Exhibit 10-rr
 

AT&T 1997 LONG TERM INCENTIVE PROGRAM
(as amended May 19, 1999 and March 14, 2000)
 

SECTION 1. PURPOSE. The purposes of the AT&T 1997 Long Term Incentive Program
(the "Plan") are to encourage selected employees and Non-Employee Directors of
AT&T Corp. (the "Company") and its Affiliates to acquire a proprietary and
vested interest in the growth and performance of the Company, to generate an
increased incentive to contribute to the Company's future success and
prosperity, thus enhancing the value of the Company for the benefit of
shareholders, and to enhance the ability of the Company and its Affiliates to
attract and retain individuals of exceptional managerial talent upon whom, in
large measure, the sustained progress, growth and profitability of the Company
depends.
 
SECTION 2. DEFINITIONS. As used in the Plan, the following terms shall have the
meanings set forth below:
 
(a) "Affiliate" shall mean (i) any Person that directly, or through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Company or (ii) any entity in which the Company has a significant equity
interest, as determined by the Committee.
 
(b) "Award" shall mean any Option, Stock Appreciation Right, Restricted Stock
Award, Performance Share, Performance Unit, Dividend Equivalent, Other Stock
Unit Award, or any other right, interest, or option relating to Shares or other
property granted pursuant to the provisions of the Plan.
 
(c) "Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award granted by the Committee hereunder,
which may, but need not, be executed or acknowledged by both the Company and the
Participant.
 
(d) "Board" shall mean the Board of Directors of the Company.
 
(e) "Change in Control" shall mean the happening of any of the following events:
 
(i) An acquisition by any individual, entity or group (within the meaning of
Section 13 (d) (3) or 14 (d) (2) of the Exchange Act) (an "Entity") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (A) the then outstanding AT&T Shares (the
"Outstanding Company Common Stock") or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities"); excluding,
however, the following: (1) any acquisition directly from the Company, other
than an acquisition by virtue of the exercise of a conversion privilege unless
the security being so converted was itself acquired directly from the Company,
(2) any acquisition by the Company, (3) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (4) any acquisition by any corporation
pursuant to a transaction which complies with clauses (A), (B) and (C) of
subsection (iii) of this Section 2(e);
 
(ii) A change in the composition of the Board such that the individuals who, as
of the effective date of the Plan, constitute the Board (such Board shall be
hereinafter referred to as the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that for
purposes of this definition, any individual who becomes a member of the Board
subsequent to the effective date of the Plan, whose election, or nomination for
election, by the Company's stockholders was approved by a vote of at least a
majority of those individuals who are members of the Board and who were also
members of the Incumbent Board (or deemed to be such pursuant to this proviso)
shall be considered as though such individual were a member of the Incumbent
Board; and provided, further however, that any such individual whose initial
assumption of office occurs as a result of or in connection with either an
actual or threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of an Entity other than the
Board shall not be so considered as a member of the Incumbent Board;
 
(iii) The approval by the stockholders of the Company of a merger,
reorganization or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (each, a "Corporate Transaction")
or, if consummation of such Corporate Transaction is subject, at the time of
such approval by stockholders, to the consent of any government or governmental
agency, the obtaining of such consent (either explicitly or implicitly by
consummation); excluding however, such a Corporate Transaction pursuant to which
(A) all or substantially all of the individuals and entities who are the
beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly, more than 60% of,
respectively, the outstanding shares of common stock, and the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation resulting from
such Corporate Transaction (including, without limitation, a corporation or
other Person which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries (a "Parent Company")) in substantially the same proportions as
their ownership, immediately prior to such Corporate Transaction, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be, (B) no Entity (other than the Company, any employee benefit
plan (or related trust) of the Company, such corporation resulting from such
Corporate Transaction or, if reference was made to equity ownership of any
Parent Company for purposes of determining whether clause (A) above is satisfied
in connection with the applicable Corporate Transaction, such Parent Company)
will beneficially own, directly or indirectly, 20% or more of, respectively, the
outstanding shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the outstanding voting
securities of such corporation entitled to vote generally in the election of
directors unless such ownership resulted solely from ownership of securities of
the Company prior to the Corporate Transaction, and (C) individuals who were
members of the Incumbent Board will immediately after the consummation of the
Corporate Transaction constitute at least a majority of the members of the board
of directors of the corporation resulting from such Corporate Transaction (or,
if reference was made to equity ownership of any Parent Company for purposes of
determining whether clause (A) above is satisfied in connection with the
applicable Corporate Transaction, of the Parent Company); or
 
(iv) The approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.
 
