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EBSA Notices

Notice of Proposed Exemption involving AT&T Inc. (Together With AT&T Inc.'s Affiliates, AT&T or the Applicant) Located in Dallas, TX   [9/9/2013]
[PDF]
Federal Register, Volume 78 Issue 174 (Monday, September 9, 2013)
[Federal Register Volume 78, Number 174 (Monday, September 9, 2013)]
[Notices]
[Pages 55103-55114]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-21801]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Application No. D-11758]


Notice of Proposed Exemption involving AT&T Inc. (Together With 
AT&T Inc.'s Affiliates, AT&T or the Applicant) Located in Dallas, TX

AGENCY: Employee Benefits Security Administration, U.S. Department of 
Labor.

ACTION: Notice of Proposed Exemption.

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SUMMARY: This document contains a notice of pendency before the 
Department of Labor (the Department) of a proposed individual exemption 
from certain prohibited transaction restrictions of the Employee 
Retirement Income Security Act of 1974, as amended (ERISA or the Act), 
and the Internal Revenue Code of 1986, as amended (the Code). The 
proposed transactions involve AT&T, the AT&T Pension Benefit Plan (the 
Plan), and the SBC Master Pension Trust (the Trust). The proposed 
exemption, if granted, would affect the Plan and its participants and 
beneficiaries.
    Effective Date: If granted, this proposed exemption will be 
effective as of September 1, 2013.

DATES: Written comments and requests for a public hearing on the 
proposed exemption should be submitted to the Department within 55 days 
from the date of publication of this Federal Register Notice.

ADDRESSES: Comments and requests for a hearing should state: (1) The 
name, address, and telephone number of the person making the comment or 
request, and (2) the nature of the person's interest in the proposed 
exemption and the manner in which the person would be adversely 
affected by the exemption, if granted. A request for a hearing must 
also state the issues to be addressed and include a general description 
of the evidence to be presented at the hearing. All written comments 
and requests for a public hearing concerning the proposed exemption 
should be sent to the Office of Exemption Determinations, Employee 
Benefits Security Administration, Room N-5700, U.S. Department of 
Labor, 200 Constitution Avenue NW., Washington DC 20210, Attention: 
Application No. D-11758. Interested persons are also invited to submit 
comments and/or hearing requests to EBSA via email or FAX. Any such 
comments or requests should be sent either by email to: 
moffitt.betty@dol.gov, or by FAX to (202) 219-0204 by the end of the 
scheduled comment period. The application for exemption and the 
comments received will be available for public inspection in the Public 
Documents Room of the Employee Benefits Security Administration, U.S. 
Department of Labor, Room N-1513, 200 Constitution Avenue NW., 
Washington, DC 20210. Comments and hearing requests will also be 
available online at www.regulations.gov and www.dol.gov/ebsa, at no 
charge.
    Warning: If you submit written comments or hearing requests, do not 
include any personally identifiable information (such as name, address, 
or other contact information) or confidential business information that 
you do not want publicly disclosed. All comments and hearing requests 
may be posted on the Internet and can be retrieved by most Internet 
search engines.

FOR FURTHER INFORMATION CONTACT: Anna Mpras Vaughan, Office of 
Exemption Determinations, Employee Benefits Security Administration, 
U.S. Department of Labor, telephone (202) 693-8565. (This is not a 
toll-free number.)

SUPPLEMENTARY INFORMATION: This document contains a notice of proposed 
exemption that, if granted, would provide exemptive relief from 
sections 406(a)(1)(A), 406(a)(1)(B), 406(a)(1)(D), 406(a)(1)(E), 
406(a)(2), 406(b)(1), 406(b)(2), and 407(a) of the Act and the 
sanctions resulting from the application of section 4975 of the Code, 
by reason of section 4975(c)(1)(A), 4975(c)(1)(B), 4975(c)(1)(D) and 
4975(c)(1)(E) of the Code. The proposed exemption has been requested by 
AT&T pursuant to section 408(a) of the Act and section 4975(c)(2) of 
the Code, and in accordance with the procedures set forth in 29 CFR 
Part 2570, Subpart B (76 FR 66637, 66644, October 27, 2011). Effective 
December 31, 1978, section 102 of the Reorganization Plan No. 4 of 
1978, 5 U.S.C. App. 1 (1996), transferred the authority of the 
Secretary of the Treasury to issue administrative exemptions under 
section 4975(c)(2) of the Code to the Secretary of Labor. Accordingly, 
this notice of proposed exemption is being issued solely by the 
Department.

Summary of Facts and Representations \1\
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    \1\ The Summary of Facts and Representations is based on the 
Applicant's representations and does not reflect the views of the 
Department.
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Background

    1. AT&T Inc. (together with its affiliates, AT&T), formerly known 
as SBC Communications Inc., is a holding company incorporated in 1983 
under the laws of the State of Delaware that has its principal 
executive offices in Dallas, Texas. AT&T, a provider of 
telecommunications services, offers its services and products to 
consumers in the U.S. and to businesses and other providers of 
telecommunications services worldwide. The services and products that 
AT&T offers vary by market, and include: wireless communications, local 
exchange services, long-distance services, data/broadband and Internet 
services, video services, telecommunications equipment, managed 
networking and wholesale services.
    2. AT&T is the sponsor of the AT&T Pension Benefit Plan (the Plan). 
Effective December 14, 2010, the Plan was amended (the 2010 Amendment) 
to name the Plan's named fiduciary, AT&T Services, as the plan 
administrator. AT&T Services, pursuant to delegation (the Delegation) 
from its Board of Directors (the Board) dated July 1, 2011, delegated 
to the AT&T Inc. Benefit Plan Investment Committee (the Committee) all 
powers and authority that may be necessary or appropriate to the 
establishment, qualification, administration, maintenance, and 
operation of the SBC Master Pension Trust (the Trust) established as 
part of the Plan. Notwithstanding its power to delegate authority, the 
Committee retains, and may not delegate, the authority to authorize 
``company-directed'' investments (i.e., investments that have not been 
delegated to a third party investment manager) in amounts greater than 
$200,000,000.
    3. In addition to AT&T Services and the Committee, other Plan 
fiduciaries include Brock Fiduciary Services LLC (the Independent 
Fiduciary), an investment manager that is independent of AT&T Inc.

[[Page 55104]]

The Issuer

    4. AT&T Mobility II LLC (the Issuer), an indirect wholly-owned 
subsidiary of AT&T Inc., is a Delaware limited liability company that 
has its principal executive offices in Atlanta, GA. The Issuer provides 
the wireless services marketed under AT&T's name and serves 
approximately 107 million mobile users over a nationwide network that 
spans all major metropolitan areas.
    The Applicant represents that AT&T's wireless business is the 
fastest growing part of AT&T's business. The Issuer earned operating 
revenues totaling $66.763 billion and income totaling $16.532 billion 
in the year ended December 31, 2012. During the same year, AT&T's total 
revenue was $127.434 billion and its cash from operating activities was 
$39.2 billion. Revenue from wireless data increased from $4.3 billion 
in 2006 to $31.8 billion in 2012. The Applicant states that the 
continued financial success of AT&T, anchored by the growth of the 
Issuer which accounted for approximately 53% of the total operating 
revenue for all of AT&T's business segments in 2012, has allowed AT&T 
to pay $10.2 billion in dividends to shareholders in 2012 which was the 
29th consecutive year of annual dividend increases for AT&T.

The Plan

    5. The Plan is a noncontributory qualified defined benefit pension 
plan covering substantially all U.S. bargained and non-bargained 
employees of the participating subsidiaries of AT&T. The Plan provides 
retirement, disability, death and certain other ancillary benefits to 
Plan participants. The Plan was originally established effective as of 
January 1, 1984, as the Southwestern Bell Corporation Management 
Pension Plan. Effective May 1, 1992, the name of the Plan was changed 
to the SBC Pension Benefit Plan, and effective November 18, 2005, the 
name of the Plan was changed to the AT&T Pension Benefit Plan. As of 
December 31, 2012, there were approximately 551,187 employees 
participating in the Plan.

The Trust

    6. The Trust was established pursuant to a Declaration of Trust 
originally effective as of January 1, 2007, and amended and restated in 
its entirety effective as of February 1, 2012, by and between AT&T 
Services and the Trustee. The Trust holds assets of the Plan and 
contributions required to fund the Plan are made to and held under the 
Trust. The assets of the Trust are invested, in small part, in employer 
securities issued by AT&T. In this regard, as of the 2012 year-end, the 
aggregate fair market value of these investments was $72,920,000, which 
constituted approximately 0.16% of the fair market value of the Trust's 
total assets. It is AT&T's belief that these investments are covered 
under the statutory exemption described in section 408(e) of ERISA.\2\
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    \2\ The Department expresses no opinion herein as to the 
applicability of the statutory exemption provided by section 408(e) 
of the Act with respect to these investments.
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Minimum Required Contributions

    7. The Applicant represents that AT&T has always satisfied its 
funding obligations and has never asked for a waiver of those 
obligations. The Applicant represents that, in fact, AT&T generally has 
voluntarily funded its pension obligations in advance of the required 
dates, and notes that AT&T made a voluntary $1 billion cash 
contribution in 2011.
    8. The Applicant represents that as of August 2013, its anticipated 
minimum required funding contributions for the Plan for the years 2013 
through 2019 are as follows:

------------------------------------------------------------------------
                                                       Minimum required
               Calendar year beginning                   contribution
                                                          (billions)
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January 1, 2013.....................................              $0.175
January 1, 2014.....................................                 1.2
January 1, 2015.....................................                 1.2
January 1, 2016.....................................                 0.4
January 1, 2017.....................................                 0.0
January 1, 2018.....................................                 0.0
January 1, 2019.....................................                 0.0
                                                     -------------------
    Total...........................................               2.975
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    The Applicant represents that these minimum required contribution 
estimates are based on certain assumptions, including that the Plan's 
assets will earn an annual return of 12.0% for 2013 and 2014 and 7.75% 
thereafter, and that interest rates rise beginning in January 2013 and 
increase to pre-financial crisis levels by 2017.

