustee not liable for error of judgment made in good faith by responsible officer unless Trustee negligent ...................................... 30 (c) Trustee not liable for action or non-action in accordance with direction of holders of majority in principal amount of Securities .............. 30 SECTION 7.02. Except as otherwise provided in Section 7.01: (a) Trustee may rely on documents believed genuine and properly signed or presented ............... 30 (b) Sufficient evidence by certain instruments provided for ................................... 31 (c) Trustee may act on Opinion of Counsel .......... 31 (d) Trustee may require indemnity from securityholders ................................ 31 (e) Trustee not liable for action in good faith believed to be authorized ...................... 31 SECTION 7.03. Trustee not liable for recitals in Indenture or in Securities .................................... 31 No representations by Trustee as to validity of Indenture or of Securities ....................... 31 Trustee not accountable for use of Securities or proceeds ......................................... 31 iv PAGE SECTION 7.04. Trustee, Authenticating Agent, Paying Agent or Securities registrar may own Securities .......... 31 SECTION 7.05. Moneys received by Trustee to be held in trust; interest not payable except by agreement ......... 32 SECTION 7.06. Trustee entitled to compensation, reimbursement and indemnity .................................... 32 Obligations to Trustee to be secured by lien prior to Securities .................................... 32 SECTION 7.07. Right of Trustee to rely on certificate of officers of Company where no other evidence specifically prescribed ....................................... 32 SECTION 7.08. (a) Trustee acquiring conflicting interest to eliminate conflict or resign ................... 33 (b) Notice to securityholders in case of failure to comply with subsection (a) ..................... 33 (c) Securityholder may petition for Trustee removal 33 SECTION 7.09. Requirements of eligibility of Trustee ............. 33 SECTION 7.10. (a) Resignation of Trustee ......................... 33 (b) Removal of Trustee by Company or by court on securityholder's application ................... 34 (c) Removal of Trustee by holders of majority in principal amount of Securities ................. 34 (d) Time when resignation of removal of Trustee effective ...................................... 34 SECTION 7.11. Acceptance by successor to Trustee ................. 34 Successor to be qualified and eligible ............. 35 Mailing of notice of succession of a Trustee ....... 35 SECTION 7.12. Successor to Trustee by merger, conversion, consolidation or succession to business .......... 35 SECTION 7.13. Appointment and qualifications of Authenticating Agent ............................................ 35 Succession of Authenticating Agent without further act .............................................. 36 Resignation of Authenticating Agent or termination of agency ........................................ 36 Compensation of Authenticating Agent ............... 36 ARTICLE EIGHT CONCERNING THE HOLDERS OF SECURITIES SECTION 8.01. (a) Form and effectiveness of securityholder action 36 (b) Proof of execution of instruments .............. 36 (c) Proof of holding of Securities ................. 37 SECTION 8.02. Who may be deemed owners of Securities ............. 37 SECTION 8.03. Securities owned by Company or controlled or controlling companies disregarded for certain purposes ......................................... 37 SECTION 8.04. Revocation of action by securityholder; action by securityholder binds future holders .............. 37 v ARTICLE NINE REDEMPTION OF SECURITIES PAGE SECTION 9.01. Redemption prices of Securities (as set forth in form of Security) ............................. 38 SECTION 9.02. Giving of notice of redemption ..................... 38 Selection of Securities in case less than all Securities to be redeemed ........................ 39 SECTION 9.03. When Securities called for redemption become due and payable .......................................... 39 Securities redeemed in part ........................ 39 ARTICLE TEN SUPPLEMENTAL INDENTURES SECTION 10.01. Purposes for which supplemental indentures may be entered into without consent of securityholders .. 39 SECTION 10.02. Modification of Indenture with consent of holders of 66 2/3% in principal amount of Securities ........ 41 SECTION 10.03. Effect of supplemental indentures .................. 42 Opinion of Counsel ................................. 42 SECTION 10.04. Securities may bear notation of changes by supplemental indentures .......................... 42 ARTICLE ELEVEN CONSOLIDATION, MERGER, SALE OR CONVEYANCE SECTION 11.01. Consolidation and merger of Company and sale or conveyance permitted ............................. 42 Assumption of obligations of Company by successor corporation or transferee ........................ 42 SECTION 11.02. Rights and duties of successor corporation ......... 42 Appropriate changes may be made in form of Securities ....................................... 43 Company may merge or acquire properties of other corporations ..................................... 43 SECTION 11.03. Opinion of Counsel ................................. 43 ARTICLE TWELVE SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS SECTION 12.01. Satisfaction and discharge of Indenture ............ 43 SECTION 12.02. Application by Trustee of funds deposited for payment of Securities ............................ 44 SECTION 12.03. Repayment of moneys held by Paying Agent ........... 44 SECTION 12.04. Repayment of moneys held by Trustee ................ 44 vi ARTICLE THIRTEEN MISCELLANEOUS PROVISIONS PAGE SECTION 13.01. Immunity of incorporators, shareholders, officers and directors .................................... 44 SECTION 13.02. Successors and assigns of Company bound by Indenture 45 SECTION 13.03. Acts of board, committee or officer of successor corporation valid ................................ 45 SECTION 13.04. Surrender of powers by Company ..................... 45 SECTION 13.05. Required notices or demands may be served by mail .. 45 SECTION 13.06. Officers' Certificate and Opinion of Counsel to be furnished upon applications or demands by the Company .......................................... 45 Statements to be included in each certificate or opinion with respect to compliance with a condition or covenant ............................ 45 SECTION 13.07. Payments due on non-business days .................. 46 SECTION 13.08. Provisions required by Trust Indenture Act to control .......................................... 46 SECTION 13.09. Indenture may be executed in counterparts .......... 46 SECTION 13.10. Governing law ...................................... 46 Testimonium ........................................................ 47 Signature and Seals ................................................ 47 Acknowledgments .................................................... 48 Form of Global Security ........................................ Exhibit A Form of Note ................................................... Exhibit B vii INDENTURE, dated as of July 10, 1991, between SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION, a Connecticut corporation (hereinafter, subject to Article Eleven, called the "Issuer" or the "Company"), having its principal office at 227 Church Street, New Haven, Connecticut 06510, and THE CONNECTICUT NATIONAL BANK, a national banking association (hereinafter, subject to Article Seven, called the "Trustee"). Recitals of the Issuer The Issuer has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its notes, debentures or other evidences of indebtedness (hereinafter generally called the "Securities"), to be issued in one or more series, authenticated and delivered, as in this Indenture provided. All things necessary have been done to make this Indenture a valid agreement of the Issuer, in accordance with its terms. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the persons acquiring the same, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities or of the Securities of any series, without any priority of any one Security or series over any other, except as otherwise expressly provided herein, as follows: ARTICLE ONE DEFINITIONS SECTION 1.01. The terms defined in this Section 1.01 (except as otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture, including any indenture supplemental hereto, have the respective meanings specified in this Section 1.01. All other terms used in this Indenture which are defined in the Trustee Indenture Act of 1939, as amended, or which are by reference therein defined in the Securities Act of 1933, as amended, shall (except as herein otherwise expressly provided or unless the context otherwise requires) have the meanings assigned to such terms in said Trust Indenture Act and in said Securities Act as in force at the date on which this Indenture was originally executed (subject to Sections 10.01 and 10.02). All accounting terms used herein and not expressly defined have the meanings assigned to such terms in accordance with generally accepted accounting principles, and the term "generally accepted accounting principles" means such accounting principles as are applicable to the financial statement of the Issuer at the time of any computation. The words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. All references herein to "Articles" or other subdivisions are to the corresponding Articles or other subdivisions of this Indenture. The terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular. 1 "Authenticating Agent" means, with respect to any series of Securities, the agent of the Trustee, if any, with respect to that series of Securities, which at the time shall be appointed and acting pursuant to Section 7.13. "Board of Directors" means either the Board of Directors of the Issuer or any committee of the Board or any other body designated by such Board as duly authorized to act. "Board Resolution" means a copy of a resolution certified by the Secretary or any Assistant Secretary of the Issuer to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means, with respect to any Security, any day, other than a Saturday or Sunday, that is not a day on which banking institutions are authorized or required by law or regulation to be closed in The City of New York or the State of Connecticut. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or if at any time after the date on which this Indenture was originally executed such Commission is not existing and performing the duties assigned to it under the Trust Indenture Act on such date or original execution, then the body performing such duties at such time. "Company": See "Issuer." "Corporate Trust Office" or "principal office of the Trustee" or similar term, means the principal office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date hereof is located at 777 Main Street, Hartford, Connecticut 06115, Attn. Corporate Trust Administration. "Depository" means, with respect to the Securities of any series which, in accordance with the determination of the Issuer, will be issued in whole or in part in the form of one or more Global Securities, The Depository Trust Company, New York, New York, another clearing agency or any successor registered under the Securities Exchange Act of 1934, or other applicable statute or regulation, which, in each case, shall be designated by the Issuer pursuant to either Section 2.04 or 3.01. If at any time there is more than one such person, "Depository" as used with respect to the Securities of any such series means the Depository with respect to the Securities of that series. "Event of Default" means any event or condition specified as such in Section 6.01, continued for the period of time, if any, therein designated. "Global Security" means, with respect to all or any part of any series of Securities, a Security executed by the Issuer and authenticated and delivered by the Trustee to the Depository or pursuant to the Depository's instruction, all in accordance with this Indenture and pursuant to an Issuer Order, which shall be registered in the name of the Depository or its nominee and the ownership of which will be registered in a "book-entry" or other system maintained by the Depository. 2 "Holder", "Holder of Securities", "securityholders" or "Registered Holder" or other similar terms mean, with respect to a Security, the person in whose name at the time such Security is registered in the Securities Register (which terms, in the case of a Global Security, mean the Depository, notwithstanding that the Depository maintains a "book-entry" or other system for identification of ownership in respect of such Global Security). The term "include" (and other forms of such term) means "include, without limitation." "Indenture" means this instrument as originally executed and delivered or, if amended or supplemented as herein provided, as so amended or supplemented, and includes the forms and/or terms of particular series of Securities established as contemplated hereunder. "Issuer" or "Company" means Southern New England Telecommunications Corporation, a Connecticut corporation, and, subject to Article Eleven, its successors and assigns. "Issuer Order" means a written order signed in the name of the Issuer by the Chairman of the Board of Directors or a Vice Chairman of the Board of Directors or its President or a Vice President and by its Treasurer or an Assistant Treasurer. "Officers' Certificate" means a certificate signed by the Chairman of the Board of Directors or a Vice Chairman of the Board of Directors or the President or a Vice President and by the Comptroller, an Assistant Comptroller, or any other accounting officer of the Issuer. Each such certificate shall include the statements provided for in Section 13.06, if and to the extent required by the provisions thereof. "Opinion of Counsel" means an opinion in writing signed by legal counsel who may be an employee of or counsel to the Issuer or who may be other counsel satisfactory to the Trustee. Each such opinion shall include the statements provided for in Section 13.06, if and to the extent required thereby. "Outstanding" (subject to Section 8.03) means, with reference to Securities as of any particular time, all Securities authenticated and delivered under this Indenture, except (a) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (b) Securities, or portions thereof, for the payment or redemption of which moneys in the necessary amount shall have been deposited in trust with the Trustee or with any Paying Agent (other than the Issuer) or shall have been set aside and segregated in trust by the Issuer (if the Issuer shall act as its own Paying Agent); provided that, if such Securities, or portions thereof, are to be redeemed, notice of such redemption shall have been given as in Article Nine provided, or provision satisfactory to the Trustee shall have been made for giving such notice; and 3 (c) Securities in substitution for which other Securities shall have been authenticated and delivered, or which shall have been paid, pursuant to the terms of Section 3.07, unless proof satisfactory to the Trustee is presented that any such Security is held by a Holder as to whom such Security is a valid, binding and legal obligation of the Issuer. "Paying Agent" means any person authorized by the Issuer to pay the principal of, or premium, if any, or interest, if any, on, any Securities on behalf of the Issuer. The term "person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. The term "responsible officer" means, with respect to the Trustee, any corporate trust officer, trust officer, vice president or assistant vice president in its Corporate Trust Office, or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his knowledge of and familiarity with the particular subject. "Security" or "Securities" has the meaning stated in the recitals of this Indenture. "Securities Register" means the register or registers kept by the Issuer as provided in Section 3.05. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force (except as otherwise provided herein) at the date on which this Indenture was originally executed. "Trustee" means the person identified as "Trustee" in the first paragraph hereof until a successor trustee becomes such pursuant to the provisions of Article Seven hereof, and then shall mean such successor trustee. SECTION 1.02. Certain other terms are defined in Article Seven and other Articles of this Indenture. ARTICLE TWO SECURITY FORMS SECTION 2.01. The Securities of each series shall be in substantially such form as shall be established pursuant to Section 3.01, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as the Issuer may deem appropriate and as are not contrary to the provisions of this Indenture, or as may be required to comply with any law or with any rules made pursuant thereto or with any rules of any securities exchange or of any automated quotation system, or to 4 conform to usage, all as determined by the officers executing such Securities, as conclusively evidenced by their execution of the Securities. The definitive Securities of each series shall be printed, lithographed or engraved on steel-engraved borders, or may be produced in any other manner, all as determined by the officers executing such Securities, as conclusively evidenced by their execution of such Securities, subject, with respect to the Securities of any series, to the rules of any securities exchange or automated quotation system on which the Securities of such series are listed or quoted and (with respect to Global Securities of any series) to the rules of the Depository. SECTION 2.02. The Trustee's certificate of authentication on all Securities shall be in substantially the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. THE CONNECTICUT NATIONAL BANK, as Trustee By Authorized Signatory SECTION 2.03. If at any time there shall be an Authenticating Agent appointed with respect to any series of Securities, then the Trustee's certificate of authentication by such Authenticating Agent on all Securities of each such series shall be in substantially the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. THE CONNECTICUT NATIONAL BANK as Trustee By (NAME OF AUTHENTICATING AGENT), Authenticating Agent By Authorized Signatory SECTION 2.04. (a) If the Issuer shall establish pursuant to Section 3.01 that the Securities of a particular series are to be issued in whole or in part as one or more Global Securities, then the Issuer shall execute, and the Trustee shall, in accordance with Section 3.03 and the Issuer Order delivered to the Trustee thereunder, authenticate and deliver, one or more Global Securities, substantially in the form of Exhibit A hereto or in such form as the Issuer may otherwise establish, which (i) shall represent an aggregate principal amount equal to the aggregate principal amount of the Outstanding Securities of such series to be represented by one or more Global Securities, (ii) shall be registered in the name of the Depository or its nominee, (iii) shall be delivered by the Trustee to the Depository or pursuant to the Depository's instruction and (iv) shall bear a legend sub- 5 stantially to the following effect: "Except as otherwise provided in Section 2.04 of the Indenture, this Security may be transferred, in whole but not in part, only to another nominee of the Depository or to a successor Depository or to a nominee of such successor Depository." (b) Notwithstanding any provision of Section 3.05, subject to the provisions of paragraph (c) below, any Global Security of a series may be transferred, in whole but not in part, and in the manner provided in Section 3.05, only to another nominee of the Depository for such series, or to a successor Depository for such series selected or approved by the Issuer or to a nominee of such successor Depository. (c) If at any time the Depository for Securities of a series notifies the Issuer that it is unwilling or unable to continue as Depository for Securities of such series or if at any time the Depository shall no longer be registered or in good standing under the Securities Exchange Act of 1934, or other applicable statute or regulation, and a successor Depository is not appointed by the Issuer within 90 days after the Issuer received such notice or becomes aware of such condition, as the case may be, this Section 2.04 shall no longer be applicable to the Securities of such series and the Issuer will execute, and the Trustee, upon receipt of an Issuer Order for the authentication and delivery of individual Securities of such series, will authenticate and deliver, Securities of such series, in authorized denominations, and in an aggregate principal amount equal to the aggregate principal amount of the Global Security or Global Securities of such series in exchange for such Global Security or Global Securities, provided, however, that no such exchange may occur during a period beginning at the opening of business 15 days before any selection of Securities of such series for redemption and ending on the relevant date fixed for redemption. The Issuer may at any time determine that Securities of any series shall no longer be represented by one or more Global Securities and that the provisions of this Section 2.04 shall no longer apply to the Securities of such series. In such event the Issuer will execute, and the Trustee, upon receipt of an Issuer Order for the authentication and delivery of individual Securities of such series, will authenticate and deliver, Securities of such series, in authorized denominations, and in an aggregate principal amount equal to the aggregate principal amount of the Global Security or Global Securities of such series in exchange for such Global Security or Global Securities, provided, however, that no such exchange may occur during a period beginning at the opening of business 15 days before any selection of Securities of such series for redemption and ending on the relevant date fixed for redemption. If specified by the Issuer pursuant to Section 3.01 with respect to a series of Securities, the Depository for such series of Securities may surrender a Global Security for such series of Securities in exchange in whole or in part for individual Securities of such series on such terms as are acceptable to the Issuer as evidenced by an Issuer Order and such Depository. Thereupon, the Issuer shall execute, and the Trustee shall authenticate and deliver, without service charge, (i) to each person specified by such Depository a new individual Security or Securities of the same series, of any authorized denomina- 6 tion as requested by such person in aggregate principal amount equal to and in exchange for such person's beneficial interest in the Global Security; and (ii) to such Depository a new Global Security in a denomination equal to the difference, if any, between the principal amount of the surrendered Global Security and the aggregate principal amount of individual Securities delivered to Holders thereof. In any exchange provided for in any of the preceding paragraphs of this Section 2.04(c), the Issuer will execute, and the Trustee will authenticate and deliver, individual Securities in registered form in authorized denominations. Upon the exchange of a Global Security for individual Securities, such Global Security shall be cancelled by the Trustee. Individual Securities issued in exchange for a Global Security pursuant to this Section shall be registered in such names and in such authorized denominations as the Depository for such Global Security, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Securities to the persons in whose names such Securities are so registered. ARTICLE THREE THE SECURITIES SECTION 3.01. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series. There shall be established in, or pursuant to, the authority granted in a resolution of the Board of Directors (delivered to the Trustee in the form of a Board Resolution) or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series, except as provided in this Section 3.01: (1) the form of the Securities of any series, which shall be substantially in the form of Exhibit B hereto or in such other form as the Issuer may establish for Securities that are issuable other than as Global Securities; (2) the title of the Securities of the series (which shall distinguish the Securities of the series from all other Securities); (3) any limit upon the aggregate principal amount of the Securities of the series that may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration or transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 2.04, 3.05, 3.06, 3.07 and 9.03); (4) the date or dates on which the Securities of such series may be issued; 7 (5) the date or dates, which may be serial, on which the principal of, and premium, if any, on, the Securities of such series are payable; (6) the rate or rates, or the method of determination thereof, at which the Securities of such series shall bear interest, the date or dates from which such interest shall accrue, the interest payment dates on which such interest shall be payable and the record dates, if other than as set forth in Section 3.02, for the determination of Holders to whom interest is payable; (7) the place or places where the principal of, and premium, if any, and interest on, the Securities of the series shall be payable (if other than provided in Section 4.02); (8) the provisions, if any, establishing the price or prices at which, the period or periods within which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Issuer, pursuant to any sinking fund or otherwise; (9) the obligation, if any, of the Issuer to redeem, purchase or repay Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the price or prices at which, and the period or periods within which, and the terms and conditions upon which, Securities of the series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligation; (10) if other than denominations of $1,000, and any integral multiple thereof, the denominations in which Securities of the series shall be issuable; (11) any Events of Default or restrictive covenants provided for with respect to the Securities of the series, if not set forth herein; (12) if other than the rate of interest stated in the title of the Securities of the series, the applicable rate; (13) if other than as set forth in Section 12.01 hereof, provisions for the satisfaction and discharge of the Securities of said series and this Indenture; (14) any trustees, authenticating or paying agents, transfer agents or registrars with respect to the Securities of the series; (15) whether the Securities of the series are issuable in whole or in part as one or more Global Securities and, in such case, the identity of the Depository for such Global Security or Global Securities; (16) if the amount of payment of principal of, and premium, if any, or interest, on, the Securities of the series may be determined with reference to an index, formula or other method, the manner in which such amounts shall be determined; and (17) any other terms of the series (which terms shall not be contrary to the provisions of this Indenture). 8 With respect to any Securities (and without limiting the generality of the foregoing provisions of this Section 3.01), such Board Resolution or indenture supplemental hereto may provide general terms or parameters and may provide that the specific terms of particular Securities, and the persons authorized to determine such terms or parameters, may be determined in accordance with or pursuant to the Issuer Order referred to in Section 3.03. All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in, or pursuant to, the authority granted in such Board Resolution or in any such indenture supplemental hereto. SECTION 3.02. In the absence of any specification pursuant to Section 3.01 with respect to the Securities of any series, the Securities of such series shall be issuable as registered Securities without coupons and in denominations of $1,000 and any integral multiple thereof. Except as otherwise provided pursuant to Section 3.01 with respect to the series of which such Security is a part, each Security shall be dated the date of its authentication, and shall bear interest from the applicable date, and payable semiannually on the dates specified in the supplemental indenture, Issuer Order or Board Resolution relating to such series or as specified in such Security. The person in whose name any Security of any series is registered at the close of business on any record date applicable to a particular series with respect to any interest payment date shall be entitled to receive the interest payable on such interest payment date notwithstanding the cancellation of such Security upon any transfer or exchange thereof subsequent to such record date and prior to such interest payment date, and, in the case of a Security issued between a record date and the interest payment date relating to such record date, if provided for in the supplemental indenture, Issuer Order or Board Resolution pursuant to Section 3.01 or as specified in such Security, the person to whom such Security shall have been originally issued shall be entitled to receive interest for the period beginning on the date of issue and ending on such initial interest payment date; provided, however, that if and to the extent the Issuer shall default in the payment of interest due on an interest payment date, such defaulted interest shall be paid to the persons in whose names the Securities are registered at the close of business on a record date established for such payment by notice by or on behalf of the Issuer to the Holders of the Securities mailed by first class mail not less than 15 days prior to such record date to their last addresses as they shall appear upon the Securities Register, such record date to be not less than 5 days preceding the date of payment of such defaulted interest. Except as otherwise specified as contemplated by Section 3.01 for Securities of a particular series, the term "record date" as used with respect to any interest payment date shall mean, if such interest payment date is the first day of a calendar month, the fifteenth day of the preceding calendar month and shall mean, if such interest payment date is the fifteenth day of a calendar month, the first day of such calendar month unless the record date as so determined would not be a Business Day, in which event the Business Day next preceding. At the option of the Issuer, payment of interest on any 9 Security may be made by check mailed to the address of the person entitled thereto (which shall be the Depository in the case of Global Securities) as such address shall appear in the Securities Register. The Issuer and the Trustee understand that interest on any Global Securities will be disbursed or credited by the Depository to the persons having ownership interests in respect thereof pursuant to a "book-entry" or other system maintained by the Depository. SECTION 3.03. At any time and from time to time after the original execution and delivery of this Indenture, the Issuer may deliver Securities of any series, executed by the Issuer, to the Trustee for authentication. Except as otherwise provided in this Article Three, the Trustee shall thereupon authenticate and deliver, or cause to be authenticated and delivered, said Securities to or upon an Issuer Order, without any further action by the Issuer; provided, however, that the Trustee shall authenticate and deliver Securities of such series for original issue from time to time in the aggregate principal amount established for such series pursuant to such procedures, acceptable to the Trustee, as may be specified from time to time by an Issuer Order. The maturity dates, original issue dates, interest rates and any other terms of the Securities of such series shall be determined by or pursuant to such Issuer Order and procedures. If provided for in such procedures, such Issuer Order may authorize authentication and delivery pursuant to oral or electronic instructions from the Issuer or its duly authorized agent, which instructions shall be promptly confirmed in writing. In authenticating such Securities and accepting the responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, prior to the initial authentication of such Securities, and (subject to Section 7.01) shall be fully protected in relying upon: (1) a Board Resolution relating thereto; (2) an executed supplemental indenture, if any, relating thereto; (3) an Officers' Certificate which shall state that all conditions precedent provided for in this Indenture relating to the issuance of such Securities have been complied with, that no Event of Default with respect to any series of Securities has occurred and is continuing and that the issuance of such Securities does not constitute and will not result in (i) any Event of Default or any event or condition, which, upon the giving of notice or the lapse of time or both, would become an Event of Default or (ii) any default under the provisions of any other instrument or agreement by which the Company is bound; and (4) an Opinion of Counsel, which shall state: (a) that the forms of such Securities have been duly authorized by the Issuer and have been established in conformity with the provisions of this Indenture; (b) that the terms of such Securities have been duly authorized by the Issuer and have been established in conformity with the provisions of this Indenture; 10 (c) that such Securities when authenticated and delivered by the Trustee and issued and delivered by the Issuer in the manner and subject to any conditions specified in such Opinion of Counsel, will have been duly issued under this Indenture and will constitute valid and legally binding obligations of the Company, entitled to the benefits provided by this Indenture, and enforceable in accordance with their terms, subject, as to enforcement, to such matters as such opinion of counsel shall specify; (d) that the Issuer has the corporate power to issue such Securities and has duly taken all necessary corporate action with respect to such issuance; (e) that the issuance of such Securities will not contravene the charter or by-laws of the Issuer or result in any violation of any of the terms or provisions of any law or regulation or of any indenture, mortgage or other instrument or agreement known to such counsel by which the Issuer is bound; and (f) that all laws and requirements in respect of the execution and delivery by the Issuer of the Securities, and the related supplemental indenture, if any, have been complied with and that authentication and delivery of such Securities and the execution and delivery of the related supplemental indenture, if any, by the Trustee will not violate the terms of the Indenture; provided, however, that, with respect to Securities of a series issued on a periodic basis, the Trustee shall be entitled to receive such Opinion of Counsel only once at or prior to the time of the first authentication of Securities of such series and that the opinions described in clauses (b) and (c) above may state, respectively, (x) that, when the terms of such Securities shall have been established pursuant to an Issuer Order or pursuant to such procedures as may be specified from time to time by an Issuer Order, all as contemplated by and in accordance with a Board Resolution or an Officers' Certificate pursuant to a Board Resolution or supplemental indenture, as the case may be, such terms will have been duly authorized by the Issuer and will have been established in conformity with the provisions of this Indenture; and (y) that such Securities, when (1) executed by the Issuer, (2) completed, authenticated and delivered by the Trustee in accordance with this Indenture, (3) issued and delivered by the Issuer and (4) paid for, all as contemplated by and in accordance with the aforesaid Issuer Order or specified procedures, as the case may be, will have been duly issued under this Indenture and will constitute valid and legally binding obligations of the Issuer, entitled to the benefits provided by the Indenture, and enforceable in accordance with the terms, subject, as to enforcement, to such matters as such opinion of counsel shall specify. Notwithstanding the provisions of Section 3.01 and of this Section 3.03, if all the Securities of a series are not to be originally issued at one time, it shall not be necessary to deliver the Board Resolution or supplemental indenture otherwise required pursuant to Section 3.01 or the 11 Issuer Order, Officers' Certificate, Opinion of Counsel and other documents required pursuant to this Section 3.03 at or prior to the time of authentication of each Security of such series if such documents are delivered at or prior to the time of authentication upon original issuance of the first Security of such series to be issued; provided, however, that any subsequent request by the Issuer to the Trustee to authenticate Securities of such series shall constitute a representation and warranty by the Issuer that as of the date of such request the statements made in the Officers' Certificate delivered pursuant to Section 3.03(3) shall be true and correct on the date thereof as if made on and as of the date thereof. In connection with the authentication and delivery of Securities of a series subject to issuance on a periodic basis, the Trustee shall be entitled to assume that the Issuer's instructions to authenticate and deliver such Securities do not violate any rules, regulations or orders of any governmental agency or commission having jurisdiction over the Issuer. The Trustee shall have the right to decline to authenticate and deliver any Securities under this Section if the issuance of such Securities pursuant to this Indenture will materially affect the Trustee's own rights, duties or immunities under the Securities and this Indenture. If any Security shall have been authenticated and delivered hereunder but never issued and sold by the Issuer, and the Issuer shall deliver such Security to the Trustee for cancellation together with a written statement (which need not comply with Section 13.06 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued and sold by the Issuer, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits hereof. SECTION 3.04. The Securities shall be signed on behalf of the Issuer by its Chairman of the Board of Directors or a Vice Chairman of the Board of Directors or its President or a Vice President and by its Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary, under its corporate seal which may, but need not, be attested. Each such signature upon the Securities may be in the form of a facsimile signature of any such officer and may be imprinted or otherwise reproduced on the Securities and for that purpose the Issuer may adopt and use the facsimile signature of any person who has been or is or shall be such officer, and in case any such officer of the Issuer signing any of the Securities shall cease to be such officer before the Securities so signed shall have been authenticated and delivered by the Trustee or by the Authenticating Agent on its behalf, or disposed of by the Issuer, such Securities nevertheless may be authenticated and delivered or disposed of as though such person had not ceased to be such officer of the Issuer. The seal of the Issuer may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Securities. Only such Securities as shall bear thereon a certificate of authentication, substantially in the form hereinbefore recited, duly executed by the Trustee or by the Authenticating Agent on its behalf shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Trustee or by the Authenticating Agent on its behalf upon any Security executed by the Company shall be conclusive 12 evidence that the Security so authenticated has been duly authenticated and delivered hereunder and that the holder is entitled to the benefits of this Indenture. SECTION 3.05. Subject, with respect to Global Securities, to Section 2.04, Securities of any series may be exchanged for a like aggregate principal amount of Securities of the same series and having the same terms but in other authorized denominations. Securities to be exchanged shall be surrendered at the office or agency to be maintained by the Issuer as provided in Section 4.02 (or at either of said offices or agencies if more than one) and the Issuer shall execute and register and the Trustee or the Authenticating Agent on its behalf shall authenticate and deliver in exchange therefor the Security or Securities which the securityholder making the exchange shall be entitled to receive. The Issuer shall keep, at the office or agency to be maintained as provided in Section 4.02 (or at least one of said offices or agencies, if more than one), a register or registers for each series of Securities issued hereunder (hereinafter collectively referred to as the "Securities Register") in which, subject to such reasonable regulations as it may prescribe, the Issuer shall, subject to the provisions of Section 2.04, register Securities of such series and shall register the transfer of Securities of such series as in this Article Three provided. The Securities Register shall be in written form or in any other form capable of being converted into written form within a reasonable time. At all reasonable times the information contained in such register or registers shall be available for inspection by the Trustee. Subject to the provisions of Section 2.04, upon due presentment for registration of transfer of any Security of any series at such office or agency, the Issuer shall execute and register and the Trustee or the Authenticating Agent on its behalf shall authenticate and deliver in the name of the transferee or transferees a new Security or Securities of the same series for an equal aggregate principal amount. All Securities presented for registration of transfer or for exchange, redemption or payment shall (if so required by the Issuer or the Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Issuer duly executed by, the Holder or his attorney duly authorized in writing. The Issuer may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Securities. No service charge shall be made for any such transaction. The Issuer shall not be required (a) to issue, register the transfer of or exchange any Securities of any series for a period of 15 days next preceding any selection of Securities to be redeemed, or (b) to register the transfer of or exchange any Securities selected, called or being called for redemption as a whole or the portion being redeemed of any Securities selected, called or being called for redemption in part. SECTION 3.06. Pending the preparation of definitive Securities of any series, the Issuer may execute and register and the Trustee shall authenti- 13 cate and deliver temporary Securities for such series (printed, lithographed, typewritten or otherwise reproduced). Temporary Securities of any series may be of any denomination and substantially in the form of the definitive Securities of such series in lieu of which they are issued, but with such omissions, insertions and variations as may be appropriate for temporary Securities, all as may be determined by the Issuer. Temporary Securities may contain such reference to any provisions of this Indenture as may be appropriate. Every temporary Security shall be executed and registered by the Issuer and be authenticated by the Trustee or by the Authenticating Agent on its behalf upon the same conditions and in substantially the same manner, and with like effect, as the definitive Securities. Without unreasonable delay the Issuer shall execute and register and shall furnish definitive Securities of such series and thereupon temporary Securities of such series may be surrendered in exchange therefore at the office or agency to be maintained by the Company as provided in Section 4.02 (or at any of said offices or agencies, if more than one), and the Trustee or the Authenticating Agent on its behalf shall authenticate and deliver in exchange for such temporary Securities a like aggregate principal amount of definitive Securities of authorized denominations of the same series. Until so exchanged, the temporary Securities of any series shall be entitled to the same benefits under this Indenture as definitive Securities of such series. SECTION 3.07. In case any temporary or definitive Security of a series shall become mutilated or be destroyed, lost or stolen, the Issuer in its discretion may execute and register, and upon its request, the Trustee or the Authenticating Agent shall authenticate and deliver, a new Security of such series, bearing a number not contemporaneously outstanding, in exchange and substitution for the Security so mutilated, or in lieu of and substitution for the Security so destroyed, lost or stolen. In every case the applicant for a substituted Security shall furnish to the Issuer and the the Trustee such security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Issuer and to the Trustee evidence to their satisfaction of the destruction, loss or theft of such Security and of the ownership thereof. The Trustee may authenticate any such substituted Security and deliver the same upon the written request or authorization of any officer of the Company. Upon the issuance of any substituted Security, the Issuer may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith and in addition a further sum not exceeding ten dollars for each Security issued in substitution. In case any Security of a series which has matured or is about to mature shall become mutilated or be destroyed, lost or stolen, the Issuer may, instead of issuing a substitute Security of such series for such Security, pay or authorize the payment of such Security (without surrender thereof except in the case of a mutilated Security) if the applicant for such payment shall furnish to the Issuer such security or indemnity as it may require to save it and the Trustee harmless, and, in every case of destruction, loss or theft, evidence to the satisfaction of the Issuer and the Trustee of the destruction, loss or theft of such Security and of the ownership thereof. 14 Every substituted Security of any series issued pursuant to the provisons of this Section 3.07 by virtue of the fact that any such Security is destroyed, lost or stolen shall, with respect to such Security, constitute an additional contractual obligation of the Issuer, whether or not the destroyed, lost or stolen Security shall at any time be enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of such series issued under this Indenture. All Securities shall be held and owned upon the express condition that (to the extent lawful) the foregoing provisions shall be exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities and shall preclude any and all other rights or remedies, notwithstanding any law or statute now existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. SECTION 3.08. All securities surrendered for payment, redemption, exchange or registration of transfer shall, if surrendered to the Issuer, the Authenticating Agent or any Paying Agent, be delivered to the Trustee for cancellation or, if surrendered to the Trustee, be cancelled by it, and no Securities shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. On request of the Issuer, the Trustee shall deliver to the Issuer cancelled Securities held by the Trustee. As directed by an Issuer Order, the Trustee may destroy cancelled Securities and deliver a certificate of such destruction to the Issuer. If the Issuer shall acquire any of the Securities, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Securities unless and until the same are delivered to the Trustee or surrendered to the Trustee for cancellation. SECTION 3.09. Nothing in this Indenture or in the Securities of any series, expressed or implied, shall give or be construed to give to any person other than the parties hereto and their successors and the Holders of the Securities of any series any legal or equitable right, remedy or claim under or in respect of this Indenture, or under any covenant, condition or provision herein contained, all the covenants, conditions and provisions hereof being for the sole benefit of the parties hereto and their successors and of the Holders of the Securities of any series. SECTION 3.10. Except as otherwise specified as contemplated by Section 3.01 for Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months. ARTICLE FOUR COVENANTS OF THE ISSUER SECTION 4.01. The Issuer will duly and punctually pay or cause to be paid the principal of (and premium, if any) and interest on each of the Securities of any series, to or upon the written order of the holders thereof, at the place or places, at the respective times and in the manner provided in such Securities and in this Indenture. SECTION 4.02. As long as any of the Securities of any series remain Outstanding, the Issuer will maintain an office or agency in the Borough of 15 Manhattan, The City of New York, State of New York (and at such other place, if any, as shall be specified in the form of Security as a place for payment of principal and interest), where the Securities of such series may be presented for registration of transfer and for exchange as in this Indenture provided, and where notices and demands to or upon the Issuer in respect of the Securities of such series or of this Indenture may be served and where the Securities of such series may be presented for payment. The Issuer will give to the Trustee notice of the location of each such office and of any change in the location thereof. Unless otherwise specified in accordance with Section 3.01, the Issuer hereby initially designates Shawmut Trust Company, 40 Broad Street, New York, NY 10004 as the office to be maintained for each such purpose. In case the Issuer shall fail to maintain any such office or shall fail to give such notice of the location or of any change in the location thereof, presentations may be made and demands may be served at the Corporate Trust Office of the Trustee. SECTION 4.03. The Issuer will not issue, assume, incur or guarantee any indebtedness for borrowed money secured by a mortgage, pledge, lien or other encumbrance, directly or indirectly, on any of the common stock of a principal subsidiary (as defined in Section 4.04 hereof) unless the Outstanding Securities and, if the Issuer so elects, any other indebtedness of the Issuer ranking on a parity with the Outstanding Securities, shall be secured equally and ratably with, or prior to, such secured indebtedness for borrowed money so long as it is outstanding. SECTION 4.04. The Issuer will not, and will not permit a principal subsidiary (as defined in this Section 4.04) to, issue, sell, assign, transfer or otherwise dispose of, directly or indirectly, any of the common stock of such principal subsidiary (except to the Issuer or for the purpose of qualifying directors); provided, however, that this covenant shall not apply if (i) the entire common stock of such principal subsidiary then owned by the Issuer is disposed of in a single transaction, or in a series of related transactions, for a consideration consisting of cash or other property which is at least equal to the fair value of such common stock, as determined in good faith by the Board of Directors; or (ii) the issuance, sale, assignment transfer or other disposition is required to comply with the order of a court or regulatory authority of competent jurisdiction, other than an order issued at the request of the Issuer or such principal subsidiary; or (iii) after giving effect to the issuance, sale, assignment, transfer or other disposition, the Issuer would own directly or indirectly at least 80% of the issued and outstanding common stock of such principal subsidiary and such issuance, sale, assignment, transfer or other disposition is made for a consideration consisting of cash or other property which is at least equal to the fair value of such common stock, as determined in good faith by the Board of Directors. For purposes of Section 4.03 and Section 4.04 of this Article IV, a "principal subsidiary" is any subsidiary of the Issuer whose consolidated tangible assets comprise in excess of 25% of consolidated tangible assets of the Issuer and its consolidated subsidiaries. "Consolidated tangible assets" with respect to any entity and its subsidiaries means the amount at which the assets, other than goodwill, patents, trademarks, and other assets classified as intangible assets in accordance with generally accepted accounting principles, would be shown on its consolidated balance sheet at 16 such time. A "subsidiary" of the Issuer is a corporation of which a majority of the outstanding shares of stock of each class having ordinary voting power is owned by the Issuer and/or by one or more subsidiaries of the Issuer. SECTION 4.05. The Issuer, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 7.10, a Trustee, so that there shall at all times be a Trustee hereunder. SECTION 4.06. (a) Whenever the Issuer shall appoint a Paying Agent other than the Trustee with respect to the Securities of any series, it will cause such Paying Agent to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section 4.06, (1) that it will hold all sums received by it as such Agent for the payment of the principal of (and premium, if any) or interest on the Securities of such series (whether such sums have been paid to it by the Issuer or by any other obligor on the Securities of such series) in trust for the benefit of the respective Holders of the Securities of such series entitled thereto and will notify the Trustee of the receipt of sums to be so held, (2) that it will give the Trustee notice of any failure by the Issuer (or by any other obligor on the Securities of such series) to make any payment of the principal of (or premium, if any) or interest on the Securities of such series when the same shall be due and payable, and (3) at any time during the continuance of any failure referred to in clause (2) above upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. (b) If the Issuer shall act as its own Paying Agent with respect to the Securities of any series, it will, on or before each due date of the principal of (and premium, if any) or interest on the Securities of such series, set aside, segregate and hold in trust for the benefit of the Holder of the Securities of such series entitled thereto a sum sufficient to pay such principal (and premium, if any) or interest so becoming due. The Issuer will promptly notify the Trustee of any failure to take such action. (c) Anything in this Section 4.06 to the contrary notwithstanding, the Issuer may, at any time, for the purpose of obtaining a satisfaction and discharge with respect to one or more or all series of Securities hereunder, or for any other reason, pay or cause to be paid to the Trustee all sums held in trust for any such series by the Issuer or any Paying Agent hereunder as required by this Section 4.06, such sums to be held by the Trustee upon the trusts herein contained. (d) Anything in this Section 4.06 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 4.06 is subject to the provisions of Sections 12.03 and 12.04. 