<PAGE>

                                                            EXHIBIT 10(iii)(a)21

                                                                  EXECUTION COPY

                              EMPLOYMENT AGREEMENT

                  This Agreement, dated as of October 1, 2002, by and between
Betsy J. Bernard (the "Executive") and AT&T Corp., a New York corporation (the
"Company").

                                 WITNESSETH THAT

                  WHEREAS, the Company has offered the Executive, and the
Executive has accepted, employment on the terms and conditions set forth in this
Agreement; and

                  WHEREAS, the Company and the Executive wish to set forth such
terms and conditions in a binding written agreement.

                  NOW, THEREFORE, in consideration of the mutual covenants set
forth in this Agreement, it is hereby agreed as follows:

                  1.       Term of Employment. The term of the Executive's
employment under this Agreement (the "Term") shall begin on October 1, 2002 (the
"Effective Date") and end on September 30, 2005; provided, that the Term shall
be extended by successive periods of one (1) year, effective as of each Renewal
Date (as defined in the next sentence), unless, before any Renewal Date, the
Company shall have notified the Executive or the Executive shall have notified
the Company that no such extension shall take place, in each case at least
ninety (90) days prior to the expiration of the then-current Term (a "Notice of
Nonrenewal"); and provided, further, that the Term shall in any event end upon a
Termination, as set forth in Section 5 below. "Renewal Date" means each October
1 following a September 30 that occurs during the Term, beginning with October
1, 2005.

                  2.       Position, Duties and Location. (a) Position.
Beginning on the Effective Date, the Executive shall serve as the Chief
Executive Officer of AT&T Business Services, with the duties and
responsibilities customarily assigned to that position and such other duties and
responsibilities as the Board of Directors of the Company (the "Board") shall
from time to time reasonably assign to the Executive consistent with Executive's
position. Beginning on the Distribution Date, as the term is defined in the
Employee Benefits Agreement, dated December 19, 2001, by and between AT&T Corp.
and AT&T Broadband Corp., but in no event later than December 31, 2002 and
continuing through the remainder of the Term, the Executive shall serve as
President of AT&T Corp. and the Chief Executive Officer of AT&T Business
Services, with the duties and responsibilities customarily assigned to that
position and such other duties and responsibilities as the Board shall from time
to time reasonably assign to the Executive consistent with Executive's position.
The Executive shall at all times report directly to the Chairman and Chief
Executive Officer of AT&T Corp.

                           (b)      Duties. During the Term, the Executive shall
devote Executive's full business attention and time to the business and affairs
of the Company and shall use

<PAGE>

Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. It shall not be considered a violation of the
foregoing for the Executive to serve on corporate, civic or charitable boards or
committees, and manage personal investments, so long as such activities do not
materially interfere with the performance of the Executive's responsibilities as
an employee of the Company in accordance with this Agreement or otherwise
violate the Executive's obligations hereunder. The Executive hereby acknowledges
that Executive has received a copy of the Non-Competition Guideline (such
Guideline and any successor policy thereto, the "Non-Competition Guideline"),
and that Executive understands that compensation and benefits otherwise payable
to Executive under this Agreement are subject to the terms of Section 8(c)
hereof and to the terms of the Non-Competition Guideline. Notwithstanding the
second sentence of this Section 2(b), the Executive shall not serve on any
corporate, civic or charitable boards or committees without first disclosing
such proposed service to the Corporate Secretary of Company (the "Corporate
Secretary") and obtaining the consent of the Corporate Secretary to such
service, and in any event Executive shall not serve on any board or committee of
an entity that is a competitor of the Company within the meaning of the
Non-Competition Guideline. The Executive hereby represents to the Company that
Executive has previously informed the Corporate Secretary of the boards and
committees on which Executive presently serves, and has obtained the Corporate
Secretary's consent to Executive remaining a member of such boards and
committees.

                           (c)      The Executive's services shall be performed
primarily at the Company's current offices in Bedminster, N.J. or such other
location within 35 miles thereof as the Company may hereafter determine.

                  3.       Compensation. (a) Base Salary. During the Term, the
Executive shall receive a base salary (the "Base Salary") at an annual rate of
not less than eight hundred fifty thousand dollars ($850,000), payable at such
times and intervals as the Company customarily pays the base salaries of other
members of the Company's Operations Group or any comparable successor group of
senior executives (hereinafter, the "Other Senior Executives"). The Base Salary
shall be reviewed in March 2003 and annually thereafter during the Term for
possible increase in accordance with the Company's normal practices for the
Other Senior Executives. The Base Salary shall not be reduced, including, after
any such increase, and the term "Base Salary" shall thereafter refer to the Base
Salary as so increased.

                           (b)      Annual Bonus. The Executive shall be
eligible to earn an annual bonus (the "Annual Bonus") based on individual and
Company performance, under the terms and conditions applicable to the Other
Senior Executives. For 2002, the Executive's target Annual Bonus shall be a
composite of one hundred twenty-five percent (125%) of the Base Salary earned by
the Executive from October 1 through December 31, 2002 and one hundred percent
(100%) of the Base Salary earned by the Executive from January 1 through
September 30, 2002. For each subsequent year, the Executive's target Annual
Bonus shall be one hundred twenty-five (125%) of the Executive's Base Salary
earned during the fiscal year in question, subject to review by the Board for
possible increase. Performance criteria with respect to the Annual Bonus will be
established by the Board and communicated to the Executive in the same manner
and at the same times as such criteria are communicated to other senior
executives of the Company.

                                      - 2 -

<PAGE>

                           (c)      Long Term Incentive Compensation. (i) During
the Term, the Executive shall be eligible to receive awards under the Company's
1997 Long Term Incentive Program or any successor thereto (collectively, the
"LTIP") in amounts and under the terms and conditions no less favorable than
those applicable to the Other Senior Executives. Executive's award shall be
issued at the same time, valued in the same manner (but not necessarily based on
the same salary multiple) and contain the same components in the same ratio as
the awards made to other members of the Company's Operations Group.

                           (d)      Special Tax Payment. Within seven days of
the execution of this Agreement, the Company shall make a cash payment to the
Executive of two hundred seventy nine thousand five hundred eighty two dollars
and fifteen cents ($279,582.15) to mitigate certain tax consequences to the
Executive in connection with Executive's relocation to New Jersey.

