ex10ii.htm


    Exhibit
10-ii

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    AT&T
Inc.

    2006
Incentive Plan

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    Plan
Effective:  May 1, 2006

    Amended
Through:  June 26, 2008


    
      
        
           

           

        

         


      

      
         


        
          

        

      

      
         


      

    


    AT&T
INC.

    2006
INCENTIVE PLAN

    


    
      	
              Article
      1

            	
              Establishment and
      Purpose.

            


    

    


    
      	
               
      

            	
              1.1

            	
              Establishment of the
      Plan.  AT&T Inc., a Delaware corporation (the
      "Company" or "AT&T"), hereby establishes an incentive compensation
      plan (the "Plan"), as set forth in this
  document.

            


    

    


    
      	
               
      

            	
              1.2

            	
              Purpose of the
      Plan.  The purpose of the Plan is to promote the success
      and enhance the value of the Company by linking the personal interests of
      Participants to those of the Company’s shareowners, and by providing
      Participants with an incentive for outstanding
  performance.

            


    

    


    
      	
               
      

            	
              1.3

            	
              Effective Date of the
      Plan.  The Plan was
      originally effective on May 1, 2006.

            


    

    
 

    


    
      	
              Article
      2

            	
              Definitions.  Whenever
      used in the Plan, the following terms shall have the meanings set forth
      below and, when the meaning is intended, the initial letter of the word is
      capitalized:

            


    

    


    (a)                 "Award"
means, individually or collectively, a grant or award under this Plan of Stock
Options, Restricted Stock (including unrestricted Stock), Restricted Stock
Units, Performance Units, or Performance Shares.

    


    (b)                 "Award
Agreement" means an agreement which may be entered into by each Participant and
the Company, setting forth the terms and provisions applicable to Awards granted
to Participants under this Plan.

    


    (c)                 "Board"
or "Board of Directors" means the AT&T Board of Directors.

    


    (d)                 "Cause"
shall mean willful and gross misconduct on the part of an Employee that is
materially and demonstrably detrimental to the Company or any Subsidiary as
determined by the Company in its sole discretion.

    


    (e)                 "Change
in Control" shall be deemed to have occurred if (i) any "person" (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee
or other fiduciary holding securities under an employee benefit plan of the
Company or a corporation owned directly or indirectly by the shareowners of the
Company in substantially the same proportions as their ownership of stock of the
Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of the Company representing
twenty percent (20%) or more of the total voting power represented by the
Company's then outstanding voting securities, or (ii) during any period of two
(2) consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Company and any new Director whose
election by the Board of Directors or nomination for election by the Company's
shareowners was approved by a vote of at least two-thirds (2/3) of the Directors
then still in office who either were Directors at the beginning of the period or
whose election or nomination for election was previously so approved, cease for
any reason to constitute a majority thereof, or (iii) the consummation of a
merger or consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total voting power represented by
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the shareowners of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or substantially all the
Company's assets.

    


    (f)                 "Code"
means the Internal Revenue Code of 1986, as amended from time to
time.

    


    (g)                 "Committee"
means the committee or committees of the Board of Directors given authority to
administer the Plan as provided in Article 3.

    


    (h)                 "Director"
means any individual who is a member of the AT&T Board of
Directors.

    


    (i)                 "Disability"
shall mean absence of an Employee from work under the relevant Company or
Subsidiary long term disability plan.

    


    (j)                 "Employee"
means any employee of the Company or of one of the Company's
Subsidiaries.  "Employment" means the employment of an Employee by the
Company or one of its Subsidiaries.  Directors who are not otherwise
employed by the Company shall not be considered Employees under this
Plan.

    


    (k)                 "Exchange
Act" means the Securities Exchange Act of 1934, as amended from time to time, or
any successor Act thereto.

    


    (l)                 "Exercise
Price" means the price at which a Share may be purchased by a Participant
pursuant to an Option, as determined by the Committee.

    


    (m)                 "Fair
Market Value" shall mean the closing price on the New York Stock Exchange
("NYSE") for a Share on the relevant date, or if such date was not a trading
day, the next preceding trading date, all as determined by the
Company.  A trading day is any day that the Shares are traded on the
NYSE.  In lieu of the foregoing, the Committee may, from time to time,
select any other index or measurement to determine the Fair Market Value of
Shares under the Plan, including but not limited to an average determined over a
period of trading days.

    


    (n)                 "Insider"
shall mean an Employee who is, on the relevant date, an officer, director, or
ten percent (10%) beneficial owner of the Company, as those terms are defined
under Section 16 of the Exchange Act.

    


    (o)                 “Option”
means an option to purchase Shares from AT&T.

    


    (p)                 "Participant"
means an Employee or former Employee who holds an outstanding Award granted
under the Plan.

    


    (q)                 "Performance
Unit" and "Performance Share" shall each mean an Award granted to an Employee
pursuant to Article 8 herein.

    


    (r)                 "Plan"
means this 2006 Incentive Plan.  The Plan may also be referred to as
the "AT&T 2006 Incentive Plan" or as the "AT&T Inc. 2006 Incentive
Plan."

    


    (s)                 "Retirement"
or to "Retire" shall mean the Participant’s Termination of Employment for any
reason other than death, Disability or for Cause, on or after the earlier of the
following dates, or as otherwise provided by the Committee: (1) for Officer
Level Employees (Participants deemed officer level Employees for compensation
purposes as indicated on the records of AT&T), the date the Participant is
at least age 55 and has five (5) years of net credited service); or (2) the date
the Participant has attained one of the following combinations of age and
service, except as otherwise indicated below:

    


                              Net
Credited
Service                                                               Age

                               10
years or
more                                                                65
or older

                               20
years or
more                                                                55
or older

                               25
years or
more                                                                50
or older

                               30
years or
more                                                                Any
age

    


    For
purposes of this Plan only, Net Credited Service shall be calculated in the same
manner as “Pension Eligibility Service” under the AT&T Pension Benefit Plan
– Nonbargained Program (“Pension Plan”), as that may be amended from time to
time, except that service with an Employer shall be counted as though the
Employer were a “Participating Company” under the Pension Plan and the Employee
was a participant in the Pension Plan.

    


    (t)                 "Rotational
Work Assignment Company" ("RWAC") shall mean any entity with which AT&T Inc.
or any of its Subsidiaries may enter into an agreement to provide an employee
for a rotational work assignment.

    


    (u)                 "Shares"
or "Stock" means the shares of common stock of the Company.

    


    (v) "Subsidiary" shall mean any corporation,
partnership, venture or other entity in which AT&T holds, directly or
indirectly, a fifty percent (50%) or greater ownership interest.  The
Committee may, at its sole discretion, designate, on such terms and conditions
as the Committee shall determine, any other corporation, partnership, limited
liability company, venture other entity a Subsidiary for purposes of this
Plan.  Unless otherwise provided by the Committee, Cingular and its
direct or indirect majority-owned subsidiaries shall each be deemed a Subsidiary
so long as AT&T holds a direct or indirect twenty five percent (25%) or
greater ownership interest in Cingular Wireless LLC or its
successor.