The Preferred Interests

    9. The Applicant proposes to make an in-kind contribution (the 
Contribution) of 320 million Series A Cumulative Perpetual Preferred 
Membership Interests of the Issuer (i.e., the Preferred Interests), a 
newly created class of preferred membership interests, to the Trust. In 
order to effectuate the transfer, the Issuer will be recapitalized by 
amending its governing documents to provide for an additional class of 
equity consisting of the Preferred Interests. The Preferred Interests 
will be issued by the Issuer to its parent company, AT&T Inc., and then 
contributed in their entirety by AT&T Inc. to the Trust. The Preferred 
Interests are non-voting and do not provide for participation in the 
management of the Issuer. Currently, the only membership interests 
issued by the Issuer are common membership interests, all of which are 
held by AT&T.
    10. The Preferred Interests will accrue, pursuant to the Second 
Amended and Restated Limited Liability Company Agreement of AT&T 
Mobility II LLC (the LLC Agreement), cumulative distributions of $1.75 
per Preferred Interest per annum, payable quarterly upon declaration by 
the Issuer (the Distributions). At any time when Distributions on any 
outstanding Preferred Interests are in arrears for purposes of the LLC 
Agreement: (i) The Issuer will not be permitted to make any transfer of 
cash to its parent, AT&T Inc., or any other member of the Issuer, 
whether pursuant to a loan, equity distribution or any other 
arrangement; and (ii) AT&T Inc. will not be permitted to declare any 
dividends on or make any repurchases of its common stock. The Applicant 
represents that it is in AT&T's financial interest, and AT&T intends to 
exercise its ownership rights in the Issuer, to cause the Issuer to pay 
the Distributions each quarter in accordance with the LLC Agreement.
    11. The Preferred Interests will rank senior to any other class or 
series of equity interests in the Issuer, now in existence or created 
in the future, in respect of the right to receive Distributions and the 
right to receive payments or distributions out of the assets of the 
Issuer upon voluntary or involuntary liquidation, dissolution or 
winding up of the Issuer. Therefore, in the event of any voluntary or 
involuntary liquidation, dissolution or winding up of the affairs of 
the Issuer, the Trust, as the holder of the Preferred Interests, will 
be entitled to receive the liquidation value of the Preferred Interests 
and any accrued cumulative but unpaid Distributions, before any 
liquidating distribution or payment is made to the holders of any other 
class or series of equity interests of the Issuer. The liquidation 
value of the Preferred Interests equals $25.00 per Preferred Interest 
(i.e., $8 billion in the aggregate) plus any accrued and unpaid 
Distributions.
    12. The fair market value of the Preferred Interests at any point 
in time will be determined by the Independent Fiduciary in its sole 
discretion based on certain factors, including the net present value of 
the expected distributions and the Option Price using a discount rate

[[Page 55105]]

that reflects the assumed term \3\ as of the valuation date and an 
appropriate discount for the non-public nature of the Preferred 
Interests. The Independent Fiduciary estimates that the Preferred 
Interests will have a fair market value of approximately $9.2-$9.5 
billion as of the date of the Contribution (the Contribution Date). The 
Independent Fiduciary will re-value the Preferred Interests immediately 
prior to the Contribution Date using the same methodology set forth in 
its original valuation report, absent extraordinary circumstances. The 
Independent Fiduciary will also value the Preferred Interests on a 
quarterly basis after the Contribution Date, using the same 
methodology, absent extraordinary circumstances, and in accordance with 
the terms of the IMA.
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    \3\ The Applicant explains that the assumed term for valuation 
purposes is the five year period during which the Preferred 
Interests cannot be put to or called by AT&T, absent a Change of 
Control or other acceleration event identified in the Contribution 
Agreement.
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The Contribution Agreement

    13. By their terms, as described in the Contribution Agreement, the 
Preferred Interests are transferable to AT&T upon exercise of a call 
option (the Call Option) and a put option (the Put Option), as 
described below.
    Call Option. AT&T and the Issuer (individually or collectively, the 
Purchaser) will have the right to purchase from the Trust all or any 
portion of the Preferred Interests, at a price per Preferred Interest 
equal to the Option Price, at any time and from time to time: (i) 
During the 12 month period following the date AT&T Inc. issues an 
annual report reflecting that the Plan is fully funded as determined 
under U.S. GAAP and calculated by including the fair market value of 
the Preferred Interests; (ii) on or after a ``Change of Control'' of 
the Issuer, as such term is defined in the Contribution Agreement; or 
(iii) on or after the fifth anniversary of the Contribution Date. The 
Call Option will be exercisable upon 30 days' prior written notice by 
the Purchaser.
    Put Option. The Trust will have the right to require AT&T Inc. to 
purchase the Preferred Interests, at a price per Preferred Interest 
equal to the Option Price, at any time and from time to time on or 
after the earlier of: (i) The first date that the Issuer's debt-to-
total-capitalization ratio exceeds that of AT&T Inc.\4\; (ii) the date 
on which AT&T Inc. is rated below investment grade for two consecutive 
calendar quarters by at least two of the following rating agencies: 
Standard & Poor's Ratings Services, Moody's Investor Services, Inc. or 
FitchRatings, Inc.\5\; (iii) a ``Change of Control'' of the Issuer, as 
such term is defined in the Contribution Agreement and described below; 
or (iv) the seventh anniversary of the Contribution Date; provided, 
however, that except in the event of a Change of Control of the Issuer, 
AT&T Inc. will not be required to purchase more than 106,666,667 
Preferred Interests in any 12 month period. Upon the Independent 
Fiduciary's request, as of the end of any calendar quarter, AT&T Inc. 
will, within forty-five (45) calendar days after the end of such 
calendar quarter, certify as to whether the Issuer's debt-to-total-
capitalization ratio exceeds that of AT&T Inc. The Put Option will be 
exercisable by the Independent Fiduciary on behalf of the Trust upon 60 
days' prior written notice to AT&T Inc. The obligation to purchase the 
Preferred Interests upon exercise of the Put Option may be consummated 
by any Purchaser (including, for purposes of clarity, any affiliate of 
AT&T).
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    \4\ The Contribution Agreement provides that the Issuer's 
``debt-to-total-capitalization ratio'' means the Issuer's ``Debt'' 
divided by the sum of the Issuer's ``Debt'' and total members' 
equity including outstanding Preferred Interests (as taken directly 
from the Issuer's most recently prepared U.S. GAAP balance sheet). 
The term ``Debt'' means, without duplication (i) all obligations of 
the entity for borrowed money or with respect to deposits or 
advances of any kind, and (ii) all obligations of the entity 
evidenced by bonds, debentures, notes or similar instruments. 
Additionally, AT&T Inc.'s ``debt-to-total-capitalization ratio'' 
means AT&T Inc.'s Debt divided by the sum of AT&T Inc.'s Debt and 
total shareholders' equity (as taken directly from AT&T Inc.'s most 
recently prepared U.S. GAAP balance sheet).
    \5\ In this instance the Put Option is triggered by a downgrade 
of AT&T Inc.'s credit rating rather than a downgrade of the Issuer's 
credit rating because the Issuer is assigned the same credit rating 
as AT&T Inc. and has no independent rating of its own.
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    Option Price. The Option Price per Preferred Interest is defined as 
the greater of: (i) The fair market value of the Preferred Interest, 
determined by the Independent Fiduciary as of the last day of the 
calendar quarter preceding the date of notice of exercise of a Call 
Option or Put Option, as the case may be, without regard to certain 
prior events (the Prior Events),\6\ or, for a Preferred Interest that 
cannot be purchased due to certain limitations noted in the ``Put 
Option'' description, the fair market value of the Preferred Interest, 
determined by Brock as of the last day of the calendar quarter 
immediately preceding the date such Preferred Interest is actually 
purchased by AT&T Inc., without regard to the Prior Events; and (ii) 
the sum of $25.00 plus any accrued and unpaid Distributions.
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    \6\ Such events include, with respect to the Call Option: (i) 
The twelve month period following the date AT&T issues an annual 
report reflecting the fully funded status of the Plan (on a U.S. 
GAAP basis); and (ii) the period on or after a Change of Control of 
the Issuer, and with respect to the Put Option: (i) The first date 
that the Issuer's debt-to-total-capitalization ratio exceeds that of 
AT&T; (ii) the date on which AT&T is rated below investment grade 
for two consecutive calendar quarters by at least two of the 
following rating agencies: Standard & Poor's Ratings Services, 
Moody's Investor Services, Inc. or FitchRatings, Inc.; and (iii) the 
period on or after a Change of Control of the Issuer.
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    Change of Control. The Contribution Agreement provides that, on the 
occurrence of any Change of Control, AT&T may exercise or assign its 
Call Option to the Issuer or any successor owner of 50% or more of the 
capital or profits interest (or equity) of the Issuer (exclusive of the 
Preferred Interests). If the Call Option is not exercised upon a Change 
of Control, the parties will negotiate in good faith to determine 
``appropriate treatment'' \7\ of the Preferred Interests, which will be 
subject to the approval of the Independent Fiduciary in its sole 
discretion. If no agreement can be reached within 60 days of the Change 
of Control, the Put Option will become immediately exercisable in full, 
thereby giving the Independent Fiduciary the right to require AT&T to 
purchase all or any portion of the Preferred Interests at the Option 
Price, except that: (i) The limitation on the number of Preferred 
Interests that AT&T may be required to purchase in any twelve month 
period as described above will not apply; and (ii) AT&T will have a 
period of up to one year to pay the Option Price. Notwithstanding the 
foregoing, in no event shall AT&T and the Issuer authorize the transfer 
of the Preferred Interests to any plan not covered by the Trust except 
in the event of an occurrence of a Change of Control as defined herein.
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    \7\ The Applicant represents that ``appropriate treatment'' 
refers to changes in the structure or features of the Preferred 
Interests that would protect their status, terms and conditions, and 
hence, value, in the context of a new business structure that could 
result from a Change of Control transaction. The Applicant explains 
that this type of language is often found in the terms of various 
equity instruments because it is impossible to predict what a future 
capital structure might be upon a Change of Control. However, the 
Applicant stresses that if the Independent Fiduciary determines that 
it cannot obtain such appropriate treatment, it has the unilateral 
right to trigger the Put Option.
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    Settlement. At the sole election of AT&T, Inc., or any other 
Purchaser, as the case may be, payment of the Option Price may be made 
in: (i) Fully paid and non-assessable shares of AT&T Inc. common stock 
(AT&T Shares) \8\; (ii)