17 SECTION 4.07. The Issuer will deliver to the Trustee, within 120 days after the end of each fiscal year, a brief certificate (which need not comply with Section 13.06), from the principal executive, financial or accounting officer of the Issuer as to his or her knowledge of the Issuer's compliance with all conditions and covenants under the Indenture (such compliance to be determined without regard to any period of grace or requirement of notice provided hereunder). ARTICLE FIVE SECURITYHOLDER LISTS AND REPORTS BY THE ISSUER AND THE TRUSTEE SECTION 5.01. The Issuer covenants and agrees that it will furnish or cause to be furnished to the Trustee a list in such form as the Trustee may reasonably require of the names and addresses of the Holders of the Securities of each series; (a) semiannually not more than 15 days after each record date for the payment of interest on such Securities of such series, as specified in such Securities, as of such record date, and (b) at such other times as the Trustee may request in writing, within 30 days after receipt by the Issuer of any such request, as of a date not more than 15 days prior to the time such information is furnished; provided, however, that so long as the Trustee is the Securities registrar, no such list need be provided. SECTION 5.02. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the Holders of each series of the Securities contained in the most recent list furnished to it as provided in Section 5.01 and the names and addresses of the Holders of the Securities of each series received by the Trustee in the capacity of Securities registrar, if so acting. The Trustee may destroy any list furnished to it as provided in Section 5.01 upon receipt of a new list so furnished. (b) In case three or more Holders of Securities (hereinafter referred to as "applicants") apply in writing to the Trustee and furnish to the Trustee reasonable proof that each such applicant has owned a Security of any series for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders of Securities of a particular series (in which case at least three of the applicants must all hold Securities of such series) or with Holders of all Securities with respect to their rights under this Indenture or under such Securities and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall, within five Business Days after the receipt of such application, at its election, either (i) afford to such applicants access to the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 5.02, or 18 (ii) inform such applicants as to the approximate number of Holders of Securities of such series or all Securities, as the case may be, whose names and addresses appear in the information preserved at the time by the Trustee, in accordance with the provisions of subsection (a) of this Section 5.02, and as to the approximate cost of mailing to such securityholders the form of proxy or other communication, if any, specified in such application. If the Trustee shall elect not to afford to such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Holder of Securities of such series or all Holders of Securities, as the case may be, whose names and addresses appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 5.02 a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender, the Trustee shall mail to such applicants and file with the Commission, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the Holders of Securities of such series or all Holders of Securities, or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If said commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, the Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met, and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Holders of Securities with reasonable promptness after the entry of such order and the renewal of such tender; otherwise, the Trustee shall be relieved of any obligation or duty to such applicants respecting their application. (c) Each and every Holder of Securities, by receiving and holding the same, agrees with the Issuer and the Trustee that neither the Issuer nor the Trustee nor any Paying Agent shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders of Securities in accordance with the provisions of subsection (b) of this Section 5.02, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under such subsection (b). SECTION 5.03. The Issuer covenants: (a) to file with the Trustee, within 15 days after the Issuer is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as said Commission may from time to time by rules and regulations prescribe) which the Issuer may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934; or, if the Issuer is not required to file information, documents or reports pursuant to either of 19 such Sections, then to file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by said Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (b) to file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Issuer with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations; and (c) to transmit by mail to the Holders of Securities in the manner and to the extent provided in subsection (c) of Section 5.04 within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Issuer pursuant to subsections (a) and (b) of this Section 5.03 as may be required to be transmitted to such Holders by rules and regulations prescribed from time to time by the Commission. SECTION 5.04. (a) On or before July 15 in each year following the date of original execution of this Indenture, so long as any Securities are Outstanding, the Trustee shall transmit by mail as provided below to the securityholders of each series, as provided in subsection (c) of this Section 5.04, a brief report, dated as of a date 60 days prior thereto with respect to: (i) any change to its eligibility under Section 7.09 and its qualification under Section 310(b) of the Trust Indenture Act; (ii) the creation of or any material change to a relationship specified in clauses (1) through (10) of Section 310(b) of the Trust Indenture Act; (iii) the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee (as such) which remain unpaid on the date of such report and for the reimbursement of which it claims or may claim a lien or charge, prior to that of the Securities of any series, on any property or funds held or collected by it as Trustee, except that the Trustee shall not be required (but may elect) to report such advances if such advances so remaining unpaid aggregate not more than 1/2 of 1% of the principal amount of the Securities of such series Outstanding on the date of such report; (iv) any change to the amount, interest rate and maturity date of all other indebtedness owing by the Issuer (or by any other obligor on the Securities of such series) to the Trustee in its individual capacity on the date of such report, with a brief description of any property held as collateral security therefor, except any indebtedness based upon a creditor relationship arising in any manner described in paragraphs (2), (3), (4) or (6) of subsection (b) of Section 311 of the Trust Indenture Act; 20 (v) any change to the property and funds, if any, physically in the possession of the Trustee (as such) on the date of such report; (vi) any additional issue of Securities of any series which the Trustee has not previously reported; and (vii) any action taken by the Trustee in the performance of its duties under this Indenture which it has not previously reported and which in its opinion materially affects the Securities of any series, except action in respect of a default, notice of which has been or is to be withheld by it in accordance with the provisions of Section 6.07. (b) The Trustee shall transmit to the securityholders of each series, as provided in subsection (c) of this Section 5.04, a brief report with respect to the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee as such since the date of the last report transmitted pursuant to the provisions of subsection (a) of this Section 5.04 (or if no such report has yet been so transmitted, since the date of execution of this Indenture), for the reimbursement of which it claims or may claim a lien or charge, prior to that of the Securities of any series, on property or funds held or collected by it as Trustee and which it has not previously reported pursuant to this subsection (b), except that the Trustee shall not be required (but may elect) to report such advances if such advances remaining unpaid at any time aggregate 10% or less of the principal amount of Securities of such series Outstanding at such time, such report to be transmitted within 90 days after such time. (c) Reports pursuant to this Section 5.04 shall be transmitted by mail to all Holders of Securities, as the names and addresses of such Holders appear in the Securities Register; to such Holders of Securities as have, within the two years preceding such transmission, filed their names and addresses with the Trustee for that purpose; and, except in the case of reports pursuant to subsection (b) of this Section 5.04, to all Holders of Securities whose names and addresses have been furnished to or received by the Trustee pursuant to this Article Five. (d) A copy of each such report shall, at the time of such transmission to the securityholders of any series, be filed by the Trustee with each national securities exchange upon which the Securities of such series are listed and also with the Commission. The Issuer agrees to notify the Trustee promptly when and as the Securities of any series are listed on any national securities exchange. ARTICLE SIX REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT SECTION 6.01. "Event of Default", with respect to the Securities of any series, where used herein, means each one of the following events which shall have occurred and be continuing (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or 21 or any order, rule or regulation of any administrative or governmental body), unless it is either inapplicable to a particular series or it is specifically deleted or modified in the applicable resolution of the Board of Directors or in the supplemental indenture under which such series of Securities is issued, as the case may be, as contemplated by Section 3.01: (a) default in the payment of any installment of interest upon any of the Securities of such series as and when the same shall become due and payable, and continuance of such default for a period of 90 days; or (b) default in the payment of all or any part of the principal of (or premium, if any) on any of the Securities of such series as and when the same shall become due and payable either at maturity, upon redemption, by declaration or otherwise, or (c) failure on the part of the Issuer duly to observe or perform any other of the covenants or agreements on the part of the Issuer in the Securities of such series or in this Indenture contained for a period of 90 days after the date on which written notice of such failure, requiring the Issuer to remedy the same, shall have been given to the Issuer by the Trustee by registered mail or to the Issuer and the Trustee by the Holders of at least 25% in aggregate principal amount of the Securities of all series affected thereby at the time Outstanding; or (d) a decree or order by a court having jurisdiction in the premises shall have been entered adjudging the Issuer a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization of the Issuer under the Federal Bankruptcy Code or any other similar applicable Federal or State law, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of the Issuer or of its property, or for the winding up or liquidation of its affairs, shall have been entered, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or (e) the Issuer shall institute proceedings to be adjudicated a voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization under the Federal Bankruptcy Code or any other similar applicable Federal or State law, or shall consent to the filing of any such petition, or shall consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of it or of its property, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due, or corporate action shall be taken by the Issuer in furtherance of any of the aforesaid purposes; or (f) an event of default, as defined in any other indenture or instrument evidencing or under which the Issuer has at the date of this Indenture or shall hereafter have outstanding at least $100,000,000 aggregate principal amount of indebtedness for borrowed money, shall happen and be continuing and such indebtedness shall have been accelera- 22 ted so that the same shall be or become due and payable prior to the date on which the same would otherwise have become due and payable, and such acceleration shall not be rescinded or annulled within ten days after notice thereof shall have been given to the Issuer by the Trustee (if such event be known to it), or to the Issuer and the Trustee by the holders of at least 25% in aggregate principal amount of all of the Securities at the time Outstanding (treated as one class); provided that if such event of default under such indenture or instrument shall be remedied or cured by the Issuer or waived by the holders of such indebtedness, then the Event of Default hereunder by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without further action upon the part of either the Trustee or any of the securityholders, and provided further however that, subject to the provisions of Section 7.01 and 7.02, the Trustee shall not be charged with knowledge of any such default unless written notice thereof shall have been given to the Trustee by the Issuer, by the holder or an agent of the holder of any such indebtedness, by the trustee then acting under any indenture or other instrument under which such default shall have occurred, or by the holders of not less than 25% in the aggregate principal amount of the Securities at the time Outstanding; or (g) any other Event of Default established by or pursuant to a resolution of the Board of Directors or one or more indentures supplemental hereto as applicable to the Securities of such series. If an Event of Default described in clause (a), (b), (c) or (g) above (if the Event of Default under clause (c) or (g) is with respect to fewer than all series of Securities then outstanding) occurs and is continuing, then and in each and every such case, unless the principal of all the Securities of such series shall have already become due and payable, either the Trustee or the Holders of not less than 25% in aggregate principal amount of the Securities of such series then Outstanding hereunder (each such series voting as a separate class) by notice in writing to the Issuer (and to the Trustee, if given by securityholders), may declare the entire principal of all the Securities of such series and the interest accrued thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in this Indenture or in the Securities of such series contained to the contrary notwithstanding. If an Event of Default described in clause (c), (d), (e), (f) or (g) above (if the Event of Default under clause (c) or (g) is with respect to all series of Securities then Outstanding) occurs and is continuing, then and in each and every case, unless the principal of all the Securities shall have already become due and payable, either the Trustee or the Holders of not less than 25% in aggregate principal amount of all the Securities then Outstanding hereunder (treated as one class), by notice in 23 writing to the Issuer (and to the Trustee, if given by securityholders), may declare the entire principal of all the Securities then Outstanding and the interest accrued thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable. The foregoing provisions, however, are subject to the condition that if, at any time after the principal of the Securities of such series (or all of the Securities, as the case may be) shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Issuer shall pay, or shall deposit with the Trustee a sum sufficient to pay, all matured installments of interest upon all the Securities of such series (or upon all the Securities, as the case may be) and the principal of (and premium, if any, on) any and all Securities of such series (or all of the Securities, as the case may be) which shall have become due otherwise than by declaration, with interest upon such principal (and premium, if any) and (to the extent that payment of such interest is enforceable under applicable law) upon any overdue installments of interest at the same rate as the rate of interest specified in the Securities of such series to the date of such payment or deposit, and such amount as shall be sufficient to cover reasonable compensation to the Trustee, its agents and counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee, or amounts otherwise due the Trustee under Section 7.06, except as a result of its negligence or bad faith, and if any and all defaults under this Indenture, other than the nonpayment of the principal of and all matured installments of interest upon all the Securities of such series which shall have become due by declaration, shall have been remedied -- then and in every such case the Holders of a majority in aggregate principal amount of the Securities of such series (each series voting as separate class), or, of all the Securities (voting as a single class), as the case may be, then Outstanding by written notice to the Issuer and to the Trustee may waive all defaults with respect to that series (or with respect to all the Securities, as the case may be) and rescind and annul such declaration and its consequences; but no such waiver or rescission or annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon. In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such waiver or rescission or annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Issuer, the Trustee and the Holders of the Securities shall be restored respectively to their former positions and rights hereunder, and all rights, remedies and powers of the Issuer, the Trustee and the Holders of the Securities shall continue as though no such proceedings had been taken. SECTION 6.02. The Issuer covenants that (1) in case default shall be made in the payment of any installment of interest on any of the Securities of any series, as and when the same shall become due and payable, and such default shall have continued for a period of 90 days or (2) in case default shall be made in the payment of all or any part of the principal of (or premium, if any, on) any of the Securities of any series when the same shall have become due and payable, whether upon maturity of the Securities of such series or upon redemption or upon declaration or otherwise -- then, upon 24 demand of the Trustee, the Issuer will pay to the Trustee for the benefit of the Holder of any such Security the whole amount that then shall have become due and payable on any such Security for the principal (and premium, if any) and interest, with interest upon any overdue principal (and premium, if any), and (to the extent that payment of such interest is enforceable under applicable law) upon any overdue installments of interest, at the same rate as the rate of interest specified in the Securities of such series, and, in addition thereto, such further amount as shall be sufficient to cover reasonable compensation to the Trustee, its agents and counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee, or otherwise due the Trustee under Section 7.06 except as a result of its negligence or bad faith. In case the Issuer shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Issuer or other obligor upon such Securities and collect in the manner provided by law out of the property of the Issuer or other obligor upon the Securities wherever situated, the moneys adjudged or decreed to be payable. In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Issuer or any other obligor upon the Securities under the Federal Bankruptcy Code or any other applicable law, or in case a receiver or trustee shall have been appointed for the property of the Issuer or such other obligor, or in the case of any other judicial proceedings relative to the Issuer or other obligor upon the Securities or to the creditors or property of the Issuer or such other obligor, the Trustee, irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 6.02, shall be entitled and empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee, its agents and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Trustee or amounts otherwise due the Trustee under Section 7.06 except as a result of its negligence or bad faith) and of the securityholders allowed in any judicial proceedings relative to the Issuer or other obligor upon the Securities, or to the creditors or property of the Issuer or such other obligor, and to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute all amounts received with respect to the claims of the securityholders and of the Trustee on their behalf; and any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of the securityholders to make payments to the Trustee and, in the event that the Trustee shall consent to the making of payments directly to the securityholders, to pay to the Trustee such amount as shall be sufficient to cover reasonable compensation to the Trustee, its agent and 25 counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee or amounts otherwise due the Trustee under Section 7.06 except as a result of its negligence or bad faith. All rights of action and to assert claims under this Indenture or under any of the Securities, may be enforced by the Trustee without the possession of any of the Securities or the production thereof on any trial or other proceedings relative thereto, and any such action or proceedings instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall be for the ratable benefit of the Holders of the Securities. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder of a Security any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder of a Security in any such proceeding. In case of a default hereunder the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or otherwise, and the Trustee may enforce any other legal or equitable right vested in the Trustee by this Indenture or by law. SECTION 6.03. Any moneys collected by the Trustee pursuant to this Article in respect of any series of the Securities shall be applied in the order following at the date or dates fixed by the Trustee and, in case of the distribution of such moneys on account of principal (or premium, if any) or interest, upon presentation of the several Securities and stamping thereon the payment if only partially paid, and upon surrender thereof if fully paid: FIRST: To the payment of costs and expenses of collection, reasonable compensation to the Trustee its agents and attorneys, and all expenses and liabilities incurred, and all advances made, by the Trustee, or amounts otherwise due the Trustee under Section 7.06, except as a result of its negligence or bad faith; SECOND: In case the principal of the Securities of such series shall not have become due, to the payment of interest on the Securities of such series in default in the order of the maturity of the installments of such interest, with interest (to the extent that such interest has been collected by the Trustee), to the extent that payment of such interest is enforceable under applicable law, upon the overdue installments of interest at the same rate as the rate of interest specified in the Securities of such series, such payments to be made ratably to the persons entitled thereto; THIRD: In case the principal of the Securities of such series shall 26 have become due by declaration or otherwise, to the payment of the whole amount then owing and unpaid upon all the Securities of such series for principal (and premium, if any) and interest, with interest upon the overdue principal (and premium, if any) and (to the extent that such interest has been collected by the Trustee), to the extent that payment of such interest is enforceable under applicable law, upon overdue installments of interest at the same rate as the rate of interest specified in the Securities of such series; and in case such moneys shall be insufficient to pay in full the whole amount so due and unpaid upon the Securities of such series, then to the payment of such principal (and premium, if any) and interest without preference or priority, ratably according to the aggregate of such principal (and premium, if any) and interest. SECTION 6.04. No Holder of any Security of any series shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to the Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless such Holder previously shall have given to the Trustee written notice of an Event of Default and unless also the Holders of not less than 25% in aggregate principal amount of the Securities of such series then Outstanding shall have made written request upon the Trustee to institute such action or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby and the Trustee, for 60 days after its receipt of such notice, request and offer of indemnity, shall have failed to institute any such action or proceeding and no direction inconsistent with such written request shall have been given to the Trustee pursuant to Section 6.06; it being understood and intended and being expressly covenanted by the taker and Holder of every Security with every other taker and Holder of any Security and the Trustee, that no one or more Holders of Securities of any series shall have any right in any manner whatever by virtue or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of any other Holder of Securities, or to obtain to seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all Holders of Securities of such series. For the protection and enforcement of the provisions of this Section 6.04, each and every securityholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. Notwithstanding any other provision in this Indenture, however, the right of any Holder of any Security of any series to receive payment of the principal of, or premium, if any, or interest on such Security, on or after the respective due dates expressed in such Security, or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.05. All powers and remedies given by this Article Six to the Trustee or to the securityholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any thereof or of any other powers and remedies available to the Trustee or the securityholders, by judicial 27 proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture, and no delay or omission of the Trustee or of any holder of any of the Securities in exercising any right or power accruing upon any default occurring and continuing as aforesaid shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the provisions of Section 6.04, every power and remedy given by this Article Six or by law to the Trustee or to the securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the securityholders. SECTION 6.06. The Holders of a majority in aggregate principal amount of the Securities of each series affected (with each series voting as a separate class) at the time Outstanding shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to the Securities of such series by this Indenture, provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture; (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction; and (3) the Trustee may decline any such direction that a committee of responsible officers of the Trustee reasonably determines, based upon a written opinion of independent counsel, will cause the Trustee to incur any personal liability for which it shall not have been adequately indemnified pursuant to Section 7.02. Prior to the declaration of the acceleration of the maturity of the Securities of any series as provided in Section 6.01, the Holders of a majority in aggregate principal amount of the Securities of such series at the time Outstanding may on behalf of the Holders of all the Securities of such series waive any past default described in clause (c) or (g) of Section 6.01 which relates to fewer than all series of Securities then Outstanding, and the Holders of a majority in aggregate principal amount of the Securities then Outstanding affected thereby (each series voting as a separate class) may waive any such default or, in the case of an event specified in clause (c) or (g) (if the event specified under clause (c) or (g) relates to all series of Securities then Outstanding) or (d), (e) or (f) of Section 6.01, the Holders of a majority in aggregate principal amount of all the Securities then Outstanding (voting as one class) may waive any such default, and its consequences, except a default in the payment of the principal of (or premium, if any) or interest on any of the Securities of such series. In the case of any such waiver, the Issuer, the Trustee and the Holders of the Securities of such series shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 6.07. The Trustee shall, within 90 days after the occurrence of a default, give to all securityholders of any series, as the names and addresses of such Holders appear on the Securities Register, notice by mail 28 of all defaults known to the Trustee to have occurred with respect to such series, unless such defaults shall have been cured before the giving of such notice (the term "default" or "defaults" for the purposes of this Section 6.07 being hereby defined to mean any event or events, as the case may be, specified in clauses (a), (b), (c), (d), (e), (f) and (g) of Section 6.01, not including periods of grace, if any, provided for therein, and irrespective of the giving of written notice specified in clause (c) of Section 6.01); provided that, except in the case of a default in the payment of the principal of (or premium, if any) or interest on any of the Securities of such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or responsible officers of the Trustee in good faith determines that the withholding of such notice is in the interests of the securityholders of such series. SECTION 6.08. All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit and that such court may in its discretion assess reasonable costs, including reasonable attorney's fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 6.08 shall not apply to any suit instituted by the Trustee, to any suit instituted by any securityholder or group of securityholders of any series holding in the aggregate more than 10% in aggregate principal amount of the Securities of such series Outstanding or in the case of any suit relating to or arising under clause (c) or (g) of Section 6.01 (if the suit relates to Securities of more than one but fewer than all series), 10% in aggregate principal amount of Securities Outstanding affected thereby, or, in the case of any suit relating to or arising under clause (c) or (g) (if the suit under clause (c) or (g) relates to all the Securities then Outstanding), (d), (e) or (f) of Section 6.01, 10% in aggregate principal amount of all Securities Outstanding, or to any suit instituted by any Holder of Securities for the enforcement of the payment of the principal of (or premium, if any) or interest on, any Security on or after the due date expressed in such Security. ARTICLE SEVEN CONCERNING THE TRUSTEE SECTION 7.01. The Trustee, prior to the occurrence of an Event of Default and after the curing or waiving of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are set forth in this Indenture. In case an Event of Default with respect to the Securities of any series has occurred (which has not been cured) the Trustee shall with respect to such Securities exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. 29 No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that (a) prior to the occurrence of an Event of Default with respect to the Securities of any series and after the curing of all Events of Default with respect to such series which may have occurred: (1) the duties and obligations of the Trustee shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (b) the Trustee shall not be liable for any error of judgment made in good faith by a responsible officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (c) the Trustee shall not be liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a majority in aggregate principal amount of the Securities of each series affected (with each series voting as a separate class) at the time Outstanding (determined as provided in Section 8.03) relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture. (d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there shall be reasonable grounds for believing that the repayment of such funds or adequate indemnity against such liability is not reasonably assured to it. SECTION 7.02. Except as otherwise provided in Section 7.01: (a) The Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, 30 instrument opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction, order or demand or other communication of the Issuer mentioned herein shall be sufficiently evidenced by an Officers' Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any resolution of the Board of Directors may be evidenced to the Trustee by a copy thereof certified by the Secretary or any Assistant Secretary of the Issuer; (c) the Trustee may consult with counsel and any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such Opinion of Counsel; (d) the Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the securityholders pursuant to the provisions of this Indenture, unless such securityholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby; (e) the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may investigate such fact or matters as it may reasonably see fit; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence of any agent or attorney appointed with due care by it hereunder; provided, however, that any appointment of any agent by the Trustee hereunder shall be made with prior notice to and in consultation with the Issuer. SECTION 7.03. The recitals contained herein and in the Securities (except in the certificates of authentication) shall be taken as the statements of the Issuer, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representation as to the validity or sufficiency of this Indenture or of the Securities. The Trustee shall not be accountable for the use or application by the Issuer of any of the Securities or of the proceeds thereof. SECTION 7.04. The Trustee or the Authenticating Agent or any Paying Agent or Securities Registrar, in its individual or any other capacity, may 31 become the owner or pledgee of Securities with the same rights it would have if it were not the Trustee, Authenticating Agent, Paying Agent or Securities Registrar. SECTION 7.05. Subject to the provisions of Section 12.04, all money received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any moneys received by it hereunder except such as it may agree with the Issuer to pay thereon. so long as no Event of Default shall have occurred and be continuing, all interest allowed on any such moneys shall be paid from time to time upon the written order of the Company signed by its Chairman of the Board of Directors or a Vice Chairman of the Board of Directors or its President or a Vice President or its Treasurer or an Assistant Treasurer. SECTION 7.06. The Issuer covenants and agrees to pay the Trustee from time to time, and the Trustee shall be entitled to, reasonable compensation (which compensation shall not be limited to by any provision of law in regard to the compensation of a trustee of an express trust) and, except as otherwise expressly provided, the Issuer will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all persons not regularly in its employ), except any such expense, disbursement or advance as may arise from its negligence or bad faith. The Issuer also covenants to indemnify the Trustee for, and hold it harmless against, any loss, liability, damage, claims or expense, incurred without negligence or bad faith on the part of the Trustee, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim or liability in the premises. The obligations of the Issuer under this Section 7.06 to compensate the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be a senior claim to that of the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the Holders of particular Securities. SECTION 7.07. Except as otherwise provided in Section 7.01, whenever in the administration of the trusts of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board of Directors or a Vice Chairman of the Board of Directors or the President or a Vice President and by the Treasurer or an Assistant Treasurer and delivered to the Trustee, and such certificate, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof. 32 SECTION 7.08. (a) If the Trustee has or shall acquire any conflicting interest, as defined in Section 310(b) of the Trust Indenture Act, it shall, within 90 days after ascertaining that it has such conflicting interest, either eliminate such conflicting interest or resign in the manner and with the effect specified in Section 7.10. (b) In the event that the Trustee shall fail to comply with the provisions of subsection (a) of this Section 7.08, the Trustee shall, within 10 days after the expiration of such 90-day period, transmit notice of such failure to all securityholders as the names and addresses of such Holders appear on the Securities Register. (c) Subject to the provisions of Section 6.08, any securityholder who has been a bona fide holder of Securities for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor, if the Trustee fails after written request thereof by such Holder to comply with the provisions of paragraph (a) above. SECTION 7.09. The Trustee shall at all times be a corporation organized and doing business under the laws of the United States or of any State or Territory or the District of Columbia having a combined capital and surplus of at least $10,000,000 and which is authorized under such laws to exercise corporate trust powers, and is subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 7.09, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.09, the Trustee shall resign immediately in the manner and with the effect specified in Section 7.10. SECTION 7.10. (a) The Trustee may at any time resign by giving written notice of resignation to the Issuer and by mailing notice thereof to all Holders of the Securities as the names and addresses of such Holders shall appear on the Securities Register. Upon receiving such notice of resignation, the Issuer shall promptly appoint a successor trustee by written instrument in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted appointment within 60 days after the mailing of such notice of resignation to the securityholders, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee, or any securityholder who has been a bona fide Holder of a Security or Securities for at least six months may, subject to the provisions of Section 6.08, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee. 33 (b) In case at any time any of the following shall occur: (1) the Trustee shall fail to comply with the provisions of subsection (a) of Section 7.08 after written request therefor by the Issuer or by any securityholder who has been a bona fide Holder of a Security or Securities for at least six months, or (2) the Trustee shall cease to be eligible in accordance with the provisions of Section 7.09 and shall fail to resign after written request therefor by the Issuer or by any such securityholder, or (3) the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then, in any case, the Issuer may remove the Trustee and appoint a successor trustee by written instrument, in duplicate, executed by order of the Board of Directors of the Issuer, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 6.08, any securityholder who has been a bona fide Holder of a Security or Securities for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee. (c) The Holders of a majority in aggregate principal amount of the Securities at the time Outstanding may at any time remove the Trustee and nominate a successor trustee unless within 10 days after such nomination the Issuer objects thereto, in which case the Trustee so removed or any securityholder, upon the terms and conditions and otherwise as in subdivision (a) of this Section 7.10 provided, may petition any court of competent jurisdiction for an appointment of a successor trustee. (d) Any resignation or removal of the Trustee and any appointment of a successor trustee pursuant to any of the provisions of this Section 7.10 shall become effective upon acceptance of appointment by the successor trustee as provided in Section 7.11. SECTION 7.11 Any successor trustee appointed as provided in Section 7.10 shall execute, acknowledge and deliver to the Issuer and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee herein; but, nevertheless, on the written request of the Issuer or of the successor trustee, the trustee ceasing to act shall, upon payment of any amounts then due it pursuant to the provisions of Section 7.06, execute and deliver an instrument transferring to such successor trustee all such rights and powers of the trustee so ceasing to act. Upon request of any successor trustee, the Issuer shall execute any and all instruments in writing for more 34 fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act, shall nevertheless, retain a prior claim upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Section 7.06 and be entitled to the indemnification provided for in Section 7.06. No successor trustee shall accept appointment as provided in this Section 7.11 unless at the time of such acceptance such successor trustee shall be qualified under the provisions of Section 7.08 and eligible under the provisions of Section 7.09. Upon acceptance of appointment by any successor trustee as provided in this Section 7.11, the Issuer shall mail notice of the succession of such trustee to all Holders of Securities as the names and addresses of such Holders appear on the Securities Register. If the Issuer fails to mail such notice in the prescribed manner within 10 days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the expense of the Issuer. SECTION 7.12. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided that such corporation shall be qualified under the provisions of Section 7.08 and eligible under the provisions of Section 7.09, without the execution of filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. SECTION 7.13. So long as any Securities remain Outstanding, if the Corporate Trust Office of the Trustee is not located in the Borough of Manhattan, The City of New York, the Trustee may appoint an Authenticating Agent to act on its behalf and subject to its direction in connection with the authentication and delivery of Securities as set forth in Articles Two and Three and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee and to the certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Such Authenticating Agent shall at all times be a corporation organized and doing business under the laws of the United States or of any State or Territory or of the District of Columbia authorized under such laws to act as authenticating agent, having a combined capital and surplus of at least $10,000,000 (unless an affiliate of the Trustee in which case it need not have such a capital and surplus) and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority, and, willing and able to act as Authenticating Agent on reasonable and customary terms, having its principal office and place of business in the Borough of Manhattan, The City of New York. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising 35 or examining authority, then for the purposes of this Section 7.13, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Any corporation into which any Authenticating Agent may be merged or converted, or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which any Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency business of any Authenticating Agent, shall continue to be the Authenticating Agent without the execution or filing of any paper or any further act on the part of the Trustee or such Authenticating Agent. Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and to the Issuer. The Trustee may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Issuer. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 7.13, the Trustee promptly shall appoint a successor Authenticating Agent, if the terms of this Section 7.13 require that there shall be an Authenticating Agent, shall give written notice of such appointment to the Issuer and shall mail notice of such appointment to all Holders of Securities as the names and addresses of such Holders appear upon the Securities Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all rights, powers, duties and responsibilities of its predecessor hereunder, with like effect as if originally named as Authenticating Agent herein. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section 7.13. The Trustee agrees to pay to the Authenticating Agent from time to time reasonable compensation for its services,and the Trustee shall be entitled to be reimbursed for such payment, subject to the provisions of Section 7.06. ARTICLE EIGHT CONCERNING THE HOLDERS OF SECURITIES SECTION 8.01. (a) Any request, demand, authorization, direction, notice, consent, waiver, vote or other action provided by this Indenture to be given or taken by securityholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such securityholders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee, and, where it is hereby expressly required, to the Issuer. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 7.01 and 7.02) conclusive in favor of the Trustee and the Issuer, if made in the manner provided in this section. (b) Subject to Sections 7.01 and 7.02, the execution of any instrument by a securityholder or his agent or proxy may be proved in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. 