(f) "Change in Control Price" means, with respect to an AT&T Share or a Wireless
Group Share, as the case may be, the higher of (A) the highest reported sales
price, regular way, of such Share in any transaction reported on the New York
Stock Exchange Composite Tape or other national exchange on which such Shares
are listed or on NASDAQ during the 60-day period prior to and including the date
of a Change in Control or (B) if the Change in Control is the result of a tender
or exchange offer or a Corporate Transaction, the highest price per such Share
paid in such tender or exchange offer or Corporate Transaction; provided
however, that in the case of Incentive Stock Options and Stock Appreciation
Rights relating to Incentive Stock Options, the Change in Control Price shall be
the Fair Market Value of such Share on the date such Incentive Stock Option or
Stock Appreciation Right is exercised or deemed exercised pursuant to
Section 11(b). To the extent that the consideration paid in any such transaction
described above consists all or in part of securities or other noncash
consideration, the value of such securities or other noncash consideration shall
be determined in the sole discretion of the Board.
 
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.
 
(h) "Committee" shall mean the Compensation and Employee Benefits Committee of
the Board, or any successor to such committee, composed of no fewer than two
directors each of whom is a Non-Employee Director and an "outside director"
within the meaning of Section 162(m) of the Code, or any successor provision
thereto.
 
(i) "Company" shall mean AT&T Corp., a New York corporation.
 
(j) "Covered Employee" shall mean a "covered employee" within the meaning of
Section 162(m)(3) of the Code, or any successor provision thereto.
 
(k) "Employee" shall mean any employee of the Company or of any Affiliate.
Unless otherwise determined by the Committee in its sole discretion, for
purposes of the Plan, an employee shall be considered to have terminated
employment and to have ceased to be an Employee if his or her employer ceases to
be an Affiliate, even if he or she continues to be employed by such employer.
 
(l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
 
(m) "Fair Market Value" shall mean, with respect to any property, the market
value of such property determined by such methods or procedures as shall be
established from time to time by the Committee.
 
(n) "Incentive Stock Option" shall mean an Option granted under Section 6 hereof
that is intended to meet the requirements of Section 422 of the Code or any
successor provision thereto.
 
(o) "Non-Employee Director" shall have the meaning set forth in Rule 16b-3(b)(3)
promulgated by the Securities and Exchange Commission under the Exchange Act, or
any successor definition adopted by the Securities and Exchange Commission.
 
(p) "Nonstatutory Stock Option" shall mean an Option granted under Section 6
hereof that is not intended to be an Incentive Stock Option.
 
(q) "Option" shall mean any right granted to a Participant under the Plan
allowing such Participant to purchase Shares at such price or prices and during
such period or periods as the Committee shall determine.
 
(r) "Other Stock Unit Award" shall mean any right granted to a Participant by
the Committee pursuant to Section 10 hereof.
 
(s) "Participant" shall mean an Employee or Non-Employee Director who is
selected by the Committee to receive an Award under the Plan.
 
(t) "Performance Award" shall mean any Award of Performance Shares or
Performance Units pursuant to Section 9 hereof.
 
(u) "Performance Period" shall mean that period established by the Committee at
the time any Performance Award is granted or at any time thereafter during which
any performance goals specified by the Committee with respect to such Award are
to be measured.
 
(v) "Performance Share" shall mean any grant pursuant to Section 9 hereof of a
unit valued by reference to a designated number of Shares, which value may be
paid to the Participant by delivery of such property as the Committee shall
determine, including, without limitation, cash, Shares, or any combination
thereof, upon achievement of such performance goals during the Performance
Period as the Committee shall establish at the time of such grant or thereafter.
 
(w) "Performance Unit" shall mean any grant pursuant to Section 9 hereof of a
unit valued by reference to a designated amount of property other than Shares,
which value may be paid to the Participant by delivery of such property as the
Committee shall determine, including, without limitation, cash, Shares, or any
combination thereof, upon achievement of such performance goals during the
Performance Period as the Committee shall establish at the time of such grant or
thereafter.
 
(x) "Person" shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, or government or
political subdivision thereof.
 
(y) "Restricted Stock" shall mean any Share issued with the restriction that the
holder may not sell, transfer, pledge, or assign such Share and with such other
restrictions as the Committee, in its sole discretion, may impose (including,
without limitation, any restriction on the right to vote such Share, and the
right to receive any cash dividends), which restrictions may lapse separately or
in combination at such time or times, in installments or otherwise, as the
Committee may deem appropriate.
  
(z) "Restricted Stock Award" shall mean an award of Restricted Stock under
Section 8 hereof.
 
(Aa) "Senior Manager" shall mean any Employee of the Company or any Affiliate
holding a position above E band or any future salary band that is the equivalent
thereof.
 