[[Page 55106]]

cash; or (iii) a combination of AT&T Shares and cash. Any AT&T Shares 
delivered to pay all or a portion of the Option Price will be valued 
for the purpose of determining the number of AT&T Shares to be 
delivered to satisfy the Option Price, at the average closing price of 
the 20 trading days preceding the date of notice of exercise (or, in 
the case of a delayed payment pursuant to the twelve month payment 
period described herein in connection with a Change of Control, the 20 
trading days preceding the date of payment).
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    \8\ Because AT&T Shares may be issued in payment of the Option 
Price, AT&T and the Trust have executed a Registration Rights 
Agreement, providing the Trust certain rights in connection with the 
registration of the AT&T Shares for sale to the public. The 
Registration Rights Agreement is described in more detail below.
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    The Contribution Agreement provides that in no event will AT&T Inc. 
or any other Purchaser, as the case may be, be required to deliver more 
than 250 million AT&T Shares (the Capped Number) to the Trust in 
settlement of the Option Price for the Preferred Interests; provided, 
however, the Purchaser may, in its discretion, deliver more than the 
Capped Number of AT&T Shares.\9\ In the event that the Purchaser, 
through delivery of the Capped Number of AT&T Shares and AT&T Shares in 
addition to the Capped Number of AT&T Shares, if any, does not deliver 
the full number of AT&T Shares otherwise deliverable in settlement of 
the Option Price for the Preferred Interests, the Purchaser will use 
its best efforts to authorize and deliver additional AT&T Shares. 
Finally, the Purchaser may elect, solely at its option, to settle the 
Option Price, in whole or in part, by delivering cash.
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    \9\ The Capped Number is equal to or less than the number of 
authorized but unissued AT&T Shares that are not reserved for future 
issuance on the date of the Contribution Agreement. According to the 
Applicant, the Capped Number is an accounting concept necessary to 
the characterization of the Preferred Interests as equity. 
Furthermore, the Applicant notes that AT&T can use more than the 
number of Capped Shares to satisfy its purchase obligation and the 
number and value of authorized but unissued AT&T Shares far exceeds 
the value of the Preferred Interests. Therefore, according to the 
Applicant, the Capped Number does not present a practical limitation 
on the right of the Independent Fiduciary to exercise the Plan's 
rights under the Put Option.
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    The Contribution Agreement provides further that, in the event that 
the Purchaser, through delivery of the Capped Number of AT&T Shares and 
AT&T Shares in addition to the Capped Number of AT&T Shares, if any, 
does not deliver the full number of AT&T Shares otherwise deliverable 
in settlement of the Option Price for the Preferred Interests 
(resulting in a shortfall), the Preferred Interests for which neither 
AT&T Shares nor cash have been delivered will remain outstanding, and 
the Plan will continue to receive its Distributions, in accordance with 
the terms thereof.
    The Contribution Agreement also provides that, in the event of a 
merger, reorganization, consolidation, recapitalization, separation, 
split-up, liquidation, share combination, stock split, stock dividend, 
or other change in the corporate structure of AT&T affecting the AT&T 
Shares (including a conversion of the AT&T Shares into cash or other 
property), an adjustment may be made in the number and class of shares 
that may be delivered in settlement of the Option Price for the 
Preferred Interests, as determined by AT&T, to prevent dilution or 
accretion with respect to the Capped Number and reflect such changes in 
corporate structure (e.g., substitution of successor shares), provided, 
that, if AT&T does not make any such adjustment or the Independent 
Fiduciary disagrees with the adjustment, the Independent Fiduciary can 
request that AT&T modify its determination and if AT&T fails to do so, 
the parties shall resolve the matter in accordance with the dispute 
resolution procedures specified in the Investment Management Agreement 
by and between AT&T Services, Inc., the AT&T Benefit Plan Investment 
Committee, AT&T Inc., and Brock Fiduciary Services LLC or any successor 
thereto, effective on or about September 9, 2013 (the IMA).
    Termination or Resignation of the Independent Fiduciary. The 
Applicant states that, in the event of a termination or resignation by 
the Independent Fiduciary, the Independent Fiduciary will continue to 
serve as the Independent Fiduciary until a successor is appointed, 
provided that the Committee must use its reasonably commercial efforts 
to hire a successor within a specified period of time, in accordance 
with the terms of the IMA. Such successor independent fiduciary shall, 
among other things, acknowledge in writing the assignment to it of the 
Contribution Agreement and the IMA and its acceptance of all rights and 
responsibilities of the Independent Fiduciary thereunder.

Reasons for Entering Into the Exemption Transactions

    14. The Applicant represents that the Contribution would benefit 
the Plan. In this regard, the Applicant states that the Contribution 
would be substantially in excess of the legally required Plan 
contributions and would allow AT&T to enhance the sound funding of the 
Plan. In that respect, the Applicant represents that the value of the 
Contribution substantially exceeds the amount of contributions that 
AT&T will be required to make to the Plan for 2013 and for a number of 
years thereafter. Pursuant to section 412 of the Code, as amended by 
2012 legislation titled ``Moving Ahead for Progress in the 21st 
Century'' (MAP-21), AT&T anticipates that its minimum required funding 
contribution for 2013 would be approximately $175 million. The 
Applicant represents that because of capital structure requirements 
relating to AT&T's business operations, AT&T could not be expected to 
make cash contributions substantially in excess of the minimum amount 
required to meet the funding requirements of section 412 of the Code. 
However, if the proposed exemption is granted, AT&T will contribute 
Preferred Interests to the Trust in an amount equal to approximately 
$9.2-$9.5 billion. Therefore, the Applicant states that the Trust will 
receive assets worth approximately $9 billion in excess of the legally 
required contributions to the Plans for 2013. The Applicant estimates 
that the expected annual cash flow payable on the Preferred Interests 
alone would exceed the 2013 minimum required contribution.
    15. The Applicant notes that the Preferred Interests will accrue 
cumulative Distributions of $1.75 per Preferred Interest per annum, 
payable quarterly upon declaration by the Issuer. The Applicant 
believes that this return is very favorable given the returns that 
otherwise can be obtained on investments in the current market 
environment. The Applicant states that the Distributions alone will 
provide $560 million in annual cash flow to the Trust, approximately 
11% of the Trust's annual cash flow requirements to pay benefits, 
thereby substantially reducing the Trust's need to liquidate other 
assets to meet its benefit payment obligations.
    The Applicant further represents that the Contribution would also 
reduce the necessary investment return on other Trust assets required 
to satisfy historic annual benefit payments, thereby providing greater 
security to Plan participants and beneficiaries. In this regard, absent 
the Contribution, the Applicant states that the Trust would have to 
earn at least 9.3% on its existing investment portfolio to satisfy its 
historic annual benefit payments without requiring the Trust to 
liquidate additional assets. However, the Applicant states that due to 
the attractive, highly secure cash yield on the Preferred Interests, 
the remaining Trust assets would have to earn only an 8% rate of 
return.

[[Page 55107]]

Benefits to AT&T

    16. The Applicant notes that the Contribution will also benefit 
AT&T in that the Contribution may be viewed favorably by lenders and 
the capital markets, and will benefit its business operations by giving 
AT&T the flexibility to invest further in its business. In this regard, 
the Applicant explains that the Issuer represents a substantial portion 
of the value of AT&T. The Applicant notes that the Contribution would 
in effect dedicate a portion of this valuable asset to satisfying the 
liabilities of the Plan. The Applicant suggests that AT&T's business 
success is, in turn, important to the continued existence of the Plan 
and its ability to pay its liabilities.

