<PAGE>
                                                          Exhibit (10)(iii)(A)42

              SPECIAL INDIVIDUAL PENSION ARRANGEMENT FOR J. POLUMBO
        AS AMENDED BY TRANSFER LETTER OF 9/7/01 AND BOARD APPROVAL 10/02

GENERAL TERMS AND CONDITIONS

-     AT&T (the Company) has established an individual non-qualified pension
      arrangement (hereinafter Individual Pension) which, subject to the terms
      and conditions below, will provide you with a benefit payable from AT&T
      operating assets upon your retirement

-     Individual Pension was applicable during your employment by AT&T and the
      joint venture know as Concert

-     This pension became vested as per the transfer letter of 9/7/01 on the
      last day of the month which contained the six month anniversary of the
      date of transfer from Concert to AT&T or on 3/31/02. Only for termination
      for "cause" (as defined) will this Individual Pension will be null and
      void in its entirety. IN ADDITION, THIS PENSION IS SUBJECT TO THE
      PROVISIONS OF THE AT&T NON-COMPETITION GUIDELINE.

-     In the event of a termination for "disability" (as defined) the Individual
      Pension accrued to the date of such Termination will be payable in
      accordance with the terms and conditions set forth below in the
      "Individual Pension Formula."

-     In the event of your death as an active employee AFTER THIS AGREEMENT IS
      SIGNED BY BOTH YOU AND THE COMPANY, your surviving spouse or other
      designated beneficiary will be eligible for a pension under this
      Individual Pension calculated as provided below.

INDIVIDUAL PENSION FORMULA

-     With respect to the amount payable under this Individual Pension at your
      retirement/Termination, the amount payable will be determined as (a) minus
      (b) below.

            (a)   the pension benefits calculated in accordance with the table
                  set forth below:

<TABLE>
<CAPTION>
                                            Percentage of Final 5 Year Average Total Cash
                                           Compensation (Base Pay Plus Actual annual bonus
Date of Retirement/Termination                             Paid in Year)*
------------------------------                             --------------
<S>                                        <C>
Prior to 7/1/2002                                             10.25
7/1/2002-09/30/2002                                           12.30
10/1/2002-6/30/2003                                           15.20
7/1/2003-6/30/2004                                            17.25
7/1/2004-6/30/2005                                            19.30
7/1/2005-6/30/2006                                            21.35
7/1/2006-6/30/2007                                            23.40
7/1/2007-6/30/2008                                            25.45
7/1/2008-6/30/2009                                            27.50
7/1/2009-6/30/2010                                            29.55
</TABLE>
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<TABLE>
<S>                                                           <C>
7/1/2010-6/30/2011                                            31.60
7/1/2011-6/30/2012                                            33.65
7/1/2012-6/30/2013                                            35.00
7/1/2013-6/30/2014                                            35.00
7/1/2014-6/30/2015                                            35.00
7/1/2015 or later                                             35.00
</TABLE>

            * For purposes of this Individual Pension Formula, Total Cash
            Compensation for years prior to actual Company service and for the
            first year of employment is assumed to be $520,000 annually, e.g.
            calculation of this formula at 7/1/99 will be determined as .1025
            multiplied by $520,000 or a single life annuity of $53,300 per year

            (b)   any pension benefits payable from AT&T, i.e., pension benefits
                  under the AT&T Management Pension Plan (AT&TMPP), AT&T Non
                  Qualified Pension Plan (AT&TNQPP), AT&T Excess Benefit and
                  Compensation Pension Plan (AT&TEBCPP), AT&T Senior Management
                  Long Term Disability and Survivor Protection Plan
                  (AT&TSMLTD&SPP)

      -     The payment form for you under this Individual Pension will be the
            same as the payment form (e.g., single life annuity, joint and 50%
            annuity, etc.) under the AT&TEBCP based on your actual NCS. Upon
            your death following your termination, your spouse's or other
            designated beneficiary's entitlement to a survivor annuity benefit
            under the Individual Pension will be in accordance with your
            election under the AT&TMPP and the reduction factor applicable to
            your Individual Pension amount for the survivor annuity under this
            Individual Pension will be in accordance with the election you made
            for your AT&T MPP benefit

DEATH AS ACTIVE EMPLOYEE

-     In the event of your death as an active employee, your surviving spouse
      will be entitled to a survivor benefit under this Individual Pension. The
      terms and conditions of such benefit shall be in accordance with the terms
      and conditions set forth in the AT&TNQPP assuming you were eligible to
      voluntarily terminate under this Individual Pension; such benefit will be
      offset by any pension payments payable from AT&T under the AT&TMPP,
      AT&TEBCPP, AT&TNQPP, AT&TMCPP, and AT&TSMLTD&SPP

DEFINITIONS

-     For purposes of this Agreement,

-     "Cause" shall be defined as follows: (1) conviction (including a plea of
      guilty or nolo contendere) of a felony or any crime or theft, dishonesty
      or moral turpitude; or (2) gross omission or gross dereliction of any
      statutory or common-law duty of loyalty to the Company or (3) violation of
      AT&T's Code of Conduct.

-     "Disability" shall mean termination of your employment with the Company
      with eligibility to receive a disability benefit/allowance under any
      long-term disability plan of the Company.