(Bb) "Shares" shall mean, collectively or as the case may be, (i)the shares of
AT&T Common Stock of the Company, $1.00 par value (“AT&T Shares”), and (ii) the
shares of Wireless Group Common Stock of the Company, $1.00 par value (“Wireless
Group Shares”). “Outstanding Wireless Group Shares” shall mean, as at any date
of determination, the sum of (i) the total issued and outstanding Wireless Group
Shares, plus (ii) the number of Wireless Group Shares represented by the
inter-group interest held by the “AT&T Common Stock Group” (as described the
Company’s Proxy Statement dated January 26, 2000). The numbers of AT&T Shares
referred to in the Plan have been adjusted to reflect the Company’s 3 for 2
stock split effective April 15, 1999.
 
(Cc) "Stock Appreciation Right" shall mean any right granted to a Participant
pursuant to Section 7 hereof to receive, upon exercise by the Participant, the
excess of (i) the Fair Market Value of one Share on the date of exercise or, if
the Committee shall so determine in the case of any such right other than one
related to any Incentive Stock Option, at any time during a specified period
before the date of exercise over (ii) the grant price of the right on the date
of grant, or if granted in connection with an outstanding Option on the date of
grant of the related Option, as specified by the Committee in its sole
discretion, which, except in the case of Substitute Awards or in connection with
an adjustment provided in Section 4(e), shall not be less than the Fair Market
Value of one Share on such date of grant of the right or the related Option, as
the case may be. Any payment by the Company in respect of such right may be made
in cash, Shares, other property, or any combination thereof, as the Committee,
in its sole discretion, shall determine.
 
(Dd) "Subsidiary" shall mean any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of the
granting of the Award, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50 percent or more of the total
combined voting power of all classes of stock in one of the other corporations
in the chain.
 
(Ee) "Substitute Awards" shall mean Awards granted or Shares issued by the
Company in assumption of, or in substitution or exchange for, awards previously
granted, or the right or obligation to make future awards, by a company acquired
by the Company or with which the Company combines.
 
SECTION 3. ADMINISTRATION. The Plan shall be administered by the Committee. The
Committee shall have full power and authority, subject to such orders or
resolutions not inconsistent with the provisions of the Plan as may from time to
time be adopted by the Board, to: (i) select the Employees of the Company and
its Affiliates and Non-Employee Directors of the Company to whom Awards may from
time to time be granted hereunder; (ii) determine the type or types of Award to
be granted to each Participant hereunder; (iii) determine the number of Shares
to be covered by each Award granted hereunder; (iv) determine the terms and
conditions, not inconsistent with the provisions of the Plan, of any Award
granted hereunder; (v) determine whether, to what extent and under what
circumstances Awards may be settled in cash, Shares or other property or
canceled or suspended; (vi) determine whether, to what extent and under what
circumstances cash, Shares and other property and other amounts payable with
respect to an Award under this Plan shall be deferred either automatically or at
the election of the Participant; (vii) interpret and administer the Plan and any
instrument or agreement entered into under the Plan; (viii) establish such rules
and regulations and appoint such agents as it shall deem appropriate for the
proper administration of the Plan; and (ix) make any other determination and
take any other action that the Committee deems necessary or desirable for
administration of the Plan. Decisions of the Committee shall be final,
conclusive and binding upon all persons, including the Company, any Participant,
any shareholder, and any employee of the Company or of any Affiliate. A majority
of the members of the Committee may determine its actions and fix the time and
place of its meetings. Notwithstanding the foregoing or anything else to the
contrary in the Plan, any action or determination by the Committee specifically
affecting or relating to an Award to a Non-Employee Director shall be approved
and ratified by the Board.
 
SECTION 4. SHARES SUBJECT TO THE PLAN.
 
(a) Subject to adjustment as provided in Section 4(e), a total of twenty-two and
one half (22.5) million AT&T Shares shall be available for a one time grant of
Options to substantially all Employees during 1997. Shares available for such
one time grant of Options, but not used for such Options, shall be available for
other Awards under the Plan, in 1997 or later years.
 