    
 

    (w)                 "Termination
of Employment" or a similar reference shall mean the event where the Employee is
no longer an Employee of the Company or of any Subsidiary, including but not
limited to where the employing company ceases to be a Subsidiary.  With respect to any Award that constitutes a
“nonqualified deferred compensation plan” within the meaning of Section 409A of
the Code, “Termination of Employment” shall mean a “separation from service” as
defined under Section 409A of the Code.

    


    


    
      	
              Article
      3

            	
              Administration.

            


    

    


    
      	
               
      

            	
              3.1

            	
              The
      Committee.  Administration of the Plan shall be as
      follows:

            


    

    


    (a)                 With
respect to Insiders, the Plan and Awards hereunder shall be administered by the
Human Resources Committee of the Board or such other committee as may be
appointed by the Board for this purpose (each of the Human Resources Committee
and such other committee is the "Disinterested Committee"), where each Director
on such Disinterested Committee is a "Non-Employee Director", as that term is
used in Rule 16b-3 under the Exchange Act (or any successor designation for
determining the committee that may administer plans, transactions or awards
exempt under Section 16(b) of the Exchange Act), as that rule may be modified
from time to time.

    


    (b)                 With
respect to persons who are not Insiders, the Plan and Awards hereunder shall be
administered by each of the Disinterested Committee and such other committee, if
any, to which the Board may delegate such authority (such other Committee shall
be the "Non-Insider Committee"), and each such Committee shall have full
authority to administer the Plan and all Awards hereunder, except as otherwise
provided herein or by the Board.  The Disinterested Committee may,
from time to time, limit the authority of the Non-Insider Committee in any
way.  Any Committee may be replaced by the Board at any
time.

    


    (c)                 Except
as otherwise indicated from the context, references to the “Committee” in this
Plan shall be to either of the Disinterested Committee or the Non-Insider
Committee.

    


    
      	
               
      

            	
              3.2

            	
              Authority of the
      Committee.  The Committee shall have complete control
      over the administration of the Plan and shall have the authority in its
      sole discretion to (a) exercise all of the powers granted to it under the
      Plan, (b) construe, interpret and implement the Plan, grant terms and
      grant notices, and all Award Agreements, (c) prescribe, amend and rescind
      rules and regulations relating to the Plan, including rules governing its
      own operations, (d) make all determinations necessary or advisable in
      administering the Plan, (e) correct any defect, supply any omission and
      reconcile any inconsistency in the Plan, (f) amend the Plan to reflect
      changes in applicable law (whether or not the rights of the holder of any
      Award are adversely affected, unless otherwise provided by the Committee),
      (g) grant Awards and determine who shall receive Awards, when such Awards
      shall be granted and the terms and conditions of such Awards, including,
      but not limited to, conditioning the exercise, vesting, payout or other
      term of condition of an Award on the achievement of Performance Goals
      (defined below), (h) unless otherwise provided by the Committee, amend any
      outstanding Award in any respect, not materially adverse to the
      Participant, including, without limitation, to (1) accelerate the time or
      times at which the Award becomes vested, unrestricted or may be exercised
      (and, in connection with such acceleration, the Committee may provide that
      any Shares acquired pursuant to such Award shall be Restricted Shares,
      which are subject to vesting, transfer, forfeiture or repayment provisions
      similar to those in the Participant’s underlying Award), (2) accelerate
      the time or times at which shares of Common Stock are delivered under the
      Award (and, without limitation on the Committee’s rights, in connection
      with such acceleration, the Committee may provide that any shares of
      Common Stock delivered pursuant to such Award shall be Restricted Shares,
      which are subject to vesting, transfer, forfeiture or repayment provisions
      similar to those in the Grantee’s underlying Award), or (3) waive or amend
      any goals, restrictions or conditions applicable such Award, or impose new
      goals, restrictions and (i) determine at any time whether, to what extent
      and under what circumstances and method or methods (1) Awards may be (A)
      settled in cash, shares of Stock, other securities, other Awards or other
      property (in which event, the Committee may specify what other effects
      such settlement will have on the Participant’s Award), (B) exercised or
      (C) canceled, forfeited or suspended, (2) Shares, other securities, cash,
      other Awards or other property and other amounts payable with respect to
      an Award may be deferred either automatically or at the election of the
      Participant or of the Committee, or (3) Awards may be settled by the
      Company or any of its Subsidiaries or any of its or their
      designees.

            


    

    


    No Award
may be made under the Plan more than ten years after its effective
date.

    


    References
to determinations or other actions by AT&T or the Company, herein, shall
mean actions authorized by the Committee, the Chairman of the Board of AT&T,
the Senior Executive Vice President of AT&T in charge of Human Resources or
their respective successors or duly authorized delegates, in each case in the
discretion of such person, provided, however, only the Disinterested Committee
may take action with respect to Insiders with regard to granting or determining
the terms of  Awards or other matters that would require the
Disinterested Committee to act in order to comply with Rule 16b-3 promulgated
under the Exchange Act.

    


    All
determinations and decisions made by AT&T pursuant to the provisions of the
Plan and all related orders or resolutions of the Board shall be final,
conclusive, and binding on all persons, including but not limited to the
Company, its stockholders, Employees, Participants, and their estates and
beneficiaries.

    


    


    
      	
              Article
      4

            	
              Shares Subject to the
      Plan.

            


    

    


    
      	
               
      

            	
              4.1

            	
              Number of
      Shares.  Subject to adjustment as provided in Section 4.3
      herein, the number of Shares available for issuance under the Plan shall
      not exceed 90 million Shares.  The Shares granted under this
      Plan may be either authorized but unissued or reacquired
      Shares.  The Disinterested Committee shall have full discretion
      to determine the manner in which Shares available for grant are counted in
      this Plan.

            


    

    


    
      	
               
      

            	
              4.2

            	
              Share
      Accounting.  Without limiting the discretion of the
      Committee under this section, unless otherwise provided by the
      Disinterested Committee, the following rules will apply for purposes of
      the determination of the number of Shares available for grant under the
      Plan or compliance with the foregoing
limits:

            


    

    


    (a)                 If
an outstanding Award for any reason expires or is terminated or canceled without
having been exercised or settled in full, or if Shares acquired pursuant to an
Award subject to forfeiture or repurchase are forfeited or repurchased by the
Company for an amount not greater than the Participant's original purchase
price, the Shares allocable to the terminated portion of such Award or such
forfeited or repurchased Shares shall again be available for issuance under the
Plan.

    


    (b)                 Shares
shall not be deemed to have been issued pursuant to the Plan with respect to any
portion of an Award that is settled in cash, other than an Option.

    


    (c)                 Shares
withheld or reacquired by the Company in satisfaction of tax withholding
obligations under a Restricted Stock Award shall not again be available for
issuance under the Plan; however Shares withheld for tax withholding from other
awards shall be available for issuance again.

    


    (d)                 If
the exercise price of an Option is paid by tender to the Company, or attestation
to the ownership, of Shares owned by the Participant, or an Option is settled
without the payment of the exercise price, the number of shares available for
issuance under the Plan shall be reduced by the gross number of shares for which
the Option is exercised.