36 (c) The holding of Securities shall be proved by the Securities Register or by a certificate of the registrar thereof. (d) The Issuer may set a record date for purposes of determining the identity of Holders of Securities of any series entitled to vote or consent to any action referred to in subsection (a) of this Section 8.01, which record date may be set at any time or from time to time by notice to the Trustee, for any date or dates (in the case of any adjournment or reconsideration) not more than 60 days nor less than five days prior to the proposed date of such vote or consent, and thereafter, notwithstanding any other provisions hereof, only Holders of Securities of such series of record on such record date shall be entitled to so vote or to give such consent or to revoke such vote or consent. SECTION 8.02. The Issuer, the Trustee, any Authenticating Agent, any Paying Agent and any Securities registrar may deem and treat the person in whose name any Security shall be registered upon the Securities Register as the absolute owner of such Security (whether or not such Security shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of (and premium, if any) and, subject to the provisions of this Indenture, interest on, such Security and for all other purposes; and neither the Issuer, the Trustee nor any Authenticating Agent nor any Paying Agent nor any Securities registrar shall be affected by any notice to the contrary. All such payments so made to any such person, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Security. SECTION 8.03. In determining whether the holders of the requisite aggregate principal amount of Securities of any series have concurred in any demand or request, the giving of any notice, direction, consent or waiver or the taking of any other action under this Indenture, Securities which are owned by the Issuer or any other obligor on the Securities or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer or any other obligor on the Securities shall be disregarded and deemed not to be outstanding for the purpose of any such determination, except that for the purpose of determining whether the Trustee shall be protected in relying on any such demand, request, notice, direction, consent or waiver only Securities which the Trustee knows are so owned shall be so disregarded. SECTION 8.04. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 8.01, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Securities of any or all series, as the case may be, specified in this Indenture in connection with such action, any Holder of Security, the serial number, letter or other distinguishing symbol of which is shown by the evidence to be included in the Securities the Holders of which have joined in such action may, by filing written notice with the Trustee at its office and upon proof of ownership as provided in Section 8.01, revoke such action so far as concerns such Security. Except as aforesaid, any such action taken by the Holder of any Security shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Security and of any Securities 37 issued upon the transfer thereof or in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Security or such other Security. Any action taken by the Holders of the percentage in aggregate principal amount of the Securities of any or all series, as the case may be, specified in this Indenture in connection with such action shall be conclusively binding upon the Issuer, the Trustee and the Holder of all the Securities affected by such action. ARTICLE NINE REDEMPTION OF SECURITIES SECTION 9.01. The Issuer may, at its option, redeem all or from time to time any part of the Securities of any series at the applicable times and redemption prices as may be specified in the Board Resolution or supplemental indenture contemplated by Section 3.01 for Securities of such series, or the Securities of such series, together with accrued interest to the date fixed for redemption. SECTION 9.02. In case the Issuer shall desire to exercise the right to redeem all or any part of the Securities of any series, as the case may be, in accordance with the right reserved so to do, it shall provide notice of such redemption to the Holder of Securities of such series to be redeemed as a whole or in part by mailing a notice of such redemption by first class mail not less than 30 nor more than 90 days prior to the date fixed for redemption to their last addresses as they shall appear upon the Securities Register. Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives the notice. In any case, failure to give such notice by mail, or any defect in the notice, to the Holder of any Security of a series designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security of such series. In the case of any redemption of Securities (i) prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, or (ii) pursuant to an election of the Issuer which is subject to a condition specified in the terms of such Securities, the Issuer shall furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction or condition. Each such notice of redemption shall specify the date fixed for redemption, and the redemption price at which Securities are to be redeemed, and shall state that payment of the redemption price of the Securities or portions thereof to be redeemed will be made at the office or agency to be maintained by the Issuer as provided in Section 4.02 (or any of said offices or agencies, if more than one) upon presentation and surrender of such Securities, that interest accrued to the date fixed for redemption will be paid as specified in said notice, and that on and after said date any interest thereon or on the portions thereof to be redeemed will cease to accrue. If less than all the Securities of any series are to be redeemed the notice of redemption shall specify the principal amount of the Securities of such series and the identification of the particular series to be redeemed. In case any Security of any series is to be redeemed in part only, the notice of redemption shall state the portion of the principal 38 amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon presentation and surrender of such Security, a new Security or Securities of such series in principal amount equal to the unredeemed portion thereof and having the same maturity date, interest rate and redemption provisions will be issued. If less than all the Securities of a series are to be redeemed, the Issuer will give the Trustee at least 45-days' notice (unless a shorter notice shall be satisfactory to the Trustee), as to the aggregate principal amount of Securities to be redeemed, and thereupon the Trustee shall select, in such manner as in its sole discretion it shall deem appropriate and fair, the Securities of such series or portions thereof to be redeemed and shall thereafter promptly notify the Issuer in writing which of the Securities or portions thereof are to be redeemed. SECTION 9.03. If the giving of notice of redemption shall have been completed as above provided, the Securities or portions of Securities of the series identified in such notice shall become due and payable on the date, and at the place or places stated in such notice at the applicable redemption price, together with interest accrued to the date fixed for redemption, and unless the Issuer shall default in the payment of such Securities at the redemption price, together with any interest accrued to said date, interest on the Securities or portions of Securities of any series so called for redemption shall cease to accrue on and after said date. On presentation and surrender of such Securities at said place or places of payment in said notice specified, such Securities or the portions thereof to be redeemed shall be paid and redeemed by the Issuer at the applicable redemption price, together with interest accrued thereon to the date fixed for redemption. Upon presentation and surrender of any Security which is redeemed in part only, the Issuer shall execute and register and the Trustee or the Authenticating Agent on its behalf shall authenticate and deliver, at the expense of the Issuer, a new Security or Securities of such series, of authorized denominations, in principal amount equal to the unredeemed portion of the Security so presented and having the same maturity date, interest rate and redemption provisions. ARTICLE TEN SUPPLEMENTAL INDENTURES SECTION 10.01 The Issuer, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as in force at the date of the execution thereof) for one or more of the following purposes: (a) to evidence the succession of another corporation to the Issuer, or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Issuer pursuant to Article Eleven hereof; (b) to add to the covenants of the Issurer such further covenants, 39 restrictions, conditions or provisions as the Board of Directors shall consider to be for the protection of the Holders of any series of Securities, and to make the occurrence or the occurrence and continuance of a default in any such additional covenants, restrictions, conditions or provisions a default or an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture; provided, however, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default or may limit the right of the Holders of a majority in aggregate principal amount the Securities of such series to waive such default; (c) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, to convey, transfer, assign, mortgage or pledge any property to or with the Trustee or to make such other provisions in regard to matters or questions arising under this Indenture as shall not adversely affect the interests of the Holders of any Securities; (d) to establish the form or terms of Securities of any series as permitted by Section 3.01; (e) to provide for the issuance under this Indenture of Securities in coupon form (including Securities registrable as to principal only), to provide for interchangeability of such Securities with the Securities issued hereunder in fully registered form of the same series and to make all appropriate changes for such purposes, or to permit or facilitate the issuance of Securities of any series in uncertificated form; (f) to provide for the issuance under this Indenture of Securities denominated or payable in currency other than Dollars and to make all appropriate changes for such purpose; (g) to evidence and provide for the acceptance of appointment hereunder by a successor trustee with respect to the Securities, pursuant to Section 7.11, or to add to or to change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee; (h) to add to or change or eliminate any provision of this Indenture as shall be necessary or desirable to conform to provisions of the Trust Indenture Act as at the time in effect, provided, that such action shall not materially adversely affect the interests of the Holders of the Securities of any series; and (i) otherwise to change or eliminate any of the provisions of this Indenture, provided however, that any such change or elimination may only be effected when no Outstanding Security of any series created prior to the execution of such supplemental indenture is entitled to the benefit of such provision. 40 The Trustee is hereby authorized to join with the Issuer in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Trustee shall not be obligated to enter into any such supplemental indenture which adversely affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Any supplemental indenture authorized by the provisions of this Section 10.01 may be executed by the Company and the Trustee without the consent of the Holders of any of the Securities at the time Outstanding. SECTION 10.02. With the consent (evidenced as provided in Section 8.01) of the Holders of not less than 66 2/3% in aggregate principal amount of the Securities at the time Outstanding of all series affected by such supplemental indenture (voting as one class), the Issuer, when authorized by a Board Resolution, and the Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as in force at the date of such supplemental indenture) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the right of the Holders of the Securities of each such series; provided, however, that no such supplemental indenture shall (i) extend the fixed maturity of any Security, or reduce the principal amount thereof or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable on redemption thereof without the consent of the Holder of each Security so affected, or (ii) reduce the aforesaid percentage of Securities of any series, the consent of the Holders of which is required for any such supplemental indenture, without the consent of the Holders of all such Securities of such series then outstanding. Upon the request of the Issuer, accompanied by a Board Resolution authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of securityholders as aforesaid, the Trustee shall join with the Issuer in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, limitations of rights, obligation, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the securityholders under this Section 10.02 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Issuer and the Trustee of any supplemental indenture pursuant to the provisions of this Section 10.02, the Issuer shall mail a notice setting forth in general terms the substance of such supplemental indenture, to all Holders of Securities of each series affected thereby as the names and addresses of such Holders appear on the Securities Register. Any failure of the Issuer to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. 41 SECTION 10.03. Upon the execution of any supplemental indenture pursuant to the provisions of this Article Ten, this Indenture shall be and be deemed to be modified and amended in accordance therewith, but only with regard to the Securities of each series affected by such supplemental indenture, and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Issuer and the Holders of any Securities of such series affected thereby shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes with regard to the Securities of such series. The Trustee, subject to the provisions of Section 7.01 and 7.02, may receive an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article complies with the provisions of this Article Ten. SECTION 10.04. Securities of any series which are authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article Ten may bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. New Securities of any series so modified as to conform, in the opinion of the Board of Directors, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Issuer, authenticated by the Trustee or the Authenticating Agent on its behalf and delivered in exchange for the Securities of such series then Outstanding. ARTICLE ELEVEN CONSOLIDATION, MERGER, SALE OR CONVEYANCE SECTION 11.01. Nothing contained in this Indenture or in any of the Securities shall prevent any consolidation of the Issuer with, or the merger of the Issuer into, any other corporation or corporations (whether or not affiliated with the Issuer), or successive consolidations or mergers to which the Issuer or its successor or successors shall be a party or parties, or shall prevent any sale or conveyance of the property of the Issuer as an entirety or substantially as an entirety to any other corporation (whether or not affiliated with the Issuer) authorized to acquire and operate the same; provided, however, and the Issuer hereby covenants and agrees, that upon any such consolidation, merger, sale or conveyance the due and punctual payment of the principal of (and premium, if any) and interest on, all the Securities of each series according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be performed or observed by the Issuer, shall be expressly assumed by a supplemental indenture satisfactory in form to the Trustee and executed and delivered to the Trustee by the corporation formed by such consolidation, or into which the Issuer shall have been merged or which shall have acquired such property and provided, further, that immediately after giving effect to such transaction, no Event of Default shall have occurred and be continuing. SECTION 11.02. In case of any consolidation, merger, sale or conveyance, and following such an assumption by the successor corporation, such successor 42 corporation shall succeed to and be substituted for the Issuer with the same effect as if it had been named herein. Such successor corporation may cause to be signed, and may issue either in its own name or in the name of the Issuer prior to such succession, any or all of the Securities of any series issuable hereunder which theretofore shall not have been signed by the Issuer and delivered to the Trustee; and, upon the order of such successor corporation instead of the Issuer and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities of any series which previously shall have been signed and delivered by the officers of the Issuer to the Trustee for authentication pursuant to such provisions and any Securities of any series which such successor corporation thereafter shall cause to be signed and delivered to the Trustee on its behalf for that purpose pursuant to such provisions. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale or conveyance, such changes in phraseology and form may be made in the Securities of any series thereafter to be issued as may be appropriate. Nothing contained in this Indenture or in any of the Securities of any series shall prevent the Company from merging into itself any other corporation (whether or not affiliated with the Company) or acquiring by purchase or otherwise all or part of the property of any other corporation (whether or not affiliated with the Company). SECTION 11.03. The Trustee, subject to the provisions of Section 7.01 and 7.02, may receive an Opinion of Counsel as conclusive evidence that any consolidation, merger, sale or conveyance and any such assumption complies with the provisions of this Article Eleven. ARTICLE TWELVE SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS SECTION 12.01. Except as otherwise provided for the Securities of any series, if at any time (a) the Issuer shall have delivered to the Trustee cancelled or for cancellation all Securities of any series theretofore authenticated (other than any Securities of such series which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 3.07), or (b) all Securities of any series not theretofore delivered to the Trustee cancelled or for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and the Issuer shall deposit or cause to be deposited with the Trustee as trust funds the entire amount sufficient to pay at maturity or upon redemption all such Securities of such series not theretofore delivered to the Trustee cancelled or for cancellation, including principal (and premium, if any) and interest due or to become due to such date of maturity 43 or date fixed for redemption, as the case may be, but excluding, however, the amount of any moneys for the payment of principal of (and premium, if any) or interest on the Securities of such series (1) theretofore deposited with the Trustee and repaid by the Trustee to the Issuer in accordance with the provisions of Section 12.04, or (2) paid to any State or to the District of Columbia pursuant to its unclaimed property or similar laws, and if in either case the Issuer shall also pay or cause to be paid all other sums payable hereunder by the Issuer, then this Indenture shall cease to be of further effect (except as to the provisions applicable to transfers and exchanges of Securities of such series) and the Trustee, on demand of and at the cost and expense of the Issuer, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Issuer to the Trustee under Section 7.06 and the obligations of the Trustee to any Authenticating Agent under Section 7.13 shall survive. SECTION 12.02. All moneys deposited with the Trustee pursuant to Section 12.01 shall be held in trust and applied by it to the payment, either directly or through any Paying Agent (including the Issuer acting as its own Paying Agent), to the holders of the particular Securities of any series for the payment or redemption of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal (and premium, if any) and interest. SECTION 12.03. In connection with the satisfaction and discharge of this Indenture all moneys then held by any Paying Agent under the provisions of this Indenture shall, upon demand of the Issuer, be repaid to it or paid to the Trustee and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. SECTION 12.04. Any monies deposited with or paid to the Trustee or any Paying Agent pursuant to any provision of this Indenture for payment of the principal of (and premium, if any) or interest on Securities of any series and not applied but remaining unclaimed by the Holders of Securities of such series for two years after the date upon which the principal of (and premium, if any) or interest on such Securities, as the case may be, shall have become due and payable, shall be repaid to the Issuer by the Trustee or such Paying Agent on demand; and the Holder of any of the Securities shall thereafter look only to the Issuer for any payment which such Holder may be entitled to collect. ARTICLE THIRTEEN MISCELLANEOUS PROVISIONS SECTION 13.01. No recourse under or upon any obligation, covenant or agreement of this Indenture, or of any Security, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, shareholder, officer or director, as such, past, present or future, of the Issuer, either directly or through the Issuer whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the issue of the Securities. 44 SECTION 13.02. All the covenants, stipulations, promises and agreements in this Indenture contained by or on behalf of the Issuer shall bind its successors and assigns, whether so expressed or not. SECTION 13.03. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Issuer shall and may be done and performed with like force and effect by the like board, committee or officer of the corporation that shall at the time be the lawful sole successor of the Issuer. SECTION 13.04. The Issuer by instrument in writing executed by authority of two-thirds of the Board of Directors and delivered to the Trustee may surrender any of the powers or rights reserved to the Issuer and thereupon such power or right so surrendered shall terminate both as to the Issuer and as to any successor corporation. SECTION 13.05. Any notice or demand which by any provision of this Indenture is required or permitted to be given or served except as provided in Section 6.01(c) by the Trustee or by the Holders of Securities to or on the Issuer may be given or served by being deposited first class, postage prepaid in a post office letter box addressed (until another address is filed by the Issuer with the Trustee) as follows: Treasurer, Southern New England Telecommunications Corporation, 227 Church Street, New Haven, Connecticut 06510. Any notice, direction, request or demand by any securityholder to or upon the Trustee shall be deemed to have been sufficiently given or made for all purposes if given or made in writing at the principal office of the Trustee. In case by reason of the suspension of regular mail service or reason of any other cause it shall be impracticable to give such notice to Holders of Securities by mail, then such notification as shall be made with approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. In any case where notice to Holders of Securities is given by mail, neither the failure to mail such notice, nor any defect in any notice mailed, to any particular Holder of a Security shall affect the sufficiency of such notice with respect to other Holders of Securities. SECTION 13.06. Upon any application or demand by the Issuer to the Trustee to take any action under any of the provisions of this Indenture, the Issuer shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or convenant provided for in this Indenture shall include (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certi- 45 ficate or opinion are based; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. SECTION 13.07. If the date of maturity of interest on or principal of the Securities of any series or the date fixed for redemption of any Security shall not be a Business Day, then payment of interest or principal (and premium, if any) need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date of maturity or the date fixed for redemption, and no interest shall accrue for the period after such date. SECTION 13.08. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with any provision of Sections 310 to 317, inclusive, of the Trust Indenture Act, such provision of the Trust Indenture Act shall control. SECTION 13.09. The Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. SECTION 13.10. This Indenture and each Security shall be deemed to be a contract under the laws of the State of Connecticut, and for all purposes this Indenture shall be constructed in accordance with the laws of said State. 46 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective seals to be hereunto affixed and attested (the date of this instrument being the date of execution by the Trustee, as indicated in its Acknowledgment). SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION BY /s/ W. H. Monteith, Jr. Name: Walter H.Monteith, Jr. Title: Chairman, President and Chief Executive Officer (Seal) Attest: /s/Madelyn M. DeMatteo Name: Madelyn M. DeMatteo Title: Secretary THE CONNECTICUT NATIONAL BANK BY /s/ Kathy A. Larimore Name:Kathy A. Larimore Title:Corporate Trust Officer (Seal) Attest: /s/ D.K. Cawley Name: Donald K. Cawley Title: Authorized Person 47 STATE OF CONNECTICUT COUNTY OF NEW HAVEN At New Haven, on this 9th day of July, 1991 before me, a Notary Public in and for the County of New Haven and State of Connecticut, personally appeared Walter H. Monteith, Jr., the Chairman, President and Chief Executive Officer of Southern New England Telecommunications Corporation, to me personally known, who executed the foregoing instrument on behalf of said corporation, and acknowledged the same to be his free act and deed in his said capacity and the free act and deed of Southern New England Telecommunications Corporation. NOTARIAL SEAL /s/ Regina A. Nicoletti Regina A. Nicoletti Notary Public My Commission Expires: March 31, 1995 STATE OF CONNECTICUT COUNTY OF HARTFORD At the city of Hartford, on this 10th day of July, 1991, before me, a Notary Public in and for the County of Hartford and State of Connecticut, personally appeared Kathy A. Larimore, a Corporate Trust Officer of The Connecticut National Bank, to me personally known, who executed the foregoing instrument on behalf of said national banking association and acknowledged the same to be his free act and deed in his said capacity and the free act and deed of The Connecticut National Bank. NOTARIAL SEAL /s/ Kathleen P. O'Sullivan Kathleen P. O'Sullivan Notary Public My Commission Expires: March 31, 1993 48 EXHIBIT A CUSIP No. (FORM OF GLOBAL NOTE1) FACE Except as otherwise provided in Section 2.04 of the Indenture referred to below, this Security may be transferred in whole, but not in part, only to another nominee of the Depository or to a successor Depository or to a nominee of such successor Depository. Unless this certificate is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) to the issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein. $ No. SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION MEDIUM TERM NOTE, SERIES Original Issue Date: Maturity Date: Interest Rate: Initial Redemption Date: Principal Amount: The Optional Redemption Price shall initially be % of the principal amount of this Note to be redeemed and shall decline at each anniversary of the Initial Redemption Date by % of the principal amount to be redeemed until the Optional Redemption Price is 100% of such principal amount. SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION, a Connecticut corporation (herein referred to as the "Company"), for value received hereby promises to pay to , or registered assigns, the principal sum of $ on the Maturity Date shown above and to pay interest thereon at the rate per annum shown above until the principal amount is paid or made available for payment. The Company will pay interest semi-annually on and (each an "Interest Payment Date"), commencing with the Interest Payment Date immediately following the Original Issue Date shown above, and on the Maturity Date shown above. Interest on this Note will accrue from the most recent Interest Payment Date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from the Original Issue Date shown above. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months. The interest so payable on any Interest Payment Date will, subject to certain exceptions provided 1 The Company may elect to use a different title (i.e., debentures) and, in such case, conforming changes would be made throughout the text of this form. A-1 in the Indenture referred to below, be paid to the person in whose name this Note is registered at the close of business on the Record Date for such interest, which shall be the or , as the case may be, next preceding such Interest Payment Date, unless such Record Date shall not be a Business Day, as defined below, in which case the Record Date shall be the Business Day next preceding. (If the Original Issue Date of this Note is between a Record Date and the corresponding Interest Payment Date, the first payment of interest on this Note shall be payable to the person to whom this Note shall have been issued.) Payment of the principal of and interest on this Note will be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, State of New York, in such coin or currency in the United States of America as at the time of payment shall be legal tender for payment of public and private debts; provided however, that, at the option of the Company payment of interest may be made by check mailed to the address of the person entitled thereto as such address shall appear in the Securities register. "Business Day" means any day, other than a Saturday or Sunday, that is not a day on which banking institutions are authorized or required by law or regulation to be closed in The City of New York or the State of Connecticut. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Note shall not be valid or become obligatory for any purpose until the appropriate certificate of authentication hereon shall have been executed by or on behalf of the Trustee under the Indenture referred to on the reverse hereof. IN WITNESS WHEREOF, SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION has caused this Instrument to be signed by its duly authorized officers, each by a facsimile of his signature, and has caused a facsimile of its corporate seal to be affixed hereunto or imprinted hereon. Date SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION By (Corporate Seal) Name: Title: Name: Title: (FORM OF CERTIFICATE OF AUTHENTICATION) This is one of the Securities of the series designated therein referred to in the within mentioned Indenture. THE CONNECTICUT NATIONAL BANK, as Trustee By Authorized Signatory A-2 (FORM OF NOTE) (REVERSE) SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION This Note is one of a duly authorized issue of unsecured debt securities (hereinafter called the "Securities") of the Company of the series hereinafter specified, all such Securities issued or to be issued under and pursuant to an indenture dated as of (herein called the "Indenture"), between the Company and The Connecticut National Bank, Trustee (herein called the "Trustee"), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Securities. The Securities may be issued in one or more series, which different series may be issued in various aggregate principal amounts, may mature at different times, may bear interest at different rates, may be subject to different redemption provisions (if any), may be subject to different sinking, purchase or analogous funds (if any), may be subject to different covenants and Events of Default and may otherwise vary as in the Indenture provided. This Note is one of a series designated as the Series Notes of the Issuer (herein called the "Series Notes"), limited in aggregate principal amount to $ . The Series Notes may be issued at various times with different maturity dates and different principal repayment provisions, may bear interest at different rates, and may otherwise vary, all as provided in the Indenture. In case an Event of Default with respect to the Series Notes shall have occurred and be continuing, the principal hereof may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than 66 2/3% in aggregate principal amount of the Securities at the time Outstanding, as defined in the Indenture, of all series to be affected (voting as one class) evidenced as in the Indenture provided, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or modifying in any manner the rights of the holders of the Securities of each such series; provided, however, that no such supplemental indenture shall (i) extend the fixed maturity of any Security, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable on redemption thereof, without the consent of the holder of each Security so affected, or (ii) reduce the aforesaid percentage of Securities, the consent of the holders of which is required for any such supplemental indenture, without the consent of the holders of all Securities then outstanding. It is also provided in the Indenture that, with respect to certain defaults or Events of Default regarding the Securities of any A-3 series, prior to any declaration of the maturity of such Securities, the holders of a majority in aggregate principal amount of the Securities of such series (or in the case of certain defaults or Events of Default, all or certain series of the Securities) at the time outstanding may on behalf of the holders of all of the Securities of such series (or all or certain series of Securities, as the case may be) waive any past default or Event of Default under the Indenture and its consequences, except a default in the payment of principal (or premium, if any) or interest. Any such consent or waiver by the holder of this Note (unless revoked as provided in the Indenture) shall be conclusive and binding upon such holder and upon all future holders and owners of this Note and of any Note issued upon the transfer thereof or in exchange or substitution therefor, irrespective of whether or not any notation of such consent or waiver is made upon this Note or such other Note. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Note at the places, at the respective times, at the rate and in the coin or currency herein prescribed. The Series Notes may be redeemed, at the option of the Company, as a whole or from time to time in part, on or after the Initial Redemption Date, set forth on the face hereof, and prior to maturity, upon the notice referred to below, all as provided in the Indenture, at the related Optional Redemption Prices (expressed in percentages of the principal amount) set forth on the face hereof, together in each case with accrued interest to the date fixed for redemption. As provided in the Indenture, notice of redemption to the holders of the Notes to be redeemed as a whole or in part shall be given by mailing a notice of such redemption not less than thirty nor more than ninety days prior to the date fixed for redemption to their last addresses as they shall appear upon the Securities register. The Series Notes are issuable as registered Notes without coupons in denominations of $1,000 or any multiple thereof. Upon due presentment for exchange or registration of transfer of this Note at the office or agency of the Company in the Borough of Manhattan, The City of New York, a new Note or Notes having the same maturity, interest rate, redemption provisions, if any, and Original Issue Date, of authorized denominations, for an equal aggregate principal amount, will be issued in the manner and subject to the limitations provided in the Indenture. No service charge shall be made for any such exchange or transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto. The Company, the Trustee, any authenticating agent, any payment agent and any Securities registrar may deem and treat the holder hereof as the absolute owner hereof (whether or not this Note shall be overdue and notwithstanding any notation of ownership or other writing hereon) for the purpose of receiving payment of or on account of the principal hereof (and premium, if any) and, subject to the provisions on the face hereof, interest hereon, and for all other purposes, and neither the Company nor the Trustee nor any authenticating agent nor any payment agent nor any securities registrar shall be affected by any notice to the contrary. A-4 No recourse shall be had for the payment of the principal of (or premium, if any) or the interest on this Note or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture or any indenture supplemental thereto, against any incorporator, shareholder, officer or director, as such past, present or future, of the Company or of any successor corporation, either directly or through the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment of penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released. This Note shall be deemed a contract under the laws of the State of Connecticut and for all purposes shall be governed by and construed in accordance with the laws of said State. A-5 EXHIBIT B (FORM OF NOTE1) FACE $ No. SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION MEDIUM TERM NOTES Original Issue Date: Maturity Date: Interest Rate: Initial Redemption Date: Principal Amount: The Optional Redemption Price shall initially be % of the principal amount of this Note to be redeemed and shall decline at each anniversary of the Initial Redemption Date by % of the principal amount to be redeemed until the Optional Redemption Price is 100% of such principal amount.2 SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION, a Connecticut corporation (herein referred to as the "Company"), for value received hereby promises to pay to , or registered assigns, the principal sum of $ on the Maturity Date shown above and to pay interest thereon at the rate per annum shown above until the principal amount is paid or made available for payment. The Company will pay interest semi-annually on and (each an "Interest Payment Date"), commencing with the Interest Payment Date immediately following the Original Issue Date shown above, and on the Maturity Date shown above. Interest on this Note will accrue from the most recent Interest Payment Date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from the Original Issue Date shown above. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months. The Interest so payable on any Interest Payment Date will, subject to certain exceptions provided in the Indenture referred to below, be paid to the person in whose name this Note is registered at the close of business on the Record Date for such interest, which shall be the or , as the case may be, next preceding such Interest Payment Date, unless such Record Date shall not be a Business Day, as defined below, in which case the Record Date shall be the Business Day next preceding. (If the Original Issue Date of this Note is between a Record Date and the corresponding Interest Payment Date, the first payment of interest on this Note shall be payable to the person to whom this Note shall have been issued.) Payment of the principal of and interest on this Note will be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, State of New York, in such coin or currency in the United States of America as at the time of payment shall be legal tender for payment of public and private debts; provided, however, that, at the option of the company payment of 1 The Company may elect to use a different title (i.e., debentures) and, in such case, conforming changes would be made throughout the text of this form. 2 If the security is offered pursuant to a firm committee underwriting, the provisions relating to redemption would be set forth in the text contained on the reverse of this form. B-1 interest may be made by check mailed to the address of the person entitled thereto as such address shall appear in the Securities register. "Business Day" means any day, other than a Saturday or Sunday, that is not a day on which banking institutions are authorized or required by law or regulation to be closed in The City of New York or the State of Connecticut. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Note shall not be valid or become obligatory for any purpose until the appropriate certificate of authentication hereon shall have been executed by or on behalf of the Trustee under the Indenture referred to on the reverse hereof. IN WITNESS WHEREOF, SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION has caused this Instrument to be signed by its duly authorized officers, each by a facsimile of his signature, and has caused a facsimile of its corporate seal to be affixed hereunto or imprinted hereon. Date SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION, By (Corporate Seal) Name: Title: Name: Title: (FORM OF CERTIFICATE OF AUTHENTICATION) This is one of the Securities of the series designated therein referred to in the within mentioned Indenture. THE CONNECTICUT NATIONAL BANK, as Trustee By Authorized Signatory B-2 (FORM OF NOTE) (REVERSE) SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION This Note is one of a duly authorized issue of unsecured debt securities (hereinafter called the "Securities") of the Company of the series hereinafter specified, all such Securities issued or to be issued under and pursuant to an indenture dated as of (herein called the "Indenture"), between the Company and The Connecticut National Bank, Trustee (herein called the "Trustee"), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Securities. The Securities may be issued in one or more series, which different series may be issued in various aggregate principal amounts, may mature at different times, may bear interest at different rates, may be subject to different redemption provisions (if any), may be subject to different sinking, purchase or analogous funds (if any), may be subject to different covenants and Events of Default and may otherwise vary as in the Indenture provided. This Note is one of a series designated as the Series Notes of the Issuer (herein called the "Series Notes"), limited in aggregate principal amount to $ . The Series Notes may be issued at various times with different maturity dates and different principal repayment provisions, may bear interest at different rates, and may otherwise vary, all as provided in the Indenture. In case an Event of Default with respect to the Series Notes shall have occurred and be continuing, the principal hereof may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than 66 2/3% in aggregate principal amount of the Securities at the time Outstanding, as defined in the Indenture, of all series to be affected (voting as one class) evidenced as in the Indenture provided, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or modifying in any manner the rights of the holders of the Securities of each such series; provided, however, that no such supplemental indenture shall (i) extend the fixed maturity of any Security, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable on redemption thereof, without the consent of the holder of each Security so affected, or (ii) reduce the aforesaid percentage B-3 of Securities, the consent of the holders of which is required for any such supplemental indenture, without the consent of the holders of all Securities then outstanding. It is also provided in the Indenture that, with respect to certain defaults or Events of Default regarding the Securities of any series, prior to any declaration of the maturity of such Securities, the holders of a majority in aggregate principal amount of the Securities of such series (or in the case of certain defaults or Events of Default, all or certain series of the Securities) at the time outstanding may on behalf of the holders of all of the Securities of such series (or all or certain series of Securities, as the case may be) waive any past default or Event of Default under the Indenture and its consequences, except a default in the payment of principal (or premium, if any) or interest. Any such consent or waiver by the holder of this Note (unless revoked as provided in the Indenture) shall be conclusive and biding upon such holder and upon all future holders and owners of this Note and of any Note issued upon the transfer thereof or in exchange or substitution therefor, irrespective of whether or not any notation of such consent or waiver is made upon this Note or such other Note. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Note at the places, at the respective times, at the rate and in the coin or currency herein prescribed. The Series Notes may be redeemed, at the option of the Company, as a whole or from time to time in part, on or after the Initial Redemption Date, set forth on the face hereof, and prior to maturity, upon the notice referred to below, all as provided in the Indenture, at the related Optional Redemption Prices (expressed in percentages of the principal amount) set forth on the face hereof, together in each case with accrued interest to the date fixed for redemption. As provided in the Indenture, notice of redemption to the holders of the Notes to be redeemed as a whole or in part shall be given by mailing a notice of such redemption not less than thirty nor more than ninety days prior to the date fixed for redemption to their last addresses as they shall appear upon the Securities register. The Series Notes are issuable as registered Notes without coupons in denominations of $1,000 or any amount in excess thereof which is a multiple of $1,000. Upon due presentment for exchange or registration of transfer of this Note at the office or agency of the Company in the Borough of Manhattan, The City of New York, a new Note or Notes having the same maturity, interest rate, redemption provisions, if any, and Original Issue Date, of authorized denominations, for an equal aggregate principal amount, will be issued in the manner and subject to the limitations provided in the Indenture. No service charge shall be made for any such exchange or transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto. The Company, the Trustee, any authenticating agent, any payment agent and any Securities registrar may deem and treat the holder hereof as the absolute owner hereof (whether or not this Note shall be overdue and notwithstanding any notation of ownership or other writing hereon) for the purpose of receiving payment of or on account of the principal hereof ( and premium, if any) and, subject to the provisions on the face hereof, interest hereon, and for all other purposes, and neither the Company nor the Trustee nor any authenticating agent nor any payment agent nor any securities registrar shall be affected by any notice to the contrary. B-4 No recourse shall be had for the payment of the principal of (or premium, if any) or the interest on this Note or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture or any indenture supplemental thereto, against any incorporator, shareholder, officer or director, as such past, present or future, of the Company or of any successor corporation, either directly or through the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment of penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released. This Note shall be deemed a contract under the laws of the State of Connecticut and for all purposes shall be governed by and construed in accordance with the laws of said State. B-5 EX-10 3 EX. 10(iii)(A)5 SNET EXECUTIVE NON-QUALIFIED PENSION PLAN AND EXCESS BENEFIT PLAN As approved by the Board of Directors on December 8, 1993, the purpose of the proposed redesign of the executive pension plans is to have the same pension formula apply for executives and management employees, and maximize the benefits which may be payable from the Pension Trust Fund. The redesign replaces the pension formula and Minimum Pension Benefit provisions of the Executive Non-Qualified Pension Plan (ENQPP) component of the SNET Executive Non-Qualified Pension Plan and Excess Benefit Plan (Plan). The provisions of the Excess Benefit Plan component of the Plan will be modified to be consistent with the changes to the SNET Management Pension Plan (MPP). Therefore, it is recommended that the name of the Plan be renamed to the SNET Pension Benefit Plan (PBP). The redesigned formula will facilitate the company's ability to recruit executives and ensure that SNET remains a competitive employer of choice. The amendments to the Plan are as follows: 1. Effective December 13, 1995, the ENQPP adjusted career income formula shall be calculated, in accordance with the Plan provisions, for all eligible executives who are on the active payroll as of December 13, 1995, and the accrued vested pension benefit payable under the ENQPP shall be frozen. Such frozen benefit shall be included with the accrued pension benefits calculated for each such executive effective January 1, 1996 under the career income average formula of the MPP for purposes of ensuring that the total SNET pension benefit shall never be less than the amount to which each such executive was previously entitled before application of any plan amendments adopted hereunder; provided, however, that in the event that such comparison of pension benefit amounts indicates for any such executive that the frozen ENQPP benefit is included in the higher amount, each such executive's opening account under the provisions of the MPP or Pension Benefit Plan component of the Plan shall be determined using such higher pension benefit, and such frozen ENQPP pension benefit will not be separately available under the ENQPP provisions of the Plan. The Minimum Pension Benefit provisions of the ENQPP component of the Plan have been replaced by the redesigned MPP Cash Balance Plan formula, and shall not be included in the determination of the accrued pension benefits payable as of January 1, 1996. 2. Effective December 13, 1995, the Plan is amended to provide that upon the last payment of ENQPP pension benefits, the ENQPP component of the Plan shall terminate. 