(b) In addition to the number of AT&T Shares available under Section 4(a), and
subject to adjustment as provided in Section 4(e), a total of (i) one hundred
twenty-seven and one half (127.5) million AT&T Shares, and (ii) a number of
Wireless Group Shares equal to 5.00% of the number of Outstanding Wireless Group
Shares shall be available for Awards granted under the Plan; provided that,
commencing on January 1, 2000 and on each subsequent January 1 throughout the
term of the Plan, an additional number of AT&T Shares shall be added to the
number of AT&T Shares available for Awards granted under the Plan, which
additional number of AT&T Shares shall be calculated by multiplying (x) the
number of AT&T Shares outstanding on such January 1, by (y) 1.75%; provided,
further, that the number of AT&T Shares available for Awards other than Options
and/or Stock Appreciation Rights shall not exceed thirty-seven and one half
(37.5) million; and provided further that, commencing on January 1, 2001 and on
each subsequent January 1 throughout the term of the Plan, an additional number
of Wireless Group Shares shall be added to the number of Wireless Group Shares
available for Awards granted under the Plan, which additional number of Wireless
Group Shares shall be calculated by multiplying (x) the number of Outstanding
Wireless Group Shares on such January 1, by (y) 2.00%; provided, further, that
the number of Wireless Group Shares available for Awards other than Options
and/or Stock Appreciation Rights shall not exceed 1.25% of the number of
Outstanding Wireless Group Shares; and provided, further, that if any Shares
subject to an Award or to an award under the Company's 1987 Long Term Incentive
Program or 1984 Stock Option Plan (the "Prior Plans") are forfeited or if any
Award or award under the Prior Plans based on Shares is settled for cash, or
expires or otherwise is terminated without issuance of such Shares, the Shares
subject to such Award shall to the extent of such cash settlement, forfeiture or
termination again be available for Awards under the Plan. In the event that any
Option or other Award granted hereunder is exercised through the delivery of
Shares or in the event that withholding tax liabilities arising from such Option
or other Award are satisfied by the withholding of Shares by the Company, the
number of Shares available for Awards under the Plan shall be increased by the
number of Shares so surrendered or withheld. In addition, Substitute Awards
shall not reduce the Shares available for grants under the Plan or to a
Participant in any calendar year.
 
(c) In addition to the number of Wireless Group Shares available under Section
4(b), and subject to adjustment as provided in Section 4(e), such additional
number of Wireless Group Shares as are required for Awards as an adjustment to
existing Awards under the Plan based upon AT&T Shares as the result of any
distribution of Wireless Group Shares to holders of AT&T Shares as more fully
described in the Company’s Proxy Statement dated January 26, 2000.
 
(d) Any Shares issued hereunder may consist, in whole or in part, of authorized
and unissued shares, treasury shares, or shares purchased in the open market or
otherwise.
 
(ed) In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, reverse stock split, spin-off or
similar transaction or other change in corporate structure affecting the Shares,
such adjustments and other substitutions shall be made to the Plan and to Awards
as the Committee in its sole discretion deems equitable or appropriate,
including without limitation such adjustments in the aggregate number, class and
kind of securities which may be delivered under the Plan, in the aggregate or to
any one Participant, in the number, class, kind and option or exercise price of
securities subject to outstanding Options, Stock Appreciation Rights or other
Awards granted under the Plan, and in the number, class and kind of securities
subject to Awards granted under the Plan (including, if the Committee deems
appropriate, the substitution of similar options to purchase the shares of, or
other awards denominated in the shares of, another company) as the Committee may
determine to be appropriate in its sole discretion, provided that the number of
Shares subject to any Award shall always be a whole number.
 
SECTION 5. ELIGIBILITY. Any Employee or Non-Employee Director shall be eligible
to be selected as a Participant, provided, however, that Incentive Stock Options
shall only be awarded to Employees of the Company.
 
SECTION 6. STOCK OPTIONS. Options may be granted hereunder to Participants
either alone or in addition to other Awards granted under the Plan. Any Option
granted under the Plan shall be evidenced by an Award Agreement in such form as
the Committee may from time to time approve. Any such Option shall be subject to
the following terms and conditions and to such additional terms and conditions,
not inconsistent with the provisions of the Plan, as the Committee shall deem
desirable:
 
(a) OPTION PRICE. The purchase price per Share purchasable under an Option shall
be determined by the Committee in its sole discretion; provided that, except in
the case of Substitute Awards or in connection with an adjustment provided for
in Section 4(e), such purchase price shall not be less than the Fair Market
Value of the Share on the date of the grant of the Option.
  
(b) OPTION PERIOD. The term of each Option shall be fixed by the Committee in
its sole discretion; provided that no Option shall be exercisable after the
expiration of ten years from the date the Option is granted.
 
(c) EXERCISABILITY. Options shall be exercisable at such time or times as
determined by the Committee at or subsequent to grant.
 
(d) METHOD OF EXERCISE. Subject to the other provisions of the Plan, any Option
may be exercised by the Participant in whole or in part at such time or times,
and the Participant may make payment of the option price in such form or forms,
including, without limitation, payment by delivery of cash, Shares or other
consideration (including, where permitted by law and the Committee, Awards)
having a Fair Market Value on the exercise date equal to the total option price,
or by any combination of cash, Shares and other consideration as the Committee
may specify in the applicable Award Agreement.
 