    


    
      	
               
      

            	
              4.3

            	
              Adjustments in
      Authorized Plan Shares.  In the event of any merger,
      reorganization, consolidation, recapitalization, separation, liquidation,
      Stock dividend, split-up, Share combination, or other change in the
      corporate structure of the Company affecting the Shares, an adjustment
      shall be made in the number and class of Shares which may be delivered
      under the Plan (including but not limited to individual limits), and in
      the number and class of and/or price of Shares subject to outstanding
      Awards granted under the Plan, and/or the number of outstanding Options,
      Shares of Restricted Stock, and Performance Shares (and Performance Units
      and other Awards whose value is based on a number of Shares) constituting
      outstanding Awards, as may be determined to be appropriate and equitable
      by the Disinterested Committee, in its sole discretion, to prevent
      dilution or enlargement of rights.

            


    

    


    


    
      	
              Article
      5

            	
              Eligibility and
      Participation.

            


    

    


    
      	
               
      

            	
              5.1

            	
              Eligibility.  All
      management Employees are eligible to receive Awards under this
      Plan.

            


    

    


    
      	
               
      

            	
              5.2

            	
              Actual
      Participation.  Subject to the provisions of the Plan,
      the Committee may, from time to time, select from all eligible Employees,
      those to whom Awards shall be granted and shall determine the nature and
      amount of each Award.  No Employee is entitled to receive an
      Award unless selected by the
Committee.

            


    

    


    


    
      	
              Article
      6

            	
              Stock
      Options.

            


    

    


    
      	
               
      

            	
              6.1

            	
              Grant of
      Options.  Subject to the terms and provisions of the
      Plan, Options may be granted to eligible Employees at any time and from
      time to time, and under such terms and conditions, as shall be determined
      by the Committee. In addition, the Committee may, from time to time,
      provide for the payment of dividend equivalents on Options, prospectively
      and/or retroactively, on such terms and conditions as the Committee may
      require.  The Committee shall have discretion in determining the
      number of Shares subject to Options granted to each Employee; provided,
      however, that no single Employee may receive Options under this Plan for
      more than one percent (1%) of the Shares approved for issuance under this
      Plan during any calendar year.  The Committee may not grant
      Incentive Stock Options, as described in Section 422 of the Code, under
      this Plan.

            


    

    


    
      	
               
      

            	
              6.2

            	
              Form of
      Issuance.  Each Option grant may be issued in the form of
      an Award Agreement and/or may be recorded on the books and records of the
      Company for the account of the Participant. If an Option is not issued in
      the form of an Award Agreement, then the Option shall be deemed granted as
      determined by the Committee.  The terms and conditions of an
      Option shall be set forth in the Award Agreement, in the notice of the
      issuance of the grant, or in such other documents as the Committee shall
      determine.  Such terms and conditions shall include the Exercise
      Price, the duration of the Option, the number of Shares to which an Option
      pertains (unless otherwise provided by the Committee, each Option may be
      exercised to purchase one Share), and such other provisions as the
      Committee shall determine.

            


    

    


    
      	
               
      

            	
              6.3

            	
              Exercise
      Price.  Unless a greater Exercise Price is determined by
      the Committee, the Exercise Price for each Option Awarded under this Plan
      shall be equal to one hundred percent (100%) of the Fair Market Value of a
      Share on the date the Option is
granted.

            


    

    


    
      	
              6.4       
      

            	
              Duration of
      Options.  Each Option shall expire at such time as the
      Committee shall determine at the time of grant (which duration may be
      extended by the Committee); provided, however, that no Option shall be
      exercisable later than the tenth (10th) anniversary date of its
      grant.  In the event the Committee does not specify the
      expiration date of an Option, then such Option will expire on the tenth
      (10th)
      anniversary date of its grant, except as otherwise provided
      herein.

            


    

    


    
      	
               
      

            	
              6.5

            	
              Vesting of
      Options.  Options shall vest at such times and under such
      terms and conditions as determined by the Committee; provided, however,
      unless another vesting period is provided by the Committee at or before
      the grant of an Option, one-third of the Options will vest on each of the
      first three anniversaries of the grant; if one Option remains after
      equally dividing the grant by three, it will vest on the first anniversary
      of the grant, if two Options remain, then one will vest on each of the
      first two anniversaries.  The Committee shall have the right to
      accelerate the vesting of any Option; however, the Chairman of the Board
      or the Senior Executive Vice President-Human Resources, or their
      respective successors, or such other persons designated by the Committee,
      shall have the authority to accelerate the vesting of Options for any
      Participant who is not an Insider.

            


    

    


    
      	
               
      

            	
              6.6

            	
              Exercise of
      Options.  Options granted under the Plan shall be
      exercisable at such times and be subject to such restrictions and
      conditions as the Committee shall in each instance approve, which need not
      be the same for each grant or for each Participant. Exercises of Options
      may be effect only on days and during the hours that the New York Stock
      Exchange is open for regular trading.  The Company may change or
      limit the times or days Options may be exercised.  If an Option
      expires on a day or at a time when exercises are not permitted, then the
      Options may be exercised no later than the immediately preceding date and
      time that the Options were
exercisable.

            


    

    


    Options
shall be exercised by providing notice to the designated agent selected by the
Company (if no such agent has been designated, then to the Company), in the
manner and form determined by the Company, which notice shall be irrevocable,
setting forth the exact number of Shares with respect to which the Option is
being exercised and including with such notice payment of the Exercise
Price.  When Options have been transferred, the Company or its
designated agent may require appropriate documentation that the person or
persons exercising the Option, if other than the Participant, has the right to
exercise the Option.  No Option may be exercised with respect to a
fraction of a Share.

    


    
      	
               
      

            	
              6.7

            	
              Payment.  Unless
      otherwise determined by the Committee, the Exercise Price shall be paid in
      full at the time of exercise.  No Shares shall be issued or
      transferred until full payment has been
  received.

            


    

    


    Payment
may be made:

    


    (a)                 in
cash, or

    


    (b)                 unless
otherwise provided by the Committee at any time, and subject to such additional
terms and conditions and/or modifications as the Committee or the Company may
impose from time to time, and further subject to suspension or termination of
this provision by the Committee or Company at any time, by:

    


    
      	
               
      

            	
              (i)

            	
              delivery
      of Shares owned by the Participant in partial (if in partial payment, then
      together with cash) or full payment; provided, however, as a condition to
      paying any part of the Exercise Price in Shares, at the time of exercise
      of the Option, the Participant must establish to the satisfaction of the
      Company that the Stock tendered to the Company has been held by the
      Participant for a minimum of six (6) months preceding the tender;
      or

            


    

    


    
      	
               
      

            	
              (ii)

            	
              if
      the Company has designated a stockbroker to act as the Company’s agent to
      process Option exercises, issuance of an exercise notice together with
      instructions to such stockbroker irrevocably instructing the
      stockbroker:  (A) to immediately sell (which shall include an
      exercise notice that becomes effective upon execution of a sale order) a
      sufficient portion of the Shares to be received from the Option exercise
      to pay the Exercise Price of the Options being exercised and the required
      tax withholding, and (B) to deliver on the settlement date the portion of
      the proceeds of the sale equal to the Exercise Price and tax withholding
      to the Company.  In the event the stockbroker sells any Shares
      on behalf of a Participant, the stockbroker shall be acting solely as the
      agent of the Participant, and the Company disclaims any responsibility for
      the actions of the stockbroker in making any such sales.  No
      Shares shall be issued until the settlement date and until the proceeds
      (equal to the Option Price and tax withholding) are paid to the
      Company.