Exemptive Relief Requested

    17. AT&T requests exemptive relief from sections 406(a)(1)(A), 
406(a)(1)(B), 406(a)(1)(D), 406(a)(1)(E), 406(a)(2), 406(b)(1), 
406(b)(2) and 407(a) of ERISA with respect to the acquisition, holding 
and disposition of the Preferred Interests by the Plans, and other 
related transactions entered into in accordance with the Contribution 
Agreement.
    18. The Applicant believes that absent the requested relief, the 
Contribution and the exercise of the Call Option or the Put Option (as 
contemplated by the Contribution Agreement) would violate section 
406(a)(1)(A) of ERISA. Section 406(a)(1)(A) of ERISA provides that a 
fiduciary with respect to a plan shall not cause the plan to engage in 
a transaction if he knows or should know that such transaction 
constitutes a direct or indirect sale or exchange of any property 
between the plan and a party in interest. Under DOL Regulations, 
section 2509.94-3, an in-kind contribution to a defined benefit pension 
plan would be prohibited under section 406(a)(1)(A) of ERISA, because 
it reduces the funding obligation of the plan sponsor.
    AT&T also requests exemptive relief from sections 406(a)(1)(B) and 
406(b)(1) with respect to certain benefits to AT&T ancillary to the 
Contribution. For example, the Applicant states that AT&T will claim a 
deduction under section 404 of the Code for the fair market value of 
the Preferred Interests on the Contribution Date. Further, the 
Contribution will preserve cash for application towards AT&T's 
operations and investments, that will, among other things, maintain 
AT&T's debt metrics and avoid dilution of shareholder value. Section 
406(a)(1)(D) prohibits the use of Plan assets for the benefit of a 
party in interest, and section 406(b)(2) prohibits a fiduciary from 
acting in its individual or any other capacity in any transactions 
involving the Plan on behalf of a party whose interests are adverse to 
the interests of the Plan or its participants or beneficiaries. The 
Applicant believes that relief from section 406(a)(1)(D) would avoid 
arguments that the above referenced (or other) ancillary benefits to 
AT&T resulting from the Contribution violate the prohibited transaction 
provisions of ERISA and the Code.
    Section 406(a)(1)(E) of ERISA provides that a fiduciary with 
respect to a plan shall not cause the plan to engage in a transaction 
if he knows or should know that such transaction constitutes a direct 
or indirect acquisition, on behalf of the plan, of any employer 
security in violation of section 407(a). Section 406(a)(2) of ERISA 
prohibits a fiduciary who has authority or discretionary control of 
plan assets to permit the plan to hold any employer security if he 
knows or should know that holding such security violates section 407(a) 
of ERISA. Section 407(a)(1) of ERISA states that a plan may not acquire 
or hold any employer security that is not a qualifying employer 
security. Section 407(a)(2) of ERISA states that a plan may not acquire 
any qualifying employer security (or qualifying employer real property) 
if immediately after such acquisition the aggregate fair market value 
of the employer securities (and employer real property) held by the 
plan exceeds 10% of the fair market value of the assets of the plan. 
Section 407(d)(5) of ERISA defines the term ``qualifying employer 
security'' to mean an employer security which is a stock, a marketable 
obligation, or an interest in certain publicly traded partnerships.
    The Applicant states that the Preferred Interests are not 
``qualifying employer securities'' within the meaning of section 
407(d)(5) of ERISA because they do not constitute stock, marketable 
obligations, or interests in a publicly traded partnership. 
Furthermore, the Applicant states that the Plan will hold 100% of the 
Preferred Interests. The Applicant represents that as of December 31, 
2012, the fair market value of Plan assets held by the Trust was 
approximately $45.06 billion and the Contribution of the Preferred 
Interests will result in the Plan holding employer securities and 
employer real property in excess of 10% of its total assets immediately 
after the Contribution of the Preferred Interests.
    Similarly, the Applicant believes that if the consideration paid to 
the Trust in connection with the exercise of the Put Option or the Call 
Option is in the form of shares of AT&T Shares, even though the AT&T 
Shares would be ``qualifying employer securities,'' their value may 
exceed 10% of the total assets of the Plan, and it may not be in the 
best interests of the Plan to require an immediate forced sale of such 
AT&T Shares at any particular point in time.
    Further, AT&T requests exemptive relief under sections 406(a)(1)(B) 
and 406(b)(1) related to the provisions in the Contribution Agreement 
that, in the event that the Independent Fiduciary exercises its Put 
Option (i) other than on account of a Change of Control, limit the 
number of Preferred Interests that AT&T can be required to purchase in 
any 12-month period, (ii) in the event of a Change of Control, allow 
AT&T to defer the purchase of Preferred Interests for up to 12 months 
(collectively, the ``deferral provisions'') or (iii) in the event the 
limitation on the maximum number of shares (i.e., the ``Capped 
Number'') that AT&T is required to deliver in payment of the Option 
Price results in a deferral of the purchase of any of the Preferred 
Interests. Relief with respect to the deferral provisions would avoid 
arguments that the deferral provisions are extensions of credit in 
violation of the above-cited sections of ERISA and the Code.
    Section 406(b)(1) of ERISA provides that a fiduciary with respect 
to a plan shall not deal with the assets of the plan in his or her own 
interest or for his or her own account. The Applicant states that it is 
possible that the Contribution could violate that section of ERISA 
because of any ancillary benefits to AT&T of the excess funding to the 
Trust. Additionally, section 406(b)(2) of ERISA provides that a 
fiduciary with respect to a plan shall not in his individual or in any 
other capacity act in any transaction involving the plan on behalf of a 
party (or represent a party) whose interests are adverse to the 
interests of the plan or the interests of its participants or 
beneficiaries. The Applicant notes that the Contribution and its 
related agreements may also violate section 406(b)(2) of ERISA because 
in effecting the Contribution and its related agreements and 
arrangements, AT&T will be acting on behalf of the Plan and on behalf 
of another party (itself) whose interests are adverse to those of the 
Plan.

The Independent Fiduciary

    19. The Independent Fiduciary, a wholly owned subsidiary of Brock 
Capital Group, has been appointed by AT&T Services to serve as an 
independent fiduciary on behalf of the Plan and the Plan's participants 
and beneficiaries with respect to the Contribution, pursuant to the 
Independent Fiduciary Agreement dated May 1, 2012, by and among AT&T

[[Page 55108]]

Services, AT&T Inc. and Brock (the Independent Fiduciary Agreement). In 
addition, the Independent Fiduciary has been appointed to serve as the 
investment manager for the Plan and the Plan's participants and 
beneficiaries with respect to the holding, management and disposition 
of the Preferred Interests, pursuant to the IMA, and has full 
discretion to manage that portion of the Plan's assets held by the 
Trust.
    20. The Independent Fiduciary represents that it is independent of 
and unrelated to AT&T, and has not previously provided services to 
AT&T. Further, the Independent Fiduciary does not directly or 
indirectly receive any compensation or other consideration from AT&T. 
The Independent Fiduciary's fees and expenses as independent fiduciary 
will be paid by the Trust. The Independent Fiduciary's compensation for 
its services is not contingent upon or in any way affected by the 
Independent Fiduciary's decisions.
    21. The Independent Fiduciary represents that it is an investment 
adviser registered under the Investment Advisers Act of 1940, as 
amended, and is qualified to act as an ``investment manager,'' as that 
term is defined in section 3(38) of ERISA, for the Plan. In addition, 
the Independent Fiduciary represents that it has extensive experience 
as an appraiser of the value of non-publicly traded securities, 
including securities of the same type as the Preferred Interests. 
Moreover, the Independent Fiduciary calls upon the services of members 
of Brock Capital Group who can provide the expertise required to 
appraise the value of employer securities contributed to employee 
benefit plans.
    22. The Independent Fiduciary will discharge its duties in 
accordance with the terms of the Independent Fiduciary Agreement and 
the IMA (and successors to these documents). Pursuant to the 
Independent Fiduciary Agreement, the Independent Fiduciary's 
responsibilities include: (i) Determining the value of the 
Contribution; (ii) determining whether the terms and conditions of the 
Preferred Interests are prudent and fair to, and in the interest of, 
the Plan and Trust; (iii) reporting its foregoing determinations in a 
written report to AT&T and the Committee; (iv) negotiating with AT&T 
and executing on behalf of the Trust a Contribution Agreement or other 
collateral agreements necessary or appropriate for implementing the 
Contribution; (v) reasonably assisting AT&T in obtaining an exemption 
from the Department and satisfying any terms and conditions thereof; 
and (vi) reasonably complying with the conditions or limitations 
imposed on the Independent Fiduciary by such exemption. Moreover, the 
Independent Fiduciary will authorize the Trustee to accept or dispose 
of the Preferred Interests, including by exercise of the Put Option or 
the Call Option, only after the Independent Fiduciary determines that 
to do so is consistent with the applicable transaction documents.