3. Effective January 1, 1996, the Plan shall be renamed to the SNET Pension Benefit Plan (PBP). - 2 - 4. The PBP is amended effective January 1, 1996 to provide for the establishment of a Cash Balance Plan (CBP) account, and annual pay related and interest credits commencing January 1, 1997, with such CBP provisions determined in accordance with the MPP amendments outlined in Exhibit A based on eligible compensation (as defined in the MPP) in excess of the maximum amount of compensation which may be included in the MPP under Section 401(a)(17) of the Code. The provisions regarding the MPP benefit which exceed the maximum "annual benefit" payable to participants under the MPP in accordance with Section 415 of the Internal Revenue Code (Code) will continue. At the time an employee leaves the company on or after January 1, 1996, the distribution election decision made by an employee under the MPP shall apply to any pension benefit that may be payable under the PBP. EX-10 4 SNET MANAGEMENT PENSION PLAN Effective October, 1980 with amendments up to and including the amendments effective through March 31, 1995 Published March 25, 1995 TABLE OF CONTENTS Page SECTION 1. PURPOSE................................................... 1 SECTION 2. DEFINITIONS............................................... 2 SECTION 3. ADMINISTRATION............................................ 8 SECTION 4. PENSIONS 1. Eligibility................................................... 12 a. Service Pension........................................... 12 b. Deferred Vested Pension................................... 12 vi. 1991 Special Early Commencement....................... 15 c. Disability Pension........................................ 16 d. Conversion from Disability to Service Pension............. 17 e. Pension Plan Participation................................ 17 f. Normal Retirement Age..................................... 17 g. Mandatory Retirement Age.................................. 17 h. Pension Benefits at the Expiration of Sickness Disability Benefits.................................................. 18 i. Disability Service Pension................................ 18 j. Transitional Retirement Status............................ 21 k. Service Beyond Age 70 1/2; Minimum Distributions.......... 24 2. Pension Amounts............................................... 24 a. Effective Date............................................ 24 b. Calculation of Monthly Pension Benefit.................... 25 i. Pension Benefit Formula............................... 25 ii. Adjusted Career Income................................ 25 iii.Compensation.......................................... 27 c. Coverage Under the SNETPP................................. 30 d. Coverage Under Predecessor Plan or Prior Service Under This Plan or in accordance with the Mandatory Portability Agreement................................................. 31 e. Early Retirement Discount................................. 32 i. Pension Deferral Option............................... 32 f. Deferred Vested Pension Amount............................ 33 g. No Reductions............................................. 34 h. Pension Benefits Under Other Plans........................ 34 i. Service Beyond Normal Retirement Age...................... 34 j. 1989 Special Increase..................................... 35 k. Minimum Benefit........................................... 35 l. 1987 Special Increase..................................... 36 m. Extension of Minimum Benefit Eligibility Provisions....... 37 n. 1991 Special Increase..................................... 38 3. Survivor Annuities............................................ 40 i. Spousal Consent Requirement............................... 40 ii. 90 Day Election Period.................................... 40 iii. Written Explanation of Election and Consent............... 40 iv. Annuity Starting Date; Consent to Receive Distributions... 41 v. Alternate Payee........................................... 41 a. Fifty Percent Annuity Option - Service Pensions........... 41 b. Survivor Annuity Option - Disability Pensions............. 43 c. Revoking Election, Restoring Pension...................... 47 d. Automatic Survivor Annuity - Prior to Commencement of Pension Benefits.......................................... 49 TABLE OF CONTENTS Page SECTION 4. PENSIONS (Continued) e. Deferred Vested Pension Joint and Survivor Annuity ....... 50 ii. Surviving Annuitant of a Deferred Vested Pensioner.... 52 viii. 1991 Special Early Commencement....................... 56 f. 1989 Special Increase .................................... 57 g. Survivor Annuity Option for Employees Eligible for Disability Service Pension................................ 58 h. Retirees Electing the Pension Deferral Option............. 59 4. Monthly Payments ............................................. 60 5. Duration of Payments; Commencement of Benefits................ 60 6. Treatment During Subsequent Participating Company Employment.. 61 7. Treatment During Employment Covered By Mandatory Portability Agreement................................................. 65 8. Notice of Retirement Eligibility.............................. 66 9. Pension Funding Policy and Method............................. 66 10. Maximum Pensions.............................................. 68 11. Pension Plan Termination Arrangements......................... 78 12. Disability Pension Payments................................... 85 SECTION 5. DEATH BENEFITS 1. Active Employee Death Benefit................................. 86 2. Retiree Death Benefit......................................... 86 3. Eligible Beneficiaries........................................ 88 a. Mandatory Beneficiaries................................... 89 b. Discretionary Beneficiaries............................... 89 c. Beneficiary Designation................................... 90 d. Payment of Final Expenses................................. 90 4. Method of Payment............................................. 90 a. Payment on Death of Employee or Pensioner................. 90 b. Payment on Death of Beneficiary........................... 91 c. Advance Payment........................................... 91 d. Payment of Interest....................................... 92 5. Death After Termination of Employment......................... 93 6. Claims........................................................ 93 7. Definition of Basic Annual Rate of Pay........................ 93 8. Charging of Payments.......................................... 94 9. Waiver of Death Benefit....................................... 94 TABLE OF CONTENTS Page SECTION 6. GENERAL PROVISIONS l. Rights to Pensions or Benefits................................ 96 2. Assignment or Alienation; Qualified Domestic Relations Orders. 96 3. Determination of Eligibility.................................. 99 4. Breaks in Service.............................................100 a. General Provisions - Except for Pension Participation and Vested Pensions.........................100 b. Pension Plan Participation................................103 c. Vesting Eligibility.......................................103 d. Accrual of Vested Pension.................................104 5. Leave of Absence..............................................106 FMLA Provisions........................................... 99 6. Layoff or Separation from Service under the Provisions of the SNET Management Severance Pay Plan........................108 7. Special Classification........................................109 8. Method of Payment.............................................109 9. Amounts Accrued Prior to Death................................109 l0. Payment to Others.............................................110 ll. Pension or Benefit Option During Disability...................110 l2. Multiple Participating Company Employment.....................111 l3. Merger or Consolidation.......................................111 l4. Annual Report.................................................111 15. Predecessor Plan Provisions...................................111 16. Prior Provisions of Plan......................................112 17. Unclaimed Benefits............................................112 18. Top Heavy Provisions..........................................112 19. Unemployment Compensation Act of 1992.........................117 SECTION 7. TRANSFER PROVISIONS WITH THE SNETPP.......................120 SECTION 8. CHANGES IN PLAN; TERMINATION OF PLAN......................121 SECTION l. PURPOSE The purpose of the SNET Management Pension Plan is to provide for the payment of definite amounts to employees of the Corporation and its participating Subsidiaries when they are retired from service, or, in the event of death, to their dependent relatives, or, in certain cases, to their annuitants, or to former employees when they become entitled to deferred vested pension payments, or in certain cases, to their annuitants. Page 1 SECTION 2. DEFINITIONS SNETMPP 1. The term "ADEA" shall mean the Age Discrimination in Employment Act of 1967 as amended in 1978 and as it may be amended from time to time. 2. The words "bargaining unit employee" shall mean an employee who is a member of the bargaining unit. 3. The words "Chairman of the Board", "President", "Chief Executive Officer" and "Board of Directors" or "Board" shall mean the Chairman of the Board of Directors, President, Chief Executive Officer and the Board of Directors, respectively, of the Company. 4. The word "Committee" shall mean the Employees' Benefit Committee appointed by the Company to administer the Plan or any Predecessor Plan. 5. The word "Company" shall mean The Southern New England Telephone Company, a Connecticut corporation, or its successors; and where applicable, the Board, a committee thereof, or its authorized representatives. 6. The word "Corporation" shall mean Southern New England Telecommunications Corporation. 7. The words "defined benefit pension plan" shall mean a pension plan as defined in Section 3(35) of the Pension Act. 8. The word "employee" shall mean any individual, who receives a regular and stated compensation, other than a pension or retainer, from a Participating Company, and who is classified as a regular or provisional regular management employee (other than a bargaining unit employee temporarily promoted to a management employee position for one year or less), or who prior to January 1, 1993 was classified as a temporary management employee. Any individual who is employed on or after January 1, 1993 on a temporary basis through the SNET Job Bank Program (herein referred to as a "job bank employee") shall not be considered an employee under this Paragraph 8, Paragraph 1(e) of Section 4, or any other provision of this Plan, except as otherwise provided in Paragraph 6 of Section 4 or Paragraph 4(c) and (d) of Section 6. Any individual who is Page 2 SECTION 2. DEFINITIONS (Continued) SNETMPP treated as an employee solely because of the provisions of Section 414(n) of the Internal Revenue Code or any regulations thereunder, shall not be considered an employee under this Paragraph 8, Paragraph 1(e) of Section 4, or any other provision of this Plan. 9. The words "Former Interchange Company" shall mean any company with which the Company had an interchange agreement either directly or indirectly prior to January 1, 1985. 10. The expression "hour of service" shall mean an hour for which an employee is paid, in accordance with Section 2530.200b-2(a) of the U.S. Department of Labor Rules and Regulations for Minimum Standards for Employee Pension Benefit Plans, which provides: (l) An hour of service is each hour for which an employee is paid, or entitled to payment, for the performance of duties for the employer during the applicable computation period. (2) An hour of service is each hour for which an employee is paid, or entitled to payment, by the employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. Notwithstanding the preceding sentence: (i) No more than 50l hours of service are required to be credited under this paragraph (2) to an employee on account of any single continuous period during which the employee performs no duties (whether or not such period occurs in a single computation period); (ii) An hour for which an employee is directly or indirectly paid, or entitled to payment, on account of a period during which no duties are performed is not required to be credited to the employee if such payment is made or due under a plan maintained solely for the purpose of complying Page 3 SECTION 2. DEFINITIONS (Continued) SNETMPP with applicable workers' compensation, or unemployment compensation or disability insurance laws; and (iii) Hours of service are not required to be credited for a payment which solely reimburses an employee for medical or medically related expenses incurred by the employee. (3) An hour of service is each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the employer. The same hours of service shall not be credited both under Paragraph (l) or Paragraph (2), as the case may be, and under this Paragraph (3); and in accordance with Section 2530.200b-2(b) and (c) of such Rules and Regulations; except where a more liberal benefit provision may apply. 11. The words "management employee" shall mean an employee who is not a member of the bargaining unit. 12. The words "Management Pension Fund Account" shall mean the account in the SNET Pension Trust Fund reflecting the equitable interest of the SNET Management Pension Plan. 13. The words "Mandatory Portability Agreement" or "MPA" shall mean the agreement dated January 1, 1985 entered into by American Information Technologies Corporation, American Telephone and Telegraph Company, Bell Atlantic Corporation, Bell Communications Research, Inc., BellSouth Corporation, Cincinnati Bell Telephone Company, NYNEX Corporation, Pacific Telesis Group, The Southern New England Telephone Company, Southwestern Bell Corporation, and U S West, Inc. which is intended to assure compliance with the provisions of the Mandatory Portability Legislation in Section 559 of the Tax Reform Act of 1984. 14. The term "Normal Retirement Age" shall mean the later of age 65 or the fourth anniversary of the time the participant commenced participation in the Plan. There shall be no mandatory retirement age for employees except as Page 4 SECTION 2. DEFINITIONS (Continued) SNETMPP otherwise provided by applicable state law (to the extent not preempted by the ADEA), and except for those employees referred to in Section 12(c)(l) of the ADEA for whom the mandatory retirement age shall be age 65 or at such later time as may be permissible under such section of the ADEA and except for those employees for whom age is a bona fide occupational qualification within the meaning of Section 4(f)(1) of the ADEA for whom the mandatory retirement age shall be at such time as may be applicable under the ADEA. 15. The term "Participating Company" shall mean the Corporation, or any Subsidiary of the Corporation which shall have requested and received approval by the Board of Directors of the Company, to participate in the Plan. 16. The words "Pension Act" shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time. 17. The words "Pension Fund Account" shall mean the account in the SNET Pension Trust Fund reflecting the equitable interest of the SNET Pension Plan. 18. The word "Plan" shall mean this SNET Management Pension Plan (SNETMPP). The words "Pension Plan" shall mean that part of the Plan which deals with service, disability and deferred vested pensions. The words "Death Benefit Plan" shall mean those parts of the Plan which deal with such death benefits. The words "Plan Year" shall mean a calendar year which begins January 1 and ends December 31. 19. The words "Predecessor Plan" shall mean the Pension Plan and/or Death Benefit Plan provisions of the Company's Plan for Employees' Pensions, Disability Benefits and Death Benefits as such plan existed from time to time prior to October l, l980. 20. The words "Review Committee" shall mean the Employees' Benefit Claim Review Committee, consisting of one or more persons who are not members of the Employees' Benefit Committee. 21. The term "SNETPP" shall mean the SNET Pension Plan. Page 5 SECTION 2. DEFINITIONS (Continued) SNETMPP 22. The word "Subsidiary" shall mean any corporation, partnership or other entity of which at least 50% of the voting stock is owned directly or indirectly by the Corporation. "Voting Stock" shall mean securities (or other ownership interest) of which the holders are ordinarily entitled to vote for the election of directors (or similar board, if not a corporation) of the entity. 23. The expression "term of employment" or "credited service", except as expressly limited or stated elsewhere in the Plan, shall mean 1) a period of continuous employment of an employee in the service of one or more Participating Companies, or 2) a period of continuous employment of an employee, in the service of one or more interchange companies or non-covered companies as defined in the Mandatory Portability Agreement (MPA), whether before or after January 1, 1985, as determined in accordance with the MPA, provided employment with a Participating Company commenced on or after January 1, 1985; or 3) a period of continuous employment of an employee in the service of one or more Former Interchange Companies before January 1, 1985 provided employment with a Participating Company commenced after the completion of such service but before January 1, 1985 with no subsequent period of employment with any Former Interchange Company prior to January 1, 1985. 24. The expression "year of service," for determining Pension Plan participation and eligibility for a deferred vested pension, shall mean a computation period in which an employee completes l000 hours of service. For the purpose of determining l000 hours of service, an employee (including a job bank employee) will be deemed to have completed 45 hours of service for each week in which he completes one or more hours of service on each business day of that week; except that in the case of any employee (including a job bank employee) who is a part-time employee, or who was hired prior to January 1, 1993 for a period not exceeding three consecutive weeks and who was not Page 6 SECTION 2. DEFINITIONS (Continued) SNETMPP employed for more than 30 days in a year (previously referred to as an occasional employee), such employee will be deemed to have completed l0 hours of service for each day in which he completes one or more hours of service. For the purpose of determining a year of service, there shall be counted an employee's service (i) included in the term of employment as defined in Paragraph 23 of this Section 2, and (ii) with any company, not referred to in Paragraph 22, of which 80 percent or more of the voting stock is owned directly or indirectly by the Corporation. In addition, for the purpose of determining a year of service for vesting eligibility only, there shall also be counted an employee's service with a Participating Company which is not otherwise included in the term of employment as defined in Paragraph 23 of this Section 2. 25. The use in this Plan of personal pronouns of the masculine gender is intended to include both the masculine and feminine genders. Page 7 SECTION 3. ADMINISTRATION SNETMPP l. The Company shall be Plan Administrator and the Sponsor of the Plan as those terms are defined in the Pension Act. The Board shall appoint (a) an Employees' Benefit Committee (herein referred to as "Committee") consisting of not less than three or more than eight persons, having the administrative responsibilities in this Section 3, and (b) an Employee Benefits Funding and Investment Committee (herein referred to as "EBFIC"), having the responsibilities described below, and (c) one or more trustees which, except as otherwise provided herein, shall be responsible for holding and managing assets of the Plan and paying pensions and death benefits payable therefrom. The EBFIC may appoint one or more investment managers to manage all or portions of the assets of the Plan. The EBFIC may issue general or specific investment directions and guidelines to trustees and investment managers; and may also issue specific directions to them for investment in investment companies or trusts and companies or trusts that hold or propose to hold two or more parcels of real property or interests therein. The EBFIC may invest, or direct a trustee to invest, all or a portion of the Plan's assets in contracts issued by insurance companies, including contracts under which the insurance company holds Plan assets in a separate account or commingled separate account managed by the insurance company. The EBFIC may direct or authorize a trustee to invest all or a portion of the Plan's assets in a group trust fund or funds established for the purpose of commingling assets of participating trusts, in which event the instrument of trust creating any such group trust fund, to the extent of the Plan's equitable share thereof, shall be deemed to have been adopted as a part of the Plan for purposes of Section 40l(a) of the Internal Revenue Code of l986 or any corresponding provision of any subsequent federal tax law. The EBFIC may authorize a trustee to invest part of the Plan's assets in deposits with such trustee bearing a reasonable interest rate. The EBFIC shall establish and carry out funding policies and methods. Page 8 SECTION 3. ADMINISTRATION (Continued) SNETMPP 2. a. The Committee shall have the specific powers elsewhere herein granted to it and shall have such other powers as may be necessary in order to enable it to adminster the Plan, except for powers herein granted or provided to be granted to others. b. The Committee shall adopt such By-Laws and rules of procedure as it may find appropriate, subject to the approval of the Chairman of the Board or, at any time there is no Chairman, the President. c. The Committee shall be empowered to employ a Secretary and such assistants as may be required in the administration of the Plan. The Secretary is hereby designated as agent for service of legal process with respect to any claims arising under the Plan. d. The Committee may appoint one or more Departmental or Area Benefit Committees or a Secretary or any individual of the Committee's choosing which shall have such authority with respect to claims for benefits of employees of the Participating Companies as may be delegated by the Committee. e. The Committee or Departmental or Area Benefit Committee or Secretary or any individual, to the extent such authority has been delegated, shall grant or deny claims for benefits under the Plan with respect to employees of the Participating Companies and authorize disbursements according to this Plan. All claims for benefits must be submitted in writing. Adequate notice, pursuant to applicable law and prescribed Company practices, shall be provided in writing to any participant or beneficiary whose claim has been denied, setting forth the specific reasons for such denial. 3. a. The Committee shall serve as the final review committee, under the Plan and the Pension Act, for the review of all appeal claims by participants whose initial claims for benefits have been denied, in whole or part, by the Committee or a Departmental or Area Benefit Committee or Secretary or individual appointed by the Committee as provided above. Page 9 SECTION 3. ADMINISTRATION (Continued) SNETMPP b. Any participant whose claim for benefits has been denied, in whole or part, may, (and must for the purpose of seeking any further review, including judicial review, of a decision or for the purpose of determining any entitlement to a benefit under the Plan), within 60 days after receipt of notice of denial, submit a written request for review of the decision denying the claim. In such case, the Committee, shall: (i) make a full and fair review of such decision within 60 days after receipt of the written request for review, or within an additional 60 days, provided the claimant is notified of the delay and the reasons for requiring such additional time; and (ii) notify the claimant in writing of the review decision, specifying the reasons for such decision. c. Any participant whose claim for benefits has been denied shall have such further rights of review as are provided in Section 503 of the Pension Act and regulations promulgated thereunder, and the Committee, or any Departmental or Area Benefit Committee or Secretary or any other individual, as applicable, appointed by them shall retain such right, authority and discretion as is provided in or not expressly limited by said Section 503 of the Pension Act and the regulations thereunder. 4. The Employees' Benefit Claim Review Committee for decisions made prior to July 13, 1994, and the Employees' Benefit Committee for decisions made on or after July 13, 1994, shall have such powers as may be necessary to determine conclusively for all parties any and all questions arising from the administration of the Plan and shall have sole and complete discretionary authority and control to manage the operation and administration of the Plan, including, but not limited to, the determination of all questions relating to eligibility for participation and benefits, interpretation of all Plan provisions, determination of the amount and kind of benefits payable to any participant, spouse or beneficiary, and Page 10 SECTION 3. ADMINISTRATION (Continued) SNETMPP construction of disputed or doubtful terms. Such decision shall be conclusive and binding on all parties and not subject to further review. 5. The expenses of the Committee, the EBFIC, or the Departmental or Area Benefit Committee or the Secretary, or any other individual appointed by the Committee as provided above, in administering the Plan shall be charged in accordance with Company practices. 6. The Company, the Committee, the EBFIC and the Secretary are each a named fiduciary as that term is used in the Pension Act with respect to the particular duties and responsibilities herein provided to be allocated to it. 7. The Company may allocate responsibilities for the operation and administration of the Plan consistent with the Plan's terms. The Company and other named fiduciaries may delegate any of their responsibilities hereunder by designating in writing other persons to carry out their respective responsibilities (other than trustee responsibilities the delegation of which may be limited by law) under the Plan, and may employ persons to advise them with regard to any such responsibilities. 8. Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan (including service both as a trustee and as an administrator). Page 11 SECTION 4. PENSIONS SNETMPP l. Eligibility a. Service Pension All employees who have reached the age of sixty-five years and whose terms of employment have been at least ten years, all employees who have reached the age of fifty-five years and whose terms of employment have been at least twenty years, all employees who have reached the age of fifty years and whose terms of employment have been at least twenty-five years, and all employees regardless of age whose terms of employment have been at least thirty years shall, if they leave the service of a Participating Company for any reason other than transfer to another Participating Company, be retired from active service and, upon such retirement, shall be granted service pensions. b. Deferred Vested Pension (i) Except as otherwise specified in this Paragraph l(b) and in Paragraph 6 of this Section 4 and in Section 6, any participant as defined in Paragraph l(e) of this Section 4 who has completed five or more years of service, computed in accordance with Paragraph 3 (c) of Section 6, beginning with the calendar year in which the participant attained the age referred to in Section 203(b)(l)(A) of the Pension Act, namely age eighteen and any participant who is in the service of a Participating Company at the Normal Retirement Age or later, who leaves the service of a Participating Company on or after January 1, 1989 for any reason other than transfer to another Participating Company, and who is not eligible for a service pension under Paragraph 1(a) of this Section 4 on account of the same period of employment, shall be eligible for a pension which shall commence upon his sixty-fifth birthday or the day following the termination of his employment with a Participating Company, whichever is later, and shall be referred to in the Plan as a deferred vested pension. Employees whose participation in this Plan terminated on the Closing Date Page 12 SECTION 4. PENSIONS (Continued) SNETMPP of the sale of SNET Fibercom, Inc. and LIGHTNET shall be vested in any accrued pension benefit for which each such employee is entitled, with such benefit calculated and distributed in accordance with the provisions of this Plan. (ii) In lieu of using the rule of eligibility for a deferred vested pension stated above in this Paragraph l(b)(i), any employee is permitted to elect to use any rule of eligibility previously in effect, under the Predecessor Plan, during any part of his term of employment. (iii) A person who leaves the service of a Participating Company and who is eligible for a deferred vested pension at normal retirement age and whose term of employment has been twenty or more years may elect in writing to have his deferred vested pension payable early in reduced amounts. An election once made to have a deferred vested pension payable early in reduced amounts shall be irrevocable. In the event of such an election, the amount of deferred vested pension otherwise payable at normal retirement age under this Plan to such person shall be reduced by multiplying such amount of deferred vested pension otherwise payable by the applicable early retirement factor in the table set forth in this Subparagraph 1(b)(iii). If the term of employment has been twenty or more years but less than twenty-five years, eligibility for such early payment shall commence upon his fifty-fifth birthday, and if the term of employment has been twenty-five or more years, eligibility for such early payment shall commence upon his fiftieth birthday. Page 13 SECTION 4. PENSIONS (Continued) SNETMPP Early Retirement Factors Based Upon Completed Years and Months of Age Completed At Commencement of Deferred Vested Pension Years Completed Months of Age of Age 0 l 2 3 4 5 6 7 8 9 10 11 50 .24 .24 .24 .25 .25 .25 .25 .25 .25 .26 .26 .26 5l .26 .26 .26 .27 .27 .27 .27 .27 .27 .28 .28 .28 52 .28 .28 .29 .29 .29 .29 .30 .30 .30 .30 .31 .31 53 .31 .31 .32 .32 .32 .32 .33 .33 .33 .33 .34 .34 54 .34 .34 .35 .35 .35 .35 .36 .36 .36 .36 .37 .37 55 .37 .37 .38 .38 .38 .38 .39 .39 .39 .39 .40 .40 56 .40 .40 .41 .41 .41 .42 .42 .42 .43 .43 .43 .44 57 .44 .44 .45 .45 .45 .46 .46 .46 .47 .47 .47 .48 58 .48 .48 .49 .49 .50 .50 .5l .5l .5l .52 .52 .53 59 .53 .53 .54 .54 .55 .55 .56 .56 .56 .57 .57 .58 60 .58 .59 .59 .60 .60 .6l .62 .62 .63 .63 .64 .64 61 .65 .66 .66 .67 .67 .68 .69 .69 .70 .70 .7l .7l 62 .72 .73 .73 .74 .75 .75 .76 .77 .77 .78 .79 .79 63 .80 .8l .82 .82 .83 .84 .85 .85 .86 .87 .88 .88 64 .89 .90 .9l .92 .93 .94 .95 .95 .96 .97 .98 .99 65 l.00 (iv) The Committee shall notify each employee who leaves the employ of such Participating Company (except to take employment without a break in service with another Participating Company) of his eligibility, if any, for a deferred vested pension by mailing, within a reasonable time after his leaving, a notice to his last known address as shown on the Participating Company's records. (v) It shall be the responsibility of each person eligible to receive payment of a deferred vested pension to file written request therefor with the Committee not earlier than one hundred fifty days prior to a prospective date for commencement of payment specified therein. Except for months Page 14 SECTION 4. PENSIONS (Continued) SNETMPP following termination of employment which are after the normal retirement age, no deferred vested pension payment shall be made for any month prior to the month in which the Committee receives such written request. (vi) 1991 Special Early Commencement of Deferred Vested Pension Notwithstanding any other provision of the Plan, the pension benefit of any participant who elects, during the period July 31, 1991 through September 13, 1991, inclusive, to terminate employment and who terminates employment during the period July 8, 1991 through October 18, 1991, inclusive, with eligibility for a deferred vested pension at normal retirement age may elect in writing to have his deferred vested pension commence upon the termination of employment in reduced amounts. An election once made under this Subparagraph (vi) to receive a deferred vested pension payable early in reduced amounts shall be irrevocable; provided, however, that should more than a specified number or percentage, as determined by the Company with the concurrence of the Committee, of any group of employees in the same department, the same level, the same job title and classification, or the same geographical location elect to retire or terminate employment in accordance with the provisions of this Subparagraph (vi) during the period from July 31, 1991 through September 13, 1991, inclusive, the Company, may, with the concurrence of the Committee, determine that a specified number of such participants, the identity of whom shall be based on seniority, may delay their termination of employment for a period ending no later than December 20, 1991 and retain eligibility for the 1991 Special Early Commencement provisions of this Subparagraph (vi). In the event of an election under this Subparagraph (vi), the amount of deferred vested pension otherwise payable at normal retirement age under this Plan to such participant shall be reduced by multiplying the amount of deferred vested pension otherwise Page 15 SECTION 4. PENSIONS (Continued) SNETMPP payable by the applicable 1991 special early retirement factor specified in the following table. 1991 SPECIAL EARLY COMMENCEMENT OF DEFERRED VESTED PENSION FACTORS BASED UPON COMPLETED YEARS AND MONTHS OF AGE AT COMMENCEMENT OF DEFERRED VESTED PENSION Completed Completed Months of Age Years of Age 0 1 2 3 4 5 6 7 8 9 10 11 Prior to 58 .50 58 .50 .50 .50 .50 .50 .50 .51 .51 .51 .52 .52 .53 59 .53 .53 .54 .54 .55 .55 .56 .56 .56 .57 .57 .58 60 .58 .59 .59 .60 .60 .61 .62 .62 .63 .63 .64 .64 61 .65 .66 .66 .67 .67 .68 .69 .69 .70 .70 .71 .71 62 .72 .73 .73 .74 .75 .75 .76 .77 .77 .78 .79 .79 63 .80 .81 .82 .82 .83 .84 .85 .85 .86 .87 .88 .88 64 .89 .90 .91 .92 .93 .94 .95 .95 .96 .97 .98 .99 65 1.00 c. Disability Pension Each employee who terminated employment prior to January 1, 1993 and whose term of employment had been fifteen or more years shall be a participant for the purposes of the disability pension provisions of the Plan. Any such participant who became totally disabled as a result of sickness or of injury, other than by accidental injury arising out of and in the course of employment by a Participating Company, shall upon leaving the service of such Participating Company by reason of such disability be granted a pension, which pension is designated a "disability pension"; provided, that if, at the time of such cessation of service, the employee is qualified for a service pension under Subparagraph (a) of this Paragraph l, a service pension shall be granted instead of a disability pension. Subject to the provisions of Subparagraph (d) of this Paragraph l, a disability Page 16 SECTION 4. PENSIONS (Continued) SNETMPP pension shall continue so long as the employee is prevented by such disability from resuming active service with a Participating Company. If the employee recovers sufficiently to resume active service, the disability pension shall be discontinued and if the employee reenters the service of a Participating Company at that time, the period of absence on disability pension shall be considered a leave of absence and not as a break in the continuity of the employee's service. d. Conversion from Disability to Service Pension Any person who attains normal retirement age while receiving a disability pension which commenced on or after January 1, 1976 shall be granted and retired with, in lieu of any other pension, a pension designated a service pension, in the same amount as the disability pension subject to the provisions of Paragraph 3(a) of this Section 4, with all the benefits under this Plan appertaining to service pensioners, and the disability pension shall be discontinued. e. Pension Plan Participation All employees who have reached the age referred to in Section 202(a)(l)(A)(i) of the Pension Act, namely age twenty-one, and whose years of service have been one year or more, shall be participants in the Pension Plan. f. Normal Retirement Age "Normal retirement age" is the later of age 65 or the fourth anniversary of the time the participant commenced participation in the Plan. g. Mandatory Retirement Age There shall be no mandatory retirement age for employees except as otherwise provided by applicable state law and except for those employees referred to in Section 12(c)(1) of the ADEA for whom the mandatory retirement age shall be age 65 and except for those employees for whom age Page 17 SECTION 4. PENSIONS (Continued) SNETMPP is a bona fide occupational qualification within the meaning of Section 4(f)(1) of the ADEA for whom the mandatory retirement age shall be at such time as may be applicable under ADEA. h. Pension Benefits at the Expiration of Sickness Disability Benefits Pension benefits for an employee who terminates employment at the expiration of Sickness Disability Benefits and is eligible to receive an immediate pension payable under the provisions of this Plan (including service, disability, disability service, and deferred vested pensions) shall not commence unless such an employee submits an Application for Pension form within 90 days of termination of employment; provided, further, that if such employee does not submit the Application form within such 90 day period, the employee will be treated as a deferred vested pensioner for the period from the termination of employment date until an Application form is submitted ("deferral") for all purposes (which means, for example, that such employee shall not be eligible for ad hoc pension increases and retiree benefit coverages), but in no event shall such deferral continue beyond such employee's consent to the receipt of the pension through submission of an Application form or attainment of age 65, whichever is earlier. At the time such employee either consents to the receipt of the pension or attains age 65, the employee shall be eligible to receive a service, disability or disability service pension and applicable retiree benefit coverages in accordance with the provisions of Section 4, or, if applicable, a deferred vested pension with no retiree benefit coverages unless such employee is otherwise eligible for such benefit coverages under the SNET disability benefit plans. i. Disability Service Pension Each employee who terminates employment on or after January 1, 1993 and whose actual term of employment had been fifteen or more years as of the Page 18 SECTION 4. PENSIONS (Continued) SNETMPP employee's termination of employment date shall be a participant for the purposes of the disability service pension provisions of the Plan, subject to the provisions of paragraph 1(h) of this Section 4. 1. Any such participant who has become totally disabled as a result of sickness or of injury, other than by accidental injury arising out of and in the course of employment by a Participating Company, shall upon leaving the service of such Participating Company by reason of such disability be eligible to commence receipt of a disability service pension beginning when such participant reaches age 65; provided, that if, at the time of such termination of employment, the employee is qualified for a service pension under this Plan, a service pension shall be granted upon termination of employment instead of eligibility for a disability service pension; and provided further that if such employee is eligible for the transitional retirement status provisions in Paragraph 1(j) of this Section 4, such employee shall be eligible to commence receipt of a disability service pension beginning when the transitional retirement status ends due to the attainment of the age and credited service requirements for a service pension. Eligibility for a disability service pension shall continue so long as the employee continues to be totally disabled under the provisions of the SNET sickness, accident or long term disability "LTD" plans for the period beginning upon termination of employment and ending on the employee's 65th birthdate (or at the end of the transitional retirement status where applicable), at which time such disability service pension shall become payable. The disability service pension will be calculated using the formula in effect at the date of termination plus any pension increases granted for retired employees receiving service pensions during the period in which LTD payments are Page 19 SECTION 4. PENSIONS (Continued) SNETMPP payable (i.e., the period following the employee's termination of employment date in which the employee continues to be disabled) until the disability service pension becomes payable, and such pension shall not be subject to the early retirement discount provisions of Paragraph 2(e) of this Section 4. If prior to the employee's 65th birthday, the employee is determined to be no longer totally disabled under the provisions of the SNET LTD plans, the employee will remain eligible for all provisions relating to the deferred vested pension under Subparagraph b of this Paragraph 1, and shall not be eligible for the disability service pension provisions. If the employee reenters the service of a Participating Company upon said determination that LTD benefits are no longer payable, the period of absence shall be considered a leave of absence and not as a break in the continuity of the employee's service. 2. Any such participant who has become totally disabled as a result of accidental injury or illness arising out of and in the course of employment by a Participating Company, shall upon leaving the service of such Participating Company by reason of such disability be eligible to commence receipt of a disability service pension beginning when such participant reaches age 65 or an earlier age, which age when combined with the employee's actual years of credited service at the termination of employment date would meet the service pension eligibility provisions of Paragraph 1(a) of this Section; provided, that if, at the time of such termination of employment, the employee is qualified for a service pension under this Plan, a service pension shall be granted upon termination of employment instead of eligibility for a disability service pension. Eligibility for a disability service pension shall continue so long as the employee continues to be Page 20 SECTION 4. PENSIONS (Continued) SNETMPP totally disabled (and prevented by such disability from resuming active service with a Participating Company or any company) for the period beginning upon termination of employment and ending on the employee's 65th birthdate or earlier commencement of such disability service pension payments. The disability service pension will be calculated using the formula in effect at the date of termination plus any pension increases granted for retired employees receiving service pensions during the period beginning on the employee's termination of employment date and ending when such disability service pension commences. If prior to the employee's commencement of a disability service pension, the employee is deemed no longer disabled pursuant to the Sickness and Accident Disability Benefit Plan or Workers' Compensation law, the employee will remain eligible for all provisions relating to the deferred vested pension under Subparagraph b of this Paragraph 1, and shall not be eligible for the disability service pension provisions. If the employee reenters the service of a Participating Company upon said determination that total disability benefits are no longer payable, the period of absence shall be considered a leave of absence and not as a break in the continuity of the employee's service. (j) Transitional Retirement Status Any employee who voluntarily or involuntarily terminates employment with a Participating Company between September 8, 1993 through December 31, 1995, inclusive, and who, based on the criteria described in Paragraph 1(a) of this Section 4, would have become eligible for a service pension after the termination of employment date but no later than December 31, 1995 if such employment had not terminated, shall be granted a transitional retirement status ("TRS") for the period Page 21 SECTION 4. PENSIONS (Continued) SNETMPP commencing on the day following the termination date and ending on the earlier of: (a) the date the employee would have first become eligible to retire with such service pension based upon the attainment of the age and/or credited service requirements; (b) death of the employee (with Automatic Survivor Annuity payments); (c) the date of rehire by a Participating Company (excluding periods of temporary employment through the SNET Job Bank Program), or, the date of hire by a company when such employment is covered under the Mandatory Portability Agreement; or (d) election by the employee to commence receipt of a Cash Balance Account distribution based on the SNET Pension Plan provisions, where applicable, effective prior to the end date of the TRS. The employee shall be eligible for retiree benefits otherwise accorded to those employees who are eligible to retire with a service pension in accordance with Paragraph 1(a) of this Section 4 for the continuous period commencing on the termination of employment date to the date the TRS is ended for any reason; provided, however that any service pension payments for which the employee may become eligible shall not commence until the day following the end date of the TRS. (i) In the event the TRS ends due to Subparagraph (a) above, the calculation of the service pension payable at end of the TRS shall be based on the employee's actual age at the end of the TRS, and the credited service and pension formula in effect as of the termination of employment date; provided, however, that for purposes of determining the early retirement discount for pensions commencing prior to age 55, the employee's age will be based on Page 22 SECTION 4. PENSIONS (Continued) SNETMPP the employee's actual age as of the date the pension becomes payable (i.e., the end of the TRS), and the employee's actual credited service as of the termination of employment date. The former employee will not be eligible for pension formula changes, downsizing offers, or pension increases, if any, which are approved while on the TRS. If such employee was receiving disability benefits under the Sickness and Accident Disability Benefit Plan or Workers' Compensation benefits when such employee terminated employment with SNET, and such employee remains totally disabled until the end of the TRS pursuant to the provisions of Subparagraph (a) above, such employee shall become eligible for the disability service pension provisions of Paragraph 1(i) of this Section 4. (ii) In the event the TRS is cancelled due to Subparagraph (b) above and prior to commencement of pension payments, the automatic survivor annuity pension benefits provided in Paragraph 3(d) of this Section 4 shall be payable immediately upon the employee's death to an eligible surviving spouse, with such pension payments calculated as if the employee had died on the last day of employment. (iii) In the event the TRS is cancelled due to Subparagraph (c) or (d) above, the employee shall immediately cease to be eligible for any retiree benefits, and any remaining benefit or pension entitlements shall be those accorded former employees eligible to receive a deferred vested pension as of the employee's termination of employment date. Page 23 SECTION 4. PENSIONS (Continued) SNETMPP (k) Service Beyond Age 70 1/2; Minimum Distribution Provisions Notwithstanding any provision of the Plan to the contrary, the distribution of an employee's Service or Deferred Vested Pension shall commence not later than April 1 of the calendar year following the calendar year in which such employee attains age 70 1/2 in accordance with the minimum distribution provisions of Code Section 401(a)(9) and the regulations thereunder, the provisions of which are incorporated herein by reference. An employee who is employed beyond age 70 1/2 and commences receipt of a pension under the provisions of this Paragraph (k) shall elect in writing during the 90 Day Election Period (described in Paragraph 3 of this Section 4) upon a form prescribed by the Committee, whether or not to have his pension made payable in reduced amounts to him for life and in lesser amounts thereafter to a surviving annuitant for life, subject to the Spousal Consent Requirement (described in Paragraph 3 of this Section 4). Such pension payments shall be payable in accordance with the provisions of Paragraph 5 of this Section 4. 