            


    

    


    If
payment is made by the delivery of Shares, the value of the Shares delivered
shall be equal to the then most recent Fair Market Value of the Shares
established before the exercise of the Option.

    


    Restricted
Stock may not be used to pay the Exercise Price.

    


    
      	
               
      

            	
              6.8

            	
              Termination of
      Employment.  Unless otherwise provided by the Committee,
      the following limitations on exercise of Options shall apply upon
      Termination of Employment:

            


    

     

    (a)        Termination by Death or
Disability.  In the event of the Participant's Termination of
Employment by reason of death or Disability, all outstanding Options granted to
that Participant shall immediately vest as of the date of Termination of
Employment and may be exercised, if at all, no more than three (3) years from
the date of the Termination of Employment, unless the Options, by their terms,
expire earlier.  However, in the event the Participant was eligible to
Retire at the time of Termination of Employment, notwithstanding the foregoing,
the Options may be exercised, if at all, no more than five (5) years from the
date of the Termination of Employment, unless the Options, by their terms,
expire earlier.

     

     (b)      Termination for
Cause.  In the event of the Participant's Termination of
Employment by the Company for Cause, all outstanding Options held by the
Participant shall immediately be forfeited to the Company and no additional
exercise period shall be allowed, regardless of the vested status of the
Options.

    


    
      	
               
      

            	
              (c)

            	
              Retirement or Other
      Termination of Employment.  In the event of the
      Participant's Termination of Employment for any reason other than the
      reasons set forth in (a) or (b),
above:

            


    

    


    
      	
               
      

            	
              (i)

            	
              If
      upon the Participant's Termination of Employment, the Participant is
      eligible to Retire (and if the Participant is an officer level employee
      for compensation purposes as determined by AT&T, the employee must
      also be age 55 or older at Termination of Employment), then all
      outstanding unvested Options granted to that Participant shall immediately
      vest as of the date of the Participant's Termination of
      Employment;

            


    

    


    
      	
               
      

            	
              (ii)

            	
              All
      outstanding Options which are vested as of the effective date of
      Termination of Employment may be exercised, if at all, no more than five
      (5) years from the date of Termination of Employment if the Participant is
      eligible to Retire, or three (3) months from the date of the Termination
      of Employment if the Participant is not eligible to Retire, as the case
      may be, unless in either case the Options, by their terms, expire earlier;
      and

            


    

    


    
      	
               
      

            	
              (iii)

            	
              In
      the event of the death of the Participant after Termination of Employment,
      this paragraph (c) shall still apply and not paragraph (a),
      above.

            


    

    


    (d)                 Options not Vested at
Termination.  Except as provided in paragraphs (a) and (c)(i),
above, all Options held by the Participant which are not vested on or before the
effective date of Termination of Employment shall immediately be forfeited to
the Company (and the Shares subject to such forfeited Options shall once again
become available for issuance under the Plan).

    


    (e)                 Notwithstanding
the foregoing, the Committee may, in its sole discretion, establish different,
or waive, terms and conditions pertaining to the effect of Termination of
Employment on Options, whether or not the Options are outstanding, but no such
modification shall shorten the terms of Options issued prior to such
modification or otherwise be materially adverse to the Participant.

    


    
      	
               
      

            	
              6.9

            	
              Employee
      Transfers.  For purposes of the Plan, transfer of
      employment of a Participant between the Company and any one of its
      Subsidiaries (or between Subsidiaries) or between the Company or a
      Subsidiary and a RWAC, to the extent the period of employment at a RWAC is
      equal to or less than five (5) years, shall not be deemed a Termination of
      Employment.  Provided, however, for purposes of this Article 6,
      termination of employment with a RWAC without a concurrent transfer to the
      Company or any of its Subsidiaries shall be deemed a Termination of
      Employment as that term is used herein.  Similarly, termination
      of an entity’s status as a Subsidiary or as a RWAC shall be deemed a
      Termination of Employment of any Participants employed by such Subsidiary
      or RWAC.

            


    

    


    
      	
               
      

            	
              6.10

            	
              Restrictions on
      Exercise and Transfer of Options.  Unless otherwise
      provided by the Committee:

            


    

    


    (a)                 During
the Participant’s lifetime, the Participant’s Options shall be exercisable only
by the Participant or by the Participant’s guardian or legal
representative.  After the death of the Participant, except as
otherwise provided by AT&T’s Rules for Employee Beneficiary Designations, an
Option shall only be exercised by the holder thereof (including, but not limited
to, an executor or administrator of a decedent’s estate) or his or her guardian
or legal representative.

    


    (b)                 No
Option shall be transferable except: (i) in the case of the Participant, only
upon the Participant’s death and in accordance with the AT&T Rules for
Employee Beneficiary Designations; and (ii) in the case of any holder after the
Participant’s death, only by will or by the laws of descent and
distribution.

    


    
      	
              6.11
        

            	
              Competition and
      Solicitation.  In the event a Participant directly or
      indirectly, engages in competitive activity, or has become associated
      with, employed by, controls, or renders service to any business that is
      engaged in competitive activity, with (i) the Company, (ii) any
      Subsidiary, or (iii) any business in which any of the foregoing have a
      substantial interest, or if the Participant attempts, directly or
      indirectly, to induce any employee of the Company or a Subsidiary to be
      employed or perform services elsewhere without the permission of the
      Company, then the Company may (i) cancel any Option granted to such
      Participant, whether or not vested, in whole or in part; and/or (ii)
      rescind any exercise of the Participant’s Options that occurred on or
      after that date six months prior to engaging in such activity, in which
      case the Participant shall pay the Company the gain realized or received
      upon such exercise of Options.  "Has become associated with"
      shall include, among other things, beneficial ownership of 1/10 of 1% or
      more of a business engaged in competitive activity.  The
      determination of whether a Participant has engaged in any such activity
      and whether to cancel Options and/or rescind the exercise of Options shall
      be made by AT&T, and in each case such determination shall be final,
      conclusive and binding on all
persons.

            


    

    


    


    
      	
              Article
      7

            	
              Restricted
      Stock.

            


    

    


    
      	
               
      

            	
              7.1

            	
              Grant of Restricted
      Stock.  Subject to the terms and provisions of the Plan,
      the Committee, at any time and from time to time, may grant Shares of
      Restricted Stock to eligible Employees in such amounts and upon such terms
      and conditions as the Committee shall determine.  In addition to
      any other terms and conditions imposed by the Committee, vesting of
      Restricted Stock may be conditioned upon the achievement of Performance
      Goals in the same manner as provided in Section 8.4, herein, with respect
      to Performance Shares.  No Employee may be awarded, in any
      calendar year, a number of Shares in the form of Restricted Stock (or
      Restricted Stock Units) exceeding one percent (1%) of the Shares approved
      for issuance under this Plan.

            


    

    


    
      	
               
      

            	
              7.2

            	
              Restricted Stock
      Agreement.  The Committee may require, as a condition to
      receiving a Restricted Stock Award, that the Participant enter into a
      Restricted Stock Award Agreement, setting forth the terms and conditions
      of the Award.  In lieu of a Restricted Stock Award Agreement,
      the Committee may provide the terms and conditions of an Award in a notice
      to the Participant of the Award, on the Stock certificate representing the
      Restricted Stock, in the resolution approving the Award, or in such other
      manner as it deems appropriate.