                           (e)      Special Individual Pension. The Company
shall provide the Executive a Special Individual Pension. This Special
Individual Pension is designed to provide Executive with a nonqualified pension
payable from Company operating assets equal to the sum of the benefits that she
would have received under the AT&T Management Pension Plan ("AT&T MPP"), the
AT&T Non-Qualified Pension ("AT&T NQPP") and the AT&T Excess Compensation and
Benefits Plan ("AT&T ECBPP") (collectively "the AT&T Pension Plans) if she had
no break in service from January 5, 1977 until her Termination Date under this
Agreement. Therefore, this Section shall assign as Executive's pensionable
compensation certain amounts as the Executive's "Assumed Salary" and "Assumed
Short Term Awards" for the period February 14, 1995 through April 8, 2001 in
which Executive was not a Company employee. For this purpose Assumed Salary
shall be one hundred thirty three thousand eight hundred dollars ($133,800) as
of February 14, 1995, with an annual increase of sixty-six thousand six hundred
dollars ($66,600) each March 1, beginning March 1, 1995 through March 1, 2001.
Assumed Short Term Award for 1994 shall be $73,300. The Assumed Short Term Award
for 1995 shall be forty-three percent (43%) of the applicable combination of the
Executive's actual salary and Assumed Salary for 1995. The Assumed Short Term
Award for each of the years 1996-1999 shall be fifty-five percent (55%) of the
Assumed Salary for each such calendar year and the Assumed Short Term Award for
2000 shall be sixty (60%) of the Assumed Salary for the calendar year 2000. The
Special Individual Pension shall apply the formulas as in effect from time to
time under the AT&T Pension Plans to both the eligible compensation (as defined
by the applicable AT&T Pension Plans) earned by the Executive during the years
that Executive was a Company employee, and the Assumed Salary and Assumed Short
Term Awards for the period Executive was not a Company employee, to determine
what the Executive's pension payments would be under the AT&T Pension Plans if
Executive had worked continuously for the Company from January 5, 1977 through
Executive's Termination Date under this Agreement. This amount shall be
Executive's Special Individual Pension. Upon the Executive's eligibility to
receive benefits under the AT&T Pension Plans, the Company shall make payments
to Executive under this Special Individual Pension, but the amount that would
otherwise be owed to Executive under the Special Individual Pension shall be
offset and reduced on an actuarially equivalent basis by the amount that
Executive is eligible to receive at that time or subsequent thereto from the
AT&T Pension Plans and both qualified and non-qualified payments from any
pension plan(s) arising from Executive's employment with Qwest Communications
International Inc. (including the entity formerly known as USWest). The form and
duration of the payments of the Special Individual Pension will be in the same

                                      - 3 -

<PAGE>

form and duration as payments made under the terms of the AT&T NQPP in effect at
the time that the Executive commences Special Individual Pension benefits under
this Section 3(e). The Company shall have the right to request confirmation from
the Executive of the amounts that Executive is receiving from both qualified and
non-qualified Qwest Communications International Inc. (including US West)
pension plans. The Special Individual Pension paid under this Section 3(e) shall
vest on April 1, 2006 and is contingent upon continued employment through such
date; provided, however, that the Special Individual Pension shall vest
immediately if the Executive's employment terminates due to death, Disability or
for Good Reason, the Company terminates the Executive without Cause, or the
Company is subject to a Change in Control, as each such term is defined in
Section 5 of this Agreement.

                           (f)      Special Individual Deferral. The Company
shall credit three million two hundred thousand dollars ($3,200,000) to a
deferral account on October 1, 2003 ("Special Individual Deferral") in the
Executive's name. The Special Individual Deferral shall vest on October 1, 2003
and from its establishment shall be credited with interest at a quarterly rate
equal to one quarter (1/4) of the average rate applicable to the Ten (10) Year
Treasury note for the prior calendar quarter, plus one-half of one percent
(.5%). The establishment of the Special Individual Deferral shall be contingent
upon Executive's employment with the Company on October 1, 2003, and if
Executive is not employed with the Company on October 1, 2003, regardless of the
reason, then Executive shall not receive this Special Individual Deferral.
Notwithstanding anything in this Agreement to the contrary, the terms of the
Special Individual Deferral are set forth in Attachment A to this Agreement and
shall govern the deferral, payment and vesting of the Special Individual
Deferral.

                           (g)      April 2001 Individual Deferral. The Special
Deferral Account (the "April 2001 Deferral") set forth in Section 5(c) of the
Executive's April 9, 2001 Agreement ("Initial Employment Agreement") shall
continue according to the terms and conditions under which it was established in
the Initial Employment Agreement, except that the reference to vesting and
payout in the event of a Special Voluntary Termination, as the Initial
Employment Agreement defines that term, shall be eliminated.

                           (h)      Lake Tahoe home. When the Executive sells
Executive's Lake Tahoe home, the Company shall provide Executive a payment equal
to the amount that the Company would have paid for real estate commissions,
closing costs and shipment of household goods to New Jersey had the Executive
been entitled to relocation benefits on the vacation home pursuant to the AT&T
Relocation Plan B.

                           (i)      To the extent that the Company's
reimbursement of the Executive's relocation expense results in taxable income to
the Executive, the Company will provide a tax allowance to offset the federal
and state income and the Medicare portion of the FICA tax impact of this payment
(to the extent not otherwise deductible or for which Executive is not entitled
to an offsetting reduction in taxable income) and an additional allowance to
offset the federal and state income and the Medicare portion of the FICA tax
impact of the tax allowance itself.

                           (j)      Certain Long Term Incentive Compensation
from the Initial Employment Agreement. 2001 AT&T Performance Shares, 2001 AT&T
Stock Options,

                                      - 4 -

<PAGE>

Restricted Stock Units, Seasoned Performance Shares, and the Special Grant of
AT&T Restricted Stock awarded to the Executive under Sections 4(a), 4(b), 4(c),
4(d), 4(e), and 4(f) of the Executive's Initial Employment Agreement shall
continue under their original terms, including, without limitation, the terms of
Section 7 of the Initial Agreement.

                           (k)      Certain Payments Not Benefit-Bearing. The
following amounts will not be counted for purposes of benefit accrual under any
employee benefit plans and perquisite programs made available by the Company to
its management and senior management employees (the "Employee Benefit Plans"):
(i) the Special Tax Payment; (ii) payments under Special Individual Pension;
(iii) Special Individual Deferral; (iv) April 2001 Individual Deferral; and (v)
tax payments associated with the sale of the Lake Tahoe home. Notwithstanding
the foregoing, in the event of a conflict between this Agreement and a
particular plan, program or agreement regarding the inclusion or exclusion of
payments under this Section, such plan and not this Agreement shall control.

                  4.       Benefits. (a) Expenses. The Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses that
Executive incurs during the Term in carrying out Executive's duties under this
Agreement, provided that Executive complies with the policies, practices and
procedures of the Company for submission of expense reports, receipts, or
similar documentation of such expenses as in effect from time to time.

                           (b)      Benefits Generally. During the Term, the
Executive shall be entitled to participate in the Employee Benefit Plans, on the
same terms and conditions as apply to the Other Senior Executives, as the same
may be in effect from time to time. Without limiting the generality of the
foregoing, Executive shall continue to be entitled to the benefits provided for
under Sections 6 and 26 of the Initial Employment Agreement, except for Sections
6(c), (e) and (g) thereof and except that Executive's vacation entitlement shall
be subject to the policies of the Company regarding carryover.

                           (c)      Perquisites. The Company shall provide
Executive with the perquisites of employment as are commonly provided to other
member of the Operations Group.

                  5.       Payments to Executive at Termination. (a)
Consequences of Termination. If the Executive's employment with the Company is
terminated for any reason other than Voluntary Resignation (as defined in
Section 5(g) below) or Cause before the end of the Term of this Agreement,
including without limitation as a result at the end of the Term pursuant to the
Executive's or the Company's Notice of Nonrenewal, by action of the Company or
the Executive or by reason of the Executive's death or Disability (as defined in
Section 5(d) below) (a "Termination"), the Term shall end on the date of the
Termination, and the Company and the Executive shall have no further obligations
under this Agreement, except as provided in this Section 5. The Executive (or,
in the case of Executive's death, the Executive's estate and/or beneficiaries)
shall be entitled to the following upon a Termination: (i) to receive the Base
Salary through the date of the Termination; (ii) payment of any Annual Bonus
earned with respect to a completed fiscal year of the Company that is unpaid as
of the date of Termination; (iii) payment of the Annual Bonus in the target
amount for the year in which the termination occurs, prorated to reflect length
of service during that year; (iv) payment of the April 2001

                                      - 5 -

<PAGE>

Deferral, and after September 30, 2003, the Special Individual Deferral and (v)
all other compensation and benefits that may be provided under the terms and
conditions of the Employee Benefit Plans.