2. Pension Amounts a. Effective Date Effective October 1, 1980, the monthly pension benefit for each employee who, on or after October 1, 1980, is retired on a pension under the provisions of Paragraph 1(a) or 1(c) of this Section, or who, on or after August 10, 1980, was retired on a pension under the provisions of Paragraph 1(a) or 1(c) of Section 4 of the Predecessor Plan shall be determined in accordance with the provisions set forth in this Paragraph 2. Page 24 SECTION 4. PENSIONS (Continued) SNETMPP b. Calculation of Monthly Pension Benefit (i) Pension Benefit Formula: The monthly pension benefit of each employee shall be determined by multiplying such employee's adjusted career income, as determined in Subparagraph 2(b)(ii), by one and six-tenths percentum (1.6%), and dividing the product of such calculation by twelve. (ii) Adjusted Career Income: 1. Except as provided hereinbelow, effective July 8, 1991 for retirements on or after July 8, 1991, the "adjusted career income," referred to in Subparagraph b(i), of each employee shall equal the greater of (A), (B), (C), (D), (E) or (F): (A) the sum of (i) the product of the employee's average annual compensation paid during the period from January 1, 1986 to December 31, 1990, inclusive, and such employee's term of employment as of December 31, 1990, plus (ii) such employee's compensation paid during all periods after December 31, 1990 which are included in the employee's term of employment; or (B) the sum of (i) the product of the employee's average annual compensation paid during the period from January 1, 1982 to December 31, 1986, inclusive, and such employee's term of employment as of December 31, 1986, plus (ii) such employee's compensation paid during all periods after December 31, 1986 which are included in the employee's term of employment; or (C) the sum of (i) the product of the employee's average annual compensation paid during the period from January 1, 1979 to December 31, 1983, inclusive, and such employee's term of employment as of December 31, 1983, plus (ii) such employee's compensation paid during all periods after December 31, 1983 which Page 25 SECTION 4. PENSIONS (Continued) SNETMPP are included in the employee's term of employment; or (D) the sum of (i) the product of the employee's average annual compensation paid during the period from October 1, 1977 to September 30, 1982, inclusive, and such employee's term of employment as of September 30, 1982, plus (ii) such employee's compensation paid during all periods after September 30, 1982 which are included in the employee's term of employment; or (E) the sum of (i) the product of the employee's average annual compensation paid during the period from October 1, 1976 to September 30, 1981, inclusive, and such employee's term of employment as of September 30, 1981, plus (ii) such employee's compensation paid during all periods after September 30, 1981 which are included in the employee's term of employment; or (F) the sum of (i) the product of the employee's average annual compensation paid during the period from January 1, 1975 to December 31, 1979, inclusive, and such employee's term of employment as of December 31, 1979, plus (ii) such employee's compensation paid during all periods after December 31, 1979 which are included in the employee's term of employment. The period referred to in clause (i) of (A), (B), (C), (D), (E) or (F) above shall hereinafter be referred to as the "averaging period". Notwithstanding any other provision of this Subparagraph 2(b)(ii)(1) above, for an employee who has no service prior to the applicable averaging period which is included in the employee's term of employment, the "adjusted career income" shall equal such employee's compensation for all periods included in the employee's term of employment. Page 26 SECTION 4. PENSIONS (Continued) SNETMPP 2. For purposes of determining an employee's average annual compensation for the applicable averaging period, as determined in accordance with Subparagraph 2(b)(ii)(1) above: (A) if during such averaging period there was any period included in the employee's term of employment for which the employee received no compensation, the employee shall be considered to have earned compensation during such non-compensated period at the same annual basic rate of pay which he earned immediately preceding such period; (B) if during such averaging period there was any period not included in an employee's term of employment, the employee shall be considered to have earned compensation during such non-included period equal to the amount of compensation which he earned for the most recent equivalent period of time preceding the applicable averaging period, for which he did earn compensation. 3. For purposes of determining an employee's compensation for all periods after the applicable averaging period, as determined in accordance with Subparagraph 2(b)(ii)(1), if after such applicable averaging period there was any period included in the employee's term of employment for which the employee received no compensation, the employee shall be considered to have earned compensation during such non- compensated period at the same annual basic rate of pay which he earned immediately preceding such period. (iii) Compensation: For purposes of this Paragraph 2, the term "compensation" shall mean an employee's (1) basic pay, differentials paid for night tours, differentials paid for temporary work in a higher classification, special project allowances if assignment commenced on or before November 30, 1983, area differentials, and the following incentive compensation actually paid before the employee's termination of employment date: Page 27 SECTION 4. PENSIONS (Continued) SNETMPP Earned for services performed during or before 1988 . Lump sum merit wage payments; . Incentive compensation for Directory or Marketing employees; . Payments under the SNET Management Short Term Incentive Plan; . Incentive compensation for the Company's Publishing employees; . Annual bonus payments for the Company's Network Marketing employees; . Quarterly bonus payments for the Company's Business Services employees; . Incentive compensation for SNET Cellular, Inc. and SNET MobileCom, Inc. employees; and . 1988 Corporate Performance Award. Earned for services performed after 1988: for management employees at or below the director or equivalent level of management of all Participating Companies except LIGHTNET and SNET Fibercom, the actual payment for all performance incentive compensation plans; and for those management employees above the director or equivalent level of management who terminate employment on or after December 8, 1993, the actual award earned and granted for services performed after 1988 under the SNET Executive Short Term Incentive Plan, and (2) basic pay, success sharing awards, differentials, wage incentives, commissions and other special payments used in computing an employee's monthly pension benefit under the SNETPP for any period of service an employee was covered by such plan if such service is included in the term of employment in computing such employee's monthly pension benefit under this Plan. For an employee who has any period of time during or after the applicable averaging period determined in accordance with Subparagraph 2(b)(ii) (1) above during which such employee receives sickness or accident disability benefits under the Sickness and Accident Disability Benefit Plan (or the predecessor of such plan), such employee's basic pay on any day during such period on disability benefits shall be considered as an amount which bears the same relationship to the position rate of the employee's job for such day, as the employee's basic pay immediately prior to the disability period bore to the position rate of such employee's job Page 28 SECTION 4. PENSIONS (Continued) SNETMPP immediately prior to the disability period. For an employee who has any period of time during or after the applicable averaging period determined in accordance with Subparagraph 2(b)(ii)(1) above during which such employee is on a Committee-approved leave of absence to a company which is not a Participating Company of SNETMPP during such period, such employee's compensation for the period on such a leave shall be the compensation, as defined in this Subparagraph 2(b)(iii), from such company. Non-cash awards such as trips, appliances, gift certificates, etc., and associated tax gross-up payments where applicable, which may be mandated by the Internal Revenue Code to be imputed to employees as taxable income, do not meet this Plan's definition of Compensation eligible for inclusion in pension calculations and shall be excluded from pension calculations. In addition, cash payments made to employees which do not meet the requirements of incentive compensation payments under the departmental incentive compensation payment plans are not eligible for inclusion in pension calculations. (iv) Notwithstanding any other provision of this Paragraph 2, if during any period or periods of time on or after October 1, l980 and during or prior to the applicable averaging period, determined in accordance with Subparagraph 2(b)(ii)(1) above, an employee was employed on a part-time basis, the compensation, as defined in Subparagraph 2(b)(iii) above, of such an employee for any period of part-time employment during the applicable averaging period shall be considered to be the compensation such employee would have been eligible to receive as an equivalent full-time employee during such period of part-time employment; and provided, further, that the term of employment of an employee who was employed on a part-time basis during any period or periods of time on or after October 1, l980 and during or prior to the applicable averaging period shall be prorated, for such Page 29 SECTION 4. PENSIONS (Continued) SNETMPP period or periods of part-time employment, based on a ratio which shall be determined by dividing the number of such employee's regular work hours as noted on the Participating Company's official service record card, excluding any overtime hours, during such period of part-time employment by the number of hours, excluding any overtime hours, the employee would have worked had such employee been a regular full-time employee during such period of part-time employment; and provided, further, that for purposes of determining the adjusted career income under Subparagraph 2(b)(ii)(l)(C), the employee's average annual compensation shall equal the greater of (l) the amount determined using the rule set forth above in this Subparagraph 2(b)(iv) or (2) the amount determined without reference to the rule set forth above in this Subparagraph 2(b)(iv). c. Coverage Under SNETPP The monthly pension benefit of an employee who was previously covered under the SNETPP shall equal the sum of (l) the pension benefit determined, for all credited service under such other plan, in accordance with the provisions of such other plan, as in effect on the last date such employee was covered by such other plan, plus (2) the pension benefit determined, for all credited service such employee was covered by this Plan, in accordance with the provisions of this Plan. Upon completion of three years continuous employment under this Plan, such employee shall receive the greater of the pension benefit determined pursuant to the preceding sentence or the pension benefit determined solely in accordance with the provisions of this Plan for all credited service under both plans. An employee's Cash Balance Account ("CBA") shall continue to be available for distribution in accordance with the interest rate and distribution provisions of the SNETPP; provided, however, the monthly pension benefit payable under this plan shall be reduced by the annuity value of such CBA at the time of the CBA Page 30 SECTION 4. PENSIONS (Continued) SNETMPP distribution, whether such CBA is payable in a lump sum payment or as an annuity, to the extent required to provide that such employee receives the pension benefit payable in accordance with the provisions of this Plan and the SNETPP. For purposes of determining an employee's term of employment under such other plan, there shall be counted only the term of employment under such other plan as of the last date the employee was covered by such other plan, which would have been counted by such other plan had the employee been covered by such other plan during the period the employee is covered by this Plan. d. Coverage Under Predecessor Plan or Prior Service Under this Plan or in accordance with the Mandatory Portability Agreement The pension benefit of an employee who was previously covered by the Predecessor Plan, or by a different formula or provision previously available under this Plan, or, if eligible for the Mandatory Portability Agreement ("MPA"), by a plan maintained by a company subject to the MPA, shall equal the sum of (l) the pension benefit determined, for all prior credited service under such other plan or under a previous formula or provision of this Plan, in accordance with the provisions of such other plan or formula, as in effect on the last date such employee was covered by such other plan or formula, plus (2) the pension benefit determined, for all credited service during which such employee was covered by this Plan, in accordance with the provisions of this Plan. Upon completion of three years of continuous employment under this Plan, such employee shall receive the greater of the pension benefit determined pursuant to the preceding sentence or the pension benefit determined solely in accordance with the provisions of this Plan for all credited service under this plan and all credited service under such other plan, or all credited service under a previous formula or provisions of this plan. Page 31 SECTION 4. PENSIONS (Continued) SNETMPP e. Early Retirement Discount The monthly pension benefit, determined in accordance with the provisions of this Paragraph 2, for each employee who is granted a service pension for reasons other than total disability as a result of sickness or injury, shall be reduced by one-half percentum (0.5%) for each calendar month or part thereof by which his age at time of retirement is less than 55 years, except that each employee retired with thirty (30) or more years of credited service shall receive a monthly pension allowance reduced by one-quarter percentum (0.25%) for each calendar month or part thereof by which such employee's age at the time of retirement is less than 55 years. (i) Pension Deferral Option (PDO): An employee who terminates employment on or after September 8, 1993 and whose pension payments will be reduced in accordance with the early retirement discount provisions are eligible for the pension deferral option (PDO) provisions. The PDO automatically begins on the day following an eligible employee's termination of employment date, and ends on the earliest of: 1) the date the employee voluntarily elects to begin receiving his discounted service pension, 2) the employee's 55th birthday, 3) the date the employee is rehired by SNET as a regular or provisional regular employee or by a former Bell System Company if such employee is covered by the Mandatory Portability Agreement, 4) the date of the employee's death, or 5) the date an employee elects to commence receipt of a Cash Balance Account distribution. For employees who are eligible for the transitional retirement status ("TRS") and whose TRS ends pursuant to Subparagraph (a) of Paragraph 1(j) of this Section 4, the election of whether to begin or defer commencement of the pension payments shall be made at the end of the TRS when such individual attains eligibility for a discounted service pension. If Page 32 SECTION 4. PENSIONS (Continued) SNETMPP an employee does not meet the eligibility criteria for a discounted service pension as described in this Paragraph 2(e), such employee shall not be eligible for the PDO. While the PDO is in effect, the employee shall be treated as a retiree for all retiree benefit coverages except that the monthly pension payments will not be payable until the retiree elects to begin receiving such payments, or reaches age 55, whichever comes first. Pension payments shall be payable beginning the day following the employee's termination of employment date if the employee notifies SNET in writing of his election to commence such pension payments, on a form to be provided for such purpose, prior to the termination of employment date or within the 90 day election period (as defined in Section 4, Paragraph 3(ii)), whichever is later. If the employee elects to begin receiving his pension payments after the 90 day election period, the pension payments shall be payable beginning the day SNET receives the election form. If the retiree should die prior to commencement of the pension payments, survivor annuity pension benefits shall be payable immediately upon the death of the employee to the spouse, if any, to which the employee was legally married on the date of employee's death. The surviving spouse's pension payments will be calculated as if the employee had elected to commence receipt of the pension payments on the date of employee's death, and the early retirement discount will apply based on the employee's actual age on that date. f. Deferred Vested Pension Amount The monthly pension benefit for each person eligible for a deferred vested pension under the provisions of Paragraph 1(b) of this Section 4 shall be calculated exclusively in accordance with the provisions specified Page 33 SECTION 4. PENSIONS (Continued) SNETMPP as applicable to those receiving a pension under Paragraph 1(a) or 1(c) of this Section 4 effective as of the date such person leaves the service of a Participating Company other than for reasons of transfer to another Participating Company, and, in any case, as if such person had retired on such date and no recomputation of the pension shall be made after such date or as a result of amendments made to this Plan subsequent to such date. An employee who leaves the service of a Participating Company with eligibility for a deferred vested pension in accordance with Paragraph l(b) of this Section but is not entitled to any other class of pension shall not be considered a pensioner or a retired employee. g. No Reductions Regardless of the application of any of the provisions of this Paragraph 2 of Section 4, in no event shall the total monthly pension benefit of any employee determined as of any time be less than the total monthly pension benefit of such employee determined as of any earlier time under this Plan, the SNETPP, any Predecessor Plan, or to the extent an employee's service with a company covered by the Mandatory Portability Agreement ("MPA") is recognized, the plan maintained by such company. h. Pension Benefits Under Other Plans The pension benefit otherwise determined under this Paragraph 2 with respect to an employee shall be reduced by such employee's pension allowance under the SNETPP or a plan maintained by a company covered by the MPA. i. Service Beyond Normal Retirement Age Service after the last day of the month in which an employee attains the Normal Retirement Age shall be credited in determining entitlement to or computation of the amount of a pension under this Plan. Page 34 SECTION 4. PENSIONS (Continued) SNETMPP j. 1989 Special Increase (i) Effective January 1, 1989, the monthly service and disability pension payments, as determined under this Paragraph 2 and, if applicable, Paragraph 3 of this Section 4, of persons retired prior to December 31, 1988 shall be increased by one forty-second of 6.25% for each calendar month or part thereof from July 1, 1985 or the effective date of their pension, whichever is later, to December 31, 1988, inclusive. No increase shall be made in deferred vested pensions under Paragraph 1(b) of this Section 4. (ii) For purposes of this Subparagraph (j), references to provisions of this Plan shall also be deemed to refer to comparable provisions of the Predecessor Plan. k. Minimum Benefit Notwithstanding any other provision of the Plan and only for purposes under the Plan of (i) determining a participant's eligibility for a service pension, or a disability pension, and for participants with five years of service or more as of November 1, 1987, eligibility for a deferred vested pension, (ii) calculating the amount of a participant's pension, and (iii) determining the application and amount, if any, of the early retirement discount under Subparagraphs 2(e) or 1(b)(iii) of Section 4, a participant's eligibility for a pension (in accordance with (i) above) shall be based on, and the amount of a participant's pension benefit shall equal, the greater of the eligibility and benefit determined on the basis of either (A) the provisions of the Plan as of any applicable time, without reference to this Subparagraph 2(k), or (B) the participant's years of service, term of employment and age as of November 1, 1987 (including service after the last day of the month in which an employee attains the Normal Retirement Age) increased by five years, not taking into account any Plan amendments or any compensation paid to the participant on or after November 1, 1987; provided, Page 35 SECTION 4. PENSIONS (Continued) SNETMPP however, that this Subparagraph 2(k) shall not apply to any individual who is not a participant in the Plan as of November 1, 1987 nor any individual who is at the department level or equivalent fifth level of management or above on November 1, 1987. l. 1987 Special Increase Notwithstanding any other provision of the Plan, the pension benefit of any participant who elects, during the period October 1, 1987 through November 16, 1987, inclusive, to retire and retires with a service pension during the period of November 1, 1987 through December 30, 1987, inclusive, shall, as of the pension effective date, be increased by five percent from what such pension benefit would be without reference to this Subparagraph l; provided, however, that should more than a specified number or percentage, as determined by the Company with the concurrence of the Committee, of any group of employees in the same department, the same level, the same job title and classification, or the same geographical location elect to retire in accordance with the provisions of this Subparagraph 2(l) during the period from November 1, 1987 through December 30, 1987, inclusive, the Company, may, with the concurrence of the Committee, determine that a specified number of such participants, the identity of whom shall be based on seniority, may delay their retirement for a period ending no later than September 30, 1988 and retain eligibility for the five percent increase. A participant may elect with spousal consent, in lieu of receiving the five percent supplemental monthly pension benefit as described above, a lump sum amount, payable within ninety days of the date of retirement, equal to the actuarial present value of such five percent single life supplemental monthly benefit (without reference to whether such supplemental monthly benefit would be payable as a joint and survivor annuity). The lump sum amount described in the immediately preceding sentence shall be determined Page 36 SECTION 4. PENSIONS (Continued) SNETMPP by multiplying the supplemental monthly benefit amount by the applicable factor in the table set forth below in this Subparagraph 2(l). This Subparagraph 2(l) shall not apply to any individual who is at the department level or equivalent fifth level of management or above on November 1, 1987 or later. LUMP SUM CONVERSION FACTORS Applied to Supplemental Monthly Benefit Amount determined in Subparagraph 2(l) using an Interest Rate Basis of 7.50%. Actual Years of Age As Of Pension Effective Date Factor 40 148.99 41 147.95 42 146.84 43 145.66 44 144.43 45 143.14 46 141.79 47 140.37 48 138.88 49 137.32 50 135.67 51 133.92 52 132.07 53 130.12 54 128.08 55 125.94 56 124.94 57 123.78 58 122.45 59 120.93 60 119.28 61 117.48 62 115.52 63 113.44 64 111.23 65 108.95 66 106.56 67 104.01 68 101.38 69 98.72 70 95.96 m. Extension of Minimum Benefit Eligibility Provisions Notwithstanding any other provision of the Plan and only for purposes under the Plan of determining a participant's eligibility for a service pension, discounted service pension or disability pension for retirements effective on or Page 37 SECTION 4. PENSIONS (Continued) SNETMPP after July 8, 1991, a participant's eligibility for a pension shall be based on the greater of the eligibility determined on the basis of either (A) the provisions of the Plan as of any applicable time, without reference to this Subparagraph 2(m), or (B) the participants's years of service, term of employment and age as of November 1, 1987 (including service after the last day of the month in which an employee attains the Normal Retirement Age) increased by five years; provided, however, that this Subparagraph 2(m) shall not apply to any individual who is not a participant in the Plan as of July 8, 1991 nor any individual who is at the department level or equivalent fifth level of management or above as of such date. n. 1991 Special Increase Notwithstanding any other provision of the Plan, the pension benefit of any participant who elects, during the period July 31, 1991 through September 13, 1991, inclusive, to retire and retires with a service or discounted service pension during the period of July 8, 1991 through October 18, 1991, inclusive, shall have his service pension increased by ten percent from what such pension benefit would have been without reference to this Subparagraph 2(n) and without any reduction for early retirement; provided, however, that should more than a specified number or percentage, as determined by the Company with the concurrence of the Committee, of any group of employees in the same department, the same level, the same job title and classification, or the same geographical location elect to retire in accordance with the provisions of this Subparagraph 2(n) during the period from July 31, 1991 through September 13, 1991, inclusive, the Company may, with the concurrence of the Committee, determine that a specified number of such participants, the identity of whom shall be based on seniority, may delay their retirement for a period ending no later than December 20, 1991 and retain eligibility for the 1991 Special Increase; and provided further that this Subparagraph 2(n) shall not apply to any individual who is not a participant Page 38 SECTION 4. PENSIONS (Continued) SNETMPP in the Plan as of July 8, 1991 nor any individual who holds the title of senior vice president or above. A participant may elect with spousal consent, in lieu of receiving the ten percent lifetime increase in the monthly pension benefit (and any associated survivor annuity benefit) as described above, a benefit (which is the actuarial equivalent of the 10% lifetime annuity) of either (i) a twenty-five percent supplemental monthly pension benefit payable commencing at retirement for a maximum of sixty months or (ii) a forty percent supplemental monthly pension benefit payable commencing at retirement for a maximum of 36 months; provided, however, that if a participant elects (i) or (ii) above and dies prior to receiving the maximum monthly payments, a lump sum payment shall be made to the participant's estate equal to the difference between the supplemental monthly pension benefits paid as of the date of the participant's death, and the maximum supplemental monthly pension benefit the participant was eligible to receive. The pensions herein specified in this Paragraph 2 are subject to all applicable provisions of this Plan. Page 39 SECTION 4. PENSIONS (Continued) SNETMPP 3. Survivor Annuities Unless otherwise noted, the following provisions apply to the survivor annuities provisions in this Paragraph 3. i. Spousal Consent Requirement: An election to waive the survivor annuity provisions shall not take effect unless (1) the spouse consents in writing to waive the spouse's rights to a pension under the Plan and such waiver is notarized by a notary public or witnessed by a Plan representative, or (2) it is established to the satisfaction of the Committee that the spouse's consent cannot be obtained because of such circumstances as prescribed in the Internal Revenue Code and in regulations under the Internal Revenue Code. ii. 90 Day Election Period: The election period shall be the 90- day period prior to annuity starting date (commencement of pension payments), or the 90-day period following the date of mailing or personal delivery of a description of the survivor annuity to the employee, if later. iii. Written Explanation of Election and Consent: Upon notice of a participant's termination of employment, but no earlier than 90 days prior to such termination of employment, a participant shall be supplied with a written explanation of (a) the terms and conditions of the reduced 50 percent joint and survivor annuity, (b) the participant's right to elect a single-life pension in lieu of the reduced 50 percent joint and survivor annuity subject to the spouse's consent, (c) the participant's right to reinstate coverage under the reduced 50 percent joint and survivor annuity prior to the pension commencement date by revoking an election of a single-life pension, (d) the amount of the single-life and reduced joint and survivor annuities, and (e) the participant's right to defer receipt of pension distributions until attainment of normal retirement age. Page 40 SECTION 4. PENSIONS (Continued) SNETMPP iv. Annuity Starting Date; Consent to Receive Distributions: The annuity starting date is the first day of the first period for which an amount is paid as an annuity or any other form. For purposes of this plan, pension payments shall be payable beginning the day following the employee's termination of employment date if the employee notifies SNET in writing of his election to commence such pension payments and his survivor annuity election decision, on a form to be provided for such purpose, prior to the termination of employment date or within the 90 day election period, whichever is later. If the employee notifies SNET in writing of his election to begin receiving his pension payments after the 90 day election period, the pension payments shall be payable beginning the day SNET receives the election form. v. Alternate Payee: If a former spouse has been designated as an Alternate Payee through a qualified domestic relations order ("Order") for purposes of the survivor annuity provisions, the term 'spouse' as used in this Paragraph 3 shall incorporate such former spouse, unless otherwise noted herein. a. Fifty Percent Annuity Option - Service Pensions Applicability: An employee who retires and commences receipt of a service pension under the provisions of Paragraphs l(a) or 1(d) (regardless of any elections made at the time of retirement with a disability pension) or 1(i) or 1(j) of this Section 4, or who is employed beyond age 70 1/2 and commences receipt of a service pension under the provisions of Paragraph 1(k) of this Section 4 shall elect in writing during the 90 Day Election Period upon a form prescribed by the Committee, whether or not to have his service pension made payable in reduced amounts to him for life and in lesser amounts thereafter to a surviving annuitant for life, subject to the Spousal Consent Requirement. Page 41 SECTION 4. PENSIONS (Continued) SNETMPP Eligible Annuitant: The surviving annuitant may only be a spouse married to the employee on the pension commencement date or a parent, and shall be described in such affirmative election by name, date of birth, and address of residence. Reduced 50 Percent Joint and Survivor Annuity: In the event of an affirmative election within the 90 Day Election Period, or in the absence of any valid election, if the employee had a spouse on both the date of retirement and the pension commencement date, as required by law, the survivor annuity shall be deemed to have been elected, and the amount of service pension otherwise payable under this Plan to the retired employee shall be reduced to ninety percentum (90%) of such amount. The amount to be paid the annuitant for as long as such annuitant survives such employee shall be computed as of the time of retirement of such employee as an amount equal to fifty percentum (50%) of the reduced service pension payable to the employee. Continuation of Survivor Annuity Upon Conversion from Disability to Service Pension (Pursuant to Paragraph 1(d) of Section 4): Notwithstanding any other provision of the Plan, if such election is consistent with a previous election made at the time of retirement with a disability pension, the amount of disability pension payable to such employee on the day prior to reaching age 65 shall be the amount of the service pension payable upon the employee's 65th birthdate, and the amount to be paid the annuitant for as long as such annuitant survives such employee shall be the amount which would have been payable to such annuitant had the disability pensioner attained age 65 on the date of his death after conversion of his disability pension to a service pension pursuant to Paragraph 1(d) of this Section 4. Page 42 SECTION 4. PENSIONS (Continued) SNETMPP b. Survivor Annuity Option - Disability Pensioners (i) For terminations effective August 8, 1977 through December 31, 1992: Applicability: Any person who leaves the service of a Participating Company on or after August 8, 1977 and prior to January 1, 1993 and who is entitled to receive a disability pension pursuant to the provisions of Paragraph l(c) of this Section 4, shall elect in writing during the 90 Day Election Period prior to the commencement of such disability pension whether or not to have his pension made payable in reduced amounts for each month commencing at retirement and ending on the earlier of the retiree's 65th birthdate, recovery or death, subject to the Spousal Consent Requirement. Eligible Annuitant: The surviving annuitant may only be a spouse married to the disability pensioner on the pension commencement date or a parent, and shall be described in such affirmative election by name, date of birth, and address of residence. Reduced 50 Percent Joint and Survivor Annuity: In the event of an affirmative election within the applicable election period, or in the absence of any valid election, if the disability pensioner had a spouse on both the date of retirement and the pension commencement date, and accordingly, the survivor annuity is deemed to have been elected, the amount of pension otherwise payable under this Plan to the disability pensioner upon his retirement on disability pension shall be reduced to ninety percentum (90%) of such amount. The amount to be paid the annuitant for as long as such annuitant survives such pensioner until the pensioner's 65th birthdate shall be computed as of the termination of employment date as an amount equal to fifty percentum (50%) of the reduced pension payable to the pensioner. Page 43 SECTION 4. PENSIONS (Continued) SNETMPP Pre-Retirement Survivor Annuity - Death Before Paid From Trust Fund: - When continuously married to the same spouse: An election of the survivor annuity provisions which is made when the disability pension commences will provide the surviving annuitant with 50% of the retiree's pension amount payable from Company funds immediately upon the death of the retiree until the retiree's 65th birthdate; provided, however, that if the surviving annuitant is the spouse who was living with the retiree on both the retiree's disability pension commencement date and the retiree's date of death, the surviving annuitant's pension payments shall be payable from the Management Pension Fund Account beginning on the retiree's 65th birthday in the same amount as the annuitant's pension payable from Company funds. - In the event of a divorce: If the retiree should obtain a divorce from the named annuitant after the disability pension is effective, the named annuitant remains eligible for the annuitant pension payments from Company funds for the period from the retiree's date of death until the retiree's 65th birthdate, subject to Paragraph 3(c) of this Section 4. - In the event of a waiver of the survivor annuity: In the event of the death of a disability pensioner who made an election to waive this option and who leaves a surviving spouse who had been married to the disability pensioner for at least the one year period prior to and ending on the pensioner's date of death, such surviving spouse shall be eligible to receive a pre-retirement survivor annuity commencing when the pensioner would have become eligible to commence payment of a deferred vested pension pursuant to Paragraph 1(b) of this Section 4 or the date of the pensioner's death if later, or at the spouse's election, deferred to when the pensioner would have attained age 65. Page 44 SECTION 4. PENSIONS (Continued) SNETMPP In such event, the pre-retirement survivor annuity shall be determined in accordance with Paragraph 3(e)(vii) of this Section 4. (ii) For terminations September 2, 1974 through December 31, 1975: Applicability: Any person who left the service of the Company with a disability pension pursuant to the provisions of Paragraph 1(c) of this Section 4 during the period September 2, 1974 to December 31, 1975, inclusive, and who had attained the age of forty at the time the disability pension commenced, and who was receiving a disability pension on August 23, 1984, shall elect in writing during the 90 Day Election Period whether or not to have his pension made payable in reduced amounts, commencing at age sixty-five, for life and in lesser amounts thereafter to a surviving annuitant for life in the event of his death, subject to the Spousal Consent Requirement. Eligible Annuitant: The surviving annuitant may only be a spouse married to the disability pensioner on the date said pensioner attains age sixty-five, and shall be described in such affirmative election by name, date of birth, and address of residence. Reduced 50 Percent Joint and Survivor Annuity: In the event of an affirmative election, or in the absence of any valid election during the aforesaid election period, if the disability pensioner had a spouse on his sixty-fifth birthdate, and accordingly, the survivor annuity is deemed to have been elected, the amount of pension otherwise payable under this Plan to the disability pensioner upon his sixty-fifth birthdate shall be reduced to ninety percentum (90%) of such amount. The amount to be paid the annuitant for as long as such annuitant survives such pensioner shall be computed as of the date of such disability pensioner's sixty-fifth birthdate as an amount equal to fifty percentum (50%) of the reduced pension payable to the pensioner. If he Page 45 SECTION 4. PENSIONS (Continued) SNETMPP is not living on his sixty-five birthday, there shall be no survivor annuity. (iii) For terminations effective January 1, 1976 through August 7, 1977, if pensioner was receiving disability pension on August 23, 1984 and died prior to being eligible to elect the survivor annuity provisions - Eligible for Pre- Retirement Survivor Annuity: In the event of the death of any person who left the service of the Company with a disability pension pursuant to the provisions of Paragraph 1(c) of this Section 4 during the period January 1, 1976 to August 7, 1977, inclusive, and who was receiving such disability pension on August 23, 1984, and whose death occurred prior to being eligible to elect or decline the survivor annuity provision under Paragraph 3(b), and who leaves a surviving spouse, such surviving spouse shall be eligible to receive a preretirement survivor annuity commencing at such time as the disability pensioner would have been eligible to elect the survivor annuity provision and payable for as long as such annuitant survives such pensioner. Such disability pensioner would have been eligible to elect or decline the survivor annuity provision on his fifty-fifth birthdate if the term of employment had been twenty or more years on the effective date of pension, or on his sixty-fifth birthdate if the term of employment had been less than twenty years on the effective date of pension. Reduced 50 Percent Survivor Annuity: The amount of the preretirement survivor annuity shall be calculated as follows: the pension payable under this Plan as determined at the date of death shall be reduced to ninety percentum (90%) of such amount; the amount to be paid the annuitant shall be an amount equal to fifty percentum (50%) of such reduced pension. Page 46 SECTION 4. PENSIONS (Continued) SNETMPP (iv) Irrevocable Decision: An election once in effect under this Paragraph 3(b) whether affirmative or negative, and whether express or constructive, shall, unless such pensioner recovers or returns to the service of a Participating Company, be irrevocable, except as provided in Paragraphs 1(d) or 3(c) of this Section 4. Except as expressly provided in this Paragraph 3(b), there shall be no annuity to any survivor of a disability pensioner. (v) Conversion of Survivor Annuity at age 65: In the event of the death of a disability pensioner prior to attainment of age 65 and subsequent to an election for a survivor annuity or, in the absence of such an election, such time, if any, that a survivor annuity option is deemed elected pursuant to Subparagraph 3(b)(i) above, the survivor annuity paid to such deceased disability pensioner's annuitant after the date on which such pensioner would have attained age 65, had he survived, shall be the survivor annuity which would have been payable had the disability pensioner attained age 65 on the date of his death after conversion of his disability pension to a service pension pursuant to Paragraph 1(d) of this Section 4 while a survivor annuity election under Subparagraph (i) of this Paragraph 3(b) was in effect. c. Revoking Election, Restoring Pension Within 90 Day Election Period: A survivor annuity election (including but not limited to a deferred vested pension joint and survivor annuity) once made in accordance with Paragraph 3 of this Section 4, whether affirmative or negative, may be revoked in writing at any time prior to its effective date or the end of the 90 Day Election Period, if later; otherwise, except as herein provided, it shall be irrevocable. Revocation in Qualified Domestic Relations Order ("Order"): In the event an Order which explicitly provides for an irrevocable waiver of the survivor Page 47 SECTION 4. PENSIONS (Continued) SNETMPP annuity benefit is received, such election shall be deemed to be revoked effective with the date of said Order; provided, however, that upon such revocation of the survivor annuity benefit, (1) the participant's service, disability or disability service pension shall be restored to the full amount before reduction for this election, starting with the pension payment for the month following the date of said Order, and (2) a participant's deferred vested pension shall not be restored to the full amount before reduction for this election. Revocation of Survivor Annuity for Parent: A retiree who has previously elected a survivor annuity naming a parent as the annuitant may have his pension restored to the full amount before reduction for this election upon submission of a notarized, irrevocable waiver of the survivor annuity benefit by the named parent; provided that such restoral shall be effective commencing the first day of the month following the month in which the waiver is received. Revocation Due to Death of Annuitant: In the event of the death of a designated annuitant prior to the effective date of an election to have a reduced pension with a survivor annuity, such election shall be deemed to be revoked, in which event, subject to the conditions and limitations specified in this Paragraph 3, the participant may designate another qualified annuitant. In the event the annuitant predeceases a service, disability or disability service pensioner after the commencement of the retiree's pension payments, the retiree's pension shall be restored to the full amount before reduction for this election starting with the pension payment for the month following the death of the annuitant. If an annuitant predeceases a deferred vested pensioner, his pension shall not be restored to the full amount. Page 48 SECTION 4. PENSIONS (Continued) SNETMPP d. Automatic Survivor Annuity - Prior to Commencement of Pension Benefits For active employees with 10 or more years of service, or former employees in the transitional retirement status or prior to commencement of a disability service pension: In the event of the death of an employee who leaves a surviving spouse and a) who has completed 10 or more years of service and is eligible for a deferred vested pension under paragraph 1(b) of this Section 4, or b) who is eligible for a service pension under paragraph 1(a), or c) who terminated employment and is in the transitional retirement status under paragraph 1(j) of this Section 4 at the time of his death, or d) who terminated employment and who was continuously disabled in accordance with the provisions of eligibility for a disability service pension under paragraph 1(i) of this Section 4 and who leaves a surviving spouse who has been married to the employee continuously from the termination of employment date, such surviving spouse shall receive a survivor annuity in the amount which would have been payable to such spouse had such employee retired on a service pension, regardless of his actual eligibility therefore, on the date of his death (or his earlier termination of employment date, if applicable), and had elected the survivor annuity option pursuant to the terms of Paragraph 3(a) of this Section 4. For active employees with less than 10 years of service and eligible for a deferred vested pension; Cash out provisions: In the event of the death of an employee who leaves a surviving spouse, who has completed less than 10 years of service and who is eligible for a deferred vested pension under Paragraph 1(b) of this Section 4 as of his date of death, the present value of the automatic survivor annuity provided under this Paragraph 3(d) shall be paid to a surviving spouse, if such spouse has been married to the employee Page 49 SECTION 4. PENSIONS (Continued) SNETMPP throughout the one year period ending on the date of the employee's death, in a single lump sum. If such present value is greater than $3,500 (or the limit allowable under the Code), the surviving spouse shall receive a monthly annuitant's pension at such time as the employee would have been eligible to commence receipt of a deferred vested pension in lieu of a lump sum distribution, unless the surviving spouse elects to receive a lump sum distribution. Interest Rates for Cashouts: Lump sum pension payments for surviving spouses payable by reason of this Paragraph 3(d) shall be equal to the present value of the annuitant's pension payable to the spouse using a discount rate equal to the Pension Benefit Guaranty Corporation's immediate and deferred annuity rate for Plans terminated as of January 1 of the year in which the lump sum is paid and in accordance with the UP84 mortality table. Miscellaneous Provisions for Paragraph 3(d): Early retirement provisions do not apply; exclusions from eligibility for survivor annuity benefits: For purposes of the automatic survivor annuity provided in this Paragraph 3(d), the early retirement discount in Subparagraph 2(e) shall not apply. Except as provided in this Paragraph 3(d), and in Subparagraph 3(e)(v), no pension payment shall be made to an annuitant of an employee if such employee dies prior to termination from service. Notwithstanding any other provisions of the Plan, the automatic survivor annuity provisions of this sub-paragraph shall not apply to an employee receiving pension payments following the attainment of age 70 1/2. e. Deferred Vested Pension Joint and Survivor Annuity (i) Applicability - Terminated Employee Reaching Age 65: A person who has left the service of a Participating Company before the first day of the first month commencing after the month of the sixty-fifth birthday, who is eligible upon making an election pursuant to Paragraph 1(b) of this Page 50 SECTION 4. PENSIONS (Continued) SNETMPP Section 4 to receive payment of a deferred vested pension, and who has filed a written request therefor with the Committee, specifying a prospective date (on or after attainment of the age of his eligibility) for commencement of payment, or who is employed beyond age 70 1/2 and commences receipt of a deferred vested pension under the provisions of Paragraph 1(k) of this Section 4, shall during the 90 Day Election Period elect in writing whether or not to have his deferred vested pension made payable in reduced amounts to him for life and in amounts equivalent to 50% of such reduced amounts thereafter to a surviving annuitant for life in the event of his death after the commencement date, subject to the Spousal Consent Requirements. Early Retirement Reduction Factors with Joint and Survivor Annuity: In the event of such an affirmative election, the amount of pension otherwise payable at normal retirement age under this Plan to such person shall be reduced by multiplying the amount of the deferred vested pension otherwise payable by the applicable early retirement factor in the table set forth on the next page in this Subparagraph 3(e)(i). Page 51 SECTION 4. PENSIONS (Continued) SNETMPP Early Retirement Factors (With Joint and Survivor Annuity Election) Based Upon Completed Years and Months of Age At Commencement of Deferred Vested Pension Completed Completed Months of Age Years of Age 0 l 2 3 4 5 6 7 8 9 10 11 50 .20 .20 .20 .20 .21 .21 .21 .21 .21 .22 .22 .22 51 .22 .22 .22 .22 .23 .23 .23 .23 .23 .24 .24 .24 52 .24 .24 .24 .24 .25 .25 .25 .25 .25 .26 .26 .26 53 .26 .26 .26 .27 .27 .27 .28 .28 .28 .28 .29 .29 54 .29 .29 .30 .30 .30 .30 .31 .31 .31 .31 .32 .32 55 .32 .32 .32 .33 .33 .33 .33 .33 .33 .34 .34 .34 56 .34 .34 .35 .35 .35 .35 .36 .36 .36 .36 .37 .37 57 .37 .37 .38 .38 .38 .39 .39 .39 .40 .40 .40 .41 58 .41 .41 .42 .42 .42 .43 .43 .43 .44 .44 .44 .45 59 .45 .45 .46 .46 .46 .47 .47 .47 .48 .48 .48 .49 60 .49 .50 .50 .5l .5l .52 .52 .53 .53 .54 .54 .55 6l .55 .56 .56 .57 .57 .58 .58 .59 .59 .60 .60 .6l 62 .6l .62 .62 .63 .63 .64 .65 .65 .66 .66 .67 .67 63 .68 .69 .69 .70 .7l .7l .72 .73 .73 .74 .75 .75 64 .76 .77 .78 .78 .79 .80 .8l .8l .82 .83 .84 .84 65 .85 (ii) Eligible Surviving Annuitant of a Deferred Vested Pensioner: The Surviving Annuitant of a deferred vested pensioner may only be a spouse who has been married to the participant throughout the one-year period ending on the earlier of (a) the participant's pension starting date, or (b) the date of the participant's death; provided, however, if the participant marries within one year before the pension start date and the participant and the participant's spouse in such marriage have been married for at least a one-year period ending on or before the date of the participant's death, such participant and such spouse shall be treated as having been married throughout the one-year period ending on the participant's pension starting date. The Surviving Annuitant shall be described in such election by name, date of birth, and address of residence. Page 52 SECTION 4. PENSIONS (Continued) SNETMPP Reduced 50 Percent Joint and Survivor Annuity: After such a written request, and if the former employee is living after reaching the prospective date for commencement of payments so specified in the request, and unless within the aforementioned reasonable period he has made a valid election in writing not to take the joint and survivor annuity, or if it is established that he had no spouse on such date, he shall be deemed to have elected such joint and survivor annuity. In cases where a valid election in writing not to take such joint and survivor annuity has not been received prior to the participant's sixty-fifth birthday, the joint and survivor annuity shall be deemed to have been elected, effective on his sixty-fifth birthday unless it is established that the participant had no spouse on that date. The Alternate Payee provisions apply to deferred vested pensions. (iii) Election for Active Employee Working Past Age 65: An employee who continues in the service of a Participating Company after the end of the month in which his sixty-fifth birthday occurs and who is eligible for a deferred vested pension pursuant to Paragraph l(b) of this Section 4 and who has filed a written request therefor with the Committee, specifying a prospective date for commencement of payment, shall during the 90 Day Election Period, elect in writing whether or not to have his deferred vested pension made payable in reduced amounts to him for life and in amounts equivalent to 50% of such reduced amounts thereafter to a Surviving Annuitant for life in the event of his death after leaving the active service of a Participating Company, subject to the Spousal Consent Requirement. In the absence of any valid election at the end of the election period, the joint and survivor annuity shall be deemed to have been elected unless it is established that the employee had no spouse on the date his employment terminated. Page 53 SECTION 4. PENSIONS (Continued) SNETMPP (iv) Irrevocable Election: An election once made under this Subparagraph (e), whether affirmative or negative, and whether express or constructive, shall be irrevocable except as provided in Paragraph 3(c); and unless pursuant to this Paragraph 3(e) there shall be no annuity payable to the surviving spouse. (v) Automatic Survivor Annuity for Active Employee Who Dies After Reaching Age 65: In the event of the death after normal retirement age of an employee who is eligible for a deferred vested pension and who leaves a surviving spouse who has been married to the employee throughout the one-year period ending on the date of the employee's death, a survivor annuity, which would have been payable under Subparagraph 3(e)(iii) of this Section 4 had the employee left the service of the Participating Company on the date of his death and elected a joint and survivor annuity, shall be payable to said spouse. (vi) Survivor Annuity Elections at age 65 for employees who terminated employment September 2, 1974 through December 31, 1975 and whose pension had not commenced prior to August 23, 1984: Any person who left the service of the Company during the period September 2, 1974 to December 31, 1975, inclusive, and who is eligible upon making an election pursuant to Paragraph 1(b) of this Section 4 to receive payment of a deferred vested pension, and who had not filed a written request therefor with the Committee specifying a prospective commencement of pension payment date of prior to August 23, 1984, shall elect in writing during the 90 Day Election Period whether or not to have his deferred vested pension made payable commencing at age sixty-five in reduced amounts to him for life and in amounts equivalent to 50% of such reduced amounts thereafter to a Surviving Annuitant for life in the event of his death after the commencement date, subject to the Spousal Consent Page 54 SECTION 4. PENSIONS (Continued) SNETMPP Requirement. In cases where a valid election in writing not to take such joint and survivor annuity has not been received prior to the participant's sixty-fifth birthday, the joint and survivor annuity shall be deemed to have been elected, effective on his sixty-fifth birthday unless it is established that the participant had no spouse on that date. If he is not living on his sixty-fifth birthday, there shall be no survivor annuity. (vii) Pre-Retirement Survivor Annuity for vested employees who terminated employment after December 31, 1975 and whose pension had not commenced prior to August 23, 1984: In the event of the death of any person who left the service of a Participating Company after December 31, 1975, and who is eligible upon making an election pursuant to Paragraph 1(b) of this Section 4 to receive payment of a deferred vested pension, and who had not filed a written request therefor with the Committee specifying a prospective commencement of pension payment date of prior to August 23, 1984, and who leaves a surviving spouse who had been married to the former employee for at least the one year period prior to and ending on the date of death of said former employee, such surviving spouse shall be eligible to receive a preretirement survivor annuity commencing at such time as the former employee would have become eligible to file a written request pursuant to Paragraph 1(b) of this Section 4 to commence payment of a deferred vested pension, or the date of death of said former employee if later, and payable for as long as such annuitant survives such former employee. When Pre-Retirement Survivor Annuity Becomes Payable: Such former employee would have become eligible to file a written request pursuant to Paragraph 1(b) of this Section 4 to commence payment of a deferred vested pension on his fiftieth birthdate if the term of employment had Page 55 SECTION 4. PENSIONS (Continued) SNETMPP been twenty-five or more years on the date his employment terminated, on his fifty-fifth birthdate if the term of employment had been twenty or more years but less than twenty-five years on the date his employment terminated, or on his sixty-fifth birthdate if the term of employment had been less than twenty years on the date his employment terminated. Reduced 50 Percent Survivor Annuity: The amount of pension otherwise payable at normal retirement age under this Plan to the former employee shall be reduced by multiplying such amount of deferred vested pension otherwise payable by the applicable early retirement factor in the table set forth in Subparagraph 3(e)(i) of this Section 4, based on the age the former employee would have attained as of the date of the commencement of the preretirement survivor annuity, and the amount of the preretirement survivor annuity shall be equivalent to 50% of such reduced amount. (viii) 1991 Special Early Commencement-Deferred Vested Pension Survivor Annuity Notwithstanding any other provision of the Plan, any participant who is eligible for a deferred vested pension at normal retirement age and who elects, during the period July 31, 1991 through September 13, 1991, inclusive, to terminate employment with a Participating Company, and who terminates employment during the period July 8, 1991 through October 18, 1991, inclusive, (or through December 20, 1991 if extended in accordance with Section 4, Paragraph 1(b) (vi)), and who elects in writing to have his deferred vested pension commence upon the termination of employment in reduced amounts, shall within the 90 Day Election Period elect in writing whether or not to have his deferred vested pension made payable in reduced amounts to him for life and in amounts equivalent to 50% of such reduced amounts thereafter to a Surviving Annuitant for life in the event of his death after the commencement date, subject to the Spousal Page 56 SECTION 4. PENSIONS (Continued) SNETMPP Consent Requirement. In the event of such an affirmative election, or in the absence of any valid election, the amount of pension otherwise payable at normal retirement age under this Plan to such person shall be reduced by multiplying the amount of the deferred vested pension otherwise payable by the applicable early retirement factor in the table set forth below. 