The IMA

    23. Pursuant to the IMA, the Independent Fiduciary, in its capacity 
as investment manager to the Plan, shall have sole authority and 
discretion to direct the Trustee with respect to the holding and 
disposition of the Preferred Interests and any AT&T Shares received by 
the Trust in exchange therefor pursuant to the Contribution Agreement. 
In performing its responsibilities as investment manager, the 
Independent Fiduciary shall value the Preferred Interests once each 
calendar quarter using the methodology contained in the valuation 
report delivered pursuant to the Independent Fiduciary Agreement 
(absent extraordinary circumstances), and report such value to the 
Committee within 30 days of the quarter end and shall provide, among 
other things, an estimate of the year end valuation within five (5) 
business days of the end of each year. In addition, the Independent 
Fiduciary shall have the authority, to be exercised in its sole 
discretion: (i) To exercise all rights of the Trust with respect to the 
Preferred Interests, as set out in (and subject to the terms of) the 
Contribution Agreement, including but not limited to negotiating and 
accepting any amendments to the Contribution Agreement; (ii) to enter 
into any agreements for the benefit of the Plan and the Trust, in order 
to carry out the purposes of the IMA; (iii) with respect to the 
Preferred Interests only, to enter into any agreements, incur 
reasonable costs on behalf of the Plan and the Trust, or pledge or 
hypothecate assets of the Trust (except the Preferred Interests or the 
Shares), in order to carry out interest rate swap transactions and 
credit default swap transactions, provided that the Independent 
Fiduciary shall provide written notice to the Committee at least 15 
days prior to entering into any such transaction and, during such 
notice period, shall engage in good faith discussions with the 
Committee as to the advisability of entering into the transactions 
\10\; and (iv) to make any decision to sell, loan hypothecate, pledge 
as security for a loan, exchange, convert, securitize, sell interests 
in, redeem, or otherwise dispose of, any and all of the AT&T Shares 
received by the Trust in exchange therefor pursuant to the Contribution 
Agreement.\11\
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    \10\ In carrying out its authority with respect to this 
responsibility, the Independent Fiduciary shall take into 
consideration the Trust's portfolio, including other similar 
investments held by the Trust.
    \11\ The Applicant notes that the foregoing responsibilities are 
subject only to the terms of the Preferred Interests and any 
conditions or limitations imposed on ownership and disposition of 
the Preferred Interests under the Contribution Agreement or in the 
proposed exemption, if granted, and applicable law.
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The Independent Fiduciary's Appraisal Report

    24. In an appraisal report dated October 18, 2012, the Independent 
Fiduciary estimated the fair market value of the Preferred Interests as 
of August 13, 2012, to be $9.573 billion (or $29.91 per Preferred 
Interest).
    25. The Independent Fiduciary states that in estimating the fair 
market value of the Preferred Interests, the Independent Fiduciary, 
among other things, applied valuation methodologies that are generally 
accepted, including a discounted cash flow analysis of the Preferred 
Interests' expected Distributions and purchase proceeds, reviewed 
relevant investment and financial studies, and conducted other such 
analyses deemed appropriate. In its discounted cash flow analysis, the 
Independent Fiduciary has considered the appropriate discount rate at 
which the Preferred Interests' Distributions should be valued (as of 
the Contribution Date), the credit quality of AT&T Inc. and the Issuer, 
an appropriate valuation discount because the Preferred Interests are 
not publicly traded and therefore, illiquid, and a further liquidity 
discount because a purchase of the Preferred Interests may be settled 
in the form of unregistered AT&T Inc. common equity.

The Independent Fiduciary's Opinion

    26. The Independent Fiduciary represents that it negotiated the 
terms and conditions of the Preferred Interests on behalf of the Plan 
over several months. The Independent Fiduciary represents that, members 
of its team,\12\

[[Page 55109]]

consisting of persons who have extensive financial management 
experience as senior executives of major corporations and investment 
banks or who have many years of experience as ERISA fiduciary law 
experts, engaged with senior officers of AT&T in numerous discussions 
concerning the nature of Preferred Interests and their terms and 
conditions. In addition, in order to determine whether the Contribution 
would be prudent and in the best interest of the Plan and its 
participants and beneficiaries, the Independent Fiduciary represents 
that it used the services of its in-house security analyst to determine 
the value of the Issuer and the value of the Preferred Interests. Those 
valuations will be updated to the Contribution Date.
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    \12\ The Independent Fiduciary's team members include Stephen R. 
Wilson (former CFO of RJR Nabisco, The Reader's Digest Association, 
and Reckitt & Colman plc), Steven C. Baum (former Managing Partner 
of Marks Paneth & Shron), Norman H. Brown Jr. (former Managing 
Director of Donaldson Lufkin & Jenrette), Anthony A. Dreyspool 
(ERISA attorney and author of the book ERISA Fiduciary Law for Non-
Lawyers), Alain Lebec (former Vice Chairman of Merrill Lynch 
Investment Banking), Donald Walkovik (former Senior Partner at 
Sullivan & Cromwell) and Charles O. Svenson (attorney and investment 
banker with Dewey Ballantine Busby Palmer & Wood, Goldman Sachs, and 
Donaldson Lufkin & Jenrette).
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    27. Based on its aforementioned analysis of the Preferred Interests 
and the Issuer, the Independent Fiduciary has concluded that it is 
prudent for the Plan to accept the Contribution and that the 
Contribution is in the interests of the Plan and its participants and 
beneficiaries for the following reasons. With the fair market value of 
the Contribution estimated to be $9.2-$9.5 billion, the Independent 
Fiduciary states that the Contribution will be well in excess of the 
legally required contribution to the Plan. Thus, the Independent 
Fiduciary states that the proposed Contribution would far exceed what 
AT&T represents it would contribute if it were to make only a cash 
contribution equal to its minimum funding requirement.
    28. Further, the Independent Fiduciary has determined that the cash 
flows of the Issuer, which is one of the largest wireless 
telecommunications providers in the United States and one of the most 
profitable and fastest growing business segments in AT&T's corporate 
structure, are large enough to cover the annual cash distributions on 
the Preferred Interests, which are senior preferred interests of the 
Issuer. In addition, the Independent Fiduciary opines that the 
cumulative annual cash distribution rate of the Preferred Interests 
($1.75 per annum per Preferred Interest) is very favorable compared to 
income returns that could be obtained on prudent investments under 
current market conditions. In that respect, the Independent Fiduciary 
states that AT&T Inc. has represented that the expected annual cash 
flow payable on the Preferred Interests will exceed the 2013 minimum 
required funding contribution to the Trust, and as noted in the 
Independent Fiduciary's valuation report, the distribution payment rate 
is significantly above the yields on comparable fixed income 
securities.
    29. The Independent Fiduciary also states that the restriction on 
payment of dividends on AT&T Shares or purchases by AT&T Inc. of AT&T 
Shares if Distributions on any Preferred Interests are in arrears will 
be an incentive to the Issuer to pay all Distributions on a regular 
basis. Further, the Independent Fiduciary states that if the Issuer 
misses any Distribution payment, the cumulative Distribution feature 
means that the Plan will not lose any current return on the Preferred 
Interests. As noted above, the Independent Fiduciary has also 
determined in its valuation of the Issuer that the Issuer generates an 
annual cash flow after capital expenses to easily cover the annual $560 
million expected Distribution on the Preferred Interests.
    30. The Independent Fiduciary has also concluded that the 
Contribution is protective of the rights of participants and 
beneficiaries of the Plan because the terms of and conditions of the 
Preferred Interests, including the Put Option and Call Option, are 
protective of the interests of the Plan and Trust and are as favorable 
to the Plan as such terms would be if negotiated at arm's length under 
similar circumstances between unrelated third parties. Further, the 
Independent Fiduciary states that it will monitor the continued holding 
of the Preferred Interests by the Trust, will manage the holding and 
disposition of the Preferred Interests pursuant to the IMA and will 
have sole authority on behalf of the Plan to take whatever action the 
Independent Fiduciary deems appropriate to insure that the transaction 
remains in the interest of the Plan. Finally, the Independent Fiduciary 
represents that it will enforce compliance with all conditions and 
obligations imposed on any party dealing with the Plan by proposed 
exemption, if granted, and manage any AT&T Shares received by the Trust 
in exchange for the Preferred Interests pursuant to the Call Option and 
Put Option until such time as the relief provided herein is no longer 
needed.

The Registration Rights Agreement

    31. As stated above, pursuant to the Contribution Agreement, AT&T 
has the right, in its sole discretion, to pay the purchase amount for 
any Preferred Interests purchased pursuant to the Put Option or the 
Call Option, in whole or in part, by delivering AT&T Shares to the 
Trust. In connection with the foregoing, the Independent Fiduciary, 
acting on behalf of the Plan and the Trust, has negotiated the terms of 
the Registration Rights Agreement with AT&T. The Registration Rights 
Agreement governs the rights and obligations of the parties with 
respect to registration rights, transfers and other matters relating to 
the AT&T Shares (if any) that may be delivered to the Trust pursuant to 
the Call Option or the Put Option. The Registration Rights Agreement 
terminates on the second anniversary of the date on which AT&T Shares 
are delivered to the Trust in the last exercise of the Put Option or 
the Call Option, as the case may be.
    32. The Registration Rights Agreement provides that AT&T will file 
a Shelf Registration \13\ on Form S-3 within thirty (30) days following 
delivery of AT&T Shares to the Trust upon exercise of the Call or Put 
Rights (the Registration Trigger). According to the Applicant, this 
arrangement takes advantage of AT&T's status as a ``well-known seasoned 
issuer'' (in short, a large public company by market capitalization, 
referred to as a ``WKSI'') and the ability to file a registration 
statement that is automatically effective upon filing. The Applicant 
states further that the Trust would be able to promptly sell AT&T 
Shares in a public offering four (4) times in any twelve (12) month 
period with only fifteen (15) business days' notice given to AT&T. 
According to AT&T and the Independent Fiduciary, fifteen (15) days' 
notice is reasonable, since a registered underwritten offering could 
require the Trustee to engage underwriters, etc., will require AT&T to 
prepare documentation and will require significant involvement from 
AT&T's outside auditors, all of which will involve some period of time.
---------------------------------------------------------------------------

    \13\ The Department understands that shelf registration is a 
process authorized by the SEC under Rule 415 that allows a single 
registration document to be filed by a company that permits the 
issuance of multiple securities. Form S-3 issuers may use shelf-
registration to register securities that will be offered on an 
immediate, continuous or delayed basis.
---------------------------------------------------------------------------

    33. The Shelf Registration would be maintained and renewed while 
the Independent Fiduciary continues to manage either the Preferred 
Interests or AT&T Shares.\14\ The Applicant states that this permits 
the Trust to sell AT&T Shares during a thirty (30) day window period 
that begins immediately following AT&T's quarterly earnings release (a 
``Window''). Each take down under the shelf registration would be for 
at least $500 million and the sale would

