January 16, 2001


Mr. Frank Ianna

Dear Frank:

         In recognition of the role AT&T Corp. (the "Company")  anticipates that
you will play  during the AT&T  restructuring  and  pursuant to the terms of the
Executive  Term  Sheet  signed  by you on  ----------------,  the  Company  will
establish a special  individual  deferred  account  (hereinafter  the  "Deferred
Account") for you. The maintenance,  vesting, forfeiture and distribution of the
Deferred Account shall be in accordance with the following terms and conditions.

         The Company shall credit the Deferred  Account with an initial  balance
of  one  million  dollars  ($1,000,000.00)   retroactive  to  January  1,  2001,
(hereinafter the "Effective  Date").  The Deferred Account will be credited with
an annual  rate of  interest  equal to the annual  rate  applicable  to actively
traded 30-Year Treasury Bonds plus 2%, compounded  quarterly  (one-quarter (1/4)
of the average rate for the prior calendar quarter plus .5%), retroactive to the
Effective Date, and will be calculated in accordance with procedures  determined
by AT&T in its sole and absolute discretion.

         The Deferred Account 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 Deferred Account,  nor in any assets of the Company with respect thereto.
You shall not have any right to receive any payment with respect to the Deferred
Account,  except as expressly  provided below.  The Deferred  Account 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 Deferred Account,
will not be recognized.

         This  Agreement  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 Deferred  Account  will vest 50%  (including  interest  thereon) on
December 31, 2001,  and 50% (including  interest  thereon) on December 31, 2002,
contingent upon your continued Company  employment through each vesting date. As
of each vesting date you will be responsible  for  applicable  FICA and Medicare
taxes on the amount vested on such date.

         In the event of your  termination  of  employment  for any reason on or
after December 31, 2002, the entire amount then credited to the Deferred Account
shall be  distributed  to you in a lump sum payment as soon as  administratively
feasible in the calendar quarter  immediately  following the calendar quarter in
which your termination occurs.

         If,  prior to  December  31,  2001,  you resign from the Company or are
terminated for Cause,  as defined below,  the entire amount then credited to the
Deferred Account shall be forfeited.

         If, on or after  December 31, 2001, but prior to December 31, 2002, you
resign from the  Company or are  terminated  for Cause,  as defined  below,  the
unvested  amount  (including  interest  thereon)  then  credited to the Deferred
Account shall be forfeited.  The vested amount (including interest thereon) then
credited  to the  Deferred  Account  shall be  distributed  to you in a lump sum
payment as soon as administratively feasible in the calendar quarter immediately
following the calendar quarter in which your termination occurs.
<PAGE>
         In the event of your  termination of employment from the Company due to
Long Term  Disability  as defined  below,  or your death,  prior to December 31,
2002,  the entire  amount then  credited to the  Deferred  Account  shall become
vested and be distributed to you or your named beneficiary (or your estate if no
beneficiary has been named),  in a lump sum payment as soon as  administratively
feasible in the calendar quarter  immediately  following the calendar quarter in
which your termination of employment occurs.

         In the event of your  resignation for Good Reason (as defined below) or
a Company-initiated termination for other than Cause (as defined below) prior to
December 31, 2002, the entire amount then credited to the Deferred Account shall
become  vested  and be  distributed  to you in a lump  sum  payment  as  soon as
administratively  feasible in the calendar  quarter  immediately  following  the
calendar quarter in which your termination occurs.

         For purposes of this Agreement:

         a)       "Cause" termination shall mean:

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

                  (ii)     violation by you 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 your
                           position despite specific instruction to do so.

         b)       "Good Reason" shall mean the  occurrence  without your express
                  written consent of any of the following events:

                  (i)      Your  demotion  to a position  which is not of a rank
                           and  responsibility  comparable  to  members  of  the
                           current    Operations    Group    or   those   of   a
                           similar/replacing governance body; provided, however,
                           that  the  Company's  decision  not  to  continue  an
                           Operations  Group  shall  not  be  Good  Reason,  and
                           provided,  further,  that (1)  changes  in  reporting
                           relationships  shall  not,  alone,   constitute  Good
                           Reason and/or (2) a reduction in your business unit's
                           budget  or a  reduction  your  business  unit's  head
                           count, by themselves,  do not constitute Good Reason;
                           or

                  (ii)     A  reduction  in  your  "Total  Annual  Compensation"
                           (defined as the sum of your Annual Base Salary  Rate,
                           Target Annual  Incentive and "Target Annual Long Term
                           Incentive  Grants")  for any calendar or fiscal year,
                           as  applicable,  to an  amount  that is less than the
                           Total Annual  Compensation  that existed in the prior
                           calendar or fiscal year, as applicable.  For purposes
                           of this  Paragraph  (b)(ii)  the dollar  value of the
                           "Target  Annual  Long Term  Incentive  Grants"  shall
                           exclude the value of any special one-time or periodic
                           long-term  incentive grants,  and shall be determined
<PAGE>
                           by   valuing   Performance   Shares,   Stock   Units,
                           Restricted  Stock,  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.

                           Notwithstanding   the  foregoing,   the  Company  may
                           require  you to  change  to an  equivalent  executive
                           position   within  the  Company  with   substantially
                           similar levels of duties or responsibilities  without
                           causing  Good  Reason to occur.  You must  notify the
                           Company  within  60 days  following  knowledge  of an
                           event you believe  constitutes  Good Reason,  or such
                           event shall not constitute Good Reason hereunder.

         c)       "Long  Term   Disability"   shall  mean  termination  of  your
                  employment  with the  Company  with  eligibility  to receive a
                  disability  allowance under the AT&T Long Term Disability Plan
                  for Management Employees or a replacement plan.

          It is understood and agreed that you will not talk about,  write about
or otherwise  publicize  the terms or  existence  of this  Agreement or any fact
concerning its execution or implementation  unless required by law or to enforce
the terms of this Agreement.  You may,  however,  discuss its contents with your
spouse, 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  AGREEMENT  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 Deferred  Account are in addition to and not in lieu
(nor will it or  anything in these  agreements  postpone,  reduce or  negatively
impact) any qualified or  non-qualified  pension,  savings,  or other retirement
plan,  program or  arrangement  covering  you.  The  Deferred  Account  payments
provided  under  this  Agreement  are  subject to payroll  tax  withholding  and
reporting,  and amounts credited to the Deferred Account 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.

         You understand  that the terms of Agreement  shall apply to the Company
and its successors.  The Company  specifically  reserves the right to assign the
terms of this Agreement to any successor, whether the successor is the result of
a sale, purchase, merger, consolidation,  asset sale, divestiture or spin-off or
any combination or form thereof. No sale, purchase, merger, consolidation, asset
sale,  divestiture or spin-off or any combination or form thereof by the Company
shall  be  construed  as a  termination  of  your  employment  and  will  not be
considered a termination for purposes of this Agreement.
<PAGE>
         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.

         In addition,  all of the benefits  provided  under this  Agreement  are
subject to forfeiture if you violate the AT&T Non-Competition  Guideline, a copy
of which has been previously provided to you.

         Frank,  I am happy to  present  this  special  arrangement  to you.  It
recognizes  the  extraordinary  contributions  that we expect you to continue to
make to our business.  If you agree with the terms and conditions detailed above
sign and date  this  Agreement  in the  spaces  provided  below and  return  the
original executed copy to me.

                                  Sincerely,





/s/ Frank Ianna                                 January 17, 2001
-------------------                             -------------------
Acknowledged and Agreed to                      Date