(e) INCENTIVE STOCK OPTIONS. In accordance with rules and procedures established
by the Committee, and except as otherwise provided in Section 11, the aggregate
Fair Market Value (determined as of the time of grant) of the Shares with
respect to which Incentive Stock Options held by any Participant which are
exercisable for the first time by such Participant during any calendar year
under the Plan (and under any other benefit plans of the Company or any
Subsidiary) shall not exceed $100,000 or, if different, the maximum limitation
in effect at the time of grant under Section 422 of the Code, or any successor
provision, and any regulations promulgated thereunder. Incentive Stock Options
shall be granted only to participants who are employees of the Company or a
Subsidiary of the Company. The terms of any Incentive Stock Option granted
hereunder shall comply in all respects with the provisions of Section 422 of the
Code, or any successor provision, and any regulations promulgated thereunder.
The aggregate number of Shares with respect to which Incentive Stock Options may
be granted under the Plan shall not exceed (i) seventy-five (75) million in the
case of AT&T Shares, and (ii) 50.00% of the aggregate number of all Wireless
Group Shares available for Awards under the Plan in the case of Wireless Group
Shares.
 
(f) FORM OF SETTLEMENT. In its sole discretion, the Committee may provide, at
the time of grant, that the Shares to be issued upon an Option's exercise shall
be in the form of Restricted Stock or other similar securities, or may reserve
the right so to provide after the time of grant.
 
SECTION 7. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be granted
hereunder to Participants either alone or in addition to other Awards granted
under the Plan and may, but need not, relate to a specific Option granted under
Section 6. The provisions of Stock Appreciation Rights need not be the same with
respect to each recipient. Any Stock Appreciation Right related to a
Nonstatutory Stock Option may be granted at the same time such Option is granted
or at any time thereafter before exercise or expiration of such Option. Any
Stock Appreciation Right related to an Incentive Stock Option must be granted at
the same time such Option is granted. In the case of any Stock Appreciation
Right related to any Option, the Stock Appreciation Right or applicable portion
thereof shall terminate and no longer be exercisable upon the termination or
exercise of the related Option, except that a Stock Appreciation Right granted
with respect to less than the full number of Shares covered by a related Option
shall not be reduced until the exercise or termination of the related Option
exceeds the number of Shares not covered by the Stock Appreciation Right. Any
Option related to any Stock Appreciation Right shall no longer be exercisable to
the extent the related Stock Appreciation Right has been exercised. The
Committee may impose such conditions or restrictions on the exercise of any
Stock Appreciation Right as it shall deem appropriate, provided that no Stock
Appreciation Right shall have a term that is longer than ten (10) years.
 
SECTION 8. RESTRICTED STOCK.
 
(a) ISSUANCE. A Restricted Stock Award shall be subject to restrictions imposed
by the Committee during a period of time specified by the Committee (the
"Restriction Period"). Restricted Stock Awards may be issued hereunder to
Participants, for no cash consideration or for such minimum consideration as may
be required by applicable law, either alone or in addition to other Awards
granted under the Plan. The provisions of Restricted Stock Awards need not be
the same with respect to each recipient.
 
(b) REGISTRATION. Any Restricted Stock issued hereunder may be evidenced in such
manner as the Committee in its sole discretion shall deem appropriate,
including, without limitation, book-entry registration or issuance of a stock
certificate or certificates. In the event any stock certificate is issued in
respect of shares of Restricted Stock awarded under the Plan, such certificate
shall be registered in the name of the Participant, and shall bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such Award.
 
(c) FORFEITURE. Except as otherwise determined by the Committee at the time of
grant or thereafter, upon termination of employment for any reason during the
restriction period, all Shares of Restricted Stock still subject to restriction
shall be forfeited by the Participant and reacquired by the Company.
Unrestricted Shares, evidenced in such manner as the Committee shall deem
appropriate, shall be issued to the grantee promptly after the period of
forfeiture, as determined or modified by the Committee, shall expire.
 
(d) MINIMUM VESTING CONDITION. The minimum Restriction Period applicable to any
Restricted Stock Award that is not subject to performance conditions restricting
transfer shall be three (3) years from the date of grant; provided, however,
that a Restriction Period of less than three (3) years may be approved under the
Plan for such Awards with respect to (i) up to twelve (12) million AT&T Shares,
and (ii) up to 0.50% of the Outstanding Wireless Group Shares.
 
SECTION 9. PERFORMANCE AWARDS. Performance Awards may be issued hereunder to
Participants, for no cash consideration or for such minimum consideration as may
be required by applicable law, either alone or in addition to other Awards
granted under the Plan. The performance criteria to be achieved during any
Performance Period and the length of the Performance Period shall be determined
by the Committee upon the grant of each Performance Award. Except as provided in
Section 11, Performance Awards will be distributed only after the end of the
relevant Performance Period. Performance Awards may be paid in cash, Shares,
other property or any combination thereof, in the sole discretion of the
Committee at the time of payment. The performance levels to be achieved for each
Performance Period and the amount of the Award to be distributed shall be
conclusively determined by the Committee. Performance Awards may be paid in a
lump sum or in installments following the close of the Performance Period or, in
accordance with procedures established by the Committee, on a deferred basis.
 