[[Page 55110]]

be accomplished in a public offering. According to the Applicant, this 
would permit the Trust to sell all or a part of the AT&T Shares quickly 
during a Window period in the offering structure deemed by the 
Independent Fiduciary to be most advantageous. AT&T will have a right-
of-first-refusal to purchase AT&T Shares offered for sale by the Plan 
for two years after the Plan's receipt of such AT&T Shares. After two 
years, AT&T will have the right to repurchase shares held by the Plan 
at a 10% premium to the then current market price.
---------------------------------------------------------------------------

    \14\ The Independent Fiduciary explains that AT&T Shares will be 
registered continuously in 3-year intervals (with AT&T having 
obligations to ``renew'' the S-3 every 3 years). According to the 
Independent Fiduciary, this arrangement is fairly standard for Shelf 
Registrations.
---------------------------------------------------------------------------

    34. The Applicant represents that, in addition to the Shelf 
Registration, for smaller sales, the Independent Fiduciary would have 
the ability to make an unlimited number of unregistered sales under 
Rule 144 with only five (5) business days' notice to AT&T (once the six 
(6) month holding period of Rule 144 is satisfied).\15\ The Applicant 
represents that, other than the provisions of Rule 144, there is no 
limit on the number of times this provision may be used or a minimum 
size.\16\
---------------------------------------------------------------------------

    \15\ The Applicant notes that the Trust can also use Rule 144 to 
sell AT&T Shares during any Window period described above, in 
addition to such sales that may take place outside the Window 
period.
    \16\ The Independent Fiduciary notes that because AT&T Shares 
sold pursuant to Rule 144 would not be registered, they would likely 
sell at a discount of at least 10%.
---------------------------------------------------------------------------

    35. The Applicant represents that AT&T would have the authority to 
notify the Independent Fiduciary that sales of AT&T Shares are 
suspended for up to two (2) blackout periods that may not exceed 60 
days, in the aggregate, in any twelve (12) month period. According to 
the Applicant, the ability to suspend sales of AT&T Shares pursuant to 
blackout periods are designed to allow AT&T to avoid disclosing time-
sensitive or confidential information relating to transactions or other 
corporate activities that otherwise would be disclosable if a 
securities sale were contemplated. According to the Applicant, blackout 
periods like these are standard features of longer term continuous 
registration arrangements, and protect both AT&T and its shareholders, 
including the Trust.\17\
---------------------------------------------------------------------------

    \17\ The Applicant represents further that the Registration 
Rights Agreement also contains provisions that would address AT&T's 
failure to comply with certain obligations, and that provide 
alternative mechanisms for effecting public offerings in the event 
AT&T loses its status as a ``well-known seasoned issuer'' for any 
reason.
---------------------------------------------------------------------------

    36. Finally, in addition to the repurchase obligations above, the 
Independent Fiduciary notes that the Plan can require AT&T to 
repurchase the AT&T Shares if, during the final 180 days of the term of 
the Registration Rights Agreement, there is not an S-3 available for 
the Plan to sell its AT&T Shares (the theory being that the Plan should 
have a simple public liquidity option available to it in the final 
months of the term).

Additional Cash Contribution and ``Lookback'' Calculation

    37. The Applicant states that AT&T has agreed to make cash 
contributions to the Trust in addition to the Contribution, in order to 
approximate the minimum required contributions that would otherwise be 
payable to the Plan by AT&T in cash, computed as if the Contribution 
had never been made, for as long as relief under the proposed exemption 
is in effect.\18\ Therefore, the Applicant has agreed to make the 
following payments to the Trust: (i) Lump sum cash payments (the Lump 
Sum Payments); and (ii) a ``lookback'' payment (the Net Lookback 
Amount). Both types of such payments will be made in accordance with 
the terms described below.
---------------------------------------------------------------------------

    \18\ The Department notes that the additional cash payments 
agreed to by AT&T lend strength to the Applicant's proposition that 
the Contribution constitutes an additional, voluntary contribution 
of assets to the Plan. As the Plan is entitled to receive cash in 
respect of its minimum required contributions, the additional cash 
payments represent AT&T's attempted satisfaction of its burden in 
this respect.
---------------------------------------------------------------------------

    38. With respect to the Lump Sum Payments, the Applicant states 
that AT&T will make cash contributions to the Trust totaling $700 
million, payable as follows: (i) $175 million paid on the Contribution 
Date; and (ii) $175 million paid no later than the due date for AT&T's 
tax return for each of the next three years (i.e., 2014, 2015 and 
2016).
    39. The Applicant represents that the calculation of the Net 
Lookback Amount and the timing of such contribution are determined as 
follows: Looking back from January 1, 2018, AT&T shall re-calculate its 
minimum required contribution after the application of any carryover 
balances (the Mandatory Funding Obligation) as of the beginning of each 
of the 2013 through 2017 Plan years with the following modifications to 
arrive at the ``Gross Lookback Amount'': (i) The calculation of the 
Mandatory Funding Obligation will use actuarial assumptions in effect 
for funding purposes as of the first day of the Plan year for which the 
minimum required contribution is calculated, and assets will assume 
Mandatory Funding Obligations are contributed when required for the 
2013 through 2017 Plan Years and earn actual Trust returns; (ii) the 
value of Preferred Interests will be disregarded; (iii) the actual cash 
contributions to the Trust, including the cash contributions made in 
connection with the Lump Sum Payments and the Distributions will be 
disregarded; and (iv) earnings on all cash contributions, including 
cash contributions made in connection with the Lump Sum Payments and 
the earnings on the Distributions will be included. The Applicant 
represents that the Gross Lookback Amount is the sum of the Mandatory 
Funding Obligation for each of the 2013 through 2017 Plan years.
    The Applicant further represents that the Gross Lookback Amount 
shall be reduced by the following items to arrive at the the Net 
Lookback Amount: (i) Actual cash contributions to the Trust, including 
cash contributions made in connection with the Lump Sum Payments and 
Distributions paid to the Trust prior to the date the Net Lookback 
Amount is paid to the Trust; (ii) the value of the Preferred Interests 
as of January 1, 2018, that is not in excess of 10% of the total value 
of the Trust's assets,\19\ and (iii) any consideration paid to the 
Trust pursuant to any exercise of the Put or Call Options at any time 
prior to the date that the Net Lookback Amount is paid to the Trust. 
The Applicant states that the Net Lookback Amount will be paid to the 
Trust no later than September 15 of the year following the year of the 
calculation of the Net Lookback Amount.\20\ The Independent Fiduciary 
will determine the value of the Preferred Interests for purposes of the 
Lookback calculation.
---------------------------------------------------------------------------

    \19\ The determination of the total value of the Trust's assets 
includes the Preferred Interests and the actual cash contributions 
to the Trust, including cash contributions made in connection with 
the Lump Sum Payments and Distributions (including contribution 
receivables).
    \20\ The Applicant states that the payment date is based on when 
the Trust values are definitely determinable.
---------------------------------------------------------------------------

Notice to Interested Persons

    It is represented that AT&T Inc. shall provide notification (the 
Notice) of the publication of the proposed exemption (the Proposed 
Exemption) in the Federal Register to interested persons in the 
following manner. The Notice shall be delivered via email to (i) all 
former employees and retirees who have consented to and enrolled in 
electronic delivery of benefits information and (ii) all currently 
active employees (which includes all non-bargained employees and 
bargained employees) who participate in the Plan and who either have 
email access as a part of performing their job or have consented to and 
enrolled in electronic delivery. Such notification will consist of an 
explanatory cover letter which will

[[Page 55111]]

contain a link to a summary of the Proposed Exemption (the Summary) and 
a link to the Proposed Exemption, and will be delivered within two (2) 
business days of the date of publication of the Notice in the Federal 
Register. The email system will notify AT&T Inc. of any delivery 
failures to (i) active employees with an AT&T email address on the day 
that the email notifications are sent and (ii) active employees using 
an external email address within one business day after the email 
notifications are sent. For each active employee whose email 
transmission fails, AT&T Inc. will send the cover letter, the Summary 
and a copy of the Proposed Exemption via first class US mail to such 
person's home address. Such mailing will be sent (i) to active 
employees with an AT&T email address within one business day after the 
failed email transmission and (ii) to active employees using an 
external email address within two business days after the failed email 
transmission.
    The Notice shall also be delivered via first class US mail to the 
home addresses of (i) the approximately 43,000 actively employed 
bargained employees who participate in the Plan and who do not have 
email access as part of performing their job or who have not consented 
to electronic delivery of benefits information and (ii) the estimated 
280,000 former employees, retirees, alternate payees, and beneficiaries 
with benefits under the Plan who have not consented to electronic 
delivery of benefits information. Such notification shall consist of a 
cover letter, a Summary and a copy of the Proposed Exemption.
    The Trustee and the Independent Fiduciary shall receive the Notice 
via first class US mail. Such notification shall consist of a cover 
letter, a Summary and a copy of the Proposed Exemption. In addition, 
AT&T Inc. or its legal counsel will email such documents to the Trustee 
and the Independent Fiduciary no later than two (2) business days of 
the date of publication of the Notice in the Federal Register. AT&T 
Inc. will provide notification to interested persons within 25 calendar 
days of the date of publication of the Notice in the Federal Register. 
All written comments and/or requests for a hearing must be received by 
the Department from interested persons no later than 55 days after 
publication of the Notice in the Federal Register.
    All comments will be made available to the public. Warning: Do not 
include any personally identifiable information (such as name, address, 
or other contact information) or confidential business information that 
you do not want publicly disclosed. All comments may be posted on the 
Internet and can be retrieved by most Internet search engines.