                           (b)      Severance. Without limiting the generality
of the foregoing, upon a Termination of the Executive's employment by the
Company without Cause or by the Executive for Good Reason (provided that a
termination upon the Company's Notice of Nonrenewal shall also be considered
without Cause) or by the Executive for Good Reason, the Executive shall be
entitled to such benefits, if any, upon such Termination as may be provided for
in, and subject to the terms and conditions (including the execution of any
required release or other documentation or agreement) of, the AT&T Senior
Officer Severance Plan (the "Severance Plan"), as in effect at the time of the
Termination (including, if applicable, any change of control severance pay or
benefits); provided, that such pay shall not duplicate any pay or benefits
provided for under Section 5(a) above. The Executive shall also be entitled to
the following, if the Severance Plan either does not provide the following or
provides the following at a level less advantageous to the Executive, provided
that the benefits received under this Section 5(b) may not duplicate benefits
receive under the Severance Plan; provided, further, that the benefits received
under this Section 5(b) are subject to Executive's execution of a release as
required by the Non-Competition Guideline: (i) a lump sum severance payment
equal to 200% of the sum of Executive's Base Salary and target Annual Bonus as
in effect at the time of termination; provided that if Executive's termination
is for Good Reason due to a reduction in any such amount, the amount use in
calculating the severance payment shall be that in effect prior to the event
giving rise to Good Reason; (ii) all outstanding options, whether or not then
exercisable, shall become exercisable and shall remain exercisable in accordance
with the terms of the grants governing Company initiated terminations; (iii)
continued vesting of outstanding 2001 Performance Shares and pay out in
accordance with the terms thereof and pro rated vesting based on the date of
Executive's termination for any Performance Shares awarded after 2001 with
payment, if any, to be based on Company performance from the beginning of the
applicable performance period through the end of the calendar year of
Termination and payable as soon as practicable in the calendar year immediately
following the calendar year in which the date of Termination occurs; (iv) lapse
of restrictions on Restricted Stock and Restricted Stock Units; (v) payout at
target for each Performance Share Cycle in which the Executive was participating
at the time of Executive's Termination, prorated for the amount of time on the
payroll in the applicable three (3) year cycle; (vi) vesting and payout of the
April 2001 Individual Deferral established in the Initial Employment Agreement;
(vii) coverage for the Executive and Executive's eligible dependents under the
Senior Management Separation Medical Plan; (viii) continuation of the Senior
Management Universal Life Insurance; and (ix) financial counseling consistent
with the type financial counseling provided to Executive under Section 6 of the
Initial Employment Agreement, including income tax return preparation and a
federal tax allowance to the Executive for the cost of the financial counseling,
for the length of time specified in Section 6 of the Initial Employment
Agreement or for the length of time specified under the Severance Plan with
respect to financial counseling, whichever is greater (the "Financial Counseling
Benefit").

                  For purposes of this Agreement, "Good Reason" shall mean the
occurrence without Executive's express written consent of any of the following
events:

                                      - 6 -

<PAGE>

                           (i)      Executive's demotion to a position which is
not of a rank and responsibility comparable to the positions set forth in
Section 2(a) of this Agreement; provided, however, that (1) while a change in
the position to which Executive reports will constitute Good Reason, changes in
the specific individuals to whom Executive reports shall not, alone, constitute
Good Reason, and/or (2) a reduction in Executive's business unit's budget or a
reduction in Executive's business unit's head count, by themselves, do not
constitute Good Reason;

                           (ii)     A reduction in Executive's Annual Base
Salary Rate, Target Annual Incentive and/or "Target Annual Long Term Incentive
Grants" for any calendar or fiscal year, as applicable, to an amount that is
less than the Executive's Annual Base Salary Rate, Target Annual Incentive
and/or Target Annual Long Term Incentive Grants (as applicable) that existed in
the prior calendar or fiscal year, as applicable. For purposes of this Section
5(b), the dollar value of the "Target Annual Long Term Incentive Grants" shall
exclude the value of any special one-time or non-ordinary course periodic
long-term incentive grants, and shall be determined by valuing Performance
Shares, Stock Units, Restricted Stock and Restricted Stock Units, etc., at the
market share price utilized in valuing the annual Senior Management compensation
structures in the materials presented to the Compensation and Employee Benefits
Committee of the Company's Board of Directors (the "Committee") when authorizing
such grants, and assuming 100% performance achievement if such grants include
performance criteria. Stock Options and Stock Appreciation Rights will be valued
by the Black-Scholes methodology (and related share price) as utilized in the
materials presented to the Committee when authorizing such grants;

                           (iii)    the failure of the Company to appoint
Executive as President of AT&T Corp. by the earlier of (A) the date that is 30
days after the appointment of David Dorman as Chief Executive Officer of the
Company, or (B) September 30, 2003; or

                           (iv)     the Company's breach of any material term of
this Agreement; provided that the Executive shall give written notice to the
Company of Executive's termination of employment for Good Reason, such notice
(A) to state in detail the particular act or acts or failure or failures to act
that constitute the grounds on which the termination for Good Reason is based
and (B) to be given within six (6) months of the Executive's learning of such
act or acts or failure or failures to act. The Company shall have ten (10)
calendar days after the date that such written notice has been given by the
Executive in which to cure such conduct, to the extent such cure is possible.

                           (c)      Termination Due to Death. In the event of a
Termination as a result of the Executive's death during the Term, Executive's
estate or Executive's beneficiaries, as the case may be, shall be entitled to
the following benefits in addition to, but not duplicative of, those provided
for in Section 5(a) above: (i) a cash payment equal to the amount of the
Executive's target Annual Bonus for the year of the Termination, pro-rated to
reflect the portion of the performance year that occurs before the Termination
payable in a single installment as soon as practicable following the
Termination; (ii) the Financial Counseling Benefit; (iii) all outstanding
options, whether or not then exercisable, shall become exercisable and shall
remain exercisable in accordance with the terms of the grants governing Death;
(iv) lapse of restrictions on Restricted Stock and Restricted Stock Units; (v)
payout at target for each Performance Share Cycle in which the Executive was
participating at the time of Executive's Death, prorated for the

                                      - 7 -

<PAGE>

amount of time on the payroll in the applicable three (3) year cycle; provided,
however, for Seasoned Performance Shares in the Executive's Initial Employment
Agreement, the period of time in each performance cycle prior to the Effective
Date of the Initial Employment Agreement shall be counted in determining the
prorated amount; and (vi) vesting and payout of the April 2001 Individual
Deferral established in the Initial Employment Agreement.