            


    

    


    
      	
               
      

            	
              7.3

            	
              Transferability.  Except
      as otherwise provided in this Article 7, and subject to any additional
      terms in the grant thereof, Shares of Restricted Stock granted herein may
      not be sold, transferred, pledged, assigned, or otherwise alienated or
      hypothecated until fully vested.

            


    

    


    
      	
               
      

            	
              7.4

            	
              Restrictions.  The
      Restricted Stock shall be subject to such vesting terms, including the
      achievement of Performance Goals (as described in Section 8.4), as may be
      determined by the Committee.  Unless otherwise provided by the
      Committee, to the extent Restricted Stock is subject to any condition to
      vesting, if such condition or conditions are not satisfied by the time the
      period for achieving such condition has expired, such Restricted Stock
      shall be forfeited. The Committee may impose such other conditions and/or
      restrictions on any Shares of Restricted Stock granted pursuant to the
      Plan as it may deem advisable including but not limited to a requirement
      that Participants pay a stipulated purchase price for each Share of
      Restricted Stock and/or restrictions under applicable Federal or state
      securities laws; and may legend the certificates representing Restricted
      Stock to give appropriate notice of such restrictions.  The
      Committee may also grant Restricted Stock without any terms or conditions
      in the form of vested Stock Awards.

            


    

    


    The
Company shall also have the right to retain the certificates representing Shares
of Restricted Stock in the Company's possession until such time as the Shares
are fully vested and all conditions and/or restrictions applicable to such
Shares have been satisfied.

    


    
      	
               
      

            	
              7.5

            	
              Removal of
      Restrictions.  Except as otherwise provided in this
      Article 7 or otherwise provided in the grant thereof, Shares of Restricted
      Stock covered by each Restricted Stock grant made under the Plan shall
      become freely transferable by the Participant after completion of all
      conditions to vesting, if any.  However, the Committee, in its
      sole discretion, shall have the right to immediately vest the shares and
      waive all or part of the restrictions and conditions with regard to all or
      part of the Shares held by any Participant at any
  time.

            


    

    


    
      	
               
      

            	
              7.6

            	
              Voting Rights,
      Dividends and Other Distributions.  Participants holding
      Shares of Restricted Stock granted hereunder may exercise full voting
      rights and shall receive all regular cash dividends paid with respect to
      such Shares.  Except as provided in the following sentence, in
      the sole discretion of the Committee, other cash dividends and other
      distributions paid to Participants with respect to Shares of Restricted
      Stock may be subject to the same restrictions and conditions as the Shares
      of Restricted Stock with respect to which they were paid.  If
      any such dividends or distributions are paid in Shares, the Shares shall
      be subject to the same restrictions and conditions as the Shares of
      Restricted Stock with respect to which they were
  paid.

            


    

    


    
      	
               
      

            	
              7.7

            	
              Termination of
      Employment Due to Death or Disability.  In the event of
      the Participant's Termination of Employment by reason of death or
      Disability, all restrictions imposed on outstanding Shares of Restricted
      Stock held by the Participant shall immediately lapse and the Restricted
      Stock shall immediately become fully vested as of the date of Termination
      of Employment.

            


    

    


    
      	
               
      

            	
              7.8

            	
              Termination of
      Employment for Other Reasons.  Unless otherwise provided
      by the Committee, in the event of the Participant's Termination of
      Employment for any reason other than those specifically set forth in
      Section 7.7 herein, all Shares of Restricted Stock held by the Participant
      which are not vested as of the effective date of Termination of Employment
      immediately shall be forfeited and returned to the
  Company.

            


    

    


    
      	
               
      

            	
              7.9

            	
              Employee
      Transfers.  For purposes of the Plan, transfer of
      employment of a Participant between the Company and any one of its
      Subsidiaries (or between Subsidiaries) or between the Company or a
      Subsidiary and a RWAC, to the extent the period of employment at a RWAC is
      equal to or less than five (5) years, shall not be deemed a Termination of
      Employment.  Provided, however, for purposes of this Article,
      termination of employment with a RWAC without a concurrent transfer to the
      Company or any of its Subsidiaries shall be deemed a Termination of
      Employment as that term is used herein.  Similarly, termination
      of an entity’s status as a Subsidiary or as a RWAC shall be deemed a
      Termination of Employment of any Participants employed by such Subsidiary
      or RWAC.

            


    

    


    
      	
               
      

            	
              7.10

            	
              Restricted Stock
      Units.  In lieu of or in addition to Restricted Stock,
      the Committee may grant Restricted Stock Units (“Units”) under such terms
      and conditions as shall be determined by the Committee.  Units
      shall otherwise be subject to the same terms and conditions under this
      Plan as Restricted Stock (including but not limited to Change in Control
      provisions), except that upon vesting, the Participant holding such Units
      shall receive Shares (or cash equal to the Fair Market Value of the number
      of Shares) equal to the number of such Units no later than ninety (90) days after the date of
      such vesting. Units shall have no voting rights, and Units shall
      not receive dividends, but shall, unless otherwise provided by the
      Committee, receive dividend equivalents at the time and at the same rate
      per Unit as dividends are paid per Share with the same record and pay
      dates.

            


    

    


    


    


    
      	
              Article
      8

            	
              Performance Units and
      Performance Shares.

            


    

    


    
      	
               
      

            	
              8.1

            	
              Grants of Performance
      Units and Performance Shares.  Subject to the terms of
      the Plan, Performance Shares and Performance Units may be granted to
      eligible Employees at any time and from time to time, as determined by the
      Committee.  The Committee shall have complete discretion in
      determining the number of Performance Units and/or Performance Shares
      Awarded to each Participant and the terms and conditions of each such
      Award.

            


    

    


    
      	
               
      

            	
              8.2

            	
              Value of Performance
      Shares and Units.

            


    

    


    (a)                 A
Performance Share is equivalent in value to a Share.  In any calendar
year, no individual may be awarded Performance Shares having a potential payout
of Shares exceeding one percent (1%) of the Shares approved for issuance under
this Plan.

    


    (b)                 A
Performance Unit shall be equal in value to a fixed dollar amount determined by
the Committee.  In any calendar year, no individual may be Awarded
Performance Units having a potential payout equivalent exceeding the Fair Market
Value, as of the date of  granting the Award, of one percent (1%) of
the Shares approved for issuance under this Plan.  The number of
Shares equivalent to the potential payout of a Performance Unit shall be
determined by dividing the maximum cash payout of the Award by the Fair Market
Value per Share on the effective date of the grant.  The Committee may
denominate a Performance Unit Award in dollars instead of Performance
Units.  A Performance Unit Award may be referred to as a "Key
Executive Officer Short Term Award."

    


    
      	
               
      

            	
              8.3

            	
              Performance
      Period.  The Performance Period for Performance Shares
      and Performance Units is the period over which the Performance Goals are
      measured.  The Performance Period is set by the Committee for
      each Award; however, in no event shall an Award have a Performance Period
      of less than one year.