1991 SPECIAL EARLY COMMENCEMENT OF DEFERRED VESTED PENSION FACTORS (WITH JOINT AND SURVIVOR ANNUITY ELECTION) BASED UPON COMPLETED YEARS AND MONTHS OF AGE AT COMMENCEMENT OF DEFERRED VESTED PENSION Completed Completed Months of Age Years of Age 0 1 2 3 4 5 6 7 8 9 10 11 Prior to 58 .43 58 .43 .43 .43 .43 .43 .43 .43 .43 .44 .44 .44 .45 59 .45 .45 .46 .46 .46 .47 .47 .47 .48 .48 .48 .49 60 .49 .50 .50 .51 .51 .52 .52 .53 .53 .54 .54 .55 61 .55 .56 .56 .57 .57 .58 .58 .59 .59 .60 .60 .61 62 .61 .62 .62 .63 .63 .64 .65 .65 .66 .66 .67 .67 63 .68 .69 .69 .70 .71 .71 .72 .73 .73 .74 .75 .75 64 .76 .77 .78 .78 .79 .80 .81 .81 .82 .83 .84 .84 65 .85 f. 1989 Special Increase (i) Effective January 1, 1989, the present and/or future monthly payment of a surviving annuitant: (1) of a person retired prior to December 31, 1988 under the provisions of Subparagraph (a) of Paragraph 1 of this Section 4; (2) of a person who died prior to December 31, 1988 while in active service; (3) of a person retired prior to December 31, 1988 under the provisions of Subparagraph (c) of Paragraph 1 of this Section 4 who Page 57 SECTION 4. PENSIONS (Continued) SNETMPP has made an election under the provisions of Subparagraph (b) of this Paragraph 3 inclusive, shall be increased by the same percentage as the related pension was or would have been increased under the provisions of Paragraph 2(j) of this Section 4. No increase shall be made in the present or future monthly payment to an annuitant who derives entitlement to such annuity under the provisions of Subparagraph (e) of this Paragraph 3. (ii) For purposes of this Subparagraph (f), references to provisions of this Plan shall also be deemed to refer to comparable provisions of the Predecessor Plan. g. Survivor Annuity Option for Employees Eligible for Disability Service Pension (1) Election of Joint and Survivor Annuity When Pension Payments Commence: Any employee who leaves the service of a Participating Company and who is eligible to receive a disability service pension pursuant to the provisions of Paragraph l(i)(1) or (2) of this Section 4, shall elect in writing during the 90 Day Election Period (which shall be prior to the commencement of such disability service pension payments, in accordance with Paragraph 3(ii) of this Section 4) whether or not to have his pension made payable in reduced amounts for each month commencing when such pension becomes payable and ending on the retiree's death to provide a survivor annuity pursuant to and in accordance with the provisions of Paragraph 3(a) of this Section 4, subject to the Spousal Consent Requirement. (2) Automatic Survivor Annuity Benefits If Dies Prior to Pension Commencement and Continuously Married to Same Spouse: If an employee remains eligible for a disability service pension pursuant to the provisions of Paragraph l(i)(1) or (2) of this Section 4 and dies prior to commencement of such pension, and was married to the same spouse continuously from the Page 58 SECTION 4. PENSIONS (Continued) SNETMPP termination of employment date through the date of the employee's death, the automatic survivor annuity of Paragraph 3(d) of this Section 4 shall be payable. Such automatic survivor annuity shall be calculated in the same manner as would have been calculated if such employee had died on the last day on the active payroll, and would include any pension increases granted for service pensioners during the period from the termination of employment date to the date of the former employee's death. An automatic survivor annuity pursuant to the provisions of this Subparagraph 2 shall not be eligible for designation as payable to an Alternate Payee pursuant to a domestic relations order. (3) Pre-Retirement Survivor Annuity Benefits If Employee Dies Prior to Pension Commencement and Marries After Termination of Employment Date: If an employee remains eligible for a disability service pension pursuant to the provisions of Paragraph l(i)(1) or (2) of this Section 4, and he marries or remarries following the termination of employment date, and such employee dies prior to commencement of such disability service pension, a surviving spouse living with the employee as of the date of death shall be eligible for an annuitant pension pursuant to the Deferred Vested Pension Joint and Survivor Annuity provisions of Paragraph 3(e) and payable when the employee would have reached age 65. An Alternate Payee of an employee who was married on or before the employee's termination of employment date may, pursuant to a qualified domestic relations order, be entitled to benefits pursuant to this Subparagraph 3. h. Survivor Annuity Option for Retirees Electing the Pension Deferral Option (1) Election of Joint and Survivor Annuity When Pension Payments Commence: Any employee who leaves the service of a Participating Company and who is eligible to receive a discounted service pension pursuant to the provisions of Paragraph l(a) and 2(e) of this Section 4, and who elects Page 59 SECTION 4. PENSIONS (Continued) SNETMPP the Pension Deferral Option (PDO) provisions of Paragraph 2(e)(i), shall elect in writing during the 90 Day Election Period (which shall be prior to the commencement of such service pension payments, in accordance with Paragraph 3(ii)) whether or not to have his pension made payable in reduced amounts for each month commencing when such pension becomes payable and ending on the retiree's death to provide a survivor annuity pursuant to and in accordance with the provisions of Paragraph 3(a) of this Section 4, subject to the Spousal Consent Requirement. (2) Automatic Election of Joint and Survivor Annuity If Dies Prior to Pension Commencement: If the retiree should die prior to commencement of the pension payments, survivor annuity pension benefits shall be payable immediately upon the death of the employee to a spouse to which the employee was legally married on the date of employee's death. The surviving spouse's pension payments will be calculated as if the employee had elected to commence receipt of the pension payments on the date of employee's death, and the early retirement discount will apply based on the employee's actual age on that date. 4. Monthly Payments Pensions shall be payable monthly or at such shorter periods as the Committee may determine in each case. 5. Duration Of Payments; Commencement of Benefits Except as provided in Paragraphs 1(h), 1(i), 1(j) and 1(k), Paragraph 2(e)(i), Paragraph 3 and Paragraph 6 of this Section, service and deferred vested pensions granted shall continue from the date the employee elects to commence receipt of such service pension or deferred vested pension payments to death of the employee, or, in cases where a payment is made prior to notification of death, through the end of the month in which death occurs. Page 60 SECTION 4. PENSIONS (Continued) SNETMPP Unless the participant elects otherwise, distribution of the benefits will begin no later than the 60th day after the latest of the close of the plan year in which (1) the participant attains the Normal Retirement Age); (2) the tenth anniversary of the year in which the participant commenced participation in the Plan; or (3) the participant terminates service with the Company. Notwithstanding the foregoing, the failure of a participant and spouse to consent to a distribution while a benefit is immediately distributable shall be deemed to be an election to defer commencement of payment of any benefit, pursuant to the provisions of Paragraph 3(iv) of Section 4 of this Plan. 6. Treatment During Subsequent Participating Company Employment a. Employment classification as a regular or provisional regular employee with any Participating Company shall suspend the right of a retired employee, a person receiving a deferred vested pension, or a person otherwise entitled to receive a service or deferred vested pension, to pension payments during the period he continues in such employment; provided, however, that such suspension shall not apply to the pension of an employee who is reemployed and during any calendar month completes less than 40 hours of service. Any such suspension imposed in accordance with this Paragraph 6(a) shall constitute a permanent withholding of the amount so suspended. Notwithstanding any other provision of the Plan, such suspension shall not apply to the pension of a retired employee, a person receiving a deferred vested pension, or a person otherwise entitled to receive a service or deferred vested pension, when such person is reemployed by a Participating Company prior to January 1, 1990 for one hour or more in ten weeks or less in any calendar year; provided, however, that such person shall be treated as a retired employee or a person receiving a deferred vested pension for all other purposes under the Plan including but not limited to payment or accrual of any benefit. Notwithstanding any other Page 61 SECTION 4. PENSIONS (Continued) SNETMPP provision of the Plan, such suspension shall not apply to the pension of a retired employee receiving a Service Pension under the provisions of Section 4, paragraph 1(a) who is rehired by a Participating Company during the period January 1, 1990 through December 31, 1992, inclusive; provided, however, that such person shall be treated as a retired employee for all other purposes under the Plan including but not limited to payment or accrual of any benefit. Employment with any Participating Company on a temporary basis through the SNET Job Bank Program on or after January 1, 1993 shall not suspend the pension benefits of any service or deferred vested pensioner who is receiving pension payments. b. If, during any subsequent employment of an employee in any Participating Company, the employee's prior service with the Participating Company or any other Participating Company or service credited in accordance with the SNETPP or the Mandatory Portability Agreement is included in his term of employment for purposes of computation of pension, any previous eligibility for a pension hereunder shall cease; provided, however, that if such prior pension benefits or a portion of such prior pension benefits were previously distributed in a lump sum payment, upon subsequent termination of employment, the pension benefits will be recalculated using the pension formula in effect as of the termination date and all credited service (including vesting service), and the annuity value of the pension benefits previously distributed in a lump sum payment shall be deducted from the recalculated pension amount with the difference, if any, payable in accordance with the service or deferred vested pension provisions and provided, further, that if such prior pension benefits commenced early in accordance with the provisions of Paragraph 1(b)(vi) of this Section 4 or similar provisions under the SNETPP, the pension benefits will be recalculated using the pension formula in effect as of the termination date Page 62 SECTION 4. PENSIONS (Continued) SNETMPP and all credited service (including vesting service), to determine the deferred vested pension payable at age 65; which value shall be compared to the value of resuming the pension payments payable in accordance with such Paragraph 1(b)(vi) or SNETPP provisions, and the greater value in pension benefits shall be payable as described below. (i) If the prior pension benefit provides a greater value in pension benefits, that pension amount shall immediately resume upon subsequent termination of employee, with no additional pension benefits for service accrued during the current period of employment. (ii) If the recalculated deferred vested pension payable at age 65 provides a greater value in pension benefits, the prior pension benefit calculated in accordance with Paragraph 1(b)(vi) shall be rescinded unless such employee irrevocably elects to have such prior pension benefit resume immediately upon subsequent termination of employment, thereby waiving additional pension benefits for service accrued during the current period of employment. (iii) If the employee accrues enough service credit to become eligible for a service pension, the prior pension benefit will be rescinded and the service pension will be payable upon such subsequent termination of employment, in accordance with the provisions of this Plan. c. If, during any subsequent employment of an employee in any Participating Company, the obligation with respect to the employee's pension benefits has been transferred to the SNETPP, any eligibility for a pension hereunder shall cease. The obligation with respect to an employee's pension benefits shall be transferred to the SNETPP on the Page 63 SECTION 4. PENSIONS (Continued) SNETMPP earlier of (l) March 3l of the year following the year which includes the date as of which the employee's prior service with any Participating Company is included in his term of employment for purposes of computation of pension under the SNETPP, or (2) the last day of the first month following the month in which the employee dies or retires, if such death or retirement occurs after the date as of which the employee's service with a Participating Company is included in his term of employment for purposes of computation of pension under the SNETPP. d. Notwithstanding any other provision of the Plan, the pension benefit of an individual who previously left the service of a Participating Company with a deferred vested pension, discounted in accordance with Paragraph 1(b) of this Section 4, and who returns to the service of a Participating Company shall be recomputed to reflect an adjustment for the period of suspension of pension benefits imposed in accordance with Paragraph 6(a) of this Section 4. Any such adjustment shall be determined in accordance with the following formula: BXCXD A= E Where A = adjusted benefit; B = reduction factor at age of initial early commencement of pension payments in accordance with the table set forth in Subparagraph 1(b) (iii) or 3(e)(i), as applicable; C = accrued benefit at initial early commencement of pension payments; D = reduction factor at age of final commencement of pension payments with respect to which pension is being computed, in accordance with the table set forth in Subparagraph 1(b)(iii) or 3(e)(i), as applicable; and E = reduction factor at age of reemployment in accordance with the table set forth in subparagraph 1(b)(iii) or 3(e)(i), as applicable. The adjusted benefit determined in accordance with the formula above shall be added to the amount of any benefit accrued during the period of reemployment and such sum shall equal the individual's total pension benefit Page 64 SECTION 4. PENSIONS (Continued) SNETMPP to be paid subsequent to the individual's final termination from service date. e. If the pension benefit of an individual has been suspended in accordance with the provisions of Paragraph 6(a) above, such pension benefit shall resume no later than the first day of the third calendar month after the calendar month in which the individual was last employed for 40 or more hours of service by a Participating Company. The initial payment upon the resumption of pension benefits in accordance with this Paragraph 6(e) shall include the pension benefit amount for the month during which such payments resume and any additional amounts withheld during the period between the cessation of employment and the resumption of payments, less any amounts which are subject to offset in accordance with Paragraph 6(f). f. The amount of any payment to be made in accordance with Paragraph 6(e) shall be reduced by the amount of any payment previously made to the individual for a period of time during which the individual was employed by a Participating Company, if such previous payment was subject to suspension under Paragraph 6(a). 7. Treatment During Employment Covered by Mandatory Portability Agreement a. Employment which is covered by the terms of the Mandatory Portability Agreement (MPA) shall suspend the right of a retired employee, a person receiving a deferred vested pension, or a person otherwise entitled to receive a service or deferred vested pension, to pension payments during the period he continues in such employment as provided in the MPA; provided, however, that, subject to the provisions of the MPA, such suspension shall not apply to the pension of an employee who during any calendar month completes less than 40 hours of service. Any such suspension imposed in accordance with this Paragraph 7(a) shall constitute a permanent withholding of the amount so suspended. Page 65 SECTION 4. PENSIONS (Continued) SNETMPP b. Employment which is covered by the MPA and is subsequently bridged by a company other than a Participating Company pursuant to the terms of the MPA shall cause a cessation of pension eligibility hereunder. c. Notwithstanding any other provision of the Plan, the terms and provisions of the MPA as it may change from time to time will govern the treatment of an employee with employment which is covered by the MPA. 8. Notice of Retirement Eligibility The Committee shall notify all employees of their eligibility to retire on service pensions as they become eligible. 9. Pension Funding Policy and Method The Company has established a fund held in a trust separate from the assets of the Participating Companies known as the "SNET Pension Trust Fund" for payment of service pensions, deferred vested pensions and related survivor annuities (defined in Paragraphs l(a), l(b) and 3 of this Section, respectively) and for payment of certain death benefits (as set forth in Paragraph 9 of Section 5) as provided under the Death Benefit provisions of the Plan. All of the Plan assets held in the SNET Pension Trust Fund which are allocable to this Plan are available to pay benefits to all employees and their beneficiaries covered by this Plan; and to pay for any reasonable compensation to the Trustee and the Investment Managers, all expenses of the Trustee and Investment Managers relating to the aquisition, service and disposition of investments constituting part of the SNET Pension Trust Fund, and all taxes of any and all kinds whatsoever that may be levied or assessed under existing or future laws upon or in respect of the SNET Pension Trust Fund or the income thereof; and to pay for any reasonable expenses of administering the SNET Pension Trust Fund and the Plan properly and actually incurred by the Trustee, the Company or the Participating Company, to the extent such expenses are directed by the Company to be charged against and paid from the SNET Pension Page 66 SECTION 4. PENSIONS (Continued) SNETMPP Trust Fund, in accordance with the SNET Pension Trust Agreement. The corpus or income of the trust or custodial account may not be diverted to or used for other than the exclusive benefit of the participants or their beneficiaries, or reasonable expenses of administration of the Plan and the Trust. The Plan is a single plan for purposes of Code Sections 401(a)(26), 401(a)(4) and 410(b). The Participating Companies undertake to maintain the SNET Pension Trust Fund so long as the said Plan shall continue, by periodic charges to operating expenses and payments to the SNET Pension Trust Fund which meet the requirements of the law and which are in such amounts that there will be available in the SNET Pension Trust Fund amounts sufficient to provide for the service pensions, deferred vested pensions, payments to annuitants in accordance with Paragraph 3 of this Section, and death benefits payable from the SNET Pension Trust Fund under the Plan, in the amounts stated in the Plan. The amounts of these periodic charges to operating expenses and payments to the SNET Pension Trust Fund will be determined on the basis of an annual actuarial valuation using the aggregate cost method. This method determines an estimated level percentage applicable to payroll such that contributions made by the Participating Companies at that level percentage applied to basic payroll of current active employees during their remaining working lives plus the present trust fund plus the future investment earnings are predicted to be just sufficient to pay all future benefits expected to become payable from the SNET Pension Trust Fund to current employees and pensioners and their future beneficiaries, persons eligible for deferred vested pensions, and annuitants. If it should appear to the Company in the future that such funding method is no longer appropriate, it shall institute another method that it deems appropriate, after obtaining any required governmental approvals. The SNET Pension Trust Fund shall be held by a trustee or trustees or an insurance company or companies as permitted by law for pension and death Page 67 SECTION 4. PENSIONS (Continued) SNETMPP benefit purposes only and shall be disbursed as directed by the Company from time to time. The Company undertakes to preserve the integrity of the SNET Pension Trust Fund as a fund held in trust or by an insurance company or companies as permitted by law to be applied solely to pension and death benefit purposes (and payment of eligible expenses) and to take such action as may be necessary or appropriate to insure the application of the entire fund, to such purposes. All service pensions, and deferred vested pensions or commuted values thereof, shall, except when not permitted by the Pension Act, be paid from the SNET Pension Trust Fund either directly or through the purchase of annuities from an insurance company as the Company may determine. For purposes of this Paragraph 9, the transfer of Management Pension Fund Account assets, as required by and as determined in accordance with applicable Internal Revenue Service Regulations in connection with the transfer of the obligation with respect to employee pension benefits, (pursuant to Paragraph 6 of this Section 4) and as directed by the Company, from time to time, to the Pension Fund Account, shall be considered to be an application of the Management Pension Fund Account for pension purposes. 10. Maximum Pensions: Notwithstanding any other provision of the Plan, a pension computed under this Section 4, Paragraph 10 shall be subject to the following: (a) Maximum Pensions: For purposes of this paragraph, the term monthly pension shall mean the pension benefit payable as a single life annuity. When expressed as a monthly pension, the pension benefit shall not exceed the lesser of (1) $7,500 (the "Dollar Limitation"), or (2) 100% of the participant's average monthly compensation as defined in Section 1.415-2(d) of the Income Tax Regulations during the three consecutive calendar years when the total compensation paid to him was the highest (the "Compensation Limitation"), subject to the following: Page 68 SECTION 4. PENSIONS (Continued) SNETMPP (i) In determining whether the monthly pension payable to the participant exceeds the maximum, the maximum shall apply to (1) the single life annuity payable to the participant if the joint and survivor annuity is waived; or (2) the monthly pension payable to the participant after reduction for the joint and survivor annuity if elected; or (3) the actuarial equivalent of the single life pension if the pension is payable in a form other than the foregoing. (ii) If benefits begin prior to a participant's Social Security Retirement Age (as defined in Code Section 415(b)(8)), the Dollar Limitation applicable to such pension shall be equal to the actuarial equivalent of the Dollar Limitation where the Dollar Limitation is deemed to be a pension commencing at the participant's Social Security Retirement Age. (iii) If a pension begins after the participant's Social Security Retirement Age, the maximum Dollar Limitation applicable to such pension shall be equal to the actuarial equivalent of the Dollar Limitation where the Dollar Limitation is deemed to be a pension commencing at the participant's Social Security Retirement Age. (iv) If the participant has fewer than 10 years of Plan participation, the Dollar Limitation shall be multiplied by a fraction, the numerator of which is the number of years (computed to fractional parts of a year) of participation in the Plan, and the denominator of which is 10. If the participant has fewer than 10 years of service, the Compensaiton Limitation shall be multiplied by a fraction, the numerator of which is the participant's years of service (computed to fractional parts of a year) divided by a denominator of 10. Page 69 SECTION 4. PENSIONS (Continued) SNETMPP (v) For all purposes of this Plan, the maximum Dollar Limitation of $7,500 shall be automatically increased as permitted by Treasury Department regulations to reflect cost-of-living adjustments. Further, the maximum Dollar Limitation applicable to a retired or terminated participant shall be increased in accordance with the cost-of-living adjustments. As a result of such an adjustment, a pension which had been limited by these provisions in a previous plan year may be increased with respect to future payments to the lesser of the adjusted Dollar Limitation amount or the amount of pension which would have been payable under this Plan without regard to the provisions of this Section 4, Paragraph 10. For purposes of this Section 4, Paragraph 10, the Dollar Limitation shall be based on the table in Subparagraph (b) of this Paragraph 10 related to the participant's completed years and months of age when the pension payment commences, and the participant's actual year of birth. Notwithstanding the foregoing, the otherwise permissible annual benefits for any participant under the Plan may be further reduced to the extent necessary, as determined by the Committee or the Secretary to prevent disqualification of the Plan under Section 415 of the Code, which imposes the following additional limitations on the benefits payable to participants who also may be participating in (1) the SNET Management Retirement Savings Plan (the "Savings Plan"), (2) the SNET Bargaining Unit Retirement Savings Plan (the "Bargaining Unit Savings Plan"), SNET Bargaining Unit Retirement Savings Plan (the "Bargaining Unit Savings Plan"), and (3) the Tax Reduction Act Stock Ownership Plan (the "TRASOP"). If an individual is a participant at any time in both a defined benefit plan and a defined contribution plan, the sum of the defined benefit plan fraction and the defined contribution plan fraction for Page 70 SECTION 4. PENSIONS (Continued) SNETMPP any plan year may not exceed 1.0. The defined benefit plan fraction for any plan year is a fraction, the numerator of which is the participant's projected annual benefit under the Plan (determined as of the close of the plan year) and the denominator of which is the lesser of (a) 1.25 multiplied by the larger of the Dollar Limitation on an annual basis and as adjusted, or (b) 1.4 multiplied by the Compensation Limitation on an annual basis. The defined contribution plan fraction for any plan year is a fraction, the numerator of which is the sum of the annual additions to the participant's accounts in such plan year and for all prior plan years and the denominator of which is the sum of the applicable maximum accounts of annual additions which could have been made under Section 415(c) of the Code for such plan year and for all prior years of such participant's employment (assuming for this purpose, that said Section 415(c) had been in effect during such prior years). The applicable maximum amount for any plan year shall be equal to the lesser of 1.25 multiplied by the Dollar Limitation in effect for such plan year under subsection 415(c)(1)(A) of the Code, or 1.4 multiplied by 25% of the participant's total compensation for such plan year. For purposes of this Section 4, Paragraph 10, "Compensation" means all earned income, wages, salaries and other amounts received for employment with a Participating Company but shall not include contributions that qualify under Internal Revenue Code Section 401(k) or other contributions to plans of deferred compensation that are not includable in a participant's gross income for the taxable year in which contributed, amounts realized in connection with stock option or stock purchase plans, or other amounts that receive special tax benefits. For purposes of the above limitation, all defined benefit plans, whether or not terminated, are to be treated as one defined benefit plan, and all Page 71 SECTION 4. PENSIONS (Continued) SNETMPP defined contribution plans, whether or not terminated, are to be treated as one defined contribution plan. To the extent a reduction in benefits is required in order to achieve compliance with the limitations of Section 415 of the Code, such reduction shall be made in the annual benefit payable under this Plan. The Committee or Secretary shall advise affected participants of any additional limitation on their annual benefits required by this paragraph. The above limitations are intended to comply with the provisions of Section 415 of the Code, as amended, so that maximum benefits shall be exactly equal to the maximum amounts allowed under Section 415 of the Code and regulations thereunder. If there is any discrepancy between the provisions of this Section 4, Paragraph 10 and the provisions of Section 415 of the Code and regulations thereunder, such discrepancy shall be resolved in such a way as to give full effect to the provisions of Section 415 of the Code. The portion of any pension or survivor annuity with respect to any participant in excess of the applicable "maximum permissible amount" shall be paid by the Participating Company directly to the participant or beneficiary entitled thereto and shall be charged to its operating expense accounts when and as paid. Compensation Limitations under Section 401(a)(17) - Prior to January 1, 1994: In addition to other applicable limitations which may be set forth in the Plan and notwithstanding any other contrary provisions of the Plan, for pension amounts calculated prior to January 1, 1994 annual compensation taken into account under the Plan shall not exceed $200,000, adjusted for changes in the cost of living as provided in Section 415(d) of the Internal Revenue Code, for the purpose of calculating a Plan participant's accrued benefit (including the right to any optional benefit provided under the Plan) for any plan year commencing after December 31, 1988. However, the accrued benefit determined in accordance with this provision shall not be less than the accrued benefit determined on May 31, 1989 without regard to this provision. Page 72 SECTION 4. PENSIONS (Continued) SNETMPP Notwithstanding the preceding sentence, the accrued benefit of any Plan participant who is a highly compensated employee, within the meaning of Section 414(q) of the Code, is reduced to the extent a benefit has accrued with respect to compensation in excess of $200,000 during the 1989 plan year before the later of the adoption or effective date of this provision. The $200,000 limitation set forth in this Paragraph 10 shall be applied in accordance with Code Section 401(a)(17) and regulations thereunder, using the extended wear-away method for transitioning pension benefits to the lower compensation limitations. Compensation Limitations under Section 401(a)(17) - On and After January 1, 1994: For pension amounts calculated for pension effective dates on or after January 1, 1994, in addition to other applicable limitations set forth in the Plan and notwithstanding any other contrary provisions of the Plan, the annual compensation of each employee taken into account under the Plan shall not exceed the Omnibus Budget Reconciliation Act of 1993 "OBRA '93" annual compensation limit. The OBRA '93 annual compensation limit is $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with Section 401(a)(17)(B) of the Internal Revenue Code. The cost of living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA '93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period and the denominator of which is 12. For plan years beginning on or after January 1, 1994, any reference in this Plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA '93 annual compensation limit set forth in this provision. If compensation for any prior determination period is taken into account in determining an employee's benefits accruing in the current plan year, the compensation for the Page 73 SECTION 4. PENSIONS (Continued) SNETMPP prior determination period is subject to the OBRA '93 annual compensation limit in effect for that prior determination period. For this purpose, for determination periods beginning before the first day of the first plan year beginning on or after January 1, 1994, the OBRA '93 annual compensation limit is $150,000. The Plan has selected the extended wear-away method as provided in the Internal Revenue Service Procedure 94-13 for transitioning pension benefits to the lower compensation limitations. Page 74 SECTION 4. PENSIONS (Continued) SNETMPP MAXIMUM ANNUAL PENSION BENEFIT FOR 1994 Based Upon Completed Years and Months of Age at Retirement or Termination
Completed Completed Months of Age Years of Age 0 1 2 3 4 5 6 7 8 9 10 11 40 17,816 17,935 18,055 18,174 18,294 18,413 18,533 18,652 18,772 18,891 19,011 19,130 41 19,250 19,378 19,506 19,635 19,763 19,891 20,020 20,148 20,276 20,405 20,533 20,661 42 20,790 20,927 21,065 21,202 21,340 21,478 21,615 21,753 21,891 22,028 22,166 22,303 43 22,441 22,588 22,736 22,883 23,031 23,178 23,325 23,473 23,620 23,767 23,915 24,062 44 24,210 24,367 24,525 24,682 24,840 24,997 25,155 25,313 25,470 25,628 25,785 25,943 45 26,100 26,269 26,437 26,605 26,773 26,941 27,110 27,278 27,446 27,614 27,782 27,951 46 28,119 28,298 28,478 28,657 28,837 29,016 29,196 29,376 29,555 29,735 29,914 30,094 47 30,273 30,465 30,657 30,849 31,041 31,233 31,425 31,617 31,809 32,001 32,193 32,385 48 32,577 32,783 32,989 33,195 33,400 33,606 33,812 34,017 34,223 34,429 34,635 34,840 49 35,046 35,267 35,488 35,709 35,930 36,151 36,372 36,593 36,814 37,034 37,255 37,476 50 37,697 37,935 38,173 38,411 38,649 38,886 39,124 39,362 39,600 39,838 40,075 40,313 51 40,551 40,808 41,064 41,321 41,578 41,834 42,091 42,348 42,604 42,861 43,118 43,374 52 43,631 43,909 44,186 44,464 44,742 45,019 45,297 45,575 45,853 46,130 46,408 46,686 53 46,963 47,265 47,566 47,867 48,169 48,470 48,771 49,072 49,374 49,675 49,976 50,278 54 50,579 50,907 51,234 51,562 51,890 52,217 52,545 52,873 53,201 53,528 53,856 54,184 55 54,511 54,869 55,226 55,584 55,941 56,298 56,656 57,013 57,370 57,728 58,085 58,442 56 38,800 59,191 59,581 59,972 60,363 60,753 61,144 61,535 61,925 62,316 62,707 63,098 57 63,488 63,917 64,345 64,773 65,201 65,630 66,058 66,486 66,914 67,343 67,771 68,199 58 68,627 69,098 69,569 70,040 70,511 70,982 71,452 71,923 72,394 72,865 73,336 73,806 59 74,277 74,796 75,315 75,835 76,354 76,873 77,392 77,911 78,430 78,949 79,468 79,988 60 80,507 81,081 81,655 82,229 82,803 83,377 83,951 84,525 85,099 85,674 86,248 86,822 61 87,396 88,033 88,670 89,307 89,944 90,581 91,218 91,855 92,492 93,129 93,766 94,403 62 95,040 95,700 96,360 97,020 97,680 98,340 99,000 99,660 100,320 100,980 101,640 102,300 63 102,960 103,620 104,280 104,940 105,600 106,260 106,920 107,580 108,240 108,900 109,560 110,220 64 110,880 111,540 112,200 112,860 113,520 114,180 114,840 115,500 116,160 116,820 117,480 118,140 65 118,800 119,759 120,718 121,678 122,637 123,596 124,555 125,514 126,473 127,433 128,392 129,351 66 130,310 131,394 132,478 133,563 134,647 135,731 136,815 137,899 138,984 140,068 141,152 142,236 67 143,321 144,552 145,783 147,014 148,245 149,477 150,708 151,939 153,170 154,402 155,633 156,864 68 158,095 159,500 160,904 162,308 163,713 165,117 166,521 167,925 169,330 170,734 172,138 173,543 69 174,947 176,556 178,166 179,775 181,385 182,994 184,603 186,213 187,822 189,432 191,041 192,651 70 194,260 * For use with employees who reach age 62 before January 1, 2000 (Date of Birth occurring before 1938)
Page 75 SECTION 4. PENSIONS (Continued) SNETMPP MAXIMUM ANNUAL PENSION BENEFIT FOR 1994 Based Upon Completed Years and Months of Age at Retirement or Termination
Completed Completed Months of Age Years of Age 0 1 2 3 4 5 6 7 8 9 10 11 40 l6,702 16,814 16,926 17,039 17,151 17,263 17,375 17,487 17,599 17,711 17,823 17,935 41 18,047 18,167 18,287 18,408 18,528 18,648 18,768 18,889 19,009 19,129 19,250 19,370 42 19,400 19,619 19,748 19,877 20,006 20,135 20,264 20,393 20,522 20,651 20,780 20,909 43 21,038 21,177 21,315 21,453 21,591 21,729 21,867 22,006 22,144 22,282 22,420 22,558 44 22,696 22,844 22,992 23,140 23,287 23,435 23,583 23,730 23,878 24,026 24,174 24,321 45 24,469 24,627 24,784 24,942 25,100 25,258 25,415 25,573 25,731 25,888 26,046 26,204 46 26,361 26,530 26,698 26,866 27,035 27,203 27,371 27,540 27,708 27,876 28,045 28,213 47 28,381 28,561 28,741 28,921 29,101 29,281 29,461 29,641 29,821 30,001 30,181 30,361 48 30,541 30,734 30,927 31,120 31,313 31,506 31,699 31,891 32,084 32,277 32,470 32,663 49 32,856 33,063 33,270 33,477 33,684 33,891 34,098 34,306 34,513 34,720 34,927 35,134 50 35,341 35,564 35,787 36,010 36,233 36,456 36,679 36,902 37,125 37,348 37,571 37,794 51 38,017 38,257 38,498 38,738 38,979 39,220 39,460 39,701 39,942 40,182 40,423 40,663 52 40,904 41,164 41,425 41,685 41,945 42,206 42,466 42,726 42,987 43,247 43,507 43,768 53 44,028 44,311 44,593 44,876 45,158 45,440 45,723 46,005 46,288 46,570 46,853 47,135 54 47,418 47,725 48,032 48,339 48,647 48,954 49,261 49,568 49,876 50,183 50,490 50,797 55 51,104 51,439 51,775 52,110 52,445 52,780 53,115 53,450 53,785 54,120 54,455 54,790 56 55,125 55,491 55,857 56,224 56,590 56,956 57,323 57,689 58,055 58,421 58,788 59,154 57 59,520 59,922 60,323 60,725 61,126 61,528 61,929 62,331 62,732 63,134 63,535 63,937 58 64,338 64,780 65,221 65,662 66,104 66,545 66,987 67,428 67,869 68,311 68,752 69,194 59 69,635 70,122 70,608 71,095 71,582 72,068 72,555 73,042 73,528 74,015 74,502 74,988 60 75,475 76,013 76,551 77,090 77,628 78,166 78,704 79,243 79,781 80,319 80,857 81,395 61 81,934 82,531 83,128 83,725 84,322 84,920 85,517 86,114 86,711 87,308 87,906 88,503 62 89,100 89,595 90,090 90,585 91,080 91,575 92,070 92,565 93,060 93,555 94,050 94,545 63 95,040 95,700 96,360 97,020 97,680 98,340 99,000 99,660 100,320 100,980 101,640 102,300 64 102,960 103,620 104,280 104,940 105,600 106,260 106,920 107,580 108,240 108,900 109,560 110,220 65 110,880 111,540 112,200 112,860 113,520 114,180 114,840 115,500 116,160 116,820 117,480 118,140 66 118,800 119,788 120,776 121,764 122,752 123,740 124,728 125,716 126,704 127,692 128,680 129,667 67 130,655 131,777 132,899 134,021 135,143 136,265 137,387 138,508 139,630 140,752 141,874 142,996 68 144,118 145,397 146,677 147,956 149,236 150,515 151,795 153,074 154,354 155,633 156,913 158,192 69 159,471 160,938 162,404 163,870 165,337 166,803 168,269 169,735 171,202 172,668 174,134 175,600 70 177,067 * For use with employees who reach age 62 after December 31, 1999 and before January 1,2017 (Date of birth occurring 1938 through 1954)
Page 76 SECTION 4. PENSIONS (Continued) SNETMPP MAXIMUM ANNUAL PENSION BENEFIT FOR 1994 Based Upon Completed Years and Months of Age at Retirement or Termination
Completed Completed Months of Age Years of Age 0 1 2 3 4 5 6 7 8 9 10 11 40 15,589 15,693 15,798 15,903 16,007 16,112 16,216 16,321 16,425 16,530 16,634 16,739 41 16,844 16,956 17,068 17,180 17,293 17,405 17,517 17,630 17,742 17,854 17,966 18,079 42 18,191 18,311 18,432 18,552 18,673 18,793 18,913 19,034 19,154 19,275 19,395 19,515 43 19,636 19,765 19,894 20,023 20,152 20,281 20,410 20,539 20,668 20,796 20,925 21,054 44 21,183 21,321 21,459 21,59? 21,735 21,873 22,011 22,148 22,286 22,424 22,562 22,700 45 22,838 22,985 23,132 23,279 23,427 23,574 23,721 23,868 24,015 24,162 24,310 24,457 46 24,604 24,761 24,918 25,075 25,232 25,389 25,546 25,704 25,861 26,018 26,175 26,332 47 26,489 26,657 26,825 26,993 27,161 27,329 27,497 27,665 27,833 28,001 28,169 28,337 48 28,505 28,685 28,865 29,045 29,225 29,405 29,585 29,765 29,945 30,125 30,305 30,485 49 30,665 30,859 31,052 31,245 31,439 31,632 31,825 32,019 32,212 32,405 32,598 32,792 50 32,985 33,193 33,401 33,609 33,817 34,026 34,234 34,442 34,650 34,858 35,066 35,274 51 35,482 35,707 35,931 36,156 36,380 36,605 36,830 37,054 37,279 37,503 37,728 37,952 52 38,177 38,420 38,663 38,906 39,149 39,392 39,635 39,878 40,121 40,364 40,607 40,850 53 41,093 41,357 41,620 41,884 42,147 42,411 42,675 42,938 43,202 43,466 43,729 43,993 54 44,257 44,543 44,830 45,117 45,404 45,690 45,977 46,264 46,551 46,837 47,124 47,411 55 47,698 48,010 48,323 48,636 48,948 49,261 49,574 49,886 50,199 50,512 50,824 51,137 56 51,450 51,792 52,134 52,475 52,817 53,159 53,501 53,843 54,185 54,527 54,868 55,210 57 55,552 55,927 56,302 56,676 57,051 57,426 57,801 58,175 58,550 58,925 59,300 59,674 58 60,049 60,461 60,873 61,285 61,697 62,109 62,521 62,933 63,345 63,757 64,169 64,581 59 64,993 65,447 65,901 66,355 66,809 67,264 67,718 68,172 68,626 69,081 69,535 69,989 60 70,443 70,946 71,448 71,950 72,453 72,955 73,457 73,960 74,462 74,964 75,467 75,969 61 76,471 77,029 77,586 78,144 78,701 79,258 79,816 80,373 80,930 81,488 82,045 82,603 62 83,160 83,655 84,150 84,645 85,140 85,635 86,130 86,625 87,120 87,615 88,110 88,605 63 89,100 89,595 90,090 90,585 91,080 91,575 92,070 92,565 93,060 93,555 94,050 94,545 64 95,040 95,700 96,360 97,020 97,680 98,340 99,000 99,660 100,320 100,980 101,640 102,300 65 102,960 103,620 104,280 104,940 105,600 106,260 106,920 107,580 108,240 108,900 109,560 110,220 66 110,880 111,540 112,200 112,860 113,520 114,180 114,840 115,500 116,160 116,820 117,480 118,140 67 118,800 119,820 120,839 121,859 122,878 123,898 124,917 125,937 126,956 127,976 128,995 130,015 68 131,034 132,197 133,360 134,522 135,685 136,848 138,010 139,173 140,336 141,498 142,661 143,824 69 144,986 146,319 147,651 148,983 150,316 151,648 152,980 154,313 155,645 156,977 158,310 159,642 70 160,974 *For use with employees who reach age 62 after December 31, 2016 (Date of Birth occurring after 1954)