                           (d)      Termination Due to Disability. The Company
shall have the right to terminate Executive's employment as a result of
Executive's inability to perform Executive's duties under this Agreement by
reason of any physical or mental impairment, which inability is expected to
continue for more than twelve (12) months ("Disability"). In the event that
Executive's employment is terminated during the Term due to Executive's
Disability, Executive shall be entitled to the following benefits in addition
to, but not duplicative of, those provided for in Section 5(a) above: (i)
disability benefits in accordance with the disability program then in effect for
Other Senior Executives (and the terms of such disability program shall govern
exclusively the Executive's rights to benefits thereunder); (ii) the Financial
Counseling Benefit; (iii) all outstanding options, whether or not then
exercisable, shall become exercisable and shall remain exercisable in accordance
with the terms of the grants governing Disability; (iv) lapse of restrictions on
Restricted Stock and Restricted Stock Units; (v) payout at target for each
Performance Share Cycle in which the Executive was participating at the time of
Executive's Disability, prorated for the amount of time on the payroll in the
applicable three (3) year; provided, however, for Seasoned Performance Shares in
the Executive's Initial Employment Agreement, the period of time in each
performance cycle prior to the Effective Date of the Initial Employment
Agreement shall be counted in determining the prorated amount; and (vi) payout
of the April 2001 Individual Deferral established in the Initial Employment
Agreement.

                           (e)      Rights upon a Change in Control. Upon the
occurrence of a Change in Control, (i) all rights and benefits of Executive that
were subject to vesting immediately prior to the Change in Control under any
employee benefit plan of the Company, other than qualified defined benefit
pension plans, shall become fully vested (and, to the extent applicable, shall
also become exercisable and/or unrestricted), including, without limitation,
stock option, Performance Shares, Restricted Stock and Restricted Stock Units
awards, special deferral arrangements (including, without limitation, the April
2001 Deferral, but excluding the Special Individual Deferral if not already
vested at such time), non-qualified pension plans and qualified savings plans;
and (ii) Executive shall be entitled to a pro rata payment of her Annual Bonus.

                           (f)      Severance in Connection with a Change in
Control. In the event of a termination Executive's employment by the Company
without Cause or by the Executive for Good Reason within two years following a
Change in Control, Executive shall be entitled to all the payments and benefits
provided for in Sections 5(a) and 5(b) hereof, provided, however, that the
severance payment in clause (i) of Section 5(b) shall be equal to the following:
three (3) times the sum of (i) Executive's Base Salary for the year in which the
termination occurs; (ii) Executive's target Annual Bonus for the year in which
the termination occurs; and (iii) Executive's target Performance Shares Value
for the year in which the termination occurs. In addition, Executive shall be
entitled to (i) a lump sum cash payment in an amount sufficient to provide fully
paid death benefits in the same amount as provided to Executive under the
Company's Senior Management Life Universal Insurance Program; (ii) full vesting
of benefits

                                      - 8 -

<PAGE>

under the Company's qualified defined benefit plans and a lump sum payment
option with respect thereto; and (iii) the Gross Up Payment (as defined below).

                  For purposes of this Agreement, "Change in Control" shall have
the meaning set forth in the AT&T 1997 Long Term Incentive Plan as in effect on
the date hereof.

                           (g)      Termination by Voluntary Resignation or for
Cause. In the event that the Executive resigns without Good Reason, which shall
include a Notice of Non-Renewal by Executive (a "Voluntary Resignation"),
Executive shall receive nothing further under this Agreement except for (i) Base
Salary earned but unpaid as of the effective date of a Voluntary Resignation;
(ii) any Annual Bonus earned with respect to a completed fiscal year of the
Company that is unpaid as of the effective date of a Voluntary Resignation,
provided that Executive is on the Company's payroll on the payment date; (iii)
any benefits due to Executive under any employee benefit plans of the Company
and any payments due to the Executive under any Company policy, program,
arrangement or agreement (including, without limitation reimbursement for
previously incurred expenses) that are not by their terms subject to forfeiture
in the event of a Voluntary Resignation; and (iv) stock options, Performance
Shares, Restricted Stock, Restricted Stock Units and any other equity-based
awards that are vested as of the effective date of a Voluntary Resignation shall
continue according to the terms of the award applicable to a Voluntary
Resignation. In the event that the Company terminate the Executive's employment
for Cause, then the Executive shall be entitled to nothing further under this
Agreement except as required by applicable law and all Long Term Incentive
Compensation previously promised or awarded (whether vested or not) shall be
cancelled as of the termination date.

                  For purposes of this Agreement "Cause" shall mean:

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

                           (ii)     violation by Executive of the Company's Code
of Conduct or Non-Competition Guideline;

                           (iii)    gross omission or gross dereliction of any
statutory, common law or other duty of loyalty to the Company or any of its
affiliates; or

                           (iv)     repeated failure to carry out the duties of
Executive's position despite specific instruction to do so.

                  Notwithstanding anything in this Agreement or in the Severance
Plan to the contrary, "Cause" shall not exist unless the provisions of this
Section 8(f) are complied with. The Executive shall be given written notice by
the Company of the intention to terminate Executive for Cause, such notice (A)
to state in detail the particular act or acts or failure or failures to act that
constitute the grounds on which the proposed termination for Cause is based and
(B) to be given within six (6) months of the Company learning of such act or
acts or failure or failures to act. The Executive shall have ten (10) calendar
days after the date that such written

                                      - 9 -

<PAGE>

notice has been given to the Executive in which to cure such conduct, to the
extent such cure is possible. If Executive fails to cure such conduct, the
Executive shall then be entitled to a hearing before a meeting of the Board of
Directors. Such hearing shall be held within fifteen (15) calendar days of such
notice to the Executive, provided Executive requests such hearing within ten
(10) calendar days of the written notice from the Company of the intention to
terminate Executive for Cause. If, within five (5) calendar days following such
hearing, the Executive is furnished written notice by the Company confirming
that, in its judgment, grounds for Cause on the basis of the original notice
exist, Executive shall thereupon be terminated for Cause. Any purported
termination for Cause that fails to comply with the foregoing requirements shall
be conclusively deemed to be a termination by the Company without Cause. Company
may suspend Executive during the pendency of the foregoing process; provided
that Executive shall continue to receive all compensation and benefits during
such suspension; provided, further that such suspension may not be effected if
it prevents or hinders Executive's ability to cure Executive's conduct.

                  6.       Confidentiality of Trade Secrets and Business
Information. The Executive agrees that Executive will not, at any time during
Executive's employment with the Company or thereafter, disclose or use any trade
secret, proprietary or confidential information of the Company or any subsidiary
or affiliate of the Company (collectively, "Confidential Information"), obtained
during the course of such employment, except for disclosures and uses required
in the course of such employment or with the written permission of the Company
or, as applicable, any subsidiary or affiliate of the Company or as may be
required by law; provided that, if the Executive receives notice that any party
will seek to compel him by process of law to disclose any Confidential
Information, Executive shall promptly notify the Company and cooperate with the
Company in seeking a protective order against such disclosure.

                  7.       Return of Information. The Executive agrees that at
the time of any termination of Executive's employment with the Company, whether
at the instance of the Executive or the Company, and regardless of the reasons
therefore, Executive will deliver to the Company, and not keep or deliver to
anyone else, any and all notes, files, memoranda, papers and, in general, any
and all physical (including electronic) matter containing Confidential
Information and other information relating to the business of the Company or any
subsidiary or affiliate of the Company which are in Executive's possession,
except as otherwise consented in writing by the Company at the time of such
termination. The foregoing shall not prevent the Executive from retain copies of
personal contact information to the extent such copies do not contain any
Confidential Information.