SECTION 10. OTHER STOCK UNIT AWARDS.
 
(a) STOCK AND ADMINISTRATION. Other Awards of Shares and other Awards that are
valued in whole or in part by reference to, or are otherwise based on, Shares or
other property ("Other Stock Unit Awards") may be granted hereunder to
Participants, either alone or in addition to other Awards granted under the
Plan. Other Stock Unit Awards may be paid in Shares, cash or any other form of
property as the Committee shall determine. Subject to the provisions of the
Plan, the Committee shall have sole and complete authority to determine the
Employees of the Company and its Affiliates and Non-Employee Directors to whom
and the time or times at which such Awards shall be made, the number of Shares
to be granted pursuant to such Awards, and all other conditions of the Awards.
The provisions of Other Stock Unit Awards need not be the same with respect to
each recipient.
 
(b) TERMS AND CONDITIONS. Subject to the provisions of this Plan and any
applicable Award Agreement, Awards and Shares subject to Awards made under this
Section 10, may not be sold, assigned, transferred, pledged or otherwise
encumbered prior to the date on which the Shares are issued, or, if later, the
date on which any applicable restriction, performance or deferral period lapses.
For any Award or Shares subject to any Award made under this Section 10 the
transferability of which is conditioned only on the passage of time, such
restriction period shall be a minimum of three (3) years. Shares (including
securities convertible into Shares) subject to Awards granted under this Section
10 may be issued for no cash consideration or for such minimum consideration as
may be required by applicable law. Shares (including securities convertible into
Shares) purchased pursuant to a purchase right awarded under this Section 10
shall be purchased for such consideration as the Committee shall in its sole
discretion determine, which, except in the case of Substitute Awards, shall not
be less than the Fair Market Value of such Shares or other securities as of the
date such purchase right is awarded.
 
SECTION 11. CHANGE IN CONTROL PROVISIONS.
 
(a) IMPACT OF EVENT. Notwithstanding any other provision of the Plan to the
contrary, unless the Committee shall determine otherwise at the time of grant
with respect to a particular Award, in the event of a Change in Control:
 
(i) any Options and Stock Appreciation Rights outstanding as of the date such
Change in Control is determined to have occurred, and which are not then
exercisable and vested, shall become fully exercisable and vested to the full
extent of the original grant;
 
(ii) the restrictions and deferral limitations applicable to any Restricted
Stock shall lapse, and such Restricted Stock shall become free of all
restrictions and limitations and become fully vested and transferable to the
full extent of the original grant;
 
(iii) all Performance Awards shall be considered to be earned and payable in
full, and any deferral or other restriction shall lapse and such Performance
Awards shall be immediately settled or distributed; and  
 
(iv) The restrictions and deferral limitations and other conditions applicable
to any Other Stock Unit Awards or any other Awards shall lapse, and such Other
Stock Unit Awards or such other Awards hall become free of all restrictions,
limitations or conditions and become fully vested and transferable to the full
extent of the original grant.
 
(b) CHANGE IN CONTROL CASH-OUT. Notwithstanding any other provision of the Plan,
during the 60-day period from and after a Change in Control (the "Exercise
Period"), if the Committee shall determine at, or at any time after, the time of
grant, a Participant holding an Option or Stock Appreciation Right shall have
the right, whether or not the Option or Stock Appreciation Right is fully
exercisable and in lieu of the payment of the purchase price for the Shares
being purchased under the Option or Stock Appreciation Right and by giving
notice to the Company, to elect (within the Exercise Period) to surrender all or
part of the Option or Stock Appreciation Right to the Company and to receive
cash, within 30 days of such notice, in an amount equal to the amount by which
the Change in Control Price per Share on the date of such election shall exceed
the purchase price per Share under the Option or Stock Appreciation Right (the
"Spread") multiplied by the number of Shares granted under the Option or Stock
Appreciation right as to which the right granted under this Section 11(b) shall
have been exercised.
 
(c) Notwithstanding any other provision of this Plan, if any right granted
pursuant to this Plan would make a Change in Control transaction ineligible for
pooling-of-interests accounting under APB No. 16, that (after giving effect to
any other actions taken to cause such transaction to be eligible for such
pooling-of-interests accounting treatment) but for the nature of such right
would otherwise be eligible for such accounting treatment, the Committee shall
have the ability to substitute for the cash payable pursuant to such right
Shares with a Fair Market Value equal to the cash that would otherwise be
payable pursuant thereto.
 