            


    

    


    
      	
               
      

            	
              8.4

            	
              Performance
      Goals.  For each Award of Performance Shares or
      Performance Units, the Committee shall establish (and may establish for
      other Awards) performance objectives ("Performance Goals") for the
      Company, its Subsidiaries, and/or divisions of any of foregoing, using the
      Performance Criteria and other factors set forth in (a) and (b),
      below.  It may also use other criteria or factors in
      establishing Performance Goals in addition to or in lieu of the
      foregoing.  A Performance Goal may be stated as an absolute
      value or as a value determined relative to an index, budget, prior period,
      similar measures of a peer group of other companies or other standard
      selected by the Committee.  Performance Goals shall include
      payout tables, formulas or other standards to be used in determining the
      extent to which the Performance Goals are met, and, if met, the number of
      Performance Shares and/or Performance Units which would be converted into
      Stock and/or cash (or the rate of such conversion) and distributed to
      Participants in accordance with Section 8.6.  Unless previously
      canceled or reduced, Performance Shares and Performance Units which may
      not be converted because of failure in whole or in part to satisfy the
      relevant Performance Goals or for any other reason shall be canceled at
      the time they would otherwise be distributable.  When the
      Committee desires an Award of Performance Shares, Performance Units,
      Restricted Stock or Restricted Stock Units to qualify under Section 162(m)
      of the Code, as amended, the Committee shall establish the Performance
      Goals for the respective Award prior to or within 90 days of the beginning
      of the Performance Period relating to such Performance Goal, and not later
      than after 25% of such period has elapsed.  For all other
      Awards, the Performance Goals must be established before the end of the
      respective Performance Period.

            


    

    


    (a)                 The
Performance Criteria which the Committee is authorized to use, in its sole
discretion, are any of the following criteria or any combination thereof,
including but not limited to the offset against each other of any combination of
the following criteria:

    


    
      	
               
      

            	
              (1)

            	
              Financial
      performance of the Company (on a consolidated basis), of one or more of
      its Subsidiaries, and/or a division of any of the
      foregoing.  Such financial performance may be based on net
      income, Value Added (after-tax cash operating profit less depreciation and
      less a capital charge), EBITDA (earnings before interest, taxes,
      depreciation and amortization), revenues, sales, expenses, costs, gross
      margin, operating margin, profit margin, pre-tax profit, market share,
      volumes of a particular product or service or category thereof, including
      but not limited to the product's life cycle (for example, products
      introduced in the last 2 years), number of customers or subscribers,
      number of items in service, including but not limited to every category of
      access or other telecommunication or television lines, return on net
      assets, return on assets, return on capital, return on invested capital,
      cash flow, free cash flow, operating cash flow,  operating
      revenues, operating expenses, and/or operating
  income.

            


    

    


    
      	
               
      

            	
              (2)

            	
              Service
      performance of the Company (on a consolidated basis), of one or more of
      its Subsidiaries, and/or of a division of any of the
      foregoing.  Such service performance may be based upon measured
      customer perceptions of service quality. Employee satisfaction, employee
      retention, product development, completion of a joint venture or other
      corporate transaction, completion of an identified special project, and
      effectiveness of management.

            


    

    


    
      	
               
      

            	
              (3)

            	
              The
      Company’s Stock price, return on stockholders’ equity, total stockholder
      return (Stock price appreciation plus dividends, assuming the reinvestment
      of dividends), and/or earnings per
Share.

            


    

    


    
      	
               
      

            	
              (4)

            	
              Impacts
      of acquisitions, dispositions, or restructurings, on any of the
      foregoing.

            


    

    


    (b)                 Except
to the extent otherwise provided by the Committee in full or in part, if any of
the following events occur during a Performance Period and would directly affect
the determination of whether or the extent to which Performance Goals are met,
the effects of such events shall be disregarded in any such computation: changes
in accounting principles; extraordinary items; changes in tax laws affecting net
income and/or Value Added; natural disasters, including but not limited to
floods, hurricanes, and earthquakes; and intentionally inflicted damage to
property which directly or indirectly damages the property of the Company or its
Subsidiaries.  No such adjustment shall be made to the extent such
adjustment would cause the Award to fail to satisfy the performance based
exemption of Section 162(m) of the Code.

    


    
      	
              8.5     
      

            	
              Dividend Equivalents
      on Performance Shares.  Unless reduced or eliminated by
      the Committee, a cash payment in an amount equal to the dividend payable
      on one Share will be made to each Participant for each Performance Share
      held by a Participant on the record date for the
  dividend.

            


    

    


    
      	
               
      

            	
              8.6

            	
              Form and Timing of
      Payment of Performance Units and Performance Shares.  As
      soon as practicable (but in no event more
      than ninety (90) days) after the applicable Performance Period has
      ended and all other conditions (other than Committee actions) to
      conversion and distribution of a Performance Share and/or Performance Unit
      Award have been satisfied (or, if applicable, at such other time
      determined by the Committee at or before the establishment of the
      Performance Goal), the Committee shall determine whether and the extent to
      which the Performance Goals were met for the applicable Performance Units
      and Performance Shares.  If Performance Goals have been met,
      then the number of Performance Units and Performance Shares to be
      converted into Stock and/or cash and distributed to the Participants shall
      be determined in accordance with the Performance Goals for such Awards,
      subject to any limits imposed by the Committee.  Unless the
      Participant has elected to defer all or part of his Performance Units or
      Performance Shares as provided in Article 10, herein, payment of
      Performance Units and Performance Shares shall be made in a single lump
      sum, as soon as reasonably administratively possible following the
      determination of the number of Shares or amount of cash to which the
      Participant is entitled.  Performance Units will be distributed
      to Participants in the form of cash.  Performance Shares will be
      distributed to Participants in the form of 50% Stock and 50% Cash, or at
      the Participant’s election, 100% Stock or 100% Cash. In the event the
      Participant is no longer an Employee at the time of the distribution, then
      the distribution shall be 100% in cash, provided the Participant may elect
      to take 50% or 100% in Stock.  At any time prior to the
      distribution of the Performance Shares and/or Performance Units (or if
      distribution has been deferred, then prior to the time the Awards would
      have been distributed), unless otherwise provided by the Committee or
      prohibited by this Plan (such as in the case of a Change in Control), the
      Committee shall have the authority to reduce or eliminate the number of
      Performance Units or Performance Shares to be converted and distributed,
      or to cancel any part or all of a grant or award of Performance Units or
      Performance Shares, or to mandate the form in which the Award shall be
      paid (i.e., in cash, in Stock or both, in any proportions determined by
      the Committee).

            


    

    


    Unless
otherwise provided by the Committee, any election to take a greater amount of
cash or Stock with respect to Performance Shares must be made in the calendar
year prior to the calendar year in which the Performance Shares are distributed
(or if distribution has been deferred, then in the year prior to the year the
Performance Shares would have been distributed absent such
deferral).

    


    For the
purpose of converting Performance Shares into cash and distributing the same to
the holders thereof (or for determining the amount of cash to be deferred), the
value of a Performance Share shall be the Fair Market Value of a Share on the
date the Committee authorizes the payout of Awards.  Performance
Shares to be distributed in the form of Stock will be converted at the rate of
one (1) Share per Performance Share.