                  8.       Covenants of the Executive. (a) Noncompetition. In
consideration for the compensation payable to the Executive under this
Agreement, including compensation under the Initial Employment Agreement
specifically incorporated into the Agreement under Sections 4(g), 4(h) and 4(i),
the Executive agrees that Executive will not, during Executive's employment with
the Company and for a period of one (1) year after any Termination, render
services to a competitor, regardless of the nature thereof, or engage in any
activity which is in conflict with or adverse to the interest of the Company, as
defined on the Effective Date by the AT&T Non-Competition Guideline (hereinafter
referred to as a "Competitive Activity"). The Executive recognizes that this
obligation includes, and is not limited to, an agreement that Executive shall
not work for a competitor of AT&T Corp. as an the Executive, consultant,
independent

                                     - 10 -

<PAGE>

contractor or in any other capacity for a period of one (1) year following any
Termination, regardless of whether the Termination is at the instance of the
Company or the Executive, and regardless of whether the Executive is entitled to
severance pay as a result thereof. The foregoing shall not prohibit the
Executive from being a passive owner of not more than one percent (1%) of the
outstanding common stock, capital stock and/or equity of any publicly traded
entity so long as the Executive has no active participation in the management of
business of such firm, corporation or enterprise.

                           (a)      Noninterference. During the Executive's
employment with the Company and for a period of one (1) year following any
Termination, the Executive agrees not to directly or indirectly recruit, solicit
or induce, any employees, consultants or independent contractors of the Company
to terminate, alter or modify their employment or other relationship with the
Company. During the Executive's employment with the Company and for a period of
one (1) year following any Termination, the Executive agrees not to directly or
indirectly solicit any customer or business partner of the Company to terminate,
alter or modify its relationship with the Company or interfere with the
Company's relationships with any of its customers or business partners on behalf
of any enterprise that directly or indirectly competes with the Company.

                           (b)      Forfeiture. Notwithstanding any other
provision of this Agreement or of any Employee Benefit Plan or other plan,
policy, arrangement or agreement, the Company may, subject to the provisions of
applicable law and in accordance with the terms of the Non-Competition
Guideline, in its discretion, determine to cause the Executive to forfeit any
and all payments and benefits from the Company and its affiliates (except those
made from Company-sponsored tax-qualified pension or welfare plans) to which
Executive may otherwise be entitled, whether under this Agreement or otherwise,
if Executive violates any of Executive's obligations under the Non-Competition
Guideline; provided, that before imposing such forfeiture, the Company shall
first given the Executive written notice of the violation and its intent to
cause such forfeiture, and an opportunity to cure such violation; and provided,
further, that no such notice shall be required if either (i) the Company had
previously notified the Executive that the conduct or proposed conduct in
question violated or would violate Executive's obligations under the
Non-Competition Guideline, or (ii) such conduct is not capable of being cured.

                  9.       Enforcement. The Executive acknowledges and agrees
that: (i) the purpose of the covenants set forth in Sections 6 through 8 above
is to protect the goodwill, trade secrets and other confidential information of
the Company; (ii) because of the nature of the business in which the Company and
the Affiliated Companies are engaged and because of the nature of the
Confidential Information to which the Executive has access, it would be
impractical and excessively difficult to determine the actual damages of the
Company and the Affiliated Companies in the event the Executive breached any
such covenants; (iii) remedies at law (such as monetary damages) for any breach
of the Executive's obligations under Sections 6 through 8 would be inadequate;
and (iv) even the threat of any misuse of the Confidential Information of the
Company would be irreparably harmful because of the importance of that
Confidential Information. The Executive therefore agrees and consents that if
Executive commits any breach of a covenant under Sections 6 through 8 or
threatens to commit any such breach, the Company shall have the right (in
addition to, and not in lieu of, any other right or remedy that may be available
to it) to temporary and permanent injunctive relief from a court of competent

                                     - 11 -

<PAGE>

jurisdiction, without posting any bond or other security and without the
necessity of proof of actual damage. If any portion of Sections 6 through 8 is
hereafter determined to be invalid or unenforceable in any respect, such
determination shall not affect the remainder thereof, which shall be given the
maximum effect possible and shall be fully enforced, without regard to the
invalid portions. In particular, without limiting the generality of the
foregoing, if the covenants set forth in Section 8 are found by a court or an
arbitrator to be unreasonable, the Executive and the Company agree that the
maximum period, scope or geographical area that is found to be reasonable shall
be substituted for the stated period, scope or area, and that the court or
arbitrator shall revise the restrictions contained herein to cover the maximum
period, scope and area permitted by law. If any of the covenants of Sections 6
through 8 are determined to be wholly or partially unenforceable in any
jurisdiction, such determination shall not be a bar to or in any way diminish
the Company's right to enforce any such covenant in any other jurisdiction.

                  10.      Cooperation After Termination of Employment.
Following the termination of Executive's employment for any reason and for a
period of six years thereafter, the Executive shall reasonably cooperate with
the Company with respect to the prosecution or defense by the Company of any
legal proceedings in which the Executive is or could be a witness. The
Executive's obligation to cooperate pursuant to this Section 10 shall continue
until such legal proceedings are concluded or Executive's services as a witness
or consultant are no longer required. The Company shall reimburse the Executive
for Executive's time (at an hourly rate based on Executive's last Base Salary),
plus all travel and other out-of-pocket expenses required by Executive's
obligations under this Section 10.

                  11.      Resolution of Disputes. Any disputes arising under or
in connection with this Agreement, other than Sections 6 through 8 above, shall
first be addressed by third-party mediation and, if such mediation fails to
resolve such dispute within sixty days, by binding arbitration, to be held in
New Jersey. The arbitration shall be conducted according to the rules and
procedures of the American Arbitration Association. Judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof. The Company shall pay the costs of the arbitrator or the mediator but
not the attorneys' fees of the Executive; provided, however, that the Company
shall reimburse the Executive for attorneys' fees if the Executive prevails in
such arbitration on any material issue.

                  12.      Certain Additional Payments. (a) If any element of
compensation or benefit provided to the Executive under the terms of this
Agreement, or under any other Company plan, program, policy or other arrangement
("Benefit"), either alone or in combination with other elements of compensation
and benefits paid or provided to the Executive, constitutes an "excess parachute
payment", as that term is defined in Section 280G of the Internal Revenue Code
and the regulations thereunder, and subjects the Executive to the excise tax
pursuant to Section 4999 of the Internal Revenue Code, and any interest and
penalties thereon (collectively, the "Excise Tax"), then the Executive shall be
entitled to an additional lump-sum cash payment from the Company (the "Gross Up
Payment"), subject to mandatory withholding, in an amount equal to the Excise
Taxes (including the Excise Tax attributable to the Gross Up Payment related to
the Benefit), plus any income and FICA taxes, and any interest and penalties
thereon attributable to the Gross Up Payment. For purposes of calculating an
Gross Up Payment to the Executive in any year, it shall be assumed (i) that the
inclusion of the Gross Up Payment in the Executive's Federal adjusted gross
income shall result in the maximum disallowance of itemized

                                     - 12 -

<PAGE>

deductions related to such inclusion, and (ii) that Executive is subject to
Federal and applicable state and local income taxes at the highest marginal
Federal and applicable state and local income tax rates, respectively, for the
year in which the Gross Up Payment is made. Also, the Gross Up Payment to the
Executive shall reflect the Federal tax benefits attributable to the deduction
of applicable state and local income taxes.