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions of the Act and/or the Code, 
including any prohibited transaction provisions to which the exemption 
does not apply and the general fiduciary responsibility provisions of 
section 404 of the Act, which, among other things, require a fiduciary 
to discharge his duties respecting the plan solely in the interest of 
the participants and beneficiaries of the plan and in a prudent fashion 
in accordance with section 404(a)(1)(b) of the Act; nor does it affect 
the requirement of section 401(a) of the Code that the plan must 
operate for the exclusive benefit of the employees of the employer 
maintaining the plan and their beneficiaries;
    (2) Before an exemption may be granted under section 408(a) of the 
Act and/or section 4975(c)(2) of the Code, the Department must find 
that the exemption is administratively feasible, in the interests of 
the plan and of its participants and beneficiaries, and protective of 
the rights of participants and beneficiaries of the plan;
    (3) The proposed exemption, if granted, will be supplemental to, 
and not in derogation of, any other provisions of the Act and/or the 
Code, including statutory or administrative exemptions and transitional 
rules. Furthermore, the fact that a transaction is subject to an 
administrative or statutory exemption is not dispositive of whether the 
transaction is in fact a prohibited transaction; and
    (4) The proposed exemption, if granted, will be subject to the 
express condition that the material facts and representations contained 
in each application are true and complete, and that each application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.

Proposed Exemption

    Based on the foregoing facts and representations submitted by the 
Applicant, the Department is considering granting an exemption under 
the authority of section 408(a) of the Employee Retirement Income 
Security Act of 1974, as amended (ERISA or the Act) and section 
4975(c)(2) of the Internal Revenue Code of 1986, as amended (the Code), 
and in accordance with the procedures set forth in 29 CFR Part 2570, 
Subpart B (76 FR 66637, 66644, October 27, 2011), as follows: \21\
---------------------------------------------------------------------------

    \21\ For purposes of this proposed exemption, references to 
specific provisions of Title I of the Act, unless otherwise 
specified, refer also to corresponding provisions of the Code.
---------------------------------------------------------------------------

Section I. Covered Transactions

    If the proposed exemption is granted, the restrictions of sections 
406(a)(1)(A), 406(a)(1)(B), 406(a)(1)(D), 406(a)(1)(E), 406(a)(2), 
406(b)(1), 406(b)(2), and 407(a) of the Act and the sanctions resulting 
from the application of section 4975 of the Code, by reason of section 
4975(c)(1)(A), 4975(c)(1)(B), 4975(c)(1)(D) and 4975(c)(1)(E) of the 
Code, shall not apply, effective September 1, 2013, to the following 
transactions, provided that the conditions described in Section II are 
satisfied:
    (a) The one-time, in-kind contribution (the Contribution) by AT&T 
of 320 million series A Cumulative Perpetual Preferred Membership 
Interests (the Preferred Interests) of AT&T Mobility II LLC (the 
Issuer) to the SBC Master Pension Trust (the Trust), which holds assets 
of the AT&T Pension Benefit Plan (the Plan) in accordance with the 
terms of the Contribution Agreement;
    (b) The holding of the Preferred Interests by the Trust on behalf 
of the Plan;
    (c) The disposition of the Preferred Interests by the Trust in 
connection with the exercise of the Put Option by the Independent 
Fiduciary, in accordance with the terms of the Contribution Agreement;
    (d) The disposition of the Preferred Interests by the Independent 
Fiduciary on behalf of the Trust in connection with the exercise of the 
Call Option, in accordance with the terms of the Contribution 
Agreement;
    (e) The disposition, restructuring, adjustment, or recapitalization 
of the Preferred Interests resulting from a Change of Control of the 
Issuer, in accordance with the terms of the Contribution Agreement;
    (f) The acquisition and holding by the Trust of shares in AT&T 
common stock (the AT&T Shares) received in connection with the exercise 
of the Put Option or the Call Option, in accordance with the terms of 
the Contribution Agreement, to the extent such acquisition and holding 
is not permitted by section 407(a) of ERISA; and

[[Page 55112]]

    (g) The deferred payment by AT&T to the Trust of any amounts due 
under the Call Option or the Put Option, in accordance with the terms 
of the Contribution Agreement.

Section II. Conditions

    Relief for the transactions described in Section I of this proposed 
exemption is conditioned upon satisfaction of the following 
requirements:
    (a) The Preferred Interests have a liquidation value of $25 per 
Preferred Interest and carry distribution rights of $1.75 per Preferred 
Interest, or $560 million per year in cash payable to the Trust (the 
Distributions) in accordance with the terms of the Contribution 
Agreement;
    (b) The Plan incurs no fees, costs or other charges in connection 
with the transactions described in paragraphs (a)-(g) of Section I, 
other than fees paid by the Plan to the Independent Fiduciary for 
duties required by this proposed exemption, if granted, as described 
herein;
    (c) AT&T makes $700 million in additional cash payments (the 
Additional Payments) to the Trust in the following manner:
    (1) $175 million paid at the time the Preferred Interests are 
contributed to the Trust; and
    (2) $175 million paid no later than the due date for AT&T's tax 
return for each of the next three years (i.e., 2014, 2015 and 2016);
    (d) AT&T makes an additional cash contribution to the Trust, equal 
to the ``Net Lookback Amount,'' no later than September 15, 2019. The 
Net Lookback Amount will be calculated as follows:
    (1) Looking back from January 1, 2018, AT&T will recalculate the 
minimum required contribution to the Plan after application of any 
carryover balances (the Mandatory Funding Obligation) for each of the 
2013 through 2017 Plan Years, subject to the following requirements:
    (i) The calculation of each Mandatory Funding Obligation will use 
actuarial assumptions in effect for funding purposes as of the first 
day of the Plan Year for which such contribution is calculated, and the 
calculation of plan assets will assume each Mandatory Funding 
Obligation is contributed when required for 2013 through 2017 Plan 
Years and earn actual Trust returns for each such year;
    (ii) The value of the Preferred Interests will be disregarded;
    (iii) Actual cash contributions to the Trust, including the 
Additional Payments and Distributions, will be disregarded; and
    (iv) Earnings on all cash contributions, including any earnings on 
the Additional Payments and Distributions, will be included;
    (2) The amounts described in Section (II)(d)(1)(i)-(iv), in the 
aggregate (the Gross Lookback Amount), shall be reduced by the 
following items to arrive at the Net Lookback Amount:
    (i) Actual cash contributions to the Trust, including the 
Additional Payments and the Distributions paid to the Trust prior to 
the date the Net Lookback Amount is paid to the Trust;
    (ii) The value of the Preferred Interests as of January 1, 2018, 
that is not in excess of 10% of the total value of the Trust's assets, 
and for the purpose of this clause (ii), the determination of the total 
value of the Trust's assets includes the actual cash contributions to 
the Trust, such as cash contributions made in connection with the Lump 
Sum Payments and Distributions (including contribution receivables); 
and
    (iii) Any consideration paid to the Trust pursuant to any exercise 
of the Put or Call Options at any time prior to the date the Net 
Lookback Amount is paid to the Trust;
    (e) An Independent Fiduciary, acting solely on behalf of the Plan 
and the Trust, represents the Plan's interests for all purposes with 
respect to the Preferred Interests, and determines, prior to entering 
into any of the transactions described in Section I (a)-(g), that each 
such transaction is in the interest of the Plan.
    (f) The Independent Fiduciary will have complete discretion 
regarding the disposition of AT&T Shares in accordance with the IMA and 
the Registration Rights Agreement;
    (g) The Independent Fiduciary negotiated and approved, on behalf of 
the Plan and the Trust, the terms and conditions of the Contribution 
Agreement, including the terms of the Preferred Interests, the Call 
Option and the Put Option, as well as the terms of the IMA and 
Registration Rights Agreement;
    (h) The Independent Fiduciary manages the holding and disposition 
of the Preferred Interests and takes whatever actions it deems 
necessary to protect the rights of the Plan with respect to the 
Preferred Interests or the AT&T Shares received in connection with the 
exercise of the Call Option or the Put Option;
    (i) The Independent Fiduciary monitors the credit rating of AT&T 
Inc. for purposes of determining whether the Put Option is triggered 
due to AT&T Inc. being rated below investment grade for two consecutive 
calendar quarters by at least two of the following rating agencies: 
Standard & Poor's Ratings Services, Moody's Investor Services, Inc. or 
FitchRatings, Inc.;
    (j) An Independent Appraiser, acting on behalf of the Plan, 
determines the fair market value of the Preferred Interests contributed 
to the Trust on behalf of the Plan as of the date of the Contribution 
and while the Preferred Interests are held on behalf of the Plan, and 
for all purposes under this exemption, if granted, consistent with 
sound principles of valuation;
    (k) The Preferred Interests rank senior to any other equity holders 
of the Issuer in respect of: The right to receive Distributions; and 
the right to receive Distributions or payments out of the assets of the 
Issuer upon liquidation of the Issuer, in accordance with the terms of 
the Contribution Agreement;
    (l) In the event that the Distributions are in arrears, AT&T is 
restricted from making certain transfers of cash out of the Issuer or 
declaring dividends on and repurchasing shares of AT&T stock, in 
accordance with the terms of the Contribution Agreement;
    (m) The Committee and the Independent Fiduciary maintain for a 
period of six (6) years from the date any Preferred Interests are 
contributed to the Trust, for a period of six (6) years from the date 
of any disposition of Preferred Interests by the Trust or the purchase 
of Preferred Interests by AT&T, and for a period of six (6) years from 
the last date that the Trust holds AT&T Shares received in connection 
with the exercise of the Put Option or the Call Option in violation of 
section 406(a)(2) of ERISA, in a manner that is convenient and 
accessible for audit and examination, the records necessary to enable 
the persons described in paragraph (n)(1) below to determine whether 
conditions of this exemption have been met, except that (i) a 
prohibited transaction will not be considered to have occurred if, due 
to circumstances beyond the control of the Committee and/or the 
Independent Fiduciary, the records are lost or destroyed prior to the 
end of the six-year period, and (ii) no party in interest other than 
the Committee or the Independent Fiduciary shall be subject to the 
civil penalty that may be assessed under ERISA section 502(i) if the 
records are not maintained, or are not available for examination as 
required by paragraph (n) below; and
    (n)(1) Except as provided in section (2) of this paragraph and not 
withstanding any provisions of subsections (a)(2) and (b) of section 
504 of ERISA, the records referred to in paragraph (m) above shall be 
unconditionally available at their