    


    
      	
               
      

            	
              8.7

            	
              Termination of
      Employment Due to Death or Disability.  In the event of
      the Participant's Termination of Employment by reason of death or
      Disability, the Participant shall receive a lump sum payout of all
      outstanding Performance Units and Performance Shares calculated as if all
      unfinished Performance Periods had ended with 100% of the Performance
      Goals achieved, payable in the year following the date of Termination of
      Employment.

            


    

    


    
      	
               
      

            	
              8.8

            	
              Termination of
      Employment for Other Reasons.  Unless the Committee
      determines otherwise, in the event of the Participant's Termination of
      Employment for other than a reason set forth in Section 8.7 (and other
      than for Cause), if the Participant is not Retirement eligible at
      Termination of Employment, then upon Termination, the number of the
      Participant’s Performance Units and/or Performance Shares shall be reduced
      at the time of the Termination of Employment so that the Participant may
      receive no more than a prorated payout of all Performance Units and
      Performance Shares granted, based on the number of months the Participant
      worked at least one day during the respective Performance Period divided
      by the number of months in the Performance Period, to be paid, if at all, at the same time and
      under the same terms that such outstanding Performance Units and
      Performance Shares would otherwise be
  paid.

            


    

    


    
      	
               
      

            	
              8.9

            	
              Termination of
      Employment for Cause.  In the event of the Termination of
      Employment of a Participant by the Company for Cause, all Performance
      Units and Performance Shares shall be forfeited by the Participant to the
      Company.

            


    

    


    
      	
               
      

            	
              8.10

            	
              Nontransferability.  Performance
      Units and Performance Shares may not be sold, transferred, pledged,
      assigned, or otherwise alienated or hypothecated, other than in accordance
      with the AT&T Rules for Employee Beneficiary
    Designations.

            


    

    


    


    
      	
              Article
      9

            	
              Beneficiary
      Designation.  In the event of the death of a Participant,
      distributions or Awards under this Plan, other than Restricted Stock,
      shall pass in accordance with the AT&T Rules for Employee Beneficiary
      Designations, as the same may be amended from time to
      time.  Beneficiary Designations of a Participant received by
      AT&T prior to November 16, 2001, that were applicable to awards under
      the 1996 Stock and Incentive Plan will also apply to awards under this
      Plan unless and until the Participant provides to the contrary in
      accordance with the procedures set forth in such
  Rules.

            


    

    


    


    
      	
              Article
      10

            	
              Deferrals. Unless
      otherwise provided by the Committee, a Participant may, as permitted by
      the Company, defer all or part of Awards made under this Plan in
      accordance with and subject to the terms of such plans so long as such
      deferral is determined by the Company to be consistent in all respects
      with Section 409A of the Code.

            


    

    


    


    
      	
              Article
      11

            	
              Employee
      Matters.

            


    

    


    
      	
               
      

            	
              11.1

            	
              Employment Not
      Guaranteed.  Nothing in the Plan shall interfere with or
      limit in any way the right of the Company or any Subsidiary to terminate
      any Participant's Employment at any time, nor confer upon any Participant
      any right to continue in the employ of the Company or one of its
      Subsidiaries.

            


    

    


    
      	
               
      

            	
              11.2

            	
              Participation.  No
      Employee shall have the right to be selected to receive an Award under
      this Plan, or, having been so selected, to be selected to receive a future
      Award.

            


    

    


    


    
      	
              Article
      12

            	
              Change in
      Control.

            


    

    


    Unless
the Committee provides otherwise prior to the grant of an Award, upon the
occurrence of a Change in Control, the following shall apply to such
Award:

    


    (a)                 Any
and all Options granted hereunder to a Participant immediately shall become
vested and exercisable upon the Termination of Employment of the Participant by
the Company or by the Participant for “Good Reason”;

    


    (b)                 Any
Restriction Periods and all restrictions imposed on Restricted Stock shall lapse
and they shall immediately become fully vested upon the Termination of
Employment of the Participant by the Company or by the Participant for “Good
Reason”;

    


    (c)                 Unless
otherwise determined by the Committee, the payout of Performance Units and
Performance Shares shall be determined exclusively by the attainment of the
Performance Goals established by the Committee, which may not be modified after
the Change in Control, and AT&T shall not have the right to reduce the
Awards for any other reason;

    


    (d)                 For
purposes of this Plan, “Good Reason” means in connection with a termination of
employment by a Participant within two (2) years following a Change in Control,
(a) a material adverse alteration in the
Participant’s position or in the nature or status of the Participant’s
responsibilities from those in effect immediately prior to the Change in
Control, or (b) any material reduction in
the Participant’s base salary rate or target annual bonus, in each case as in
effect immediately prior to the Change in Control, or (c) the relocation
of  the Participant’s principal place of employment to a location that
is more than fifty (50) miles from the location where the Participant was
principally employed at the time of the Change in Control or materially increases the time of the Participant’s
commute as compared to the Participant’s commute at the time of the Change in
Control (except for required travel on the Company’s business to an
extent substantially consistent with the Participant’s customary business travel
obligations in the ordinary course of business prior to the Change in
Control).

    


    In order to invoke a Termination of Employment for Good
Reason, a Participant must provide written notice to AT&T or the Employer
with respect to which the Participant is employed or providing services of the
existence of one or more of the conditions constituting Good Reason within
ninety (90) days following the Participant’s knowledge of the initial existence
of such condition or conditions, specifying in reasonable detail the conditions
constituting Good Reason, and AT&T shall have thirty (30) days following
receipt of such written notice (the “Cure Period”) during which it may remedy
the condition.  In the event that AT&T or the Employer fails to
remedy the condition constituting Good Reason during the applicable Cure Period,
the Participant’s “separation from service” (within the meaning of Section 409A
of the Code) must occur, if at all, within two (2) years following such Cure
Period in order for such termination as a result of such condition to constitute
a Termination of Employment for Good Reason. 

    


    


    
      	
              Article
      13

            	
              Amendment,
      Modification, and
Termination.

            


    

    


    
      	
               
      

            	
              13.1

            	
              Amendment,
      Modification, and Termination.  The Board or the
      Disinterested Committee may at any time and from time to time, alter or
      amend the Plan or any Award in whole or in part or suspend or terminate
      the Plan in whole or in part.

            


    

    


    
      	
               
      

            	
              13.2

            	
              Awards Previously
      Granted.  No termination, amendment, or modification of
      the Plan or any Award shall adversely affect in any material way any Award
      previously granted under the Plan, without the written consent of the
      Participant holding such Award; provided, however, that any such
      modification made for the purpose of complying with Section 409A of the
      Code may be made by the Company without the consent of any
      Participant

            


    

    


    
      	
               
      

            	
              13.3

            	
              Delay in
      Payment.  To the extent required in order to avoid the
      imposition of any interest and/or additional tax under Section
      409A(a)(1)(B) of the Code, any amount that
      is considered deferred compensation under the Plan or Agreement and that
      is required to be postponed pursuant to Section 409A of the Code,following
      the a Participant’s Termination of Employment shall be delayed for six months if a
      Participant is deemed to be a “specified employee” as defined in Section
      409A(a)(2)(i)(B) of the Code; provided that,
      if the Participant dies during the postponement period prior to the
      payment of the postponed amount, the amounts withheld on account of
      Section 409A shall be paid to the executor or administrator of the
      decedent’s estate within 60 days following the date of his death. A
      “Specified Employee” means any Participant who is a “key employee” (as
      defined in Code Section 416(i) without regard to paragraph (5) thereof),
      as determined by AT&T in accordance with its uniform policy with
      respect to all arrangements subject to Code Section 409A, based upon the
      twelve (12) month period ending on each December 31st (such twelve (12)
      month period is referred to below as the “identification
      period”).  All Participants who are determined to be key
      employees under Code Section 416(i) (without regard to paragraph (5)
      thereof) during the identification period shall be treated as Specified
      Employees for purposes of the Plan during the twelve (12) month period
      that begins on the first day of the 4th month following the close of such
      identification period.