Page 77 SECTION 4. PENSIONS (Continued) SNETMPP 11. Pension Plan Termination Arrangements In the event of termination or partial termination of the Plan, the rights of all participants to benefits accrued to the date of such termination or partial termination, to the extent funded as of such date, shall be nonforfeitable. In the event of termination of the Plan, the balances in the Management Pension Fund Account, or in the event of a partial termination of the Plan the portion of the Management Pension Fund Account allocable to the partial termination, shall be applied first among the participants and the beneficiaries of the Plan in the order and to the extent required by Section 4044 of the Pension Act. Thereafter this Management Pension Fund Account shall be applied, insofar as that Act permits, as follows, with proper adjustment in each case for any portion of the benefit already provided for under a prior allocation under that Act or under this Paragraph 11: First: To making adequate provision for the payment of the full amounts of the service pensions previously granted to retired employees (including the full amounts payable to designated annuitants of retired employees) and deferred vested pensions to former employees if such employees, such annuitants or former employees are on the pension roll as of the termination date; for the payment of the full amounts which may be payable in the future to designated annuitants of employees who have retired and who are on the pension roll as of the termination date; for the payment of the full amounts of the service pensions or deferred vested pensions which employees, as of the termination date, have then become entitled to receive upon terminating service, such pensions to start upon the employee's retirement or separation from active service, including the payment of the full amounts which may be payable to designated annuitants of such employees, following the death of such employees after their retirement or separation from service, such amounts to be computed in accordance with the provisions of Paragraph 3(a) or 3(e) of Page 78 SECTION 4. PENSIONS (Continued) SNETMPP this Section on the basis of the pensions to which such eligible employees have become entitled as of the termination date; and for the payment of the full amounts payable in accordance with the provisions of Paragraphs 3(d) or 3(e)(v) of this Section to the surviving spouses of employees if such employees die while in active service, such amounts to be computed in accordance with the provisions of Paragraphs 3(a) and 3(e) of this Section on the basis of the pensions to which such employees have become entitled as of the termination date. Second: To making provision for the payment of death benefits attributable to deaths occurring prior to the date of termination which would have been payable from the Management Pension Fund Account, and for the payment, upon the deaths of retired employees who are on the pension roll as of the date of termination and of employees eligible as of that date for retirement, of death benefits which would have been payable from the Management Pension Fund Account, had the Plan not been so terminated. Third: To making provision, to the extent permitted by the balance, if any, remaining in the Management Pension Fund Account after the foregoing provision shall have been made, for the payment of deferred vested pensions starting at age sixty-five and continuing until the death of the former employee, computed as hereinafter specified, to all former employees who left the service of the Company after May 3l, l969 and before September 30, 1971 and at the time of termination of their employment were eligible for retirement on service pension with the approval of the Committee under the Predecessor Plan, but not at their own request. If the remaining balance in the Management Pension Fund Account shall be insufficient, in the judgment of the Company, to provide the full amount of the computed deferred vested pensions to employees in this group, the amount of the pension payment from the Management Pension Fund Account to each person in the group shall be Page 79 SECTION 4. PENSIONS (Continued) SNETMPP reduced pro rata. Fourth: To making provision, to the extent permitted by the balance, if any, remaining in the Management Pension Fund Account after the foregoing provision shall have been made, for the payment of deferred vested pensions starting at age sixty- five and continuing until the death of the former employee, computed as hereinafter specified, to all employees who, as of the termination date, were not eligible for retirement on service pension but had reached the age of forty years and whose term of employment was fifteen or more years and all former employees who left the service of a Participating Company after May 3l, l969 at a time when they had reached the age of forty years and whose term of employment was fifteen or more years but who were not eligible for retirement on service pension with the approval of the Committee under this Plan or the Predecessor Plan. If the remaining balance in the Management Pension Fund Account shall be insufficient, in the judgment of the Company, to provide the full amount of the computed deferred vested pensions to employees in this group, the amount of pension payment from the Management Pension Fund Account to each person in the group shall be reduced pro rata. Fifth: To making provision, to the extent permitted by the balance, if any, remaining in the Management Pension Fund Account after the foregoing provision shall have been made, for the payment of deferred vested pensions starting at age sixty-five and continuing until the death of the former employee, computed as hereinafter specified, to all employees who, as of the termination date, were not eligible for retirement on service pension but whose calendar years of service after age twenty-two were ten or more and all former employees who left the service of a Participating Company after January l, l976 at a time when their calendar years of service after age twenty-two were ten or more but who were not eligible for retirement on Page 80 SECTION 4. PENSIONS (Continued) SNETMPP service pension. If the remaining balance in the Management Pension Fund Account shall be insufficient in the judgment of the Company, to provide the full amount of the computed deferred pensions to employees in this group, the amount of pension payment from the Management Pension Fund Account to each person in the group shall be reduced pro rata. Sixth: To making provision, to the extent permitted by the balance, if any, remaining in the Management Pension Fund Account after the foregoing provision shall have been made, for the payment of deferred vested pensions starting at age sixty-five and continuing until the death of the former employee, computed as hereinafter specified, to all employees who, as of the termination date, were not eligible for retirement on service pension but whose calendar years of service after age eighteen were ten or more and all former employees who left the service of a Participating Company after January 1, 1985 at a time when their calendar years of service after age eighteen were ten or more but who were not eligible for retirement on service pension. If the remaining balance in the Management Pension Fund Account shall be insufficient in the judgment of the Company, to provide the full amount of the computed deferred pensions to employees in this group, the amount of pension payment from the Management Pension Fund Account to each person in the group shall be reduced pro rata. Seventh: To making provision, to the extent permitted by the balance, if any, remaining in the Management Pension Fund Account after the foregoing provision shall have been made, for the payment of deferred pensions starting at age sixty-five and continuing until the death of the former employee, computed as hereinafter specified, to all employees not referred to in the preceding paragraphs who are participants in the Management Pension Plan and whose calendar years of service after age eighteen were five or more years on the termination date. If the remaining balance in the Page 81 SECTION 4. PENSIONS (Continued) SNETMPP Management Pension Fund Account shall be insufficient, in the judgment of the Company, to provide the full amount of the computed deferred pensions to employees in this group, the amount of the pension to each employee in the group shall be reduced pro rata. Eighth: No Reversion of Pension Assets: In the event that there is any remaining balance in the Management Pension Fund Account after making provision deemed adequate for the full amount of the pensions hereinbefore specified as payable in case of termination of the Plan, such balance shall be applied solely for pension purposes in an equitable manner consistent with the purposes of the Plan. The deferred vested pensions, specified in this Paragraph 11 as payable to employees who have not yet reached normal retirement age and who have not yet become eligible as of the termination date for retirement on service pension, and to former employees shall be computed, without allowance for any payment upon the death of the employee, in accordance with the provisions of Paragraph 2 of Section 4, subject to the provisions of Paragraph 16 of Section 6, except that the term of employment used in the computation shall end as of the date of termination of the Plan, the average annual pay, if applicable, used in the computation shall in every case be the average annual pay for the applicable five consecutive year period prior to the date of termination of the Plan, or termination of employment if earlier during which the employee was paid the highest rate of wages and any provisions relating to minimum pensions shall not apply. The payment of such deferred vested pension shall not be contingent upon the employee's being in the service of a Participating Company after the termination of the Plan. In all cases such deferred vested pensions shall be computed on the basis of the employee's age and term of employment, as of the termination date as shown by the records of the Participating Company which last employed such individual. The Company reserves the right to make provision Page 82 SECTION 4. PENSIONS (Continued) SNETMPP out of the Management Pension Fund Account for any or all pensions specified in this paragraph through the purchase of annuities from an insurance company or in such other manner as the Company may determine. In the case of all pensions for which provision is made through the purchase of annuities from an insurance company, the delivery of an annuity contract to each person to whom such pensions are payable shall serve to absolve the Company, any other Participating Company, and the Management Pension Fund Account from any further obligations for the payment of such pensions. In the case of all pensions for which provision is not made through the purchase of annuities from an insurance company, the Company's judgment as to the adequacy of the alternative provision made shall be final. If such alternative provision made, as of the termination date, for deferred vested pensions to persons not then on the pension roll or eligible to receive a pension at their own request should thereafter at any time appear, in the judgment of the Company, to be inadequate or more than sufficient to continue the payment of the amounts previously estimated to be payable, the remaining payments on all such pensions shall be adjusted pro rata in accordance with the remaining provision available. In lieu of the deferred vested pensions starting at age sixty-five as provided for in this paragraph, the Company reserves the right to offer to all or specified groups of persons the option of a reduced pension starting at an earlier age, or such other form of payment as may be consistent with the equities involved. The Company's judgment as to the amounts and methods of such alternative payments and the groups to which such options are to be offered shall be final. Pre-termination restrictions: (i) In the event of termination of the Plan, the benefit of any highly compensated employee (as that term is defined in Section 414(q) of the Internal Revenue Code and the regulations thereunder), and any former highly compensated employee (as that term is defined in the regulations Page 83 SECTION 4. PENSIONS (Continued) SNETMPP under Internal Revenue Code section 414(q)) shall be limited to a benefit that is nondiscriminatory under Section 401(a)(4) of the Internal Revenue Code. (ii) The payments of benefits to or on behalf of a "restricted employee" (as that term is defined in paragraph (iii) below) shall not exceed an amount equal to the payments that would be made to or on behalf of the restricted employee in that year under a straight life annuity that is the actuarial equivalent of the accrued benefit and other benefits to which the restricted employee is entitled under the Plan (other than a social security supplement), as well as a social security supplement, if any, that the restricted employee is entitled to receive. (iii) A "restricted employee" means any highly compensated employee or former highly compensated employee (as those terms are defined under Internal Revenue Code Section 414(q) and the regulations thereunder). However, a highly compensated or former highly compensated employee need not be treated as a restricted employee in the current year if the highly- or former highly-compensated employee is not one of the 25 nonexcludable (within the meaning of Section 401(a)(4) and the regulations thereunder) employees and former employees with the largest amount of compensation in the current or any prior year. (iv) The restrictions in this Section 4 shall not apply, however, if any one of the following requirements is satisfied: (A) After taking into account payment to or on behalf of the restricted employee of all benefits payable to or on behalf of that restricted employee under the Plan, the value of Plan assets equals or exceeds 110 percent of the value of current liabilities, as defined in Internal Revenue Code Section 412(l)(7). Page 84 SECTION 4. PENSIONS (Continued) SNETMPP (B) The value of the benefits payable to or on behalf of the restricted employee must be less than one percent of the value of current liabilities before distribution. (C) The value of the benefits payable to or on behalf of the restricted employee does not exceed $3,500. 12. Disability Pension Payments All disability pensions (defined in Paragraph l(c) of this Section) and related payments to annuitants except as otherwise provided in Sub-paragraph 3(b)(iii) of this Section, shall be a charge to the operating expense accounts of the Participating Company, when and as paid. Page 85 SECTION 5. DEATH BENEFITS SNETMPP l. Active Employee Death Benefit a. All employees on the payroll as of September 17, 1989 shall be eligible for the Active Employee Death Benefit ("eligible employees"); employees hired or rehired after September 17, 1989 shall not be eligible. In the event of the death of any eligible employee resulting from sickness or injury, including injuries arising out of and in the course of employment by a Participating Company, there may be paid (and in the circumstances described in Subparagraph 3(a) of this Section, there shall be paid) an Active Employee Death Benefit, equal to the eligible employee's basic annual rate of pay (based on such employee's regular scheduled work hours) in effect as of the earlier of the employee's date of death or January 1, 1992. Payment of the Active Employee Death Benefit, subject to the conditions imposed in Paragraph 4 of this Section and elsewhere in this Plan shall be made to the employee's beneficiaries as provided in Paragraph 3 of this Section. 2. Retiree Death Benefit a. In the event of the death of any person who 1) retired prior to September 17, 1989 and at the time of death is receiving a pension granted under Paragraph l(a) or l(c) of Section 4 of this Plan or the Predecessor Plan; or 2) was eligible to retire with a service pension under the provisions of this Plan or the SNETPP as of September 17, 1989, and who retired on or after September 17, 1989, there may be paid (and in the circumstances described in Subparagraph 3(a) of this Section, there shall be paid) a Retiree Death Benefit in an amount described in Subparagraph 2(b) of this Section. Notwithstanding any other provision of the Plan and only for purposes under the Plan of determining a participant's eligibility for a Retiree Death Benefit for retirements effective on or after July 8, 1991, a participant's Page 86 SECTION 5. DEATH BENEFITS (Continued) SNETMPP eligibility for a service or discounted service pension as of September 17, 1989 shall be based on the greater of the eligibility determined on the basis of either (A) the provisions of the Plan as of September 17, 1989, without reference to this Subparagraph, or (B) the participant's years of service, term of employment and age as of November 1, 1987 (including service after the last day of the month in which an employee attains the Normal Retirement Age) increased by five years; provided, however, that this Subparagraph shall not apply to any individual who is not a participant in the Plan as of July 8, 1991 nor any individual who is at the department level or equivalent fifth level of management or above as of such date. b. If such pensioner leaves any beneficiary bearing the relationship to the deceased and conforming to the other conditions stated with respect to the death of an employee in Subparagraph 3(a) of this Section, such Death Benefit shall be paid in accordance with the following: (i) If the Pensioner retired under this Plan or under any Predecessor Plan on or after September 30, 1963, the date specified in such Predecessor Plan for the payment of an unreduced death benefit subsequent to retirement, the Death Benefit shall be the amount of the maximum Active Employee Death Benefit that could have been paid if he had died on his last day of active service before retirement on pension; provided, however, that in the case of a pensioner who retired after the last day of the month in which his sixty- fifth birthday occurred, and whose pension was effective during the period from January 2, l979 to August l0, l980, inclusive, the Death Benefit shall not exceed the maximum Active Employee Death Benefit which could have been paid if the pensioner had died on the last day of the month in which his sixty-fifth birthday occurred. Page 87 SECTION 5. DEATH BENEFITS (Continued) SNETMPP (ii) If the pensioner retired under a Predecessor Plan prior to September 30, 1963, the date specified in such Predecessor Plan for the payment of an unreduced death benefit subsequent to retirement, the Death Benefit shall be not less than the amount specified in Subparagraph (i) of this Paragraph 2(b) reduced by ten percentum (l0%) of such amount for each full year which has elapsed since his retirement. (iii) The Death Benefit payable under either Subparagraphs (i) or (ii) of this Paragraph 2(b) shall not be less than the annual pension allowance as determined under Paragraph 2 of Section 4 for employees who retired before September 17, 1989. No Death Benefit shall be payable upon the death of an annuitant receiving a payment under Paragraph 3 of Section 4 or upon the death of a former employee eligible for a deferred vested pension under Paragraph l(b) of Section 4 of this Plan, unless Paragraph 5 of this Section 5 applies. 3. Eligible Beneficiaries The persons who may be beneficiaries of the Active Employee Death Benefit or the Retiree Death Benefit on the death of a pensioner hereunder are limited to the spouse living with the employee or pensioner at the time of death, and the dependent children and other dependent relatives of the deceased. Former spouses and children who are not dependent upon the deceased as defined in this Paragraph 3 are not eligible to receive a death benefit under this Plan, and cannot be designated as an Alternate Payee pursuant to a domestic relations order for purposes of eligibility for the death benefits provided by this Plan. The amount to be paid in each case and the beneficiary or beneficiaries who shall receive the same, and the share which each shall receive, shall be determined by the Committee, subject to the following provisions and to the provisions of Paragraphs 2 and 4 of this Section. Page 88 SECTION 5. DEATH BENEFITS (Continued) SNETMPP a. Mandatory Beneficiaries In the event of death of an eligible active employee, the maximum Active Employee Death Benefit specified in Paragraph 1 of this Section 5 shall be paid, subject to the provisions of Subparagraph (c) of this Paragraph 3, to the spouse of the deceased employee if living with him at the time of his death, or to the unmarried child or children of the deceased employee under the age of 23 years (or over that age if physically or mentally incapable of self-support) who were actually supported in whole or in part by the deceased employee at the time of death, or a dependent parent who lives in the same household with the employee or who lives in a separate household in the vicinity which is provided for the parent by the employee. If the employee leaves two or more of a spouse, a child or children, or a parent, as herein described, the Committee or the Secretary, in its discretion, may pay the Death Benefit to or for any one or more of such possible beneficiaries in such portions as it may determine. b. Discretionary Beneficiaries If there be no beneficiary of the deceased employee or pensioner, as described in Subparagraph (a) of this Paragraph 3, then an Active Employee Death Benefit in an amount not to exceed the amount specified in Paragraph 1, or a Retiree Death Benefit in an amount not to exceed the amount specified in Paragraph 2 of this Section, may be paid to any other person or persons who may be beneficiaries, as defined in the first sentence of this Paragraph 3, and be receiving or entitled to receive support from the deceased employee or pensioner at the time of his death. Subject to the limitations expressed in this Subparagraph (b) the Committee or the Secretary shall have full authority to determine to whom payments shall be made and the amount of the payments, taking into consideration the degree of dependency and such other facts as it may deem Page 89 SECTION 5. DEATH BENEFITS (continued) SNETMPP pertinent. c. Beneficiary Designation If the employee or pensioner shall have made written request and shown good cause therefor, the Committee or the Secretary may pay all or a portion of the Death Benefit to a person or persons included in Subparagraph (b) of this Paragraph 3, and reduce, by the amount thus paid, the amount which is payable to the persons included in Subparagraph (a), provided in the opinion of the Committee or the Secretary, good cause for such action still exists at the time of the employee's or pensioner's death. d. Payment of Final Expenses Upon the death of an employee eligible for the Active Employee Death Benefit or pensioner eligible for the Retiree Death Benefit and receiving pension payments under Paragraph l(a) or l(c) of Section 4, if there be no beneficiary qualified to receive an award under the provisions of this Section, or if the amount of such award authorized by the Committee or the Secretary, be less than the maximum specified in Paragraph l or 2 of this Section, as the case may be, the Committee or the Secretary may authorize such payments as may be required to defray the necessary expenses incident to the death of the employee or pensioner and the disability immediately preceding, provided, however, that the amount so paid shall not exceed the maximum benefits specified in said paragraphs. 4. Method of Payment a. Payment on Death of Employee or Pensioner At the death of an employee or pensioner the Death Benefit may be paid in a lump sum or installment payments, the number and size of which may be varied in accordance with the circumstances, at the discretion of the Committee or the Secretary, provided, however, that all such payments shall be completed within five (5) years after the death of the employee or Page 90 SECTION 5. DEATH BENEFITS (Continued) SNETMPP pensioner, and provided further that a beneficiary who has previously requested to receive the death benefit in installment payments may request a lump sum distribution of the remaining balance by submitting said request in writing to the Secretary. Notwithstanding the foregoing and subject to the provisions hereinafter included in this Paragraph 4, an employee or pensioner may file with the Secretary, a written direction that a death benefit which may become payable to a beneficiary qualified under Paragraph 3(a) shall be paid, when such amount has been determined, to said beneficiary in equal monthly installments over a period to be specified in such written direction but such period may not extend beyond ten years in the case of a written direction filed prior to January 1, 1984 and such period may not extend beyond five years after the death of an employee or pensioner in the case of a written direction filed on or after January 1, 1984, and benefits shall be paid in accordance with such direction. b. Payment on Death of Beneficiary In the event of the death of a beneficiary who is receiving or is entitled to receive payments under this Section, the remainder of the amount previously determined shall be payable, in a manner determined by the Secretary, to any remaining beneficiary or beneficiaries pursuant to Paragraph 3, Subparagraph (a) or Subparagraph (b), or to the estate of the deceased beneficiary, provided, however, that all such payments shall be completed within five years of the death of the employee or pensioner. c. Advance Payment Upon the death of an employee or pensioner, the Secretary, without awaiting determination of the beneficiary or beneficiaries, if any, to whom the award will be made, may pay an amount equivalent to the wages, disability benefits or pension which the deceased was receiving, to the end of the month in which the death occurs, and such payment may be made to the Page 91 SECTION 5. DEATH BENEFITS (Continued) SNETMPP spouse of the deceased, or to some other suitable person selected by the Secretary. Such payment, if made, shall constitute a part of the award. In addition the Secretary, in its discretion, may authorize payment, before the final settlement, of a part of the award not exceeding One Thousand Five Hundred Dollars ($1500), to meet urgent expenses incident to the death and the immediately preceding disability of the deceased. If any of the persons to whom an award may be payable cannot be found or cannot be conveniently communicated with or are incompetent to authorize use of any part thereof for the burial of the deceased and the payment of necessary expenses incident to his death and preceding disability, the Secretary, in his discretion, may make such payments, as a part of the award, as in its judgment may be reasonable for the proper burial of the deceased and the payment of necessary expenses incident to his death and disability immediately preceding. d. Payment of Interest In the event that a death benefit is paid in installments pursuant to the written direction of the employee or pensioner, or in the discretion of the Committee or the Secretary, under this Paragraph 4, such death benefit shall be credited with a rate of interest from the date of the first installment, and such portion of the death benefit which remains unpaid after any installment shall be credited with a rate of interest from the date of such installment and such interest shall be paid as part of the next installment. The rate of interest shall be determined or redetermined solely in the discretion of the Plan Administrator, but the rate of interest shall not be redetermined more often than once in any calendar year. Notwithstanding the foregoing, no interest shall be credited beyond the date of death of the initial beneficiary who is receiving the death benefit in installments unless the Secretary determines to pay any unpaid balance to Page 92 SECTION 5. DEATH BENEFITS (Continued) SNETMPP another beneficiary in installments. 5. Death After Termination of Employment Except as provided in Paragraph 2, a Death Benefit shall not be payable in the case of any person who dies after he has ceased to be an employee of a Participating Company, unless such person became disabled by reason of accident or sickness while an employee and continued disabled, until death, to such a degree as to be unable to engage in any gainful occupation. In such cases a Death Benefit may be paid, in the discretion of the Committee or the Secretary, provided it has been furnished from time to time with such proof of continued disability as it may have required and provided it has been permitted to make, or have made by a physician, such examinations of the disabled person as it has deemed necessary in order to ascertain his condition. The amount of the Death Benefit, if any, shall not exceed the amount which could have been paid if the disabled person had died on the day he ceased to be an employee of a Participating Company. 6. Claims All claims for Death Benefits should be made within one year of the death on which the claim is based. In case notice of the existence of a spouse, child or other dependent relative of a deceased employee or pension shall not be served on the Secretary within one year after such employee's or pensioner's death, the Committee or the Secretary shall not be required to recognize any claim made by or in behalf of any such person provided such death benefit would not otherwise have been payable pursuant to Paragraph 1 or 2 of this Section 5. 7. Definition of Basic Annual Rate of Pay "Basic annual rate of pay" for the purposes of this Section 5 shall mean wages for full time service (not including overtime), computed at the employee's rate of pay at the date of retirement, death or as of January 1, 1992 if earlier; provided, however, that if the employee normally serves a Page 93 SECTION 5. DEATH BENEFITS (Continued) SNETMPP Participating Company on less than a full time basis, benefits in case of death shall be computed on the basis of the time constituting the employee's normal service under his contract of hiring. For purposes of this Section 5, basic annual rate of pay will be no greater than the compensation allowable under the Internal Revenue Code Section 401(a)(17) and regulations thereunder, which includes the OBRA '93 provisions. 8. Charging of Payments Active Employee Death Benefits payable pursuant to Paragraph 1 of this Section 5 and any interest payable pursuant to Paragraph 4(d) of this Section 5 to the initial beneficiary or beneficiaries on account of deaths of employees who are participants in the Pension Plan pursuant to Paragraph l(e) of Section 4 and who leave beneficiaries bearing the relationship to the deceased and conforming to the other conditions stated in Paragraph 3(a) of this Section 5 and Retiree Death Benefits payable pursuant to Paragraph 2(b) of this Section 5 to the initial beneficiary or beneficiaries on account of deaths of service pensioners, exclusive of any amount payable under Subparagraph (ii) of Paragraph 2(b) in excess of the minimum set forth in Subparagraph (iii) of said Paragraph 2(b) shall be paid from the Management Pension Fund Account either directly or through the purchase of annuities from an insurance company as the Company may determine. All other amounts, including any interest thereon, payable pursuant to this Section 5 which are not paid from the Management Pension Fund Account, shall be a charge to the operating expense accounts of the Participating Company when and as paid. 9. Waiver of Death Benefit No death benefit shall be payable under the provisions of Paragraph 1 or 2 of this Section 5 with respect to any employee who is or was a member of a group of employees designated by the Board of Directors as eligible to waive such benefit, if such employee has waived such benefit under this Plan or the Page 94 SECTION 5. DEATH BENEFITS (Continued) SNETMPP Predecessor Plan, unless the Board of Directors has authorized the Page 95 SECTION 6. GENERAL PROVISIONS SNETMPP l. Rights to Pensions or Benefits Neither the action of the Board of Directors in establishing this Plan nor any action hereafter taken by the Company, the Board, the Committee or any Participating Company shall be construed as giving to any officer, agent or employee a right to be retained in the service of any Participating Company or any right or claim to any pension or other benefit or allowance after discharge from the service of any Participating Company, unless the right to such pension or benefit has accrued prior to such discharge. Except in the event of termination of the Plan, no employee or annuitant shall have any right to a service, disability service or deferred vested pension unless he meets the conditions specified in Paragraph l(a) or l(b) or 1(d) or 1(i) or 1(j) of Section 4 of the Plan, nor any right in the SNET Management Pension Trust Fund unless a pension authorized by the Committee under the Plan has not been paid, nor any right against any Participating Company to any benefit under the Plan other than the amount to which the employee or annuitant has theretofore become entitled and which the Committee has directed be paid to that employee or annuitant under the Plan. In the event of termination of the Plan, no employee or annuitant shall have any right in the SNET Management Pension Trust Fund or against any Participating Company except as herein provided or as otherwise provided by law. 2. Assignment or Alienation; Qualified Domestic Relations Orders Except as otherwise provided by law, no benefit, payment or distribution under this Plan shall be subject either to the claim of any creditor of a participating employee or beneficiary, or to attachment, garnishment, levy (other than a Federal tax levy under Internal Revenue Code Section 6331), execution or other legal or equitable process by any creditor of such person, and no such person shall have any right to alienate, commute, anticipate or assign (either at law or equity) all or any portion of any benefit, payment or Page 96 SECTION 6. GENERAL PROVISIONS (Continued) SNETMPP distribution under this Plan. Notwithstanding the foregoing sentence, the Plan shall provide for payment of pension benefits in accordance with the applicable requirements of a "qualified domestic relations order (QDRO or Order)" as that term is defined in Code Section 414(p). The Death Benefit provisions in Section 5 and the Automatic Survivor Annuity benefits in Section 4, Paragraph 3(g)(2) are not available for assignment to Alternate Payees under a domestic relations order. The remaining Survivor Annuity benefits provided in Section 4, Paragraph 3 are available for assignment to an Alternate Payee as described in that Section, subject to the divorce related provisions described in Paragraph 3(b). The Secretary, in accordance with uniform and nondiscriminatory procedures established by the Secretary, shall determine the qualified status of any domestic relations order submitted to the Plan Administrator and administer any distributions under this Plan pursuant to a QDRO in accordance with the rules set forth in Code Section 414(p), and any such determination or payment shall be final and binding on all parties. Unless otherwise prohibited by law, upon written notice that a Participant is in a divorce proceeding or another type of domestic relations proceeding with which this Plan's assets may be subject to a payment to an Alternate Payee, the Plan shall segregate any such pension amounts for a reasonable period of time as determined by the Secretary. Any necessary actuarial computation relating to the determination or application of a qualified domestic relations order shall be ascertained by using the PBGC immediate and deferred annuity rates for Plans terminated as of January 1 of the year in which the order is entered by a court and in accordance with applicable mortality tables set forth on the next page: Page 97 SECTION 6. GENERAL PROVISIONS (Continued) SNETMPP Mortality Table for Actives, Retirees, and Alternate Payees Age Rate Age Rate 16 0.001437 64 0.018685 17 0.001414 65 0.020517 18 0.001385 66 0.022562 19 0.001351 67 0.024847 20 0.001311 68 0.027232 21 0.001267 69 0.029634 22 0.001219 70 0.032073 23 0.001167 71 0.034743 24 0.001149 72 0.037667 25 0.001129 73 0.040871 26 0.001107 74 0.044504 27 0.001083 75 0.048504 28 0.001058 76 0.052913 29 0.001083 77 0.057775 30 0.001111 78 0.063142 31 0.001141 79 0.068628 32 0.001173 80 0.074648 33 0.001208 81 0.081256 34 0.001297 82 0.088518 35 0.001398 83 0.096218 36 0.001513 84 0.104310 37 0.001643 85 0.112816 38 0.001792 86 0.122079 39 0.001948 87 0.132174 40 0.002125 88 0.143179 41 0.002327 89 0.155147 42 0.002556 90 0.168208 43 0.002818 91 0.182461 44 0.003095 92 0.198030 45 0.003410 93 0.215035 46 0.003769 94 0.232983 47 0.004180 95 0.252545 48 0.004635 96 0.273878 49 0.005103 97 0.297152 50 0.005616 98 0.322553 51 0.006196 99 0.349505 52 0.006853 100 0.378865 53 0.007543 101 0.410875 54 0.008278 102 0.445768 55 0.009033 103 0.483830 56 0.009875 104 0.524301 57 0.010814 105 0.568365 58 0.011863 106 0.616382 59 0.012952 107 0.668696 60 0.014162 108 0.725745 61 0.015509 109 0.786495 62 0.017010 110 0.852659 63 0.018685 Page 98 SECTION 6. GENERAL PROVISIONS (Continued) SNETMPP 3. Determination of Eligibility a. In all questions relating to age and service for eligibility to become a participant or eligibility for a deferred vested pension, or relating to term of employment and rates of pay for determining service pensions and other benefits, the decision of the Committee, based upon this Plan and upon the records of the Participating Company last employing such individual and insofar as permitted by applicable law, shall be final. b. The computation period for determining eligibility to become a participant in the Pension Plan, under Paragraph l(e) of Section 4 shall be the first of the following computation periods in which the employee completes l000 hours of service: (l) the l2-consecutive-month period beginning with the employment commencement date and the succeeding such periods beginning on the anniversaries of the employment commencement date; or, (2) the l2-month period of the calendar year which includes the first anniversary of the employment commencement date and succeeding calendar years. When a conversion to calendar years is made, or when both anniversary and calendar years are utilized, the participant who completes 1000 hours of service in both the initial employment year and the initial calendar year will be credited with two years of eligibility service credit. c. The computation period for determining eligibility for a deferred vested pension under Paragraph l(b) of Section 4, is the calendar year. d. The computation of "term of employment" or "credited service" for the accrual of pensions and calculation of benefits provided in Sections 4 and 5 of the Plan shall be as defined in Paragraph 22 of Section 2, and shall not be dependent on the completion of any given amount of service during any computation periods. Page 99 SECTION 6. GENERAL PROVISIONS (Continued) SNETMPP 4. Breaks in Service a. General Provisions-except for Pension Participation and Vested Pensions (i) Any absence from the service without pay other than absence during a period of disability benefits, or leave of absence or temporary layoff as defined in Paragraphs 5 and 6 of this Section, shall be considered as a break in the continuity of service and if any person is reemployed as a regular or provisional regular employee after such a break in the continuity of his service, his term of employment shall be reckoned from the date of such reemployment; provided, however, that 1) any break in the continuity of or absence from the service that does not exceed six months shall be eligible to have his prior service restored (herein referred to as a service bridging) if return to active service from such an absence occurs on or after October 1, 1980 and 2) effective November 1, 1986, any break in the continuity of or absence from service shall be eligible for a service bridging upon completion by an employee (who has previous periods of credited service which is eligible to be restored, which does not include the first period of service if its duration was less than six months) of four years of continuous credited service after the termination of the absence and prior to attaining the age of sixty-five years and 3) effective January 1, 1988, any break in the continuity of or absence from service shall be eligible for a service bridging upon completion by an employee, who has previous periods of credited service, but exclusive of the first period of service if less than six months, of four years of continuous credited service after the termination of the absence. This Paragraph 4(a) shall apply for determination of "term of employment" or "credited service" in all cases under the Plan, except as a more liberal rule may be provided in Subparagraph (d) of this Paragraph 4. It does not apply to the Page 100 SECTION 6. GENERAL PROVISIONS (Continued) SNETMPP measurement of "years of service" to become a participant in the Pension Plan (Paragraph 4(b)) or to "calendar years of service" after age eighteen for determining eligibility for deferred vested pensions (Paragraph 4(c)). Any break in continuity of service referred to in this Paragraph 4 will not impair any pension for which the employee may have previously become eligible. (ii) Notwithstanding any other provision of the Plan, the term of employment of an individual who is reemployed by a Participating Company in accordance with the terms of a settlement, award or order involving litigation relating to a prior termination from employment of such individual shall include, immediately upon such reemployment, any time relating to the following periods: (1) Any period of time, determined in accordance with the provisions of Subparagraph (iii) below for which back pay or a lump sum settlement award is made, (2) Any period of time between the date of the prior termination and the date of reemployment, not in excess of thirty days, if the termination was converted by the Participating Company from which the individual was terminated to a suspension, or (3) Any period of time between the date of the prior termination and the date of the reemployment as is specified to be included in the individual's service or term of employment by a court order or court award or in accordance with the terms of a settlement which results in the individual's reemployment; and (4) All periods of credited service which were included in the individual's term of employment as of the date of his prior termination if the termination is converted to a suspension on the Page 101 SECTION 6. GENERAL PROVISIONS (Continued) SNETMPP records of the Participating Company from which he was previously terminated, the period of absence from the date of termination was six months or less, or the provisions of a settlement agreement or court order or court award provide for such inclusion. (iii) The period of time, as directed by Subdivision (ii)(1) above, for which a back pay award, order or settlement or lump sum payment relates shall be such period as specified in such award, order or settlement. If no period of time is specified in such award, order or settlement, the period of time with respect to which a back pay award or lump sum payment shall be considered to relate shall equal the number of weeks determined by dividing the full amount of such award or payment by the employee's basic weekly wage rate in effect at the time of the individual's prior termination. In any such case, the amount of the back pay award or lump sum payment shall be deemed to include any amount of compensation or other payment received by the individual from other sources which has been offset against the amount awarded or paid to the individual in accordance with the award, order or settlement. Notwithstanding any other provision of this subparagraph, in no event shall the period of time included in an individual's term of employment, in accordance with the provisions of Subparagraph a(ii) 1-3 of this Paragraph 4, exceed the actual amount of time from the date of the employee's termination to the date of the employee's reemployment. (iv) Notwithstanding any other provision of this Plan, any individual hired as a regular or provisional regular employee shall be eligible to have any prior periods of temporary or job bank employment bridged to such regular periods of employment, in accordance with the standard service bridging provisions (i.e., immediately upon rehire if within six months of termination from regular or provisional regular employment; or upon Page 102 SECTION 6. GENERAL PROVISIONS (Continued) SNETMPP completion of four consecutive years of credited service as a regular or provisional regular employee). b. Pension Plan Participation For purposes of determining the required service of an employee to be a participant in the Pension Plan under Paragraph l(e) of Section 4 any consecutive calendar years during which there is an absence without pay (other than absence during a period of disability benefits or leave of absence or temporary layoff as defined in Paragraph 5 and 6 of this Section) and during which an employee is not credited with more than 500 hours of service with one or more Participating Companies (constituting a "one-year break in service" within the meaning of Section 4ll(a) (6) of the Internal Revenue Code) shall be considered as a break in the continuity of service, and if the employee is already a participant, also a break in the continuity of participation. If any non-vested person is reemployed during or after a calendar year in which such a break in continuity occurs, and if said break equals or exceeds the greater of (a) the number of years of service prior to such break or (b) five years, his "years of service" to meet the participation test of said Paragraph l(e) shall be reckoned from the date of such reemployment, and no benefits which result from amendments to the Pension Plan during the break in service will be effective for such person until his participation is renewed with a "year of service". c. Vesting Eligibility For purposes of determining eligibility for a deferred vested pension under Paragraph l(b) of Section 4 any calendar year during which there is an absence without pay (other than absence during a period of disability benefits or leave of absence or temporary layoff as defined in Paragraphs 5 and 6 of this Section) and during which an employee is not credited with more than 500 hours of service with one or more Participating Companies Page 103 SECTION 6. GENERAL PROVISIONS (Continued) SNETMPP (constituting a "one-year break in service" within the meaning of Section 4ll(a) (6) of the Internal Revenue Code) shall be considered as a break in the continuity of service, and if any non-vested person is reemployed during or after a calendar year in which such a break in the continuity of his service occurs, his "years of service" shall be reckoned (by calendar years) from after such reemployment, unless: (i) he completes one calendar year of service after reemployment, in the case of a person who at the time of commencement of the absence was eligible for a deferred vested pension; or (ii) the aggregate number of years of service prior to such break exceeds the number of consecutive one-year breaks in service, or, unless the Plan is permitted to disregard years of service that were disregarded under Plan provisions satisfying Sections 410(a)(5)(D) and 411(a)(6)(D) of the Internal Revenue Code (as in effect on August 22, 1984) as of December 31, 1984, the number of consecutive one-year breaks in service is fewer than five, and he completes one calendar year of service after reemployment (and after age 18) in the case of a person who at the time of commencement of the absence was not eligible for a deferred vested pension. d. Accrual of Vested Pension A break occurring on or after January l, l976, in the continuity of service of an employee who has already become a participant in the Plan under Paragraph l(e) of Section 4 or who had become a participant in the Predecessor Plan insofar as it results in the exclusion of service prior to the break from the "term of employment", used in determining the amount of a deferred vested pension, shall be considered to occur only when it is a "one-year break in service" within the meaning of Paragraphs 4(b) and 4(c) of this Section. If any such person is reemployed during or after a calendar year in which such "one- year break in service" occurs, his term of Page 104 SECTION 6. GENERAL PROVISIONS (Continued) SNETMPP employment for such purpose shall be reckoned from the date of such reemployment unless: (i) he completes a twelve month period of service after the date of such reemployment, in the case of a person who at the time of commencement of the absence was eligible for a deferred vested pension; or (ii) the aggregate number of years of service before such break exceeds the number of consecutive one-year breaks in service, or, unless the Plan is permitted to disregard years of service that were disregarded under Plan provisions satisfying Sections 410(a)(5)(D) and 411(a)(6)(D) of the Code (as in effect on August 22, 1984) as of December 31, 1984, regardless of the aggregate number of years of service prior to such break the number of consecutive one-year breaks in service is fewer than five, and he completes a twelve month period of service after the date of such reemployment in the case of a person who at the time of commencement of the absence was not eligible for a deferred vested pension. Whether or not it is a "one-year break in service," the period of a break in the continuity of service is not part of the "term of employment." Notwithstanding any other provision of this Paragraph 4(d), an employee's years of service shall include any previous periods of service (but not the first period of service if its duration was less than six months) prior to a break in service if the employee completes four years of continuous credited service after the break in service. (e) Effective January 1, 1988, any credited service after the last day of the month in which a person reaches normal retirement age shall be considered in applying the provisions of Paragraphs 4(b), 4(c) and 4(d) of this Section 6. (f) The provisions of Paragraphs 4(c)(ii) and 4(d)(ii) effective January 1, 1985, shall not be construed to require the Plan to recognize any Page 105 SECTION 6. GENERAL PROVISIONS (Continued) SNETMPP employee's service prior to a break in service if such prior service would not have been recognized on December 31, 1984, pursuant to the Plan's break in service rules in effect on August 22, 1984. (g) Notwithstanding any other provision of the Plan, if any individual accrues five years of vesting service while working on a temporary basis through the SNET Job Bank Program and such service is not otherwise recognized for purposes of pension eligibility or accrual, such periods of job bank service shall be bridged solely for purposes of determining eligibility for a deferred vested pension, and such individual shall be eligible to receive a deferred vested pension calculated based on job bank service only and payable at age 65 in accordance with the deferred vested pension provisions of Section 4. 