                           (b)      Subject to the provisions of paragraph (c)
below, all determinations required to be made under this section, including
whether and when an Gross Up Payment is required and the amount of such Gross Up
Payment and the assumptions utilized in arriving at such determinations, shall
be made by the Company's independent accounting firm responsible for auditing
the Company's financial statements for the annual period in which the
determinations are made. The Accounting Firm shall provide detailed supporting
calculations to the Company and to the Executive within thirty (30) business
days of the receipt of notice from the Company or the Executive that there has
been a Benefit provided to which this section applies (or such earlier time as
requested by the Company). Any Gross Up Payment, as determined pursuant to this
paragraph (b), shall be paid by the Company to the Executive within fifteen (15)
business days of the receipt of the Accounting Firm's determination.

                           (c)      (i)  If it is established pursuant to a
final determination of a court or an Internal Revenue Service proceeding, or in
the opinion of independent counsel whose opinion is agreed upon by the Company
and the Executive, that the Excise Tax payable by the Executive on the Benefit
is less than the amount initially taken into account under paragraph (a) for
purposes of calculating the Gross Up Payment related to such Benefit, the
Accounting Firm shall recalculate the Gross Up Payment, based on the results of
the judicial determination or Internal Revenue Service proceeding to reflect the
actual Excise Tax related to such Benefit. Within thirty (30) business days
following the later of (i) the Executive's receipt of notice of the results of
such recalculation from the Accounting Firm and/or the Company, or (ii) the
Executive's receipt of a refund from the Internal Revenue Service, related to
the Excise Tax on such Benefit, the Executive shall repay to the Company the
excess of the initial Gross Up Payment over the recalculated Gross Up Payment.

                                    (ii) If it is established pursuant to a
final determination of a court or an Internal Revenue Service proceeding, or in
the opinion of an independent counsel agreed upon by the Company and the
Executive, that the Excise Tax payable by the Executive on the Benefit is more
than the amount initially taken into account under paragraph (a) for purposes of
calculating the Gross Up Payment, the Accounting Firm shall recalculate the
Gross Up Payment to reflect the actual Excise Tax. Within fifteen (15) business
days following the Company's receipt of notice of the results of such
recalculation from the Accounting Firm, the Company shall pay to the Executive
the excess of the recalculated Gross Up Payment over the initial Gross Up
Payment.

                           (d)      All fees and expenses of the Accounting Firm
shall be borne solely by the Company.

                           (e)      The Executive shall notify the Company in
writing of any written claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of a Gross Up Payment or
the recalculation of a Gross Up Payment. The notification

                                     - 13 -

<PAGE>

shall apprise the Company of the nature of such claim, including (1) a copy of
the written claim from the Internal Revenue Service, (2) the identification of
the element of compensation and/or benefit that is the subject of such Internal
Revenue Service claim, and (3) the date on which such claim is requested to be
paid. Such notification shall be given as soon as practicable but no later than
ten (10) business days after the Executive receives notice in writing of such
claim.

                  Within ten (10) business days following receipt of the
notification of the Internal Revenue Service written claim from the Executive,
the Company shall pay to the Executive an Gross Up Payment, or the excess of a
recalculated Gross Up Payment over the initial Gross Up Payment, as applicable,
related to the element of compensation and/or benefit which is the subject of
the Internal Revenue Service claim. Within ten (10) business days following such
payment to the Executive, the Executive shall provide to the Company written
evidence that she had paid the claim to the Internal Revenue Service (the United
States Treasury).

                  The failure of the Executive to properly notify the Company of
the Internal Revenue Service claim (or to provide any required information with
respect thereto) shall not affect any rights granted to the Executive under this
section, except to the extent that the Company is materially prejudiced in the
challenge to such claim as a direct result of such failure. If the Company
notifies the Executive in writing, within sixty (60) business days following
receipt from the Executive of notification of the Internal Revenue Service
claim, that it desires to contest such claim, the Executive shall:

                           (i)      give the Company any information reasonably
requested by the Company relating to such claim;

                           (ii)     take such action in connection with
contesting such claim as the Company shall reasonably request in writing from
time to time including, without limitation accepting legal representation with
respect to such claim by an attorney selected by the Company and reasonably
acceptable to the Executive;

                           (iii)    cooperate with the Company in good faith in
order effectively to contest such claim; and

                           (iv)     permit the Company to participate in any
proceedings relating to such claim if the Company elects not to assume and
control the defense of such claim; provided, however, that the Company shall
bear and pay directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify and hold
the Executive harmless, on an after-tax basis, for any Excise Tax, income tax
and FICA tax (including interest and penalties with respect thereto) imposed as
a result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this section, the Company shall have
the right, at its sole option, to assume the control of all proceedings in
connection with such contest, in which case it may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim, and may direct the Executive to sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, that any extension of the

                                      - 14 -

<PAGE>

statute of limitations relating to payment of tax for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's rights to
assume the control of the contest shall be limited to issues with respect to
which an Gross Up Payment would be payable hereunder, and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority. To the extent that the
contest to the Internal Revenue Service claim is successful, the Gross Up
Payment related to the element of compensation and/or benefit that was the
subject of the claim shall be recalculated in accordance with the provisions of
paragraph (c)(ii).

                  13.      Indemnification. The Company agrees that if the
Executive is made a party, or is threatened to be made a party, to any action,
suit or proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that Executive is or was a director,
officer or employee of the Company or is or was serving at the request of the
Company as a director, officer, member, employee or agent of another
corporation, partnership, joint venture, trust, limited liability company or
other enterprise, including service with respect to employee benefit plans,
whether or not the basis of such Proceeding is the Executive's alleged action in
an official capacity while serving as a director, officer, member, employee or
agent, the Executive shall be indemnified and held harmless by the Company to
the fullest extent legally permitted or authorized by the Company's certificate
of incorporation or bylaws or resolutions of the Company's Board of Directors
or, if greater, by the laws of the State of New York, against all cost, expense,
liability and loss (including, without limitation, attorney's fees, judgments,
fines, ERISA excise taxes or other liabilities or penalties and amounts paid or
to be paid in settlement) reasonably incurred or suffered by the Executive in
connection therewith, and such indemnification shall continue as to the
Executive even if Executive has ceased to be a director, member, employee or
agent of the Company or other entity and shall inure to the benefit of the
Executive's heirs, executors and administrators. The Company shall advance to
the Executive all reasonable costs and expenses incurred by Executive in
connection with a Proceeding within twenty (20) calendar days after receipt by
the Company of a written request for such advance. Such request shall include an
undertaking by the Executive to repay the amount of such advance if it shall
ultimately be determined that Executive is not entitled to be indemnified
against such costs and expense. Neither the failure of the Company (including
its board of directors, independent legal counsel or stockholders) to have made
a determination prior to the commencement of any proceeding concerning payment
of amounts claimed by the Executive under Section 16(a) above that
indemnification of the Executive is proper because Executive has met the
applicable standard of conduct, nor a determination by the Company (including
its board of directors, independent legal counsel or stockholders) that the
Executive has not met such applicable standard of conduct, shall create a
presumption that the Executive has not met the applicable standard of conduct.
The Company agrees to continue and maintain a directors' and officers' liability
insurance policy covering the Executive to the extent the Company provides such
coverage for its other executive officers. Such insurance coverage shall be
maintained for at least six (6) years following any Change of Control. In
addition to, and not in limitation of the foregoing, the terms of the letter
agreement dated December 17, 2001 between C. Michael Armstrong and the Executive
shall remain in full force and effect during the Term.