            


    

    


    


    
      	
              Article
      14

            	
              Withholding.

            


    

    


    
      	
               
      

            	
              14.1

            	
              Tax
      Withholding.  Unless otherwise provided by the Committee,
      the Company shall deduct or withhold an amount sufficient to satisfy
      Federal, state, and local taxes (including but not limited to the
      Participant's employment tax obligations) required by law to be withheld
      with respect to any taxable event arising or as a result of this Plan
      ("Withholding Taxes").

            


    

    


    
      	
              14.2  
        

            	
              Share
      Withholding.  Unless otherwise provided by the Committee,
      upon the exercise of Options, the lapse of restrictions on Restricted
      Stock, the distribution of Performance Shares in the form of Stock, or any
      other taxable event hereunder involving the transfer of Stock to a
      Participant, the Company shall withhold Stock equal in value, using the
      Fair Market Value on the date determined by the Company to be used to
      value the Stock for tax purposes, to the Withholding Taxes applicable to
      such transaction.

            


    

    


    Any
fractional Share of Stock payable to a Participant shall be withheld as
additional Federal withholding, or, at the option of the Company, paid in cash
to the Participant.

    


    Unless
otherwise determined by the Committee, when the method of payment for the
Exercise Price is from the sale by a stockbroker pursuant to Section 6.7(b)(ii),
herein, of the Stock acquired through the Option exercise, then the tax
withholding shall be satisfied out of the proceeds.  For
administrative purposes in determining the amount of taxes due, the sale price
of such Stock shall be deemed to be the Fair Market Value of the
Stock.

    


    If
permitted by the Committee, prior to the end of any Performance Period a
Participant may elect to have a greater amount of Stock withheld from the
distribution of Performance Shares to pay withholding taxes; provided, however,
the Committee may prohibit or limit any individual election or all such
elections at any time.

    


    


    
      	
              Article
      15

            	
              Successors.

            


    

    


    All
obligations of the Company under the Plan, with respect to Awards granted
hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.

    


    


    
      	
              Article
      16

            	
              Legal
      Construction.

            


    

    


    
      	
               
      

            	
              16.1

            	
              Gender and
      Number.  Except where otherwise indicated by the context,
      any masculine term used herein also shall include the feminine; the plural
      shall include the singular and the singular shall include the
      plural.

            


    

    


    
      	
               
      

            	
              16.2

            	
              Severability.  In
      the event any provision of the Plan shall be held illegal or invalid for
      any reason, the illegality or invalidity shall not affect the remaining
      parts of the Plan, and the Plan shall be construed and enforced as if the
      illegal or invalid provision had not been
  included.

            


    

    


    
      	
              16.3 
        

            	
              Requirements of
      Law.  The granting of Awards and the issuance of Shares
      under the Plan shall be subject to all applicable laws, rules, and
      regulations, and to such approvals by any governmental agencies or
      national securities exchanges as may be
  required.

            


    

    


    
      	
              16.4  
       

            	
              Errors.  At
      any time AT&T may correct any error made under the Plan without
      prejudice to AT&T.  Such corrections may include, among
      other things, changing or revoking an issuance of an
  Award.

            


    

    


    
      	
              16.5 
        

            	
              Elections and
      Notices.  Notwithstanding anything to the contrary
      contained in this Plan, all elections and notices of every kind shall be
      made on forms prepared by AT&T or the General Counsel, Secretary or
      Assistant Secretary, or their respective delegates or shall be made in
      such other manner as permitted or required by AT&T or the General
      Counsel, Secretary or Assistant Secretary, or their respective delegates,
      including but not limited to elections or notices through electronic
      means, over the Internet or otherwise.  An election shall be
      deemed made when received by AT&T (or its designated agent, but only
      in cases where the designated agent has been appointed for the purpose of
      receiving such election), which may waive any defects in
      form.  AT&T may limit the time an election may be made in
      advance of any deadline.

            


    

    


    Where any
notice or filing required or permitted to be given to AT&T under the Plan,
it shall be delivered to the principal office of AT&T, directed to the
attention of the Senior Executive Vice President-Human Resources of AT&T or
his or her successor.  Such notice shall be deemed given on the date
of delivery.

    


    Notice to
the Participant shall be deemed given when mailed (or sent by telecopy) to the
Participant's work or home address as shown on the records of AT&T or, at
the option of AT&T, to the Participant's e-mail address as shown on the
records of AT&T.  It is the Participant's responsibility to ensure
that the Participant's addresses are kept up to date on the records of
AT&T.  In the case of notices affecting multiple Participants, the
notices may be given by general distribution at the Participants' work
locations.

    


    
      	
              16.6 
        

            	
              Governing
      Law.  To the extent not preempted by Federal law, the
      Plan, and all awards and agreements hereunder, and any and all disputes in
      connection therewith, shall be governed by and construed in accordance
      with the substantive laws of the State of Texas, without regard to
      conflict or choice of law principles which might otherwise refer the
      construction, interpretation or enforceability of this Plan to the
      substantive law of another
jurisdiction.

            


    

    


    
      	
              16.7  
       

            	
              Venue.  Because
      awards under the Plan are granted in Texas, records relating to the Plan
      and awards thereunder are located in Texas, and the Plan and awards
      thereunder are administered in Texas, the Company and the Participant to
      whom an award under this Plan is granted, for themselves and their
      successors and assigns, irrevocably submit to the exclusive and sole
      jurisdiction and venue of the state or federal courts of Texas with
      respect to any and all disputes arising out of or relating to this Plan,
      the subject matter of this Plan or any awards under this Plan, including
      but not limited to any disputes arising out of or relating to the
      interpretation and enforceability of any awards or the terms and
      conditions of this Plan.  To achieve certainty regarding the
      appropriate forum in which to prosecute and defend actions arising out of
      or relating to this Plan, and to ensure consistency in application and
      interpretation of the Governing Law to the Plan, the parties agree that
      (a) sole and exclusive appropriate venue for any such action shall be an
      appropriate federal or state court in Bexar County, Texas, and no other,
      (b) all claims with respect to any such action shall be heard and
      determined exclusively in such Texas court, and no other, (c) such Texas
      court shall have sole and exclusive jurisdiction over the person of such
      parties and over the subject matter of any dispute relating hereto and (d)
      that the parties waive any and all objections and defenses to bringing any
      such action before such Texas court, including but not limited to those
      relating to lack of personal jurisdiction, improper venue or forum non
      conveniens.