[[Page 55113]]

customary location during normal business hours to:
    (i) any duly authorized employee or representative of the 
Department or the Internal Revenue Service;
    (ii) AT&T or any duly authorized representative of AT&T;
    (iii) the Independent Fiduciary or any duly authorized 
representative of the Independent Fiduciary;
    (iv) the Committee or any duly authorized representative of the 
Committee; and
    (v) any participant or beneficiary of the Plan, or any duly 
authorized representative of such participant or beneficiary;
    (2) None of the persons described above in paragraph (n)(1) (iii) 
or (v) shall be authorized to examine the trade secrets of AT&T or 
commercial or financial information that is privileged or confidential, 
and should AT&T refuse to disclose information on the basis that such 
information is exempt from disclosure; AT&T shall by the close of the 
thirtieth (30th) day following the request, provide a written notice 
advising that person of the reasons for the refusal and that the 
Department may request such information.

III. Definitions

    For purposes of this proposed exemption:
    (a) The term ``Affiliate'' means:
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person;
    (2) Any officer, director, employee, relative, or partner in any 
such person;
    (3) Any corporation or partnership of which such person is an 
officer, director, partner, or employee.

For the purposes of clause (a)(1) above, the term ``control'' means the 
power to exercise a controlling influence over the management or 
policies of a person other than an individual.
    (b) The term ``Committee'' means the AT&T Inc. Benefit Plan 
Investment Committee, which has been delegated the power and authority 
to appoint and remove trustees and investment managers, and to enter 
into and amend trust agreements and other agreements relating to the 
management of Plan assets and, in respect of such power and authority, 
has been designated by AT&T Services, Inc. as a ``named fiduciary'' of 
the Plan.
    (c) The term ``Trust'' means the SBC Master Pension Trust, 
established and maintained pursuant to an agreement between AT&T Inc. 
and JPMorgan Chase Bank, N.A., as amended and restated effective as of 
February 1, 2012.
    (d) The term ``IMA'' means the Investment Management Agreement by 
and between AT&T Services, Inc., the AT&T Benefit Plan Investment 
Committee, AT&T Inc. and Brock Fiduciary Services LLC, effective on or 
about September 9, 2013.
    (e) The term ``Contribution Agreement'' means the Contribution 
Agreement between Brock Fiduciary Services LLC, JPMorgan Chase Bank, 
N.A., as Directed Trustee of the Trust, AT&T Inc. and AT&T Mobility II 
LLC, dated August 30, 2013, which, among other things, sets forth the 
terms and conditions of the Contribution, the Put Option and the Call 
Option.
    (f) The term ``Registration Rights Agreement'' means the 
Registration Rights Agreement by and among AT&T Inc. the SBC Master 
Pension Trust and Brock Fiduciary Services LLC, as Independent 
Fiduciary and investment manager with respect to the AT&T Pension 
Benefit Plan, a participating plan in the SBC Master Pension Trust, 
dated August 30, 2013.
    (g) The term ``Change of Control'' means (i) the occurrence of any 
merger, reorganization or other transaction that results in AT&T, 
directly or indirectly, owning less than fifty percent of the capital 
or profits interests (where the Issuer remains taxable as a 
partnership), or equity (if the Issuer becomes taxable as a 
corporation), of the Issuer, exclusive of the Preferred Interests, or 
(ii) a transfer of fifty percent or more of the Plan liabilities and 
Trust assets to an entity not under common control with AT&T Inc.
    (h) The term ``Independent Fiduciary'' means Brock Fiduciary 
Services LLC and any other fiduciary who (1) is independent or 
unrelated to AT&T Inc. and its affiliates and has the appropriate 
training, experience, and facilities to act on behalf of the Plan 
regarding the covered transactions in accordance with the fiduciary 
duties and responsibilities prescribed by ERISA (including, if 
necessary, the responsibility to seek the counsel of knowledgeable 
advisors to assist in its compliance with ERISA), and (2) if relevant, 
succeeds Brock Fiduciary Services LLC pursuant to the terms of the 
Investment Management Agreement, Independent Fiduciary Agreement, or 
other relevant agreement. The Independent Fiduciary will not be deemed 
to be independent of and unrelated to AT&T Inc. and its affiliates if: 
(i) Such fiduciary directly or indirectly controls, is controlled by or 
is under common control, with AT&T and its affiliates; (ii) such 
fiduciary directly or indirectly receives any compensation or other 
consideration in connection with any transaction described in this 
proposed exemption other than for acting as an Independent Fiduciary in 
connection with the transactions described herein, provided that the 
amount or payment of such compensation is not contingent upon, or in 
any way affected by, the Independent Fiduciary's ultimate decision; and 
(iii) the annual gross revenue received by the Independent Fiduciary, 
during any year of its engagement, from AT&T Inc. and its affiliates, 
exceeds two percent (2%) of the Independent Fiduciary's annual gross 
revenue from all sources (for federal income tax purposes) for its 
prior tax year. For the purpose of this Section III(h), the term 
``control'' has the meaning set forth in Section III(a) above.
    (i) The term ``Put Option'' means the right of the Independent 
Fiduciary to require AT&T to purchase the Preferred Interests from the 
Trust, pursuant to the terms and conditions set forth in the 
Contribution Agreement, at the Option Price per Preferred Interest at 
any time and from time to time on or after the earliest of: (1) The 
first date that the Issuer's debt-to-total-capitalization ratio (as 
defined in the Contribution Agreement) exceeds that of AT&T; (2) the 
date on which AT&T, Inc. is rated below investment grade for two 
consecutive calendar quarters by at least two of the following rating 
agencies: (x) Standard & Poor's Ratings Services, (y) Moody's Investor 
Services, Inc., or (z) FitchRatings, Inc.; (3) a Change of Control; or 
(4) the seventh anniversary of the date on which the Preferred 
Interests are contributed to the Trust.
    (j) The term ``Call Option'' means the right of AT&T to purchase 
all or any portion of the Preferred Interests from the Trust, pursuant 
to the terms and conditions set forth in the Contribution Agreement, at 
a price per Preferred Interest equal to the Option Price per Preferred 
Interest, at any time and from time to time: (1) During the twelve 
month period following the date AT&T issues an annual report reflecting 
that the Plan is fully funded as determined under U.S. GAAP and 
calculated by including the fair market value of the Preferred 
Interests; (2) on or after a Change of Control; or (3) on or after the 
fifth anniversary of the date on which the Preferred Interests are 
contributed to the Trust.
    (k) The term ``Trustee'' means JPMorgan Chase Bank, N.A. or any 
successor trustee retained by the Trust to hold the assets of the 
Trust, acting solely as a directed trustee with no discretionary 
authority over the investment of Trust assets.
    (l) The term ``Option Price'' means an amount equal to the greater 
of: (1) The fair market value of the Preferred

[[Page 55114]]

Interest, determined by the Independent Fiduciary as of the last date 
of the calendar quarter preceding the date of notice of exercise of a 
Call Option or Put Option, as the case may be, without regard to the 
occurrence of any prior event described in clauses (1) or (2) of the 
definition of Call Option or in clauses (1) through (3) of the 
definition of Put Option, or, for the portion of Preferred Interests 
that are not immediately purchased by AT&T pursuant to the Put Option 
because of the limitation on AT&T's obligation to purchase the 
Preferred Interests pursuant to the Put Option to no more than 
106,666,667 Preferred Interests in any twelve month period, the fair 
market value of the Preferred Interest, determined by the Independent 
Fiduciary as of the last date of the calendar quarter immediately 
preceding the date such portion of the Preferred Interest is actually 
purchased by AT&T Inc., without regard to the occurrence of any prior 
event described in clauses (1) or (2) of the definition of Call Option 
or in clauses (1) through (3) of the definition of Put Option; and (2) 
the sum of $25.00 (i.e., $8 billion in the aggregate) plus any accrued 
and unpaid Distributions.
    (m) The term ``Independent Fiduciary Agreement'' means the 
Independent Fiduciary Agreement dated May 1, 2012, as amended, by and 
among AT&T Services, AT&T Inc. and Brock.
    (n) The term ``Independent Appraiser'' means an individual or 
entity meeting the definition of a ``Qualified Independent Appraiser'' 
under 25 CFR 2570.31(i) retained to determine, on behalf of the Plan, 
the fair market value of the Preferred Interests as of the date of the 
Contribution and while the Preferred Interests are held on behalf of 
the Plan. For avoidance of doubt, the Independent Appraiser may be the 
Independent Fiduciary, provided it qualifies as a Qualified Independent 
Appraiser.

    Signed at Washington, DC, this 3rd day of September, 2013.
Lyssa Hall,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. 2013-21801 Filed 9-6-13; 8:45 am]
BILLING CODE 4510-29-P