                  14.      The Executive's Representations. The Executive hereby
represents and warrants that the Executive has the right to enter into this
Agreement with the Company and to

                                      - 15 -

<PAGE>

grant the rights contained in this Agreement, and the provisions of this
Agreement do not violate any other contracts or agreements that the Executive
has entered into with any other individual or entity. The Executive acknowledges
that before signing this Agreement, Executive was given the opportunity to read
it, evaluate it and discuss it with Executive's personal advisors and attorney
and with representatives of the Company. The Executive further acknowledges that
the Company has not provided the Executive with any legal advice regarding this
Agreement.

                  15.      Notices. All notices and other communications
required or permitted hereunder shall be in writing and shall be deemed given
when delivered (a) personally, (b) by facsimile with evidence of completed
transmission, or (c) delivered by overnight courier; to the Party concerned at
the address indicated below or to such changed address as such Party may
subsequently give such notice of:

                           If to the Company:

                                    AT&T Corp.
                                    900 Route 202/206N
                                    Post Office Box 752
                                    Bedminster, N.J.  07921
                                    Attention:  Executive Vice President,
                                       Human Resources

                           If to the Executive:

                                    Betsy Bernard
                                    900 Route 202/206N
                                    Bedminster, N.J. 07921

                  16.      Assignment and Successors. (a) The Executive. This
Agreement is personal to the Executive and, without the prior written consent of
the Company, shall not be assignable by the Executive otherwise than by will or
the laws of descent and distribution. This Agreement shall inure to the benefit
of and be enforceable by the Executive's legal representatives.

                  (b)      The Company. This Agreement shall inure to the
benefit of and be binding upon the Company and its successors and assigns. The
Company specifically reserves the right to assign the terms of this Agreement to
any successor, whether the successor is the result of any sale, purchase,
merger, consolidation, asset sale, divestiture or spin-off or any form or
combination thereof. As used in this Agreement, "Company" shall mean both the
Company as defined above and any such successor to which this Agreement is
assigned or that assumes this Agreement by operation of law or otherwise. The
provisions of this Section 14(b) are not intended to, and in no way shall, limit
Executive's rights and entitlement under Sections 5(b) and 5(e) of this
Agreement.

                  17.      Governing Law; Amendment. This Agreement shall be
governed by, and construed in accordance with, the laws of New Jersey, without
reference to principles of conflict of laws. This Agreement may not be amended
or modified except by a written agreement

                                      - 16 -

<PAGE>

executed by the Executive and the Company or their respective successors and
legal representatives.

                  18.      Severability. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement. If any provision of this Agreement
shall be held invalid or unenforceable in part, the remaining portion of such
provision, together with all other provisions of this Agreement, shall remain
valid and enforceable and continue in full force and effect to the fullest
extent consistent with law.

                  19.      Tax Withholding. Notwithstanding any other provision
of this Agreement, the Company may withhold from amounts payable under this
Agreement all federal, state, local and foreign taxes that are required to be
withheld by applicable laws or regulations.

                  20.      Costs Associated with Agreement. The Company shall
reimburse the Executive for the costs incurred by The Executive for financial
counseling and attorneys' fees associated with negotiation and preparation of
this Agreement. To the extent the Company's reimbursement under this Section 18
results in taxable income to the Executive, the Company will provide a tax
allowance to offset the federal and state income and Medicare portion of FICA
tax impact of this payment (to the extent not otherwise deductible or for which
Executive is not entitled to an offsetting reduction in taxable income) and an
additional allowance to offset the federal and state income and Medicare portion
of FICA tax impact of the tax allowance itself.

                  21.      No Waiver. The Executive's or the Company's failure
to insist upon strict compliance with any provision of, or to assert any right
under, this Agreement shall not be deemed to be a waiver of such provision or
right or of any other provision of or right under this Agreement.

                  22.      No Mitigation/Offset. The Executive shall not be
obligated to mitigate the amount of any payments due under this Agreement and,
except as specifically provided in Section 8(c) hereof, no payments or benefits
under this Agreement shall be subject to reduction, offset or forfeiture for any
reason.

                  23.      Headings. The Section headings contained in this
Agreement are for convenience only and in no manner shall be construed as part
of this Agreement.

                  24.      Entire Agreement. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter hereof and
shall supersede all prior agreements, whether written or oral, with respect
thereto, including without limitation any term sheet and the Initial Employment
Agreement (including but not limited to the Special Voluntary Termination),
except where the Initial Employment Agreement or any other document is
specifically incorporated into this Agreement.

                  25.      Duration of Terms. The respective rights and
obligations of the parties hereunder shall survive any termination of Executive'
employment, the Term or this Agreement to the extent necessary to give effect to
such rights and obligations.

                                      - 17 -

<PAGE>

                  26.      Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.

                                      - 18 -

<PAGE>

                  IN WITNESS WHEREOF, the Executive has hereunto set Executive's
hand and, pursuant to the authorization of its Board of Directors, the Company
has caused this Agreement to be executed in its name on its behalf, all as of
the day and year first above written.

                                        /s/ Betsy Bernard
                                        -------------------------
                                            Betsy Bernard

                                        AT&T Corp.

                                        By: /s/ Mirian M. Graddick-Weir
                                           --------------------------------
                                           Mirian M. Graddick-Weir
                                           Executive Vice-President
                                           Human Resources

<PAGE>

                                          B. Bernard Special Individual Deferral
                                                                    Attachment A

         This Arrangement will detail and document the terms of a Special
Individual Deferral (the SID) which will be provided to you as part of
employment agreement with AT&T Corp. (the "Company"), dated as of October 1,
2002 (the "Employment Agreement").

         Under this Arrangement, the SID will be established in your name. The
maintenance, vesting, forfeiture and distribution of the SID shall be in
accordance with the following terms and conditions.

                  As of October 1, 2003 (hereinafter the "Effective Date"), and
contingent upon your continued employment with the Company through the Effective
Date, the Company shall credit the SID with an initial balance of three million
two hundred thousand dollars ($3,200,000). The SID will be fully vested and
non-forfeitable on the Effective Date and you will be responsible for applicable
FICA and Medicare taxes on the amount vested on such date. The Company shall
credit interest to the SID, compounded as of the end of each calendar quarter
following the Effective Date, at a rate equal to the sum of one-quarter (1/4) of
the average rate applicable to the 10 year Treasury Note for the prior calendar
quarter, plus .5%.

         The SID will be maintained as a bookkeeping account on the records of
the Company and you will have no present ownership right or interest in the SID,
nor in any assets of the Company with respect thereto. You shall not have any
right to receive any payment with respect to the SID, except as expressly
provided below. The SID may not be assigned, pledged or otherwise alienated by
you and any attempt to do so, or any garnishment, execution or levy of any kind
with respect to the SID, will not be recognized.