5. Leave of Absence Leave of absence shall not constitute a break in the continuity of service. Leave of absence, for the purposes of this Plan, shall mean leave formally granted in conformity with the rules of the Committee, as adopted from time to time, and, except in the case of leave on account of continued disability following the expiration of a period of disability benefits, or a leave on account of an individual's attendance at an educational institution, such leave must be obtained at or before the time the absence begins. A leave of absence for a period not exceeding one month, except a leave following expiration of disability benefits, may be granted in accordance with the rules of the Participating Company which employs the individual granted such a leave, without approval by the Secretary, and the period of absence shall be credited in computing term of employment, and the employee shall retain eligibility to benefits during the absence. Leave of absence for any period in excess of one month shall not be effective unless approved in writing by the Secretary, and in any case in which such approval is given, the Secretary shall indicate, in Page 106 SECTION 6. GENERAL PROVISIONS (Continued) SNETMPP accordance with applicable legal requirements and the rules and regulations of the Company, whether or not the period of absence is to be deducted in computing term of employment and whether during the absence the employee shall be eligible to benefits under this Plan. For employees whose termination of employment was prior to January 1, 1993, absence following the expiration of a period of disability benefits (including a termination of employment with eligibility for a disability pension or long term disability benefits or workers' compensation benefits) shall be considered as a break in the continuity of service unless the employee is granted a leave of absence by the Committee; provided, however, that in its discretion, the Committee may consider any such absence as a leave of absence, either on a prospective or retrospective basis, if satisfactory evidence is furnished that the disability was continuous during the entire period of absence. If the Committee has decided to consider any such absence as a leave of absence, a determination of the former employee's pension eligibility would be based on the employee's actual credited service as of the actual termination of employment date, and the employee's age as of the date of the Committee's decision, and in accordance with the pension eligibility provisions in Paragraph 1 of Section 4. Maternity/Paternity Leave Provisions: To the extent that an employee's absence for any period (i) by reason of the employee's pregnancy, (ii) by reason of the birth of the employee's child, (iii) by reason of the placement of a child with the employee in connection with the employee's adoption of the child, or (iv) for purposes of caring for such child for a period beginning immediately after such birth or placement is not considered a leave of absence under the foregoing provisions, the employee shall be credited with the hours of service which would normally have been credited but for such absence up to a maximum of 501 hours. Such hours shall be credited to the calendar year following the Page 107 SECTION 6. GENERAL PROVISIONS (Continued) SNETMPP year in which the absence begins, unless the employee would have a one-year break in service for the year in which the absence begins, in which case such hours shall instead be credited to that year. Family and Medical Leave Act Provisions: For periods commencing after August 4, 1993, if an employee is eligible under the Family and Medical Leave Act of 1993 to take an unpaid leave to care for the employee's child after birth, or placement for adoption or foster care; to care for the employee's spouse, son or daughter, or parent, who has a serious health condition; or if the employee has a serious health condition that makes the employee unable to perform the employee's job, the employee shall be credited with up to 501 hours of service either in the year the absence began or in the following year, as necessary to prevent a break in vesting service. The service to be credited shall not be counted toward vesting service for purposes of a year of service or eligibility to participate; nor will the credited service be included in term of employment. The crediting of up to 501 hours of service for any period in this paragraph shall run concurrently with the crediting of hours of service in the event that an unpaid leave is taken by an eligible employee for maternity or paternity leave. The crediting of service for any year in this paragraph in addition to any service credited for maternity or paternity leave shall not exceed 501 hours or such lesser number of hours as is necessary for the employee to avoid a break in service in the year of recognition. 6. Layoff or Separation from Service Under the Provisions of the SNET Management Severance Pay Plan A period of layoff, or a separation from service where the employee received benefits under the provisions of the SNET Management Severance Pay Plan (herein referred to as the 'temporary layoff date'), shall be considered as a temporary layoff for purposes of this plan if the employee is reemployed as a regular or provisional regular employee (under such conditions as the rules of the Page 108 SECTION 6. GENERAL PROVISIONS (Continued) SNETMPP Participating Company which employs such individual as adopted from time to time may require) as follows: a) within two years of the temporary layoff date if such employee completed less than six years' service as of the termination of employment date, or b) within four years of the temporary layoff date if such employee completed six or more years' service as of the termination of employment date. If the employee is thus reemployed, the continuity of his service shall not be broken, and such employee shall be eligible to have his prior periods of service bridged (including periods of temporary SNET employment subsequent to the first six month period following the temporary layoff date) with service credit for up to the first six months of such absence; the remaining period of the temporary layoff absence will be deducted in computing term of employment. If the employee is not thus reemployed, the continuity of his service shall be deemed to have been broken, and such employee shall not receive service credit under the provisions of this Paragraph 6 for any period of such absence. 7. Special Classification Death resulting from infection of a cut, abrasion, scratch, puncture, or other wound not immediately disabling and not reported at the time of the occurrence causing the injury, or from sunstroke or frostbite, shall not be classed as due to accident, except at the discretion of the Committee. 8. Method of Payment Payments under the Plan shall be made in conformity with the financial methods of the Company and on orders of or bills prepared by the Committee or such other persons as may be designated by the Committee. 9. Amounts Accrued Prior to Death Pension payments accrued but not actually paid at the time of death of a former employee, pensioner or annuitant may, if permissible under applicable law and, if so, in the discretion of the Secretary, be paid to the spouse of Page 109 SECTION 6. GENERAL PROVISIONS (Continued) SNETMPP the deceased person or to some other suitable person selected by the Secretary, for use in payment of expenses incident to the death of the deceased person, or for the benefit of any one or more persons who were dependent upon him at the time of his death. In cases where a participant's pension payment has been mailed or deposited to a participant's account in a bank or other financial institution prior to the Secretary's receipt of notification of the participant's death, the participant's estate shall be entitled to retain the full pension payment for the month in which the death occurred. l0. Payment to Others Benefits payable to a former employee, pensioner or annuitant unable to execute a proper receipt may be paid to a relative or other proper person, selected by the Secretary, to use for the benefit of the former employee, pensioner or annuitant and the receipt of such person shall be a sufficient discharge. ll. Pension or Benefit Option During Disability If a person receiving sickness or accident disability benefits under the Sickness and Accident Disability Benefit Plan leaves the service of a Participating Company for any reason and is entitled to payment of a service or deferred vested pension, any such disability benefits shall continue to be payable to such person; provided, however, that upon the commencement of the service or deferred vested pension payments, the Participating Company shall reduce the amount of such disability benefits to an amount which when added to the service or deferred vested pension amount ensures that the total pension and disability payment does not exceed and is not diminished below the rate of disability payments to which he would have been entitled to receive if such pension payments did not commence. If a person receiving a disability pension files a written request for payment of a deferred vested pension and is entitled thereto, the disability pension shall be discontinued upon the Page 110 SECTION 6. GENERAL PROVISIONS (Continued) SNETMPP commencement of the deferred vested pension payment. 12. Multiple Participating Company Employment If an employee of one Participating Company is an employee also of one or more other Participating Companies, any pension or death benefit to which such employee, his beneficiaries or his annuitant may become entitled under the Plan shall be computed on the basis of the total combined pay which the employee is receiving from all such companies, and, except in the case of death due to accident arising out of and in the course of employment by any of such companies, shall be pro-rated among the Participating Companies on the basis of the pay the employee was receiving from each company, and the Participating Company or Companies, as applicable, shall only pay its or their share thus determined. Any maximum or minimum amounts fixed by the Plan for pensions or death benefits shall apply to the total amount payable by all companies and not to the portion payable by any Participating Company or Companies. 13. Merger or Consolidation In case the Pension Plan is merged or consolidated with, or the assets or liabilities of the Management Pension Fund Account transferred to any other plan, the benefit that each participant in the Pension Plan would receive if there were a termination immediately after such merger, consolidation or transfer shall be not less than he would have received if there were a termination immediately before. 14. Annual Report The Committee shall publish annually, in accordance with the requirements of the Pension Act, a report of the operations under the Plan. 15. Predecessor Plan Provisions This Plan shall be deemed to incorporate the provisions of the Predecessor Plan with respect to the entitlement to or computation of any benefit of an individual who is not and never becomes an employee on or after October l, l980 Page 111 GENERAL PROVISIONS (continued) SNETMPP and such provisions shall apply to all such individuals who would have been entitled to a benefit hereunder, pursuant to such provisions, if this Plan had existed, from time to time, prior to October l, l980. 16. Prior Provisions of the Plan The Plan, as set forth herein, shall be deemed to incorporate any prior provision which was effective at the time of or became effective after an individual's termination from service or retirement to the extent such individual's entitlement (or the entitlement of a beneficiary of such individual) to any right under the Plan continues to be determined in accordance with such provision. 17. Unclaimed Benefits If any payment or other benefit to which an individual is entitled under this Plan is unclaimed or otherwise not subject to payment to the person or persons so entitled, such amounts representing such payment or payments shall be retained in the trust associated with the Plan and shall not escheat to any state or revert to any party unless required by law, but may in the judgment of the Company, be used to offset future contributions to the Plan and/or its associated trust; provided, however, that any such benefits shall be restored pursuant to an eligible claim therefor. 18. Top-Heavy Provisions In the event that this Plan is deemed a "Top-Heavy Plan" with respect to any Plan Year, the following provisions shall apply with respect to such Plan Year, notwithstanding any other provisions of the Plan to the contrary: (1) Vesting: Any participant as defined in Paragraph 1(e) of Section 4 who has completed two or more years of service, computed in accordance with Paragraph 3(c) of Section 6, beginning with the calendar year in which the participant attained the age referred to in Section 203(b)(1)(A) of the Pension Act, namely age eighteen, and any participant who is in the service of a Page 112 SECTION 6. GENERAL PROVISIONS (Continued) SNETMPP Participating Company at age sixty-five or later, who leaves the service of a Participating Company for any reason other than transfer to another Participating Company, and who is not eligible for a service pension under Paragraph 1(a) of Section 4 on account of the same period of employment, shall be eligible for a pension which shall commence upon his sixty-fifth birthday or the day following the termination of his employment with a Participating Company, whichever is later, and shall be referred to in the Plan as a deferred vested pension. The monthly pension allowance for each person eligible for a deferred vested pension under the preceding paragraph shall be computed by multiplying the amount determined under Paragraph 2(f) of Section 4, or one-twelfth of the "Minimum Accrued Benefit" as determined under Subparagraph 2 of this Paragraph 18, whichever is greater, by 100%, for any participant who is in the service of a Participating Company at age sixty-five, or by the percentage in the schedule below related to the employee's completed years of service, as computed in accordance with the preceding paragraph, for any participant who leaves the service of a Participating Company before attaining age 65. Years of Service Percentage Less than 2 -0- 2 20% 3 40% 4 60% 5 or more 100% If the Plan ceases to be a "Top-Heavy Plan", then any employee who has at least three years of plan participation as of the 60th day following the last day of the last Plan Year in which the Plan was "Top-Heavy" may elect that the provisions contained in this Subparagraph 1 shall continue to apply with respect to such employee. For any other employee, the provisions contained in this Subparagraph 1 shall apply only to the employee's eligibility for a deferred vested pension and monthly pension allowance computed as if the employee left the service of a Participating Company as of the last day of the Page 113 SECTION 6. GENERAL PROVISIONS (Continued) SNETMPP last Plan Year in which the Plan was "Top-Heavy." (2) Minimum Accrued Benefits: The "Minimum Accrued Benefit" of each participant who is not a "Key Employee" on the "Determination Date" and has completed at least 1,000 Hours of Service in the Plan Year in which the Plan is deemed top-heavy shall equal the lesser of (1) 20% of the participant's "Top-Heavy Average Compensation", or (2) 2% of the participant's "Top-Heavy Average Compensation" multiplied by such participant's "Top-Heavy Years of Service". The "Minimum Accrued Benefit" applies even though under other Plan provisions the participant would not otherwise be entitled to receive an accrual for the year because the non-key employee is not employed on the last day of the Plan Year. For purposes of this Subparagraph 2, "Top-Heavy Average Compensation" means the participant's average annual compensation over the period of 5 consecutive years during which the participant had the greatest aggregate compensation. Years ending in a Plan Year beginning before January 1, 1984 and years beginning after the close of the last Plan Year in which this Plan is deemed a "Top- Heavy Plan" shall not be taken into account. For purposes of this Subparagraph 2, compensation shall mean either (i) the total W-2 compensation paid by a Participating Company to a participant in the normal course of employment but shall exclude contributions made by a Participating Company to a deferred compensation plan to the extent that such contributions are not includable in the gross income for such participant for the taxable year in which contributed prior to the application of Section 415 of the Code for such plan, or (ii) all wages subject to tax under Code Section 3101(a) without the dollar limitation of Section 3121(a), but not including deferred compensation other than contributions through a salary reduction agreement to a cash or deferred annuity under Code Section 401(k) or to a tax deferred annuity under Section 403(b) of the Code, or (iii) W-2 wages for the calendar year ending Page 114 SECTION 6. GENERAL PROVISIONS (Continued) SNETMPP coincident with the Plan Year. (3) Top-Heavy Determination: This Plan shall be deemed a "Top- Heavy Plan" only with respect to any Plan Year in which, as of the "Determination Date", the present value of the cumulative accrued benefits under the Plan for "Key Employees" exceeds 60% of the present value of the cumulative accrued benefits under the Plan for all employees. For purposes of determining the present value of the cumulative accrued benefit of any employee, such present value shall be increased by the aggregate distribution (if any) made with respect to such employee under this Plan, the Predecessor Plan, or both, during the 5-year period ending on the "Determination Date". However, a Plan distribution made after the "Valuation Date" and before the "Determination Date" of any Plan Year shall be included as a Plan distribution under this Subparagraph to the extent such distribution is included in the present value of the accrued benefits as of such "Valuation Date." For purposes of calculating the present value of accrued benefits under this Plan, such present values shall be calculated as of the "Determination Date" using the same actuarial assumptions that are used in the annual actuarial valuation, described in Paragraph 8 of Section 4, except that the assumed rate of return shall be the rate used by the Pension Benefit Guaranty Corporation, as of the "Determination Date", for determining the value of plan benefits under termination pension plans. The accrued benefit for any participant shall be calculated as if the participant had terminated service as of the applicable "Determination Date". For purposes of determining the present value of the cumulative accrued benefit of any employee, such present value shall be increased by the aggregate distribution (if any) made with respect to such employee under this Plan, the Page 115 SECTION 6. GENERAL PROVISIONS (continued) SNETMPP Predecessor Plan, or both, during the 5-year period ending on the "Determination Date". (4) Adjustments to Section 415 Limits: In calculating the denominator of the fraction described in Subparagraph (e)(1) of Paragraph 9 of Section 4, the factor "1.0" shall be used instead of "1.25", and in calculating the denominator of the fraction described in Subparagraph (e)(2) of Paragraph 9 of Section 4, the phrase "100% of the dollar limitation under Section 415(c)(1) (A) of the Code for each such year" shall be substituted for the phrase "125% of the dollar limitation under Section 415(c)(1)(A) of the Code for each such year". If a non-key employee is entitled to a Minimum Accrued Benefit under this Plan in a Plan Year, he shall not be entitled to any minimum contribution under any defined contribution plan in which he participates which is maintained by a Participating Company in the event such defined contribution plan is also deemed top-heavy in such year. (5) Aggregation: Each plan of a Participating Company required to be included in an "Aggregation Group" shall be treated as a "Top- Heavy Plan" if such group is a "Top-Heavy Group". For purposes of this Subparagraph 5, "Aggregation Group" means: (i) each plan of a Participating Company in which a "Key Employee" is a participant, and (ii) each other plan of a Participating Company which enables the plan or plans described in (i) above to meet the requirements of Sections 401(a)(4) or 410 of the Code, as amended. Any plan of the employer that is not required to be included in an "Aggregation Group" may be treated as part of such group if such group would continue to meet the requirements of Sections 401(a)(4) and 410 of the Code, as amended. For purposes of this Subparagraph 5, "Top-Heavy Group" means any "Aggregation Group" if the sum (as of the "Determination Date") of the present value of the cumulative accrued benefits for "Key Employees" under all defined Page 116 SECTION 6. GENERAL PROVISIONS (continued) SNETMPP benefit plans included in such group and the aggregate of the accounts of "Key Employees" under all defined contribution plans included in such group exceeds 60% of a similar sum determined for all employees. (6) Rollovers: For purposes of this Paragraph 18, an "Unrelated Transfer" shall mean a plan-to-plan transfer that is both (i) initiated by the employee and (ii) made from a plan maintained by one employer to a plan maintained by another employer. A "Related Transfer" shall mean a plan-to-plan transfer that is either (i) not initiated by the employee or (ii) is made to a plan maintained by the same employer. For purposes of determining whether the employer is the same employer, all employers aggregated under Section 414(b), (c) and/or (m) of the Code, as amended, shall be treated as the same employer. If an "Unrelated Transfer" is received by this Plan, such transfer will not be considered part of the employee's accrued benefit if accepted after December 31, 1983. If an "Unrelated Transfer" was received by this Plan before December 31, 1983, such transfer will be considered part of the employee's accrued benefit. If a distribution made from this Plan is deemed an "Unrelated Transfer", such distribution shall be recognized pursuant to the final sentence of Subparagraph 3 of this Paragraph 18. If a distribution made from this Plan is deemed a "Related Transfer", such distribution shall not be recognized pursuant to the final sentence of Subparagraph 3 of this Paragraph 18. (8) Valuation Date: The Valuation Date means the first day of each Plan Year and any other date deemed necessary by the Committee. 19. Unemployment Compensation Act of 1992 Effective for eligible distributions from the Plan made on or after January 1, 1993, and notwithstanding any provision of the Plan, a participant or a beneficiary may elect, at the time and in the manner prescribed by the plan administrator, to have any portion of an eligible rollover distribution paid Page 117 SECTION 6. GENERAL PROVISIONS (continued) SNETMPP directly in a direct rollover to an eligible retirement plan specified by the participant or the beneficiary. The plan administrator will notify each participant and beneficiary if a distribution is eligible for the direct rollover provisions based on Section 401(a)(31) of the Internal Revenue Code, and will provide such individual with the special notice which outlines the types of distributions eligible for a direct rollover, as well as the tax withholding provisions which will apply if a direct rollover is not elected when available, and the forms required to instruct the Plan on the method of distribution chosen by such individual. An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the participant or beneficiary, except that an eligible rollover distribution does not include any distribution that is one or a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the participant or beneficiary or the joint lives (or joint life expectancy) of the participant and his beneficiary, or for a specified period of ten years of more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and the portion of any distribution that is not includible in gross income. An eligible retirement plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the participant's or beneficiary's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. For purposes of this Paragraph 19, a participant includes an employee or Page 118 SECTION 6. GENERAL PROVISIONS (continued) SNETMPP former employee, and a beneficiary includes the employee's or former employee's surviving spouse, or the spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code. A direct rollover is a payment by the Plan to the eligible retirement plan specified by the participant or beneficiary. Page 119 SECTION 7. TRANSFER PROVISIONS WITH THE SNETPP SNETMPP In the event of the transfer of a participant in this Plan to the SNETPP or from the SNETPP to this Plan, the obligation with respect to the employee's pension benefits under this Plan or under the SNETPP, as applicable, will be transferred from the plan from which the employee transfers to the plan to which the employee transfers pursuant to the provisions of Paragraph 6(c) of Section 4. Upon the transfer of such obligation, assets shall be transferred in connection with such obligation transferred, as required by and as determined in accordance with applicable Internal Revenue Service Regulations, from the pension fund which transfers the obligation to the pension fund which accepts the obligation. Upon the transfer of an employee's pension obligation from this Plan to the SNETPP or from the SNETPP to this Plan, such employee's term of employment, as hereinabove defined, under the plan to which he transfers shall include any applicable term of employment with any Participating Company. Page 120 SECTION 8. CHANGES IN PLAN; TERMINATION OF PLAN SNETMPP This Plan may be amended from time to time or terminated at any time by the Board acting in accordance with the Corporation's by- laws. The Board may delegate authority to the Committee (or other representative designated by the Board or the Committee) with respect to modification of the Plan and the Committee, to the extent authorized by the Board, may in turn delegate the authority to modify the Plan to a representative of the Committee's choosing. The Committee, acting in accordance with its by-laws, is authorized to adopt amendments a) which are administrative modifications and do not (i) affect the level or cost of benefits, or (ii) change the Plan's eligibility or vesting requirements, or (b) are dictated by requirements of Federal or State statutes or regulations thereunder, or are authorized or made desirable by such statutes or regulations, as determined by the Committee with the advice of legal counsel. The Committee may recommend other amendments for adoption by the Board. The Secretary is authorized to adopt amendments which, in the opinion of the Secretary with the advice of legal counsel, are dictated by requirements of federal or state statutes or regulations thereunder, or are authorized or made desirable by such statutes or regulations thereunder. The Secretary shall periodically report such amendments to the Committee. Any such changes or termination, whether adopted by the Board, the Committee, the Secretary (or other designated representative) shall not affect the rights of any employee, without his consent, to any benefit or pension to which he may have previously become entitled hereunder. If an amendment changes the vesting schedule in the Plan, any participant having three or more years of plan participation on the date which is sixty days after such amendment is adopted or effective (or, if later, sixty days after written notice of such amendment is given) may, within a reasonable time after the effective date of the amendment, elect to remain subject to the vesting schedule in effect prior to such amendment. Page 121 SNET MANAGEMENT PENSION PLAN A summary of amendments to the SNET Management Pension Plan ("Plan") is as follows: Effective January 1, 1996: For eligible management employees (as described below), the SNET Management Pension Plan ("Plan") is amended to provide for the conversion of the pension benefits payable under this Plan to a total Cash Balance Plan ("CBP") using the conversion formula and ongoing CBP accrual formula as described below. 1. Eligibility Criteria: All regular full and part-time management employees who: 1) as of January 1, 1996 are on the active payroll or an approved Leave of Absence; 2) are on the active payroll as of December 13, 1995 and die on or after such date; 3) terminate employment on or after December 13, 1995 at the expiration of sickness or accident disability benefits under the provisions of the SNET Disability Benefits Plan; or 4) former management employees who accepted employment with Computer Sciences Corporation (CSC), who as of January 1, 1996 are still employed by CSC and have not elected to commence their pension benefits. 2. Vesting: Each employee's CBP shall vest in accordance with the rules applicable under the provisions of the Plan, which generally requires 5 years of service. 3. Determination of the Opening Cash Balance Plan Account: Solely for purposes of determining the opening CBP account amount, each eligible employee's prior periods of service shall be 'bridged' to determine the employee's net credited service date, irrespective of such employee's actual eligibility for such service bridging. Each eligible employee's opening CBP account shall be credited with an amount equal to the product of (1), (2), (3) and (4) below: (1) The employee's annualized Base Pay Rate in effect as of November 1, 1995 (including any lump sum payment made in 1994 in lieu of a base pay rate increase) plus five percent plus any eligible incentive compensation payments (as defined in the Plan Section 4, Paragraph 2(iii)) paid in 1995 or that would have been paid in 1995 except that the employee elected to defer such payment in accordance with the terms of a deferred compensation plan; (2) The years and months of service calculated as of December 31, 1996 except for those former management employees who, due to their employment status with CSC, are eligible for service credit up through June 30, 1996 under the provisions adopted May 10, 1995 in which case the years and months of service shall be calculated as of June 30, 1996; (3) .015; and (4) The applicable transition multiplier factor based on the employee's actual age and service as of January 1, 1997 for the early retirement factor component, and the actual age as of January 1, 1996 for the lump sum conversion factor component (as set forth in Table 1(a) and 1(b)). In the event that the total compensation eligible for inclusion in Step 3(1) exceeds $150,000, the opening account balance credited under the Plan shall be determined based on eligible compensation up to and including $150,000, and an opening account balance shall be credited under the SNET Pension Benefit Plan based on eligible compensation in excess of $150,000. For eligible management employees, the pension benefit shall never be less than the amount to which they would be entitled as of January 1, 1996 pursuant to any pension formula in effect prior to the adoption of this amendment. 4. Interest credits: For the period from January 1, 1997 through December 31, 1998, each employee's CBP account payable under this Plan and the Pension Benefit Plan will be credited with interest on the last business day of each month at a rate of a) for an employee whose years and months of service as of December 31 of such year is less than 30 years, .565% (for an effective annual rate of 7.0%), or b) for an employee whose years and months of service as of December 31 of such year is 30 or more years, .247% (for an effective annual rate of 3.0%). For periods after December 31, 1998, an employee's CBP account shall be credited with an effective annual rate of not less than 3.0%. When the CBP account is to be distributed in the form of an immediate life annuity or a single lump sum payment, interest will be credited at the then current year's crediting rate to the end of the month in which termination or death occurs. For an employee who retires or terminates service and who elects to defer receipt of his/her pension benefits to any later date up to the employee's normal retirement age, the interest on such employee's CBP account will be credited as of the last business day of each month at a rate equal to the effective annual rate of 3% until the end of the month prior to the month in which a life annuity commences. If an employee elects to defer receipt of pension benefits upon retirement or termination, the lump sum pension distribution option will not be available when such pension benefits subsequently become payable. 5. Annual Pay Related Credits: On the last day of each plan year beginning December 31, 1997, each employee's CBP account payable under this Plan and the Pension Benefit Plan will be credited with basic pay related credits as set forth below. Basic pay related credits are based on age and service credit (defined below) and the current years' eligible pay. An employee's eligible pay shall be equal to the calculated basic rate of pay based on the employee's scheduled work hours for the period January 1 through December 31 of such year and eligible incentive compensation payments paid that year or that would have been paid in such year except that the employee elected to defer such payment in accordance with the terms of a deferred compensation plan. The pay related credit will be determined based on a) the years, months and days an employee has been employed by SNET as of the end of each Plan year and will include service credited under the Plan service bridging provisions, and b) the years, months and days of the employee's age as of the end of each Plan year. As of January 1 of each Plan year beginning with January 1, 1997, the pay related credit shall be determined by adding age and service expected as of the end of such year and raising any fractional days of the sum of age and service to a month to calculate the number of "points" to be recognized for purposes of determining the level of pay related credits to be granted for such year based on the following table: POINTS (In years) CREDIT Under 35 3.5% 35-44 4.0% 45-54 5.0% 55-64 6.0% 65-74 7.0% 75-84 8.0% 85-94 9.0% Over 95 10.0% For years in which an employee does not receive full service credit due to a leave of absence or other break in service, the employee's eligible pay shall be prorated to reflect the deduction of the term of such break in service. 6. Supplemental Pay Credits: In the event that an employee's eligible pay exceeds 80% of the Social Security Wage Base for any Plan year, such employee's CBP account payable under this Plan and the Pension Benefit Plan will be credited with a supplemental pay credit which shall be determined by multiplying the amount of eligible pay in excess of 80% of the Social Security Wage Base by the same credit percentage as was applied under Paragraph 5 above. 7. CBP Distribution Options: In general, employees who terminate employment for any reason will be eligible to elect to receive a distribution of the vested CBP account in a single lump sum distribution, monthly pension benefits (with surviving spouse pension benefits available), or a combination of monthly pension benefits and a lump sum distribution. The normal form of payment of the CBP shall be a joint and survivor annuity for married employees or a single life annuity for unmarried employees. The monthly payment amount of the CBP if payable as a single life annuity, shall be determined by dividing the CBP account balance as of the termination of employment date by the applicable annuity factor provided in Table 2. If the CBP is payable as a joint and survivor annuity, such single life annuity amount payable to the employee shall be reduced by 10% with the named spouse as annuitant eligible to receive 50% of the employee's reduced pension benefit; provided, however, that if the named annuitant shall predecease the employee, the 10 percent reduction shall be restored to such employee effective with the pension payment due for the month following the month of such annuitant's death. The employee may elect a lump sum certain option where the employee elects to receive a reduced monthly pension benefit to provide for a lump sum distribution of the balance in the event the employee, and his or her surviving spouse if the survivor annuity provisions are elected, does not receive monthly pension benefit payments equal to the lump sum benefit that would have been payable when such employee terminated employment. The lump sum certain option shall be calculated using the reduction factors set forth in Table 3. In the event of the death of an employee prior to termination of employment, the surviving spouse will be eligible to receive the employee's vested account balance in one lump sum payment, or in monthly pension payments. If there is no spouse, the employee's vested account balance will be paid to the employee's estate in one lump sum payment. For any employee who elects the entire portion of the pension benefit to be payable in a lump sum distribution, such employee shall not be considered a participant in the Plan or the Pension Benefit Plan for any purpose after the date of such distribution. For any employee who elects all or any portion of the pension benefit to be payable in a lump sum, such employee shall not be eligible for future pension benefit increases, if any, or the Death Benefit provisions of the Plan. The lump sum certain option shall not be considered to be a lump sum distribution for purposes of this paragraph. If the CBP account balance as of the termination of employment date is $3,500 or less, the entire CBP account will be payable immediately in a single lump sum distribution. In addition: The Plan is to provide for a combination of monthly pension benefits and a lump sum distribution of the balance. The combination options will require 50% or 75% of the total pension benefit to be payable in monthly pension benefits, and the balance payable in a lump sum. The Plan is amended to provide that, for eligible management employees on the active payroll or eligible leave of absence as of January 1, 1996, the employee's annualized Base Pay Rate used for determining an eligible employee's opening Cash Balance Plan account shall (1) include the employee's annualized differential rate in effect as of November 1, 1995 for evening and night tours (hereafter referred to as "fixed differentials"); and (2) be the employee's annualized Base Pay Rate in effect during the period January 1, 1995 through December 31, 1995 in each case in which such employee's Base Pay Rate in effect as of November 1, 1995 is less than the Base Pay Rate in effect as of January 1, 1995. The Plan is amended to provide that the definition of basic rate of pay used for purposes of determining the amount of an eligible employee's annual pay related credits shall include the employee's calculated basic rate of pay plus the employee's calculated fixed differential rate of pay, when applicable, based on the employee's scheduled work hours for the period January 1 through December 31 of such year. Effective December 20, 1995 The Plan be clarified to provide that, in the event that a former SNET bargaining unit employee who accepted employment with Computer Sciences Corporation (CSC), in accordance with the Agreement between SNET and CSC and related negotiations with the Connecticut Union of Telephone Workers' Inc., is subsequently rehired to a management position at SNET, such individual shall be considered for all benefit purposes, except for the vesting requirements under the SNETMPP as a new employee with no previous SNET service. This clarification reflects the provisions of the Agreement which provides that the pension benefit assets associated with such bargaining unit employees will be transferred to the CSC pension plan for all purposes, and that the prior periods of SNET service will be recognized by CSC for all purposes. Effective March 1, 1996: The Plan be amended to provide that employees of Participating Companies who retire or terminate service with fifteen or more years of credited service, whose date of termination or retirement is on or after January 1, 1993 and who received the maximum 52 week period of sickness or accident disability benefits provided under the SNET Disability Benefit Plan, shall be eligible to commence receipt of a Disability Service Pension payable from the trust fund in accordance with the provisions of the Plan and calculated using the undiscounted pension benefits payable in accordance with the pension formula and related distribution option provisions in effect at the time such employee's employment ended (as described below), unless such employee is eligible for distribution under the Cash Balance Plan provisions of the SNETMPP. For eligible management employees, the undiscounted pension benefit amount payable under this provision shall mean the undiscounted pension benefits payable in accordance with the Adjusted Career Income formula in effect as of the earlier of the employee's date of termination or December 31, 1995, with such pension benefit payable in the form of: (1) for terminations prior to January 1, 1996, monthly pension payments with or without the survivor annuity provisions; or (2) for terminations on or after January 1, 1996, monthly pension payments with or without the survivor annuity or the lump sum certain option provisions. Effective April 1, 1996: The Plan be amended to provide that any former employee who commenced receiving a disability pension on or after January 1, 1976 and prior to January 1, 1993, and who is still receiving such disability pension as of April 1, 1996, shall be granted and retired with, in lieu of any other pension, a pension designated a service pension, in the same amount as the disability pension under the terms and conditions provided under Section 4, Paragraph 1(d) of the SNETMPP and the disability pension shall be discontinued. - - Report of provisions adopted by the Secretary of the Committee as authorized by this Committee on January 24, 1996 as necessary or desirable for the implementation of the change to a Cash Balance Plan concerning the calculation of the SNETMPP opening Cash Balance Plan account balance for eligible management employees as of January 1, 1996. For management employees who were on the active payroll or an approved leave of absence as of January 1, 1996, the following provisions were adopted and implemented: - - Opening CBP account balances were created and provided to all eligible employees who were vested (i.e., have 5 or more years of service) or who would have become vested by December 31, 1996. - - For eligible employees whose prior service was eligible to be bridged on or before December 31, 1996, the prior service was bridged solely for purposes of determining the eligibility for the CBP during 1996, and the amount of the opening CBP account balance. - - Employees who were promoted to management status between January 1, 1993 and December 31, 1995, inclusive, had their opening CBP account balance created using all service as a bargaining unit and management employee. The three year waiting period previously required by the SNETMPP before pension benefits would be determined using bargaining unit service under the management formula was eliminated. - - Employees who were rehired by SNET on or after January 1, 1992 and whose prior periods of service were bridged or were eligible to be bridged by December 31, 1996, had their opening CBP account balance created with the bridged credited service. The requirement that a minimum of one year of reemployment be completed in addition to the prior service being bridged was waived solely for purposes of creating the opening CBP account balance under the transition formula. For eligible management employees who did not meet the above criteria to be eligible to leave during 1996 with the CBP account, the following provisions were adopted and implemented: - - Employees who will not become vested during 1996 must remain as an active employee or on an approved leave of absence continuously until they have completed five years of service and became vested; they would then be eligible for distribution of an opening CBP account balance created using the transition formula. If they are not continuously employed, they will be eligible for a CBP calculated in accordance with the rehire provisions in effect when they are subsequently rehired. - - Employees who are not eligible to have their prior service bridged during 1996 must remain on the active payroll until such time as their prior service is eligible to be bridged and they have completed one continuous year of service to be eligible to have their opening CBP balance created using all periods of service and the transition formula. If they do not remain continuously employed until their prior periods of service are eligible to be bridged, they will be eligible for a CBP calculated in accordance with the rehire provisions in effect when they are subsequently rehired. The following provisions have been adopted regarding calculations of CBP account balances for employees who, on or after January 1, 1996, are promoted to management status or rehired: - - Employees promoted to management status on or after January 1, 1996 shall have their opening CBP account balance created using the CBP balance calculated under the SNETPP provisions and reflecting all interest and service credits through the date of promotion. Ongoing accruals in the SNETMPP CBP shall be based on all credited service as a bargaining unit and management employee. For employees promoted during 1996, the SNETMPP accrual provisions for the CBP shall apply for periods following the date of promotion through December 31, 1996. - - Employees who are rehired by SNET on or after January 1, 1996 must have their prior periods of service bridged in accordance with the SNETMPP provisions and must satisfy the minimum of one year of reemployment requirement to have their prior accrued pension benefits converted to a CBP account balance. Amounts accrued during such period of reemployment shall be subject to offset for any pension benefits previously distributed to such employee. The remaining specifics relating to the rehire provisions have not been finalized at this time. EX-12 5 EXHIBIT 12 1995 Form 10-K Southern New England Telecommunications Corporation Computation of Ratio of Earnings to Fixed Charges Dollars in Millions, for the Year Ended December 31, 1995 Income from continuing operations before income taxes $278.4 Add: Interest on indebtedness 85.3 Portion of rents representative of the interest factor 9.7 Earnings before fixed charges, income taxes and extraordinary items(1) $373.4 Fixed charges Interest on indebtedness $ 85.3 Portion of rents representative of the interest factor 9.7 Fixed charges(2) $ 95.0 Ratio of earnings to fixed charges [(1) divided by (2)] 3.93 EX-21 6 Southern New England Telecommunications Corporation Subsidiaries of the Registrant Name State of Incorporation The Southern New England Telephone Company Connecticut SNET America, Inc. Connecticut SNET Cellular, Inc. Connecticut SNET Mobility, Inc. Connecticut SNET Paging, Inc. Connecticut SNET Diversified Group, Inc. Connecticut SNET Real Estate, Inc. Connecticut SNET Credit, Inc. Connecticut SNET Personal Vision, Inc. Connecticut EX-23 7 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference of our reports, which include an explanatory paragraph related to the discontinuance of SFAS No. 71, "Accounting for Certain Types of Regulation" in 1995 and the changes in accounting methods in 1993, dated January 22, 1996 on our audits of the consolidated financial statements and financial statement schedule of Southern New England Telecommunications Corporation as of December 31, 1995 and 1994 and for each of the three years in the period ended December 31, 1995, included or incorporated by reference in this Annual Report on Form 10-K, in the following documents filed by Southern New England Telecommunications Corporation: Registration Statement No. 33-59713 on Form S-3 relating to the Shareholder Dividend Reinvestment and Stock Purchase Plan. Post-Effective Amendment No. 3 to Registration Statement No. 33-6326 on Form S-8 relating to the SNET Bargaining Unit Retirement Savings Plan. Post-Effective Amendment No. 2 to Registration Statement No. 33-6325 on Form S-8 relating to the SNET Management Retirement Savings Plan. Registration Statement No. 33-19058 on Form S-8 relating to the SNET 1986 Stock Option Plan. Registration Statement No. 33-41237 on Form S-3 relating to the registration of $165 million of Debt Securities. Registration Statement No. 33-51055 on Form S-8 relating to the SNET Non-Employee Director Stock Plan. Registration Statement No. 33-64975 on Form S-8 relating to the SNET 1995 Stock Incentive Plan. Registration Statement No. 33-60133 on Form S-3 relating to the registration of $470 million of Debt Securities. Hartford, Connecticut March 20, 1996 EX-24 8 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, Southern New England Telecommunications Corporation, a Connecticut corporation (hereinafter referred to as the "Corporation"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, each of the undersigned is an officer or director, or both, of the Corporation, and holds the office, or offices, in the Corporation herein below indicated under his or her name; NOW, THEREFORE, the undersigned, and each of them, hereby constitutes and appoints Donald R. Shassian their attorney-in-fact for them and in their name, place and stead, and in each of their offices and capacities with the Corporation, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorney full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, as fully, to all intents and purposes, as the undersigned might or could do, if personally present at the doing thereof, hereby ratifying and confirming all that said attorney may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF each of the undersigned has executed this Power of Attorney this 13th day of March 1996. Principal Executive Officer: Directors: /s/ Daniel J. Miglio Daniel J. Miglio Chairman, President and Chief Executive Officer and Director /s/ William F. Andrews William F. Andrews, Director /s/ Richard H. Ayers Richard H. Ayers, Director /s/ Zoe Baird Zoe Baird, Director /s/ Robert L. Bennett Robert L. Bennett, Director /s/ Barry M. Bloom Barry M. Bloom, Director /s/ Frank J. Connor Frank J. Connor, Director /s/ William R. Fenoglio William R. Fenoglio, Director /s/ Claire L. Gaudiani Claire L. Gaudiani, Director /s/ James R. Greenfield James R. Greenfield, Director /s/ Ira D. Hall Ira D. Hall, Director /s/ Burton G. Malkiel Burton G. Malkiel, Director /s/ Frank R. O'Keefe, Jr. Frank R. O'Keefe, Jr., Director EX-24 9 C E R T I F I C A T E This is to certify that at a regular meeting of the Board of Directors of Southern New England Telecommunications Corporation held on March 13, 1996, the following vote was adopted and, as of the date of this Certificate, has not been amended, modified or rescinded and is in full force and effect: "VOTED: That the Chief Executive Officer and the Chief Financial Officer are, or either one of them is, authorized to execute, personally or by attorney, in the name and on behalf of the Company, and to cause to be filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, the Company's Annual Report on Form 10-K, for the fiscal year ended December 31, 1995, in substantially the form submitted to this meeting, but with such changes, additions and revisions as the officer executing the same shall approve, such approval to be conclusively evidenced by such execution and thereafter to execute personally, and to cause to be filed, any amendments or supplements to such report, and to do any and all other acts and things, and to execute and deliver any and all other documents necessary or advisable in connection with the foregoing." Attest: /s/ Paula M. Anderson Paula M. Anderson Assistant Secretary New Haven, Connecticut March 20, 1996 EX-27 10
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1995 ANNUAL REPORT ON FORM 10-K OF SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 11,100 0 381,500 34,200 26,100 534,900 4,532,100 2,966,900 2,724,200 735,600 1,182,400 0 0 67,900 285,000 2,724,200 0 1,838,500 0 1,474,200 0 0 85,900 278,400 109,600 168,800 0 (687,100) 0 (518,300) (7.99) (7.99)
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