SECTION 12. CODE SECTION 162(m) PROVISIONS.
 
(a) Notwithstanding any other provision of this Plan, if the Committee
determines at the time Restricted Stock, a Performance Award or an Other Stock
Unit Award is granted to a Participant who is then a Senior Manager or an E band
employee that such Participant is, or is likely to be as of the end of the tax
year in which the Company would claim a tax deduction in connection with such
Award, a Covered Employee, then the Committee may provide that this Section 12
is applicable to such Award.
 
(b) If an Award is subject to this Section 12, then the lapsing of restrictions
thereon and the distribution of cash, Shares or other property pursuant thereto,
as applicable, shall be subject to the achievement of one or more objective
performance goals established by the Committee, which shall be based on the
attainment of specified levels of one or any combination of the following: net
cash provided by operating activities, earnings per share from continuing
operations, operating income, revenues, gross margin, return on operating
assets, return on equity, economic value added, stock price appreciation, total
stockholder return, or cost control, of the Company or the Affiliate or division
of the Company for or within which the Participant is primarily employed. Such
performance goals also may be based upon the achievement of specified levels of
Company performance (or performance of applicable Affiliate or division of the
Company) under one or more of the measures described above relative to the
performance of  
other corporations. Such performance goals shall be set by the Committee within
the time period prescribed by, and shall otherwise comply with the requirements
of, Section 162(m) of the Code, or any successor provision thereto, and the
regulations thereunder.
 
(c) Notwithstanding any provision of this Plan other than Section 11, with
respect to any Award that is subject to this Section 12, the Committee may
adjust downwards, but not upwards, the amount payable pursuant to such Award,
and the Committee may not waive the achievement of the applicable performance
goals except in the case of the death or disability of the Participant.
 
(d) The Committee shall have the power to impose such other restrictions on
Awards subject to this Section 12 as it may deem necessary or appropriate to
ensure that such Awards satisfy all requirements for "performance-based
compensation" within the meaning of Section 162(m) (4) (C) of the Code, or any
successor provision thereto.
 
(e) Notwithstanding any provision of this Plan other than Section 4(e),
commencing with calendar year 1999, no Participant may be granted Options and/or
SARs in any calendar year period with respect to more than three million
(3,000,000) AT&T Shares, or more than three million (3,000,000) Wireless Group
Shares and the maximum dollar value payable with respect to Performance Units
and/or Other Stock Unit Awards that are valued with reference to property other
than Shares and granted to any Participant in any one calendar year is
$10,000,000.
 
SECTION 13. AMENDMENTS AND TERMINATION. The Board may amend, alter, suspend,
discontinue or terminate the Plan or any portion thereof at any time; provided
that no such amendment, alteration, suspension, discontinuation or termination
shall be made without (i) shareholder approval if such approval is necessary to
qualify for or comply with any tax or regulatory requirement for which or with
which the Board deems it necessary or desirable to qualify or comply or (ii) the
consent of the affected Participant, if such action would impair the rights of
such Participant under any outstanding Award. Notwithstanding anything to the
contrary herein, the Committee may amend the Plan in such manner as may be
necessary so as to have the Plan conform to local rules and regulations in any
jurisdiction outside the United States.
 
The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any Participant without his or her consent. Notwithstanding any provision of
this plan, the Committee may not amend the terms of any Option to reduce the
option price nor may the Committee, without prior shareholder approval, cancel
any outstanding Option and replace it with a new Option with a lower option
price, where the economic effect would be the same as reducing the option price
of the canceled Option.
 
SECTION 14. GENERAL PROVISIONS.
 
(a) Unless the Committee determines otherwise at the time the Award is granted
or thereafter: (i) no Award, and no Shares subject to Awards described in
Section 10 which have not been issued or as to which any applicable restriction,
performance or deferral period has not lapsed, may be sold, assigned,
transferred, pledged or otherwise encumbered, except by will or by the laws of
descent and distribution; provided that, if so determined by the Committee, a
Participant may, in the manner established by the Committee, designate a
beneficiary to exercise the rights of the Participant with respect to any Award
upon the death of the Participant; and (ii) each Award shall be exercisable,
during the Participant's lifetime, only by the Participant or, if permissible
under applicable law, by the Participant's guardian or legal representative.
 
(b) The term of each Award shall be for such period of months or years from the
date of its grant as may be determined by the Committee; provided that in no
event shall the term of any Stock Option or any Stock Appreciation Right exceed
a period of ten (10) years from the date of its grant.
 
(c) No Employee or Participant shall have any claim to be granted any Award
under the Plan and there is no obligation for uniformity of treatment of
Employees or Participants under the Plan.
 