         This Arrangement may not be amended or waived, unless the amendment or
waiver is in a writing signed by you and AT&T's Executive Vice President - Human
Resources.

         The applicable SID balance shall be paid to you in a single lump sum
payment as soon as administratively feasible following the earliest to occur of:
(i) your written election to receive such payment, subject to a 10% reduction in
your SID balance, notwithstanding the full vesting and non-forfeitability of
your SID on the Effective Date; (ii) December 31, 2004 (unless deferred pursuant
to clause (iii)); (iii) a Deferral Date (as defined below) or (iv) your
termination from the Company for any reason following the Effective Date. For
purpose of determining the SID balance, interest shall be credited through the
end of the calendar quarter in which the applicable payment date occurs.
Notwithstanding any provision herein to the contrary, in the event a change in
applicable law or regulation is reasonably likely to result in the recognition
of income by you for income tax purposes following the Effective Date in respect
of the SID, the SID balance shall be paid to you as soon as practicable
following the earliest date that such law or regulation would be reasonably
likely to cause you to recognize income in respect of the SID.

         "Deferral Date" means a date, elected by you in writing no later than
one calendar year prior to the date certain on which the SID balance would
otherwise be paid, until which such

                                      - 2 -

<PAGE>

payment will be deferred; provided that such date shall be at least five
calendar years after the date on which the payment was originally due. By way of
example, if you wish to defer payment beyond December 31, 2004, you must elect
to do so no later than December 31, 2003, and you may not elect a Deferral Date
prior to December 31, 2009.

         In the event of Change in Control (as defined in the Employment
Agreement), the Company shall deposit the entire amount of your SID balance into
an account for your benefit under a "rabbi" trust established by the Company
upon the Change in Control. Any interest earned on your SID balance following a
Change in Control will also be deposited into the rabbi trust account when
earned.

         In the event of your termination for any reason prior to the Effective
Date, the SID will not be established for you.

         It is understood and agreed that you will not talk about, write about
or otherwise publicize the terms or existence of this Arrangement or any fact
concerning its execution or implementation unless required by law or to enforce
the terms of this Arrangement. You may, however, discuss its contents with your
legal and/or financial counselor, provided that you advise them of your
obligations of confidentiality and that any disclosures made by any of them may
be treated by the Company as disclosures made by you for purposes of this
provision.

         THIS ARRANGEMENT IS NOT AN EMPLOYMENT CONTRACT AND SHOULD NOT BE
CONSTRUED OR INTERPRETED AS CONTAINING ANY GUARANTEE OF CONTINUED EMPLOYMENT.
THE EMPLOYMENT RELATIONSHIP WITH THE COMPANY IS BY MUTUAL CONSENT
("EMPLOYMENT-AT-WILL"). THIS MEANS THAT EMPLOYEES HAVE THE RIGHT TO TERMINATE
THEIR EMPLOYMENT AT ANY TIME AND FOR ANY REASON. LIKEWISE, THE COMPANY RESERVES
THE RIGHT TO DISCONTINUE YOUR EMPLOYMENT WITH OR WITHOUT CAUSE AT ANY TIME AND
FOR ANY REASON.

         Payments from the SID are in addition to and not in lieu (nor will it
or anything in this agreement postpone, reduce or negate impact) of qualified or
non-qualified pension, savings, or other retirement plan, program or arrangement
covering you. The SID payments provided under this Arrangement are subject to
payroll tax withholding and reporting, and amounts credited to the SID are not
included in the base for calculating benefits (nor shall such amounts offset any
benefits) under any employee or Senior Management benefit plan, program or
practice.

         The construction, interpretation and performance of this Agreement
shall be governed by the laws of the State of New York, without regard to its
conflict of laws rule.

                                      - 3 -

<PAGE>

                                          B. Bernard Special Individual Deferral
                                                                    Attachment X

         This Arrangement will detail and document the terms of a Special
Individual Deferral (the SID) which will be provided to you as part of your new
Employment Agreement.

         Under this Arrangement, the SID will be established in your name. The
maintenance, vesting, forfeiture and distribution of the SID shall be in
accordance with the following terms and conditions.

         As of October 1, 2003 (hereinafter the "Effective Date"), and
contingent upon your continued employment with the Company, AT&T Corp.
(hereinafter "the Company") shall credit the SID with an initial balance of
three million two hundred thousand dollars ($3,200,000). The SID will vest on
the Effective Date and you will be responsible for applicable FICA and Medicare
taxes on the amount vested on such date. The Company shall credit interest to
the SID, compounded as of the end of each calendar quarter, at a rate equal to
the sum of one-quarter (1/4) of the average rate applicable to the 10 year
Treasury Note for the prior calendar quarter, plus .5%.

         The SID will be maintained as a bookkeeping account on the records of
the Company and you will have no present ownership right or interest in the SID,
nor in any assets of the Company with respect thereto. You shall not have any
right to receive any payment with respect to the SID, except as expressly
provided below. The SID may not be assigned, pledged or otherwise alienated by
you and any attempt to do so, or any garnishment, execution or levy of any kind
with respect to the SID, will not be recognized.

         This Arrangement may not be amended or waived, unless the amendment or
waiver is in a writing signed by you and AT&T's Executive Vice President - Human
Resources.

         The SID balance shall be paid to you in a single lump sum payment as
soon as administratively feasible in the calendar quarter immediately following
your termination from the Company. Interest shall be credited through the end of
the calendar quarter in which the termination occurs.

                                      - 4 -

<PAGE>

         In the event of your termination for any reason prior to the Effective
Date, the SID will not be established for you.

         It is understood and agreed that you will not talk about, write about
or otherwise publicize the terms or existence of this Arrangement or any fact
concerning its execution or implementation unless required by law or to enforce
the terms of this Arrangement. You may, however, discuss its contents with your
legal and/or financial counselor, provided that you advise them of your
obligations of confidentiality and that any disclosures made by any of them may
be treated by the Company as disclosures made by you for purposes of this
provision.

         THIS ARRANGEMENT IS NOT AN EMPLOYMENT CONTRACT AND SHOULD NOT BE
CONSTRUED OR INTERPRETED AS CONTAINING ANY GUARANTEE OF CONTINUED EMPLOYMENT.
THE EMPLOYMENT RELATIONSHIP WITH THE COMPANY IS BY MUTUAL CONSENT
("EMPLOYMENT-AT-WILL"). THIS MEANS THAT EMPLOYEES HAVE THE RIGHT TO TERMINATE
THEIR EMPLOYMENT AT ANY TIME AND FOR ANY REASON. LIKEWISE, THE COMPANY RESERVES
THE RIGHT TO DISCONTINUE YOUR EMPLOYMENT WITH OR WITHOUT CAUSE AT ANY TIME AND
FOR ANY REASON.

         Payments from the SID are in addition to and not in lieu (nor will it
or anything in this agreement postpone, reduce or negate impact) of qualified or
non-qualified pension, savings, or other retirement plan, program or arrangement
covering you. The SID payments provided under this Arrangement are subject to
payroll tax withholding and reporting, and amounts credited to the SID are not
included in the base for calculating benefits (nor shall such amounts offset any
benefits) under any employee or Senior Management benefit plan, program or
practice.

         The construction, interpretation and performance of this Agreement
shall be governed by the laws of the State of New Jersey, without regard to its
conflict of laws rule.

                                      - 5 -