(d) The prospective recipient of any Award under the Plan shall not, with
respect to such Award, be deemed to have become a Participant, or to have any
rights with respect to such Award, until and unless such recipient shall have
executed an agreement or other instrument evidencing the Award and delivered a
copy thereof to the Company, and otherwise complied with the then applicable
terms and conditions.
 
(e) Except as provided in Section 12, the Committee shall be authorized to make
adjustments in performance award criteria or in the terms and conditions of
other Awards in recognition of unusual or nonrecurring events affecting the
Company or its financial statements or changes in applicable laws, regulations
or accounting principles. The Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award in the manner
and to the extent it shall deem desirable to carry it into effect. In the event
the Company shall assume outstanding employee benefit awards or the right or
obligation to make future such awards in connection with the acquisition of or
combination with another corporation or business entity, the Committee may, in
its discretion, make such adjustments in the terms of Awards under the Plan as
it shall deem appropriate.
 
(f) The Committee shall have full power and authority to determine whether, to
what extent and under what circumstances any Award shall be canceled or
suspended. In addition, all outstanding Awards to any Participant shall be
canceled if the Participant, without the consent of the Company, while employed
by the Company or after termination of such employment, establishes a
relationship with a competitor of the Company or engages in activity which is in
conflict with or adverse to the interest of the Company, as determined under the
AT&T Non-Competition Guideline.
 
(g) All certificates for Shares delivered under the Plan pursuant to any Award
shall be subject to such stock-transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Shares are then listed, and any applicable Federal or state securities
law, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
 
(h) No Award granted hereunder shall be construed as an offer to sell securities
of the Company, and no such offer shall be outstanding, unless and until the
Committee in its sole discretion has determined that any such offer, if made,
would be in compliance with all applicable requirements of the U.S. federal
securities laws and any other laws to which such offer, if made, would be
subject.
 
(i) The Committee shall be authorized to establish procedures pursuant to which
the payment of any Award may be deferred. Subject to the provisions of the Plan
and any Award Agreement, the recipient of an Award (including, without
limitation, any deferred Award) may, if so determined by the Committee, be
entitled to receive, currently or on a deferred basis, cash dividends, or cash
payments in amounts equivalent to cash dividends on Shares ("dividend
equivalents"), with respect to the number of Shares covered by the Award, as
determined by the Committee, in its sole discretion, and the Committee may
provide that such amounts (if any) shall be deemed to have been reinvested in
additional Shares or otherwise reinvested.
 
(j) Except as otherwise required in any applicable Award Agreement or by the
terms of the Plan, recipients of Awards under the Plan shall not be required to
make any payment or provide consideration other than the rendering of services.
 
(k) The Committee may delegate to one or more Senior Managers or a committee of
Senior Managers the right to grant Awards to Employees who are not officers or
directors of the Company and to cancel or suspend Awards to Employees who are
not officers or directors of the Company.
 
(l) The Company shall be authorized to withhold from any Award granted or
payment due under the Plan the amount of withholding taxes due in respect of an
Award or payment hereunder and to take such other action as may be necessary in
the opinion of the Company to satisfy all obligations for the payment of such
taxes. The Committee shall be authorized to establish procedures for election by
Participants to satisfy such obligations for the payment of such taxes by
delivery of or transfer of Shares to the Company, or by directing the Company to
retain Shares otherwise deliverable in connection with the Award.
 
(m) Nothing contained in this Plan shall prevent the Board from adopting other
or additional compensation arrangements, subject to shareholder approval if such
approval is required; and such arrangements may be either generally applicable
or applicable only in specific cases.
 
(n) The validity, construction, and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the laws
of the State of New York and applicable Federal law.
 
(o) If any provision of this Plan is or becomes or is deemed invalid, illegal or
unenforceable in any jurisdiction, or would disqualify the Plan or any Award
under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to applicable laws or if it cannot be
construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan, it shall be stricken and the
remainder of the Plan shall remain in full force and effect.
 
(p) Awards may be granted to Participants who are foreign nationals or employed
outside the United States, or both, on such terms and conditions different from
those applicable to Awards to Employees employed in the United States as may, in
the judgment of the Committee, be necessary or desirable in order to recognize
differences in local law or tax policy. The Committee also may impose conditions
on the exercise or vesting of Awards in order to minimize the Company's
obligation with respect to tax equalization for Employees on assignments outside
their home country.
 
SECTION 15. EFFECTIVE DATE OF PLAN. The Plan shall be effective as of
June 1, 1997.
 
SECTION 16. TERM OF PLAN. No Award shall be granted pursuant to the Plan after
May 31, 2004, but any Award theretofore granted may extend beyond that date.